Filed Pursuant to Rule 424(b)(5)
Registration File No. 333-08328
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL THESE
SECURITIES AND IT IS NOT A SOLICITATION OF AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT MAY BE AMENDED OR COMPLETED,
DATED JUNE 9, 2003
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 9, 2003)
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
GERMAN AMERICAN CAPITAL CORPORATION
LASALLE BANK NATIONAL ASSOCIATION
MORTGAGE LOAN SELLERS
------------------------------
The COMM 2003-LNB1 Commercial Mortgage Pass-Through Certificates will
represent beneficial ownership interests in the COMM 2003-LNB1 Mortgage Trust.
The trust's assets will primarily be 92 fixed-rate mortgage loans secured by
first liens on 99 commercial and multifamily properties. The COMM 2003-LNB1
Commercial Mortgage Pass-Through Certificates are not obligations of Deutsche
Bank AG or any of its affiliates or Deutsche Mortgage & Asset Receiving
Corporation or any of its affiliates, and neither the certificates nor the
underlying mortgage loans are insured or guaranteed by any governmental agency.
------------------------------
Certain characteristics of the offered certificates include:
- -------------------------------------------------------------------------------------------------------
INITIAL S&P/MOODY'S
INITIAL PASS-THROUGH ASSUMED FINAL ANTICIPATED
CERTIFICATE BALANCE(1) RATE DISTRIBUTION DATE(2) RATINGS
- -------------------------------------------------------------------------------------------------------
Class A-1 ......... $162,434,000 % October 10, 2012 AAA/Aaa
- -------------------------------------------------------------------------------------------------------
Class A-2 ......... $347,583,000 June 10, 2013 AAA/Aaa
- -------------------------------------------------------------------------------------------------------
Class B ........... $28,553,000 (3) June 10, 2013 AA/Aa2
- -------------------------------------------------------------------------------------------------------
Class C ........... $12,691,000 (3) June 10, 2013 AA-/Aa3
- -------------------------------------------------------------------------------------------------------
Class D ........... $19,036,000 (3) July 10, 2013 A/A2
- -------------------------------------------------------------------------------------------------------
Class E ........... $10,575,000 (3) October 10, 2013 A-/A3
- -------------------------------------------------------------------------------------------------------
- --------------
(FOOTNOTES ON PAGE S-3)
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED THAT THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS ARE TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INVESTING IN THE OFFERED CERTIFICATES INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE S-24 OF THIS PROSPECTUS SUPPLEMENT AND PAGE 8 OF THE
PROSPECTUS.
Deutsche Bank Securities Inc. and ABN AMRO Incorporated are acting as
co-lead managers and underwriters of the offering and Banc of America Securities
LLC, J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated are acting as co-managers of the offering. Deutsche Bank Securities
Inc. is sole bookrunner of all the offered certificates. The underwriters will
offer the offered certificates to the public in negotiated transactions at
varying prices to be determined at the time of sale.
Deutsche Bank Securities Inc., ABN AMRO Incorporated, Banc of America
Securities LLC, J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated are required to purchase the offered certificates (in the
amounts set forth in this prospectus supplement) from Deutsche Mortgage & Asset
Receiving Corporation, subject to certain conditions. Deutsche Mortgage & Asset
Receiving Corporation expects to receive from the sale of the offered
certificates approximately ___% of the initial aggregate certificate balance of
the offered certificates, plus accrued interest, before deducting expenses
payable by it. The underwriters expect to deliver the offered certificates to
purchasers on or about June __, 2003.
DEUTSCHE BANK SECURITIES ABN AMRO INCORPORATED
Sole Book Running Manager and Co-Lead Manager Co-Lead Manager
BANC OF AMERICA SECURITIES LLC JPMORGAN MERRILL LYNCH & CO.
Co-Manager Co-Manager Co-Manager
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS JUNE __, 2003
COMM 2003-LNB1
Commercial Mortgage Pass-Through Certificates
[GRAPHIC OMITTED]
GEOGRAPHIC OVERVIEW OF MORTGAGE POOL
[GRAPHIC OMITTED]
75 ROCKEFELLER PLAZA, New York, NY
[GRAPHIC OMITTED]
GSA -- CLARKSBURG, Clarksburg, WV
[GRAPHIC OMITTED]
GATEWAY CENTER BJ'S, Brooklyn, NY
[GRAPHIC OMITTED]
SIERRA VISTA MALL, Clovis, CA
[GRAPHIC OMITTED]
THE RESERVE AT SUGARLOAF, Duluth,GA
[GRAPHIC OMITTED]
PLAZA ALMERIA, Huntington Beach, CA
[GRAPHIC OMITTED]
CHANDLER FASHION CENTER, Chandler, AZ
WESTFIELD SHOPPINGTOWN PORTFOLIO
[GRAPHIC OMITTED]
WESTFIELD SHOPPINGTOWN MAINPLACE, Santa Ana, CA
[GRAPHIC OMITTED]
WESTFIELD SHOPPINGTOWN GALLERIA AT ROSEVILLE, Roseville, CA
[GRAPHIC OMITTED]
DESERT CROSSING T.J. MAXX, Palm Desert, CA
[GRAPHIC OMITTED]
REDLAND CENTER, Rockville, MD
[GRAPHIC OMITTED]
EMPIRIAN LUXURY TOWERS, Philadelphia, PA
[GRAPHIC OMITTED]
UNIVERSITY VILLAGE APARTMENTS,
Central, SC
[GRAPHIC OMITTED]
PALLADIUM AT BIRMINGHAM, Birmingham, MI
[GRAPHIC OMITTED]
1669 COLLINS AVENUE, MIAMI BEACH LAND, Miami Beach, FL
[GRAPHIC OMITTED]
COPLEY CORPORATE CENTER, San Diego, CA
The footnotes to the table on the cover page are as follows:
- -------------
(1) Approximate, subject to adjustment as described in this prospectus
supplement.
(2) The "Assumed Final Distribution Date" with respect to any class of offered
certificates is the distribution date on which the final distribution would
occur for such class of certificates based upon the assumption that no
mortgage loan is prepaid prior to its stated maturity date and otherwise
based on modeling assumptions described in this prospectus supplement. The
actual performance and experience of the mortgage loans will likely differ
from such assumptions. The Rated Final Distribution Date (as defined in
this prospectus supplement) for each class of offered certificates is the
Distribution Date in June 2038. See "Yield and Maturity Considerations" and
"Ratings" in this prospectus supplement.
(3) The rate shown is the initial pass-through rate. The pass-through rates on
the Class B, Class C, Class D and Class E Certificates will equal one of
(i) a fixed rate, (ii) a rate equal to the lesser of the related initial
Pass-Through Rate and the Weighted Average Net Mortgage Pass-Through Rate
(as defined in this prospectus supplement), (iii) a rate equal to the
Weighted Average Net Mortgage Pass-Through Rate less a specified percentage
or (iv) a rate equal to the Weighted Average Net Mortgage Pass-Through
Rate.
-------------------------------
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the offered certificates is contained in two separate
documents that progressively provide more detail: (a) the accompanying
prospectus, which provides general information, some of which may not apply to
the offered certificates; and (b) this prospectus supplement, which describes
the specific terms of the offered certificates. If the terms of the offered
certificates vary between this prospectus supplement and the accompanying
prospectus, you should rely on the information in this prospectus supplement.
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. We have not authorized anyone to
provide you with information that is different from that contained in this
prospectus supplement and the prospectus. The information in this prospectus
supplement is accurate only as of the date of this prospectus supplement.
This prospectus supplement and the accompanying prospectus include cross
references to sections in these materials where you can find further related
discussions. The Tables of Contents in this prospectus supplement and the
prospectus identify the pages where these sections are located.
Certain capitalized terms are defined and used in this prospectus
supplement and the prospectus to assist you in understanding the terms of the
offered certificates and this offering. The capitalized terms used in this
prospectus supplement are defined on the pages indicated under the caption
"INDEX OF PRINCIPAL TERMS" beginning on page S-180 in this prospectus
supplement. The capitalized terms used in the prospectus are defined on the
pages indicated under the caption "INDEX OF PRINCIPAL TERMS" beginning on page
108 in the prospectus.
-------------------------------
In this prospectus supplement, the terms "Depositor," "we," "us" and "our"
refer to Deutsche Mortgage & Asset Receiving Corporation.
-------------------------------
UNTIL THE DATE THAT IS NINETY DAYS FROM THE DATE OF THIS PROSPECTUS
SUPPLEMENT, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR
NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS'
OBLIGATION TO DELIVER A PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
S-3
EXECUTIVE SUMMARY
This Executive Summary does not include all of the information you need to
consider in making your investment decision. You are advised to carefully read,
and should rely solely on, the detailed information appearing elsewhere in this
prospectus supplement and the prospectus relating to the offered certificates
and the underlying mortgage loans.
THE CERTIFICATES
INITIAL
CERTIFICATE APPROXIMATE DESCRIPTION ASSUMED INITIAL WEIGHTED
ANTICIPATED BALANCE OR PERCENT OF APPROXIMATE OF PASS- FINAL PASS- AVERAGE
RATINGS NOTIONAL TOTAL CREDIT THROUGH DISTRIBUTION THROUGH LIFE PRINCIPAL
CLASS (S&P/MOODY'S) BALANCE(1) CERTIFICATES SUPPORT RATE DATE RATE CUSIP NO. (YRS.)(2) WINDOW(2)
- ------------------------------------------------------------------------------------------------------------------------------------
OFFERED CERTIFICATES
- ------------------------------------------------------------------------------------------------------------------------------------
Class A-1(8) AAA/Aaa $162,434,000 19.20% 18.125%(3) 10/10/2012 ___% ______ 5.70 7/03-10/12
- ------------------------------------------------------------------------------------------------------------------------------------
Class A-2(8) AAA/Aaa $347,583,000 41.08 18.125%(3) 6/10/2013 ___% ______ 9.71 10/12-6/13
- ------------------------------------------------------------------------------------------------------------------------------------
Class B AA/Aa2 $28,553,000 3.37 14.750% (4) 6/10/2013 ___% ______ 9.96 6/13-6/13
- ------------------------------------------------------------------------------------------------------------------------------------
Class C AA-/Aa3 $12,691,000 1.50 13.250% (4) 6/10/2013 ___% ______ 9.96 6/13-6/13
- ------------------------------------------------------------------------------------------------------------------------------------
Class D A/A2 $19,036,000 2.25 11.000% (4) 7/10/2013 ___% ______ 10.01 6/13-7/13
- ------------------------------------------------------------------------------------------------------------------------------------
Class E A-/A3 $10,575,000 1.25 9.750% (4) 10/10/2013 ___% ______ 10.10 7/13-10/13
- ------------------------------------------------------------------------------------------------------------------------------------
PRIVATE CERTIFICATES(6)
- ------------------------------------------------------------------------------------------------------------------------------------
Class X-1 AAA/Aaa $846,037,513(7) NA NA Variable 2/10/2024 ___% ______ NA NA
Interest
Only(7)
- ------------------------------------------------------------------------------------------------------------------------------------
Class X-2 AAA/Aaa $817,601,000(7) NA NA Variable 6/10/2010 ___% ______ NA NA
Interest
Only(7)
- ------------------------------------------------------------------------------------------------------------------------------------
Class A-1A(8) AAA/Aaa $182,676,000 21.59% 18.125%(3) 6/10/2013 ___% ______ 8.70 7/03-6/13
- ------------------------------------------------------------------------------------------------------------------------------------
Class F BBB+/Baa1 $10,576,000 1.25 8.500% (4) 8/10/2014 ___% ______ 10.93 10/13-8/14
- ------------------------------------------------------------------------------------------------------------------------------------
Class G BBB/Baa2 $8,460,000 1.00 7.500% (4) 8/10/2014 ___% ______ 11.13 8/14-8/14
- ------------------------------------------------------------------------------------------------------------------------------------
Class H BBB-/Baa3 $12,691,000 1.50 6.000% (4) 8/10/2014 ___% ______ 11.13 8/14-8/14
- ------------------------------------------------------------------------------------------------------------------------------------
Class J BB+/Ba1 $16,921,000 2.00 4.000% (5) 8/10/2014 ___% ______ 11.13 8/14-8/14
- ------------------------------------------------------------------------------------------------------------------------------------
Class K BB/Ba2 $4,230,000 0.50 3.500% (5) 8/10/2014 ___% ______ 11.13 8/14-8/14
- ------------------------------------------------------------------------------------------------------------------------------------
Class L BB-/Ba3 $5,287,000 0.62 2.875% (5) 8/10/2014 ___% ______ 11.13 8/14-8/14
- ------------------------------------------------------------------------------------------------------------------------------------
Class M B+/B1 $4,231,000 0.50 2.375% (5) 8/10/2014 ___% ______ 11.13 8/14-8/14
- ------------------------------------------------------------------------------------------------------------------------------------
Class N B/B2 $4,230,000 0.50 1.875% (5) 8/10/2014 ___% ______ 11.13 8/14-8/14
- ------------------------------------------------------------------------------------------------------------------------------------
Class O B-/B3 $3,172,000 0.37 1.500% (5) 1/10/2016 ___% ______ 11.54 8/14-1/16
- ------------------------------------------------------------------------------------------------------------------------------------
Class P NR/NR $12,691,513 1.50 0.000% (5) 2/10/2024 ___% ______ 16.58 1/16-2/24
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------
(1) Approximate; subject to a variance of plus or minus 5%.
(2) The weighted average life and principal window during which distributions
of principal would be received as set forth in the table with respect to
each class of certificates is based on (i) modeling assumptions and
prepayment assumptions described in this prospectus supplement, (ii)
assumptions that there are no prepayments or losses on the mortgage loans,
and (iii) assumptions that there are no extensions of maturity dates.
(3) Represents the approximate credit support for the Class A-1, Class A--2 and
Class A-1A Certificates in the aggregate.
(4) The pass-through rates on the Class B, Class C, Class D, Class E, Class F,
Class G and Class H certificates will equal one of (i) a fixed rate, (ii) a
rate equal to the lesser of the initial Pass-Through Rate for such Class
and the Weighted Average Net Mortgage Pass-Through Rate (as defined in this
prospectus supplement), (iii) a rate equal to the Weighted Average Net
Mortgage Pass-Through Rate less a specified percentage or (iv) a rate equal
to the Weighted Average Net Mortgage Pass-Through Rate.
(5) The pass-through rates on the Class J, Class K, Class L, Class M, Class N,
Class O and Class P Certificates will equal a fixed rate subject to a cap
of the Weighted Average Net Mortgage Pass-Through Rate.
(6) Not offered hereby.
(7) The Class X-1 and Class X-2 Certificates will not have a certificate
balance. Interest will accrue on such classes of certificates at the
applicable pass-through rate, determined as described in this prospectus
supplement, on their notional balances.
(8) For purposes of making distributions to the Class A-1, Class A-2 and Class
A-1A certificates, the pool of mortgage loans will be deemed to consist of
two distinct loan groups, loan group 1 and loan group 2. Loan group 1 will
consist of 60 mortgage loans, representing approximately 78.41% of the
initial outstanding pool balance. Loan group 2 will consist of 32 mortgage
loans, representing approximately 21.59% of the aggregate principal balance
of the pool of mortgage loans as of the cut-off date. Loan group 2 will
include approximately 92.16% of all the mortgage loans secured by
multifamily properties and approximately 80.33% of all the mortgage loans
secured by manufactured housing properties).
S-4
So long as funds are sufficient on any distribution date to make
distributions of all interest on such distribution date to the Class A-1,
Class A-2, Class A-1A, Class X-1 and Class X-2 certificates, interest
distributions on the Class A-1 and Class A-2 certificates will be based
upon amounts available relating to mortgage loans in loan group 1 and
interest distributions on the Class A-1A certificates will be based upon
amounts available relating to mortgage loans in loan group 2. In addition,
generally, the Class A-1 and Class A-2 certificates will be entitled to
receive distributions of principal collected or advanced in respect of
mortgage loans in loan group 2 after the certificate principal balance of
the Class A-1A certificates has been reduced to zero, and the Class A-1A
certificates will be entitled to receive distributions of principal
collected or advanced in respect of mortgage loans in loan group 1 after
the certificate principal balance of the Class A-2 certificates has been
reduced to zero. However, on and after any distribution date on which the
certificate principal balances of the Class B through Class P certificates
have been reduced to zero, distributions of principal collected or advanced
in respect of the pool of mortgage loans will be distributed to the Class
A-1, Class A-2 and Class A-1A certificates, PRO RATA.
The Class R and Class LR Certificates are not represented in this table.
The following table shows information regarding the mortgage loans and the
mortgaged properties as of the cut-off date. All weighted averages set forth
below are based on the principal balances of the mortgage loans as of such date.
THE MORTGAGE POOL
Initial Outstanding Pool Balance (1) ............................ $846,037,514
Number of Mortgage Loans ........................................ 92
Number of Mortgaged Properties .................................. 99
Average Mortgage Loan Balance ................................... $9,196,060
Weighted Average Mortgage Rate .................................. 5.629%
Weighted Average Remaining Term to Maturity (in months) ......... 118
Weighted Average Debt Service Coverage Ratio .................... 1.64x
Weighted Average Loan-to-Value Ratio ............................ 69.00%
- -----------------
(1) Subject to a permitted variance of plus or minus 5%.
S-5
TABLE OF CONTENTS
EXECUTIVE SUMMARY .............................. S-4
SUMMARY OF THE PROSPECTUS
SUPPLEMENT .................................. S-7
RISK FACTORS ................................... S-24
Risks Related to the Mortgage Loans ......... S-24
Conflicts of Interest ....................... S-46
Risks Related to the Offered
Certificates .............................. S-47
DESCRIPTION OF THE MORTGAGE
POOL ........................................ S-51
General ..................................... S-51
Security for the Mortgage Loans ............. S-51
The Mortgage Loan Sellers ................... S-55
Certain Underwriting Matters ................ S-55
Underwriting Standards ...................... S-57
GACC's Underwriting Standards ............... S-57
LaSalle's Underwriting Standards ............ S-59
Description of the Ten Largest
Mortgage Loans ............................ S-60
Additional Loan Information ................. S-86
Certain Terms and Conditions of the
Mortgage Loans ............................ S-106
DESCRIPTION OF THE OFFERED
CERTIFICATES ................................ S-110
General ..................................... S-110
Distributions ............................... S-111
Realized Losses ............................. S-121
Prepayment Interest Shortfalls .............. S-122
Subordination ............................... S-122
Appraisal Reductions ........................ S-123
Delivery, Form and Denomination ............. S-125
Book-Entry Registration ..................... S-126
Definitive Certificates ..................... S-127
YIELD AND MATURITY
CONSIDERATIONS .............................. S-129
Yield Considerations ........................ S-129
Weighted Average Life ....................... S-130
Certain Price/Yield Tables .................. S-134
THE POOLING AND SERVICING
AGREEMENT ................................... S-137
General ..................................... S-137
Assignment of the Mortgage Loans ............ S-137
Representations and Warranties;
Repurchases; Substitution ................. S-137
Servicing of the Mortgage Loans;
Collection of Payments .................... S-140
Advances .................................... S-141
Accounts .................................... S-143
Withdrawals from the Collection
Account ................................... S-144
Enforcement of "Due-on-Sale" and
"Due-on-Encumbrance" Clauses .............. S-145
Defeasance .................................. S-146
Inspections ................................. S-146
Insurance Policies .......................... S-147
Evidence as to Compliance ................... S-149
Certain Matters Regarding the
Depositor, the Servicer and the
Special Servicer .......................... S-150
Events of Default ........................... S-151
Rights Upon Event of Default ................ S-152
Amendment ................................... S-153
Voting Rights ............................... S-154
Realization Upon Defaulted Mortgage
Loans ..................................... S-154
Modifications ............................... S-157
Optional Termination ........................ S-158
The Trustee and the Bond
Administrator ............................. S-159
Duties of the Trustee ....................... S-160
The Servicer ................................ S-161
Servicing Compensation and
Payment of Expenses ....................... S-161
Special Servicing ........................... S-161
Servicing of the Non-Serviced
Mortgage Loans ............................ S-166
Certain Rights of the Holder of
the Westfield Shoppingtown
Portfolio B Note .......................... S-166
Certain Rights of the Holder of the
Chandler Fashion Center B Note ............ S-168
Servicer and Special Servicer
Permitted to Buy Certificates ............... S-170
Reports to Certificateholders; Available
Information ............................... S-170
Other Information ........................... S-172
USE OF PROCEEDS ............................. S-173
CERTAIN FEDERAL INCOME TAX CONSEQUENCES ..... S-173
ERISA CONSIDERATIONS ........................ S-175
LEGAL INVESTMENT ............................ S-177
METHOD OF DISTRIBUTION ...................... S-177
LEGAL MATTERS ............................... S-178
RATINGS ..................................... S-178
INDEX OF PRINCIPAL TERMS .................... S-180
ANNEX A-1 Certain Characteristics of the
Mortgage Loans ............................ A-1-1
ANNEX A-2 Certain Characteristics of the
Multifamily and Manufactured Housing
Community Mortgage Loans .................. A-2-1
ANNEX A-3 Amortization Schedule of the
Westfield Shoppingtown Mortgage Loan ...... A-3-1
ANNEX B Structural and Collateral Term
Sheet ..................................... B-1
ANNEX C Global Clearance, Settlement
and Tax Documentation Producers ........... C-1
S-6
SUMMARY OF THE PROSPECTUS SUPPLEMENT
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS
SUPPLEMENT AND DOES NOT INCLUDE ALL OF THE RELEVANT INFORMATION YOU NEED TO
CONSIDER IN MAKING YOUR INVESTMENT DECISION. YOU ARE ADVISED TO CAREFULLY READ,
AND SHOULD RELY SOLELY ON, THE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS SUPPLEMENT AND IN THE ACCOMPANYING PROSPECTUS.
Title of Certificates ..................... COMM 2003-LNB1 Commercial Mortgage
Pass-Through Certificates.
RELEVANT PARTIES AND DATES
Depositor ................................. Deutsche Mortgage & Asset Receiving
Corporation.
Servicer .................................. GMAC Commercial Mortgage
Corporation, a California
corporation, with respect to all of
the mortgage loans (including the
Chandler Fashion Center Loan, which
will be serviced pursuant to a
separate pooling and servicing
agreement) other than the mortgage
loan known as "Westfield
Shoppingtown Portfolio" (the
"Westfield Shoppingtown Portfolio
Loan"), and GEMSA Loan Services,
L.P., a Delaware limited
partnership, with respect to the
Westfield Shoppingtown Portfolio
Loan. GMAC Commercial Mortgage
Corporation's address is 200 Witmer
Road, Horsham Pennsylvania 19044.
GEMSA Loan Services, L.P.'s address
is 1500 City West Boulevard, Suite
200, Houston, Texas 77042, and its
telephone number is (713) 458-7200.
See "The Pooling and Servicing
Agreement--The Servicer" in this
prospectus supplement.
Special Servicer .......................... Lennar Partners, Inc., a Florida
corporation, with respect to all of
the mortgage loans other than the
Westfield Shoppingtown Portfolio
Loan and the mortgage loan known as
"Chandler Fashion Center" (the
"Chandler Fashion Center Loan";
together with the Westfield
Shoppingtown Portfolio Loan, each a
"Non-Serviced Mortgage Loan"),
KeyCorp Real Estate Capital Markets,
Inc., an Ohio corporation, with
respect to the Westfield
Shoppingtown Portfolio Loan and GMAC
Commercial Mortgage Corporation, a
California corporation, with respect
to the Chandler Fashion Center Loan.
Lennar Partners, Inc.'s address is
1601 Washington Avenue, Suite 800,
Miami Beach, Florida 33139 and its
telephone number is (305) 695-5500.
KeyCorp Real Estate Capital Markets,
Inc.'s address is 911 Main Street,
Suite 1500, Kansas City, Missouri
64106, and its telephone number is
(816) 221-8800. GMAC Commercial
Mortgage Corporation's address is
200 Witmer Road, Horsham
Pennsylvania 19044. See "The Pooling
and Servicing Agreement--Special
Servicing--The Special Servicer" in
this prospectus supplement.
Trustee ................................... Wells Fargo Bank Minnesota, N.A., a
national banking association. The
trustee's address is (i) for
certificate transfer purposes, Sixth
Street and Marquette Avenue,
Minneapolis, Minnesota 55479, and
(ii) for all other purposes, 9062
Old Annapolis Road, Columbia,
Maryland 21045-1951, Attention:
Corporate Trust Services (COMM
2003-LNB1), and its telephone number
is (410) 884-2000. See "The Pooling
and Servicing Agreement--The Trustee
and the Bond Administrator" in this
prospectus supplement.
S-7
Bond Administrator ........................ LaSalle Bank National Association, a
national banking association. See
"The Pooling and Servicing
Agreement--The Trustee and the Bond
Administrator" in this prospectus
supplement.
Mortgage Loan Sellers ..................... German American Capital Corporation,
an affiliate of Deutsche Bank
Securities Inc., an underwriter; and
LaSalle Bank National Association,
an affiliate of ABN AMRO
Incorporated, an underwriter. See
"Description of the Mortgage
Pool--The Mortgage Loan Sellers" in
this prospectus supplement.
The mortgage loans were originated
or purchased by the mortgage loan
sellers as follows:
% OF % OF % OF
NUMBER INITIAL INITIAL INITIAL CUT-OFF
OF OUTSTANDING LOAN LOAN DATE
MORTGAGE POOL GROUP 1 GROUP 2 PRINCIPAL
MORTGAGE LOAN SELLER LOANS BALANCE BALANCE BALANCE BALANCE
- --------------------- -------- ----------- -------- -------- ---------
German American Capital Corporation ....... 30 67.73% 75.39% 39.88% $572,995,298
LaSalle Bank National Association ......... 62 32.27% 24.61% 60.12% $273,042,215
Underwriters .............................. Deutsche Bank Securities Inc., ABN
AMRO Incorporated and Banc of
America Securities LLC, J.P. Morgan
Securities Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
Deutsche Bank Securities Inc. and
ABN AMRO Incorporated are required
to purchase the offered certificates
from the Depositor (in the amounts
set forth in this prospectus
supplement under "Method of
Distribution"), subject to certain
conditions. See "Method of
Distribution" in this prospectus
supplement.
Cut-off Date .............................. June 1, 2003 (except in the case of
the mortgage loans known as "75
Rockefeller Plaza," "Shaw's
Merrimack," "Hampton Inn & Holiday
Inn," "Fredericksburg Shopping
Center" and "Commerce Square
Center," the respective loan closing
date in June 2003).
Closing Date .............................. On or about June __, 2003.
Distribution Date ......................... The 10th day of each month, or if
such 10th day is not a business day,
the business day immediately
following such 10th day, commencing
in July 2003.
Record Date ............................... With respect to any Distribution
Date, the close of business on the
last business day of the preceding
month.
Determination Date ........................ The sixth day of the month in which
the related Distribution Date
occurs, or if such sixth day is not
a business day, then the immediately
preceding business day.
Except:
In the case of the Westfield
Shoppingtown Portfolio Loan, the
earlier of (i) the sixth day of the
month in which the related
Distribution Date occurs, or if such
sixth day is not a business day,
then the immediately preceding
business day, and (ii) the fourth
business day prior to the related
Distribution Date; and
S-8
In the case of the Chandler Fashion
Center Loan, the first day of the
month in which the related
Distribution Date occurs, or if such
first day is not a business day, the
next succeeding business day.
Collection Period ......................... With respect to a Distribution Date,
the period that begins immediately
following the Determination Date in
the calendar month preceding the
month in which such Distribution
Date occurs (or, in the case of the
initial Distribution Date,
immediately following the Cut-off
Date) and ends on the Determination
Date in the calendar month in which
such Distribution Date occurs.
Interest Accrual Period ................... With respect to any Distribution
Date, the calendar month immediately
preceding the month in which such
Distribution Date occurs.
OFFERED CERTIFICATES
General ................................... The Depositor is offering the
following six classes of COMM
2003-LNB1 Commercial Mortgage
Pass-Through Certificates
(collectively, the "Offered
Certificates") as part of the trust:
o Class A-1
o Class A-2
o Class B
o Class C
o Class D
o Class E
The trust created by the Depositor
(the "Trust") will consist of a
total of 21 classes, the following
15 of which are not being offered
through this prospectus supplement
and the accompanying prospectus:
Class A-1A, Class X-1, Class X-2,
Class F, Class G, Class H, Class J,
Class K, Class L, Class M, Class N,
Class O, Class P, Class R and Class
LR (collectively, the "Private
Certificates").
The Offered Certificates and the
Private Certificates will represent
beneficial ownership interests in
the Trust created by the Depositor.
The Trust's assets will primarily
consist of 92 mortgage loans secured
by first liens on 99 commercial and
multifamily properties.
Certificate Balances ...................... Your certificates have the
approximate aggregate initial
certificate balance set forth below,
subject to a permitted variance of
plus or minus 5%.
Class A-1 ............ $ 162,434,000
Class A-2 ............ $ 347,583,000
Class B .............. $ 28,553,000
Class C .............. $ 12,691,000
Class D .............. $ 19,036,000
Class E .............. $ 10,575,000
The Private Certificates (other than
the Class R and Class LR
Certificates) will have the initial
aggregate certificate balances or
S-9
notional balances, as applicable, as
set forth under "Executive
Summary--The Certificates" in this
prospectus supplement.
See "Description of the Offered
Certificates--General" and
"--Distributions" in this prospectus
supplement.
Pass-Through Rates ........................ The certificates will accrue
interest at an annual rate called a
"Pass-Through Rate" which is set
forth below.
o The Pass-Through Rate applicable
to the Class A-1, Class A-2 and
Class A-1A Certificates are
fixed at ___%, ___% and ___%,
respectively per annum.
o The Pass-Through Rates
applicable to the Class B, Class
C, Class D, Class E, Class F,
Class G and Class H Certificates
will equal one of (i) a fixed
rate, (ii) a rate equal to the
lesser of the initial
Pass-Through Rate for such Class
(as described in "Executive
Summary--The Certificates" in
this prospectus supplement) and
the Weighted Average Net
Mortgage Pass-Through Rate, each
with the initial Pass-Through
Rate described in "Executive
Summary--The Certificates" in
this prospectus supplement,
(iii) a rate equal to the
Weighted Average Net Mortgage
Pass-Through Rate less a
specified percentage or (iv) a
rate equal to the Weighted
Average Net Mortgage
Pass-Through Rate.
o The Pass-Through Rates
applicable to the Class J, Class
K, Class L, Class M, Class N,
Class O and Class P Certificates
will, at all times, be equal to
a fixed rate per annum subject
to a cap of the Weighted Average
Net Mortgage Pass-Through Rate.
The Class R and Class LR
Certificates will not have
Pass-Through Rates. See
"Description of the Offered
Certificates--Distributions--
Method, Timing and Amount" and
"--Payment Priorities" in this
prospectus supplement.
o The Pass-Through Rate applicable
to the Class X-1 Certificates
for the initial distribution
date will equal approximately
___% per annum. The Pass-Through
Rate applicable to the Class X-2
Certificates for the initial
distribution date will equal
approximately ___% per annum.
The Pass-Through Rate applicable
to the Class X-1 and Class X-2
Certificates for each
Distribution Date subsequent to
the initial distribution date
generally will be equal in the
aggregate to the difference
between the Weighted Average Net
Mortgage Pass-Through Rate and
the Weighted Average
Pass-Through Rate of the
Principal Balance Certificates
(based on their certificate
balances).
Distributions ............................. On each distribution date, you will
be entitled to receive interest and
principal distributions from
available funds in an amount equal
to your certificate's interest and
principal entitlement, subject to:
(i) payment of the respective
interest entitlement for any
class of certificates bearing
an earlier alphabetical
designation (except in respect
of the distribution of interest
among the Class X-1 and Class
X-2, Class A-1, Class A-2 and
Class A-1A Certificates, which
will have the same senior
priority), and
S-10
(ii) if applicable, payment of the
respective principal
entitlement for such
distribution date to
outstanding classes of
certificates having an earlier
alphanumeric designation.
For purposes of making distributions
to the Class A-1, Class A-2 and
Class A-1A certificates, the pool of
mortgage loans will be deemed to
consist of two distinct groups, loan
group 1 and loan group 2. Loan group
1 will consist of 60 mortgage loans,
representing approximately 78.41% of
the initial outstanding pool
balance, and loan group 2 will
consist of 32 mortgage loans,
representing approximately 21.59% of
the initial outstanding pool
balance. Loan group 2 will include
approximately 92.16% of all the
mortgage loans secured by
multifamily properties and
approximately 80.33% of all the
mortgage loans secured by
manufactured housing properties.
Annex A-1 to this prospectus
supplement will set forth the loan
group designation with respect to
each mortgage loan.
The Class A-1 and Class A-2
Certificates will have priority to
payments received in respect of
mortgage loans included in loan
group 1. The Class A-1A Certificates
will have priority to payments
received in respect of mortgage
loans included in loan group 2.
A description of the principal and
interest entitlement of each class
of Offered Certificates for each
distribution date can be found in
"Description of the Offered
Certificates--Distributions--Method,
Timing and Amount," "--Payment
Priorities" and "--Distribution of
Available Funds" in this prospectus
supplement. The Class X-1 and Class
X-2 Certificates will not be
entitled to any distributions of
principal.
Prepayment Premiums ....................... Prepayment premiums will be
allocated as described in
"Description of the Offered
Certificates--Distributions--
Prepayment Premiums" in this
prospectus supplement.
Prepayment and Yield
Considerations .......................... The yield to investors, in
particular investors in subordinate
classes, will be sensitive to the
timing of prepayments, repurchases
or purchases of mortgage loans, and
the magnitude of losses on the
mortgage loans due to liquidations.
The yield to maturity on each class
of the Offered Certificates will be
sensitive to the rate and timing of
principal payments (including both
voluntary and involuntary
prepayments, defaults and
liquidations) on the mortgage loans
and payments with respect to
repurchases thereof that are applied
in reduction of the certificate
balance of such class. See "Risk
Factors--Risks Related to the
Offered Certificates--Risks Related
to Prepayments and Repurchases" and
"--Yield Considerations" and "Yield
and Maturity Considerations" in this
prospectus supplement and "Yield and
Maturity Considerations" in the
prospectus.
S-11
Subordination; Allocation of
Losses and Certain
Expenses ................................ The chart below describes the manner
in which the rights of various
classes will be senior to the rights
of other classes. This subordination
will be effected in two ways:
entitlement to receive principal and
interest on any distribution date is
in descending order and loan losses
are allocated in ascending order.
(However, no principal payments or
principal losses will be allocated
to the Class X-1 and Class X-2
Certificates, although loan losses
will reduce the notional balances of
the Class X-1 and Class X-2
Certificates and, therefore, the
amount of interest they accrue)
-----------------------------------
Class A-1, Class A-2, Class A-1A*
Class X-1** and Class X-2**
-----------------------------------
--------------
Class B
--------------
--------------
Class C
--------------
--------------
Class D
--------------
--------------
Class E
--------------
--------------
Class F
--------------
--------------
Class G
--------------
--------------
Class H
--------------
--------------
Class J
--------------
--------------
Class K
--------------
--------------
Class L
--------------
--------------
Class M
--------------
--------------
Class N
--------------
--------------
Class O
--------------
--------------
Class P
--------------
-----------------
* The Class A-1A certificates are
not offered hereby. The Class
A-1A certificates have a
priority entitlement to
principal payments received in
respect of mortgage loans
included in loan group 2. The
Class A-1 and Class A-2
certificates have a priority
entitlement to principal
payments received in respect of
mortgage loans included in loan
group 1. See "Description of the
Offered Certificates--
Distributions--Method, Timing
and Amount" in this prospectus
supplement.
** The Class X-1 and Class X-2
Certificates are not offered
hereby and are not entitled to
distributions of principal.
NO OTHER FORM OF CREDIT ENHANCEMENT
WILL BE AVAILABLE FOR THE BENEFIT OF
THE HOLDERS OF THE OFFERED
CERTIFICATES.
S-12
Shortfalls in mortgage loan interest
that are the result of the timing of
prepayments and that are in excess
of the sum of (x) the servicing fee
payable to the Servicer and (y) the
amount of mortgage loan interest
that accrues and is collected with
respect to any principal prepayment
that is made after the date on which
interest is due will be allocated
to, and be deemed distributed to,
each class of certificates, PRO
RATA, based upon amounts
distributable in respect of interest
to each such class. See "Description
of the Offered
Certificates--Prepayment Interest
Shortfalls" in this prospectus
supplement.
Shortfalls in Available Funds ............. The following types of shortfalls in
available funds will be allocated in
the same manner as mortgage loan
losses: (i) shortfalls resulting
from additional servicing
compensation (other than servicing
fees) which the Servicer or Special
Servicer is entitled to receive;
(ii) shortfalls resulting from
interest on advances made by the
Servicer, the Special Servicer or
the Trustee (to the extent not
covered by default interest and late
payment charges paid by the
borrower); (iii) shortfalls
resulting from unanticipated
expenses of the Trust (including,
but not limited to, expenses
relating to environmental
assessments, appraisals, any
administrative or judicial
proceeding, management of REO
properties, maintenance of insurance
policies, and permissible
indemnification); and (iv)
shortfalls resulting from a
reduction of a mortgage loan's
interest rate by a bankruptcy court
or from other unanticipated or
default-related expenses of the
Trust.
S-13
THE MORTGAGE POOL
Characteristics of the Mortgage Pool
A. General ................................ For a more complete description of
the mortgage loans, see the
following sections in this
prospectus supplement:
o Description of the Mortgage
Pool; and
o Annex A-1 (Certain
Characteristics of the Mortgage
Loans).
All numerical information provided
in this prospectus supplement with
respect to the mortgage loans is
approximate. All weighted average
information regarding the mortgage
loans reflects weighting of the
mortgage loans by their respective
principal balances as of the Cut-off
Date.
ALL MORTGAGE LOANS LOAN GROUP 1 LOAN GROUP 2
---------------------- ---------------- -----------------
Number of Mortgage Loans ................ 92 60 32
Number of Mortgaged
Properties ............................ 99 64 35
Aggregate Initial Principal
Balance (plus or minus 5%) ............ $846,037,514 $663,361,297 $182,676,217
Range of Mortgage Loan
Principal Balances .................... $ 1,147,709 $ 1,147,709 $ 1,298,836
to to to
........................................ $65,000,000 $65,000,000 $38,063,492
Average Mortgage Loan
Principal Balance ..................... $9,196,060 $11,056,022 $ 5,708,632
Range of Mortgage Rates ................. 4.665% to 4.665% to 4.940% to
........................................ 7.250% 7.250% 6.100%
Weighted Average
Mortgage Rate ......................... 5.629% 5.653% 5.541%
Range of Remaining
Terms to Maturity ..................... 55 months 55 months 59 months
........................................ to 248 months to 248 months to 124 months
Weighted Average Remaining
Term to Maturity ...................... 118 months 119 months 113 months
Range of Remaining
Amortization Term ..................... 0 months to 0 months to 293 months to
360 months 360 months 360 months
Weighted Average Remaining
Amortization Term ..................... 320 months 311 months 352 months
Weighted Average
Loan-to-Value Ratio(1) ................ 69.00% 66.54% 77.20%
Weighted Average Debt
Service Coverage Ratio(1) ............. 1.64x 1.72x 1.39x
- ------------------
(1) In the case of two mortgage loans with two or more companion loans that are
not included in the Trust, DSCR and LTV have been calculated with respect
to the mortgage loans included in the Trust and the mortgage loans that are
pari passu in right of payment with the mortgage loans included in the
Trust. Calculations of the Weighted Average Loan-to-Value Ratio and
Weighted Average Debt Service Coverage Ratio do not include the 4 credit
tenant lease loans and 2 land loans.
S-14
The two mortgage loans identified in
the table below are secured by one
or more mortgaged properties that
also secure two or more companion
mortgage loans that are not included
in the Trust.
CUT-OFF CUT-OFF
DATE PRINCIPAL DATE PRINCIPAL PERCENT OF
BALANCE OF BALANCE OF INITIAL
CUT-OFF PARI PASSU SUBORDINATE OUTSTANDING PERCENT OF
NUMBER OF DATE PRINCIPAL COMPANION LOANS COMPANION LOAN POOL BALANCE INITIAL LOAN
MORTGAGED BALANCE OF (NOT INCLUDED (NOT INCLUDED REPRESENTED BY GROUP 1
NAME OF MORTGAGE LOANS PROPERTIES MORTGAGE LOAN IN THE TRUST) IN THE TRUST) MORTGAGE LOAN BALANCE
- -------------------------------------------------------------------------------------------------------------------------
Westfield Shoppingtown
Portfolio ..................... 2 $59,549,050 $113,770,648 $38,079,430 7.04% 8.98%
Chandler Fashion Center ......... 1 $54,181,450 $ 56,392,938 $71,987,139 6.40% 8.17%
The Westfield Shoppingtown Portfolio
Loan is secured by two mortgaged
properties that also secure three
companion loans that are not
included in the Trust. One of the
companion loans and the senior
portion of a second companion loan
are PARI PASSU in right of payment
with the Westfield Shoppingtown
Portfolio Loan and have Cut-off Date
Principal Balances of $96,270,965
and $17,499,683, respectively. The
junior portion of such second
companion loan, which is subordinate
in right of payment to the Westfield
Shoppingtown Portfolio Loan, the
other senior companion loan and the
senior portion of the related
companion loan, has a Cut-off Date
principal balance of $2,350,000. The
third companion loan is subordinate
in right of payment to the Westfield
Shoppingtown Portfolio Loan and the
two other companion loans and has a
Cut-off Date Principal Balance of
$38,079,430. The Westfield
Shoppingtown Portfolio Loan and the
three companion loans will be
serviced and administered by a
separate servicer and special
servicer pursuant to a separate
pooling and servicing agreement. The
holder of such subordinate companion
loan will have the right to purchase
the Westfield Mortgage Loan from the
Trust under certain default
circumstances. See "Description of
the Mortgage Pool--Description of
the Ten Largest Mortgage Loans--The
Westfield Shoppingtown Portfolio
Loan" in this prospectus supplement.
The Chandler Fashion Center Loan is
secured by a mortgaged property that
also secures two companion loans
that are not included in the Trust.
One of the companion loans is pari
passu in right of payment with the
Chandler Fashion Center Loan and has
a Cut-off Date Principal Balance of
$56,392,938. The second companion
loan is subordinate in right of
payment to the Chandler Fashion
Center Loan and the other companion
loan and has a Cut-off Date
Principal Balance of $71,987,139.
The Chandler Fashion Center Loan and
the two companion loans will be
serviced and administered pursuant
to a separate pooling and servicing
agreement by GMAC Commercial
Mortgage Corporation, as master
servicer and as special servicer.
The holder of such subordinate
companion loan will have the right
to purchase the Chandler Fashion
Center Loan from the Trust under
certain default circumstances. See
"Description of the Mortgage
Pool--Description of the Ten Largest
Mortgage Loans--The Chandler Fashion
Center Loan" in this prospectus
supplement.
S-15
B. NON-RECOURSE ........................... Substantially all of the mortgage
loans are non-recourse obligations.
No mortgage loan will be insured or
guaranteed by any governmental
entity or private insurer, or by any
other person.
C. FEE SIMPLE/LEASEHOLD ESTATE ............ Each mortgage loan is secured by a
first mortgage lien on the
borrower's fee simple estate (or in
3 cases, which represent 10.84% of
the initial outstanding pool
balance, a leasehold estate in all
or a portion of the property and a
fee estate in the remainder of the
property and, with regard to the
second case, a leasehold estate in
all of the property) in an
income-producing real property.
D. PROPERTY PURPOSE ....................... The number of mortgaged properties,
and the approximate percentage of
the initial outstanding pool balance
of the mortgage loans secured
thereby, for each indicated purpose
are:
PERCENTAGE PERCENTAGE PERCENTAGE
NUMBER OF AGGREGATE PRINCIPAL OF INITIAL OF INITIAL OF INITIAL
MORTGAGED BALANCE OF THE OUTSTANDING LOAN GROUP 1 LOAN GROUP 2
PROPERTY TYPE PROPERTIES MORTGAGE LOANS POOL BALANCE(1) BALANCE BALANCE
- ------------------- ------------ ------------------- --------------- ------------- -------------
Retail ......................... 34 $353,191,571 41.75% 53.24% 0.00%
ANCHORED ..................... 29 328,096,657 38.78 49.46 0.00
UNANCHORED ................... 1 1,396,503 0.17 0.21 0.00
CTL .......................... 4 23,698,411 2.80 3.57 0.00
Multifamily .................... 38 200,406,908 23.69 2.67 100.00
MULTIFAMILY .................. 32 183,337,755 21.67 2.17 92.49
MANUFACTURED HOUSING ......... 6 17,069,154 2.02 0.51 7.51
Office ......................... 15 181,574,459 21.46 27.37 0.00
Industrial ..................... 5 48,201,385 5.70 7.27 0.00
Land ........................... 2 29,130,854 3.44 4.39 0.00
Hotel .......................... 2 13,250,000 1.57 2.00 0.00
Mixed Use(2) ................... 2 14,815,706 1.75 2.23 0.00
Senior Housing ................. 1 5,466,631 0.65 0.82 0.00
--- ------------- ------ ------ ------
Total .......................... 99 $846,037,514 100.00% 100.00% 100.00%
=== ============= ====== ====== ======
- ---------------
(1) 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 loan
amounts.
(2) Includes office and retail spaces.
E. Property Location ...................... The number of mortgaged properties,
and the approximate percentage of
the initial outstanding pool balance
of mortgage loans secured thereby,
that are located in the five states
with the highest concentrations of
mortgaged properties are:
S-16
ALL MORTGAGED PROPERTIES
PERCENTAGE
OF
NUMBER OF AGGREGATE PRINCIPAL OUTSTANDING
MORTGAGED BALANCE OF THE INITIAL POOL
STATE PROPERTIES MORTGAGE LOANS BALANCE(1)
-------- ------------ ------------------- -------------
New York .................... 5 $154,224,547 18.23%
California .................. 8 139,924,421 16.54
SOUTHERN CALIFORNIA(2) .... 6 87,266,426 10.31
NORTHERN CALIFORNIA(2) .... 2 52,657,995 6.22
Arizona ..................... 4 65,220,205 7.71
Pennsylvania ................ 4 61,388,568 7.26
Georgia ..................... 12 60,528,611 7.15
Other(3) .................... 66 364,751,162 43.11
---- ------------ ------
Total ....................... 99 $846,037,514 100.00%
==== ============ ======
-------------------
(1) 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 loan amounts.
(2) Northern California properties
have a zip code greater than 93600.
Southern California properties have
a zip code less than 93600.
(3) This reference consists of 26
states.
LOAN GROUP 1
PERCENTAGE
AGGREGATE OF
NUMBER OF PRINCIPAL BALANCE INITIAL LOAN
MORTGAGED OF THE GROUP 1
STATE PROPERTIES MORTGAGE LOAN BALANCE
-------- ------------ ----------------- -------------
New York ...................... 5 $154,224,547 23.25%
California .................... 8 139,924,421 21.09
SOUTHERN CALIFORNIA(2) ...... 6 87,266,426 13.16
NORTHERN CALIFORNIA(2) ...... 2 52,657,995 7.94
Arizona ....................... 1 54,181,450 8.17
Michigan ...................... 3 46,797,312 7.05
Florida ....................... 4 44,945,532 6.78
Other(3) ...................... 43 223,288,035 33.66
--- ------------ ------
Total ......................... 64 $663,361,297 100.00%
=== ============ ======
-----------------------
(1) 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 loan amounts.
(2) Northern California properties
have a zip code greater than
93600. Southern California
properties have a zip code less
than 93600.
(3) This reference consists of 21
states.
S-17
LOAN GROUP 2
PERCENTAGE
AGGREGATE OF
NUMBER OF PRINCIPAL BALANCE INITIAL LOAN
MORTGAGED OF THE GROUP 2
STATE PROPERTIES MORTGAGE LOAN BALANCE
-------- ------------ ----------------- -------------
Georgia ...................... 8 $ 51,227,200 28.04%
Pennsylvania ................. 1 38,063,492 20.84
Illinois ..................... 3 21,230,272 11.62
Florida ...................... 2 11,337,586 6.21
Arizona ...................... 3 11,038,755 6.04
Other(2) ..................... 18 49,778,913 27.25
--- ------------ ------
Total ........................ 35 $182,676,217 100.00%
=== ============ ======
------------------
(1) 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 loan amounts.
(2) This reference consists of 10
states.
See "Description of the Mortgage
Pool--Additional Loan Information"
in this prospectus supplement.
F. Other Mortgage Loan Features ........... As of the Cut-off Date, the mortgage
loans had the following
characteristics:
o No scheduled payment of
principal and interest on any
mortgage loan was thirty days or
more past due, and no mortgage
loan has been thirty days or
more delinquent in the past
year.
o Several groups of mortgage loans
have related borrowers that are
affiliated with one another
through partial or complete
direct or indirect common
ownership, with the three
largest of these groups
representing 9.98%, 4.25% and
3.04%, respectively, of the
initial outstanding pool
balance, approximately 12.72%,
5.42% and 3.88% of the initial
loan group 1 balance.
o All mortgage loans bear interest
at fixed rates.
o No mortgage loan permits
negative amortization or the
deferral of accrued interest.
G. Balloon Loans .......................... The mortgage loans provide for one
of the following:
o 87 mortgage loans, representing
89.52% of the initial
outstanding pool balance (which
include 55 mortgage loans in
loan group 1 or 86.63% of such
group and 32 mortgage loans in
loan group 2 or 100.00% of such
group), provide for regularly
scheduled payments of interest
and principal based on an
amortization period longer than
the term of the mortgage loan
and therefore have an expected
balloon balance at the maturity
date.
S-18
o 4 mortgage loans, representing
2.80% of the initial outstanding
pool balance (which include 4
mortgage loans in loan group 1
or 3.57% of such group), are
fully amortizing.
o 3 mortgage loans, representing
6.39% of the initial outstanding
pool balance (which include 2
mortgage loans in loan group 1
or 4.18% of such group and 1
mortgage loan in loan group 2 or
14.45% of such group), provide
for payments of interest only
for the first 8 to 36 months of
their terms. This excludes 4
mortgage loans that are closing
in June 2003 and, as such, have
an interest-only payment in July
2003.
o 1 mortgage loan, representing
7.68% of the initial outstanding
pool balance (and 9.80% of the
initial loan group 1 balance),
provides for payments of
interest only for the entire 134
months of its term.
H. Prepayment Provisions;
Defeasance Loans ....................... As of the Cut-off Date, all of the
mortgage loans provide for a
lock-out period, followed by a
period during which defeasance is
permitted. See "Description of the
Mortgage Pool--Certain Terms and
Conditions of the Mortgage
Loans--Prepayment Provisions" and
"--Property Releases."
The mortgage loans generally provide
for a period prior to maturity
(generally three to six months)
during which prepayments may be made
without penalty.
Advances of Principal and Interest
A. General ................................ Except with respect to the Westfield
Shoppingtown Portfolio Loan, the
Servicer is required to advance
(each, a "P&I Advance") delinquent
monthly mortgage loan payments if it
determines that the advance will be
recoverable. A P&I Advance will
generally equal the delinquent
portion of the monthly mortgage loan
payment. The Servicer will not be
required to advance interest in
excess of a loan's regular interest
rate (i.e., not including any
default rate). The Servicer also is
not required to advance prepayment
or yield maintenance premiums, or
balloon payments. If an advance is
made, the Servicer will defer rather
than advance servicing fees, but
will advance the Trustee's and the
Bond Administrator's fees. GEMSA
Loan Services, L.P., as master
servicer with respect to the
Westfield Shoppingtown Portfolio
Loan, will be required to advance
delinquent monthly mortgage loan
payments with respect to the
Westfield Shoppingtown Portfolio
Loan pursuant to the servicing
agreement under which such mortgage
loan is being serviced, on terms
substantially similar but not
identical to those set forth above.
If a borrower fails to pay amounts
due on the maturity date of the
related mortgage loan, the Servicer
will be required on and after such
date and until final liquidation
thereof, to advance only an amount
equal to the interest (at the loan's
regular interest rate, as described
above) and principal portion of the
constant mortgage
S-19
loan payment due immediately prior
to the maturity date, subject to a
recoverability determination.
If either the Servicer or GEMSA Loan
Services, L.P. fails to make a
required P&I Advance, the Trustee
will be required to make the P&I
Advance. The obligation of the
Servicer and the Trustee to make a
P&I Advance will also be subject to
a determination of recoverability.
The Trustee will be entitled to
conclusively rely on the
determination of recoverability made
by the Servicer.
P&I Advances are intended to
maintain a regular flow of scheduled
interest and principal payments to
the certificateholders and are not
intended to guarantee or insure
against losses. Advances which
cannot be reimbursed out of
collections on, or in respect of,
the related mortgage loans will be
reimbursed directly from any other
collections on the mortgage loans as
provided in this prospectus
supplement and this will cause
losses to be borne by
certificateholders in the priority
specified in this prospectus
supplement. The Servicer, the
Special Servicer (in the case of
Property Advances) and the Trustee,
as the case may be, will be entitled
to interest on any advances made,
such interest accruing at the rate
and payable under the circumstances
described in this prospectus
supplement. Interest accrued on
outstanding advances may result in
reductions in amounts otherwise
available for payment on the
certificates.
See "The Pooling and Servicing
Agreement--Advances" in this
prospectus supplement.
B. Appraisal Reduction Event
Advances ............................... Certain adverse events affecting a
mortgage loan, called "Appraisal
Reduction Events," will require the
Special Servicer to obtain a new
appraisal (or, with respect to
mortgage loans having a principal
balance under $2,000,000, at the
Special Servicer's option, an
estimate of value prepared by the
Special Servicer or with the consent
of the Directing Certificateholder,
an appraisal) on the related
mortgaged property. Based on the
appraised value in such appraisal,
it may be necessary to calculate an
"Appraisal Reduction Amount." The
amount required to be advanced in
respect of a mortgage loan that has
been subject to an Appraisal
Reduction Event will be reduced so
that the Servicer will not be
required to advance interest on the
Appraisal Reduction Amount (as
described in this prospectus
supplement). Due to the payment
priorities described above, this
will reduce the funds available to
pay interest on the most subordinate
class or classes of certificates
then outstanding.
See "Description of the Offered
Certificates--Appraisal Reductions"
in this prospectus supplement.
S-20
ADDITIONAL CONSIDERATIONS
Optional Termination ...................... On any distribution date on which
the remaining aggregate principal
balance of the mortgage loans is
less than 1% of the initial
outstanding pool balance as of the
Cut-off Date, the holder of
Certificates representing greater
than 50% of the then Controlling
Class (as defined in this prospectus
supplement) may purchase, and if the
holder of Certificates representing
greater than 50% of the then
Controlling Class does not exercise
the option, the Servicer may
purchase, and if the Servicer does
not exercise the option, the Special
Servicer may purchase, all of the
mortgage loans (and all property
acquired through exercise of
remedies in respect of any mortgage
loan). Exercise of this option will
effect the termination of the Trust
and retirement of the
then-outstanding certificates. The
Trust could also be terminated in
connection with an exchange by a
sole remaining Certificateholder of
all the then outstanding
certificates, including the interest
only certificates (PROVIDED,
HOWEVER, that the Class A through
Class E certificates are no longer
outstanding), for the mortgage loans
remaining in the Trust.
See "The Pooling and Servicing
Agreement--Optional Termination" in
this prospectus supplement and
"Description of the
Certificates--Termination" in the
prospectus.
Certain Federal Income
Tax Consequences .......................... Elections will be made to treat the
Trust (other than rights to specific
payments on certain mortgage loans
identified in the Pooling and
Servicing Agreement) as two separate
REMICs--the "Lower-Tier REMIC" and
the "Upper-Tier REMIC")--for federal
income tax purposes. In the opinion
of counsel, the Trust will qualify
for this treatment pursuant to its
election.
Federal income tax consequences of
an investment in the Offered
Certificates include:
o Each class of Offered
Certificates will constitute a
class of "regular interests" in
the Upper-Tier REMIC.
o The regular interests will be
treated as newly originated debt
instruments for federal income
tax purposes.
o Beneficial owners of the Offered
Certificates will be required to
report income on the Offered
Certificates in accordance with
the accrual method of
accounting.
o One or more classes of Offered
Certificates may be issued with
original issue discount.
See "Certain Federal Income Tax
Consequences" in this prospectus
supplement and "Certain Federal
Income Tax Consequences--Federal
Income Tax Consequences for REMIC
Certificates" in the prospectus.
S-21
ERISA Considerations ...................... A fiduciary of a Plan should review
with its legal advisors whether the
purchase or holding of Offered
Certificates could give rise to a
transaction that is prohibited or is
not otherwise permitted under either
ERISA or Section 4975 of the
Internal Revenue Code of 1986, as
amended (the "Code"), or whether
there exists any statutory,
regulatory or administrative
exemption applicable thereto. The
United States Department of Labor
has granted to each of the
underwriters an administrative
exemption (Deutsche Bank Securities
Inc., as Department Final
Authorization Number 97-03E, as
amended by Prohibited Transaction
Exemption ("PTE") 2002-41 (the "DBS
Exemption"), and ABN AMRO
Incorporated, as Department Final
Authorization Number 98-08E, as
amended by PTE 2002-41 (the "ABN
Exemption" and collectively with the
DBS Exemption, the "Exemption")),
which generally exempts from the
application of certain of the
prohibited transaction provisions of
Section 406 of ERISA and the excise
taxes imposed on such prohibited
transactions by Sections 4975(a) and
(b) of the Code, transactions
relating to the purchase, sale and
holding of pass-through certificates
underwritten by the underwriters and
the servicing and operation of the
related asset pool, PROVIDED that
certain conditions are satisfied.
The Depositor expects that the
Exemption will generally apply to
the Offered Certificates, PROVIDED
that certain conditions are
satisfied. See "ERISA
Considerations" in this prospectus
supplement and "Certain ERISA
Considerations" in the prospectus.
Ratings ................................... It is a condition to their issuance
that the Offered Certificates
receive from Standard & Poor's
Ratings Services, a division of The
McGraw-Hill Companies, and Moody's
Investors Service, Inc., the credit
ratings indicated below.
S&P MOODY'S
----- -------
Class A-1 ....... AAA Aaa
Class A-2 ....... AAA Aaa
Class B ......... AA Aa2
Class C ......... AA- Aa3
Class D ......... A A2
Class E ......... A- A3
See "Ratings" in this prospectus
supplement and in the prospectus for
a discussion of the basis upon which
ratings are given, the limitations
of and restrictions on the ratings,
and the conclusions that should not
be drawn from a rating.
Legal Investment .......................... The appropriate characterization of
the Offered Certificates under
various legal investment
restrictions, and thus the ability
of investors subject to these
restrictions to purchase the Offered
Certificates, may be subject to
significant interpretative
uncertainties. None of the
certificates will constitute
"mortgage related securities" within
the meaning of the Secondary
Mortgage Market Enhancement Act of
1984, as amended. Investors should
consult their own legal advisors to
determine whether and to what
S-22
extent the Offered Certificates
constitute legal investments for
them. See "Legal Investment" in this
prospectus supplement and in the
prospectus.
Denominations; Clearance
and Settlement ............................ The Offered Certificates will be
issuable in registered form, in
minimum denominations of certificate
balance of (i) $10,000 with respect
to the Class A-1 and Class A-2
Certificates and (ii) $25,000 with
respect to the Class B, Class C,
Class D and Class E Certificates.
Investments in excess of the minimum
denominations may be made in
multiples of $1.
You may hold your certificates
through (i) The Depository Trust
Company ("DTC") (in the United
States) or (ii) Clearstream Banking,
societe anonyme ("Clearstream") or
The Euroclear System ("Euroclear")
(in Europe). Transfers within DTC,
Clearstream or Euroclear will be in
accordance with the usual rules and
operating procedures of the relevant
system. See "Description of the
Offered Certificates--Delivery, Form
and Denomination," "--Book-Entry
Registration" and "--Definitive
Certificates" in this prospectus
supplement and "Description of the
Certificates--Book-Entry
Registration and Definitive
Certificates" in the prospectus.
S-23
RISK FACTORS
You should carefully consider the risks before making an investment
decision. In particular, the timing and amount of distributions on your
certificates will depend on payments received on and other recoveries with
respect to the mortgage loans. Therefore, you should carefully consider the risk
factors relating to the mortgage loans and the mortgaged properties.
The risks and uncertainties described below are not the only ones relating
to your certificates. Additional risks and uncertainties not presently known to
us or that we currently deem immaterial may also impair your investment.
If any of the following risks actually occur, your investment could be
materially and adversely affected.
This prospectus supplement also contains forward-looking statements that
involve risks and uncertainties. Actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including the risks described below and elsewhere in this prospectus
supplement.
RISKS RELATED TO THE MORTGAGE LOANS
MORTGAGE LOANS ARE NONRECOURSE AND ARE NOT INSURED OR GUARANTEED
Payments under the mortgage loans are not insured or guaranteed by any
person or entity.
Substantially all of the mortgage loans are nonrecourse loans. If a default
occurs, the lender's remedies generally are limited to foreclosing against the
specific properties and other assets that have been pledged to secure the loan.
Payment of amounts due under the mortgage loan prior to maturity is consequently
dependent primarily on the sufficiency of the net operating income of the
mortgaged property. Payment of the mortgage loan at maturity is primarily
dependent upon the borrower's ability to sell or refinance the property for an
amount sufficient to repay the loan.
Except with respect to the 5 mortgage loans that were originated after the
Cut-off Date, all of the mortgage loans were originated within 20 months prior
to the Cut-off Date. Consequently, the mortgage loans do not have a
long-standing payment history.
COMMERCIAL LENDING IS DEPENDENT UPON NET OPERATING INCOME
The mortgage loans are secured by various types of income-producing
commercial properties. Commercial mortgage loans are generally thought to expose
a lender to greater risk than one-to-four family residential loans because
commercial mortgage loans are typically larger and are made to a single
borrower.
The repayment of a commercial loan is typically dependent upon the ability
of the applicable property to produce cash flow. Even the liquidation value of a
commercial property is determined, in substantial part, by the amount of the
mortgaged property's cash flow (or its potential to generate cash flow).
However, net operating income and cash flow can be volatile and may be
insufficient to cover debt service on the loan at any given time. Lenders
typically look to the debt service coverage ratio (that is, the ratio of net
cash flow to debt service) of a mortgage loan secured by income producing
property as an important measure of the risk of default of such mortgage loan.
The net operating income, cash flow and property value of the mortgaged
properties may be adversely affected by a large number of factors. Some of these
factors relate to the property itself, such as:
o the age, design and construction quality of the mortgaged property;
o perceptions regarding the safety, convenience and attractiveness of
the mortgaged property;
o the proximity and attractiveness of competing properties;
o the adequacy of the mortgaged property's management and maintenance;
S-24
o increases in operating expenses at the mortgaged property and in
relation to competing properties;
o an increase in the capital expenditures needed to maintain the
mortgaged property or make improvements;
o the dependence upon a single tenant, or a concentration of tenants in
a particular business or industry;
o a decline in the financial condition of a major tenant;
o an increase in vacancy rates; and
o a decline in rental rates as leases are renewed or entered into with
new tenants.
Others factors are more general in nature, such as:
o national, regional or local economic conditions (including plant
closings, military base closings, industry slowdowns and unemployment
rates);
o local real estate conditions (such as an oversupply of competing
properties, space, multifamily housing or hotel rooms);
o demographic factors;
o decreases in consumer confidence;
o changes in consumer tastes and preferences;
o retroactive changes in building codes;
o changes or continued weakness in specific industry segments; and
o the public's 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:
o the length of tenant leases;
o the creditworthiness of tenants;
o tenant defaults;
o in the case of rental properties, the rate at which new rentals occur;
and
o the mortgaged property's "operating leverage" (I.E., 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 mortgaged properties with short-term revenue sources and may lead to
higher rates of delinquency or defaults under mortgage loans.
SOME MORTGAGED PROPERTIES MAY NOT BE READILY CONVERTIBLE TO ALTERNATIVE USES
Some of the mortgaged properties may not be readily convertible to
alternative uses if those properties were to become unprofitable for any reason.
Converting commercial properties to alternate uses generally requires
substantial capital expenditures. In addition, zoning or other restrictions also
may prevent alternative uses. The liquidation value of any such mortgaged
property consequently may be substantially less than would be the case if the
property were readily adaptable to other uses.
S-25
PROPERTY VALUE MAY BE ADVERSELY AFFECTED EVEN WHEN CURRENT OPERATING INCOME IS
NOT
Various factors may adversely affect the value of the mortgaged properties
without affecting the properties' current net operating income. These factors
include, among others:
o changes in governmental regulations, fiscal policy, zoning or tax
laws;
o potential environmental legislation or liabilities or other legal
liabilities;
o the availability of refinancing; and
o changes in interest rate levels.
TENANT CONCENTRATION ENTAILS RISK
A deterioration in the financial condition of a tenant can be particularly
significant if a mortgaged property is leased to a single tenant, or a small
number of tenants. Mortgaged properties leased to a single tenant, or a small
number of tenants, also are more susceptible to interruptions of cash flow if a
tenant fails to renew its lease. This is so because: (i) the financial effect of
the absence of rental income may be severe; (ii) more time may be required to
re-lease the space; and (iii) substantial capital costs may be incurred to make
the space appropriate for replacement tenants.
In the case of 23 mortgage loans, representing 24.48% of the initial
outstanding pool balance, one or more of the related mortgaged properties are
secured by liens on mortgaged properties that are 100% leased to a single
tenant. For example, 8 of such mortgage loans, representing 3.26% of the initial
outstanding pool balance (and 4.16% of the initial loan group 1 balance), are
secured by mortgaged properties that are 100% leased to Walgreens, 3 of such
mortgage loans, representing 0.84% of the initial outstanding pool balance (and
1.07% of the initial loan group 1 balance), are secured by mortgaged properties
that are 100% leased to Eckerd, and 3 of such mortgage loans, representing 0.72%
of the initial outstanding pool balance (and 0.92% of the initial loan group 1
balance), are secured by mortgaged properties that are 100% leased to CVS.
With respect to 2 mortgage loans, representing 10.99% of the initial
outstanding pool balance (and 14.02% of the initial loan group 1 balance), the
primary lease term of the single tenant that occupies the mortgaged property
expires before the scheduled maturity date of the related mortgage loan.
The underwriting of the single-tenant mortgage loans is based primarily
upon the monthly rental payments due from the tenant under the lease of the
related mortgaged property, and where the primary lease term expires before the
scheduled maturity date of the related mortgage loan, the underwriters
considered the incentives for the primary tenant to re-lease the premises and
the anticipated rental value of the premises at the end of the primary lease
term. In addition, the loan underwriting for certain of the single-tenant
mortgage loans took into account the creditworthiness of the tenants under the
applicable leases. Accordingly, such single-tenant mortgage loans may have
higher loan-to-value ratios and lower debt-service-coverage ratios than other
types of mortgage loans.
Retail and office properties also may be adversely affected if there is a
concentration of particular tenants among the mortgaged properties or of tenants
in a particular business or industry.
For instance, certain of the retail properties have tenants that are
theaters. In recent years, the theater industry has experienced a high level of
new theater construction, increasing competition among theater operators. This
has caused some theater operators to experience financial difficulties,
resulting in downgrades in credit ratings and, in certain cases, has led to
bankruptcy filings.
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 debt service payments.
Multi-tenanted mortgaged properties also may experience higher continuing
vacancy rates and greater volatility in rental income and expenses.
S-26
RISKS RELATED TO LOAN CONCENTRATION
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 pool than would be the
case if the aggregate balance of the pool were more evenly distributed. The ten
largest mortgage loans represent approximately 48.03% of the initial outstanding
pool balance, approximately 51.53% of the initial loan group 1 balance and
approximately 35.29% of the initial loan group 2 balance. Losses on any of these
loans may have a particularly adverse effect on the Offered Certificates.
These largest loans are described under "Description of the Mortgage
Pool--Description of the Ten Largest Mortgage Loans" in this prospectus
supplement.
Each of the other mortgage loans represents no more than 2.52% of the
initial outstanding pool balance.
RISKS RELATED TO BORROWER CONCENTRATION
Several groups of mortgage loans are made to the same borrower or have
related borrowers that are affiliated with one another through partial or
complete direct or indirect common ownership, with the three largest of these
groups representing 9.98%, 4.25% and 3.04%, respectively, of the initial
outstanding pool balance. A concentration of mortgage loans with the same
borrower or related borrowers also can pose increased risks. For instance, if a
borrower that owns several mortgaged properties experiences financial difficulty
at one mortgaged property, or another income producing property that it owns, it
could attempt to avert foreclosure by filing a bankruptcy petition that might
have the effect of interrupting monthly payments for an indefinite period on all
of the related mortgage loans.
RISKS RELATING TO PROPERTY TYPE CONCENTRATION
A concentration of mortgage loans secured by the same mortgaged property
types can increase the risk that a decline in a particular industry or business
would have a disproportionately large impact on the pool of mortgage loans. In
particular, the mortgage loans in loan group 1 are secured primarily by
properties other than multifamily properties and the mortgage loans in loan
group 2 are secured primarily by multifamily properties. Because principal
distributions on the Class A-1A certificates are generally received from
collections on the mortgage loans in loan group 2, an adverse event with respect
to multifamily properties would have a substantially greater impact on the Class
A-1A certificates than if such class received principal distributions from other
property types as well. However, on and after any distribution date on which the
certificate principal balances of the Class B through Class P certificates have
been reduced to zero, the Class A-1A certificates will receive principal
distributions from the collections on the pool of mortgage loans, PRO RATA, with
the Class A-1 and Class A-2 certificates. As to property types:
o retail properties (excluding 4 CTL properties) represent 38.95% of the
initial outstanding pool balance and approximately 49.67% of the
initial loan group 1 balance;
o CTL properties represent 2.80% of the initial outstanding pool balance
and approximately 3.57% of the initial loan group 1 balance;
o multifamily properties represent 21.67% of the initial outstanding
pool balance, approximately 2.17% of the initial loan group 1 balance
and approximately 92.49% of the initial loan group 2 balance;
o manufactured housing properties represent 2.02% of the initial
outstanding pool balance, approximately 0.51% of the initial loan
group 1 balance and approximately 7.51% of the initial loan group 2
balance;
o office properties represent 21.46% of the initial outstanding pool
balance and approximately 27.37% of the initial loan group 1 balance;
S-27
o industrial properties represent 5.70% of the initial outstanding pool
balance and 7.27% of the initial group 1 balance;
o land properties represent 3.44% of the initial outstanding pool
balance and 4.39% of the initial group 1 balance;
o mixed use properties represent 1.75% of the initial outstanding pool
balance and 2.23% of the initial group 1 balance;
o hotel properties represent 1.57% of the initial outstanding pool
balance and 2.00% of the initial group 1 balance; and
o senior housing properties represent 0.65% of the initial outstanding
pool balance and 0.82% of the initial group 1 balance.
GEOGRAPHIC CONCENTRATION ENTAILS RISKS
As of the Cut-off Date, the mortgaged properties are located in 31 states.
Mortgaged properties securing mortgage loans representing 18.23% of the initial
outstanding pool balance and 23.25% of the initial loan group 1 balance are
located in New York, mortgaged properties securing mortgage loans representing
16.54% of the initial outstanding pool balance and 21.09% of the initial loan
group 1 balance are located in California and mortgaged properties securing
mortgage loans representing 7.71% of the initial outstanding pool balance and
8.17% of the initial loan group 1 balance and 6.04% of the initial loan group 2
balance are located in Arizona. See the table entitled "Geographic Concentration
of Mortgage Loans" under "Description of the Mortgage Pool" in this prospectus
supplement. Except as set forth above, no state contains more than 7.27% of the
mortgaged properties (based on the principal balance as of the Cut-off Date of
the related mortgage loans or, in the case of mortgage loans secured by multiple
mortgaged properties, on the portion of principal amount of the related mortgage
loan allocated to such mortgaged property).
The economy of any state or region in which a mortgaged property is located
may be adversely affected more than that of other areas of the country by:
o certain developments particularly affecting industries concentrated in
such state or region;
o conditions in the real estate markets where the mortgaged properties
are located;
o changes in governmental rules and fiscal policies;
o acts of nature (which may result in uninsured losses); and
o other factors which are beyond the control of the borrowers.
For example, improvements on mortgaged properties located in California may
be more susceptible to certain types of special hazards not fully covered by
insurance (such as earthquakes) than properties located in other parts of the
country. To the extent that general economic or other relevant conditions in
states or regions in which concentrations of mortgaged properties securing
significant portions of the aggregate principal balance of the mortgage loans
are located decline and result in a decrease in commercial property, housing or
consumer demand in the region, the income from and market value of the mortgaged
properties and repayment by borrowers may be adversely affected.
RISKS TO THE MORTGAGED PROPERTIES RELATING TO TERRORIST ATTACKS
On September 11, 2001, the United States was subjected to multiple
terrorist attacks, resulting in the loss of many lives and massive property
damage and destruction in New York City, the Washington, D.C. area and
Pennsylvania. The terrorist attacks may adversely affect the revenues or costs
of operation of the mortgaged properties. It is possible that any further
terrorist attacks could (i) lead to damage to one or more of the mortgaged
properties, (ii) result in higher costs for insurance premiums or diminished
availability of insurance coverage for losses related to terrorist attacks,
particularly for large mortgaged properties, which could adversely affect the
cash flow at such mortgaged properties, or (iii) impact leasing patterns or
shopping patterns which could adversely impact leasing revenue, retail
S-28
traffic and percentage rent. In particular, the decrease in air travel may have
a negative effect on certain of the mortgaged properties, including hotel
properties and those mortgaged properties in tourist areas, which could reduce
the ability of such mortgaged properties to generate cash flow. These
disruptions and uncertainties could materially and adversely affect the value
of, and an investor's ability to resell, the certificates. See "--Property
Insurance" below.
RETAIL PROPERTIES HAVE SPECIAL RISKS
30 of the mortgaged properties, which represent security for 38.95% of the
initial outstanding pool balance and 49.67% of the initial group 1 balance, are
retail properties (excluding 4 CTL properties). Of these, 29 mortgaged
properties, representing 38.78% of the initial outstanding pool balance and
49.46% of the initial group 1 balance, are considered anchored or shadow
anchored properties, and 1 mortgaged property, representing 0.17% of the initial
outstanding pool balance and 0.21% of the initial group 1 balance, are
considered unanchored properties. The quality and success of a retail property's
tenants significantly affect the property's value. For example, if the sales of
retail tenants were to decline, rents tied to a percentage of gross sales may
decline and those tenants may be unable to pay their rent or other occupancy
costs.
The presence or absence of an "anchor tenant" or a "shadow anchor" in or
near a shopping center also can be important, because anchors play a key role in
generating customer traffic and making a center desirable for other tenants. An
"anchor tenant" is usually proportionately larger in size than most other
tenants in the mortgaged property, is vital in attracting customers to a retail
property and is located on the related mortgaged property. A "shadow anchor" is
usually proportionally larger in size than most tenants in the mortgaged
property, is important in attracting customers to a retail property and is
located sufficiently close and convenient to the mortgaged property, but not on
the mortgaged property, so as to influence and attract potential customers. The
economic performance of an anchored or shadow anchored retail property will
consequently be adversely affected by:
o an anchor tenant's or shadow anchor tenant's failure to renew its
lease;
o termination of an anchor tenant's or shadow anchor tenant's lease, or
if the anchor tenant or shadow anchor owns its own site, a decision to
vacate;
o the bankruptcy or economic decline of an anchor tenant, shadow anchor
or self-owned anchor; or
o the cessation of the business of an anchor tenant, or shadow anchor
tenant or of a self-owned anchor (notwithstanding its continued
payment of rent).
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. Furthermore, certain of the anchor
stores at the retail properties have co-tenancy clauses in their leases or
operating agreements which permit those anchors to cease operating if certain
other stores are not operated at those locations. The breach of various other
covenants in anchor store leases or operating agreements also may permit those
stores to cease operating. Certain non-anchor tenants at retail properties also
may be permitted to terminate their leases if certain other stores are not
operated or if those tenants fail to meet certain business objectives.
In addition, one of the mortgaged properties, which represents 0.27% of the
initial outstanding pool balance and 0.34% of the initial group 1 balance, is
secured by a mortgage on a parcel of land and an assignment of the lease of that
land to a single tenant, which is in the process of constructing a retail store
on the leasehold estate created by the lease.
Retail properties also face competition from sources outside a given real
estate market. For example, all of the following compete with more traditional
retail properties for consumer business: factory outlet centers; discount
shopping centers and clubs; catalogue retailers; home shopping networks;
internet web sites; and telemarketers. 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 mortgage pool, as
well as the income from, and market value of, the mortgaged properties.
S-29
Moreover, additional competing retail properties may be built in the areas
where the retail properties are located.
CREDIT TENANT LEASE PROPERTIES HAVE SPECIAL RISKS
Credit tenant lease properties secure 4 of the mortgage loans, representing
approximately 2.80% of the initial outstanding pool balance and 3.57% of the
initial group 1 balance. The credit tenant lease loans are secured by mortgaged
properties subject to credit lease obligations of certain tenants which are
subject to certain offset and other rights for landlord defaults. Such
properties are leased to either (i) Walgreens (whose published long-term
unsecured debt is rated, as of June 6, 2003, "A+" by S&P and "Aa3" by Moody's)
or (ii) Shaw's Supermarkets, Inc. (whose published long-term unsecured debt is
rated, as of June 6, 2003, "A-" by S&P and "A3" by Moody's) or a subsidiary
thereof whereby the lease obligations are guaranteed by J. Sainsbury plc. Such
rating reflects the rating agency's assessment of the long-term unsecured
obligations of such entity only, and do not imply an assessment of the
likelihood that the credit tenant leases will not be terminated or such loans
repaid.
MULTIFAMILY PROPERTIES HAVE SPECIAL RISKS
38 of the mortgaged properties (including 6 manufactured housing community
properties), which represent security for 23.69% of the initial outstanding pool
balance, 2.67% of the initial loan group 1 balance and 100.00% of the initial
loan group 2 balance, are multifamily properties. Of these, 32 mortgaged
properties, representing 21.67% of the initial outstanding pool balance, 2.17%
of the initial loan group 1 balance and 92.49% of the initial loan group 2
balance, are conventional multifamily properties and 6 mortgaged properties,
representing 2.02% of the initial outstanding pool balance, 0.51% of the initial
loan group 1 balance and 7.51% of the initial loan group 2 balance, are
manufactured housing community properties.
A large number of factors may adversely affect the value and successful
operation of a multifamily property, including:
o the physical attributes of the apartment building (E.G., its age,
appearance and construction quality);
o the location of the property (e.g., a change in the neighborhood over
time);
o the ability of management to provide adequate maintenance and
insurance;
o the types of services the property provides;
o the property's reputation;
o the level of mortgage interest rates (which may encourage tenants to
purchase rather than rent housing);
o the presence of competing properties in the local market;
o adverse local or national economic conditions, which may limit the
amount of rent that can be charged and may result in a reduction in
timely rent payments or a reduction in occupancy;
o state and local regulations;
o government assistance/rent subsidy programs; and
o national, state, or local politics.
Certain states regulate the relationship of an owner and its tenants.
Commonly, these laws require a written lease, good cause for eviction,
disclosure of fees, and notification to residents of changed land use, while
prohibiting unreasonable rules, retaliatory evictions, and restrictions on a
resident's choice of unit vendors. Apartment building owners have been the
subject of suits under state "Unfair and Deceptive Practices Acts" and other
general consumer protection statutes for coercive, abusive or unconscionable
leasing and sales practices. A few states offer more significant protection. For
example,
S-30
there are provisions that limit the basis on which a landlord may terminate a
tenancy or increase its rent or prohibit a landlord from terminating a tenancy
solely by reason of the sale of the owner's building.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control on apartment buildings.
These ordinances may limit rent increases to fixed percentages, to percentages
of increases in the consumer price index, to increases set or approved by a
governmental agency, or to increases determined through mediation or binding
arbitration. In many cases, the rent control laws do not permit vacancy
decontrol. Local authority to impose rent control is pre-empted by state law in
certain states, and rent control is not imposed at the state level in those
states. In some states, however, local rent control ordinances are not
pre-empted for tenants having short-term or month-to-month leases, and
properties there may be subject to various forms of rent control with respect to
those tenants. 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 now by mortgaged properties
that are eligible (or become eligible in the future) for and have received low
income housing tax credits pursuant to Section 42 of the Internal Revenue Code
in respect of various units within the mortgaged property or have tenants that
rely on rent subsidies under various government-funded programs, including the
Section 8 Tenant-Based Assistance Rental Certificate Program of the United
States Department of Housing and Urban Development. We can give you no assurance
that such programs will be continued in their present form or that the level of
assistance provided will be sufficient to generate enough revenues for the
related borrower to meet its obligations under the related mortgage loans.
Certain of the mortgage loans may be secured now or in the future by
mortgaged properties that are subject to certain affordable housing covenants,
in respect of various units within the mortgaged properties.
MANUFACTURED HOUSING COMMUNITY PROPERTIES HAVE SPECIAL RISKS
6 of the mortgaged properties, which represent security for 2.02% of the
initial outstanding pool balance, 0.51% of the initial loan group 1 balance and
7.51% of the initial loan group 2 balance, are manufactured housing community
properties. Loans secured by liens on manufactured housing community properties
pose risks not associated with loans secured by liens on other types of income
producing real estate.
The successful operation of a manufactured housing community property may
depend upon the number of other competing residential developments in the local
market, such as:
o other manufactured housing communities;
o apartment buildings; and
o site built single family homes.
Other factors may also include:
o the physical attributes of the community, including its age and
appearance;
o location of the manufactured housing community;
o the ability of management to provide adequate maintenance and
insurance;
o the type of services or amenities it provides;
o the property's reputation; and
o state and local regulations, including rent control and rent
stabilization.
The manufactured housing community properties are "special 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
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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.
OFFICE PROPERTIES HAVE SPECIAL RISKS
15 of the mortgaged properties, which represent security for 21.46% of the
initial outstanding pool balance and 27.37% of the initial loan group 1 balance,
are office properties.
Various factors may adversely affect the value of office properties,
including:
o the quality of an office building's tenants;
o an economic decline in the business operated by the tenants;
o the diversity of an office building's tenants (or reliance on a single
or dominant tenant);
o the physical attributes of the building in relation to competing
buildings (e.g., age, condition, design, location, access to
transportation and ability to offer certain amenities, including,
without limitation, current business wiring requirements);
o the desirability of the area as a business location;
o the strength and nature of the local economy (including labor costs
and quality, tax environment and quality of life for employees); and
o an adverse change in population, patterns of telecommuting or sharing
of office space, and employment growth (which creates demand for
office space).
Moreover, the cost of refitting office space for a new tenant is often
higher than the cost of refitting other types of property.
INDUSTRIAL PROPERTIES HAVE SPECIAL RISKS
5 of the mortgaged properties, which represent security for 5.70% of the
initial outstanding pool balance and 7.27% of the initial loan group 1 balance,
are industrial properties. Various factors may adversely affect the economic
performance of an industrial property, including:
o quality of the tenants, especially if the property is occupied by a
single tenant;
o reduced demand for industrial space because of a decline in a
particular industry segment;
o whether the building design is conducive to industrial use;
o a property becoming functionally obsolete;
o the unavailability of labor sources;
o changes in access, energy prices, strikes, relocation of highways, the
construction of additional highways or other factors;
o a change in the proximity of supply sources;
o the expense of converting a previously adapted space to general use;
and
o environmental hazards.
HOTEL PROPERTIES HAVE SPECIAL RISKS
2 of the mortgaged properties, which represent security for 1.57% of the
initial outstanding pool balance and 2.00% of the initial loan group 1 balance,
are hotel properties. Various factors may adversely affect the economic
performance of a hotel, including:
o adverse economic and social conditions, either local, regional or
national (which may limit the amount that can be charged for a room
and reduce occupancy levels);
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o the construction of competing hotels or resorts;
o continuing expenditures for modernizing, refurbishing, and maintaining
existing facilities prior to the expiration of their anticipated
useful lives;
o a deterioration in the financial strength or managerial capabilities
of the owner and operator of a hotel; and
o changes in travel patterns (including, for example, the decline in air
travel following the terrorist attacks in New York City, Washington,
D.C. and Pennsylvania and the current military action in Iraq) caused
by changes in access, energy prices, strikes, relocation of highways,
the construction of additional highways or other factors.
Because hotel rooms generally are rented for short periods of time, the
financial performance of hotels tends to be affected by adverse economic
conditions and competition more quickly than other commercial properties.
Additionally, as a result of high operating costs, relatively small decreases in
revenue can cause significant stress on a property's cashflow.
Moreover, the hotel and lodging industry is generally seasonal in nature
and different seasons affect different hotels depending on type and location.
This seasonality can be expected to cause periodic fluctuations in a hotel
property's room and restaurant revenues, occupancy levels, room rates and
operating expenses.
When applicable, the liquor licenses for most of the mortgaged properties
are commonly held by affiliates of the mortgagors, unaffiliated managers and
operating lessees. The laws and regulations relating to liquor licenses
generally prohibit the transfer of such licenses to any person. In the event of
a foreclosure of a hotel property that holds a liquor license, the trustee or a
purchaser in a foreclosure sale would likely have to apply for a new license,
which might not be granted or might be granted only after a delay, which could
be significant. There can be no assurance that a new license could be obtained
promptly or at all. The lack of a liquor license in a full-service hotel could
have an adverse impact on the revenue from the related mortgaged property or on
the hotel's occupancy rate.
RISKS RELATED TO AFFILIATION WITH A FRANCHISE OR HOTEL MANAGEMENT COMPANY
Certain of the hotel properties are franchises of national hotel chains or
managed by a hotel management company. The performance of a hotel property
affiliated with a franchise or hotel management company depends in part on:
o the continued existence and financial strength of the franchisor or
hotel management company;
o the public perception of the franchise or hotel chain service mark;
and
o the duration of the franchise licensing or agreements.
Any provision in a franchise agreement or management agreement providing
for termination because of a bankruptcy of a franchisor or manager generally
will not be enforceable.
The transferability of franchise license agreements may be restricted. In
the event of a foreclosure, the Trustee may not have the right to use the
franchise license without the franchisor's consent. Conversely, in the case of
certain mortgage loans, the lender may be unable to remove a franchisor or a
hotel management company that it desires to replace following a foreclosure.
SENIOR HOUSING PROPERTIES HAVE SPECIAL RISKS
One of the mortgaged properties, which represents security for 0.65% of the
initial outstanding pool balance and 0.82% of the initial loan group 1 balance,
is a senior housing/independent living facility.
In addition to the special risks pertaining to multifamily properties, a
senior housing/independent living facility may be adversely affected by the
imposition of governmental regulation and supervision and by competing
facilities owned by non-profit organizations or governmental agencies supported
by endowments, charitable contributions, tax revenues and other sources.
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PROPERTIES WITH CONDOMINIUM OWNERSHIP HAVE SPECIAL RISKS
5 mortgage loans, representing 12.95% of the initial outstanding pool
balance, 15.25% of the initial loan group 1 balance and 4.59% of the initial
loan group 2 balance, are secured, in whole or in part, by the related
borrower's fee simple ownership interest in one or more condominium units. 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. 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 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 mortgagee 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.
The mortgage loan known as "Palladium at Birmingham," representing 4.61% of
the initial outstanding pool balance and 5.88% of the initial loan group 1
balance, is secured by two buildings, one of which consists of the borrower's
interest in four commercial condominium units (all of the commercial units) in a
residential condominium building. The borrower controls 100% of the commercial
condominium board. The borrower does not control the combined commercial and
residential board; with respect to issues common to the commercial units and the
residential units, the borrower has a 15.82% interest. The condominium
association is required to give the lender notice of a default and an
opportunity to cure. In addition, in connection with any action that would
materially alter or change the rights of a lender, such action requires the
approval of at least 67% of all first mortgagees of record (allocating one vote
for each mortgage held).
The mortgage loan known as "Redland Center," representing 3.31% of the
initial outstanding pool balance and 4.22% of the initial loan group 1 balance,
is secured by the borrower's interest in one unit (one building) of a three unit
(building) office condominium. With respect to voting rights on the condominium
board, the borrower has a 28.35% interest and is responsible for that percentage
interest in common charges. Affiliates of the borrower own the other units in
the condominium. The condominium association is required to give the lender
notice of default and an opportunity to cure. In addition, consent of the lender
is required in connection with any action that would materially amend the
condominium documents; however, the failure to deliver a negative response
within 30 days after receipt is deemed approval of such action.
The mortgage loan known as "1669 Collins Avenue, Miami Beach Land,"
representing 3.18% of the initial outstanding pool balance and 4.05% of the
initial loan group 1 balance, is secured by the borrower's interest (subject to
the tenant's ground lease) in the hotel unit (consists of the land and the hotel
portion of the building) of a three unit condominium. The borrower does not have
any voting rights because any such rights have been leased to the tenant.
However, the related condominium by-laws provide that no amendment may be
adopted that would eliminate, modify or otherwise adversely affect the rights of
a mortgagee without the prior consent of the mortgagee.
The mortgage loan known as "Plaza Almeria," representing 0.87% of the
initial outstanding pool balance and 1.10% of the initial loan group 1 balance,
is secured by the borrowers interest in 100% of the retail and office
condominium units (the ground and second floor of the building) in a mixed-use
condominium with 42 residential condominium units on the top floors of the
building (not collateral for the loan). The borrower is the owner of all of the
commercial condominium units and is responsible for 32.6% of the condominium
assessments. In connection with the assessments, the borrower deposited
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$9,500 in a reserve to cover the estimated cost of six months of condominium
assessments, and the loan documents obligate the borrower to replenish the
reserve if funds are used and to deposit additional funds if the estimated
amount is later determined by lender to be inadequate. In addition, the loan is
recourse to the sponsor for any unpaid assessments by the borrower. The
condominium board consists of 5 individuals, at least 1 and not more than 2 of
which are appointed by the borrower. The board is required to give the lender
notice of a default and an opportunity to cure. In addition, consent of the
lender is required in connection with certain actions that could materially
affect the lender's rights, including changes in the pro rata interest for any
unit, actions to encumber, sell or transfer the common areas, use of hazard
insurance proceeds or failure to maintain fire and extended coverage on the
improvements. Following and during the continuation of an event of default under
the loan documents, the lender will have the right to vote for the borrower.
The mortgage loan know as "Regal Townhomes," representing 0.99% of the
initial outstanding pool balance and 4.59% of the initial loan group 2 balance,
is secured by the borrower's interest in 100.00% of the residential condominium
units in a residential condominium complex. As such, the borrower has 100.00% of
the control rights related to the condominium regime.
Due to the nature of condominiums and a borrower's ownership interest
therein, a default on a loan secured by the borrower's interest in one or more
condominium units may not allow the holder of the mortgage loan the same
flexibility in realizing upon the underlying real property as is generally
available with respect to properties that are not condominiums. The rights of
any other unit owners, the governing documents of the owners' association and
state and local laws applicable to condominiums must be considered and
respected. Consequently, servicing and realizing upon such collateral could
subject the trust to greater expense and risk than servicing and realizing upon
collateral for other loans that are not condominiums.
CERTAIN ADDITIONAL RISKS RELATED TO TENANTS
The income from, and market value of, the mortgaged properties leased to
various tenants would be adversely affected if:
o space in the mortgaged properties could not be leased or re-leased;
o tenants were unable to meet their lease obligations;
o a significant tenant were to become a debtor in a bankruptcy case; or
o rental payments could not be collected for any other reason.
Repayment of the mortgage loans secured by retail and office properties
will be affected by the expiration of leases and the ability of the respective
borrowers to renew the leases or relet the space on comparable terms.
Even if vacated space is successfully relet, the costs associated with
reletting, including tenant improvements and leasing commissions, could be
substantial and could reduce cash flow from the mortgaged properties. Moreover,
if a tenant defaults in its obligations to a borrower, the borrower may incur
substantial costs and experience significant delays associated with enforcing
its rights and protecting its investment, including costs incurred in renovating
and reletting the property.
TENANT BANKRUPTCY ENTAILS RISKS
The bankruptcy or insolvency of a major tenant, or a number of smaller
tenants, in retail and office properties may adversely affect the income
produced by a mortgaged property. Under the Bankruptcy Code, a tenant has the
option of assuming or rejecting any unexpired lease. If the tenant rejects the
lease, the landlord's claim for breach of the lease would be a general unsecured
claim against the tenant (absent collateral securing the claim). The claim would
be limited to the unpaid rent under the lease for the periods prior to the
bankruptcy petition (or earlier surrender of the leased premises), plus the rent
under the lease for the greater of one year, or 15% (not to exceed three years),
of the remaining term of such lease.
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ENVIRONMENTAL LAWS ENTAIL RISKS
Various environmental laws may make a current or previous owner or operator
of real property liable for the costs of removal or remediation of hazardous or
toxic substances on, under, in, or emanating from such property. Those laws
often impose liability whether or not the owner or operator knew of, or was
responsible for, the presence of the hazardous or toxic substances. For example,
certain laws impose liability for release of asbestos-containing materials
("ACMs") into the air or require the removal or containment of ACMs.
Polychlorinated biphenyls ("PCBs") in hydraulic or electrical equipment may be
regulated as hazardous or toxic substances. The Environmental Protection Agency
has also identified health risks associated with elevated radon gas levels in
buildings. In some states, contamination of a property may give rise to a lien
on the property for payment of the costs of cleanup. In some states, this lien
has priority over the lien of a pre-existing mortgage. Additionally, third
parties may seek recovery from owners or operators of real properties for
personal injury or property damages associated with ACMs or other exposure to
hazardous or toxic substances related to the properties.
Federal law requires owners of certain residential housing constructed
prior to 1978 to disclose to potential residents or purchasers any condition on
the property that causes exposure to lead-based paint. Contracts for the
purchase and sale of an interest in residential housing constructed prior to
1978 must contain a "Lead Warning Statement" that informs the purchaser of the
potential hazards to pregnant women and young children associated with exposure
to lead-based paint. The ingestion of lead-based paint chips and/or the
inhalation of dust particles from lead-based paint by children can cause
permanent injury, even at low levels of exposure. Property owners may be held
liable for injuries to their tenants resulting from exposure to lead-based paint
under common law and various state and local laws and regulations that impose
affirmative obligations on property owners of residential housing containing
lead-based paint.
The owner's liability for any required remediation generally is not limited
by law and could accordingly exceed the value of the property and/or the
aggregate assets of the owner. The presence of hazardous or toxic substances
also may adversely affect the owner's ability to refinance the property or to
sell the property to a third party. The presence of, or strong potential for
contamination by, hazardous substances consequently can have a materially
adverse effect on the value of the property and a borrower's ability to repay
its mortgage loan.
In addition, under certain circumstances, a lender (such as the trust)
could be liable for the costs of responding to an environmental hazard. See
"Certain Legal Aspects of Mortgage Loans--Environmental Considerations" in the
prospectus.
With respect to the mortgage loan known as "Gateway Center BJ's,"
representing 5.37% of the initial outstanding pool balance and 6.84% of the
initial loan group 1 balance, the underlying land, purchased by the developer
(an affiliate of the borrower) from the State and the City of New York, was
formerly used as a municipal landfill. In connection with rezoning the property
for the development of a shopping center, an environmental impact statement
("EIS") of the site was completed, reviewed and approved by the applicable
environmental agencies, which revealed residual contamination which was
mitigated during construction of the shopping center in accordance with the
approved EIS. In addition, a satisfactory Phase I environmental site assessment
was received in connection with the origination of the Gateway Center BJ's Loan,
which recommended no further action. One of the loan sponsors, The Related
Companies, L.P., has provided standard environmental indemnities under such
mortgage loan.
With respect to the mortgage loan known as "Northeast Plaza," representing
0.46% of the initial outstanding pool balance and 0.58% of the initial loan
group 1 balance, there currently exists soil and ground water contamination
caused by the activities performed by a tenant, Kean's Dry Cleaning. A Voluntary
Remedial Action Cooperative Agreement with the State of Louisiana has been
signed with Kean's who has agreed to cover all costs of the cleanup and
remediation and to provide environmental and liability insurance in the amount
of $2,000,000. The borrower with respect to this loan has also provided
environmental liability insurance in the amount of $1,000,000.
With respect to the mortgage loan known as "Oakridge Shopping Center,"
representing 0.17% of the initial outstanding pool balance and 0.21% of the
initial loan group 1 balance, a $75,000 holdback
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has been established to insure the related borrower obtains a "no further
action" letter from the Wisconsin Department of Nature Resources confirming
regulatory closure relating to the release of PCB containing oil at the
mortgaged property within five (5) years from the date of the closing of the
loan.
POTENTIAL TRUST LIABILITY RELATED TO A MATERIALLY ADVERSE ENVIRONMENTAL
CONDITION
The mortgage loan sellers have represented to the Depositor that all of the
mortgaged properties (with the exception of one mortgage loan representing 0.72%
of the initial outstanding pool balance) have been subject to environmental site
assessments or an update of a previously conducted assessment or an update of an
assessment based upon information in an established database or studies within
the 12 months preceding the Cut-off Date. In the case of 2 mortgaged properties,
securing 0.94% of the initial outstanding pool balance and 4.34% of the initial
loan group 2 balance, environmental insurance was obtained in addition to
subjecting such mortgaged properties to an environmental site assessment. Each
environmental insurance policy insures the Trust against losses resulting from
certain known and unknown environmental conditions at the related mortgaged
property or properties during the applicable policy period. See "Description of
the Mortgage Pool--Certain Underwriting Matters--Environmental Site Assessments"
in this prospectus supplement. There can be no assurance that any such
assessment, study or review revealed all possible environmental hazards. Each
mortgage loan seller has informed the Depositor that no assessment, study or
review revealed any environmental condition or circumstance that such mortgage
loan seller believes will have a material adverse impact on the value of the
related mortgaged property or the borrower's ability to pay its debt. The
environmental assessments relating to certain of the mortgage loans revealed the
existence of friable or non-friable ACMs, lead-based paint, radon gas, leaking
underground storage tanks, PCB contamination or other material environmental
conditions. Each mortgage loan seller has informed the Depositor that where such
conditions were identified, the borrowers agreed to establish and maintain
operations and maintenance or abatement programs, environmental reserves, or
indemnification agreements. For more information regarding environmental
considerations, see "Certain Legal Aspects of Mortgage Loans--Environmental
Considerations" in the prospectus.
The Pooling and Servicing Agreement requires that the Special Servicer
obtain an environmental site assessment of a mortgaged property prior to
acquiring title thereto on behalf of the Trust or assuming its operation. Such
requirement may effectively preclude realization of the security for the related
note until a satisfactory environmental site assessment is obtained (or until
any required remedial action is thereafter taken), but will decrease the
likelihood that the Trust will become liable under any environmental law.
However, there can be no assurance that the requirements of the Pooling and
Servicing Agreement will effectively insulate the Trust from potential liability
under environmental laws. See "The Pooling and Servicing Agreement--Realization
Upon Defaulted Mortgage Loans" in this prospectus supplement and "Certain Legal
Aspects of Mortgage Loans--Environmental Considerations" in the prospectus.
BORROWER MAY BE UNABLE TO REPAY REMAINING PRINCIPAL BALANCE ON MATURITY DATE
87 mortgage loans, representing 89.52% of the initial outstanding pool
balance, 86.63% of the initial loan group 1 balance and 100.00% of the initial
loan group 2 balance, are "Balloon Loans" which provide for payments of interest
and principal and then have substantial payments of principal ("Balloon
Payments") due at their stated maturities unless previously prepaid.
Loans that require Balloon Payments or substantial principal payments
involve a greater risk to the lender than fully amortizing loans because a
borrower's ability to repay a Balloon Loan on its maturity date typically will
depend upon its ability either to refinance the loan or to sell the mortgaged
property at a price sufficient to permit repayment. A borrower's ability to
achieve either of these goals will be affected by a number of factors,
including:
o the availability of, and competition for, credit for commercial real
estate projects;
o prevailing interest rates;
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o the fair market value of the related properties;
o the borrower's equity in the related properties;
o the borrower's financial condition;
o the operating history and occupancy level of the property;
o tax laws; and
o prevailing general and regional economic conditions.
The availability of funds in the credit markets fluctuates over time.
RISKS RELATED TO MODIFICATION OF MORTGAGE LOANS WITH BALLOON PAYMENTS
In order to maximize recoveries on defaulted mortgage loans, the Pooling
and Servicing Agreement enables the Special Servicer to extend and modify
mortgage loans that are in material default or as to which a payment default
(including the failure to make a Balloon Payment) is reasonably foreseeable,
subject, however, to the limitations described under "The Pooling and Servicing
Agreement--Servicing of the Mortgage Loans; Collection of Payments" in this
prospectus supplement. The Servicer and the Special Servicer may extend the
maturity date of a mortgage loan under limited circumstances. See "The Pooling
and Servicing Agreement--Modifications" in this prospectus supplement. There can
be no assurance, however, that any such extension or modification will increase
the present value of recoveries in a given case. Any delay in collection of a
Balloon Payment that would otherwise be distributable in respect of a class of
Offered Certificates, whether such delay is due to borrower default or to
modification of the related mortgage loan by the Special Servicer, will likely
extend the weighted average life of such class of Offered Certificates. See
"Yield and Maturity Considerations" in this prospectus supplement and in the
prospectus.
RISKS RELATING TO BORROWERS' ORGANIZATION OR STRUCTURE
Although the loan documents generally contain covenants customarily
employed to ensure that a borrower is a single-purpose entity, in many cases the
borrowers are not required to observe all covenants and conditions which
typically are required in order for them to be viewed under standard rating
agency criteria as "special-purpose entities." In general, the borrowers'
organizational documents or the terms of the mortgage loans limit their
activities to the ownership of only the related mortgaged property or properties
and limit the borrowers' ability to incur additional indebtedness. These
provisions are designed to mitigate the possibility that the borrowers'
financial condition would be adversely impacted by factors unrelated to the
mortgaged property and the mortgage loan in the pool. However, we cannot assure
you that the related borrowers will comply with these requirements. Also,
although a borrower may currently be a single-purpose entity, in certain cases,
the borrowers previously owned property other than the related mortgaged
property and/or did not observe all covenants and conditions which typically are
required to view a borrower as a "single purpose entity." There can be no
assurance that circumstances that arose when the borrower did not observe the
required covenants and conditions will not impact the borrower or the mortgaged
property. In addition, most of the borrowers do not have an independent director
whose consent would be required to file a voluntary bankruptcy petition on
behalf of such borrower. One of the purposes of an independent director of the
borrower (or of a special-purpose entity having an interest in the borrower) is
to avoid a bankruptcy petition filing which is intended solely to benefit an
affiliate and is not justified by the borrower's own economic circumstances.
Borrowers (and any special purpose entity having an interest in any such
borrowers) that do not have an independent director may be more likely to file a
voluntary bankruptcy petition and therefore less likely to repay the related
mortgage loan. The bankruptcy of a borrower, or the general partner or the
managing member of a borrower, may impair the ability of the lender to enforce
its rights and remedies under the related mortgage.
With respect to 11 mortgage loans, representing 9.09% of the initial
outstanding pool balance, 8.75% of the initial loan group 1 balance and 10.31%
of the initial loan group 2 balance, two or more borrowers own the related
mortgaged property as tenants-in-common. As a result, if a borrower
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exercises its right of partition, the related mortgage loans may be subject to
prepayment. In addition, the tenant-in-common structure may cause delays in the
enforcement of remedies because each time a tenant-in-common borrower files for
bankruptcy, the bankruptcy court stay will be reinstated. In most cases, the
related tenant-in-common borrower waived its right to partition, reducing the
risk of partition. However, there can be no assurance that, if challenged, this
waiver would be enforceable. In some cases, the related borrower is a special
purpose entity (in some cases bankruptcy-remote), reducing the risk of
bankruptcy. In some cases, the related loan documents provide for full recourse
to the related tenant-in-common borrower and the guarantor if a tenant-in-common
files for bankruptcy. There can be no assurance that a bankruptcy proceeding
will not delay enforcement of this mortgage loan.
RISKS RELATED TO ADDITIONAL DEBT
The mortgage loans generally prohibit the borrower from incurring any
additional debt secured by the mortgaged property without the consent of the
lender. The Westfield Shoppingtown Portfolio Loan and the Chandler Fashion
Center Loan (each a "Non-Serviced Mortgage Loan" and collectively, the
"Non-Serviced Mortgage Loans") are secured by one or more mortgaged properties
that also secure two or more related mortgage loans that are not included in the
Trust (collectively, the "Companion Loans" and each, a "Companion Loan").
Certain information with respect to the Mortgage Loans that have Companion Loans
is set forth in the table below.
CUT-OFF DATE CUT-OFF DATE
PRINCIPAL BALANCE PRINCIPAL BALANCE PERCENT OF INITIAL
OF PARI PASSU OF SUBORDINATE OUTSTANDING PERCENT OF INITIAL
NUMBER OF CUT-OFF DATE COMPANION LOAN(S) COMPANION LOAN POOL BALANCE LOAN GROUP 1
MORTGAGED PRINCIPAL BALANCE (NOT INCLUDED (NOT INCLUDED REPRESENTED BY BALANCE REPRESENTED
NAME OF MORTGAGE LOAN PROPERTIES OF MORTGAGE LOAN IN THE TRUST) IN THE TRUST) MORTGAGE LOAN BY MORTGAGE LOAN
- ----------------------- ---------- ----------------- ----------------- ----------------- ------------------- -------------------
Westfield Shoppingtown
Portfolio 2 $59,549,050 $113,770,648 $38,079,430 7.04% 8.98%
Chandler Fashion Center 1 $54,181,450 $ 56,392,938 $71,987,139 6.40% 8.17%
Substantially all of the mortgage loans permit the related borrower to
incur limited unsecured indebtedness in the ordinary course of business.
With respect to 1 of the mortgage loans representing 0.85% of the initial
outstanding pool balance and 3.93% of the initial loan group 2 balance, the
limited partner in the related borrower pledged its interest in the borrower as
collateral for a $450,000 mezzanine loan.
In addition, with respect to 6 of the mortgage loans, representing
approximately 14.04% of the initial outstanding pool balance and 17.90% of the
initial loan group 1 balance, the owners of the related borrowers are permitted,
under certain circumstances, to pledge their ownership interests in such
borrowers as security for mezzanine debt in the future. See "Description of the
Mortgage Pool--Certain Terms and Conditions of the Mortgage Loans--Other
Financing" in this prospectus supplement.
Although, except as provided above, the terms of the mortgage loans
generally prohibit additional indebtedness of the borrowers, and indebtedness
secured by ownership interests in the borrowers, it has not been confirmed
whether or not any of the borrowers have incurred additional secured or
unsecured debt, or have permitted encumbrances on the ownership interests in
such borrowers. There can be no assurance that the borrowers have complied with
the restrictions on indebtedness.
When a borrower (or its constituent members) also has one or more other
outstanding loans (even if subordinated or mezzanine loans), the trust is
subjected to additional risk. The borrower may have difficulty servicing and
repaying multiple loans. The existence of another loan generally also will make
it more difficult for the borrower to obtain refinancing of the mortgage loan
and may thereby jeopardize repayment of the mortgage loan. Moreover, the need to
service additional debt may reduce the cash flow available to the borrower to
operate and maintain the mortgaged property.
Additionally, if the borrower (or its constituent members) defaults on the
mortgage loan and/or any other loan, actions taken by other lenders could impair
the security available to the trust. If a junior
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lender files an involuntary petition for bankruptcy against the borrower (or the
borrower files a voluntary petition to stay enforcement by a junior lender), the
trust's ability to foreclose on the property would be automatically stayed, and
principal and interest payments might not be made during the course of the
bankruptcy case. The bankruptcy of another lender also may operate to stay
foreclosure by the trust.
Further, if another loan secured by the mortgaged property is in default,
the other lender may foreclose on the mortgaged property, absent an agreement to
the contrary, thereby causing a delay in payments and/or an involuntary
repayment of the mortgage loan prior to maturity. The trust may also be subject
to the costs and administrative burdens of involvement in foreclosure
proceedings or related litigation.
BANKRUPTCY PROCEEDINGS ENTAIL CERTAIN RISKS
Under the Bankruptcy Code, the filing of a petition in bankruptcy by or
against a borrower will stay the sale of the real property owned by that
borrower, as well as the commencement or continuation of a foreclosure action.
In addition, even if a court determines that the value of the mortgaged property
is less than the principal balance of the mortgage loan it secures, the court
may prevent a lender from foreclosing on the mortgaged property (subject to
certain protections available to the lender). As part of a restructuring plan, a
court also may reduce the amount of secured indebtedness to the then-current
value of the mortgaged property. This action would make the lender a general
unsecured creditor for the difference between the then-current value and the
amount of its outstanding mortgage indebtedness. A bankruptcy court also may:
o grant a debtor a reasonable time to cure a payment default on a
mortgage loan;
o reduce monthly payments due under a mortgage loan;
o change the rate of interest due on a mortgage loan; or
o otherwise alter the mortgage loan's repayment schedule.
Moreover, the filing of a petition in bankruptcy by, or on behalf of, a
junior lienholder may stay the senior lienholder from taking action to foreclose
on the junior lien. Additionally, the borrower's trustee or the borrower, as
debtor-in-possession, has certain special powers to avoid, subordinate or
disallow debts. In certain circumstances, the claims of the Trustee may be
subordinated to financing obtained by a debtor-in-possession subsequent to its
bankruptcy.
Under the Bankruptcy Code, the lender will be stayed from enforcing a
borrower's assignment of rents and leases. The Bankruptcy Code also may
interfere with the Trustee's ability to enforce any lockbox requirements. The
legal proceedings necessary to resolve these issues can be time consuming and
may significantly delay the lender's receipt of rents. Rents also may escape an
assignment to the extent they are used by the borrower to maintain the mortgaged
property or for other court authorized expenses.
As a result of the foregoing, the Trustee'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.
LACK OF SKILLFUL PROPERTY MANAGEMENT ENTAIL RISKS
The successful operation of a real estate project depends upon the property
manager's performance and viability. The property manager is generally
responsible for:
o responding to changes in the local market;
o planning and implementing the rental structure;
o operating the property and providing building services;
o managing operating expenses; and
o assuring that maintenance and capital improvements are carried out in
a timely fashion.
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Properties deriving revenues primarily from short-term sources, such as
hotels and self-storage facilities, are generally more management intensive than
properties leased to creditworthy tenants under long-term leases.
A good property manager, by controlling costs, providing appropriate
service to tenants and seeing to the maintenance of improvements, can improve
cash flow, reduce vacancy, leasing and repair costs and preserve the building's
value. On the other hand, management errors can, in some cases, impair
short-term cash flow and the long-term viability of an income-producing
property.
No representation or warranty can be made as to the skills of any present
or future managers. Additionally, there can be no assurance that the property
managers will be in a financial condition to fulfill their management
responsibilities throughout the terms of their respective management agreements.
RISKS OF INSPECTIONS RELATING TO PROPERTY
Licensed engineers or consultants inspected the mortgaged properties in
connection with the origination of the mortgage loans to assess items such as
structure, exterior walls, roofing, interior construction, mechanical and
electrical systems and general condition of the site, buildings and other
improvements. However, there is no assurance that all conditions requiring
repair or replacement were identified.
PROPERTY INSURANCE
Subject to certain exceptions including where the loan documents permit the
borrower to rely on self-insurance provided by a tenant, the loan documents for
the mortgage loans generally require the related borrower to maintain, or cause
to be maintained, comprehensive all-risk property and casualty insurance.
However, the mortgaged properties may suffer casualty losses due to risks which
were not covered by insurance or for which the insurance coverage is inadequate.
In addition, 8, 6 and 12 of the mortgaged properties, representing 16.54%, 6.65%
and 4.21% of the initial outstanding pool balance, 21.09%, 6.78% and 4.21% of
the initial group 1 balance and 0.00%, 6.21% and 4.24% of the initial group 2
balance, are located in California, Florida and Texas, respectively, areas that
have historically been at greater risk regarding acts of nature (such as
earthquakes, hurricanes and floods) than other states.
We cannot assure you that borrowers will maintain the insurance required
under the loan documents or that such insurance will be adequate. Moreover, if
reconstruction or any major repairs are required, changes in laws may materially
affect the borrower's ability to effect any reconstruction or major repairs or
may materially increase the costs of the reconstruction or repairs.
Certain mortgage loans are secured by improvements for which coverage for
acts of terrorism has been waived.
The September 11, 2001 terrorist attacks have caused many reinsurance
companies (which assume some of the risk of policies sold by primary insurers)
to indicate that they intend to eliminate coverage for acts of terrorism from
their reinsurance. Without that reinsurance coverage, primary insurance
companies would have to assume that risk themselves, which may cause them to
eliminate such coverage in their policies, increase the amount of deductible for
acts of terrorism or charge higher premiums for such coverage. In order to
offset this risk, Congress passed the Terrorism Risk Insurance Act of 2002,
which established the Terrorism Insurance Program. The Terrorism Insurance
Program is administered by the Secretary of the Treasury and will provide
financial assistance from the United States government to insurers in the event
of another terrorist attack that is the subject of an insurance claim. The
Treasury Department will establish procedures for the Terrorism Insurance
Program under which the federal share of compensation will be equal to 90% of
that portion of insured losses that exceeds an applicable insurer deductible
required to be paid during each program year. The federal share in the aggregate
in any program year may not exceed $100 billion. An insurer that has paid its
deductible is not liable for the payment of any portion of total annual United
States-wide losses that exceed $100 billion, regardless of the terms of the
individual insurance contracts.
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The Terrorism Insurance Program requires that each insurer for policies in
place prior to November 26, 2002 provide its insureds with a statement of the
proposed premiums for terrorism coverage, identifying the portion of the risk
that the federal government will cover, within 90 days after November 26, 2002.
Insureds will have 30 days to accept the continued coverage and pay the premium.
If an insured does not pay the premium, insurance for acts of terrorism may be
excluded from the policy. Subject to the foregoing, any commercial property and
casualty terrorism insurance exclusion that was in force on November 26, 2002 is
automatically voided to the extent that it excludes losses that would otherwise
be insured losses. Any state approval of such types of exclusions in force on
November 26, 2002 is also voided. All policies for insurance issued after
November 26, 2002 must make similar disclosure.
The Terrorism Risk Insurance Act of 2002 does not require insureds to
purchase the coverage nor does it stipulate the pricing of the coverage. In
addition, there can be no assurance that all of the borrowers under the mortgage
loans have accepted the continued coverage.
Through December 2004, insurance carriers are required under the program to
provide terrorism coverage in their basic "all-risk" policies. By September 1,
2004, the Secretary of the Treasury shall determine whether mandatory
participation should be extended through December 2005.
However, the Terrorism Insurance Program applies to United States risks
only and to acts that are committed by an individual or individuals acting on
behalf of a foreign person or foreign interest as an effort to influence or
coerce United States civilians or the United States government. It remains
unclear what acts will fall under the purview of the Terrorism Insurance
Program.
Furthermore, because the Terrorism Insurance Program has only been recently
passed into law, there can be no assurance that it or state legislation will
substantially lower the cost of obtaining terrorism insurance.
For example, with respect to the mortgaged properties which secure the
Westfield Shoppingtown Portfolio, representing approximately 7.04% of the
initial outstanding pool balance and 8.98% of the initial loan group 1 balance,
the "all risk" insurance polices delivered to the mortgagee on the closing date
contain terrorism insurance exclusions; however, the related borrowers delivered
separate blanket policies of insurance to the mortgagee on the closing date
covering such mortgaged properties which include terrorism insurance with a
blanket limit of $400,000,000. Such policies expire on July 1, 2003. Westfield
America, Inc. has guaranteed the recourse obligations of the borrowers under
such mortgage loan (including loss arising from terrorist acts or similar acts
of sabotage affecting the related mortgaged properties to the extent (a) the
applicable "all risk" insurance policies do not insure such terrorist acts and
(b) the borrowers fail to maintain separate terrorism insurance in the amount of
at least $26,000,000 for each of the related properties; PROVIDED, that the
liability of Westfield America, Inc., with respect to any such loss, is limited
with respect to each related mortgaged property to the difference between (x)
$26,000,000 and (y) the amount of terrorism insurance maintained by the
borrowers for such mortgaged property.
Finally, the Terrorism Insurance Program terminates on December 31, 2004
(with a potential to extend to December 31, 2005). There can be no assurance
that such temporary program will create any long-term changes in the
availability and cost of such insurance. Moreover, there can be no assurance
that such program will be renewed or subsequent terrorism insurance legislation
will be passed upon its expiration.
The various forms of insurance maintained with respect to any of the
mortgaged properties, including casualty insurance, environmental insurance and
earthquake insurance, may be provided under a blanket insurance policy. That
blanket insurance policy will also cover other real properties, some of which
may not secure mortgage loans in the trust. As a result of total limits under
any of those blanket policies, losses at other properties covered by the blanket
insurance policy may reduce the amount of insurance coverage with respect to a
property securing one of the loans in the trust.
With respect to certain of the mortgage loans, the "all-risk" policy
specifically excludes terrorism insurance from its coverage. In some such cases,
the related borrower obtained supplemental
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insurance to cover terrorism risk. In other cases, the lender waived the
requirement that such insurance be maintained.
With respect to certain of the mortgage loans that we intend to include in
the Trust, the related mortgage loan documents generally provide that the
borrowers are required to maintain comprehensive all-risk casualty insurance but
may not specify the nature of the specific risks required to be covered by such
insurance policies.
Even if the mortgage loan documents specify that the related borrower must
maintain all-risk casualty insurance or other insurance that covers acts of
terrorism, the borrower may fail to maintain such insurance and the Servicer or
Special Servicer may not enforce such default or cause the borrower to obtain
such insurance if the Special Servicer has determined, in accordance with the
servicing standards, that either (a) such insurance is not available at any rate
or (b) such insurance is not available at commercially reasonable rates (which
determination, with respect to terrorism insurance, will be subject to consent
of the Directing Certificateholder) and that such hazards are not at the time
commonly insured against for properties similar to the mortgaged property and
located in or around the geographic region in which such mortgaged property is
located. Additionally, if the related borrower fails to maintain such insurance,
the Servicer or the Special Servicer, as applicable, will not be required to
maintain such terrorism insurance coverage if the Special Servicer determines,
in accordance with the servicing standards, that such insurance is not available
for the reasons set forth in (a) or (b) of the preceding sentence. Furthermore,
at the time existing insurance policies are subject to renewal, there is no
assurance that terrorism insurance coverage will be available and covered under
the new policies or, if covered, whether such coverage will be adequate. Most
insurance policies covering commercial real properties such as the mortgaged
properties are subject to renewal on an annual basis. If such coverage is not
currently in effect, is not adequate or is ultimately not continued with respect
to some of the mortgaged properties and one of those properties suffers a
casualty loss as a result of a terrorist act, then the resulting casualty loss
could reduce the amount available to make distributions on your certificates.
As a result of any of the foregoing, the amount available to make
distributions on your certificates could be reduced.
APPRAISALS AND MARKET STUDIES HAVE CERTAIN LIMITATIONS
An appraisal or other market analysis was conducted with respect to the
mortgaged properties in connection with the origination or acquisition of the
related mortgage loan. The resulting estimates of value are the bases of the
Cut-off Date Loan-to-Value Ratios referred to in this prospectus supplement.
Those estimates represent the analysis and opinion of the person performing the
appraisal or market analysis and are not guarantees of present or future values.
There can be no assurance that another appraiser would not have arrived at a
different evaluation, even if such appraiser used the same general approach to,
and the same method of, appraising the mortgaged property. Moreover, the values
of the mortgaged properties may have fluctuated significantly since the
appraisal or market study was performed. In addition, appraisals seek 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.
Information regarding the values of mortgaged properties available to the
Depositor as of the Cut-off Date is presented in Appendix A to this prospectus
supplement for illustrative purposes only. See "Description of the Mortgage
Pool" in this prospectus supplement.
TAX CONSIDERATIONS RELATED TO FORECLOSURE
If the Trust acquires a mortgaged property pursuant to a foreclosure or
deed in lieu of foreclosure, the Special Servicer will generally retain an
independent contractor to operate the mortgaged property. Among other things,
the independent contractor generally will not be able to perform construction
work, other than repair, maintenance or certain types of tenant build-outs,
unless the construction was at least 10% completed when default on the mortgage
loan becomes imminent. Furthermore, any net income from such operation (other
than qualifying "rents from real property"), or any rental income based on the
net profits of a tenant or sub-tenant or allocable to a non-customary service,
will subject
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the Lower-Tier REMIC to federal tax on such income at the highest marginal
corporate tax rate (currently 35%) and possibly state or local tax. "Rents from
real property" does not include any 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 building involved. In such event, the net proceeds available
for distribution to certificateholders will be reduced. The Special Servicer may
permit the Lower-Tier REMIC to earn "net income from foreclosure property" that
is subject to tax if it determines that the net after-tax benefit to
certificateholders is greater than under another method of operating or leasing
the mortgaged property. See "The Pooling and Servicing Agreement--Realization
Upon Defaulted Mortgage Loans" in this prospectus supplement.
In addition, if the Trust were to acquire one or more mortgaged properties
pursuant to a foreclosure or deed in lieu of foreclosure, upon acquisition of
those mortgaged properties, the Trust may in certain jurisdictions, particularly
in New York, be required to pay state or local transfer or excise taxes upon
liquidation of such properties. Such state or local taxes may reduce net
proceeds available for distribution with respect to the Offered Certificates.
RISKS RELATED TO ENFORCEABILITY
All of the mortgages permit the lender to accelerate the debt upon default
by the borrower. The courts of all states will enforce acceleration clauses in
the event of a material payment default. Courts, however, may refuse to permit
foreclosure or acceleration if a default is deemed immaterial or the exercise of
those remedies would be unjust or unconscionable.
If a mortgaged property has tenants, the borrower typically assigns its
income as landlord to the lender as further security, while retaining a license
to collect rents as long as there is no default. If the borrower defaults, the
license terminates and the lender is entitled to collect rents. In certain
jurisdictions, such assignments may not be perfected as security interests until
the lender takes actual possession of the property's cash flow. In some
jurisdictions, the lender may not be entitled to collect rents until the lender
takes possession of the property and secures the appointment of a receiver. In
addition, as previously discussed, if bankruptcy or similar proceedings are
commenced by or for the borrower, the lender's ability to collect the rents may
be adversely affected.
STATE LAW LIMITATIONS ENTAIL CERTAIN RISKS
Some states (including California) have laws prohibiting more than one
"judicial action" to enforce a mortgage obligation. Some courts have construed
the term "judicial action" broadly. In the case of a mortgage loan secured by
mortgaged properties located in multiple states, the Special Servicer may be
required to foreclose first on mortgaged properties located in states where such
"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. As a result, the ability to realize
upon the mortgage loans may be limited by the application of state laws.
Foreclosure actions may also, in certain circumstances, subject the Trust to
liability as a "lender-in-possession" or result in the equitable subordination
of the claims of the trustee to the claims of other creditors of the borrower.
The Special Servicer may take these state laws into consideration in deciding
which remedy to choose following a default by a borrower.
LEASEHOLD INTERESTS ENTAIL CERTAIN RISKS
3 mortgage loans, representing 10.84% of the initial outstanding pool
balance and 13.82% of the initial loan group 1 balance, are secured by a
mortgage on (i) the borrower's leasehold interest in the related mortgaged
property, (ii) both the borrower's leasehold interest in a portion of the
related mortgaged property and the borrower's fee simple interest in the
remainder of the related mortgaged property or (iii) both the borrower's
leasehold interest in the mortgaged property and the fee interest underlying
such leasehold interest in the 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 borrower's
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leasehold interest were to be terminated upon a lease default, the leasehold
mortgagee would lose its security. Generally, the related ground lease requires
the lessor to give the leasehold mortgagee notice of lessee defaults and an
opportunity to cure them, permits the leasehold estate to be assigned to the
leasehold mortgagee or the purchaser at a foreclosure sale, and contains certain
other protective provisions typically included in a "mortgageable" ground lease.
Upon the bankruptcy of a lessor or a lessee under a ground lease, the
debtor entity has the right to assume or reject the lease. If a debtor lessor
rejects the lease, the lessee has the right to remain in possession of its
leased premises under the rent under the lease for the term of the lease
(including renewals). If a debtor lessee/borrower rejects any or all of its
leases, the leasehold lender could succeed to the lessee/borrower's position
under the lease only if the lessor specifically grants the lender such right. If
both the lessor and the lessee/borrowers are involved in bankruptcy proceedings,
the Trustee may be unable to enforce the bankrupt lessee/borrower's obligation
to refuse to treat a ground lease rejected by a bankrupt lessor as terminated.
In such circumstances, a lease could be terminated notwithstanding lender
protection provisions contained therein or in the mortgage.
Most of the ground leases securing the mortgaged properties provide that
the ground rent payable thereunder increases during the term of the lease. These
increases may adversely affect the cash flow and net income of the borrower from
the mortgaged property.
POTENTIAL ABSENCE OF ATTORNMENT PROVISIONS ENTAILS RISKS
In some jurisdictions, if tenant leases are subordinate to the liens
created by the mortgage and do not contain attornment provisions (I.E.,
provisions requiring the tenant to recognize a successor owner following
foreclosure as landlord under the lease), the leases may terminate upon the
transfer of the property to a foreclosing lender or purchaser at foreclosure.
Not all leases were reviewed to ascertain the existence of attornment or
subordination provisions. Accordingly, if a mortgaged property is located in
such a jurisdiction and is leased to one or more desirable tenants under leases
that are subordinate to the mortgage and do not contain attornment provisions,
such mortgaged property could experience a further decline in value if such
tenants' leases were terminated. This is particularly likely if such tenants
were paying above-market rents or could not be replaced.
If a lease is not subordinate to a mortgage, the Trust will not possess the
right to dispossess the tenant upon foreclosure of the mortgaged property
(unless it has otherwise agreed with the tenant). If the lease contains
provisions inconsistent with the mortgage (E.G., provisions relating to
application of insurance proceeds or condemnation awards) or which could affect
the enforcement of the lender's rights (E.G., a right of first refusal to
purchase the property), the provisions of the lease will take precedence over
the provisions of the mortgage.
RISKS RELATED TO ZONING LAWS
Due to changes in applicable building and zoning ordinances and codes which
have come into effect after the construction of improvements on certain of the
mortgaged properties, some improvements may not comply fully with current zoning
laws (including density, use, parking and set-back requirements) but qualify as
permitted non-conforming uses. Such changes may limit the ability of the related
mortgagor to rebuild the premises "as is" in the event of a substantial casualty
loss. Such limitations may adversely affect the ability of the mortgagor to meet
its mortgage loan obligations from cash flow. Insurance proceeds may not be
sufficient to pay off such mortgage loan in full. In addition, if the mortgaged
property were to be repaired or restored in conformity with then-current law,
its value could be less than the remaining balance on the mortgage loan and it
may produce less revenue than before such repair or restoration.
RISKS RELATED TO LITIGATION
There may be pending or threatened legal proceedings against the borrowers
and managers of the mortgaged properties and their respective affiliates arising
out of the ordinary business of the
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borrowers, managers and affiliates, which litigation could have a material
adverse effect on your investment.
With respect to 1 of the mortgage loans, representing approximately 0.65%
of the initial outstanding pool balance and 0.82% of the initial loan group 1
balance, the related borrower is subject to litigation which is only partially
covered by insurance.
RISKS RELATED TO COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT
Under the Americans with Disabilities Act of 1990 ("ADA"), all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. Borrowers may incur costs complying with the
ADA. In addition, noncompliance could result in the imposition of fines by the
federal government or an award of damages to private litigants.
CONFLICTS OF INTEREST
CONFLICTS BETWEEN VARIOUS CLASSES OF CERTIFICATEHOLDERS
The Special Servicer is given considerable latitude in determining whether
and in what manner to liquidate or modify defaulted mortgage loans. The
Controlling Class will be empowered to replace the Special Servicer. In
addition, the Directing Certificateholder of the Controlling Class has certain
rights to advise and direct the Special Servicer. The Controlling Class is the
most subordinated (or, under certain circumstances, the next most subordinated)
class of certificates outstanding from time to time, and such holders may have
interests in conflict with those of the holders of the other certificates. For
instance, the holders of certificates of the Controlling Class might desire to
mitigate the potential for loss to that class from a troubled mortgage loan by
deferring enforcement in the hope of maximizing future proceeds. However, the
interests of the Trust may be better served by prompt action, since delay
followed by a market downturn could result in less proceeds to the Trust than
would have been realized if earlier action had been taken. The Directing
Certificateholder has no duty to act in the interests of any class other than
the Controlling Class.
The Special Servicer or an affiliate may acquire certain of the most
subordinated certificates. Under such circumstances, the Special Servicer itself
may have interests that conflict with the interests of the other holders of the
certificates.
CONFLICTS BETWEEN TRUST AND EACH OF GERMAN AMERICAN CAPITAL CORPORATION AND
LASALLE BANK NATIONAL ASSOCIATION
Conflicts of interest may arise between the Trust and each of German
American Capital Corporation and LaSalle Bank National Association, or their
affiliates, that engage in the acquisition, development, operation, financing
and disposition of real estate.
Those conflicts may arise because each of German American Capital
Corporation and LaSalle Bank National Association and their affiliates intend to
continue to actively acquire, develop, operate, finance and dispose of real
estate-related assets in the ordinary course of their business. During the
course of their business activities, those affiliates may acquire or sell
properties, or finance mortgage loans secured by properties which may include
the mortgaged properties or properties which are in the same markets as the
mortgaged properties. In addition, German American Capital Corporation and
LaSalle Bank National Association or their affiliates may have financing or
other arrangements with affiliates of the mortgagors, and may enter into
additional arrangements in the future. In such case, the interests of those
affiliates may differ from, and compete with, the interests of the trust, and
decisions made with respect to those assets may adversely affect the amount and
timing of distributions with respect to the certificates.
CONFLICTS BETWEEN MANAGERS AND THE MORTGAGE LOAN BORROWERS
A substantial number of the mortgaged properties are managed by property
managers affiliated with the respective mortgagors. In addition, substantially
all of the property managers for the
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mortgaged properties (or their affiliates) manage additional properties,
including properties that may compete with the mortgaged properties. Affiliates
of the managers, and certain of the managers themselves, also may own other
properties, including competing properties. The managers of the mortgaged
properties may accordingly experience conflicts of interest in the management of
such mortgaged properties.
CONFLICTS BETWEEN SELLERS OF MORTGAGE LOANS AND CLASSES OF CERTIFICATEHOLDERS
German American Capital Corporation and LaSalle Bank National Association
and their respective affiliates may acquire certain of the certificates. Under
such circumstances, they may become the Directing Certificateholder, and as such
have interests that may conflict with their interests as sellers of the mortgage
loans.
CONFLICTS BETWEEN CERTIFICATEHOLDERS AND HOLDERS OF COMPANION LOANS
The Westfield Shoppingtown Portfolio Loan and the Chandler Fashion Center
Loan will be serviced and administered pursuant to the applicable Other PSA,
each of which provides for servicing arrangements that are similar but not
identical to those under the Pooling and Servicing Agreement. In addition, the
legal and/or beneficial owners of the related Companion Loans, directly or
through representatives, have certain rights under the applicable Other PSA and
the related intercreditor agreement that affect the Non-Serviced Mortgage Loans,
including with respect to the servicing thereof and the termination and
replacement of the related special servicer. Those legal and/or beneficial
owners may have interests that conflict with your interests.
RISKS RELATED TO THE OFFERED CERTIFICATES
RISKS RELATED TO PREPAYMENTS AND REPURCHASES
The yield to maturity on your certificates will depend, in significant
part, upon the rate and timing of principal payments on the mortgage loans. For
this purpose, principal payments include both voluntary prepayments, if
permitted, and involuntary prepayments, such as prepayments resulting from
casualty or condemnation of mortgaged properties, defaults and liquidations by
borrowers, or repurchases upon a mortgage loan seller's breach of
representations or warranties.
In addition, because the amount of principal that will be distributed to
the Class A-1, Class A-2 and Class A-1A certificates will generally be based
upon the particular loan group in which the related mortgage loan is deemed to
be a part, the yield on the Class A-1 and Class A-2 certificates will be
particularly sensitive to prepayments on mortgage loans in loan group 1 and the
yield on the Class A-1A certificates will be particularly sensitive to
prepayments on mortgage loans in loan group 2.
The investment performance of your certificates may vary materially and
adversely from your expectations if the actual rate of prepayment is higher or
lower than you anticipate.
Voluntary prepayments under certain mortgage loans may require payment of a
yield maintenance premium unless the prepayment is made within a specified
number of days of the stated maturity date. See "Description of the Mortgage
Pool--Certain Terms and Conditions of the Mortgage Loans--Prepayment Provisions"
in this prospectus supplement. Nevertheless, we cannot assure you that the
related borrowers will refrain from prepaying their mortgage loans due to the
existence of a prepayment premium. We also cannot assure you that involuntary
prepayments will not occur. The rate at which voluntary prepayments occur on the
mortgage loans will be affected by a variety of factors, including:
o the terms of the mortgage loans;
o the length of any prepayment lockout period;
o the level of prevailing interest rates;
o the availability of mortgage credit;
o the applicable yield maintenance charges or prepayment premiums;
S-47
o the Servicer's or Special Servicer's ability to enforce those charges
or premiums;
o the occurrence of casualties or natural disasters; and
o economic, demographic, tax, legal or other factors.
Generally, no yield maintenance charge or prepayment premium will be
required for prepayments in connection with a casualty or condemnation unless,
in the case of most of the mortgage loans, an event of default has occurred and
is continuing. In addition, if a Seller repurchases any mortgage loan from the
Trust due to breaches of representations or warranties, the repurchase price
paid will be passed through to the holders of the certificates with the same
effect as if the mortgage loan had been prepaid in part or in full, except that
no prepayment premium or yield maintenance charge would be payable. Such a
repurchase may therefore adversely affect the yield to maturity on your
certificates. Furthermore, with regard to mortgage loans that are secured by one
or more mortgaged properties that also secure a Companion Loan that is not
included in the trust, yield maintenance charges will not be payable if the
holder of a subordinate Companion Loan purchases the related mortgage loan due
to certain default circumstances under such mortgage loan.
RISKS RELATED TO ENFORCEABILITY OF PREPAYMENT PREMIUMS AND DEFEASANCE PROVISIONS
Provisions requiring yield maintenance charges, prepayment premiums and
lock-out periods may not be enforceable in some states and under federal
bankruptcy law. Those provisions for charges and premiums also may constitute
interest for usury purposes. Accordingly, we cannot assure you that the
obligation to pay a yield maintenance charge or prepayment premium or to
prohibit prepayments will be enforceable. We also cannot assure you that the
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 requiring a yield maintenance charge or prepayment
premium. In certain jurisdictions those collateral substitution provisions might
therefore be deemed unenforceable under applicable law, or usurious.
YIELD CONSIDERATIONS
The yield on any Offered Certificate will depend on (i) the price at which
such certificate is purchased by an investor and (ii) the rate, timing and
amount of distributions on such certificate. The rate, timing and amount of
distributions on any certificate will, in turn, depend on, among other things:
o the interest rate for such certificate;
o the rate and timing of principal payments (including principal
prepayments) and other principal collections on or in respect of the
mortgage loans and the extent to which such amounts are to be applied
or otherwise result in a reduction of the certificate balance of such
certificate;
o the rate, timing and severity of losses on or in respect of the
mortgage loans or unanticipated expenses of the trust;
o the timing and severity of any interest shortfalls resulting from
prepayments;
o the timing and severity of any appraisal reductions; and
o the extent to which prepayment premiums are collected and, in turn,
distributed on such certificate.
The investment performance of the Offered Certificates may be materially
different from what you expected if the assumptions you made with respect to the
factors listed above are incorrect.
RISKS RELATED TO BORROWER DEFAULT
The rate and timing of delinquencies or defaults on the mortgage loans will
affect:
o the aggregate amount of distributions on the Offered Certificates;
S-48
o their yield to maturity;
o the rate of principal payments; and
o their weighted average life.
The rights of holders of each class of subordinate certificates to receive
certain payments of principal and interest otherwise payable on their
certificates will be subordinated to such rights of the holders of the more
senior certificates having an earlier alphabetical class designation and to such
rights of the holders of the Class X-1 and Class X-2 Certificates. See
"Description of the Offered Certificates--Distributions" in this prospectus
supplement. Losses on the mortgage loans will be allocated to the Class P, Class
O, Class N, Class M, Class L, Class K, Class J, Class H, Class G, Class F, Class
E, Class D, Class C and Class B Certificates, in that order, reducing amounts
otherwise payable to each class. Any remaining losses would then be allocated to
the Class A-1, Class A-2 and Class A-1A Certificates, PRO RATA.
Each class of certificates (other than the Class R and Class LR
Certificates) is senior to certain other classes of certificates in respect of
the right to receive distributions and to be allocated losses. If losses on the
mortgage loans exceed the aggregate principal amount of the classes of
certificates subordinated to such class, that class will suffer a loss equal to
the full amount of such excess (up to the outstanding certificate balance of
such class).
If you calculate your anticipated yield based on assumed rates of default
and losses that are lower than the default rate and losses actually experienced
and such losses are allocable to your certificates, your actual yield to
maturity will be lower than the assumed yield. Under certain extreme scenarios,
such yield could be negative. In general, the earlier a loss borne by your
certificates occurs, the greater the effect on your yield to maturity.
Even if losses on the mortgage loans are not borne by your certificates,
those losses may affect the weighted average life and yield to maturity of your
certificates. This may be so because those losses cause your certificates to
have a higher percentage ownership interest in the Trust (and therefore related
distributions of principal payments on the mortgage loans) than would otherwise
have been the case. The effect on the weighted average life and yield to
maturity of your certificates will depend upon the characteristics of the
remaining mortgage loans.
Additionally, delinquencies and defaults on the mortgage loans may
significantly delay the receipt of distributions by you on your certificates,
unless P&I Advances are made to cover delinquent payments or the subordination
of another class of certificates fully offsets the effects of any such
delinquency or default.
RISKS RELATED TO CERTAIN PAYMENTS
To the extent described in this prospectus supplement, the Servicer, the
Special Servicer or the Trustee, as applicable, will be entitled to receive
interest on unreimbursed Advances. 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 interest, a mortgage loan will be
specially serviced, and the Special Servicer is entitled to compensation for
special servicing activities. The right to receive interest on Advances or
special servicing compensation is senior to the rights of certificateholders to
receive distributions and may lead to shortfalls in amounts otherwise
distributable on your certificates.
RISKS OF LIMITED LIQUIDITY AND MARKET VALUE
There is currently no secondary market for the Offered Certificates. While
the Underwriters have advised that they currently intend to make a secondary
market in the Offered Certificates, they are under no obligation to do so. We
cannot assure you that a secondary market for the Offered Certificates will
develop. Moreover, if a secondary market does develop, we cannot assure you that
it will provide you with liquidity of investment or that it will continue for
the life of the Offered Certificates. The Offered Certificates will not be
listed on any securities exchange. Lack of liquidity could result in a
precipitous drop in the market value of the Offered Certificates. In addition,
the market value of the
S-49
Offered Certificates at any time may be affected by many factors, including then
prevailing interest rates, and no representation is made by any person or entity
as to the market value of any Offered Certificate at any time.
SUBORDINATION OF SUBORDINATE OFFERED CERTIFICATES
As described in this prospectus supplement, unless your Offered
Certificates are the Class A-1 or Class A-2 Certificates, your rights to receive
distributions of amounts collected or advanced on or in respect of the mortgage
loans will be subordinated to those of the holders of the Offered Certificates
with an earlier alphabetical designation and the Class A-1A, Class X-1 and Class
X-2 Certificates. See "Description of the Offered Certificates--Distributions"
and "--Subordination" in this prospectus supplement.
RISK OF PASS-THROUGH RATE VARIABILITY CONSIDERATIONS
The Pass-Through Rates on the Class B, Class C, Class D and Class E
Certificates will equal one of (i) a fixed rate, (ii) a rate equal to the lesser
of a specified fixed rate and the weighted average net mortgage pass-through
rate, (iii) a rate equal to the Weighted Average Net Mortgage Pass-Through Rate
less a specified percentage, or (iv) a rate equal to the Weighted Average Net
Mortgage Pass-Through Rate. In general, mortgage loans with relatively high
mortgage interest rates are more likely to prepay than mortgage loans with
relatively low mortgage interest rates. Varying rates of principal payments on
mortgage loans having mortgage interest rates above the weighted average of such
rates of the mortgage loans will have the effect of reducing the interest rate
of such certificates.
RISK OF LIMITED ASSETS
The Offered Certificates will represent interests solely in the assets of
the Trust and will not represent an interest in or an obligation of any other
entity or person. Distributions on any of the certificates will depend solely on
the amount and timing of payments on the mortgage loans.
RISKS RELATING TO LACK OF CERTIFICATEHOLDER CONTROL OVER TRUST
You generally do not have a right to vote, except with respect to required
consents to certain amendments to the Pooling and Servicing Agreement.
Furthermore, you will generally not have the right to make decisions concerning
trust administration. The Pooling and Servicing Agreement gives the Servicer,
the Bond Administrator, the Special Servicer or the REMIC Administrator, as
applicable, certain decision-making authority concerning trust administration.
These parties may make decisions different than those that holders of any
particular class of Offered Certificates would have made, and which may
negatively affect those holders' interests.
DIFFERENT TIMING OF MORTGAGE LOAN AMORTIZATION POSES CERTAIN RISKS
As principal payments or prepayments are made on a mortgage loan that is
part of a pool of loans, the pool may be subject to more risk with respect to
the decreased diversity of mortgaged properties, types of mortgaged properties,
geographic location and number of borrowers and affiliated borrowers, as
described above. Classes that have a later sequential designation or a lower
payment priority are more likely to be exposed to this concentration risk than
are classes with an earlier sequential designation or higher priority. This is
so because principal on the Offered Certificates is generally payable in
sequential order, and no class entitled to distribution of principal generally
receives principal until the principal amount of the preceding class or classes
entitled to receive principal have been reduced to zero.
OTHER RISKS
"Risk Factors" in the prospectus describes other risks and special
considerations that may apply to your investment in certificates.
S-50
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
A trust (the "Trust") to be created by Deutsche Mortgage & Asset Receiving
Corporation (the "Depositor") will consist primarily of a pool (the "Mortgage
Pool") of 92 fixed-rate mortgage loans (each a "Mortgage Loan," and
collectively, the "Mortgage Loans") secured by first liens on 99 multifamily and
commercial properties (each a "Mortgaged Property," and collectively, the
"Mortgaged Properties"). The Mortgage Pool has an aggregate principal balance as
of June 1, 2003 or, in the case of the Mortgage Loans known as the "75
Rockefeller Plaza," "Shaw's Merrimack," "Hampton Inn and Holiday Inn,"
"Fredericksburg Shopping Center" and "Commerce Square Center," the Note Date (as
applicable, the "Cut-off Date") of approximately $846,037,514 (the "Initial
Outstanding Pool Balance"), subject to a variance of plus or minus 5%. The
principal balances of the Mortgage Loans as of the Cut-off Date (each, a
"Cut-off Date Principal Balance") will range from $1,147,709 to $65,000,000 and
the average Cut-off Date Principal Balance will be $9,196,060. The pool of
mortgage loans will be deemed to consist of two loan groups ("Loan Group 1" and
"Loan Group 2" and, collectively, the "Loan Groups"). Loan Group 1 will consist
of 60 Mortgage Loans, representing 78.41% of the Initial Outstanding Pool
Balance (the "Initial Loan Group 1 Balance"). Loan Group 2 will consist of 32
Mortgage Loans (or 92.16% of the aggregate principal balance of the mortgage
loans secured by multifamily properties and 80.33% of the aggregate principal
balance of the Mortgage Loans secured by manufactured housing properties),
representing 21.59% of the Initial Pool Balance (the "Initial Loan Group 2
Balance"). Annex A-1 to this prospectus supplement sets forth the loan group
designation with respect to each Mortgage Loan. All numerical information
provided herein with respect to the Mortgage Loans is provided on an approximate
basis. All percentages of the Mortgage Pool, or of any specified sub-group
thereof, referred to herein without further description are approximate
percentages of the Initial Outstanding Pool Balance. Descriptions of the terms
and provisions of the Mortgage Loans are generalized descriptions of the terms
and provisions of the Mortgage Loans in the aggregate. Many of the individual
Mortgage Loans have specific terms and provisions that deviate from the general
description. In addition, the Depositor will be required to deposit with the
Trustee on the Closing Date an amount (the "Interest Deposit Amount") which will
be sufficient to cover the interest shortfalls that would otherwise occur on the
Certificates on the first Distribution Date as a result of certain mortgage
loans being originated (and therefore beginning to accrue interest) on a date
following the Cut-off Date. The Interest Deposit Amount will be distributed on
the first Distribution Date.
Each Mortgage Loan is evidenced by one or more promissory notes (each, a
"Note") and secured by one or more mortgages, deeds of trust or other similar
security instruments (each, a "Mortgage"). Each of the Mortgages creates a first
lien on the interests of the related borrower in the related Mortgaged Property,
as set forth on the following table:
SECURITY FOR THE MORTGAGE LOANS
% OF INITIAL
OUTSTANDING POOL % OF INITIAL LOAN % OF INITIAL LOAN
INTEREST OF BORROWER ENCUMBERED BALANCE(1) GROUP 1 BALANCE GROUP 2 BALANCE
- -------------------------------- ---------------- ----------------- -----------------
Fee Simple Estate ............................... 89.16% 86.18% 100.00%
Combined Fee/Leasehold Estate ................... 10.50% 13.40% 0.00%
Leasehold ....................................... 0.33% 0.43% 0.00%
------ ------ ------
TOTAL ........................................... 100.00% 100.00% 100.00%
- ---------------
(1) Based on the Allocated Loan Amount of the related Mortgaged Property.
S-51
DISTRIBUTION OF PROPERTY TYPES
PERCENTAGE PERCENTAGE PERCENTAGE WEIGHTED WEIGHTED
OF AGGREGATE OF INITIAL OF INITIAL AVERAGE REMAINING AVERAGE
NUMBER OF CUT-OFF DATE CUT-OFF DATE LOAN LOAN WEIGHTED MORTGAGE TERM TO CUT-OFF
MORTGAGED PRINCIPAL PRINCIPAL GROUP 1 GROUP 2 AVERAGE INTEREST MATURITY DATE
PROPERTY TYPE PROPERTIES BALANCE BALANCE BALANCE BALANCE DSCR(2) RATE (MOS.) LTV(2)
- ------------- ---------- ------------ ------------ ---------- ---------- --------- -------- --------- ----------
Retail ..................... 34 353,191,571 41.75% 53.24% 0.00% 1.85x 5.633% 118 64.91%
ANCHORED ................. 29 328,096,657 38.78 49.46 0.00 1.85X 5.616% 110 64.94%
UNANCHORED ............... 1 1,396,503 0.17 0.21 0.00 1.49X 6.500% 118 58.19%
CTL ...................... 4 23,698,411 2.80 3.57 0.00 5.824% 238
Multifamily ................ 38 200,406,908 23.69 2.67 100.00 1.40x 5.558% 113 77.03%
MULTIFAMILY .............. 32 183,337,755 21.67 2.17 92.49 1.38X 5.576% 115 77.17%
MANUFACTURED HOUSING ..... 6 17,069,154 2.02 0.51 7.51 1.62X 5.359% 90 75.55%
Office ..................... 15 181,574,459 21.46 27.37 0.00 1.61x 5.447% 124 66.29%
Industrial ................. 5 48,201,385 5.70 7.27 0.00 1.45x 6.138% 109 75.25%
Land ....................... 2 29,130,854 3.44 4.39 0.00 5.700% 116
Mixed Use(1) ............... 2 14,815,706 1.75 2.23 0.00 1.31x 5.952% 119 71.08%
Hotel ...................... 2 13,250,000 1.57 2.00 0.00 1.71x 6.350% 121 58.63%
Senior Housing ............. 1 5,466,631 0.65 0.82 0.00 1.43x 6.500% 113 74.48%
-- ----------- ------ ----- ------ ----- ----- --- ------
TOTAL/WTD. AVG. ............ 99 846,037,514 100.00% 100.00% 100.00% 1.64x 5.629% 118 69.00%
- ---------------
(1) Includes office and retail spaces.
(2) Excludes 4 credit tenant lease mortgage loans and 2 land mortgage loans
which represent 6.24% of the Initial Outstanding Pool Balance and 7.96% of
the Initial Loan Group 1.
S-52
GEOGRAPHIC CONCENTRATION OF MORTGAGE PROPERTIES
PERCENTAGE PERCENTAGE PERCENTAGE WEIGHTED WEIGHTED
OF AGGREGATE OF INITIAL OF INITIAL AVERAGE REMAINING AVERAGE
NUMBER OF CUT-OFF DATE CUT-OFF DATE LOAN LOAN WEIGHTED MORTGAGE TERM TO CUT-OFF
MORTGAGED PRINCIPAL PRINCIPAL GROUP 1 GROUP 2 AVERAGE INTEREST MATURITY DATE
STATE/LOCATION PROPERTIES BALANCE BALANCE BALANCE BALANCE DSCR(2) RATE (MOS.) LTV(2)
- -------------- ---------- ------------ ------------ ---------- ---------- --------- -------- --------- ----------
New York ................... 5 154,224,547 18.23% 23.25% 0.00% 1.68x 5.254% 123 66.35%
California ................. 8 139,924,421 16.54 21.09 0.00 1.85x 5.730% 105 62.22%
SOUTHERN(1) .............. 6 87,266,426 10.31 13.16 0.00 1.75X 5.783% 116 64.64%
NORTHERN(1) .............. 2 52,657,995 6.22 7.94 0.00 2.02X 5.642% 86 58.31%
Arizona .................... 4 65,220,205 7.71 8.17 6.04 2.70x 5.149% 107 47.00%
Pennsylvania ............... 4 61,388,568 7.26 3.52 20.84 1.41x 5.628% 119 78.27%
Georgia .................... 12 60,528,611 7.15 1.40 28.04 1.33x 5.597% 121 78.03%
Florida .................... 6 56,283,118 6.65 6.78 6.21 1.38x 5.838% 117 75.80%
Michigan ................... 5 52,897,312 6.25 7.05 3.34 1.35x 5.727% 119 78.52%
Texas ...................... 12 35,652,192 4.21 4.21 4.24 1.46x 5.974% 106 71.50%
Illinois ................... 5 31,117,425 3.68 1.49 11.62 1.53x 5.589% 119 69.97%
Maryland ................... 2 30,092,419 3.56 4.54 0.00 1.27x 5.751% 119 78.72%
West Virginia .............. 2 22,305,207 2.64 3.36 0.00 1.45x 5.740% 119 76.84%
Virginia ................... 3 20,250,000 2.39 3.05 0.00 1.62x 6.022% 121 65.86%
North Carolina ............. 3 17,948,983 2.12 2.71 0.00 1.36x 6.097% 119 73.27%
Mississippi ................ 7 14,814,062 1.75 1.17 3.85 1.41x 6.009% 162 75.47%
New Hampshire .............. 1 13,666,000 1.62 2.06 0.00 5.600% 248
South Carolina ............. 2 8,600,990 1.02 0.34 3.47 1.41x 5.712% 119 77.49%
Iowa ....................... 1 8,392,381 0.99 0.00 4.59 1.23x 5.650% 83 79.93%
Ohio ....................... 2 7,607,029 0.90 1.15 0.00 1.64x 5.490% 120 72.88%
Missouri ................... 1 6,092,806 0.72 0.92 0.00 1.60x 7.250% 102 64.13%
Louisiana .................. 2 6,001,237 0.71 0.90 0.00 1.55x 5.499% 68 74.05%
Arkansas ................... 1 5,995,053 0.71 0.90 0.00 1.50x 6.020% 119 74.94%
Indiana .................... 1 4,950,410 0.59 0.00 2.71 1.25x 6.000% 113 70.72%
New Jersey ................. 1 4,346,535 0.51 0.66 0.00 1.31x 6.150% 119 73.67%
Oregon ..................... 1 4,341,119 0.51 0.00 2.38 1.49x 5.500% 118 71.64%
Colorado ................... 1 3,291,323 0.39 0.50 0.00 1.48x 6.060% 117 74.46%
New Mexico ................. 1 2,151,120 0.25 0.32 0.00 1.33x 6.650% 115 74.95%
Connecticut ................ 1 2,077,187 0.25 0.00 1.14 1.43x 5.700% 83 76.93%
Alabama .................... 1 1,681,917 0.20 0.25 0.00 1.43x 6.000% 118 73.13%
Tennessee .................. 1 1,500,000 0.18 0.00 0.82 1.51x 6.000% 120 75.00%
Wisconsin .................. 1 1,396,503 0.17 0.21 0.00 1.49x 6.500% 118 58.19%
Oklahoma ................... 2 1,298,836 0.15 0.00 0.71 1.47x 5.700% 119 79.93%
--- ----------- ------ ------ ------ ----- ----- --- -----
TOTAL/WTD. AVG. ............ 99 846,037,514 100.00% 100.00% 100.00% 1.64x 5.629% 118% 69.00%
- --------------
(1) Northern California properties have a zip code greater than 93600. Southern
California properties have a zip code less than 93600.
(2) Excludes 4 credit tenant lease mortgage loans and 2 land mortgage loans,
which represent 6.24% of the Initial Outstanding Pool Balance and 7.96% of
the Initial Loan Group 1.
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DISTRIBUTION OF LOAN-TO-VALUE RATIOS(1)
PERCENTAGE PERCENTAGE PERCENTAGE WEIGHTED WEIGHTED
OF AGGREGATE OF INITIAL OF INITIAL AVERAGE REMAINING AVERAGE
NUMBER OF CUT-OFF DATE CUT-OFF DATE LOAN LOAN WEIGHTED MORTGAGE TERM TO CUT-OFF
RANGE OF CUT-OFF DATE MORTGAGED PRINCIPAL PRINCIPAL GROUP 1 GROUP 2 AVERAGE INTEREST MATURITY DATE
LOAN-TO-VALUE RATIO PROPERTIES BALANCE BALANCE BALANCE BALANCE DSCR(2) RATE (MOS.) LTV
- --------------------- ---------- ------------ ------------ ---------- ---------- --------- -------- --------- ----------
41.0%-45.0% 1 54,181,450 6.40% 8.17% 0.00% 2.93x 5.140% 113 40.95%
45.1%-50.0% 2 124,549,050 14.72 18.78 0.00 2.20x 5.327% 123 47.99%
50.1%-60.0% 3 21,146,503 2.50 3.19 0.00 1.76x 6.099% 120 58.74%
60.1%-65.0% 5 23,373,463 2.76 3.28 0.90 1.54x 6.214% 78 64.30%
65.1%-70.0% 6 25,998,019 3.07 1.68 8.14 1.41x 5.649% 116 68.64%
70.1%-75.0% 33 169,584,848 20.04 21.94 13.15 1.44x 5.846% 109 73.34%
75.1%-80.0% 35 370,223,408 43.76 35.01 75.53 1.38x 5.620% 115 78.95%
80.1%-80.6% 1 4,151,507 0.49 0.00 2.27 1.46x 5.500% 118 80.61%
-- ----------- ----- ----- ------ ---- ----- --- -----
TOTAL/WTD. AVG. 86 793,208,249 93.76% 92.04% 100.00% 1.64x 5.620% 114 69.00%
- ----------------
(1) Excludes 4 credit tenant lease mortgage loans and 2 land mortgage loans
which represent 6.24% of the Initial Outstanding Pool Balance and 7.96% of
the Initial Loan Group 1.
DISTRIBUTION OF DEBT SERVICE COVERAGE RATIOS(1)
PERCENTAGE PERCENTAGE PERCENTAGE WEIGHTED WEIGHTED
OF AGGREGATE OF INITIAL OF INITIAL AVERAGE REMAINING AVERAGE
NUMBER OF CUT-OFF DATE CUT-OFF DATE LOAN LOAN WEIGHTED MORTGAGE TERM TO CUT-OFF
RANGE OF CUT-OFF MORTGAGED PRINCIPAL PRINCIPAL GROUP 1 GROUP 2 AVERAGE INTEREST MATURITY DATE
DATE DSCR PROPERTIES BALANCE BALANCE BALANCE BALANCE DSCR(2) RATE (MOS.) LTV
- ---------------- ---------- ------------ ------------ ---------- ---------- --------- -------- --------- ----------
1.23x+ to 1.25x 2 34,792,381 4.11% 0.00% 19.05% 1.23x 5.529% 111 79.53%
1.25x+ to 1.30x 8 67,469,155 7.97 9.06 4.02 1.28x 5.859% 117 77.07%
1.30x+ to 1.35x 13 86,313,901 10.20 11.45 5.68 1.32x 5.860% 119 76.54%
1.35x+ to 1.40x 5 70,319,956 8.31 3.54 25.62 1.37x 5.717% 119 78.11%
1.40x+ to 1.45x 19 160,776,048 19.00 18.59 20.49 1.43x 5.725% 119 77.81%
1.45x+ to 1.50x 18 67,883,728 8.02 6.28 14.36 1.47x 5.691% 106 74.02%
1.50x+ to 1.55x 8 56,193,913 6.64 6.94 5.55 1.52x 5.611% 112 72.42%
1.55x+ to 1.60x 4 37,168,048 4.39 5.60 0.00 1.57x 5.570% 69 72.33%
1.60x+ to 1.70x 3 12,171,507 1.44 0.64 4.34 1.67x 5.078% 80 74.73%
1.70x+ to 1.80x 1 13,250,000 1.57 2.00 0.00 1.71x 6.350% 121 58.63%
1.80x+ to 2.40x 3 73,139,111 8.64 10.78 0.90 2.01x 4.771% 132 51.10%
2.40x+ to 2.93x 2 113,730,500 13.44 17.14 0.00 2.65x 5.616% 112 43.49%
-- ----------- ----- ----- ------ ---- ----- --- -----
TOTAL/WTD. AVG. 86 793,208,249 93.76% 92.04% 100.00% 1.64x 5.620% 114 69.00%
- ------------
(1) Excludes 4 credit tenant lease mortgage loans and 2 land mortgage loans
which represent 6.24% of the Initial Outstanding Pool Balance and 7.96% of
the Initial Loan Group 1.
See Annex A-1 to this prospectus supplement for additional information.
SECURITY FOR THE MORTGAGE LOANS
None of the Mortgage Loans are insured or guaranteed by the United States,
any governmental agency or instrumentality, any private mortgage insurer or by
the Depositor, any of Deutsche Bank AG, German American Capital Corporation
("GACC") or LaSalle Bank National Association ("LaSalle," and together with
GACC, the "Mortgage Loan Sellers"), the Servicer, the Special Servicer, the
Trustee or the Bond Administrator or any of their respective affiliates. Each
Mortgage Loan is generally non-recourse and is secured by one or more Mortgages
encumbering the related borrower's interest in the applicable Mortgaged Property
or Mortgaged Properties so that, in the event of a borrower default on any
Mortgage Loan, recourse may generally be had only against the specific Mortgaged
Property or Mortgaged Properties securing such Mortgage Loan and such limited
other assets as have been pledged to secure such Mortgage Loan, and not against
the borrower's other assets. Each Mortgage Loan is also secured by an assignment
of the related borrower's interest in the leases, rents, issues and profits of
the related Mortgaged Properties. In certain instances, additional collateral
exists in the nature of partial indemnities or guaranties, or the establishment
and pledge of one or more reserve or escrow
S-54
accounts (such accounts, "Reserve Accounts"). Each Mortgage constitutes a first
lien on a Mortgaged Property, subject generally only to (i) liens for real
estate and other taxes and special assessments not yet due and payable, (ii)
covenants, conditions, restrictions, rights of way, easements and other
encumbrances whether or not of public record as of the date of recording of the
related Mortgage, such exceptions having been acceptable to the related Mortgage
Loan Seller in connection with the purchase or origination of the related
Mortgage Loan, and (iii) such other exceptions and encumbrances on Mortgaged
Properties as are reflected in the related title insurance policies.
THE MORTGAGE LOAN SELLERS
The Depositor will purchase the Mortgage Loans to be included in the
Mortgage Pool on or before the Closing Date from GACC and LaSalle pursuant to
two separate Mortgage Loan Purchase Agreements (each, a "Mortgage Loan Purchase
Agreement"), to be dated the Closing Date between the related Mortgage Loan
Seller and the Depositor.
GACC. 30 Mortgage Loans, which represent security for 67.73% of the Initial
Outstanding Pool Balance, 75.39% of the Initial Loan Group 1 Balance and 39.88%
of the Initial Loan Group 2 Balance, will be sold to the Depositor by GACC. GACC
is a wholly-owned subsidiary of Deutsche Bank Americas Holding Corp., which in
turn is a wholly-owned subsidiary of Deutsche Bank AG, a German corporation.
GACC is also an affiliate of Deutsche Bank Securities Inc., one of the
Underwriters. GACC engages primarily in the business of purchasing and holding
mortgage loans pending securitization, repackaging or other disposition. GACC
also acts from time to time as the originator of mortgage loans. Although GACC
purchases and sells mortgage loans for its own account, it does not act as a
broker or dealer in connection with any such loans. The principal offices of
GACC are located at 60 Wall Street, New York, New York 10005.
LASALLE. 62 Mortgage Loans, which represent security for 32.27% of the
Initial Outstanding Pool Balance, 24.61% of the Initial Loan Group 1 Balance and
60.12% of the Initial Loan Group 2 Balance, will be sold to the Depositor by
LaSalle. One Mortgage Loan, representing 0.19% of the Initial Outstanding Pool
Balance, was originated pursuant to LaSalle's underwriting guidelines by another
entity and was purchased by LaSalle immediately upon the funding of each
Mortgage Loan. LaSalle is a national banking association whose principal offices
are in Chicago, Illinois. LaSalle is a subsidiary of LaSalle National
Corporation, which is a subsidiary of ABN AMRO Bank N.V., a bank organized under
the laws of The Netherlands. LaSalle is a commercial bank offering a wide range
of banking services to customers in the United States. Its business is subject
to examination and regulation by Federal banking authorities. LaSalle is also an
affiliate of ABN AMRO Incorporated, one of the Underwriters. LaSalle is also
acting as Bond Administrator and as paying agent and certificate registrar with
respect to the Certificates.
Each of the Mortgage Loan Sellers will make certain representations and
warranties with respect to the Mortgage Loans sold by it, and with respect to
any breach of any representation or warranty that materially and adversely
affects the value of such a Mortgage Loan, the related Mortgaged Property or the
interests of the Trustee or any holders of the Certificates therein will be
required to cure such breach or repurchase or substitute for such Mortgage Loan.
See "The Pooling and Servicing Agreement--Representations and Warranties;
Repurchase; Substitution" in this prospectus supplement.
The information set forth herein concerning the Mortgage Loan Sellers and
the underwriting conducted by each of the Mortgage Loan Sellers with respect to
the related Mortgage Loans has been provided by the respective Mortgage Loan
Sellers, and none of the Depositor, the Underwriters or the other Mortgage Loan
Seller make any representation or warranty as to the accuracy or completeness of
such information.
CERTAIN UNDERWRITING MATTERS
ENVIRONMENTAL SITE ASSESSMENTS. Environmental site assessments or updates
of a previously conducted assessment based on information in an established
database or studies, were conducted on all of the Mortgaged Properties. Such
environmental site assessments, updates or reviews were
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conducted within the 23-month period prior to the Cut-off Date. In some cases
these assessments or updates revealed the existence of material environmental
conditions (for more information regarding environmental conditions, see "Risk
Factors--Risks Related to the Mortgage Loans--Potential Trust Liability Related
to a Materially Adverse Environmental Condition" in this prospectus supplement).
The Mortgage Loan Sellers have informed the Depositor that where such conditions
were identified, the borrowers agreed to establish and maintain operations and
maintenance or abatement programs, environmental reserves, or indemnification
agreements.
In the case of 2 Mortgaged Properties securing 0.94% of the Initial
Outstanding Pool Balance and 4.34% of the Initial Loan Group 2 Balance,
environmental insurance for such Mortgage Loans were obtained from an affiliate
of American International Group, Inc. in addition to environmental site
assessments performed with respect to each of the underlying Mortgaged
Properties. Each environmental insurance policy insures the Trust against losses
resulting from certain known and unknown environmental conditions at the related
Mortgaged Property during the applicable policy period. Subject to certain
conditions and exclusions, the insurance policies generally provide coverage
against (i) losses resulting from default under the applicable Mortgage Loan, up
to the outstanding balance of the Mortgage Loan, if on-site environmental
conditions are discovered at the Mortgaged Property during the policy period and
no foreclosure of the Mortgaged Property has taken place, (ii) losses from
third-party claims against the lender during the policy period for bodily
injury, property damage or clean-up costs resulting from environmental
conditions at or emanating from the Mortgaged Property and (iii) after
foreclosure, costs of clean-up of environmental conditions discovered during the
policy period to the extent required by applicable law, including any court
order or other governmental directive.
The information contained herein regarding environmental conditions at the
Mortgaged Properties is based on the environmental site assessments or similar
studies and has not been independently verified by the Depositor, the Mortgage
Loan Sellers, the Underwriters, the Servicer, the Special Servicer, the Trustee,
the Bond Administrator or any of their respective affiliates. There can be no
assurance that the environmental site assessments or studies, as applicable,
identified all environmental conditions and risks, or that any such
environmental conditions will not have a material adverse effect on the value or
cash flow of the related Mortgaged Property.
PROPERTY CONDITION ASSESSMENTS. The Mortgage Loan Sellers have informed the
Depositor that inspections of substantially all of the Mortgaged Properties (or
updates of previously conducted inspections) were conducted by independent
licensed engineers or other representatives or designees of the related Mortgage
Loan Seller within 23 months of the Cut-off Date. Such inspections were
commissioned to inspect the exterior walls, roofing, interior construction,
mechanical and electrical systems (in most cases) and general condition of the
site, buildings and other improvements located at a Mortgaged Property. With
respect to certain of the Mortgage Loans, the resulting reports indicated a
variety of deferred maintenance items and recommended capital expenditures. The
estimated cost of the necessary repairs or replacements at a Mortgaged Property
was included in the related property condition assessment. In some (but not all)
instances, cash reserves were established to fund such deferred maintenance
and/or replacement items.
APPRAISALS AND MARKET ANALYSIS. The Mortgage Loan Sellers have informed the
Depositor that an appraisal or market analysis for all of the Mortgaged
Properties was performed (or an existing appraisal updated) on behalf of the
related Mortgage Loan Seller within 12 months of the Cut-off Date. See Annex A-1
to this prospectus supplement. Each such appraisal was conducted by an
independent appraiser that is state certified and/or designated as a Member of
the Appraisal Institute ("MAI"), in order to establish that the appraised value
of the related Mortgaged Property or Properties exceeded the original principal
balance of the Mortgage Loan (or, in the case of a set of related Pool Loans (as
defined herein), the aggregate original principal balance of such set). In
general, such appraisals represent the analysis and opinions of the respective
appraisers at or before the time made, and are not guarantees of, and may not be
indicative of, present or future value. There can be no assurance that another
appraiser would not have arrived at a different valuation, even if such
appraiser used the same general approach to and same method of appraising the
property. In addition, appraisals seek 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. See "Risk
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Factors--Risks Related to the Mortgage Loans--Appraisals and Market Studies Have
Certain Limitations" in this prospectus supplement.
HAZARD, LIABILITY AND OTHER INSURANCE. The Mortgage Loans require that
either: (i) in most cases, the Mortgaged Property be insured by a hazard
insurance policy in an amount (subject to a customary deductible) at least equal
to the lesser of the outstanding principal balance of the related Mortgage Loan,
100% of the full insurable replacement cost of the improvements located on the
related Mortgaged Property or, with respect to certain Mortgage Loans, the full
insurable actual cash value of the Mortgaged Property; or (ii) in certain cases,
the Mortgaged Property be insured by hazard insurance in such other amounts as
was required by the related originators and if applicable, the related hazard
insurance policy contains appropriate endorsements to avoid the application of
co-insurance and does not permit reduction in insurance proceeds for
depreciation. In addition, if any portion of the improvement to a Mortgaged
Property securing any Mortgage Loan was, at the time of the origination of such
Mortgage Loan, in an area identified in the "Federal Register" by the Federal
Emergency Management Agency as having special flood hazards, and flood insurance
was available, a flood insurance policy meeting any requirements of the
then-current guidelines of the Federal Insurance Administration is in effect
with a generally acceptable insurance carrier, in an amount representing
coverage not less than the least of (1) the outstanding principal balance of
such Mortgage Loan, (2) the full insurable actual cash value of such Mortgaged
Property, (3) the maximum amount of insurance required by the terms of the
related Mortgage and available for the related Mortgaged Property under the
National Flood Insurance Act of 1968, as amended and (4) 100% of the replacement
cost of the improvements located in the special flood hazard area on the related
Mortgaged Property except in certain cases where self insurance was permitted.
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 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. Each Mortgage generally further requires the related borrower to
maintain business interruption or rent loss insurance in an amount not less than
100% of the projected rental income from the related Mortgaged Property for not
less than six months. In general, the Mortgaged Properties are not insured for
earthquake risk, floods and other water-related causes, landslides and mudflow,
vermin, nuclear reaction or war.
UNDERWRITING STANDARDS
GACC'S UNDERWRITING STANDARDS
GENERAL. All of the mortgage loans sold to the Depositor by GACC were
originated by GACC, or an affiliate of GACC, in each case, generally in
accordance with the underwriting criteria described herein. GACC originates
loans secured by retail, multifamily, office, self storage and industrial
properties as well as manufactured housing communities located in the United
States.
LOAN ANALYSIS. In connection with the origination or acquisition of the
mortgage loans, GACC conducted extensive review of the related Mortgaged
Property, including an analysis of the appraisal, environmental report, property
operating statements, financial data, rent rolls and related information or
statements of occupancy rates provided by the borrower and, with respect to the
mortgage loans secured by retail and office properties, certain major tenant
leases and the tenant's credit. The credit of the borrower and certain key
principals of the borrower are examined for financial strength and character
prior to approval of the loan through a review of historical tax returns, third
party credit reports, judgment, lien, bankruptcy and pending litigation searches
and, if applicable, the loan payment history of the borrower and principals of
the borrower. Generally, borrowers are required to be single-purpose entities. A
member of the GACC underwriting or due diligence team visits the property for a
site inspection to confirm the occupancy rates of the property, analyze the
property's market and the utility of the property within the market. Unless
otherwise specified herein, all financial occupancy and
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other information contained herein is based on such information and there can be
no assurance that such financial, occupancy and other information remains
accurate.
LOAN APPROVAL. Prior to commitment, all mortgage loans must be approved by
GACC's credit committee (the make-up of which varies by loan size) in accordance
with its credit policies. 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. GACC's underwriting standards
generally require the following minimum debt service coverage ratios for each of
the indicated property types:
Property Type DSCR Guideline LTV Ratio Guideline
------------- -------------- -------------------
Anchored Retail ............. 1.25x 75%
Unanchored Retail ........... 1.30x 70%
Office ...................... 1.25x 75%
Multifamily ................. 1.20x 80%
Self storage ................ 1.30x 70%
Industrial/Warehouse ........ 1.25x 75%
Manufactured Housing ........ 1.20x 80%
The debt service coverage ratio guidelines listed above are calculated
based on Underwritten Net Cash Flow at origination. Therefore, the debt service
coverage ratio for each mortgage loan as reported elsewhere in this prospectus
supplement and Annex A-1 may differ from the amount calculated at the time of
origination. In addition, GACC's underwriting guidelines generally permit a
maximum amortization period of 30 years. However, notwithstanding the foregoing,
in certain circumstances the actual debt service coverage ratios and
loan-to-value ratios for the mortgage loans originated by GACC may vary from
these guidelines. See "Description of the Mortgage Pool" in this prospectus
supplement and Annex A-1 to this prospectus supplement.
ESCROW REQUIREMENTS. GACC generally requires a borrower to fund various
escrows for taxes and insurance, replacement reserves, TI/LC and capital
expenses. In some cases, the borrower is permitted to post a letter of credit or
guaranty in lieu of funding a given reserve or escrow. Generally, the required
escrows for mortgage loans originated by GACC are as follows:
o TAXES AND INSURANCE--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) and annual
insurance premium are required to provide GACC with sufficient funds
to satisfy all taxes and insurance bills prior to their respective due
dates.
o REPLACEMENT RESERVES--Monthly deposits generally based on the greater
of the amount recommended pursuant to a building condition report
prepared for GACC or the following minimum amounts:
Retail ................................ $0.20 per square foot
Office ................................ $0.20 per square foot
Multifamily ........................... $250 per unit
Self storage .......................... $0.15 per square foot
Industrial/Warehouse .................. $0.20 per square foot
Manufactured Housing Community ........ $50-100 per pad
o DEFERRED MAINTENANCE/ENVIRONMENTAL REMEDIATION--Generally, an initial
deposit, upon funding of the mortgage loan, in an amount equal to at
least 125% of the estimated costs of the recommended substantial
repairs or replacements pursuant to the building condition report
completed by a licensed third-party engineer and the estimated costs
of environmental remediation expenses as recommended by an independent
environmental assessment. In some cases, borrowers are permitted to
substitute environmental insurance policies in lieu of reserves.
o RE-TENANTING--In most cases, major tenants and a significant number of
smaller tenants have lease expirations within the mortgage loan term.
To mitigate this risk, special reserves may be established to be
funded either at closing and/or during the mortgage loan term to cover
certain
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anticipated leasing commissions and/or tenant improvement costs which
may be associated with re-leasing the space occupied by these tenants.
Loans originated by GACC generally conform to the above described
underwriting guidelines. However, there can be no assurance that each loan
originated by GACC conforms in its entirety to the guidelines described above.
LASALLE'S UNDERWRITING STANDARDS
UNDERWRITING GUIDELINES AND PROCESSES
LaSalle has developed guidelines establishing certain procedures with
respect to underwriting the Mortgage Loans originated or purchased by it which
are generally consistent with those described below. All of the Mortgage Loans
were generally originated in accordance with such guidelines. One Mortgage Loan,
representing 0.19% of the Initial Outstanding Pool Balance, was originated by
Collateral Mortgage Capital, LLC, and LaSalle re-underwrote such Mortgage Loan.
In some instances, one or more provisions of the guidelines were waived or
modified by LaSalle where it was determined not to adversely affect the Mortgage
Loans originated by it in any material respect.
PROPERTY ANALYSIS. LaSalle generally performs or causes to be performed a
site inspection to evaluate the location and quality of the related mortgaged
properties. Such inspection generally includes an evaluation of functionality,
design, attractiveness, visibility and accessibility, as well as convenience to
major thoroughfares, transportation centers, employment sources, retail areas
and educational or recreational facilities. LaSalle assesses the submarket in
which the property is located to evaluate competitive or comparable properties
as well as market trends. In addition, LaSalle evaluates the property's age,
physical condition, operating history, lease and tenant mix, and management.
CASH FLOW ANALYSIS. LaSalle reviews, among other things, historical
operating statements, rent rolls, tenant leases and/or budgeted income and
expense statements provided by the mortgagor and makes adjustments in order to
determine a DSCR. See "DESCRIPTION OF THE MORTGAGE POOL--ADDITIONAL MORTGAGE
LOAN INFORMATION" in this prospectus supplement.
APPRAISAL AND LOAN-TO-VALUE RATIO. For each mortgaged property, LaSalle
obtains a current full narrative appraisal conforming at least to the
requirements of the Financial Institutions Reform, Recovery, and Enforcement Act
of 1989 ("FIRREA"). The appraisal must be based on the highest and best use of
the mortgaged property and must include an estimate of the current market value
of the property in its current condition. LaSalle then determines the LTV Ratio
of the mortgage loan at the date of origination based on the value set forth in
the appraisal.
EVALUATION OF MORTGAGOR. LaSalle evaluates the mortgagor and its principals
with respect to credit history and prior experience as an owner and operator of
commercial real estate properties. The evaluation will generally include
obtaining and reviewing a credit report or other reliable indication of the
mortgagor's financial capacity; obtaining and verifying credit references and/or
business and trade references; and obtaining and reviewing certifications
provided by the mortgagor as to prior real estate experience and current
contingent liabilities. Finally, although the mortgage loans are nonrecourse in
nature, in the case of certain mortgage loans, the mortgagor and/or certain
principals thereof may be required to assume legal responsibility for
liabilities relating to fraud, misrepresentation, misappropriation of funds and
breach of environmental or hazardous waste requirements. LaSalle evaluates the
financial capacity of the mortgagor and such principals to meet any obligations
that may arise with respect to such liabilities.
ENVIRONMENTAL SITE ASSESSMENT. Prior to origination LaSalle either (i)
obtains or updates an environmental site assessment ("ESA") for a mortgaged
property prepared by a qualified environmental firm or (ii) obtains an
environmental insurance policy for a mortgaged property. If an ESA is obtained
or updated, LaSalle reviews the ESA to verify the absence of reported violations
of applicable laws and regulations relating to environmental protection and
hazardous waste. In cases in which the ESA identifies such violations, LaSalle
requires the mortgagor to carry out satisfactory remediation activities prior to
the origination of the mortgage loan, to establish an operations and maintenance
plan or to
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place sufficient funds in escrow at the time of origination of the mortgage loan
to complete such remediation within a specified period of time, or to obtain an
environmental insurance policy for the Mortgaged Property or to execute an
indemnity agreement with respect to such condition.
PHYSICAL ASSESSMENT REPORT. Prior to origination (or in certain limited
cases, after origination with respect to certain PARs), LaSalle obtains a
physical assessment report ("PAR") for each Mortgaged Property prepared by a
qualified structural engineering firm. However, in certain cases a PAR is not
obtained if the Mortgaged Property is new construction. LaSalle reviews the PAR
to verify that the property is reported to be in satisfactory physical
condition, and to determine the anticipated costs of necessary repair,
replacement and major maintenance or capital expenditure needs over the term of
the mortgage loan. In cases in which the PAR identifies material repairs or
replacements needed immediately, LaSalle generally requires the mortgagor to
carry out such repairs or replacements prior to the origination of the mortgage
loan, or to place sufficient funds in escrow at the time of origination of the
mortgage loan to complete such repairs or replacements within not more than
twelve months.
TITLE INSURANCE POLICY. The mortgagor is required to provide, and LaSalle
reviews, a title insurance policy for each Mortgaged Property. The title
insurance policy must meet the following requirements: (a) the policy must be
written by a title insurer licensed to do business in the jurisdiction where the
mortgaged property is located, (b) the policy must be in an amount equal to the
original principal balance of the mortgage loan, (c) the protection and benefits
must run to the mortgagee and its successors and assigns, (d) the policy should
be written on a standard policy form of the American Land Title Association or
equivalent policy promulgated in the jurisdiction where the mortgaged property
is located and (e) the legal description of the mortgaged property in the title
policy must conform to that shown on the survey of the mortgaged property, where
a survey has been required.
PROPERTY INSURANCE. The mortgagor is required to provide, and LaSalle
reviews, certificates of required insurance with respect to the Mortgaged
Properties where self-insurance is not permitted. Such insurance generally may
include: (1) commercial general liability insurance for bodily injury or death
and property damage; (2) an "All Risk of Physical Loss" policy; (3) if
applicable, boiler and machinery coverage; (4) if the Mortgaged Property is
located in a flood hazard area, flood insurance; and (5) such other coverage as
LaSalle may require based on the specific characteristics of the Mortgaged
Property.
DESCRIPTION OF THE TEN LARGEST MORTGAGE LOANS
The following summaries describe the ten largest Mortgage Loans in the
Trust.
THE 75 ROCKEFELLER PLAZA LOAN
THE LOAN. The Mortgage Loan known as "75 Rockefeller Plaza" (the "75
Rockefeller Plaza Loan") is secured by a first mortgage on the fee and leasehold
interests of the borrower in 75 Rockefeller Plaza, a 33-story office building
built in 1947 and located in New York, New York. The 75 Rockefeller Plaza Loan
was originated on June 6, 2003 and is evidenced by a note with an original
principal balance of $65,000,000. The cut-off date balance for the 75
Rockefeller Plaza Loan is $65,000,000, which represents 7.68% of the Initial
Outstanding Pool Balance.
THE PROPERTY. The 75 Rockefeller Plaza Mortgaged Property consists of one
578,241 square foot (based on net rentable square footage) office building on a
37,557 square foot parcel of land. The 75 Rockefeller Plaza Mortgaged Property
is 100% occupied by AOL Time Warner, Inc. ("TWI"), pursuant to a lease dated
March 11, 1993 ("TWI Lease"). The TWI lease expires July 31, 2014 and had an
early termination provision, which has since been waived.
THE BORROWER AND SPONSOR. The borrower is 75 Plaza LLC, a special purpose
Delaware limited liability company. Legal counsel to the borrower delivered a
non-consolidation opinion in connection with the origination of the 75
Rockefeller Plaza Loan. The sponsor of the borrower is 75 Plaza Holdings LLC, a
Delaware limited liability company.
MATURITY DATE. The 75 Rockefeller Plaza Loan has a remaining term of 134
months. The scheduled maturity date is August 1, 2014.
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INTEREST RATE. The 75 Rockefeller Plaza Loan accrues interest at an annual
rate of 4.6650% per annum.
LOAN-TO-VALUE RATIO; DEBT SERVICE COVERAGE RATIO. Based on an appraisal
dated June 1, 2003 by a third-party appraiser, the appraised value of the
Mortgaged Property for the 75 Rockefeller Plaza Loan (the "75 Rockefeller Plaza
Mortgaged Property") is $130,000,000. Based on that appraised value, the 75
Rockefeller Plaza Loan has a cut-off date loan-to-value ratio of 50.0%. The
underwritten net cash flow of the 75 Rockefeller Plaza Mortgaged Property was
calculated to be $6,228,077. Based on that underwritten net cash flow, the 75
Rockefeller Plaza Loan has an underwritten debt service coverage ratio of 2.02x.
APPLICATION OF PAYMENTS. On the first day of each month (with a five day
grace period), the borrower is required to make interest payments calculated
based on the on the Interest Rate divided by twelve (12) months and multiplied
by a quotient of the actual number of days in a month over thirty (30) days. On
the maturity date, the entire principal amount, all unpaid accrued interest and
all other sums due under the loan documents will be due.
LOCKBOX AND CASH MANAGEMENT. The borrower has directed the sole tenant at
the 75 Rockefeller Plaza Mortgaged Property to send its rent directly to a
lender-controlled account. During the term of the TWI Lease (hereinafter
defined) and provided that TWI (hereinafter defined) has not given the borrower
notice of its intention not to renew the term of such lease, funds in the
lender-controlled account will be applied to pay debt service and reserves for
tenant improvement and leasing costs. Any remaining amounts will be returned to
the borrower. Upon notice from TWI of non-renewal, or at the expiration or
termination of the TWI Lease, the borrower is required to fund reserves related
to real estate taxes, insurance and certain property expenses. On the occurrence
of an event of default, (i) the lender may make withdrawals from the lender
controlled account to pay any obligations, operating expenses or capital
expenditures relating to the 75 Rockefeller Plaza Mortgaged Property and (ii)
all excess cash in the lender-controlled account will not be returned to the
borrower.
PREPAYMENT; DEFEASANCE. The borrower is prohibited from voluntarily
prepaying the 75 Rockefeller Plaza Loan, in whole or in part, at any time prior
to May 1, 2014, on which date the 75 Rockefeller Plaza Loan is freely prepayable
in whole (but not in part). If, despite the above restriction, the 75
Rockefeller Plaza Loan is voluntarily or mandatorily prepaid at any time prior
to the payment date in July 2005, (other than as a result of the application of
insurance proceeds or condemnation awards), the borrower will be required to pay
to lender liquidated damages equal to 5% of the principal amount of the 75
Rockefeller Plaza Loan being repaid. Subject to certain conditions set forth in
the loan documents, on any payment date from the payment date in July 2005 to
the payment date in May 2014, the borrower is permitted to obtain a release of
the 75 Rockefeller Mortgaged Property from the lien of the mortgage by pledging
sufficient defeasance collateral to the lender.
MEZZANINE DEBT OR SUBORDINATE DEBT. None.
ESCROWS AND RESERVES. The loan documents provide for escrows or reserves
for tenant improvement and leasing costs (monthly deposits of $62,500), and,
only if the lender receives notice from TWI of its intention not to renew the
lease or at the expiration or termination of the TWI Lease, real estate taxes,
insurance and certain property expenses.
PROPERTY MANAGEMENT. The 75 Rockefeller Mortgaged Property is managed by
TWI pursuant to the terms of the TWI Lease. Upon an event of default under the
loan agreement or the management agreement, if the DSCR falls below the level
outlined in the loan agreement or if the manager becomes insolvent, the
borrower, at the lender's request, is required to replace the manager.
TERRORISM INSURANCE. The loan documents provide that, if the TRIA or a
similar statute (i) is in effect, then the borrower is required to maintain
terrorism insurance on a per occurrence basis in an amount equal to the lesser
of (A) the principal amount of the 75 Rockefeller Plaza Loan or (B) 100% of the
replacement cost value of the improvements and building equipment located on the
75 Rockefeller Plaza Mortgaged Property; and (ii) is not in effect, and if
terrorism insurance is either (A) commercially available or (B) maintained for
another Class "A" office property in the same geographic area as the 75
Rockefeller Plaza Mortgaged Property which is owned directly or indirectly by an
affiliate of the
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borrower, then the borrower is required to maintain terrorism insurance on a per
occurrence basis in an amount not less than the lesser of (x) the principal
amount of the 75 Rockefeller Plaza Loan, (y) the replacement cost of the
improvements or (z) that which can be purchased for a sum equal to 200% of the
total insurance premium being paid in connection with the "all-risk" property
insurance required by the loan documents, or such greater amount as shall be
required by the rating agencies. The borrower is currently insured for damage
caused by terrorism as specified in clause (i) above.
THE WESTFIELD SHOPPINGTOWN PORTFOLIO LOAN
THE LOAN. The Mortgage Loan known as "Westfield Shoppingtown Portfolio"
(the "Westfield Shoppingtown Portfolio Loan"), evidenced by a promissory note
dated November 1, 2002 with an original principal balance of $59,950,922
("Westfield Shoppingtown Portfolio A-2 Note"), is secured by a first mortgage on
two Class A super-regional malls, the Shoppingtown Galleria at Roseville located
in Roseville, California (the "Westfield Shoppingtown Galleria at Roseville
Property") and the Shoppingtown MainPlace located in Santa Ana, California (the
"Westfield Shoppingtown MainPlace Property," and together with Westfield
Shoppingtown Galleria at Roseville Property, the "Westfield Shoppingtown
Portfolio Mortgaged Properties"). The Westfield Shoppingtown Portfolio Loan is a
portion of a larger loan (the "Westfield Shoppingtown Portfolio Whole Loan")
that was originated by GACC on September 13, 2002. The Westfield Shoppingtown
Portfolio Whole Loan, secured by the Westfield Shoppingtown Portfolio Mortgaged
Properties, is evidenced by four notes: (i) Westfield Shoppingtown Portfolio A-2
Note, (ii) a promissory note dated November 1, 2002 ("Westfield Shoppingtown
Portfolio A-1 Note") with an original principal balance of $96,920,657, which
note was transferred by GACC to GE Capital Commercial Mortgage Corporation and
is an asset in the trust fund established pursuant to that certain pooling and
servicing agreement (the "GECCMC Series 2002-3 PSA"), by and among GE Capital
Commercial Mortgage Corporation, as depositor, GEMSA Loan Services, L.P., as
master servicer (in such capacity, the "2002-3 Master Servicer"), KeyCorp Real
Estate Capital Markets, Inc., as special servicer (in such capacity, the "2002-3
Special Servicer"), and Wells Fargo Bank Minnesota, N.A., as trustee, (iii) a
promissory note dated November 1, 2002 ("Westfield Shoppingtown Portfolio A-3
Note" and, together with Westfield Shoppingtown Portfolio Note A-2 and Westfield
Shoppingtown Portfolio A-1 Note, the "Westfield Shoppingtown Portfolio A
Notes"), with an original principal balance of $19,983,641, and (iv) a
promissory note dated November 1, 2003 in the original principal amount of
$35,970,553 ("Westfield Shoppingtown Portfolio B Note," and together with the
Westfield Shoppingtown Portfolio A Notes, the "Westfield Shoppingtown Portfolio
Notes"). The Westfield Shoppingtown Portfolio A-3 Note and the Westfield
Shoppingtown Portfolio B Note were transferred by GACC to Deutsche Mortgage &
Asset Receiving Corporation and are assets in the trust fund established
pursuant to that certain trust agreement dated as of November 1, 2002 by and
between Deutsche Mortgage & Asset Receiving Corporation, as depositor, and Wells
Fargo Bank Minnesota, N.A., as trustee. The Westfield Shoppingtown Portfolio A-3
Note is divided into two loan components, the first of which ("Westfield
Shoppingtown Portfolio A-3A Loan Component") has an original principal balance
of $17,633,641 and the second of which ("Westfield Shoppingtown Portfolio A-3B
Loan Component") has an original principal balance of $2,350,000. Each of the
Westfield Shoppingtown Portfolio A-1 Note and the Westfield Shoppingtown
Portfolio A-3A Loan Component is pari passu in right of payment to the Westfield
Shoppingtown Portfolio Loan. The Westfield Shoppingtown Portfolio A-3B Loan
Component is subordinate in right of payment to the Westfield Shoppingtown
Portfolio Loan, the Westfield Shoppingtown Portfolio A-1 Note and the Westfield
Shoppingtown Portfolio A-3A Loan Component; and the Westfield Shoppingtown
Portfolio B Note is subordinate to each of the Westfield Shoppingtown Portfolio
A Notes. The cut-off date balance for the Westfield Shoppingtown Portfolio Loan
is $59,549,050, which represents 7.04% of the initial outstanding pool balance.
A co-lender agreement (the "Westfield Shoppingtown Portfolio Co-Lender
Agreement") by and among the holder of the Westfield Shoppingtown Portfolio
Loan, the holder of the Westfield Shoppingtown Portfolio A-1 Note, the holder of
the Westfield Shoppingtown Portfolio A-3 Note and the holder of the Westfield
Shoppingtown Portfolio B Note sets forth the rights of each note holder.
THE WESTFIELD SHOPPINGTOWN GALLERIA AT ROSEVILLE PROPERTY. The Shoppingtown
Galleria at Roseville is a 1,034,710 square feet two-level Class A
super-regional mall located in the Sacramento, CA market. 462,666 square feet of
inline space serves as collateral for the Westfield Shoppingtown
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Portfolio Loan. The property was completed in 2000. The mall is anchored by four
department stores: Nordstrom, Macy's, JC Penney and Sears, each of which own
their own stores and are not part of the loan collateral. The property has more
than 4,900 surface parking spaces (approximately 4.8 spaces per 1,000 square
feet of GLA).
The following table presents certain information related to the five
largest in-line tenants, based on net rentable square feet, at the Westfield
Shoppingtown Galleria at Roseville Property:
FIVE LARGEST IN-LINE TENANTS BASED ON NET RENTABLE SQUARE FEET
% OF BASE LEASE
TENANT NRSF NRSF RENT (PSF) EXPIRATION
------ -------- -------- ---------- ----------
Crate & Barrel ............. 36,223 7.83% $19.08 8/31/2010
Copeland's Sports .......... 31,164 6.74 18.67 1/31/2011
Borders Books & Music ...... 25,120 5.43 19.90 1/31/2016
Restoration Hardware ....... 11,472 2.91 18.50 8/31/2010
The Gap .................... 11,214 2.42 32.30 1/31/2006
------- ---- ------
TOTAL/WTD. AVG. ............ 115,193 24.90% $20.38
======= ===== ======
The following table presents certain information related to the anchor
tenants at the Westfield Shoppingtown Galleria at Roseville Property that are
not collateral for the Westfield Shoppingtown Portfolio Loan:
CREDIT RATING
ANCHOR TENANT S&P/MOODY'S/FITCH NET RENTABLE AREA (SF)
------------- ------------------- ----------------------
Macy's .................. BBB+/Baa1/BBB+ 180,000
Nordstrom ............... A-/Baa1/-- 144,000
JC Penney ............... BB+/Ba3/BB 125,445
Sears ................... BBB+/Baa1/BBB+ 122,599
The Westfield Shoppingtown MainPlace Property. The Shoppingtown MainPlace
is a 1,109,228 square feet two-level Class A super-regional mall located in the
Orange County, CA MSA. 448,728 square feet of in-line space and 435,500 square
feet of ground leased anchor space serves as collateral for the loan. The
majority of the property was constructed in 1987 and expanded in 1992. The mall
is anchored by Macy's, Nordstrom, and two Robinson's-May stores, each of which
are under long-term ground leases except for Macy's, which owns its own store.
The property features more than 5,000 surface parking spaces, which equates to
approximately 4.5 spaces per 1,000 square feet of GLA.
The following table presents certain information related to the five
largest in-line tenants, based on net rentable square feet, at the Westfield
Shoppingtown MainPlace Property:
FIVE LARGEST IN-LINE TENANTS BASED ON NET RENTABLE SQUARE FEET
% OF BASE LEASE
TENANT NRSF NRSF RENT (PSF) EXPIRATION
------------ ------- -------- ---------- ----------
MainPlace Theaters ............ 41,886 4.74% $ 4.77 12/31/2005
Crate & Barrel ................ 13,780 1.56 25.40 1/31/2007
Barnes & Noble ................ 11,580 1.31 18.00 7/31/2004
Olive Garden .................. 11,500 1.30 20.70 7/31/2006
Lerner New York ............... 10,796 1.22 20.00 1/31/2005
------- ----- ------
TOTAL/WTD. AVG. ............... 89,542 10.13% $13.54
======= ===== ======
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The following table presents certain information related to the anchor
tenants at the Westfield Shoppingtown MainPlace Property that are collateral for
the Westfield Shoppingtown Portfolio Loan only to the extent of the fee interest
in the land occupied by Nordstrom and the two Robinson's-May stores, and upon
expiration of the related ground lease to each of such anchor stores, the
reversionary interest in the related improvements:
ANCHOR TENANT RATING NET RENTABLE AREA (SF)
-------------- ------------------ ----------------------
Macy's ............................. BBB+/Baa1/BBB+ 225,000
Nordstrom .......................... A-/Baa1/- 150,500
Robinson's-May Women's ............. A/A2/BBB+ 142,500
Robinson's-May Men's ............... A/A2/BBB+ 142,500
SERVICING OF THE WESTFIELD SHOPPINGTOWN PORTFOLIO WHOLE LOAN. The Westfield
Shoppingtown Portfolio Whole Loan and any related REO property are being
serviced under the GECCMC Series 2002-3 PSA, and 2002-3 Master Servicer will
service the Westfield Shoppingtown Portfolio Loan and remit collections on the
Westfield Shoppingtown Portfolio Loan to or on behalf of the Trust. The 2002-3
Master Servicer will make servicing advances relating to the Westfield
Shoppingtown Portfolio Mortgaged Properties and principal and interest advances
on the Westfield Shoppingtown Portfolio Whole Loan, including the Westfield
Shoppingtown Portfolio Loan. The Westfield Shoppingtown Portfolio Loan will be
held as an asset of a REMIC (a "Loan REMIC"), which will be administered
pursuant to the Pooling and Servicing Agreement. See "The Pooling and Servicing
Agreement--Servicing of the Non-Serviced Mortgage Loans" herein.
THE BORROWER AND SPONSOR. The borrowers are Roseville Shoppingtown LLC and
MainPlace Shoppingtown LLC, each of which is a special purpose Delaware limited
liability company with an independent director. Legal counsel to the borrowers
delivered a non-consolidation opinion in connection with the origination of the
Westfield Shoppingtown Portfolio Whole Loan. The sponsor of the borrowers is
Westfield America, Inc.
MATURITY DATE. The Westfield Shoppingtown Portfolio Loan has a remaining
term of 112 months. The scheduled maturity date is October 1, 2012.
INTEREST RATE. The Westfield Shoppingtown Portfolio Loan accrues interest
at an annual rate of 6.0500000%. The Westfield Shoppingtown Portfolio A-1 Note,
the Westfield Shoppingtown Portfolio A-3 Note and the Westfield Shoppingtown
Portfolio B Note accrue interest at an annual rate of 6.2241190%, 5.7484000% and
5.7484000%, respectively.
LOAN-TO-VALUE RATIO; DEBT SERVICE COVERAGE RATIO. Based on an appraisal
dated August 12, 2002 by a third-party appraiser, the appraised value of the
Westfield Shoppingtown Galleria at Roseville Property is $183,500,000. Based on
an appraisal dated August 7, 2002 by a third-party appraiser, the appraised
value of the Westfield Shoppingtown MainPlace Property is $195,000,000. Based on
those appraised values, the Westfield Shoppingtown Portfolio Whole Loan has a
cut-off date Loan-to-Value Ratio of 55.85%. The underwritten net cash flow of
the Westfield Shoppingtown Portfolio Mortgaged Properties was calculated to be
$30,697,568. Based on that underwritten net cash flow, the Westfield
Shoppingtown Portfolio Whole Loan has an underwritten debt service coverage
ratio of 1.99x.
APPLICATION OF PAYMENTS. Payments to the Westfield Shoppingtown Portfolio
Loan are made pursuant to a schedule presented in Annex A-3 to the prospectus
supplement. On the maturity date, a balloon payment equal to $180,926,307
($82,393,670 designated for the holder of Westfield Shoppingtown Portfolio A-1
Note, $50,965,157 designated for the holder of Westfield Shoppingtown Portfolio
A-2 Note, $16,988,386 designated for the holder of Westfield Shoppingtown
Portfolio A-3 Note and $30,579,094 designated for the holder of Westfield
Shoppingtown Portfolio B Note) is due.
Pursuant to the terms of the Westfield Shoppingtown Whole Loan, prior to
the occurrence and continuance of an event of default with respect to the
Westfield Shoppingtown Whole Loan, all payments received with respect to the
Westfield Shoppingtown Whole Loan will generally be paid in the following
manner: (i) each of the Trust, the holder of the Westfield Shoppingtown
Portfolio A-1 Note, the holder of the Westfield Shoppingtown Portfolio A-3 Note
and the holder of the Westfield
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Shoppingtown Portfolio B Note will receive accrued and unpaid interest on its
outstanding principal at its interest rate, pro rata; and (ii) any principal
payments will then be paid to the Trust, the holder of the Westfield
Shoppingtown Portfolio A-1 Note, the holder of the Westfield Shoppingtown
Portfolio A-3 Note and the holder of the Westfield Shoppingtown Portfolio B
Note, pro rata, based on their respective amortization schedules (or in the case
of an unscheduled principal payment, based on their outstanding principal
balances).
After the occurrence of a prepayment on the Westfield Shoppingtown Whole
Loan (including a prepayment that would occur in connection with an event of
default (PROVIDED that such event of default has been cured, and in connection
with such cure the principal balance of each Westfield Shoppingtown Portfolio
Note has been repaid such that such principal balance is not greater than the
amount it would have been reduced to in accordance with its amortization
schedule had there been no event of default)), the principal amortization
schedule on each Westfield Shoppingtown Portfolio Note which has received
principal prepayments will be proportionately reduced by its respective
Westfield Shoppingtown Portfolio Prepayment Allocation Ratio.
The "Westfield Shoppingtown Portfolio Prepayment Allocation Ratio" is equal
to, with respect to any Westfield Shoppingtown Portfolio Note, the ratio of: (a)
the difference between (i) the Westfield Shoppingtown Portfolio Amortization
Scheduled Balance of such Westfield Shoppingtown Portfolio Note, and (ii) the
outstanding principal amount of such Westfield Shoppingtown Portfolio Note, to
(b) the Westfield Shoppingtown Portfolio Amortization Scheduled Balance of such
Westfield Shoppingtown Portfolio Note. The "Westfield Shoppingtown Portfolio
Amortization Scheduled Balance" means, with respect to any date of calculation,
the principal balance that the Westfield Shoppingtown Portfolio Note would have
been on such date if no prepayments had been made on the Westfield Shoppingtown
Portfolio Whole Loan, based on the amortization schedule of such Westfield
Shoppingtown Portfolio Note, as adjusted prior to such date of calculation.
Following the occurrence and during the continuance of an event of default
with respect to the Westfield Shoppingtown Portfolio Whole Loan, after payment
of any costs and expenses incurred by the mortgagee in connection with such
event of default or reasonably expended by the mortgagee to protect the
Westfield Shoppingtown Portfolio Mortgaged Properties (in each case to the
extent permitted to be charged to the Borrower pursuant to the loan documents),
liquidation proceeds and other collections with respect to the Westfield
Shoppingtown Portfolio Whole Loan will be applied in the following manner: (i)
FIRST, to the payment of accrued and unpaid interest (other than default
interest) to the Trust, the holder of the Westfield Shoppingtown Portfolio A-1
Note and the holder of the Westfield Shoppingtown Portfolio A-3A Loan Component,
PRO RATA, (ii) SECOND, to accrued and unpaid interest (other than default
interest), on the Westfield Shoppingtown Portfolio A-3B Loan Component, (iii)
THIRD, to accrued and unpaid interest (other than default interest), on the
Westfield Shoppingtown Portfolio B Note, (iv) FOURTH, to the payment of
principal on the Westfield Shoppingtown Portfolio Loan, the Westfield
Shoppingtown Portfolio A-1 Note and the Westfield Shoppingtown Portfolio A-3A
Loan Component, PRO RATA, until principal thereof is paid in full, (v) FIFTH, to
the payment of principal on the Westfield Shoppingtown A-3B Loan Component,
until principal thereof is paid in full, (vi) SIXTH, to the payment of principal
on the Westfield Shoppingtown Portfolio B Note, until principal thereof is paid
in full, then to the payment of default interest to the Trust, the holder of the
Westfield Shoppingtown Portfolio A-1 Note and the holder of the Westfield
Shoppingtown Portfolio A-3A Loan Component, PRO RATA, (vii) SEVENTH, to the
payment of default interest to the Westfield Shoppingtown Portfolio A-3B Loan
Component, (viii) EIGHTH, to the payment of default interest to the Westfield
Shoppingtown B Note, (ix) NINTH, to the payment of late payment charges to the
Trust, the holder of the Westfield Shoppingtown Portfolio A-1 Note and the
holder of the Westfield Shoppingtown Portfolio A-3A Loan Component, PRO RATA,
(x) TENTH, to the payment of late payment charges to the Westfield Shoppingtown
A-3B Loan Component, (xi) ELEVENTH, to the payment of late payment charges to
the Westfield Shoppingtown B Note, (xii) TWELFTH, to the payment of default
prepayment consideration (equal to 3% of the amount prepaid) to the Westfield
Shoppingtown Portfolio Loan, the Westfield Shoppingtown Portfolio A-1 Note, the
Westfield Shoppingtown Portfolio A-3 Note and the Westfield Shoppingtown
Portfolio B Note, PRO RATA, based on the amount of the principal prepayment
received by each Westfield Shoppingtown Portfolio Note, (xiii) THIRTEENTH, to
the payment of any other amounts due to the Westfield
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Shoppingtown Portfolio Loan, the Westfield Shoppingtown Portfolio A-1 Note and
the Westfield Shoppingtown Portfolio A-3A Loan Component, PRO RATA, (xiv)
FOURTEENTH, to the payment of any other amounts due to the Westfield
Shoppingtown A-3B Loan Component, then to the payment of any other amounts due
to the Westfield Shoppingtown B Note, and (xv) FIFTEENTH, to the payment of any
other amounts due under the Westfield Shoppingtown Portfolio Whole Loan, PRO
RATA among the Westfield Shoppingtown Portfolio Loan, the Westfield Shoppingtown
Portfolio A-1 Note, the Westfield Shoppingtown Portfolio A-3 Note and the
Westfield Shoppingtown Portfolio B Note.
Notwithstanding the foregoing, net liquidation proceeds, net insurance
proceeds and net condemnation proceeds with respect to the Westfield
Shoppingtown Portfolio Whole Loan will generally be applied first to interest
due on the Westfield Shoppingtown Portfolio Whole Loan and then to principal in
the manner set forth above; provided, however, that in the event that (i) one or
more principal or interest advances made by the 2002-3 Master Servicer with
respect to the Westfield Shoppingtown Portfolio Whole Loan was reduced as a
result of an Appraisal Reduction Event (as defined in the GECCMC Series 2002-3
PSA) and (ii) any Appraisal Reduction Amounts (as defined in the GECCMC Series
2002-3 PSA) have resulted in shortfalls of interest allocated to any class of
certificates issued under the GECCMC Series 2002-3 PSA, then the amount of net
liquidation proceeds, net insurance proceeds and net condemnation proceeds
applied to interest pursuant to the preceding paragraph will be reduced by the
aggregate amount of reductions in principal or interest advances made by 2002-3
Master Servicer in respect of the Westfield Shoppingtown Portfolio Whole Loan,
such reduction to be applied in the reverse of the priority in which funds are
applied to interest under the preceding paragraph. Interest amounts that remain
outstanding with respect to any Westfield Shoppingtown Portfolio Note or
component thereof will be paid from available proceeds on the Westfield
Shoppingtown Portfolio Whole Loan immediately prior to the application of such
proceeds against amounts of principal outstanding on such loan component.
The Westfield Shoppingtown Co-Lender Agreement provides that expenses and
losses relating to the Westfield Shoppingtown Portfolio Whole Loan will be
allocated first, to the Westfield Shoppingtown Portfolio B Note, second, to the
Westfield Shoppingtown Portfolio A-3B Loan Component and thereafter, to the
Westfield Shoppingtown Portfolio Loan, the Westfield Shoppingtown Portfolio A-1
Note and the Westfield Shoppingtown Portfolio A-3A Loan Component, pro rata,
based on their respective outstanding principal balances.
LOCKBOX AND CASH MANAGEMENT. The tenants at the Westfield Shoppingtown
Portfolio Mortgaged Properties have been instructed to send rent payments
directly to a lender controlled lockbox account. Prior to the commencement of a
trigger period (as described below), amounts in the lockbox account will be
transferred, on a daily basis, to an operating account controlled by the
borrower. Upon (i) an event of default or (ii) if the debt service ratio
coverage for the Westfield Shoppingtown Portfolio Whole Loan is less than or
equal to 1.20x ("Westfield Shoppingtown Portfolio DSCR Event"), until such time
that (i) the event of default has been cured or (ii) the debt service coverage
ratio is greater than 1.25x for three consecutive months or the borrowers
deliver a letter of credit in an amount necessary to increase the debt service
coverage ratio to 1.25x and the debt service coverage ratio is at least 1.20x
for three consecutive months following such delivery, as applicable, during such
trigger period, funds in the lockbox account will be applied to pay debt
service, required reserves and any other amounts due under the Westfield
Shoppingtown Portfolio Loan and any excess cash remaining will be returned to
the borrower.
As a result of a reserve guaranty provided by the Westfield America, Inc.
(the "Westfield Shoppingtown Portfolio Guarantor"), the borrowers are not
required to fund any of the collateral accounts other than (a) the tax reserve
account and (b) amounts deposited into any of the collateral accounts on the
origination date of the Westfield Shoppingtown Portfolio Loan, PROVIDED,
HOWEVER, that if an event of default occurs, the borrowers fail to maintain a
quarterly debt service coverage ratio of at least 1.20x or the Westfield
Shoppingtown Portfolio Guarantor has liquidity of less than $25,000,000
calculated based on cash, cash equivalents and amounts, immediately available
under credit lines to Westfield America, Inc. or Westfield America Limited
Partnership ("WALP") pursuant to terms reasonably acceptable to the mortgagee (a
"Westfield Shoppingtown Portfolio Guarantor Liquidity Event"), each borrower is
required to deposit into the holding account an amount equal to all amounts that
would have been required to be deposited into the collateral accounts to pay for
reserve account
S-66
items less any amounts actually applied by the borrowers prior to such an event
of default, DSCR Event or Westfield Shoppingtown Portfolio Guarantor Liquidity
Event on account of such items. Additionally, from and after the occurrence of a
Westfield Shoppingtown Portfolio Guarantor Liquidity Event, the borrowers are
required on a monthly basis to fund all of the collateral accounts.
PREPAYMENT; DEFEASANCE. The borrower is prohibited from voluntarily
prepaying the Westfield Shoppingtown Portfolio Loan, in whole or in part, at any
time prior to April 1, 2012, and on and after which date the Westfield
Shoppingtown Portfolio Loan is freely prepayable in whole but not in part.
Subject to certain conditions set forth in the loan documents, at any time after
December 3, 2004, the borrowers are permitted to obtain a release of the
Westfield Shoppingtown Galleria at Roseville Property and/or the Westfield
Shoppingtown MainPlace Property from the lien of the mortgage by pledging (i) in
the case of the simultaneous release of the Westfield Shoppingtown Galleria at
Roseville Property and the Westfield Shoppingtown MainPlace Property, sufficient
defeasance collateral to the lender to provide payment of all principal and
scheduled interest on the Westfield Shoppingtown Portfolio Whole Loan through
the maturity date, (ii) in the case of the release of either the Westfield
Shoppingtown Galleria at Roseville Property or the Westfield Shoppingtown
MainPlace Property, sufficient collateral to the lender to provide payments
equal to 125% of the allocated loan amount with respect to such property
outstanding as of the date of defeasance and scheduled interest on such amount
through the maturity date, and (iii) in the case of the release of the second
remaining property, sufficient collateral to the lender to provide payment of
all outstanding principal on the Westfield Shoppingtown Portfolio Whole Loan and
scheduled interest on such amount through the maturity date.
MEZZANINE DEBT. None permitted.
OTHER SUBORDINATE DEBT. Deutsche Bank Trust Company Americas ("Westfield
Shoppingtown Portfolio L/C Issuing Bank") issued a letter of credit in the
amount of $10,300,000 to the City of Roseville on behalf of one of the
borrowers, Roseville Shoppingtown LLC, to secure such borrower's obligations to
pay certain developer fees to the City of Roseville under a sublease agreement
with the City of Roseville, to the extent sales tax revenue from the Westfield
Shoppingtown Galleria at Roseville Property is insufficient to pay such fees.
The letter of credit is secured by a second mortgage on the Westfield
Shoppingtown Galleria at Roseville Property. Pursuant to an intercreditor
agreement between the lender and the Westfield Shoppingtown Portfolio L/C
Issuing Bank, all of the Westfield Shoppingtown Portfolio L/C Issuing Bank's
rights under the second mortgage are fully subordinate to the lender's rights
under the loan documents executed in connection with the Westfield Shoppingtown
Portfolio Whole Loan.
PARTIAL RELEASE. Pursuant to certain office and hotel development documents
regarding the Westfield Shoppingtown MainPlace Property, Santa Ana F/C
Development Venture, LLC (the "Westfield Shoppingtown Portfolio Developer"), a
third party developer, has the right to cause MainPlace Shoppingtown LLC to
convey approximately 13 acres of unimproved land that is part of the Westfield
Shoppingtown MainPlace Property (the "Westfield Shoppingtown MainPlace
Outparcels") to the Westfield Shoppingtown Portfolio Developer (without the
payment of any fee or other amount by the Westfield Shoppingtown Portfolio
Developer to MainPlace Shoppingtown LLC). The Westfield Shoppingtown Portfolio
Developer may use the Westfield Shoppingtown MainPlace Outparcels to develop,
construct and operate one or more office buildings and/or hotels up to an
aggregate of 1,500,000 square feet of office buildings and 1,200 hotel rooms.
The lender has reviewed and pre-approved certain documents relating to such
development and has certain continuing approval rights with respect to the
foregoing.
The lender is required to release (on one or more occasions) the Westfield
Shoppingtown MainPlace Outparcels from the lien of the mortgage on at least 25
days prior written notice, provided that the borrowers deliver to the lender:
(i) endorsements to the title policy or other evidence reasonably satisfactory
to the mortgagee of continuing title insurance coverage confirming that (A) the
mortgage constitutes a first priority lien on the remaining portion of the
Westfield Shoppingtown MainPlace Property after the release of the Westfield
Shoppingtown MainPlace Outparcels, (B) the remaining portion of the Westfield
Shoppingtown MainPlace Property constitutes a separate tax lot from the
Westfield Shoppingtown MainPlace Outparcels and (C) the remaining Westfield
Shoppingtown
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MainPlace Property after the release of Westfield Shoppingtown MainPlace
Outparcels complies with all applicable zoning, land use and subdivision laws
and regulations, (ii) any other documents that mortgagee shall reasonably
request and (iii) payment of all reasonable out-of-pocket costs and expenses
incurred by mortgagee in connection with such partial release.
Prior to any conveyance of the Westfield Shoppingtown MainPlace Outparcels
to the Westfield Shoppingtown Portfolio Developer, the Westfield Shoppingtown
Portfolio Developer is required to assume the borrower's obligations under a
certain participation agreement (the "Westfield Shoppingtown MainPlace
Participation Agreement") with the Community Redevelopment Agency of the City of
Santa Ana (the "Agency"). Under the Westfield Shoppingtown MainPlace
Participation Agreement, to the extent the aggregate square feet of net leasable
square feet exceeds 1,000,000 square feet and the aggregate net leasable office
space exceeds 600,000 square feet at the Westfield Shoppingtown MainPlace
Property (which could only occur after the Westfield Shoppingtown Portfolio
Developer constructs the office buildings on the Westfield Shoppingtown
MainPlace Outparcels), the City of Santa Ana is required to construct certain
freeway ramps and transportation system improvements at the Westfield
Shoppingtown MainPlace Property, and the related borrower is obligated to
provide a loan (the "Westfield Shoppingtown MainPlace TSI Loan") to the Agency
to enable the Agency to pay a portion of the construction costs associated with
such improvements. The Westfield Shoppingtown MainPlace Participation Agreement
provides that upon the related borrower's assignment of its rights under the
Westfield Shoppingtown MainPlace Participation Agreement to the Westfield
Shoppingtown Portfolio Developer, such borrower will be released of its
obligations under the Westfield Shoppingtown MainPlace Participation Agreement
with respect to the Westfield Shoppingtown MainPlace Outparcels including,
without limitation, the obligation to make the Westfield Shoppingtown MainPlace
TSI Loan.
To the extent an adjacent site at Shoppingtown MainPlace Property becomes
available for sale (the "Westfield Shoppingtown MainPlace KLST Site"), the
Agency has agreed to work to purchase and sell such site to the Westfield
Shoppingtown Portfolio Developer. The related borrower is obligated to fund a
portion of the purchase price of the Westfield Shoppingtown MainPlace KLST Site
in an amount equal to the lesser of (i) $2,675,000 (minus any amounts incurred
by borrower in connection with the constructing the freeway expansion ramps at
the Westfield Shoppingtown MainPlace Property pursuant to the Westfield
Shoppingtown MainPlace Participation Agreement) and (ii) the net amount that the
borrower receives from J.C. Penney Properties, Inc. and from The May Department
Stores Company (as J.C. Penney Properties, Inc. and The May Department Stores
Company have certain rights to expand or construct improvements regarding their
respective stores at the Westfield Shoppingtown MainPlace Property on a portion
of the Westfield Shoppingtown MainPlace KLST Site).
ESCROWS AND RESERVES. The loan documents provide for escrows or reserves
for (i) real estate taxes and insurance (1/12th of the estimated amount required
to be deposited each month, (ii) tenant improvements/leasing commissions
$5,913/month which amount is based upon 1/12th of the amount of vacant space
multiplied by $1.00 and (iii) capital expenditure ($15,178/month). The reserve
for taxes is required in cash. Westfield America, Inc. has posted a corporate
guarantee in lieu of cash reserves for insurance, TI/LC, and capital
expenditures. In the event the debt service coverage ratio for the Westfield
Shoppingtown Portfolio Whole Loan drops below 1.20x, the borrower will be
required to post all cash reserves that would have been required from the first
payment date of the Westfield Shoppingtown Portfolio Whole Loan and monthly
reserves on an ongoing basis.
PROPERTY MANAGEMENT. The Westfield Shoppingtown Portfolio Mortgaged
Properties are managed by Westfield Corporation, Inc. an entity affiliated with
the borrower. The lender is permitted to replace the manager upon an event of
default.
TERRORISM INSURANCE. The loan documents require the borrower to maintain
terrorism insurance unless such insurance is not available on commercially
reasonable terms. At closing of the Westfield Shoppingtown Portfolio Loan, the
borrowers delivered blanket policies of insurance to the lender covering the
Westfield Shoppingtown Portfolio Mortgaged Properties which include terrorism
insurance for such properties with a blanket limit of $400,000. Such policies
expire on July 1, 2003.
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THE CHANDLER FASHION CENTER LOAN
THE LOAN. The Mortgage Loan known as "Chandler Fashion Center" (the
"Chandler Fashion Center A-2 Note" or the "Chandler Fashion Center Loan"),
evidenced by a promissory note dated May 1, 2003 with an original principal
balance of $54,247,077, is secured by a first mortgage on a retail center known
as Chandler Fashion Center, located in Chandler, Arizona (the "Chandler Fashion
Center Mortgaged Property"). The Chandler Fashion Center Loan is a portion of a
larger loan (the "Chandler Fashion Center Whole Loan") that was originated on
October 21, 2002. The Chandler Fashion Center Whole Loan, secured by the
Chandler Fashion Center Mortgaged Property, is evidenced by three notes: (i) the
Chandler Fashion Center Loan, (ii) a promissory note dated May 1, 2003 (the
"Chandler Fashion Center A-1 Note" and, together with the Chandler Fashion
Center A-2 Note, the "Chandler Fashion Center A Loans"), with an original
principal balance of $56,461,243, which note was transferred by GACC to GMAC
Commercial Mortgage Securities, Inc., which then deposited it into the trust
fund established pursuant to that certain pooling and servicing agreement (the
"GMAC Series 2003-C1 PSA"), by and among GMAC Commercial Mortgage Securities,
Inc., as depositor, GMAC Commercial Mortgage Corporation, as master servicer (in
such capacity, the "2003-C1 Master Servicer"), GMAC Commercial Mortgage
Corporation, as special servicer (in such capacity, the "2003-C1 Special
Servicer"), LaSalle Bank National Association, as trustee and ABN AMRO Bank,
N.V., as fiscal agent, and (iii) a promissory note dated October 21, 2002 in the
original principal amount of $72,500,000 (the "Chandler Fashion Center B Note"),
which note is held by an unaffiliated third party. The Chandler Fashion Center
A-1 Note is PARI PASSU in right of payment to the Chandler Fashion Center Loan
and the Chandler Fashion Center B Note is subordinate to the Chandler Fashion
Center A Loans. The cut-off date balance for the Chandler Fashion Center Loan is
$54,181,450, which represents 6.40% of the initial outstanding pool balance.
An intercreditor agreement (the "Chandler Fashion Center Intercreditor
Agreement") sets forth the rights of the holders of the Chandler Fashion Center
A-1 Note, the Chandler Fashion Center Loan and the Chandler Fashion Center B
Note.
THE PROPERTY. The Chandler Fashion Center Mortgaged Property is the in-line
space (approximately 630,570 square feet) and 6,155 parking spaces at a
two-level enclosed regional mall located in at the Chandler Fashion Center
located in Chandler, Arizona. The Chandler Fashion Center comprises 101.2 acres,
of which approximately 46.75 acres are included in the collateral. The anchor
tenants at the Chandler Fashion Center include Dillard's, Robinson's-May,
Nordstrom and Sears, none of which are included in the collateral. The national
tenants at the Chandler Fashion Center Mortgaged Property include Barnes &
Noble, The Gap, Pottery Barn, Banana Republic, Eddie Bauer and Abercrombie and
Fitch.
The following table presents certain information related to the five
largest in-line tenants, based on net rentable square feet, at the Chandler
Fashion Center Mortgaged Property:
FIVE LARGEST IN-LINE TENANTS BASED ON NET RENTABLE SQUARE FEET
% OF BASE LEASE
TENANT NRSF NRSF RENT (PSF) EXPIRATION
------- -------- ------- ---------- ------------
Harkins Theatres ................ 85,625 13.58% $14.00 12/31/2016
Barnes & Noble .................. 28,441 4.51 16.16 1/31/2011
The Gap ......................... 20,000 3.17 30.00 1/31/2007
Pottery Barn .................... 12,447 1.97 31.00 1/31/2014
The Cheesecake Factory .......... 11,458 1.82 26.00 12/31/2017
------- ----- ------
TOTAL/WTD. AVG. ................. 157,971 25.05% $18.62
======= ===== ======
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The following table presents certain information related to the anchor
tenants at Chandler Fashion Center that are not collateral for The Chandler
Fashion Center Loan:
CREDIT RATING
ANCHOR TENANT (S&P/MOODY'S/FITCH) NET RENTABLE AREA (SF)
-------------- ------------------- ----------------------
Dillard's ................ -/Ba3/BB+ 200,208
Robinson's-May ........... A/A2/BB+ 191,500
Nordstrom ................ A-/Baa1/- 143,920
Sears .................... BBB+/Baa1/BBB+ 141,032
SERVICING OF THE CHANDLER FASHION CENTER WHOLE LOAN. The Chandler Fashion
Center Whole Loan and any related REO property are being serviced under the GMAC
Series 2003-C1 PSA, and the 2003-C1 Master Servicer will service the Chandler
Fashion Center Loan and collections on the Chandler Fashion Center Loan will be
remitted to or on behalf of the Trust pursuant to the GMAC Series 2003-C1 PSA.
The 2003-C1 Master Servicer will make property advances relating to the Chandler
Fashion Center Mortgaged Property but is not required to make principal and
interest advances on the Chandler Fashion Center Loan. The Chandler Fashion
Center Loan will be held as an asset of a Loan REMIC, which will be administered
pursuant to the Pooling and Servicing Agreement. See "The Pooling and Servicing
Agreement--Servicing of the Non-Serviced Mortgage Loans".
THE BORROWER AND SPONSOR. The borrower is TWC Chandler LLC, a special
purpose Delaware limited liability company with an independent director. Legal
counsel to the borrower delivered a non-consolidation opinion in connection with
the origination of the Chandler Fashion Center Whole Loan. The sponsor of the
borrower is The Macerich Company.
MATURITY DATE. The Chandler Fashion Center Loan has a remaining term of 113
months. The scheduled maturity date is November 1, 2012.
INTEREST RATE. The Chandler Fashion Center Whole Loan accrues interest at
an annual rate of 5.1400% per annum (for the Chandler Fashion Center A Notes)
and 6.0000% per annum (for the Chandler Fashion Center B Note).
LOAN-TO-VALUE RATIO; Debt Service Coverage Ratio. Based on an appraisal
dated October 1, 2002 by a third-party appraiser, the appraised value of the
Chandler Fashion Center Mortgaged Property is $270,000,000. Based on that
appraised value, the Chandler Fashion Center Whole Loan has a cut-off date
Loan-to-Value Ratio of 40.95%. The underwritten net cash flow of the Chandler
Fashion Center Mortgaged Property was calculated to be $21,358,512. Based on
that underwritten net cash flow, the Chandler Fashion Center Whole Loan has an
underwritten debt service coverage ratio of 2.93x.
APPLICATION OF PAYMENTS. On the first day of each month (with a five day
grace period), the borrower is required to make principal and interest payments
equal to $1,042,806.59 ($310,147.55 designated for the holder of the Chandler
Fashion Center A-1 Note, $297,984.91 designated for the holder of the Chandler
Fashion Center Loan and $434,674.13 designated for the holder of the Chandler
Fashion Center B Note). On the maturity date, a balloon payment equal to
$151,748,924 ($46,449,155 designated for the holder of the Chandler Fashion
Center A-1 Note, $44,627,618 designated for the holder of the Chandler Fashion
Center Loan and $60,672,151 designated for the holder of the Chandler Fashion
Center B Note) is due.
The Chandler Fashion Center Intercreditor Agreement provides that prior to
the occurrence and continuance of a monetary event of default or other material
event of default with respect to the Chandler Fashion Center Whole Loan (unless
the holder of the Chandler Fashion Center B Note has cured such default in
accordance with the GMAC Series 2003-C1 PSA), all payments will generally be
paid as follows (generally after payment of all amounts then payable or
reimbursable under the GMAC Series 2003-C1 PSA): FIRST, each of the holders of
the Chandler Fashion Center A-1 Note, the Chandler Fashion Center Loan and the
Chandler Fashion Center B Note will receive accrued and unpaid interest on its
outstanding principal at its interest rate, PRO RATA; SECOND, any scheduled
principal payments will be paid to each of the holders of the Chandler Fashion
Center A-1 Note, the Chandler Fashion Center Loan and the Chandler Fashion
Center B Note, PRO RATA, based on its respective amortization schedule; THIRD,
any
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unscheduled principal payments on or allocated to the Chandler Center Fashion
A-1 Note and Chandler Fashion Center Loan will be paid to the holder of the
Chandler Fashion Center A-1 Note and the Trust, PRO RATA, and any unscheduled
principal payments on or allocated to the Chandler Fashion Center B Note will be
paid to the holder of the Chandler Fashion Center B Note; FOURTH, any yield
maintenance premium that is allocable to the Chandler Fashion Center A-1 Note
and the Chandler Fashion Center Loan on the one hand, and the Chandler Fashion
Center B Note on the other hand, respectively, to the extent actually paid by
the borrower, will be paid to the holder of the Chandler Fashion Center A-1 Note
and the Trust, PRO RATA, and the holder of the Chandler Fashion Center B Note,
respectively; FIFTH, any default interest (after application as provided in the
GMAC Series 2003-C1 PSA) will be paid to each of the holders of the Chandler
Fashion Center A-1 Note, the Chandler Fashion Center Loan and the Chandler
Fashion Center B Note, on a PRO RATA basis in accordance with its respective
principal balance; and SIXTH, if any excess amount is paid by the borrower, and
not otherwise applied in accordance with the foregoing clauses first through
fifth above, such amount will be paid to each of the holders of the Chandler
Fashion Center A-1 Note, the Chandler Fashion Center Loan and the Chandler
Fashion Center B Note on a PRO RATA basis in accordance with its respective
principal balance.
Following the occurrence and during the continuance of a monetary event of
default or other material event of default with respect to the Chandler Fashion
Center Whole Loan, after payment of all amounts then payable or reimbursable
under the GMAC Series 2003-C1 PSA, liquidation proceeds and other collections
with respect to the Chandler Fashion Center Whole Loan will generally be applied
in the following manner: FIRST, each of the holder of the Chandler Fashion
Center A-1 Note and the Trust will receive accrued and unpaid interest on its
outstanding principal balance at its interest rate, PRO RATA; SECOND, each of
the holder of the Chandler Fashion Center A-1 Note and the Trust will receive
its principal balance, PRO RATA, until such principal has been paid in full;
third, the holder of the Chandler Fashion Center B Note will receive all accrued
and unpaid interest on its outstanding principal balance at its interest rate;
FOURTH, the holder of the Chandler Fashion Center B Note will receive its
principal balance, until such principal has been paid in full; FIFTH, if the
proceeds of any foreclosure sale or any liquidation of the Chandler Fashion
Center Whole Loan or the Chandler Fashion Center Mortgaged Property exceed the
amounts required to be applied in accordance with the foregoing clauses first
through fourth and, as a result of a workout, the principal balance of either
the Chandler Fashion Center A-1 Note and the Chandler Fashion Center Loan on the
one hand, and the Chandler Fashion Center B Note on the other hand have been
reduced, such excess amount will first be paid to the holder of the Chandler
Fashion Center A-1 Note and the Trust, PRO RATA, in an amount up to the
reduction, if any, of the respective principal balance as a result of such
workout, and then to the holder of the Chandler Fashion Center B Note in an
amount up to the reduction, if any, of its principal balance as a result of such
workout; SIXTH, any yield maintenance premium that is allocable to the Chandler
Fashion Center A-1 Note and the Chandler Fashion Center Loan on the one hand,
and the Chandler Fashion Center B Note on the other hand, respectively, to the
extent actually paid by the borrower, will be paid to the holder of the Chandler
Fashion Center A-1 Note and the Trust, PRO RATA, and the holder of the Chandler
Fashion Center B Note, respectively; SEVENTH, any default interest in excess of
the interest paid in accordance with clauses first and third above, will be paid
to the holder of the Chandler Fashion Center A-1 Note and the Trust, PRO RATA,
or the holder of the Chandler Fashion Center B Note on the total amount of
default interest then owing to each such party; and EIGHTH, if any excess amount
is paid by the borrower that is not otherwise applied in accordance with the
foregoing clauses first through seventh or the proceeds of any foreclosure sale
or any liquidation of the Chandler Fashion Center Whole Loan or the Chandler
Fashion Center Mortgaged Property are received in excess of the amounts required
to be applied in accordance with the foregoing clauses first through seventh,
such amount will generally be paid, PRO RATA, to the holders of the Chandler
Fashion Center A-1 Note and the Chandler Fashion Center Loan (on a PRO RATA
basis) on the one hand, and the holder of the Chandler Fashion Center B Note on
the other hand, in accordance with their respective initial principal balances.
LOCKBOX AND CASH MANAGEMENT. The tenants at the Chandler Fashion Center
Mortgaged Property have been instructed to send rent payments directly to a
lender controlled lockbox account. Prior to the commencement of a Trigger Period
(as defined below), amounts in the lockbox account will be transferred, on a
daily basis, to an operating account controlled by the borrower. Upon (i) an
event of default or (ii) if the debt service ratio coverage for the Chandler
Fashion Center Whole Loan is less than
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or equal to 1.30x, until such time that the event of default has been cured or
the debt service coverage ratio is greater than 1.30x for six consecutive
months, as applicable (such period, a "Chandler Fashion Center Trigger Period"),
funds in the lockbox account will be applied to pay debt service, required
reserves and any other amounts due under the Chandler Fashion Center Loan and
any excess cash remaining will be returned to the borrower.
PREPAYMENT; DEFEASANCE. The borrower is prohibited from voluntarily
prepaying the Chandler Fashion Center Loan, in whole or in part, at any time
prior to May 1, 2012, on which date the Chandler Fashion Center Loan is freely
prepayable in whole but not in part. Subject to certain conditions set forth in
the loan documents, on any payment date beginning on the June 2005 payment date
to the payment date in May 2012, the borrower is permitted to obtain a release
of the Chandler Fashion Center Mortgaged Property from the lien of the mortgage
by pledging sufficient defeasance collateral to the lender in respect of the
Chandler Fashion Center A Notes and prepaying the Chandler Fashion Center B Note
with yield maintenance.
MEZZANINE DEBT. None permitted.
OTHER SUBORDINATE DEBT. None permitted.
PARTIAL RELEASE. The borrower has the one time right to obtain a partial
release of a portion of the Chandler Fashion Center Mortgaged Property (the
"Chandler Fashion Center Release Parcel") from the lien of the mortgage on a
date after June 1, 2005 and prior to May 1, 2012 upon satisfaction of certain
conditions, including (i) the debt service coverage ratio for the Chandler
Fashion Center Whole Loan, after taking into account any improvement that is
proposed to be built on the Chandler Fashion Center Release Parcel and its
effect on income and expenses at the Chandler Fashion Center Mortgaged Property,
will not be less than the greater of 1.70x or 95% of the debt service coverage
ratio for the Chandler Fashion Center Whole Loan as of the date immediately
preceding such release; (ii) the fair market value of the Chandler Fashion
Center Release Parcel, as determined by an updated appraisal submitted by the
borrower, will not exceed $15,000,000; and (iii) the borrower is required to
deliver a confirmation that the partial release and the anticipated improvements
to be placed on the Chandler Fashion Center Release Parcel will not result in a
downgrade, withdrawal or qualification of the ratings on any of the
Certificates.
CONVERSION OF MALL STORE SPACE. The borrower may decrease the in-line mall
space at the Chandler Fashion Center Mortgaged Property to accommodate the
addition of a new anchor tenant upon satisfaction of certain conditions
including (i) the debt service coverage ratio for the Chandler Fashion Center
Whole Loan, after taking into account any improvement that is proposed to be
built on the in-line store portion of the Chandler Fashion Center Mortgaged
Property to be converted to an anchor store (the "Chandler Fashion Center
Conversion Space") and its effect on income and expenses at the Chandler Fashion
Center Mortgaged Property, will not be less than the greater of 1.70x or 95% of
the debt service coverage ratio for the Chandler Fashion Center Whole Loan as of
the date immediately preceding such conversion; (ii) the borrower has executed a
lease with a proposed anchor tenant for the Chandler Fashion Center Conversion
Space, which anchor tenant is of the same general quality with similar drawing
power as the anchors at the Chandler Fashion Center Mortgaged Property, as
approved by the lender, and which lease with such anchor tenant is of equal or
better economic benefit (excluding initial tenant inducements) to the borrower
when compared to any leases being terminated in connection with such conversion;
and (iii) the borrower is required to deliver a confirmation that the proposed
conversion of the Chandler Fashion Center Conversion Space and the anticipated
improvements to be placed on the Chandler Fashion Center Mortgaged Property will
not result in a downgrade, withdrawal or qualification of the ratings on any of
the Certificates.
ESCROWS AND RESERVES. The loan documents provide for escrows or reserves
for (i) real estate taxes and insurance (1/12th of the estimated amount required
to be deposited each month, except, with respect to insurance escrows, if the
borrower is insured under a blanket insurance policy, monthly deposits for
insurance are only required during a Trigger Period), (ii) tenant
improvements/leasing commissions (during a Chandler Fashion Center Trigger
Period, a monthly deposit of $51,685), (iii) repairs and replacement (during a
Chandler Fashion Center Trigger Period, a monthly deposit of $12,921.
S-72
TI ALLOWANCE LETTER OF CREDIT. As security for the borrower's obligation to
pay certain tenant improvement allowances previously incurred by the borrower,
the borrower delivered at origination a letter of credit (the "Chandler Fashion
Center TI Allowance Letter of Credit") in the original face amount of
$2,200,000. Provided no "event of default" under the Chandler Fashion Center
Loan is continuing, the amount of the Chandler Fashion Center TI Allowance
Letter of Credit may be reduced at the request of the borrower by half of the
amount that the borrower represented was owing to each tenant, provided the
borrower delivers an estoppel certificate confirming that (i) such tenant's
lease is in full force and effect, (ii) such tenant has accepted the space
demised thereunder and (iii) the tenant improvement allowance payable to such
tenant has been paid. Upon the borrower's delivery of such estoppel certificates
for all of the tenants to whom amounts were owing at origination, the Chandler
Fashion Center TI Allowance Letter of Credit is required to be released to the
borrower.
PROPERTY MANAGEMENT. The Chandler Fashion Center Mortgaged Property is
managed by Macerich Westcor Management LLC, an entity affiliated with the
borrower. The lender is permitted to replace the manager upon an event of
default.
TERRORISM INSURANCE. The loan documents require the borrower to maintain
terrorism insurance in an amount equal to the greater of (i) $100,000,000 and
(ii) the maximum amount of terrorism coverage that may be maintained on the
sponsors' portfolio (consists of 79 properties as of 12/31/02) at a cost equal
to $300,000 per annum, PROVIDED that if the cost of $100,000,000 of terrorism
coverage exceeds $450,000 per annum, the borrower is required to purchase the
greatest amount of terrorism coverage that can be obtained for $450,000 per
annum. The borrower maintains such insurance under a blanket policy.
THE GATEWAY CENTER BJ'S LOAN
THE LOAN. The Mortgage Loan known as "Gateway Center BJ's" (the "Gateway
Center BJ's Loan") is secured by a first mortgage on a retail center located in
Brooklyn, New York. ("Gateway Center BJ's Mortgaged Property") The Gateway
Center BJ's Loan was originated on May 9, 2003 and is evidenced by a note with
an original principal balance of $45,400,000. The cut-off date balance for the
Gateway Center BJ's Loan is $45,400,000, which represents 5.37% of the initial
outstanding pool balance.
THE PROPERTY. The Gateway Center BJ's Mortgaged Property is a portion of a
larger retail center known as "Gateway Center BJ's" Gateway Center BJ's, sitting
on approximately 48-acres located just off the Belt Parkway in Brooklyn, New
York, consists of the Gateway Center BJ's Mortgaged Property, plus three other
parcels owned by affiliates of the borrower (and certain anchor owned pads).
Gateway Center BJ's is improved with 638,992 square feet of "big box" stores,
in-line space and restaurant pad sites. Anchor tenants at Gateway Center BJ's
include Target, Home Depot, Marshall's, Babies R' Us, Staples, and Bed, Bath &
Beyond (none of which are collateral for the Gateway Center BJ's Loan). The
Gateway Center BJ's Mortgaged Property consists of a BJ's Wholesale Club store
(128,995 square feet) and three pad sites ground leased to restaurant operators
(23,505 square feet). Gateway Center BJ's (and the Gateway Center BJ's Mortgaged
Property) is 100% occupied. Gateway Center BJ's was developed by the Gateway
Sponsor (as defined below) at a cost of $135,000,000.
The Gateway Sponsor purchased the Gateway Center BJ's land from the State
and the City of New York. The land was formerly used as a municipal landfill. In
connection with rezoning the property for the development of a shopping center,
an environmental impact statement ("EIS") of the site was completed, reviewed
and approved by the applicable environmental agencies. The EIS originally
revealed residual contamination, which was mitigated during construction of the
shopping center in accordance with the approved EIS. A Phase I environmental
site assessment received in connection with the origination of the Gateway
Center BJ's Loan recommended no further action. TRC (as defined below) has
provided standard environmental indemnities under the Gateway Center BJ's Loan.
In connection with the development of Gateway Center BJ's, the City and
State of New York provided the Gateway Sponsor with tax and other incentives
(including below market land price). In return, the Gateway Sponsor constructed
a new interchange to and from the Belt Parkway and constructed, and is required
to maintain, a 17-acre public park adjacent to Gateway Center BJ's.
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In exchange for tax benefits from the city, the borrower's sole member is
required to employ, or cause to be employed, at least 1,275 people at Gateway
Center BJ's during the years from 2006 through 2010. In the event the borrower's
sole member fails to meet this condition, the borrower's sole member may be
assessed a penalty in an amount up to $2,090,000. TRC has guaranteed any losses
the lender may suffer as a result of such obligation.
The following table presents certain information related to the tenants at
the Gateway Center BJ's Mortgaged Property:
% OF BASE DATE OF LEASE
TENANT NRSF NRSF RENT (PSF) EXPIRATION
------- -------- -------- ---------- --------------
BJ's Wholesale Club ............. 128,995 84.59% $31.75 9/30/2027
Red Lobster ..................... 8,096 5.31 24.70 10/31/2017
Olive Garden .................... 8,062 5.29 24.81 10/31/2017
Boulder Creek ................... 7,347 4.82 30.74 10/31/2022
------- ------ ------
TOTAL/WTD. AVG. ................. 152,500 100.00% $30.96
======= ====== ======
The following table presents certain information related to the shadow
anchor tenants at Gateway Center that are not collateral for the Gateway Center
BJ's Loan:
CREDIT RATING
ANCHOR TENANT (S&P/MOODY'S/FITCH) NET RENTABLE AREA (SF)
-------------- ------------------- ----------------------
Target .......................... A+/A2/A 148,705
Home Depot ...................... AA/Aa3/AA 135,403
Bed Bath & Beyond ............... BB/-/- 37,672
Babies "R" Us(1) ................ BBB-/Ba3/BB+ 36,908
Marshall's(2) ................... A/A3/- 35,008
Staples ......................... BBB-/Baa2/BBB 22,700
- ------------------
(1) Toys "R" Us Inc. (NYSE: TOY) operates Babies "R" Us and other subsidiaries.
(2) The TJX companies Inc. (NYSE: TJX) operates Marshalls and other
subsidiaries.
THE BORROWER AND SPONSOR. The borrower is Gateway Center BJ's Properties I,
L.L.C., a special purpose Delaware limited liability company with an independent
director. Legal counsel to the borrower delivered a non-consolidation opinion in
connection with the origination of the Gateway Center BJ's Loan. The sponsors of
the borrower (the "Gateway Sponsor") consists of The Related Companies, L.P.
("TRC") (50% interest in the borrower) and Blackacre Capital Management LLC
("Blackacre") (together, with an entity controlled by Blackacre, a 50% interest
in the borrower). TRC is also the sponsor of the Palladium at Birmingham Loan.
The loan documents provide that transfers of direct or indirect interests
in TRC are permitted without consent of the lender and are not subject to any
other transfer restrictions in the loan documents. In addition, the loan
documents permit all or any portion of the direct or indirect ownership
interests in RBV Gateway, LLC (a member of the owner of the borrower) to be
transferred without lender consent, PROVIDED, HOWEVER, if such transfer will
result in an entity that has not been previously approved by the lender owning
more than a 49% (direct or indirect) ownership interest in the borrower, then
such transfer will be subject to, among other things, receipt by the lender of a
satisfactory non-consolidation opinion and evidence from the Rating Agencies
that such transfer will not result in the withdrawal, downgrade or qualification
of the then current ratings assigned to any of the Certificates.
MATURITY DATE. The Gateway Center BJ's Loan has a remaining term of 120
months. The scheduled maturity date is June 1, 2013.
INTEREST RATE. The Gateway Center BJ's Loan accrues interest at an annual
rate of 5.4300% per annum.
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LOAN-TO-VALUE RATIO; DEBT SERVICE COVERAGE RATIO. Based on an appraisal
dated January 27, 2003 by a third-party appraiser, the appraised value of the
Gateway Center BJ's Mortgaged Property is $56,800,000 (final reconciled). Based
on that appraised value, the Gateway Center BJ's Loan has a cut-off date
Loan-to-Value Ratio of 66.64%. The underwritten net cash flow of the Gateway
Center BJ's Mortgaged Property was calculated to be $4,376,263. Based on that
underwritten net cash flow, the Gateway Center BJ's Loan has an underwritten
debt service coverage ratio of 1.43x.
APPLICATION OF PAYMENTS. On the first day of each month (with a five day
grace period), the borrower is required to make principal and interest payments
equal to $255,785.83. On the maturity date, a balloon payment equal to
$37,849,452 is due.
LOCKBOX AND CASH MANAGEMENT. The tenants at the Gateway Center BJ's
Mortgaged Property have been instructed to send rent payments directly to a
lender controlled lockbox account. Prior to the occurrence of a trigger event,
amounts in the lockbox account will be transferred, on a daily basis, to an
operating account controlled by the borrower. A trigger event will commence upon
(i) an event of default or (ii) if BJ's Wholesale Club, Inc. ("BJ's") (or a
replacement tenant) ceases operation at the Gateway Center BJ's Mortgaged
Property for more than 30 days. Upon the occurrence of a trigger event, the
funds in the lockbox account will be used by the lender to satisfy monthly
obligations of the borrower under the Gateway Center BJ's Loan. Any excess cash
remaining will be deposited in the Rollover Reserve (as defined below) and
disbursed to the borrower for tenant improvements and leasing commissions,
pursuant to the terms of the mortgage. The trigger event period will end when
BJ's reopens for business or the applicable space is leased or subleased to an
acceptable tenant under a lease approved by the lender (such approval is subject
to, among other things, receipt by the lender of an acceptable estoppel
certificate). Upon termination of the trigger event period, any amounts held in
the Rollover Reserve as a result of the cash sweep will be disbursed to the
borrower. The cash sweep will be suspended when the amount in the Rollover
Reserve as a result of the cash sweep is equal to the lesser of (x) $2,000,000
or (y) the amount of outstanding tenant improvements and leasing commissions
owed by the borrower with respect to any approved replacement lease at such
space.
PREPAYMENT; DEFEASANCE. The borrower is prohibited from voluntarily
prepaying the Gateway Center BJ's Loan, in whole or in part, at any time prior
to March 1, 2013, on which date the Gateway Center BJ's Loan is freely
prepayable in whole but not in part. Subject to certain conditions set forth in
the loan documents, on any payment date beginning on the July 2005 payment date
to the payment date in March 2013, the borrower is permitted to obtain a release
of the Gateway Center BJ's Mortgaged Property from the lien of the mortgage by
pledging sufficient defeasance collateral to the lender.
MEZZANINE DEBT. The loan documents permit TRC and Blackacre to pledge their
interest in Related Retail, LP (the managing member of the managing member of
the owner of the borrower) and Blackacre RBV Gateway, LLC ("Blackacre Gateway")
(the managing member of a member of the owner of the borrower), respectively, as
collateral in traditional corporate financings with institutional lenders
without the consent of the lender. The loan documents also permit the direct and
indirect owners of Blackacre Gateway or LR Gateway LLC (a member of a member of
the owner of the borrower) to pledge all or any portion of their membership
interest in Blackacre Gateway or LR Gateway, LLC, as applicable, as collateral
for a mezzanine loan, subject to the satisfaction of conditions, including but
not limited to, an aggregate debt service coverage ratio of at least 1.15x, an
aggregate loan-to-value ratio of not more than 85% and the delivery of a
satisfactory intercreditor and subordination agreement.
ESCROWS AND RESERVES. The loan documents provide for escrows or reserves
for (i) real estate taxes and insurance (1/12th of the estimated amount required
to be deposited each month, reduced by any amount required to be paid by BJ's or
any other credit tenant pursuant to the terms of its lease), (ii) tenant
improvements/ leasing commissions (the "Rollover Reserve") (to commence in the
event (1) occupancy falls below 90%, (2) BJ's (or any other tenant leasing
10,000 square feet or more) goes dark, (3) any tenant becomes subject to
bankruptcy proceedings or (4) the debt service coverage ratio falls below 1.15x)
and (iii) capital improvements (monthly deposits of $200.00, so long as BJ's (or
any replacement for the BJ's space) is a credit tenant, otherwise, monthly
deposits of $1,525.00).
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PROPERTY MANAGEMENT. The Gateway Center BJ's Mortgaged Property is managed
by Related Retail Management Corp., an entity affiliated with the borrower. The
lender is permitted to replace the manager upon an event of default.
TERRORISM INSURANCE. The loan documents require the borrower to maintain
terrorism insurance, to the extent commercially available. The borrower is
currently insured for damage caused by terrorism.
THE PALLADIUM AT BIRMINGHAM LOAN
THE LOAN. The Mortgage Loan known as "Palladium at Birmingham" (the
"Palladium at Birmingham Loan") is secured by a first mortgage on two buildings
located in downtown Birmingham (suburban Detroit), Michigan. The Palladium at
Birmingham Loan was originated on May 7, 2003 and is evidenced by a note with an
original principal balance of $39,000,000. The cut-off date balance for the
Palladium at Birmingham Loan is $39,000,000, which represents 4.61% of the
initial outstanding pool balance.
THE PROPERTY. The Palladium at Birmingham Mortgaged Property consists of
two buildings, "Palladium Theater and Retail," a 124,477 square foot retail
center and "Willits Retail," a 25,536 square foot retail condominium, each of
which are located in Birmingham (suburban Detroit), Michigan.
Palladium Theater and Retail is a new four-story building, leased to four
tenants. The anchor is Palladium Theater (73,500 square feet), a 12-screen 2,650
seat multiplex cinema with stadium seating. The other tenants are Tower Records,
City Cellar/Blue Martini Restaurants and Buca di Beppo Restaurant. There is
9,126 square feet of vacant space available at Palladium Theater and Retail.
Willits Retail consists of four first floor retail condominium units
totaling 25,536 square feet in a five-story, newly constructed luxury
residential building. The upper floors of the building contain 55 residential
condominium units that are not part of the collateral. One of the retail
condominium units is leased and occupied by Mitchell's Fishmarket. Another
retail condominium unit is currently vacant but one tenant, Illusions by Sherri
Day Spa has executed a lease and anticipates taking occupancy (and commencing
rent payments) in July 2003. There is 6,891 square feet of additional (not
including Illusions by Sherri Day Spa) vacant space available at Willits Retail.
In connection with the vacant space, (9,126 square feet at Palladium
Theater and Retail and 6,891 square feet at Willits Retail), TRC has entered
into master leases under which TRC is obligated to make lease payments to the
borrower only if the borrower is otherwise unable to satisfy debt service and
reserve obligations under the Palladium at Birmingham Loan. Each master lease
will terminate once a new tenant has executed a lease for such space in
compliance with terms specified in the loan documents (and upon termination of
the related master lease, TRC is required to enter into a rent protection
agreement covering the period between lease signing and the commencement of rent
payments by the new tenant). There is currently a rent protection agreement in
effect with respect to the Illusions at Sherri Day Spa. In addition, TRC has
executed a loan payment guaranty, in an amount not to exceed $10,000,000 in the
aggregate, which amount may be reduced as new tenants lease-up vacant space.
The following table presents certain information related to the tenants at
the Palladium at Birmingham Mortgaged Property:
BASE NET RENTABLE % OF NET LEASE
TENANT LOCATION RENT (PSF) AREA (PSF) RENTABLE AREA EXPIRATION
- ------- ---------- ---------- ------------ ------------- -----------
Palladium Theater ...................... Palladium $24.49 73,500 49.04% 11/30/2021
Tower Records .......................... Palladium 30.00 17,500 11.68 4/30/2017
City Cellar/Blue Martini ............... Palladium 33.00 14,872 9.92 2/28/2013
Buca di Beppo .......................... Palladium 33.98 9,479 6.32 10/31/2013
Illusions by Sherri Day Spa(1) ......... Willits 28.00 10,693 7.13 5/31/2013
Mitchell's Fishmarket .................. Willits 40.00 7,812 5.21 6/11/2013
------ ------- -----
TOTAL/WTD. AVG. ........................ $28.01 133,856 89.31%
====== ======= =====
- ----------------
(1) Not yet in occupancy.
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THE BORROWER AND SPONSOR. The borrower is Crowley-Willits Retail, L.L.C., a
special purpose Delaware limited liability company with an independent director.
Legal counsel to the borrower delivered a non-consolidation opinion in
connection with the origination of the Palladium at Birmingham Loan. The sponsor
of the borrower is The Related Companies, L.P. ("TRC"). TRC is one of the
sponsors of the Gateway Retail Center Loan.
The loan documents for the Palladium at Birmingham Loan provide that
transfers of direct or indirect interests in TRC are permitted without consent
of the lender and are not subject to any other transfer restrictions in the loan
documents.
MATURITY DATE. The Palladium at Birmingham Loan has a remaining term of 120
months. The scheduled maturity date is June 1, 2013.
INTEREST RATE. The Palladium at Birmingham Loan accrues interest at an
annual rate of 5.6300% per annum.
LOAN-TO-VALUE RATIO; DEBT SERVICE COVERAGE RATIO. Based on an appraisal
dated January 1, 2003 by a third-party appraiser, the appraised value of the
Palladium at Birmingham Mortgaged Property is $48,800,000 (final reconciled).
Based on that appraised value, the Palladium at Birmingham Loan has a cut-off
date Loan-to-Value Ratio of 79.92%. The underwritten net cash flow of the
Palladium at Birmingham Mortgaged Property was calculated to be $3,539,392.
Based on that underwritten net cash flow, the Palladium at Birmingham Loan has
an underwritten debt service coverage ratio of 1.31x.
APPLICATION OF PAYMENTS. On the first day of each month (with a five day
grace period), the borrower is required to make principal and interest payments
equal to $224,629.13. On the maturity date, a balloon payment equal to
$32,715,946 is due.
LOCKBOX AND CASH MANAGEMENT. The tenants at the Palladium at Birmingham
Mortgaged Property have been instructed to send rent payments directly to a
lender controlled lockbox account. Prior to an event of default, amounts in the
lockbox account will be transferred, on a daily basis to an operating account
controlled by the borrower. Upon the occurrence of an event of default, the
funds in the lockbox account will be used by the lender to satisfy monthly
obligations of the borrower under the Palladium at Birmingham Loan. Any excess
amounts remaining after payment of debt service and required monthly reserves
may be held and applied by lender, in its discretion.
PREPAYMENT; DEFEASANCE. The borrower is prohibited from voluntarily
prepaying the Palladium at Birmingham Loan, in whole or in part, at any time
prior to March 1, 2013, on which date the Palladium at Birmingham Loan is freely
prepayable in whole but not in part. Subject to certain conditions set forth in
the loan documents, on any payment date beginning on the July 2005 payment date,
to the payment date in March 2013, the borrower is permitted to obtain a release
of the Palladium at Birmingham Mortgaged Property from the lien of the mortgage
by pledging sufficient defeasance collateral to the lender.
MEZZANINE DEBT. The loan documents permit TRC to pledge its interest in
Crowley-Willits Member, L.L.C. (the sole member of the borrower) and/or Related
Urban Development, L.L.C. as collateral in traditional corporate financings with
institutional lenders without the consent of the lender.
THE CONDOMINIUM INTEREST AT THE WILLITS RETAIL PROPERTY. The Willits Retail
Property consists of 59 condominium units, 4 of which are commercial units
(controlled 100% by the borrower) and 55 of which are residential units (not
controlled by the borrower). With respect to issues common to the commercial
units and the residential units, the borrower has a 15.82% interest. The
condominium association is required to give the lender notice of a default and
an opportunity to cure. In addition, in connection with any action that would
materially alter or change the rights of a lender, the approval of 67% of all
first mortgagees of record is required (allocating one vote for each mortgage
held).
ESCROWS AND RESERVES. The loan documents provide for escrows and reserves
for (i) real estate taxes and insurance (1/12th of the estimated amount required
to be deposited each month), (ii) tenant improvement and leasing commission
reserves ($4,900 per month to commence at such time that the upfront tenant
improvement and leasing commission ("TI/LC") reserves identified in (iv) below
is equal to the amount that would have been collected had ongoing collections
under this clause commenced at
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closing), which monthly TI/LC reserve, once implemented, will continue until the
Palladium at Birmingham Loan is paid in full and will be available for future
tenant improvements and leasing commissions), (iii) replacement reserve ($1,500
per month for capital improvements), and (iv) an upfront TI/LC (at closing, the
lender retained $1,341,723, which amount will be used in connection with the
completion of certain unfinished construction work and future tenant
improvements and leasing commissions with respect to specified spaces).
PROPERTY MANAGEMENT. The Palladium Theater and Retail property is managed
by Brenmar Management Company, Inc., an entity unaffiliated with the borrower.
It is anticipated the Willits Retail property will be managed by the Habitat
Company, an entity unaffiliated with the borrower. The Willits Retail property
is currently managed by the borrower. The lender is permitted to replace the
manager upon an event of default.
TERRORISM INSURANCE. The loan documents require the borrower to maintain
terrorism insurance, to the extent commercially available. The borrower is
currently insured for damage caused by terrorism.
THE EMPIRIAN LUXURY TOWERS LOAN
THE LOAN. The Mortgage Loan known as "Empirian Luxury Towers" (the
"Empirian Luxury Towers Loan") is secured by a first mortgage on a 570-unit
high-rise apartment complex located in the Germantown section of Philadelphia,
Pennsylvania. The Empirian Luxury Towers Loan was originated on April 30, 2003
and is evidenced by a note with an original principal balance of $38,100,000.
The cut-off date balance for The Empirian Luxury Towers Loan is $38,063,492,
which represents 4.50% of the initial outstanding pool balance.
THE PROPERTY. The Empirian Luxury Towers Mortgaged Property consists of two
interconnected, 12-story apartment buildings containing 570 units located in the
Germantown section of Philadelphia, just northwest of Philadelphia's central
business district. The Empirian Luxury Towers Mortgaged Property is located
directly across the street from Fairmount Park, the largest park in
Philadelphia. In addition to residential units, the lobby at the Empirian Luxury
Towers Mortgaged Property has 14,265 square feet of commercial space (a deli, a
dry cleaner, a hair salon and a dentist). As of April 14, 2003, occupancy at the
Empirian Luxury Towers Mortgaged Property was 96.67%.
AVERAGE TOTAL
TYPE OF UNIT # OF UNITS SQUARE FEET SQUARE FEET RENT/UNIT RENT PSF
- ------------- ---------- --------------- ----------- ---------- ---------
Studio/1 BA ................ 49 289 14,161 $ 530 $1.83
1 BR/1 BA .................. 239 633 151,287 $ 658 $1.04
1 BR/1 BA .................. 48 663 31,824 $ 633 $0.95
2 BR/1 BA .................. 48 826 39,648 $ 792 $0.96
2 BR/1 BA .................. 182 983 178,906 $ 847 $0.90
4 BR/2 BA .................. 4 1,966 7,864 $1,518 $0.77
--- ----- -------
TOTAL/AVG. ................. 570 743 423,690
=== ===== =======
THE BORROWER AND SPONSOR. The borrower is Park Drive Group, LP, a special
purpose Pennsylvania limited partnership with an independent director. Legal
counsel to the borrower delivered a non-consolidation opinion in connection with
the origination of The Empirian Luxury Towers Loan. The sponsor of the borrower
is Ezra S. Beyman.
MATURITY DATE. The Empirian Luxury Towers Loan has a remaining term of 119
months. The scheduled maturity date is May 1, 2013.
INTEREST RATE. The Empirian Luxury Towers Loan accrues interest at an
annual rate of 5.4300% per annum.
LOAN-TO-VALUE RATIO; DEBT SERVICE COVERAGE RATIO. Based on an appraisal
dated February 12, 2003 by a third-party appraiser, the appraised value of the
Mortgaged Property for The Empirian Luxury Towers Loan (the "Empirian Luxury
Towers Mortgaged Property") is $47,700,000 (final reconciled). Based on that
appraised value, The Empirian Luxury Towers Loan has a cut-off date
Loan-to-Value Ratio of 79.80%. The underwritten net cash flow of the Empirian
Luxury Towers Mortgaged Property was
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calculated to be $3,519,227. Based on that underwritten net cash flow, The
Empirian Luxury Towers Loan has an underwritten debt service coverage ratio of
1.37x.
APPLICATION OF PAYMENTS. On the first day of each month (with a five day
grace period), the borrower is required to make principal and interest payments
equal to $214,657.27. On the maturity date, a balloon payment equal to
$31,766,390 is due.
LOCKBOX AND CASH MANAGEMENT. The borrower and the affiliated property
manager at the Empirian Luxury Towers Mortgaged Property have been instructed to
send rent payments directly to a lockbox account. Prior to an event of default,
the funds in the lockbox account will be transferred to the borrower on a daily
basis. Upon and following an event of default, tenants have been instructed to
send rent payments directly to the lockbox account and the funds in the lockbox
account will be applied to pay debt service and satisfy required reserves
accounts. Any excess amounts remaining after payment of debt service and
required monthly reserves may be held and applied by lender, in its discretion.
PREPAYMENT; DEFEASANCE. The borrower is prohibited from voluntarily
prepaying the Empirian Luxury Towers Loan, in whole or in part, at any time
prior to February 1, 2013, on which date the Empirian Luxury Towers Loan is
freely prepayable in whole but not in part. Subject to certain conditions set
forth in the loan documents, on any payment date beginning on the July 2005
payment date, to the payment date in February 2013, the borrower is permitted to
obtain a release of the Empirian Luxury Towers Mortgaged Property from the lien
of the mortgage by pledging sufficient defeasance collateral to the lender.
MEZZANINE DEBT OR SUBORDINATE DEBT. None permitted.
ESCROWS AND RESERVES. The loan documents provide for escrows or reserves to
be deposited with the lender for (i) real estate taxes and insurance (1/12th of
the estimated amount required to be deposited each month), (ii) deferred
maintenance ($3,750 deposited at closing) and (iii) replacement (on-going
monthly deposits of $11,875 ($250 per unit per year)).
PROPERTY MANAGEMENT. The Empirian Luxury Towers Mortgaged Property is
managed by Royal Management Company, an entity affiliated with the borrower. The
lender is permitted to replace the manager upon an event of default.
TERRORISM INSURANCE. The loan documents require the borrower to maintain
terrorism insurance, to the extent then (i) commercially available and (ii)
required by lenders for similarly situated multifamily properties in the same or
similar location. The borrower is currently insured for damage caused by
terrorism.
THE REDLAND CENTER LOAN
THE LOAN. The Mortgage Loan known as "Redland Center" (the "Redland Center
Loan") is secured by a first mortgage on Redland Center, a new, 6-story office
condominium building located in Rockville, Maryland (the "Redland Center
Mortgaged Property"). The Redland Center Loan was originated on April 28, 2003
and is evidenced by a note with an original principal balance of $28,000,000.
The cut-off date balance for the Redland Center Loan is $27,975,125, which
represents 3.31% of the initial outstanding pool balance.
THE PROPERTY. The Redland Center Mortgaged Property consists of one 133,895
square foot (based on net rentable square footage) condominium building on a
12.1 acre site, developed in 2002 and completed in 2003. The Redland Center
Mortgaged Property is part of a proposed three building condominium office
complex on 75.5 acres. The Redland Center Mortgaged Property is 100% occupied by
the Department of Health and Human Services, pursuant to a lease with the
federal government's General Services Administration ("GSA"). The GSA took
occupancy on or about March 22, 2003. The GSA lease expires March 22, 2013, is
not subject to annual appropriations and does not have an early termination
provision. However, the lease has a clause whereby the GSA can vacate the
premises and reduce its rent by $1.00 per square foot (currently $28.68 per
square foot).
The Redland Center office complex consists of three condominium units, one
of which is the office building owned by the borrower. The other two office
building units are owned by affiliates of the
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borrower (the "Other Owners"). The borrower controls 28.35% of the voting rights
on the condominium board and is responsible for such percentage of common area
expenses. The condominium association is required to give the lender notice of a
default and an opportunity to cure the default. In addition, the lender's
consent is required prior to taking any action that would materially amend the
condominium documents; however, the failure to deliver a negative response
within 30 days after receipt of such notice is deemed approval of such actions.
In addition to its obligation to pay its portion of common area expenses, the
borrower has certain obligations to the Other Owners related to improvements to
the common areas. Such obligations are identified and recorded in the
declaration of condominium for this condominium. If the borrower fails to
complete and fulfill its obligations in a timely manner, the other unit owners
have the right to complete the work and charge the borrower for costs involved,
plus a 10% administrative fee. The Other Owners are permitted to file a lien
against the Redland Center Mortgaged Property if the borrower fails to pay the
amounts owed.
THE BORROWER AND SPONSOR. The borrower is Redland Tech Center, L.L.C., a
special purpose Delaware limited liability company with an independent director.
Legal counsel to the borrower delivered a non-consolidation opinion in
connection with the origination of the Redland Center Loan. The sponsor of the
borrower is Stephen A. Goldberg.
MATURITY DATE. The Redland Center Loan has a remaining term of 119 months.
The scheduled maturity date is May 1, 2013.
INTEREST RATE. The Redland Center Loan accrues interest at an annual rate
of 5.7320% per annum.
LOAN-TO-VALUE RATIO; DEBT SERVICE COVERAGE RATIO. Based on an appraisal
dated March 3, 2003 by a third-party appraiser, the appraised value of the
Mortgaged Property for the Redland Center Loan (the "Redland Center Mortgaged
Property") is $35,500,000 (final reconciled). Based on that appraised value, the
Redland Center Loan has a cut-off date loan-to-value ratio of 78.80%. The
underwritten net cash flow of the Redland Center Mortgaged Property was
calculated to be $2,484,824. Based on that underwritten net cash flow, the
Redland Center Loan has an underwritten debt service coverage ratio of 1.27x.
APPLICATION OF PAYMENTS. On the first day of each month (with a five day
grace period), the borrower is required to make principal and interest payments
equal to $163,080.37. On the maturity date, a balloon payment equal to
$23,563,893 is due.
LOCKBOX AND CASH MANAGEMENT. The sole tenant at the Redland Center
Mortgaged Property has been instructed to send its rent directly to the lender
controlled lockbox account. Prior to the occurrence of a Redland Center Trigger
Event (as defined below), funds in the lockbox account are transferred to a
borrower controlled account within one day of receipt. Upon the occurrence of a
Redland Center Trigger Event, the lender will instruct the lockbox bank not to
transfer the funds to the borrower's account and from that point, any funds in
the lockbox account will be applied to pay debt service and required reserve
accounts; any remaining amounts will be returned to the borrower. A "Redland
Center Trigger Event" is any one of the following: (i) an event of default, (ii)
if, on May 1, 2004 (subject to recalculation on a quarterly basis), the debt
service coverage ratio is less than 1.25x (a "Parking Trigger Event") or (iii)
on any of May 1, 2010, May 1, 2011 or May 1, 2012, the borrower fails to deposit
$800,000 into the rollover reserve account (or fails to deliver an acceptable
letter of credit on such dates in such amount) (such payments, "Rollover Reserve
Payments" and the failure to make a Rollover Reserve Payment, a "Rollover
Reserve Trigger Event"). The cash sweep will continue until, (i) with respect to
an event of default, such default has been cured, (ii) in connection with a
Parking Trigger Event, until the related reserve account has an amount which,
when netted against the then outstanding principal balance of the Redland Center
Loan, would yield a debt service coverage ratio of not less than 1.25x or (iii)
in connection with Rollover Reserve Trigger Event, until (a) the loan is paid in
full or the Rollover Reserve Account has a balance of $2,400,000 (whichever
occurs first), (b) the GSA has renewed its lease for a minimum of five years at
a rent acceptable to the lender or (c) the borrower has re-let the premises to
an acceptable replacement tenant with comparable creditworthiness on comparable
lease terms.
PREPAYMENT; DEFEASANCE. The borrower is prohibited from voluntarily
prepaying the Redland Center Loan, in whole or in part, at any time prior to
February 1, 2013, on which date the Redland
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Center Loan is freely prepayable in whole but not in part. Subject to certain
conditions set forth in the loan documents, on any payment date beginning on the
July 2005 payment date, to the payment date in February 2013, the borrower is
permitted to obtain a release of the Redland Center Mortgaged Property from the
lien of the mortgage by pledging sufficient defeasance collateral to the lender.
MEZZANINE DEBT OR SUBORDINATE DEBT. None permitted.
ESCROWS AND RESERVES. The loan documents provide for escrows or reserves to
be deposited with the lender for (i) real estate taxes and insurance (1/12th of
the estimated amount required to be deposited each month), (ii) tenant
improvement and leasing commission (monthly deposits suspended provided the
borrower makes the Rollover Reserve Payments as required under the loan
documents), (iii) replacement (on-going monthly deposits of $2,232 ($0.20 per
square foot per year)) and (iv) parking income (required during the continuation
of a Parking Trigger Event, until the date the account has an amount which, when
netted against the then outstanding principal balance of the Redland Center
Loan, would yield a debt service coverage ratio of not less than 1.25x).
PROPERTY MANAGEMENT. The Redland Center Mortgaged Property is managed by
Cassidy & Pinkard, Inc., a third party management company unrelated to the
borrower. The lender is permitted to terminate the management agreement, upon or
at any time after an event of default under the mortgage, with 30 days' prior
written notice to the property manager.
TERRORISM INSURANCE. The loan documents require the borrower to maintain
terrorism insurance, to the extent commercially available. The borrower is
currently insured for damage caused by terrorism.
THE 1669 COLLINS AVENUE, MIAMI BEACH LAND LOAN
THE LOAN. The Mortgage Loan known as "1669 Collins Avenue, Miami Beach
Land" (the "1669 Collins Avenue, Miami Beach Land Loan") is secured by 3.75
acres of land and the hotel portion of a building (together, the "Hotel Unit"),
subject to the DBR Lease (as defined below) (the "Collins Avenue Mortgaged
Property"), of a three unit condominium building that is presently being
renovated as a Ritz Carlton Hotel (the "Hotel Building"). The Collins Avenue
Mortgaged Property is subject to a ground lease to Di Lido Beach Resort, Ltd
(such tenant, "DBR," such lease, the "DBR Lease"). The 1669 Collins Avenue,
Miami Beach Land Loan was originated on January 14, 2003 and is evidenced by a
note with an original principal balance of $27,000,000. The cut-off date balance
for the 1669 Collins Avenue, Miami Beach Land Loan is $26,885,252, which
represents 3.18% of the initial outstanding pool balance.
THE PROPERTY. The Hotel Building is an 11-story beachfront building
consisting of three condominium units located at 1669 Collins Avenue in Miami
Beach, Florida. The two retail units in the building are not collateral for the
1669 Collins Avenue, Miami Beach Land Loan. The Hotel Building is located within
the historic "Art Deco District" known as "South Beach." Alfredo Lowenstein, the
sponsor of the borrower, owned and operated the property as the Di Lido Beach
Hotel since acquiring it in 1971. The redevelopment of the Ritz Carlton Hotel
entailed a gut renovation of the existing facility and the addition of three
additional stories. Upon completion, the Ritz Carlton hotel will have two
3-story guestroom buildings at poolside, 376 guestrooms, including 40 two
bedroom suites and a four bedroom suite, a 150-seat cafe/restaurant, a 90-seat
specialty gourmet restaurant, a lobby bar/lounge, a poolside bar and grill,
19,200 square feet of meeting space, a 13,000 square foot health/fitness
facility, a heated outdoor pool and 17 poolside cabanas. The hotel is expected
to be open for business in about October 2003.
THE BORROWER AND SPONSOR. The borrower is Di Lido Beach Hotel Corporation,
a special purpose Florida corporation with an independent director. Legal
counsel to the borrower delivered a non-consolidation opinion in connection with
the origination of the 1669 Collins Avenue, Miami Beach Land Loan. The sponsor
of the borrower is Alfredo Lowenstein.
THE DBR LEASE. DBR, an affiliate of the borrower, is the tenant under a
129-year ground lease, under which DBR is required to pay the borrower $500,000
on a quarterly basis and, except for a few exceptions described below, DBR has
no right to abate such rent. The ground rent payments may increase annually,
based on increases in the consumer price index. DBR is not permitted to offset
rent for any reason other than under the following limited circumstances: (i) if
(1) DBR's gross revenues fall below the quarterly rent payments due under the
DBR Lease, (2) DBR's parent decides to fund such
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deficit through a capital contribution, and (3) notwithstanding the decision to
fund the deficit, Lionstone Partners, one of DBR's two direct parents and an
affiliate of the borrower, fails to cover this deficit (as it is required to do
under its limited partnership agreement), then, DBR will be permitted to offset
this amount from lease payments due to the borrower under the DBR Lease; or (ii)
following a condemnation, if the property has been rebuilt as required under the
DBR Lease, DBR is permitted to reduce its rent under the DBR Lease in an amount
equal to 10% of the award paid to the borrower. However, the sponsor has
guaranteed any amounts that are offset by DBR. DBR has pledged its interest in
the DBR Lease to other lenders (including Sun Trust Bank) as security for loans
in excess of $110,000,000. The DBR Lease is not subordinate to the borrower's
obligations under the mortgage. DBR has a right of first refusal should the
borrower desire to sell any of its interest in the Collins Avenue Mortgaged
Property.
The borrower is required to purchase the DBR Lease if a dispute arises
related to the use of the property. However, the sponsor has agreed to consent
to any change of business requested so that the borrower will not be forced to
purchase the DBR Lease. In addition, under certain circumstances, the borrower
may be required to sell its interest in the Collins Avenue Mortgaged Property,
PROVIDED such sale is (i) to a purchaser in connection with a sale of DBR's
business, (ii) for an amount not less than $30,000,000, (iii) not earlier than
the date that is three years after the hotel opening date (currently scheduled
to be in or after October 2003), and (iv) in compliance with the terms of the
loan documents.
MATURITY DATE. The 1669 Collins Avenue, Miami Beach Land Loan has a
remaining term of 116 months. The scheduled maturity date is February 1, 2013.
INTEREST RATE. The 1669 Collins Avenue, Miami Beach Land Loan accrues
interest at an annual rate of 5.7000% per annum.
LOAN-TO-VALUE RATIO; DEBT SERVICE COVERAGE RATIO. Based on two appraisals
dated November 25, 2002 and December 1, 2003 by a third-party appraiser, the
appraised land value of the Collins Avenue Mortgaged Property is $30,500,000 and
the appraised value of the land, together with the Hotel Building is
$233,200,000. Based on such appraised values, the 1669 Collins Avenue, Miami
Beach Land Loan has a cut-off date loan-to-value ratio of 88.15% and 11.53%,
respectively. The underwritten net cash flow of the Collins Avenue Mortgaged
Property was calculated to be $2,000,000. Based on that underwritten net cash
flow, the 1669 Collins Avenue, Miami Beach Land Loan has an underwritten debt
service coverage ratio of 1.06x. In the event DBR fails to make ground rent
payments and the leasehold mortgagee fails to cure the default under the 1669
Collins Avenue, Miami Beach Land Loan, the trust will be entitled to foreclose
on the fee and ground lease interest, thereby foreclosing on any interest in the
Hotel Building improvements (other than the two retail units).
APPLICATION OF PAYMENTS. On the first day of each month (with a five day
grace period), the borrower is required to make principal and interest payments
equal to $156,708.12. On the maturity date, a balloon payment equal to
$22,690,867 is due.
LOCKBOX AND CASH MANAGEMENT. The 1669 Collins Avenue, Miami Beach Land Loan
is structured with a hard lockbox with cash management. DBR is required to send
rent payments under the DBR Lease (required to be paid quarterly) directly to a
lockbox account controlled by the lender. Amounts in the lockbox will be applied
to pay debt service and reserves; any remaining amounts will be returned to the
borrower on a quarterly basis.
PREPAYMENT; DEFEASANCE. The borrower is prohibited from voluntarily
prepaying the 1669 Collins Avenue, Miami Beach Land Loan, in whole or in part,
at any time prior to November 1, 2012, on which date the 1669 Collins Avenue,
Miami Beach Land Loan is freely prepayable in whole but not in part. Subject to
certain conditions set forth in the loan documents, on any payment date
beginning on the July 2005 payment date, to the payment date in November 2012,
the borrower is permitted to obtain a release of the Collins Avenue Mortgaged
Property from the lien of the mortgage by pledging sufficient defeasance
collateral to the lender.
MEZZANINE DEBT OR SUBORDINATE DEBT. None permitted.
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CONDOMINIUM INTEREST. The Hotel Unit and all of the borrower's rights under
the condominium declaration have been leased to DBR. As such, the borrower does
not have any voting rights; however, under the DBR Lease, DBR is required to pay
common charges. The condominium by-laws provide that the adoption of any
amendment that would eliminate, modify or otherwise adversely affect the rights
of a lender must be previously consented to by such lender.
ESCROWS AND RESERVES. The loan documents do not provide for escrows or
reserves to be deposited with the lender. DBR is responsible for all costs and
expenses (including taxes, insurance and replacement reserves) involved in
owning and operating the Ritz Carlton Hotel. Therefore, the borrower is not
required to pay reserves for taxes, insurance or replacement.
PROPERTY MANAGEMENT. The Collins Avenue Mortgaged Property is managed by
Lionstone Group, Inc., an affiliated property manager wholly owned by Alfredo
Lowenstein. Day-to-day management of the hotel will be performed for DBR by Ritz
Carlton. The lender does not have any right to replace the manager.
INSURANCE. The loan documents require the borrower to maintain terrorism
insurance, to the extent such coverage is commercially available. However, the
DBR lease obligates DBR to maintain certain insurance coverage and the loan
documents provide that as long as DBR is maintaining such insurance, the
borrower is not required to maintain insurance. However, if (i) there is an
event of default under the loan documents or under the DBR Lease, (ii) the DBR
Lease is not in full force and effect or DBR is not fully liable for insuring
the Collins Avenue Mortgaged Property, (iii) DBR is in default of its loan with
Sun Trust Bank, (iv) the lender or the borrower is not named as an additional
insured under any of the policies, or (v) any of the insurance policies are not
in full force and effect, then the lender can require that the borrower maintain
the insurance required under the loan documents. DBR is not currently insured
for damage caused by terrorism.
THE RESERVE AT SUGARLOAF LOAN
THE LOAN. The Mortgage Loan known as "The Reserve at Sugarloaf" ("The
Reserve at Sugarloaf Loan") is secured by a first mortgage on a 333-unit, Class
"A," luxury, garden-style apartment complex situated on a 26-acre site and
located in Duluth, Georgia. The Reserve at Sugarloaf Loan was originated on May
28, 2003 and is evidenced by a note with an original principal balance of
$26,400,000. The cut-off date balance for The Reserve at Sugarloaf Loan is
$26,400,000, which represents 3.12% of the initial outstanding pool balance.
THE PROPERTY. The Reserve at Sugarloaf Mortgaged Property, located in
Duluth, Georgia, a suburb of Atlanta, consists of 23 three-story Class "A,"
luxury, garden-style apartment buildings containing 333 units situated on
26-acres. The Reserve at Sugarloaf Mortgaged Property is located across the
street from the Sugarloaf Country Club community (where single family home
prices start at $750,000), and it is less than one mile from the Interstate-85
corridor, a major area of commercial and retail development. As of April 10,
2003, occupancy at The Reserve at Sugarloaf Mortgaged Property was 90.39%.
AVERAGE TOTAL
TYPE OF UNIT # OF UNITS SQUARE FEET SQUARE FEET RENT/UNIT RENT (PSF)
- ------------ ----------- -------------- ----------- --------- ---------
1 BR ......................... 110 813 89,430 $853 $1.05
2 BR ......................... 173 1,320 228,360 $1,090 $0.83
3 BR ......................... 38 1,603 60,914 $1,422 $0.89
4 BR ......................... 12 2,295 27,540 $1,956 $0.85
--- ----- -------
TOTAL/AVG. ................... 333 1,220 406,244
=== ===== =======
THE BORROWER AND SPONSOR. The borrower is SRP-FFC Sugarloaf LLC, a Delaware
limited liability company. The sponsor of the borrower is Milton Fine.
MATURITY DATE. The Reserve at Sugarloaf Loan has a remaining term of 120
months. The scheduled maturity date is June 1, 2013.
INTEREST RATE. The Reserve at Sugarloaf Loan accrues interest at an annual
rate of 5.4900% per annum.
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LOAN-TO-VALUE RATIO; DEBT SERVICE COVERAGE RATIO. Based on an appraisal
dated May 7, 2003 by a third-party appraiser, the appraised value of the
Mortgaged Property for The Reserve at Sugarloaf Loan ("The Reserve at Sugarloaf
Mortgaged Property") is $33,250,000 (final reconciled). Based on that appraised
value, The Reserve at Sugarloaf Loan has a cut-off date Loan-to-Value Ratio of
79.40%. The underwritten net cash flow of the Reserve at Sugarloaf Mortgaged
Property was calculated to be $2,205,976. Based on that underwritten net cash
flow, The Reserve at Sugarloaf Loan has an underwritten debt service coverage
ratio of 1.23x.
APPLICATION OF PAYMENTS. On the first day of each month (with a five day
grace period) through and including the payment date in June 2006, the borrower
is required to make interest-only payments based on a 5.4900% interest rate on
an actual/360 basis. Thereafter, until the payment date in June 2013, the
borrower is required to make principal and interest payments equal to
$149,730.70. On the maturity date, a balloon payment equal to $23,616,363 is
due.
LOCKBOX AND CASH MANAGEMENT. None required.
PREPAYMENT; DEFEASANCE. The borrower is prohibited from voluntarily
prepaying The Reserve at Sugarloaf Loan, in whole or in part, at any time prior
to March 1, 2013, on which date The Reserve at Sugarloaf Loan is freely
prepayable in whole but not in part. Subject to certain conditions set forth in
the loan documents, on any payment date beginning on the July 2005 payment date,
to the payment date in March 2013, the borrower is permitted to obtain a release
of The Reserve at Sugarloaf Mortgaged Property from the lien of the mortgage by
pledging sufficient defeasance collateral to the lender.
MEZZANINE DEBT OR SUBORDINATE DEBT. None permitted.
ESCROWS AND RESERVES. The loan documents provide for escrows or reserves to
be deposited with the lender for (i) real estate taxes and insurance (1/12 of
the estimated amount required to be deposited each month) and (ii) replacement
(on-going monthly deposits of $5,550 ($200 per unit per year or $66,600) for the
first three years of the loan term. Thereafter, monthly deposits in the amount
of $6,938 ($250 per unit per year or $83,256 annually) for the remaining term of
The Reserve at Sugarloaf Loan).
PROPERTY MANAGEMENT. The Reserve at Sugarloaf Mortgaged Property is managed
by Atlantic Realty Partners, Inc., an entity affiliated with the borrower. The
lender is permitted to replace the manager upon an event of default.
TERRORISM INSURANCE. The loan documents require the borrower to maintain
terrorism insurance coverage against loss or damage to persons and property by
reason of any act of terrorism, to the extent such coverage is commercially
available. The borrower is currently insured for damage caused by terrorism.
THE SIERRA VISTA MALL LOAN
THE LOAN. The Mortgage Loan known as "Sierra Vista Mall" (the "Sierra Vista
Mall Loan") is secured by a first deed of trust encumbering the borrowers' fee
and leasehold interest in the Sierra Vista Mall, a 588,643 square feet regional
mall located in Clovis (Fresno County), California (the "Sierra Vista Mall
Mortgaged Property"). The Sierra Vista Mall Loan was originated on December 12,
2002 and is evidenced by a note with an original principal balance of
$24,000,000. The cut-off date balance for the Sierra Vista Mall Loan is
$23,861,975, which represents 2.82% of the initial outstanding pool balance.
THE PROPERTY. The Sierra Vista Mall is a one-story regional mall located in
the City of Clovis, Fresno County, California. The Sierra Vista Mall Mortgaged
Property has four anchor tenants, Sears, Gottschalk's, Mervyn's, and a
freestanding Target store, and seven pad site buildings occupied by tenants
including Red Robin Restaurant, International House of Pancakes, Starbuck's
Coffee, a credit union and a dental center. There are also vacant but
developable pad sites.
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The following table presents certain information related to the anchor
tenants at the Sierra Vista Mall Mortgaged Property:
ANCHOR TENANTS BASED ON NET RENTABLE SQUARE FEET
ANCHOR TENANT RATING (S/M/F) NRSF
------------- ---------------- --------
Sears ..................... BBB+/Baa+/BBB+ 116,641
Target .................... A+/A2/A 109,648
Gottschalks ............... NR 99,539
Mervyn's .................. A+/A2/A 75,088
--------
TOTAL/WTD. AVG. ........... 400,916
THE BORROWER AND SPONSOR. The borrowers are SV LandValue 27, LLC, SV 5
Souls, LLC and SV Cuyama Valley, LLC, each of which is a tenant-in-common and is
a special purpose Delaware limited liability company with an independent
director. Legal counsel to the borrower delivered a non-consolidation opinion in
connection with the origination of the Sierra Vista Mall Loan. In connection
with the tenant-in-common structure, the borrowers each waived its partition
right and the loan documents provide for full recourse to the related borrower
and guarantor if a borrower files for bankruptcy. The primary sponsor of the
borrowers is James H. Huelskamp.
MATURITY DATE. The Sierra Vista Mall Loan has a remaining term of 55
months. The scheduled maturity date is January 1, 2008.
INTEREST RATE. The Sierra Vista Mall Loan accrues interest at an annual
rate of 5.1500% per annum.
LOAN-TO-VALUE RATIO; DEBT SERVICE COVERAGE RATIO. Based on an appraisal
dated August 7, 2002 by a third-party appraiser, the appraised value of the
Mortgaged Property for the Sierra Vista Mall Loan (the "Sierra Vista Mall
Mortgaged Property") is $32,500,000 (final reconciled). Based on that appraised
value, the Sierra Vista Mall Loan has a cut-off date loan-to-value ratio of
73.42%. The underwritten net cash flow of the Sierra Vista Mall Mortgaged
Property was calculated to be $2,453,175. Based on that underwritten net cash
flow, the Sierra Vista Mall Loan has an underwritten debt service coverage ratio
of 1.56x.
APPLICATION OF PAYMENTS. On the first day of each month (with a five day
grace period), the borrower is required to make principal and interest payments
equal to $131,046.29. On the maturity date, a balloon payment equal to
$22,182,804 is due.
LOCKBOX AND CASH MANAGEMENT. The tenants at the Sierra Vista Mall Mortgaged
Property have been instructed to send their rent directly to the lender
controlled lockbox account. Prior to the occurrence of a Sierra Vista Mall
Trigger Event (as defined below), funds in the lockbox account are transferred
to a borrower controlled account on a daily basis. Upon the occurrence of a
Sierra Vista Trigger Event, the lender will instruct the lockbox bank not to
transfer the funds to the borrower's account. Funds in the lockbox account will
be applied to pay debt service and required reserve accounts; provided, no event
of default exists, any remaining amounts will be returned to the borrower. A
"Sierra Vista Mall Trigger Event" is any one of the following: (i) an event of
default or (ii) the debt service coverage ratio is less than 1.10x. The cash
sweep will continue until, (i) such default has been cured or (ii) the debt
service coverage ration is greater than or equal to 1.10x for six consecutive
months.
PREPAYMENT; DEFEASANCE. The borrower is prohibited from voluntarily
prepaying the Sierra Vista Mall Loan, in whole or in part, at any time prior to
October 1, 2007. On any payment date on or after such date, the Sierra Vista
Mall Loan is freely prepayable in whole but not in part. Subject to certain
conditions set forth in the loan documents, on any payment date beginning on the
July 2005 payment date to the payment date in October 2007, the borrower is
permitted to obtain a release of the Sierra Vista Mall Mortgaged Property from
the lien of the mortgage by pledging sufficient defeasance collateral to the
lender.
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MEZZANINE DEBT OR SUBORDINATE DEBT. None permitted, except as described
under "--Partial Release of Unimproved Land" below.
GROUND LEASE. The Sierra Vista Mall Mortgaged Property (other than a
6.08-acre parking lot in which the borrower holds fee interest) is subject to a
55-year ground lease with the borrower as lessee. The ground lease expires in
2038 and has eight 5-year extension options that are automatically exercised
unless the lessee gives notice of its intent not to renew six months prior to
the expiration of the existing lease term. Ground rent is comprised of (a)
annual base rent which is fixed at $300,020 through 2024 at which time a
re-valuation of the property will occur, and (b) additional rent which is equal
to 25% of annual rent revenue received above the sum of (i) $4,345,430 and (ii)
cumulative tenant improvement costs.
PARTIAL RELEASE OF UNIMPROVED LAND. With respect to approximately eight
acres of unimproved land at the Sierra Vista Mall Mortgaged Property (known as
the "theater/anchor site"), the loan documents permit the borrowers to (i)
sublease this space (whereby the subtenant would improve the premises), (ii)
incur mezzanine debt to finance the development of the theater/anchor site,
subject to confirmation from the Rating Agencies and satisfaction of other
conditions, including that prior to any improvements to the theater/anchor site,
(A) the loan-to-value ratio for the combined Sierra Vista Mall Loan and the
future mezzanine loan must not exceed 90% prior to completion of the
improvements and 75% after completion of the improvements and (B) the DSCR for
the combined Sierra Vista Mall Loan and the future mezzanine loan must be at
least equal to 1.15x prior to completion of the improvements and at least equal
to 1.25x after completion of the improvements, or (iii) obtain a release of this
portion of the Sierra Vista Mall Mortgaged Property from the lien of the
mortgage, subject to (A) the borrowers' deposit of $950,000 in a development
reserve account, which amount will be extra collateral for the Sierra Vista Mall
Loan, to be returned to the borrowers when the theater/anchor site is developed,
occupied by a tenant and all excess cash flow generated from this parcel has
been pledged to the lender as additional collateral for the Sierra Vista Mall
Loan and (B) the remaining portion of the Sierra Vista Mall Mortgaged Property
being 90% occupied with a DSCR of at least 1.25x.
ESCROWS AND RESERVES. The loan documents provide for escrows or reserves to
be deposited with the lender for (i) real estate taxes and insurance (1/12th of
the estimated amount required to be deposited each month), (ii) tenant
improvement and leasing commission (on-going monthly deposits of $14,368, up to
$344,824 on deposit), (iii) replacement (on-going monthly deposits of $4,652
($55,824 annually)) and (iv) in the event the borrowers intend to obtain a
release of the theater/anchor site, from the lien of the mortgage, a development
reserve (as described above, under "--Partial Release of Unimproved Land.").
PROPERTY MANAGEMENT. The Sierra Vista Mall Mortgaged Property is managed by
LandValue Management, LLC, an affiliate of the primary sponsor of the Sierra
Vista Mall Loan, James H. Huelskamp. The lender is permitted to terminate the
management agreement, upon or at any time after an event of default under the
mortgage, with 30 days' prior written notice to the property manager.
TERRORISM INSURANCE. The loan documents require the borrower to maintain
terrorism insurance coverage against loss or damage to persons and property by
reason of any act of terrorism, to the extent such coverage is commercially
available. The borrower is currently insured for damage caused by terrorism.
ADDITIONAL LOAN INFORMATION
GENERAL. The following tables set forth certain information with respect to
the Mortgage Loans and Mortgaged Properties. Such information is presented,
where applicable, as of the Cut-off Date for each Mortgage Loan and the related
Mortgaged Properties, as adjusted for the scheduled principal payments due on
the Mortgage Loans on or before the Cut-off Date. The statistics in such
schedule and tables were derived, in many cases, from information and operating
statements furnished by or on behalf of the respective borrowers. Such
information and operating statements were generally unaudited and have not been
independently verified by the Depositor, the applicable Mortgage Loan Seller or
the Underwriters or any of their respective affiliates or any other person. The
sum of the
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amounts in any column of any of the following tables or of Annex A-1 to this
prospectus supplement may not equal the indicated total under such column due to
rounding.
Net income for a Mortgaged Property as determined in accordance with
generally accepted accounting principles ("GAAP") would not be the same as the
stated Underwritten Net Cash Flow for such Mortgaged Property as set forth in
the following schedule or tables. In addition, Underwritten Net Cash Flow is not
a substitute for or comparable to operating income as determined in accordance
with GAAP as a measure of the results of a property's operations or a substitute
for cash flows from operating activities determined in accordance with GAAP as a
measure of liquidity. No representation is made as to the future net cash flow
of the Mortgaged Properties, nor is the Underwritten Net Cash Flow set forth
herein with respect to any Mortgaged Property intended to represent such future
net cash flow.
In the tables set forth below, with respect to Mortgage Loans evidenced by
one Mortgage Note, but secured by multiple Mortgaged Properties, for certain
purposes, separate amounts for each such related Mortgaged Property are shown.
DEFINITIONS. For purposes of the Prospectus Supplement, including the
following tables and Annex A-1 to this prospectus supplement, the indicated
terms shall have the following meanings, modified accordingly, by reference to
the "Certain Loan Payment Terms" below and footnotes to the schedules that
follow:
1. "Underwritten Net Cash Flow," "Underwritten NCF" or "UW NCF" with
respect to any Mortgaged Property, means an estimate of cash flow available for
debt service in a typical year of stable, normal operations as determined by the
related Mortgage Loan Seller. In general, it is the estimated revenue derived
from the use and operation of such Mortgaged Property less the sum of estimated
(a) operating expenses (such as utilities, administrative expenses, repairs and
maintenance, management and franchise fees and advertising), (b) fixed expenses
(such as insurance, real estate taxes and, if applicable, ground lease
payments), (c) capital expenditures and reserves for capital expenditures,
including tenant improvement costs and leasing commissions, as applicable, and
(d) an allowance for vacancies and losses. Underwritten Net Cash Flow generally
does not reflect interest expense and non-cash items such as depreciation and
amortization. The Underwritten Net Cash Flow for each Mortgaged Property is
calculated on the basis of numerous assumptions and subjective judgments, which,
if ultimately proven erroneous, could cause the actual net cash flow for such
Mortgaged Property to differ materially from the Underwritten Net Cash Flow set
forth herein. Certain such assumptions and subjective judgments of each Mortgage
Loan Seller relate to future events, conditions and circumstances, including
future expense levels, the re-leasing of vacant space and the continued leasing
of occupied space, which will be affected by a variety of complex factors over
which none of the Depositor, the applicable Mortgage Loan Seller or the Servicer
have control. In some cases, the Underwritten Net Cash Flow set forth herein for
any Mortgaged Property is higher, and may be materially higher, than the annual
net cash flow for such Mortgaged Property based on historical operating
statements.
In determining Underwritten Net Cash Flow for a Mortgaged Property, the
applicable Mortgage Loan Seller generally relied on rent rolls and/or other
generally unaudited financial information provided by the respective borrowers;
in some cases the appraisal and/or local market information was the primary
basis for the determination. From that information, the applicable Mortgage Loan
Seller calculated stabilized estimates of cash flow that took into consideration
historical financial statements (where available), material changes in the
operating position of a Mortgaged Property of which the applicable Mortgage Loan
Seller was aware (E.G., current rent roll information including newly signed
leases, near term market rent steps, expirations of "free rent" periods, market
rents, and market vacancy data), and estimated capital expenditures, leasing
commission and tenant improvement reserves. In certain cases, the applicable
Mortgage Loan Seller's estimate of Underwritten Net Cash Flow reflected
differences from the information contained in the operating statements obtained
from the respective borrowers (resulting in either an increase or decrease in
the estimate of Underwritten Net Cash Flow derived therefrom) based upon the
applicable Mortgage Loan Seller's own analysis of such operating statements and
the assumptions applied by the respective borrowers in preparing such
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statements and information. In certain instances, for example, property
management fees and other expenses may have been taken into account in the
calculation of Underwritten Net Cash Flow even though such expenses may not have
been reflected in actual historic operating statements. In most of those cases,
the information was annualized, with certain adjustments for items deemed not
appropriate to be annualized, before using it as a basis for the determination
of Underwritten Net Cash Flow. No assurance can be given with respect to the
accuracy of the information provided by any borrowers, or the adequacy of the
procedures used by any Mortgage Loan Seller in determining the presented
operating information.
2. "Annual Debt Service" generally means, for any Mortgage Loan 12 times
the monthly payment in effect as of the Cut-off Date for such Mortgage Loan or,
for certain Mortgage Loans that pay interest only for a period of time, 12 times
the monthly payment of principal and interest. In the case of 3 Mortgage Loans
known as "75 Rockefeller Plaza," "Westfield Shoppingtown Portfolio" and
"Chandler Fashion Center," please refer to Footnotes for the Annex A-1 for more
detailed information regarding calculation of debt service.
3. "UW NCF DSCR," "Underwritten NCF DSCR," "Debt Service Coverage Ratio" or
"DSCR" means, with respect to any Mortgage Loan, (a) the Underwritten Net Cash
Flow for the Mortgaged Property, divided by (b) the Annual Debt Service for such
Mortgage Loan. For purposes of calculating such amounts in the following tables
and in Annex A-1 to this prospectus supplement, original balance and Cut-off
Date Balance are reduced by approximately $100,000, in the aggregate, for a
holdback amount for 1 mortgage loan, representing approximately 0.19% of the
Initial Outstanding Pool Balance 0.25% of the Initial Loan Group 1 Balance. In
addition, all calculations of such amounts in the following tables and in Annex
A-1 to this prospectus supplement exclude 4 credit tenant lease loans, which
represent approximately 2.80% of the Initial Outstanding Pool Balance and 3.57%
of the Initial Loan Group 1 Balance and the two Mortgage Loans that are secured
by land, representing 3.44% of the Initial Outstanding Pool Balance and 4.39% of
the Initial Loan Group 1 Balance.
In general, debt service coverage ratios are used by income property
lenders to measure the ratio of (a) cash currently generated by a property that
is available for debt service to (b) required debt service payments. However,
debt service coverage ratios only measure the current, or recent, ability of a
property to service mortgage debt. If a property does not possess a stable
operating expectancy (for instance, if it is subject to material leases that are
scheduled to expire during the loan term and that provide for above-market rents
and/or that may be difficult to replace), a debt service coverage ratio may not
be a reliable indicator of a property's ability to service the mortgage debt
over the entire remaining loan term. The Underwritten NCF DSCRs are presented
herein for illustrative purposes only and, as discussed above, are limited in
their usefulness in assessing the current, or predicting the future, ability of
a Mortgaged Property to generate sufficient cash flow to repay the related
Mortgage Loan. Accordingly, no assurance can be given, and no representation is
made, that the Underwritten NCF DSCRs accurately reflects that ability. The
Mortgage Loans that are credit tenant lease loans are not included in the
weighted average, minimum and maximum DSCR calculations.
4. "Appraised Value" means, for any Mortgaged Property, the appraiser's
adjusted value as stated in the most recent third party appraisal available to
the Depositor. In certain cases, the appraiser's adjusted value takes into
account certain repairs or stabilization of operations. In certain cases in
which the appraiser assumed the completion of repairs, such repairs were, in
general, either completed prior to the appraisal date or the applicable Mortgage
Loan Seller has taken reserves sufficient to complete such repairs. No
representation is made that any such 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.
5. "Cut-off Date Loan-to-Value Ratio," "Loan-to-Value Ratio," "Cut-off Date
LTV," "Cut-off Date LTV Ratio," " Current LTV," or "LTV" means, with respect to
any Mortgage Loan, (a) the Cut-off Date Balance of such Mortgage Loan divided
(b) by the Appraised Value of the Mortgaged Property or Mortgaged Properties.
For purposes of calculating such amounts in the following tables and in Annex
A-1 to this prospectus supplement, Cut-off Date Balance is reduced by
approximately $100,000, in the aggregate, a
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holdback amount for 1 mortgage loan, representing approximately 0.19% of the
Initial Outstanding Pool Balance and 0.25% of the Initial Loan Group 1 Balance.
In addition, all calculations of such amounts in the following tables and in
Annex A-1 to this prospectus supplement exclude 4 credit tenant lease loans,
which represent approximately 2.80% of the Initial Outstanding Pool Balance and
3.57% of the Initial Loan Group 1 Balance and the 2 Mortgage Loans that are
secured by land, representing 3.44% of the Initial Outstanding Pool Balance and
4.39% of the Initial Loan Group 1 Balance.
6. "Square Feet" or "Sq. Ft." means, in the case of a Mortgaged Property
operated as a retail center, office, industrial/warehouse facility, combination
retail office facility or other special purpose property, the square footage of
the net rentable or leasable area.
7. "Units," "Rooms" or "Pads" means: (i) in the case of a Mortgaged
Property operated as multifamily housing, the number of apartments, regardless
of the size of or number of rooms in such apartment, (ii) in the case of a
Mortgaged Property operated as a hospitality property, the number of guest rooms
and (iii) in the case of a mortgaged property operated as a mobile home park,
the number of pads.
8. "Occupancy Rate" means the percentage of Square Feet or Units, as the
case may be, of a Mortgaged Property that was occupied or leased or, in the case
of certain properties, average units so occupied over a specified period, as of
a specified date (identified on Annex A-1 to this prospectus supplement as the
"Occupancy As-of Date") or as specified by the borrower or as derived from the
Mortgaged Property's rent rolls, operating statements or appraisals or as
determined by a site inspection of such Mortgaged Property. Information on Annex
A-1 to this prospectus supplement concerning the "Largest Tenant" is presented
as of the same date as of which the Occupancy Rate is specified.
9. "Balloon Balance" means, with respect to any Balloon Loan, the principal
amount that will be due at maturity for such Balloon Loan.
10. "Scheduled Maturity Date LTV" or "LTV Ratio at Maturity" means, with
respect to any Balloon Loan, the Balloon Balance for such Mortgage Loan divided
by the Appraised Value of the related Mortgaged Property. For purposes of
calculating such amounts in the following tables and in Annex A-1 to this
prospectus supplement, the 4 credit tenant lease loans, which represent
approximately 2.80% of the Initial Outstanding Pool Balance and 3.57% of the
Initial Loan Group 1 Balance, and the 2 Mortgage Loans that are secured by land,
representing approximately 3.44% of the Initial Outstanding Pool Balance and
4.39% of the Initial Loan Group 1 Balance, are excluded.
11. "Mortgage Rate" or "Interest Rate" means, with respect to any Mortgage
Loan, the Mortgage Rate in effect as of the Cut-off Date for such Mortgage Loan.
12. "Servicing Fee Rate" for each Mortgage Loan is the percentage rate per
annum set forth in Annex A-1 for such Mortgage Loan is payable in respect of the
servicing of such Mortgage Loan (which includes the Master Servicing Fee Rate)
and payable to the Servicer.
13. "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.
14. "GLA" means gross leaseable area.
15. "U/W Revenue" means, with respect to any Mortgage Loan, the gross
potential rent, less vacancies and collection loss.
16. "NRSF" means net rentable square feet.
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RANGE OF CUT-OFF DATE BALANCES--ALL MORTGAGE LOANS
% OF WEIGHTED AVERAGES
OUTSTANDING ------------------------------------------------------------
NUMBER OF AGGREGATE INITIAL STATED
RANGE OF CUT-OFF MORTGAGE CUT-OFF DATE POOL MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
DATE BALANCES LOANS BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- ---------------- --------- ------------ ----------- -------- ----------- ----- ------------ ------------
$1,147,709 to $2,000,000 13 $ 19,751,692 2.33% 5.976% 118 1.46x 71.41% 56.53%
$2,000,001 to $4,000,000 26 77,386,731 9.15 5.863% 124 1.45x 74.45% 63.01%
$4,000,001 to $6,000,000 18 84,793,773 10.02 5.752% 112 1.44x 74.72% 62.51%
$6,000,001 to $8,000,000 12 83,975,588 9.93 5.908% 108 1.47x 70.94% 59.16%
$8,000,001 to $10,000,000 4 34,942,529 4.13 5.719% 110 1.33x 78.55% 67.30%
$10,000,001 to $15,000,000 5 65,448,456 7.74 5.908% 146 1.51x 71.79% 59.82%
$15,000,001 to $20,000,000 3 52,222,400 6.17 5.940% 118 1.38x 79.25% 67.23%
$20,000,001 to $30,000,000 5 126,322,352 14.93 5.502% 107 1.38x 76.40% 67.16%
$30,000,001 to $40,000,000 2 77,063,492 9.11 5.531% 120 1.34x 79.86% 66.82%
$40,000,001 to $60,000,000 3 159,130,500 18.81 5.563% 115 2.30x 53.88% 45.13%
$60,000,001 to $65,000,000 1 65,000,000 7.68 4.665% 134 2.02x 50.00% 50.00%
--- ------------ ------
TOTAL/WEIGHTED
AVERAGE 92 $846,037,514 100.00% 5.629% 118 1.64x 69.00% 58.88%
=== ============ ======
RANGE OF CUT-OFF DATE BALANCES--LOAN GROUP 1
WEIGHTED AVERAGES
% OF -----------------------------------------------------------
NUMBER OF AGGREGATE INITIAL LOAN STATED
RANGE OF CUT-OFF MORTGAGE CUT-OFF DATE GROUP 1 MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
DATE BALANCES LOANS BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- ---------------- --------- ------------ ----------- -------- ----------- ----- ------------ ------------
$1,147,709 to $2,000,000 ....... 6 $ 9,131,510 1.38% 6.087% 119 1.38x 68.50% 53.16%
$2,000,001 to $4,000,000 ....... 18 53,901,603 8.13 6.002% 132 1.45x 74.09% 62.32%
$4,000,001 to $6,000,000 ....... 8 38,344,599 5.78 6.065% 117 1.43x 73.89% 61.64%
$6,000,001 to $8,000,000 ....... 9 63,451,780 9.57 5.991% 104 1.48x 69.48% 57.78%
$8,000,001 to $10,000,000 ...... 2 17,808,096 2.68 5.788% 117 1.36x 77.26% 65.29%
$10,000,001 to $15,000,000 ..... 5 65,448,456 9.87 5.908% 146 1.51x 71.79% 59.82%
$15,000,001 to $20,000,000 ..... 3 52,222,400 7.87 5.940% 118 1.38x 79.25% 67.23%
$20,000,001 to $30,000,000 ..... 4 99,922,352 15.06 5.505% 103 1.44x 75.32% 65.76%
$30,000,001 to $40,000,000 ..... 1 39,000,000 5.88 5.630% 120 1.31x 79.92% 67.04%
$40,000,001 to $60,000,000 ..... 3 159,130,500 23.99 5.563% 115 2.30x 53.88% 45.13%
$60,000,001 to $65,000,000 ..... 1 65,000,000 9.80 4.665% 134 2.02x 50.00% 50.00%
--- ------------ ------
TOTAL/WEIGHTED
AVERAGE ...................... 60 $663,361,297 100.00% 5.653% 119 1.72x 66.54% 56.88%
=== ============ ======
RANGE OF CUT-OFF DATE BALANCES--LOAN GROUP 2
WEIGHTED AVERAGES
% OF -----------------------------------------------------------
NUMBER OF AGGREGATE INITIAL LOAN STATED
RANGE OF CUT-OFF MORTGAGE CUT-OFF DATE GROUP 2 MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
DATE BALANCES LOANS BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- ---------------- --------- ------------ ----------- -------- ----------- ----- ------------ ------------
$1,298,836 to $2,000,000 ........ 7 $ 10,620,182 5.81% 5.880% 118 1.52x 73.92% 59.42%
$2,000,001 to $4,000,000 ........ 8 23,485,128 12.86 5.546% 105 1.45x 75.08% 64.24%
$4,000,001 to $6,000,000 ........ 10 46,449,174 25.43 5.494% 107 1.45x 75.41% 63.23%
$6,000,001 to $8,000,000 ........ 3 20,523,807 11.24 5.651% 119 1.44x 75.47% 63.44%
$8,000,001 to $10,000,000 ....... 2 17,134,434 9.38 5.647% 101 1.30x 79.88% 69.39%
$20,000,001 to $30,000,000 ...... 1 26,400,000 14.45 5.490% 120 1.23x 79.40% 71.03%
$30,000,001 to $38,063,492 ...... 1 38,063,492 20.84 5.430% 119 1.37x 79.80% 66.60%
--- ------------ ------
TOTAL/WEIGHTED
AVERAGE ....................... 32 $182,676,217 100.00% 5.541% 113 1.39x 77.20% 65.57%
=== ============ ======
S-90
TYPE OF MORTGAGED PROPERTIES--ALL MORTGAGE LOANS
% OF
NUMBER OF AGGREGATE OUTSTANDING NUMBER
MORTGAGED CUT-OFF DATE INITIAL OF UNITS OR
PROPERTY TYPE PROPERTIES BALANCE POOL BALANCE NRA
- ------------- ---------- ------------ ------------ -----------
Retail ....................... 34 $353,191,571 41.75% 4,083,950
ANCHORED ................... 29 328,096,657 38.78 3,947,408
UNANCHORED ................. 1 1,396,503 0.17 27,512
CTL ........................ 4 23,698,411 2.80 109,030
Multifamily .................. 38 200,406,908 23.69 5,039
MULTIFAMILY ................ 32 183,337,755 21.67 3,827
MANUFACTURED HOUSING ....... 6 17,069,154 2.02 1,212
Office ....................... 15 181,574,459 21.46 1,618,761
Industrial ................... 5 48,201,385 5.70 557,603
Land ......................... 2 29,130,854 3.44 220,208
Mixed Use .................... 2 14,815,706 1.75 138,647
Hotel ........................ 2 13,250,000 1.57 451
Senior Housing ............... 1 5,466,631 0.65 82
--- ------------ ------
TOTAL/WEIGHTED AVERAGE ....... 99 $846,037,514 100.00%
=== ============ ======
WEIGHTED AVERAGES
- ------------------------------------------------------------------------------------
CUT-OFF DATE
BALANCE PER STATED CUT-OFF
# OF UNITS MORTGAGE REMAINING DATE LTV LTV RATIO AT
OR NRA RATE TERM (MOS.) OCCUPANCY DSCR RATIO MATURITY
- ------------- -------- ----------- --------- ---- ------- ------------
$ 146.67 5.633% 118 96.17% 1.85x 64.91% 54.93%
$ 141.88 5.616% 110 96.10% 1.85x 64.94% 54.96%
$ 50.76 6.500% 118 90.26% 1.49x 58.19% 45.94%
$ 218.68 5.824% 238 100.00%
$54,926.03 5.558% 113 93.52% 1.40x 77.03% 65.41%
$58,558.98 5.576% 115 93.50% 1.38x 77.17% 65.32%
$15,904.95 5.359% 90 93.81% 1.62x 75.55% 66.48%
$ 131.14 5.447% 124 96.98% 1.61x 66.29% 58.14%
$ 141.97 6.138% 109 97.51% 1.45x 75.25% 64.91%
$ 154.95 5.700% 116 100.00%
$ 136.60 5.952% 119 91.16% 1.31x 71.08% 57.56%
$31,467.59 6.350% 121 75.79% 1.71x 58.63% 45.95%
$66,666.24 6.500% 113 90.24% 1.43x 74.48% 64.47%
5.629% 118 1.64x 69.00% 58.88%
S-91
TYPE OF MORTGAGED PROPERTIES--LOAN GROUP 1
NUMBER OF AGGREGATE % OF INITIAL NUMBER
MORTGAGED CUT-OFF DATE LOAN GROUP 1 OF UNITS OR
PROPERTY TYPE PROPERTIES BALANCE BALANCE NRA
- ------------- ---------- ------------ ------------ -----------
Retail ..................... 34 $353,191,571 53.24% 4,083,950
ANCHORED ................. 29 328,096,657 49.46 3,947,408
UNANCHORED ............... 1 1,396,503 0.21 27,512
CTL ...................... 4 23,698,411 3.57 109,030
Multifamily ................ 3 17,730,691 2.67 358
MULTIFAMILY .............. 2 14,373,663 2.17 183
MANUFACTURED HOUSING ..... 1 3,357,029 0.51 175
Office ..................... 15 181,574,459 27.37 1,618,761
Industrial ................. 5 48,201,385 7.27 557,603
Land ....................... 2 29,130,854 4.39 220,208
Mixed Use .................. 2 14,815,706 2.23 138,647
Hotel ...................... 2 13,250,000 2.00 451
Senior Housing ............. 1 5,466,631 0.82 82
--- ------------ ------
TOTAL/WEIGHTED AVERAGE ..... 64 $663,361,297 100.00%
=== ============ ======
WEIGHTED AVERAGES
- --------------------------------------------------------------------------------
CUT-OFF DATE
BALANCE PER STATED CUT-OFF
# OF UNITS MORTGAGE REMAINING DATE LTV LTV RATIO AT
OR NRA RATE TERM (MOS.) OCCUPANCY DSCR RATIO MATURITY
- ------------- -------- ----------- --------- ---- ------- ------------
$ 146.67 5.633% 118 96.17% 1.85x 64.91% 54.93%
$ 141.88 5.616% 110 96.10% 1.85x 64.94% 54.96%
$ 50.76 6.500% 118 90.26% 1.49x 58.19% 45.94%
$ 218.68 5.824% 238 100.00%
$67,851.60 5.726% 118 94.52% 1.51x 75.35% 63.82%
$79,218.35 5.720% 118 96.31% 1.49x 75.68% 64.18%
$19,183.02 5.750% 119 86.86% 1.59x 73.94% 62.32%
$ 131.14 5.447% 124 96.98% 1.61x 66.29% 58.14%
$ 141.97 6.138% 109 97.51% 1.45x 75.25% 64.91%
$ 154.95 5.700% 116 100.00%
$ 136.60 5.952% 119 91.16% 1.31x 71.08% 57.56%
$31,467.59 6.350% 121 75.79% 1.71x 58.63% 45.95%
$66,666.24 6.500% 113 90.24% 1.43x 74.48% 64.47%
5.653% 119 1.72x 66.54% 56.88%
S-92
TYPE OF MORTGAGED PROPERTIES--LOAN GROUP 2
NUMBER OF AGGREGATE % OF INITIAL NUMBER
MORTGAGED CUT-OFF DATE LOAN GROUP 2 OF UNITS OR
PROPERTY TYPE PROPERTIES BALANCE BALANCE NRA
- ------------- ---------- ------------ ------------ -----------
Multifamily ................ 30 $168,964,092 92.49% 3,644
Manufactured Housing ....... 5 13,712,125 7.51 1,037
--- ------------ ------ -----
TOTAL/WEIGHTED AVERAGE ..... 35 $182,676,217 100.00% 4,681
=== ============ ====== =====
WEIGHTED AVERAGES
- --------------------------------------------------------------------------------
CUT-OFF DATE
BALANCE PER STATED CUT-OFF
# OF UNITS MORTGAGE REMAINING DATE LTV LTV RATIO AT
OR NRA RATE TERM (MOS.) OCCUPANCY DSCR RATIO MATURITY
- ------------- -------- ----------- --------- ---- ------- ------------
$56,801.50 5.564% 115 93.36% 1.37x 77.30% 65.41%
$15,102.41 5.264% 83 94.99% 1.63x 75.95% 67.50%
$53,671.46 5.541% 113 93.72% 1.39x 77.20% 65.57%
S-93
MORTGAGED PROPERTIES BY STATE AND/OR LOCATION--ALL MORTGAGE LOANS
% OF WEIGHTED AVERAGES
OUTSTANDING --------------------------------------------------------
NUMBER OF AGGREGATE INITIAL STATED
MORTGAGED CUT-OFF DATE POOL MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
STATE/LOCATION PROPERTIES BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- -------------- ---------- ------------ ------- -------- ----------- ----- ----------- ------------
New York .............. 5 $154,224,547 18.23% 5.254% 123 1.68x 66.35% 59.32%
California ............ 8 139,924,421 16.54 5.730% 105 1.85x 62.22% 53.94%
S. CALIFORNIA ....... 6 87,266,426 10.31 5.783% 116 1.75x 64.64% 54.94%
N. CALIFORNIA ....... 2 52,657,995 6.22 5.642% 86 2.02x 58.31% 52.31%
Arizona ............... 4 65,220,205 7.71 5.149% 107 2.70x 47.00% 39.70%
Pennsylvania .......... 4 61,388,568 7.26 5.628% 119 1.41x 78.27% 65.04%
Georgia ............... 12 60,528,611 7.15 5.597% 121 1.33x 78.03% 66.62%
Florida ............... 6 56,283,118 6.65 5.838% 117 1.38x 75.80% 64.55%
Michigan .............. 5 52,897,312 6.25 5.727% 119 1.35x 78.52% 66.09%
Texas ................. 12 35,652,192 4.21 5.974% 106 1.46x 71.50% 60.26%
Illinois .............. 5 31,117,425 3.68 5.589% 119 1.53x 69.97% 58.02%
Maryland .............. 2 30,092,419 3.56 5.751% 119 1.27x 78.72% 65.94%
West Virginia ......... 2 22,305,207 2.64 5.740% 119 1.45x 76.84% 64.73%
Virginia .............. 3 20,250,000 2.39 6.022% 121 1.62x 65.86% 52.97%
North Carolina ........ 3 17,948,983 2.12 6.097% 119 1.36x 73.27% 57.86%
Mississippi ........... 7 14,814,062 1.75 6.009% 162 1.41x 75.47% 59.75%
New Hampshire ......... 1 13,666,000 1.62 5.600% 248
South Carolina ........ 2 8,600,990 1.02 5.712% 119 1.41x 77.49% 63.71%
Iowa .................. 1 8,392,381 0.99 5.650% 83 1.23x 79.93% 71.81%
Ohio .................. 2 7,607,029 0.90 5.490% 120 1.64x 72.88% 60.90%
Missouri .............. 1 6,092,806 0.72 7.250% 102 1.60x 64.13% 57.05%
Louisiana ............. 2 6,001,237 0.71 5.499% 68 1.55x 74.05% 66.88%
Arkansas .............. 1 5,995,053 0.71 6.020% 119 1.50x 74.94% 63.66%
Indiana ............... 1 4,950,410 0.59 6.000% 113 1.25x 70.72% 55.31%
New Jersey ............ 1 4,346,535 0.51 6.150% 119 1.31x 73.67% 62.82%
Oregon ................ 1 4,341,119 0.51 5.500% 118 1.49x 71.64% 59.98%
Colorado .............. 1 3,291,323 0.39 6.060% 117 1.48x 74.46% 63.45%
New Mexico ............ 1 2,151,120 0.25 6.650% 115 1.33x 74.95% 59.68%
Connecticut ........... 1 2,077,187 0.25 5.700% 83 1.43x 76.93% 65.58%
Alabama ............... 1 1,681,917 0.20 6.000% 118 1.43x 73.13% 62.15%
Tennessee ............. 1 1,500,000 0.18 6.000% 120 1.51x 75.00% 58.09%
Wisconsin ............. 1 1,396,503 0.17 6.500% 118 1.49x 58.19% 45.94%
Oklahoma .............. 2 1,298,836 0.15 5.700% 119 1.47x 79.93% 67.26%
--- ------------ -----
TOTAL/WEIGHTED
AVERAGE ............. 99 $846,037,514 100.00% 5.629% 118 1.64x 69.00% 58.88%
=== ============ ======
S-94
MORTGAGED PROPERTIES BY STATE AND/OR LOCATION--LOAN GROUP 1
WEIGHTED AVERAGES
% OF --------------------------------------------------------
NUMBER OF AGGREGATE INITIAL LOAN STATED
MORTGAGED CUT-OFF DATE GROUP 1 MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
STATE/LOCATION PROPERTIES BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- -------------- ---------- ------------ ------- -------- ----------- ----- ---------- ----------
New York .............. 5 $154,224,547 23.25% 5.254% 123 1.68x 66.35% 59.32%
California ............ 8 139,924,421 21.09 5.730% 105 1.85x 62.22% 53.94%
S. CALIFORNIA ....... 6 87,266,426 13.16 5.783% 116 1.75x 64.64% 54.94%
N. CALIFORNIA ....... 2 52,657,995 7.94 5.642% 86 2.02x 58.31% 52.31%
Arizona ............... 1 54,181,450 8.17 5.140% 113 2.93x 40.95% 33.73%
Michigan .............. 3 46,797,312 7.05 5.748% 119 1.34x 78.93% 66.48%
Florida ............... 4 44,945,532 6.78 5.883% 117 1.34x 73.09% 62.76%
Maryland .............. 2 30,092,419 4.54 5.751% 119 1.27x 78.72% 65.94%
Texas ................. 8 27,911,392 4.21 6.070% 104 1.44x 71.56% 60.33%
Pennsylvania .......... 3 23,325,076 3.52 5.952% 119 1.47x 75.77% 62.49%
West Virginia ......... 2 22,305,207 3.36 5.740% 119 1.45x 76.84% 64.73%
Virginia .............. 3 20,250,000 3.05 6.022% 121 1.62x 65.86% 52.97%
North Carolina ........ 3 17,948,983 2.71 6.097% 119 1.36x 73.27% 57.86%
New Hampshire ......... 1 13,666,000 2.06 5.600% 248
Illinois .............. 2 9,887,153 1.49 5.654% 119 1.75x 64.07% 51.74%
Georgia ............... 4 9,301,411 1.40 6.050% 163 1.37x 73.66% 54.98%
Mississippi ........... 3 7,780,120 1.17 6.170% 201 1.27x 74.05% 48.70%
Ohio .................. 2 7,607,029 1.15 5.490% 120 1.64x 72.88% 60.90%
Missouri .............. 1 6,092,806 0.92 7.250% 102 1.60x 64.13% 57.05%
Louisiana ............. 2 6,001,237 0.90 5.499% 68 1.55x 74.05% 66.88%
Arkansas .............. 1 5,995,053 0.90 6.020% 119 1.50x 74.94% 63.66%
New Jersey ............ 1 4,346,535 0.66 6.150% 119 1.31x 73.67% 62.82%
Colorado .............. 1 3,291,323 0.50 6.060% 117 1.48x 74.46% 63.45%
South Carolina ........ 1 2,256,750 0.34 5.888% 120 1.33x 77.82% 60.05%
New Mexico ............ 1 2,151,120 0.32 6.650% 115 1.33x 74.95% 59.68%
Alabama ............... 1 1,681,917 0.25 6.000% 118 1.43x 73.13% 62.15%
Wisconsin ............. 1 1,396,503 0.21 6.500% 118 1.49x 58.19% 45.94%
--- ------------- ------
TOTAL/WEIGHTED
AVERAGE ............. 64 $663,361,297 100.00% 5.653% 119 1.72x 66.54% 56.88%
=== ============= ======
S-95
MORTGAGED PROPERTIES BY STATE AND/OR LOCATION--LOAN GROUP 2
WEIGHTED AVERAGES
% OF --------------------------------------------------------
NUMBER OF AGGREGATE INITIAL LOAN STATED
MORTGAGED CUT-OFF DATE GROUP 2 MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
STATE/LOCATION PROPERTIES BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- -------------- ---------- ------------ ------- -------- ----------- ----- ---------- ----------
Georgia ............... 8 $ 51,227,200 28.04% 5.515% 114 1.32x 78.54% 67.96%
Pennsylvania .......... 1 38,063,492 20.84 5.430% 119 1.37x 79.80% 66.60%
Illinois .............. 3 21,230,272 11.62 5.558% 119 1.43x 72.72% 60.94%
Florida ............... 2 11,337,586 6.21 5.658% 118 1.44x 80.13% 67.41%
Arizona ............... 3 11,038,755 6.04 5.191% 76 1.57x 76.67% 69.00%
Iowa .................. 1 8,392,381 4.59 5.650% 83 1.23x 79.93% 71.81%
Texas ................. 4 7,740,799 4.24 5.627% 116 1.55x 71.30% 60.00%
Mississippi ........... 4 7,033,942 3.85 5.831% 118 1.43x 75.70% 61.56%
South Carolina ........ 1 6,344,240 3.47 5.650% 119 1.43x 77.37% 65.01%
Michigan .............. 2 6,100,000 3.34 5.566% 120 1.45x 75.34% 63.07%
Indiana ............... 1 4,950,410 2.71 6.000% 113 1.25x 70.72% 55.31%
Oregon ................ 1 4,341,119 2.38 5.500% 118 1.49x 71.64% 59.98%
Connecticut ........... 1 2,077,187 1.14 5.700% 83 1.43x 76.93% 65.58%
Tennessee ............. 1 1,500,000 0.82 6.000% 120 1.51x 75.00% 58.09%
Oklahoma .............. 2 1,298,836 0.71 5.700% 119 1.47x 79.93% 67.26%
--- ------------- ------
TOTAL/WEIGHTED
AVERAGE ............. 35 $182,676,217 100.00% 5.541% 113 1.39x 77.20% 65.57%
=== ============= ======
S-96
RANGE OF DEBT SERVICE COVERAGE RATIOS AS OF THE CUT-OFF DATE--ALL MORTGAGE LOANS
% OF WEIGHTED AVERAGES
OUTSTANDING --------------------------------------------------------
NUMBER OF AGGREGATE INITIAL STATED
RANGE OF DEBT SERVICE MORTGAGE CUT-OFF DATE POOL MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
COVERAGE RATIOS LOANS BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- --------------------- ------- ------------ ------- -------- ------------ ----- --------- ----------
1.23x+ to 1.25x ....... 2 $ 34,792,381 4.11% 5.529% 111 1.23x 79.53% 71.21%
1.25x+ to 1.30x ....... 8 67,469,155 7.97 5.859% 117 1.28x 77.07% 64.47%
1.30x+ to 1.35x ....... 13 86,313,901 10.20 5.860% 119 1.32x 76.54% 62.69%
1.35x+ to 1.40x ....... 5 70,319,956 8.31 5.717% 119 1.37x 78.11% 64.84%
1.40x+ to 1.45x ....... 19 160,776,048 19.00 5.725% 119 1.43x 77.81% 65.22%
1.45x+ to 1.50x ....... 18 67,883,728 8.02 5.691% 106 1.47x 74.02% 63.07%
1.50x+ to 1.55x ....... 8 56,193,913 6.64 5.611% 112 1.52x 72.42% 61.68%
1.55x+ to 1.60x ....... 4 37,168,048 4.39 5.570% 69 1.57x 72.33% 66.23%
1.60x+ to 1.70x ....... 3 12,171,507 1.44 5.078% 80 1.67x 74.73% 66.63%
1.70x+ to 1.80x ....... 1 13,250,000 1.57 6.350% 121 1.71x 58.63% 45.95%
1.80x+ to 2.40x ....... 3 73,139,111 8.64 4.771% 132 2.01x 51.10% 49.75%
2.40x+ to 2.93x ....... 2 113,730,500 13.44 5.616% 112 2.65x 43.49% 36.54%
--- --------------- ------
TOTAL/WEIGHTED
AVERAGE ............. 86 $793,208,249 93.76% 5.620% 114 1.64x 69.00% 58.88%
=== =============== ======
RANGE OF DEBT SERVICE COVERAGE RATIOS AS OF THE CUT-OFF DATE--LOAN GROUP 1
WEIGHTED AVERAGES
% OF ----------------------------------------------------------
NUMBER OF AGGREGATE INITIAL LOAN STATED
RANGE OF DEBT SERVICE MORTGAGE CUT-OFF DATE GROUP 1 MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
COVERAGE RATIOS LOANS BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- --------------------- ------ ------------ ------- -------- ----------- ----- ---------- ----------
1.27x+ to 1.30x ....... 6 $ 60,128,945 9.06% 5.853% 117 1.28x 77.90% 65.46%
1.30x+ to 1.35x ....... 10 75,935,959 11.45 5.888% 119 1.31x 76.41% 62.99%
1.35x+ to 1.40x ....... 3 23,514,411 3.54 6.208% 118 1.37x 74.73% 61.15%
1.40x+ to 1.45x ....... 10 123,351,649 18.59 5.750% 119 1.42x 78.29% 65.61%
1.45x+ to 1.50x ....... 11 41,643,895 6.28 5.806% 106 1.47x 72.19% 61.34%
1.50x+ to 1.55x ....... 4 46,058,624 6.94 5.612% 111 1.52x 73.12% 62.81%
1.55x+ to 1.60x ....... 4 37,168,048 5.60 5.570% 69 1.57x 72.33% 66.23%
1.60x+ to 1.70x ....... 1 4,250,000 0.64 5.285% 120 1.68x 72.03% 59.78%
1.70x+ to 1.80x ....... 1 13,250,000 2.00 6.350% 121 1.71x 58.63% 45.95%
1.80x+ to 2.40x ....... 2 71,500,000 10.78 4.741% 133 2.01x 50.83% 49.65%
2.40x+ to 2.93x ....... 2 113,730,500 17.14 5.616% 112 2.65x 43.49% 36.54%
--- --------------- ------
TOTAL/WEIGHTED
AVERAGE ............. 54 $610,532,032 92.04% 5.644% 115 1.72x 66.54% 56.88%
=== =============== ======
S-97
RANGE OF DEBT SERVICE COVERAGE RATIOS AS OF THE CUT-OFF DATE--LOAN GROUP 2
WEIGHTED AVERAGES
% OF --------------------------------------------------------
NUMBER OF AGGREGATE INITIAL LOAN STATED
RANGE OF DEBT SERVICE MORTGAGE CUT-OFF DATE GROUP 2 MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
COVERAGE RATIOS LOANS BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- --------------------- ------ ----------- ------- -------- ----------- ----- ---------- ----------
1.23x+ to 1.25x ....... 2 $34,792,381 19.05% 5.529% 111 1.23x 79.53% 71.21%
1.25x+ to 1.30x ....... 2 7,340,210 4.02 5.902% 114 1.26x 70.25% 56.34%
1.30x+ to 1.35x ....... 3 10,377,942 5.68 5.655% 121 1.33x 77.46% 60.52%
1.35x+ to 1.40x ....... 2 46,805,545 25.62 5.470% 119 1.37x 79.80% 66.68%
1.40x+ to 1.45x ....... 9 37,424,399 20.49 5.642% 116 1.43x 76.23% 63.92%
1.45x+ to 1.50x ....... 7 26,239,834 14.36 5.508% 107 1.48x 76.93% 65.81%
1.50x+ to 1.55x ....... 4 10,135,289 5.55 5.606% 119 1.51x 69.28% 56.53%
1.60x+ to 1.70x ....... 2 7,921,507 4.34 4.967% 59 1.67x 76.17% 70.30%
1.80x+ to 1.86x ....... 1 1,639,111 0.90 6.100% 113 1.86x 63.04% 53.98%
--- --------------- -------
TOTAL/WEIGHTED
AVERAGE ............. 32 $182,676,217 100.00% 5.541% 113 1.39x 77.20% 65.57%
=== =============== =======
S-98
RANGE OF LTV RATIOS AS OF THE CUT-OFF DATE
% OF WEIGHTED AVERAGES
OUTSTANDING ---------------------------------------------------------
NUMBER OF AGGREGATE INITIAL STATED
RANGE OF LTV RATIOS MORTGAGE CUT-OFF DATE POOL MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
AS OF THE CUT-OFF DATE LOANS BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- ---------------------- ------ ------------ ------- -------- ------------ ----- ---------- ----------
41.0% to 45.0% ........ 1 $ 54,181,450 6.40% 5.140% 113 2.93x 40.95% 33.73%
45.1% to 50.0% ........ 2 124,549,050 14.72 5.327% 123 2.20x 47.99% 44.79%
50.1% to 60.0% ........ 3 21,146,503 2.50 6.099% 120 1.76x 58.74% 46.02%
60.1% to 65.0% ........ 5 23,373,463 2.76 6.214% 78 1.54x 64.30% 58.15%
65.1% to 70.0% ........ 6 25,998,019 3.07 5.649% 116 1.41x 68.64% 57.40%
70.1% to 75.0% ........ 33 169,584,848 20.04 5.846% 109 1.44x 73.34% 61.62%
75.1% to 80.0% ........ 35 370,223,408 43.76 5.620% 115 1.38x 78.95% 66.84%
80.1% to 80.6% ........ 1 4,151,507 0.49 5.500% 118 1.46x 80.61% 67.49%
--- ------------- ------
TOTAL/WEIGHTED
AVERAGE ............. 86 $793,208,249 93.76% 5.620% 114 1.64x 69.00% 58.88%
=== ============= ======
RANGE OF LTV RATIOS AS OF THE CUT-OFF DATE--LOAN GROUP 1
WEIGHTED AVERAGES
% OF ------------------------------------------------------------
NUMBER OF AGGREGATE INITIAL LOAN STATED
RANGE OF LTV RATIOS MORTGAGE CUT-OFF DATE GROUP 1 MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
AS OF THE CUT-OFF DATE LOANS BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- ---------------------- ------ ------------ ------- -------- ------------ ----- ---------- ----------
41.0% to 45.0% ........ 1 $ 54,181,450 8.17% 5.140% 113 2.93x 40.95% 33.73%
45.1% to 50.0% ........ 2 124,549,050 18.78 5.327% 123 2.20x 47.99% 44.79%
50.1% to 60.0% ........ 3 21,146,503 3.19 6.099% 120 1.76x 58.74% 46.02%
60.1% to 65.0% ........ 4 21,734,352 3.28 6.222% 75 1.52x 64.39% 58.47%
65.1% to 70.0% ........ 3 11,120,000 1.68 5.809% 113 1.36x 69.53% 58.02%
70.1% to 75.0% ........ 25 145,558,806 21.94 5.870% 108 1.45x 73.46% 61.97%
75.1% to 79.9% ........ 16 232,241,870 35.01 5.687% 118 1.38x 78.89% 66.37%
--- ------------- ------
TOTAL/WEIGHTED
AVERAGE ............. 54 $610,532,032 92.04% 5.644% 115 1.72x 66.54% 56.88%
=== ============= ======
RANGE OF LTV RATIOS AS OF THE CUT-OFF DATE--LOAN GROUP 2
WEIGHTED AVERAGES
% OF --------------------------------------------------------
NUMBER OF AGGREGATE INITIAL LOAN STATED
RANGE OF LTV RATIOS MORTGAGE CUT-OFF DATE GROUP 2 MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
AS OF THE CUT-OFF DATE LOANS BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- ---------------------- ------ ----------- ------- -------- ------------ ----- ---------- ----------
63.0% to 65.0% ........ 1 $ 1,639,111 0.90% 6.100% 113 1.86x 63.04% 53.98%
65.1% to 70.0% ........ 3 14,878,019 8.14 5.530% 119 1.45x 67.98% 56.94%
70.1% to 75.0% ........ 8 24,026,042 13.15 5.705% 117 1.44x 72.64% 59.53%
75.1% to 80.0% ........ 19 137,981,538 75.53 5.508% 111 1.37x 79.05% 67.63%
80.1% to 80.6% ........ 1 4,151,507 2.27 5.500% 118 1.46x 80.61% 67.49%
--- ------------- -------
TOTAL/WEIGHTED
AVERAGE ............. 32 $182,676,217 100.00% 5.541% 113 1.39x 77.20% 65.57%
=== ============= =======
S-99
RANGE OF LTV RATIOS AS OF MATURITY DATES
% OF WEIGHTED AVERAGES
OUTSTANDING --------------------------------------------------------
NUMBER OF AGGREGATE INITIAL STATED
RATIOS RANGE OF LTV AS MORTGAGE CUT-OFF DATE POOL MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
OF MATURITY DATES LOANS BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- ---------------------- ------ ------------ ------- -------- ------------ ----- ---------- ----------
33.7% to 40.0% ........ 2 $113,730,500 13.44% 5.616% 112 2.65x 43.49% 36.54%
40.1% to 50.0% ........ 6 88,901,005 10.51 5.048% 130 1.94x 52.78% 48.98%
50.1% to 55.0% ........ 3 8,783,841 1.04 5.690% 118 1.57x 66.03% 54.63%
55.1% to 60.0% ........ 23 104,193,047 12.32 6.023% 109 1.41x 70.89% 58.10%
60.1% to 65.0% ........ 26 142,670,328 16.86 5.789% 119 1.45x 74.87% 63.27%
65.1% to 70.0% ........ 21 288,039,639 34.05 5.599% 112 1.39x 78.91% 66.95%
70.1% to 74.0% ........ 5 46,889,889 5.54 5.425% 98 1.32x 79.15% 71.48%
--- ------------ ------
TOTAL/WEIGHTED
AVERAGE ............. 86 $793,208,249 93.76% 5.620% 114 1.64x 69.00% 58.88%
=== ============ ======
RANGE OF LTV RATIOS AS OF MATURITY DATES--LOAN GROUP 1
WEIGHTED AVERAGES
% OF -------------------------------------------------------
NUMBER OF AGGREGATE INITIAL LOAN STATED
RATIOS RANGE OF LTV AS MORTGAGE CUT-OFF DATE GROUP 1 MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
OF MATURITY DATES LOANS BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- ---------------------- ------ ------------ ------- -------- ------------ ----- ---------- ----------
33.7% to 40.0% ........ 2 $113,730,500 17.14% 5.616% 112 2.65x 43.49% 36.54%
40.1% to 50.0% ........ 6 88,901,005 13.40 5.048% 130 1.94x 52.78% 48.98%
50.1% to 55.0% ........ 1 1,650,000 0.25 6.150% 120 1.46x 69.77% 54.31%
55.1% to 60.0% ........ 15 75,362,447 11.36 6.158% 105 1.42x 70.42% 58.26%
60.1% to 65.0% ........ 19 118,538,560 17.87 5.821% 119 1.45x 74.75% 63.32%
65.1% to 70.0% ........ 10 208,493,282 31.43 5.628% 112 1.38x 78.70% 66.94%
70.1% to 71.6% ........ 1 3,856,237 0.58 5.360% 59 1.59x 77.12% 71.59%
--- ------------- ------
TOTAL/WEIGHTED
AVERAGE ............. 54 $610,532,032 92.04% 5.644% 115 1.72x 66.54% 56.88%
=== ============= ======
RANGE OF LTV RATIOS AS OF MATURITY DATES--LOAN GROUP 2
WEIGHTED AVERAGES
% OF --------------------------------------------------------
NUMBER OF AGGREGATE INITIAL LOAN STATED
RATIOS RANGE OF LTV AS MORTGAGE CUT-OFF DATE GROUP 2 MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
OF MATURITY DATES LOANS BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- ---------------------- ------ ----------- ------- -------- ------------ ----- ---------- ----------
54.0% to 55.0% ........ 2 $ 7,133,841 3.91% 5.584% 118 1.59x 65.17% 54.70%
55.1% to 60.0% ........ 8 28,830,600 15.78 5.670% 118 1.39x 72.13% 57.67%
60.1% to 65.0% ........ 7 24,131,768 13.21 5.630% 118 1.44x 75.47% 63.02%
65.1% to 70.0% ........ 11 79,546,357 43.54 5.523% 114 1.41x 79.48% 66.99%
70.1% to 74.0% ........ 4 43,033,651 23.56 5.431% 101 1.29x 79.33% 71.47%
--- ------------- --------
TOTAL/WEIGHTED
AVERAGE ............. 32 $182,676,217 100.00% 5.541% 113 1.39x 77.20% 65.57%
=== ============= ========
S-100
RANGE OF MORTGAGE RATES AS OF THE CUT-OFF DATE--ALL MORTGAGE LOANS
% OF WEIGHTED AVERAGES
OUTSTANDING --------------------------------------------------------
NUMBER OF AGGREGATE INITIAL STATED
MORTGAGE CUT-OFF DATE POOL MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
RANGE OF MORTGAGE RATES LOANS BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- ----------------------- ------ ------------ ------- -------- ------------ ----- ---------- ----------
4.665% to 4.999% ...... 3 $ 72,921,507 8.62% 4.698% 126 1.98x 52.84% 52.21%
5.000% to 5.249% ...... 3 82,608,662 9.76 5.140% 93 2.45x 52.49% 45.93%
5.250% to 5.499% ...... 9 156,014,459 18.44 5.419% 118 1.41x 77.96% 66.18%
5.500% to 5.749% ...... 27 228,071,724 26.96 5.652% 125 1.40x 77.00% 64.56%
5.750% to 5.999% ...... 19 119,043,034 14.07 5.867% 111 1.40x 75.58% 64.40%
6.000% to 6.249% ...... 23 142,956,476 16.90 6.080% 123 1.84x 61.07% 50.53%
6.250% to 6.499% ...... 2 20,650,000 2.44 6.332% 121 1.60x 64.40% 50.44%
6.500% to 6.749% ...... 3 9,014,254 1.07 6.536% 114 1.42x 72.07% 60.45%
6.750% to 6.999% ...... 2 8,664,592 1.02 6.835% 112 1.31x 71.92% 57.80%
7.000% to 7.250% ...... 1 6,092,806 0.72 7.250% 102 1.60x 64.13% 57.05%
--- ------------- --------
TOTAL/WEIGHTED
AVERAGE ............. 92 $846,037,514 100.00% 5.629% 118 1.64x 69.00% 58.88%
=== ============= ========
S-101
RANGE OF MORTGAGE RATES AS OF THE CUT-OFF DATE--LOAN GROUP 1
WEIGHTED AVERAGES
% OF ---------------------------------------------------------
NUMBER OF AGGREGATE INITIAL LOAN STATED
MORTGAGE CUT-OFF DATE GROUP 1 MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
RANGE OF MORTGAGE RATES LOANS BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- ----------------------- ------ ------------ ------- -------- ----------- ----- --------- ----------
4.665% to 4.999% ...... 1 $ 65,000,000 9.80% 4.665% 134 2.02x 50.00% 50.00%
5.000% to 5.249% ...... 2 78,043,426 11.76 5.143% 95 2.51x 50.88% 44.29%
5.250% to 5.499% ...... 6 86,056,237 12.97 5.392% 117 1.47x 77.48% 65.23%
5.500% to 5.749% ...... 10 154,867,260 23.35 5.676% 130 1.39x 77.27% 64.78%
5.750% to 5.999% ...... 14 101,699,340 15.33 5.884% 109 1.39x 75.30% 64.36%
6.000% to 6.249% ...... 19 133,273,381 20.09 6.084% 124 1.87x 60.25% 50.05%
6.250% to 6.499% ...... 2 20,650,000 3.11 6.332% 121 1.60x 64.40% 50.44%
6.500% to 6.749% ...... 3 9,014,254 1.36 6.536% 114 1.42x 72.07% 60.45%
6.750% to 6.999% ...... 2 8,664,592 1.31 6.835% 112 1.31x 71.92% 57.80%
7.000% to 7.250% ...... 1 6,092,806 0.92 7.250% 102 1.60x 64.13% 57.05%
--- -------------- ------
TOTAL/WEIGHTED
AVERAGE ............. 60 $663,361,297 100.00% 5.653% 119 1.72x 66.54% 56.88%
=== ============== ======
S-102
RANGE OF MORTGAGE RATES AS OF THE CUT-OFF DATE--LOAN GROUP 2
WEIGHTED AVERAGES
% OF --------------------------------------------------------
NUMBER OF AGGREGATE INITIAL LOAN STATED
MORTGAGE CUT-OFF DATE GROUP 2 MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
RANGE OF MORTGAGE RATES LOANS BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- ----------------------- ------ ----------- ------- -------- ------------ ----- ---------- -----------
4.940% to 4.999% ...... 2 $ 7,921,507 4.34% 4.967% 59 1.67x 76.17% 70.30%
5.000% to 5.249% ...... 1 4,565,237 2.50 5.082% 59 1.48x 80.09% 74.05%
5.250% to 5.499% ...... 3 69,958,222 38.30 5.453% 119 1.33x 78.55% 67.35%
5.500% to 5.749% ...... 17 73,204,463 40.07 5.601% 113 1.40x 76.59% 64.23%
5.750% to 5.999% ...... 5 17,343,694 9.49 5.762% 118 1.43x 77.18% 64.64%
6.000% to 6.100% ...... 4 9,683,095 5.30 6.017% 115 1.41x 71.56% 56.61%
--- -------------- ------
TOTAL/WEIGHTED
AVERAGE ............. 32 $182,676,217 100.00% 5.541% 113 1.39x 77.20% 65.57%
=== ============== ======
S-103
RANGE OF REMAINING TERMS TO MATURITY DATE IN MONTHS--ALL MORTGAGE LOANS
% OF WEIGHTED AVERAGES
OUTSTANDING --------------------------------------------------------
NUMBER OF AGGREGATE INITIAL STATED
RANGE OF REMAINING MORTGAGE CUT-OFF DATE POOL MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
TERMS (MOS.) LOANS BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- ------------------ ------ ------------ ------- -------- ------------ ----- ---------- ----------
55 to 60 .............. 7 $ 54,197,915 6.41% 5.304% 57 1.56x 72.34% 66.92%
61 to 84 .............. 3 12,614,567 1.49 5.675% 83 1.30x 77.50% 68.50%
85 to 120 ............. 73 660,259,500 78.04 5.734% 117 1.62x 70.47% 59.09%
121 to 148 ............ 5 95,267,120 11.26 5.031% 130 1.87x 56.18% 51.69%
201 to 248 ............ 4 23,698,411 2.80 5.824% 238
--- ------------- -------
TOTAL/WEIGHTED
AVERAGE ............. 92 $846,037,514 100.00% 5.629% 118 1.64x 69.00% 58.88%
=== ============= =======
RANGE OF REMAINING TERMS TO MATURITY DATE IN MONTHS--LOAN GROUP 1
WEIGHTED AVERAGES
% OF --------------------------------------------------------
NUMBER OF AGGREGATE INITIAL LOAN STATED
RANGE OF REMAINING MORTGAGE CUT-OFF DATE GROUP 1 MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
TERMS (MOS.) LOANS BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- ------------------ ------ ------------ ------- -------- ------------ ----- ---------- ----------
55 to 60 .............. 4 $ 41,711,172 6.29% 5.393% 57 1.55x 70.77% 65.50%
61 to 84 .............. 1 2,145,000 0.32 5.750% 84 1.46x 68.53% 58.40%
85 to 120 ............. 47 506,206,714 76.31 5.781% 117 1.70x 68.35% 57.16%
121 to 148 ............ 4 89,600,000 13.51 5.001% 130 1.90x 54.89% 51.34%
201 to 248 ............ 4 23,698,411 3.57 5.824% 238
--- ------------- -------
TOTAL/WEIGHTED
AVERAGE ............. 60 $663,361,297 100.00% 5.653% 119 1.72x 66.54% 56.88%
=== ============= =======
RANGE OF REMAINING TERMS TO MATURITY DATE IN MONTHS--LOAN GROUP 2
WEIGHTED AVERAGES
% OF --------------------------------------------------------
NUMBER OF AGGREGATE INITIAL LOAN STATED
RANGE OF REMAINING MORTGAGE CUT-OFF DATE GROUP 2 MORTGAGE REMAINING CUT-OFF DATE LTV RATIO AT
TERMS (MOS.) LOANS BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- ------------------ ------ ------------ ------- -------- ------------ ----- ---------- ----------
59 to 60 3 $ 12,486,744 6.84% 5.009% 59 1.60x 77.60% 71.67%
61 to 84 2 10,469,567 5.73 5.660% 83 1.27x 79.33% 70.57%
85 to 120 26 154,052,786 84.33 5.578% 118 1.38x 77.04% 65.04%
121 to 124 1 5,667,120 3.10 5.500% 124 1.35x 76.58% 57.27%
--- ------------- -------
TOTAL/WEIGHTED
AVERAGE 32 $182,676,217 100.00% 5.541% 113 1.39x 77.20% 65.57%
=== ============= =======
S-104
TEN LARGEST MORTGAGE LOANS
WEIGHTED AVERAGES
% OF %OF APPLICABLE -----------------------------------------------
NUMBER OF NUMBER OF AGGREGATE INITIAL INITIAL LOAN STATED CUT-OFF LTV RATIO
MORTGAGE MORTGAGED CUT-OFF DATE POOL GROUP MORTGAGE REMAINING DATE AT
MORTGAGE LOANS LOANS PROPERTIES BALANCE BALANCE BALANCE RATE TERM (MOS.) DSCR LTV RATIO MATURITY
- -------------- -------- ---------- ----------- -------- ----------- ------- ---------- ----- --------- --------
75 Rockefeller Plaza 1 1 $65,000,000 7.68% 9.80% 4.665% 134 2.02x 50.00% 50.00%
Westfield
Shoppingtown
Portfolio 1 2 59,549,050 7.04 8.98% 6.050% 112 2.40x 45.79% 39.10%
Chandler Fashion
Center 1 1 54,181,450 6.40 8.17% 5.140% 113 2.93x 40.95% 33.73%
Gateway Center BJ's 1 1 45,400,000 5.37 6.84% 5.430% 120 1.43x 79.93% 66.64%
Palladium at
Birmingham 1 1 39,000,000 4.61 5.88% 5.630% 120 1.31x 79.92% 67.04%
Empirian Luxury
Towers 1 1 38,063,492 4.50 20.84% 5.430% 119 1.37x 79.80% 66.60%
Redland Center 1 1 27,975,125 3.31 4.22% 5.732% 119 1.27x 78.80% 66.38%
1669 Collins Avenue,
Miami Beach Land 1 1 26,885,252 3.18 4.05% 5.700% 116 1.06x 88.15% 74.40%
The Reserve at
Sugarloaf 1 1 26,400,000 3.12 14.45% 5.490% 120 1.23x 79.40% 71.03%
Sierra Vista Mall 1 1 23,861,975 2.82 3.60% 5.150% 55 1.56x 73.42% 68.25%
-- -- ------------ -----
TOTAL/WEIGHTED
AVERAGE 10 11 $406,316,344 48.03% 5.405% 116 1.86x 63.34% 55.19%
== == ============ =====
S-105
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
CALCULATION OF INTEREST. 6.40% of the Mortgage Loans, based on the Initial
Outstanding Pool Balance (or 8.17% based on Initial Loan Group 1 Balance, accrue
interest on the basis of a 360-day year consisting of twelve 30-day months,
93.60% of the Mortgage Loans, based on the Initial Outstanding Pool Balance (or
91.83% based on Initial Loan Group 1 Balance and 100.00% based on Initial Loan
Group 2 Balance), accrue interest on the basis of the actual number of days
elapsed and a 360-day year.
AMORTIZATION OF PRINCIPAL. The Mortgage Loans provide for one of the
following:
87 Mortgage Loans, representing 89.52% of the Initial Outstanding Pool
Balance 86.63% of the Initial Loan Group 1 Balance and 100.00% of the Initial
Loan Group 2 Balance, provide for payments of interest and principal and then
have an expected balloon balance at the maturity date.
4 Mortgage Loans, representing 2.80% of the initial outstanding pool
balance 3.57% of the Initial Loan Group 1 Balance, are fully amortizing.
3 Mortgage Loans, representing 6.39% of the initial outstanding pool
balance 4.18% of the Initial Loan Group 1 Balance and 14.45% of the Initial Loan
Group 2 Balance, provide for payments of interest only for the first 8 to 36
months of their terms. This excludes 4 Mortgage Loans that are closing in June
2003 and, as such, have an interest-only payment in July 2003.
1 Mortgage Loan, representing 7.68% of the initial outstanding pool balance
and 9.80% of the Initial Loan Group 1 Balance, provides for payments of interest
only for the entire 134 months of its term.
PREPAYMENT PROVISIONS. All of the Mortgage Loans prohibit voluntary
prepayment for a specified period (each, a "Lock-Out Period") and provide for
defeasance as described below under "--Property Releases." The weighted average
Lock-Out Period remaining from the Cut-off Date for the Mortgage Loans is
approximately 26 months.
In the case of most of the Mortgage Loans, if an award or loss resulting
from an event of condemnation or casualty is less than a specified percentage of
the original principal balance of the Mortgage Loan and if in the reasonable
judgment of the mortgagee (i) the Mortgaged Property can be restored within six
months prior to the maturity of the related Note to a property no less valuable
or useful than it was prior to the condemnation or casualty, (ii) after a
restoration the Mortgaged Property would adequately secure the outstanding
balance of the related Note and (iii) no event of default has occurred or is
continuing, the proceeds or award may be applied by the borrower to the costs of
repairing or replacing the Mortgaged Property. In all other circumstances, the
Mortgage Loans provide generally that in the event of a condemnation or
casualty, the mortgagee may apply the condemnation award or insurance proceeds
to the repayment of debt, without payment of a Prepayment Premium. In general,
in the event that a condemnation award or insurance proceeds are used to prepay
a Specially Serviced Mortgage Loan (as defined in this prospectus supplement),
the constant monthly payment due under the related Note shall be revised based
on the remaining balance, amortization term and the applicable interest rate.
Certain Mortgage Loans provide that if casualty or condemnation proceeds
are above a specified amount, the borrower will be permitted to supplement such
proceeds with an amount sufficient to prepay the entire principal balance of the
Mortgage Loan. In such event, no Prepayment Premium would be required to be
paid.
Neither the Depositor nor any of the Mortgage Loan Sellers makes any
representation as to the enforceability of the provision of any Mortgage Loan
requiring the payment of a Prepayment Premium, or of the collectibility of any
Prepayment Premium. See "Risk Factors--Risks Related to the Offered
Certificates--Risk Related to Prepayments and Repurchases" and "--Yield
Considerations" in this prospectus supplement and "Certain Legal Aspects of
Mortgage Loans--Default Interest and Limitations on Prepayments" in the
prospectus.
PROPERTY RELEASES. Certain of the Mortgage Loans contain provisions which
permit the related borrower to release some or all of the Mortgaged Properties
securing such Mortgage Loans.
S-106
All of the Mortgage Loans permit the applicable borrower at any time after
a specified period (the "Defeasance Lock-Out Period"), PROVIDED no event of
default exists, to obtain a release of a Mortgaged Property from the lien of the
related Mortgage (a "Defeasance Option"), PROVIDED that, among other conditions,
the borrower (a) pays on any Due Date (the "Release Date") (i) all interest
accrued and unpaid on the principal balance of the Note to and including the
Release Date, (ii) all other sums, excluding scheduled interest or principal
payments, due under the Mortgage Loan and all other loan documents executed in
connection therewith, (iii) an amount (the "Collateral Substitution Deposit")
that will be sufficient to purchase direct non-callable obligations of the
United States of America providing payments (1) on or prior to, but as close as
possible to, all successive scheduled payment dates from the Release Date to the
related maturity date, and (2) in amounts equal to the scheduled payments due on
such dates under the Mortgage Loan or the defeased amount thereof in the case of
a partial defeasance, and (3) for any costs and expenses incurred in connection
with the purchase of such U.S. government obligations and (b) delivers a
security agreement granting the Trust a first priority lien on the Collateral
Substitution Deposit and the U.S. government obligations purchased with the
Collateral Substitution Deposit and an opinion of counsel to such effect.
Certain Mortgage Loans provide for a portion of the Mortgaged Property to
be released upon the partial defeasance of the Mortgage Loan. These Mortgage
Loans generally require that (i) in the case of such a partial defeasance, prior
to the release of a related Mortgaged Property, a specified percentage
(generally 125%) of the Allocated Loan Amount for such Mortgaged Property be
defeased and (ii) that the DSCR with respect to the remaining Mortgaged
Properties after the defeasance be no less than the greater of (x) the DSCR at
origination and (y) the DSCR immediately prior to such defeasance. Any amount in
excess of the amount necessary to purchase such U.S. government obligations will
be returned to the borrower. Simultaneously with such actions, the related
Mortgaged Property will be released from the lien of the Mortgage Loan and the
pledged U.S. government obligations (together with any Mortgaged Property not
released, in the case of a partial defeasance) will be substituted as the
collateral securing the Mortgage Loan.
In general, a successor borrower established or designated by the related
lender will assume all of the defeased obligations of a borrower exercising a
Defeasance Option under a Mortgage Loan and the borrower will be relieved of all
of the defeased obligations thereunder. If a Mortgage Loan is partially
defeased, the related Note will be split and only the defeased portion of the
borrower's obligations will be transferred to the successor borrower.
The Depositor makes no representation as to the enforceability of the
defeasance provisions of any Mortgage Loan. See "Risk Factors--Risks Related to
the Offered Certificates--Risks Related to Prepayments and Repurchases" and
"--Yield Considerations" in this prospectus supplement.
ESCROWS. Certain of the Mortgage Loans provide for monthly escrows to cover
property taxes, insurance premiums, ground lease payments and ongoing capital
replacements.
OTHER FINANCING. The Westfield Shoppingtown Portfolio Loan and the Chandler
Fashion Center Loan are secured by one or more mortgaged properties that also
secure two or more mortgage loans (collectively, the "Companion Loans") that are
not included in the Trust. See "--Description of the Ten Largest Mortgage
Loans--The Westfield Shoppingtown Portfolio Loan" and "--The Chandler Fashion
Center Loan" herein in this prospectus supplement.
Substantially all of the mortgage loans permit the related borrower to
incur limited unsecured indebtedness in the ordinary course of business. In
general, none of the Mortgage Loans permit secured debt.
One of the borrowers for the mortgage loan known as the Westfield
Shoppingtown Portfolio Loan is obligated to pay certain developer fees to the
City of Roseville under a sublease agreement with the City of Roseville, to the
extent sales tax revenue from the Westfield Shoppingtown Galleria at Roseville
Property is insufficient to pay such fees. Deutsche Bank Trust Company Americas
issued a letter of credit in the amount of $10,300,000 to secure such borrower's
obligation. The letter of credit is secured by a second mortgage on the
Westfield Shoppingtown Galleria at Roseville Property. Pursuant to an
intercreditor agreement between the trustee under the GECCMCSeries 2003-3 PSA
and the issuing bank, all of the issuing bank's rights under the second mortgage
are fully subordinate to the lender's rights under the loan documents executed
in connection with the Westfield Shoppingtown Portfolio Whole Loan.
S-107
The Mortgage Loan known as "Waters Inlet" representing 0.85% of the Initial
Outstanding Pool Balance and 3.93% of the Initial Loan Group 2 Balance,
presently has $450,000 of mezzanine debt secured by a pledge of the entire
interest of the limited partner in the related borrower.
The Mortgage Loan documents generally prohibit direct or indirect transfers
of ownership interests in the Mortgaged Property, including a pledge or
assignment of ownership interests in the related borrower; however, the Mortgage
Loan Sellers have notified the Depositor that they are aware of the following
potential mezzanine debt:
o The Mortgage Loan known as "Gateway Center BJ's," representing 5.37%
of the Initial Outstanding Pool Balance and 6.84% of the Initial Group
1 Balance, permits each of the sponsors (The Related Companies, L.P.
("TRCLP") and Blackacre Capital Partners, L.P.) to pledge its interest
in Related Retail, LP (the managing member of the managing member of
the owner of the related borrower) and Blackacre RBV Gateway, LLC
("Blackacre Gateway") (the managing member of a member of the owner of
the related borrower), respectively, as collateral in traditional
corporate financings with institutional lenders without the consent of
the lender. Such Mortgage Loan also permits the direct and indirect
owners of Blackacre Gateway or LR Gateway LLC (a member of a member of
the owner of the related borrower) to pledge all or any portion of
their membership interest in Blackacre Gateway or LR Gateway LLC, as
applicable, as collateral for a mezzanine loan, subject to the
satisfaction of conditions, including an aggregate debt service
coverage ratio of not less than 1.15x, an aggregate loan-to-value
ratio of not more than 85% and the delivery of a satisfactory
intercreditor and subordination agreement.
o The Mortgage Loan known as "Palladium at Birmingham," representing
4.61% of the Initial Outstanding Pool Balance and 5.88% of the Initial
Group 1 Balance, permits the sponsor (TRCLP) to pledge its interest in
the direct owner of the related borrower and/or in a member of the
owner of such borrower as collateral in traditional corporate
financings with institutional lenders without the consent of the
lender.
o The Mortgage Loan known as "Sierra Vista Mall," representing 2.82% of
the Initial Outstanding Pool Balance and 3.60% of the Initial Loan
Group 1 Balance, permits the related borrower to incur mezzanine debt
in connection with the financing of the development of the portion of
unimproved land at the related Mortgaged Property known as the
theater/anchor site, subject to a pre-improvement aggregate debt
service coverage ratio of not less than 1.15x and a pre-improvement
aggregate loan-to-value ratio of not more than 90%. In addition, such
Mortgage Loan requires that the after improvement debt service
coverage ratio be at least 1.25x and the after improvement
loan-to-value ratio not exceed 75%.
In addition, 3 Mortgage Loans, known as "Northeast Plaza," "Crystal Lake
MHC" and "Parker Valley Center," initially representing 1.24% of the Initial
Outstanding Pool Balance and 1.58% of the Initial Loan Group 1 Balance, allow
the borrower to obtain mezzanine financing upon satisfaction of various
conditions relating to the economic performance of the property, structure of
the financing and acceptable documentation, including acceptable intercreditor
agreements.
Certain risks relating to additional debt are described in "Risk
Factors--Risks Related to Additional Debt" in this prospectus supplement.
"DUE-ON-SALE" AND "DUE-ON-ENCUMBRANCE" PROVISIONS. The Mortgage Loans
generally contain "due-on-sale" and "due-on-encumbrance" clauses that, in each
case, permit the holder of the Mortgage Loan to accelerate the maturity of the
Mortgage Loan if the borrower sells or otherwise transfers or encumbers the
related Mortgaged Property without the consent of the mortgagee. The Servicer or
the Special Servicer, as applicable, will determine, in a manner consistent with
the Servicing Standard, whether to exercise any right the mortgagee may have
under any such clause to accelerate payment of the related Mortgage Loan upon,
or to withhold its consent to, any transfer or further encumbrance of the
related Mortgaged Property. Certain of the Mortgage Loans provide that the
mortgagee may condition an assumption of the loan on the receipt of an
assumption fee, which is in some cases equal to one percent of the then unpaid
principal balance of the applicable Note, in addition to the payment of all
costs and expenses incurred in connection with such assumption. Certain of the
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Mortgage Loans permit either: (i) a transfer of the related Mortgaged Property
if certain specified conditions are satisfied or if the transfer is to a
borrower reasonably acceptable to the lender; or (ii) transfers to parties
related to the borrower. See "Description of the Pooling Agreements--Due-on-Sale
and Due-on-Encumbrance Provisions" and "Certain Legal Aspects of Mortgage
Loans--Due-on-Sale and Due-on-Encumbrance Provisions" in the prospectus. The
Depositor makes no representation as to the enforceability of any due-on-sale or
due-on-encumbrance provision in any Mortgage Loan.
SECTION 42 LOANS. Certain of the mortgage loans may be secured now or in
the future by mortgaged properties that are eligible for and have received low
income housing tax credits pursuant to Section 42 of the Internal Revenue Code
in respect of various units within the mortgaged property or have tenants that
rely on rent subsidies under various government-funded programs, including the
Section 8 Tenant-Based Assistance Rental Certificate Program of the United
States Department of Housing and Urban Development. We can give you no assurance
that such programs will be continued in their present form or that the level of
assistance provided will be sufficient to generate enough revenues for the
related borrower to meet its obligations under the related mortgage loans.
DELINQUENCY. As of the Cut-off Date, none of the Mortgage Loans were 30
days or more delinquent, or had been 30 days or more delinquent during the 12
calendar months preceding the Cut-off Date.
BORROWER CONCENTRATIONS. Several groups of Mortgage Loans have related
borrowers ("Related Borrower Loan Groups") that are affiliated with one another
through partial or complete direct or indirect common ownership. The three
largest of these groups represent 9.98%, 4.25%, and 3.04%, respectively, of the
Initial Outstanding Pool Balance, and 12.72%, 5.42% and 3.88%, respectively, of
the Initial Loan Group 1 Balance.
SINGLE-TENANT MORTGAGE LOANS. In the case of 23 Mortgage Loans,
representing 24.48% of the Initial Outstanding Pool Balance, one or more of the
related Mortgaged Properties are 100% leased to a single tenant (each such
Mortgage Loan, a "Single-Tenant Mortgage Loan"). The Mortgaged Property securing
each Single-Tenant Mortgage Loan is generally subject to a single space lease,
which generally have a primary lease term that expires on or after the scheduled
maturity date of the related Mortgage Loan. The amount of the monthly rental
payments payable by the tenant under the lease is equal to or greater than the
scheduled payment of all principal, interest and other amounts (other than any
Balloon Payment) due each month on the related Mortgage Loan.
GEOGRAPHIC LOCATION. The Mortgaged Properties are located throughout 31
states, with the largest concentrations in the State of New York (5 Mortgaged
Properties, which represent security for 18.23% of the Initial Outstanding Pool
Balance, and 23.25% of the Initial Loan Group 1 Balance) and the State of
California (8 Mortgaged Properties, which represent 16.54% of the Initial
Outstanding Pool Balance, and 21.09% of the Initial Loan Group 1 Balance). No
other state has a concentration of Mortgaged Properties that represents security
for more than 7.72% of the Initial Outstanding Pool Balance and 8.18% of the
Initial Loan Group 1 Balance.
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this prospectus supplement, including Annex A-1, 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 herein.
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates and will be filed by the Depositor,
together with the Pooling and Servicing Agreement, with the Securities and
Exchange Commission within fifteen days after the initial issuance of the
Offered Certificates. In the event Mortgage Loans are removed from the Mortgage
Pool as set forth in the preceding paragraph, such removal will be noted in the
Form 8-K. Such Form 8-K will be available to purchasers and potential purchasers
of the Offered Certificates.
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DESCRIPTION OF THE OFFERED CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and will consist of 21 classes (each, a "Class") to be designated as
the Class X-1 Certificates, Class X-2 Certificates, Class A-1 Certificates,
Class A-2 Certificates, Class A-1A Certificates, Class B Certificates, Class C
Certificates, Class D Certificates, Class E Certificates, Class F Certificates,
Class G Certificates, Class H Certificates, Class J Certificates, Class K
Certificates, Class L Certificates, Class M Certificates, Class N Certificates,
Class O Certificates, Class P Certificates, Class R Certificates and Class LR
Certificates. Only the Class A-1, Class A-2, Class B, Class C, Class D and Class
E Certificates (the "Offered Certificates") are offered hereby. The Class X-1,
Class X-2, Class A-1A Certificates, Class F, Class G, Class H, Class J, Class K,
Class L, Class M, Class N, Class O, Class P, Class R and Class LR Certificates
(the "Private Certificates") are not offered hereby.
The Certificates represent in the aggregate the entire beneficial ownership
interest in a Trust consisting of, among other things: (i) the Mortgage Loans
and all payments under and proceeds of the Mortgage Loans due after the Cut-off
Date; (ii) any Mortgaged Property acquired on behalf of the Trust through
foreclosure or deed in lieu of foreclosure (upon acquisition, an "REO
Property"); (iii) such funds or assets as from time to time are deposited in the
Collection Account, the Distribution Account, the Excess Interest Distribution
Account, the Default Interest Distribution Account, the Excess Liquidation
Proceeds Account, the Interest Reserve Account and any account established in
connection with REO Properties (an "REO Account"); (iv) the rights of the
mortgagee under all insurance policies with respect to the Mortgage Loans and
the Mortgaged Properties, to the extent of the Trust's interests therein; (v)
the Depositor's rights and remedies under the Mortgage Loan Purchase Agreements
relating to Mortgage Loan documents delivery requirements with respect to the
Mortgage Loans and the representations and warranties of the related Mortgage
Loan Seller regarding its Mortgage Loans; and (vi) all of the mortgagee's right,
title and interest in the Reserve Accounts and Lock Box Accounts, to the extent
of the Trust's interests therein.
Upon initial issuance, the Class A-1, Class A-2, Class A-1A Certificates,
Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K,
Class L, Class M, Class N, Class O and Class P Certificates (collectively, the
"Principal Balance Certificates" and each a "Principal Balance Certificate")
will have the following aggregate principal balances (each, a "Certificate
Balance") (in each case, subject to a variance of plus or minus 5%):
INITIAL AGGREGATE APPROXIMATE PERCENT APPROXIMATE PERCENT
CLASS CERTIFICATE BALANCE OF INITIAL POOL BALANCE OF CREDIT SUPPORT
----------- ------------------- ----------------------- -------------------
OFFERED CERTIFICATES
Class A-1 ........................ 162,434,000 19.20% 18.125%(1)
Class A-2 ........................ 347,583,000 41.08% 18.125%(1)
Class B .......................... 28,553,000 3.37% 14.750%
Class C .......................... 12,691,000 1.50% 13.250%
Class D .......................... 19,036,000 2.25% 11.000%
Class E .......................... 10,575,000 1.25% 9.750%
PRIVATE CERTIFICATES
Class A-1A ....................... 182,676,000 21.59% 18.125%(1)
Class F .......................... 10,576,000 1.25% 8.500%
Class G .......................... 8,460,000 1.00% 7.500%
Class H .......................... 12,691,000 1.50% 6.000%
Class J .......................... 16,921,000 2.00% 4.000%
Class K .......................... 4,230,000 0.50% 3.500%
Class L .......................... 5,287,000 0.62% 2.875%
Class M .......................... 4,231,000 0.50% 2.375%
Class N .......................... 4,230,000 0.50% 1.875%
Class O .......................... 3,172,000 0.37% 1.500%
Class P .......................... 12,691,513 1.50% 0.000%
- -----------------
(1) Represents the approximate credit support for the Class A-1, Class A-2 and
Class A-1A Certificates in the aggregate.
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The Class X-1 and Class X-2 Certificates will each have a notional balance
(the "Notional Balance"). The Class X-1 Certificate will have a Notional Balance
equal to the aggregate Certificate Balance of the Principal Balance Certificates
from time to time. The initial Notional Balance of the Class X-1 Certificates
will be $846,037,513. The initial Notional Balance of the Class X-2 Certificates
will be $817,601,000.
The Class R and Class LR Certificates will not have Certificate Balances or
Notional Balances.
The Certificate Balance of any Class of Certificates outstanding at any
time represents the maximum amount which the holders thereof are entitled to
receive as distributions allocable to principal from the cash flow on the
Mortgage Loans and the other assets in the Trust; PROVIDED, HOWEVER, that in the
event that Realized Losses previously allocated to a Class of Certificates in
reduction of the Certificate Balance thereof are recovered subsequent to the
reduction of the Certificate Balance of such Class to zero, such Class may
receive distributions in respect of such recoveries in accordance with the
priorities set forth under "--Distributions--Payment Priorities" in this
prospectus supplement.
The respective Certificate Balance of each Class of Certificates (other
than the Class X-1, Class X-2, Class R and Class LR Certificates) will in each
case be reduced by amounts actually distributed thereon that are allocable to
principal and by any Realized Losses allocated to such Class of Certificates.
The Class X-1 and Class X-2 Certificates represent a right to receive interest
accrued as described below on a Notional Balance. The Notional Balance of the
Class X-1 Certificates will be reduced to the extent of all reductions in the
aggregate Certificate Balance of the Principal Balance Certificates. The
Notional Balance of the Class X-2 Certificates will be reduced to the extent of
all reductions in the Certificate Balances of any Class of Certificates included
in the calculation of the Notional Balance of the Class X-2 Certificates on such
Distribution Date.
DISTRIBUTIONS
METHOD, TIMING AND AMOUNT. Distributions on the Certificates will be made
on the 10th day of each month or, if such 10th day is not a business day, then
on the next succeeding business day, commencing in July 2003 (each, a
"Distribution Date"). All distributions (other than the final distribution on
any Certificate) will be made by the Bond Administrator to the persons in whose
names the Certificates are registered at the close of business on the last
business day of the calendar month immediately preceding the month in which such
Distribution Date occurs (the "Record Date"). Such distributions will be made
(a) by wire transfer in immediately available funds to the account specified by
the Certificateholder at a bank or other entity having appropriate facilities
therefor, if such Certificateholder provides the Bond Administrator with wiring
instructions no less than five business days prior to the related Record Date,
or otherwise (b) by check mailed to such Certificateholder. The final
distribution on any Offered Certificates will be made in like manner, but only
upon presentment or surrender (for notation that the Certificate Balance thereof
has been reduced to zero) of such Certificate at the location specified in the
notice to the holder thereof of such final distribution. All distributions made
with respect to a Class of Certificates on each Distribution Date will be
allocated PRO RATA among the outstanding Certificates of such Class based on
their respective Percentage Interests. The "Percentage Interest" evidenced by
any Offered Certificate is equal to the initial denomination thereof as of the
Closing Date divided by the initial Certificate Balance of the related Class.
The aggregate distribution to be made with respect to the Certificates on
any Distribution Date will equal the Available Funds. The "Available Funds" for
any Distribution Date will be the sum of (i) all previously undistributed
Monthly Payments or other receipts on account of principal and interest on or in
respect of the Mortgage Loans (including Unscheduled Payments and Net REO
Proceeds, if any, but excluding Excess Liquidation Proceeds) received by or on
behalf of the Servicer in the related Collection Period, (ii) all P&I Advances
made by the Servicer or the Trustee, as applicable, in respect of such
Distribution Date, (iii) all other amounts required to be deposited in the
Collection Account by the Servicer pursuant to the Pooling and Servicing
Agreement allocable to the Mortgage Loans for the applicable Collection Period,
(iv) any late payments of Monthly Payments received after the end of the
Collection Period relating to such Distribution Date but prior to the related
Servicer Remittance Date, (v) any amounts representing Prepayment Interest
Shortfalls remitted by the Servicer to the Collection
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Account (as described under "--Prepayment Interest Shortfalls" below), (vi) for
the Distribution Date occurring in each March, the Withheld Amounts then on
deposit in the Interest Reserve Account as described under "The Pooling and
Servicing Agreement--Accounts--Interest Reserve Account" below, and (vii) with
respect to the first Distribution Date, the Interest Deposit Amount, but
excluding the following:
(a) amounts permitted to be used to reimburse the Servicer or the
Trustee, as applicable, for previously unreimbursed Advances and interest
thereon as described in this prospectus supplement under "The Pooling and
Servicing Agreement--Advances";
(b) the aggregate amount of the Servicing Fee (which includes the fees
for the Servicer, the Trustee, the Bond Administrator and fees for primary
servicing functions), and the other Servicing Compensation (e.g., Net
Prepayment Interest Excess, late payment fees (to the extent not applied to
the reimbursement of interest on Advances and certain expenses, as provided
in the Pooling and Servicing Agreement), assumption fees, loan modification
fees, extension fees, loan service transaction fees, demand fees,
beneficiary statement charges and similar fees) payable to the Servicer,
the Trustee and the Bond Administrator and the Special Servicing Fee (and
other amounts payable to the Special Servicer described in this prospectus
supplement under "The Pooling and Servicing Agreement--Special
Servicing--The Special Servicer), together with interest thereon to the
extent provided in the Pooling and Servicing Agreement and reinvestment
earnings on payments received with respect to the Mortgage Loans which the
Servicer or Special Servicer is entitled to receive as additional servicing
compensation, in each case in respect of such Distribution Date;
(c) all amounts representing scheduled Monthly Payments due after the
related Due Date;
(d) to the extent permitted by the Pooling and Servicing Agreement,
that portion of net liquidation proceeds, net insurance proceeds and net
condemnation proceeds with respect to a Mortgage Loan which represents any
unpaid Servicing Fee and special servicing compensation together with
interest thereon as described in this prospectus supplement, to which the
Servicer, the Special Servicer, any subservicer, the Bond Administrator and
the Trustee are entitled;
(e) all amounts representing certain expenses reimbursable or payable
to the Servicer, the Special Servicer, the Trustee or the Bond
Administrator and other amounts permitted to be retained by the Servicer or
withdrawn pursuant to the Pooling and Servicing Agreement in respect of
various items, including interest thereon as provided in the Pooling and
Servicing Agreement;
(f) Prepayment Premiums;
(g) Net Default Interest;
(h) all amounts received with respect to each Mortgage Loan previously
purchased or repurchased from the Trust pursuant to the Pooling and
Servicing Agreement or a Mortgage Loan Purchase Agreement during the
related Collection Period and subsequent to the date as of which such
Mortgage Loan was purchased or repurchased;
(i) the amount reasonably determined by the Bond Administrator to be
necessary to pay any applicable federal, state or local taxes imposed on
the Upper-Tier REMIC or the Lower-Tier REMIC under the circumstances and to
the extent described in the Pooling and Servicing Agreement; and
(j) with respect to any Distribution Date occurring in each February,
and in any January occurring in a year that is not a leap year, in either
case, unless such Distribution Date is the final Distribution Date, the
Withheld Amounts to be deposited in the Interest Reserve Account and held
for future distribution.
The "Monthly Payment" with respect to any Mortgage Loan (other than any REO
Loan) and any Due Date is the scheduled monthly payment of principal (if any)
and interest at the Mortgage Rate, excluding any Balloon Payment (but not
excluding any constant Monthly Payment due on a Balloon Loan), which is payable
by the related borrower on the related Due Date. The Monthly Payment with
respect to an REO Loan for any Distribution Date is the monthly payment that
would otherwise have
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been payable on the related Due Date had the related Note not been discharged,
determined as set forth in the Pooling and Servicing Agreement.
"Unscheduled Payments" are all net liquidation proceeds, net insurance
proceeds and net condemnation proceeds payable under the Mortgage Loans, the
repurchase price of any Mortgage Loan repurchased by a Mortgage Loan Seller due
to a breach of a representation or warranty made by it or the purchase price
paid by the parties described in this prospectus supplement under "The Pooling
and Servicing Agreement--Optional Termination" and "--Realization Upon Defaulted
Mortgage Loans," and any other payments under or with respect to the Mortgage
Loans not scheduled to be made, including Principal Prepayments (but excluding
Prepayment Premiums). See "Yield and Maturity Considerations--Yield
Considerations--Certain Relevant Factors" in this prospectus supplement.
"Net REO Proceeds" with respect to any REO Property and any related REO
Loan are all revenues received by the Special Servicer with respect to such REO
Property or REO Loan net of any insurance premiums, taxes, assessments and other
costs and expenses permitted to be paid therefrom pursuant to the Pooling and
Servicing Agreement.
"Principal Prepayments" are payments of principal made by a borrower on a
Mortgage Loan which are received in advance of the scheduled Due Date for such
payments and which are not accompanied by an amount of interest representing the
full amount of scheduled interest due on any date or dates in any month or
months subsequent to the month of prepayment, other than any amount paid in
connection with the release of the related Mortgaged Property through
defeasance.
The "Collection Period" with respect to a Distribution Date and each
Mortgage Loan, is the period that begins immediately following the Determination
Date in the calendar month preceding the month in which such Distribution Date
occurs (or, in the case of the initial Distribution Date, immediately following
the Cut-off Date) and ends on the Determination Date in the calendar month in
which such Distribution Date occurs.
The "Determination Date" will be the sixth day of the month in which the
related Distribution Date occurs, or if such sixth day is not a business day,
then the immediately preceding business day, except in the case of the Westfield
Shoppingtown Portfolio Loan, the earlier of (i) the sixth day of the month in
which the related Distribution Date occurs, or if such sixth day is not a
business day, then the immediately preceding business day, and (ii) the fourth
business day prior to the related Distribution Date and in the case of the
Chandler Fashion Center Loan, the first day of the month in which the related
Distribution Date occurs, or if such first day is not a business day, the next
succeeding business day.
"Net Default Interest" with respect to any Mortgage Loan is any Default
Interest accrued on such Mortgage Loan less amounts required to pay the
Servicer, the Special Servicer or the Trustee, as applicable, interest on
Advances at the Advance Rate and to reimburse the Trust for certain trust fund
expenses.
"Default Interest" with respect to any Mortgage Loan is interest accrued on
such Mortgage Loan at the excess of (i) the related Default Rate over (ii) the
related Mortgage Rate.
The "Default Rate" with respect to any Mortgage Loan is the per annum rate
at which interest accrues on such Mortgage Loan following any event of default
on such Mortgage Loan including a default in the payment of a Monthly Payment or
a Balloon Payment.
PAYMENT PRIORITIES. As used below in describing the priorities of
distribution of Available Funds for each Distribution Date, the terms set forth
below will have the following meanings:
The "Interest Accrual Amount" with respect to any Distribution Date and any
Class of Certificates (other than the Class R and Class LR Certificates), is
equal to interest for the related Interest Accrual Period at the Pass-Through
Rate for such Class on the related Certificate Balance or Notional Balance
(PROVIDED, that for interest accrual purposes any distributions in reduction of
Certificate Balance or reductions in Notional Balance as a result of allocations
of Realized Losses on the Distribution Date occurring in an Interest Accrual
Period will be deemed to have been made on the first day of such Interest
Accrual Period), as applicable, minus the amount of any Excess Prepayment
Interest Shortfall allocated to such Class with respect to such Distribution
Date. Calculations of interest due in respect of the Certificates will be made
on the basis of a 360-day year consisting of twelve 30-day months.
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"Appraisal Reduction Amount" is the amount described under "--Appraisal
Reductions" below.
"Delinquency" means any failure of the borrower to make a scheduled payment
on a Due Date.
The "Interest Accrual Period" with respect to any Distribution Date is the
calendar month immediately preceding the month in which such Distribution Date
occurs.
An "Interest Shortfall" with respect to any Distribution Date for any Class
of Offered Certificates is any shortfall in the amount of interest required to
be distributed on such Class on such Distribution Date. No interest accrues on
Interest Shortfalls.
The "Pass-Through Rate" for any Class of Offered Certificates is the per
annum rate at which interest accrues on the Certificates of such Class during
any Interest Accrual Period. The Pass-Through Rate on the Class A-1, Class A-2
and Class A-1A Certificates is a per annum rate equal to _____%, _____% and
_____%, respectively. The Pass-Through Rate on the Class B, Class C, Class D,
Class E, Class F, Class G and Class H Certificates will, at all times, be equal
to one of (i) a fixed rate, (ii) a rate equal to the lesser of the initial
Pass-Through Rate for such Class, as described in "Executive Summary--The
Certificates" herein and the Weighted Average Net Mortgage Pass-Through Rate,
(iii) a rate equal to the Weighted Average Net Mortgage Pass-Through Rate less a
specified percentage or (iv) a rate equal to the Weighted Average Net Mortgage
Pass-Through Rate. The Pass-Through Rates applicable to the Class J, Class K,
Class L, Class M, Class N, Class O and Class P Certificates will be equal to a
fixed rate subject to a cap of the Weighted Average Net Mortgage Pass-Through
Rate. The Pass-Through Rate applicable to the Class X-1 Certificates for the
intial distribution date will equal approximately ___% per annum. The
Pass-Through Rate applicable to the Class X-2 Certificates for the initial
distribution date will equal approximately ___% per annum. The Pass-Through Rate
applicable to the Class X-1 and Class X-2 Certificates for each Distribution
Date subsequent to the initial distribution date generally will be equal in the
aggregate to the difference between the Weighted Average Net Mortgage
Pass-Through Rate and the Weighted Average Pass-Through Rate of the Principal
Balance Certificates (based on their certificate balances).
The "Weighted Average Net Mortgage Pass-Through Rate" for any Distribution
Date is a per annum rate equal to a fraction (expressed as a percentage) the
numerator of which is the sum for all Mortgage Loans of the products of (i) the
Net Mortgage Pass-Through Rate of each such Mortgage Loan as of the immediately
preceding Distribution Date and (ii) the Stated Principal Balance of each such
Mortgage Loan, and the denominator of which is the sum of the Stated Principal
Balances of all such Mortgage Loans as of the immediately preceding Distribution
Date.
The "Due Date" with respect to any Mortgage Loan and any month, is the
first day of such month in the related Collection Period as specified in the
related Note for such Mortgage Loan.
The "Net Mortgage Pass-Through Rate" with respect to any Mortgage Loan and
any Distribution Date is the Mortgage Pass-Through Rate for such Mortgage Loan
for the related Interest Accrual Period minus the Servicing Fee Rate; PROVIDED,
HOWEVER, that for purposes of calculating Pass-Through Rates, the Net Mortgage
Pass-Through Rate for any Mortgage Loan will be determined without regard to any
modification, waiver or amendment of the terms of the Mortgage Loan, whether
agreed to by the Servicer or resulting from a bankruptcy, insolvency or similar
proceeding involving the related borrower.
The "Mortgage Rate" with respect to each Mortgage Loan and any Interest
Accrual Period is the annual rate at which interest accrues on such Mortgage
Loan during such period (in the absence of a default), as set forth in the
related Note and on Annex A-1 to this prospectus supplement. For purposes of
calculating the Pass-Through Rate on the Certificates, the Mortgage Rate of each
Mortgage Loan which accrues interest on an actual/360 basis 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 Mortgage Rate;
PROVIDED, HOWEVER, that the 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 will be determined exclusive of the
amounts withheld from that month, and (2) prior to the Due Date in March, will
be determined inclusive of the amounts withheld from the immediately preceding
February, and, if applicable, January.
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So long as both the Class A-2 and Class A-1A Certificates remain
outstanding, the Principal Distribution Amount for each Distribution Date will
be calculated on a loan group-by-loan group basis. On each Distribution Date
after the Certificate Balance of either the Class A-2 or Class A-1A Certificates
has been reduced to zero, a single Principal Distribution Amount will be
calculated in the aggregate for both loan groups.
The "Principal Distribution Amount" for any Distribution Date will be equal
to the sum of the following items without duplication:
(i) the principal component of all scheduled Monthly Payments
(other than Balloon Payments) due on the Mortgage Loans on or before
the related Due Date (if received or advanced);
(ii) the principal component of all Assumed Scheduled Payments due
on or before the related Due Date (if received or advanced) with
respect to any Mortgage Loan that is delinquent in respect of its
Balloon Payment;
(iii) the Stated Principal Balance of each Mortgage Loan that was,
during the related Collection Period, repurchased from the Trust in
connection with the breach of a representation or warranty or
purchased from the Trust as described in this prospectus supplement
under "The Pooling and Servicing Agreement--Optional Termination";
(iv) the portion of Unscheduled Payments (to the extent not
included in clause (iii)) allocable to principal of any Mortgage Loan
which was liquidated during the related Collection Period;
(v) all Balloon Payments and, to the extent not included in the
preceding clauses, any other principal payment on any Mortgage Loan
received on or after the Maturity Date thereof, to the extent received
during the related Collection Period;
(vi) to the extent not included in the preceding clause (iii) or
(iv), all other Principal Prepayments received in the related
Collection Period; and
(vii) to the extent not included in the preceding clauses, any
other full or partial recoveries in respect of principal, including
net insurance proceeds, net liquidation proceeds and Net REO Proceeds
received in the related Collection Period (in the case of clauses (i)
through (vii), net of any related outstanding P&I Advances allocable
to principal).
The "Group 1 Principal Distribution Amount" is the sum of clauses (i)
through (vii) above allocable to Mortgage Loans in Loan Group 1.
The "Group 2 Principal Distribution Amount" is the sum of clauses (i)
through (vii) above allocable to Mortgage Loans in Loan Group 2.
The "Assumed Scheduled Payment" with respect to any Mortgage Loan that is
delinquent in respect of its Balloon Payment (including any REO Loan as to which
the Balloon Payment would have been past due) is an amount equal to the sum of
(a) the principal portion of the Monthly Payment that would have been due on
such Mortgage Loan on the related Due Date (or the portion thereof not received)
based on the constant payment required by the related Note or the original
amortization or payment schedule thereof (as calculated with interest at the
related Mortgage Rate), if applicable, assuming such Balloon Payment has not
become due after giving effect to any modification, and (b) interest at the
applicable Net Mortgage Pass-Through Rate.
An "REO Loan" is any Mortgage Loan as to which the related Mortgaged
Property has become an REO Property.
DISTRIBUTION OF AVAILABLE FUNDS. On each Distribution Date, prior to the
Crossover Date, the Available Funds for such Distribution Date will be
distributed in the following amounts and order of priority:
(i) FIRST, to pay interest, concurrently, (i) PRO RATA, on the
Class A-1 and Class A-2 Certificates from the portion of the Available
Funds for such Distribution Date attributable to Mortgage Loans in
Loan Group 1 up to an amount equal to the aggregate Interest Accrual
Amount for those Classes; (ii) on the Class A-1A Certificates from the
portion of the Available
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Funds for such Distribution Date attributable to Mortgage Loans in
Loan Group 2 up to an amount equal to the aggregate Interest Accrual
Amount for such Class; and (iii) PRO RATA, on the Class X-1 and Class
X-2 Certificates from the Available Funds for such Distribution Date
up to an amount equal to the aggregate Interest Accrual Amount for
those Classes, in each case in accordance with their interest
entitlements. However, if on any Distribution Date, the Available
Funds (or applicable portion thereof) is insufficient to pay in full
the total amount of interest to be paid to any of the Classes
described above, the Available Funds for such Distribution Date will
be allocated among all those Classes PRO rata, in accordance with
their interest entitlements;
(ii) SECOND, PRO RATA, to the Class A-1, Class A-2, Class A-1A,
Class X-1 and Class X-2 Certificates, in respect of interest, up to an
amount equal to the aggregate unpaid Interest Shortfalls previously
allocated to such Classes;
(iii) THIRD, to the Class A-1, Class A-2 and Class A-1A
Certificates, in reduction of the Certificate Balances thereof: (i)(A)
first, to the Class A-1 Certificates, in an amount equal to the Group
1 Principal Distribution Amount for such Distribution Date and, after
the Class A-1A Certificates have been reduced to zero, the Group 2
Principal Distribution Amount remaining after payments to the Class
A-1A Certificates have been made on such Distribution Date, until the
Class A-1 Certificates are reduced to zero, (B) second, to the Class
A-2 Certificates, in an amount equal to the Group 1 Principal
Distribution Amount (or the portion of it remaining after
distributions on the Class A-1 Certificates) for such Distribution
Date and, after the Class A-1A Certificates have been reduced to zero,
the Group 2 Principal Distribution Amount remaining after payments to
the Class A-1A and Class A-1 Certificates have been made on such
Distribution Date, until the Class A-2 Certificates are reduced to
zero, and (ii) to the Class A-1A Certificates, in an amount equal to
the Group 2 Principal Distribution Amount for such Distribution Date
and, after the Class A-2 Certificates have been reduced to zero, the
Group 1 Principal Distribution Amount remaining after payments to the
Class A-1 and Class A-2 Certificates have been made on such
Distribution Date, until the Class A-1A Certificates are reduced to
zero;
(iv) FOURTH, to the Class A-1, Class A-2 and Class A-1A
Certificates, PRO RATA, to the extent not distributed pursuant to all
prior clauses, for the unreimbursed amounts of Realized Losses, if
any, an amount equal to the aggregate of such unreimbursed Realized
Losses previously allocated to such Class;
(v) FIFTH, to the Class B Certificates in respect of interest, up
to an amount equal to the Interest Accrual Amount of such Class;
(vi) SIXTH, to the Class B Certificates, in respect of interest,
up to an amount equal to the aggregate unpaid Interest Shortfalls
previously allocated to such Class;
(vii) SEVENTH, to the Class B Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal
Distribution Amount less amounts of Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate
Balance of such Class is reduced to zero;
(viii) EIGHTH, to the Class B Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed
amounts of Realized Losses, if any, an amount equal to the aggregate
of such unreimbursed Realized Losses previously allocated to such
Class;
(ix) NINTH, to the Class C Certificates in respect of interest, up
to an amount equal to the Interest Accrual Amount of such Class;
(x) TENTH, to the Class C Certificates, in respect of interest, up
to an amount equal to the aggregate unpaid Interest Shortfalls
previously allocated to such Class;
(xi) ELEVENTH, to the Class C Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal
Distribution Amount less amounts of Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate
Balance of such Class is reduced to zero;
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(xii) TWELFTH, to the Class C Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed
amounts of Realized Losses, if any, an amount equal to the aggregate
of such unreimbursed Realized Losses previously allocated to such
Class;
(xiii) THIRTEENTH, to the Class D Certificates in respect of
interest, up to an amount equal to the Interest Accrual Amount of such
Class;
(xiv) FOURTEENTH, to the Class D Certificates, in respect of
interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class;
(xv) FIFTEENTH, to the Class D Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal
Distribution Amount less amounts of Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate
Balance of such Class is reduced to zero;
(xvi) SIXTEENTH, to the Class D Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed
amounts of Realized Losses, if any, an amount equal to the aggregate
of such unreimbursed Realized Losses previously allocated to such
Class;
(xvii) SEVENTEENTH, to the Class E Certificates in respect of
interest, up to an amount equal to the Interest Accrual Amount of such
Class;
(xviii) EIGHTEENTH, to the Class E Certificates, in respect of
interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class;
(xix) NINETEENTH, to the Class E Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal
Distribution Amount less amounts of Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate
Balance of such Class is reduced to zero;
(xx) TWENTIETH, to the Class E Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed
amounts of Realized Losses, if any, an amount equal to the aggregate
of such unreimbursed Realized Losses previously allocated to such
Class;
(xxi) TWENTY-FIRST, to the Class F Certificates in respect of
interest, up to an amount equal to the Interest Accrual Amount of such
Class;
(xxii) TWENTY-SECOND, to the Class F Certificates, in respect of
interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class;
(xxiii) TWENTY-THIRD, to the Class F Certificates, in reduction of
the Certificate Balance thereof, an amount equal to the Principal
Distribution Amount less amounts of Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate
Balance of such Class is reduced to zero;
(xxiv) TWENTY-FOURTH, to the Class F Certificates, to the extent
not distributed pursuant to all prior clauses, for the unreimbursed
amounts of Realized Losses, if any, an amount equal to the aggregate
of such unreimbursed Realized Losses previously allocated to such
Class;
(xxv) TWENTY-FIFTH, to the Class G Certificates in respect of
interest, up to an amount equal to the Interest Accrual Amount of such
Class;
(xxvi) TWENTY-SIXTH, to the Class G Certificates, in respect of
interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class;
(xxvii) TWENTY-SEVENTH, to the Class G Certificates, in reduction
of the Certificate Balance thereof, an amount equal to the Principal
Distribution Amount less amounts of Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate
Balance of such Class is reduced to zero;
(xxviii) TWENTY-EIGHTH, to the Class G Certificates, to the extent
not distributed pursuant to all prior clauses, for the unreimbursed
amounts of Realized Losses, if any, an amount equal to the aggregate
of such unreimbursed Realized Losses previously allocated to such
Class;
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(xxix) TWENTY-NINTH, to the Class H Certificates in respect of
interest, up to an amount equal to the Interest Accrual Amount of such
Class;
(xxx) THIRTIETH, to the Class H Certificates, in respect of
interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class;
(xxxi) THIRTY-FIRST, to the Class H Certificates, in reduction of
the Certificate Balance thereof, an amount equal to the Principal
Distribution Amount less amounts of Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate
Balance of such Class is reduced to zero;
(xxxii) THIRTY-SECOND, to the Class H Certificates, to the extent
not distributed pursuant to all prior clauses, for the unreimbursed
amounts of Realized Losses, if any, an amount equal to the aggregate
of such unreimbursed Realized Losses previously allocated to such
Class;
(xxxiii) THIRTY-THIRD, to the Class J Certificates in respect of
interest, up to an amount equal to the Interest Accrual Amount of such
Class;
(xxxiv) THIRTY-FOURTH, to the Class J Certificates, in respect of
interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class;
(xxxv) THIRTY-FIFTH, to the Class J Certificates, in reduction of
the Certificate Balance thereof, an amount equal to the Principal
Distribution Amount less amounts of Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate
Balance of such Class is reduced to zero;
(xxxvi) THIRTY-SIXTH, to the Class J Certificates, to the extent
not distributed pursuant to all prior clauses, for the unreimbursed
amounts of Realized Losses, if any, an amount equal to the aggregate
of such unreimbursed Realized Losses previously allocated to such
Class;
(xxxvii) THIRTY-SEVENTH, to the Class K Certificates in respect of
interest, up to an amount equal to the Interest Accrual Amount of such
Class;
(xxxviii) THIRTY-EIGHTH, to the Class K Certificates, in respect
of interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class;
(xxxix) THIRTY-NINTH, to the Class K Certificates, in reduction of
the Certificate Balance thereof, an amount equal to the Principal
Distribution Amount less amounts of Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate
Balance of such Class is reduced to zero;
(xl) FORTIETH, to the Class K Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed
amounts of Realized Losses, if any, an amount equal to the aggregate
of such unreimbursed Realized Losses previously allocated to such
Class;
(xli) FORTY-FIRST, to the Class L Certificates in respect of
interest, up to an amount equal to the Interest Accrual Amount of such
Class;
(xlii) FORTY-SECOND, to the Class L Certificates, in respect of
interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class;
(xliii) FORTY-THIRD, to the Class L Certificates, in reduction of
the Certificate Balance thereof, an amount equal to the Principal
Distribution Amount less amounts of Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate
Balance of such Class is reduced to zero;
(xliv) FORTY-FOURTH, to the Class L Certificates, to the extent
not distributed pursuant to all prior clauses, for the unreimbursed
amounts of Realized Losses, if any, an amount equal to the aggregate
of such unreimbursed Realized Losses previously allocated to such
Class;
(xlv) FORTY-FIFTH, to the Class M Certificates in respect of
interest, up to an amount equal to the Interest Accrual Amount of such
Class;
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(xlvi) FORTY-SIXTH, to the Class M Certificates, in respect of
interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class;
(xlvii) FORTY-SEVENTH, to the Class M Certificates, in reduction
of the Certificate Balance thereof, an amount equal to the Principal
Distribution Amount less amounts of Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate
Balance of such Class is reduced to zero;
(xlviii) FORTY-EIGHTH, to the Class M Certificates, to the extent
not distributed pursuant to all prior clauses, for the unreimbursed
amounts of Realized Losses, if any, an amount equal to the aggregate
of such unreimbursed Realized Losses previously allocated to such
Class;
(xlix) FORTY-NINTH, to the Class N Certificates in respect of
interest, up to an amount equal to the Interest Accrual Amount of such
Class;
(l) FIFTIETH, to the Class N Certificates, in respect of interest,
up to an amount equal to the aggregate unpaid Interest Shortfalls
previously allocated to such Class;
(li) FIFTY-FIRST, to the Class N Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal
Distribution Amount less amounts of Principal Distribution Amount
distributed pursuant to all prior clauses until the Certificate
Balance of such Class is reduced to zero;
(lii) FIFTY-SECOND, to the Class N Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed
amounts of Realized Losses, if any, an amount equal to the aggregate
of such unreimbursed Realized Losses previously allocated to such
Class;
(liii) FIFTY-THIRD, to the Class O Certificates in respect of
interest, up to an amount equal to the Interest Accrual Amount of such
Class;
(liv) FIFTY-FOURTH, to the Class O Certificates, in respect of
interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class;
(lv) FIFTY-FIFTH, to the Class O Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal
Distribution Amount less amounts of Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate
Balance of such Class is reduced to zero;
(lvi) FIFTY-SIXTH, to the Class O Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed
amounts of Realized Losses, if any, an amount equal to the aggregate
of such unreimbursed Realized Losses previously allocated to such
Class; and
(lxii) FIFTY-SEVENTH, to the Class P Certificates in respect of
interest, up to an amount equal to the Interest Accrual Amount of such
Class;
(lxiii) FIFTY-EIGHTH, to the Class P Certificates, in respect of
interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class;
(lix) FIFTY-NINTH, to the Class P Certificates, in reduction of
the Certificate Balance thereof, an amount equal to the Principal
Distribution Amount less amounts of Principal Distribution Amount
distributed pursuant to all prior clauses until the Certificate
Balance of such Class is reduced to zero;
(lx) SIXTIETH, to the Class P Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed
amounts of Realized Losses, if any, an amount equal to the aggregate
of such unreimbursed Realized Losses previously allocated to such
Class; and
(lxi) SIXTY-FIRST, to the Class R and Class LR Certificates as
specified in the Pooling and Servicing Agreement.
All references to "PRO RATA" in the preceding clauses unless otherwise
specified mean pro rata based upon the amount distributable pursuant to such
clause.
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Notwithstanding the foregoing, on each Distribution Date occurring on or
after the Crossover Date, the Principal Distribution Amount will be distributed
to the Class A-1, Class A-2 and Class A-1A Certificates, PRO RATA, based on
their respective Certificate Balances, in reduction of their respective
Certificate Balances, until the Certificate Balance of each such Class is
reduced to zero, and any unreimbursed amounts of Realized Losses previously
allocated to such Classes, if available, will be distributed pro rata based on
the amount of unreimbursed Realized Losses previously allocated to such Classes.
The "Crossover Date" is the Distribution Date on which the Certificate Balance
of each Class of Principal Balance Certificates, other than the Class A-1, Class
A-2 and Class A-1A Certificates, have been reduced to zero. The Class X-1 and
Class X-2 Certificates will not be entitled to any distribution of principal.
PREPAYMENT PREMIUMS. Any prepayment premium or yield maintenance premium
actually collected on a Mortgage Loan during any Collection Period will be
distributed on the related Distribution Date to the holders of the Class A-1,
Class A-1A, Class A-2, Class B, Class C, Class D, Class E, Class F, Class G and
Class H Certificates as additional interest and not in reduction of their
Certificate Balances or in an amount up to, in the case of each Class, the
product of
the Prepayment Discount Rate Principal Allocation
Premium or yield x Fraction for that x Fraction of that
maintenance charge Class Class
The "Discount Rate Fraction" for any Class of Certificates equal to:
Pass-Through Rate for
that Class of Certificates - relevant Discount Rate
---------------------------------------------------
Mortgage Rate of the
related Mortgage Loan - relevant Discount Rate
The Discount Rate Fraction may not be greater than 1.0 or less than 0.0 and
both the numerator and denominator must be greater than zero.
The "Principal Allocation Fraction" for any class with respect to any
Prepayment Premiums or yield maintenance charges collected from Loan Group 1 for
any Distribution Date is:
the portion, if any, of the Loan Group 1
Principal Distribution Amount allocated to that
Class of Certificates for that Distribution
Date
---------------------------------------------------
entire Loan Group 1 Principal Distribution Amount
for that Distribution Date
The Principal Allocation Fraction for any Class with respect to any
Prepayment Premiums or yield maintenance charges collected from Loan Group 2 for
any Distribution Date is:
the portion, if any, of the Loan Group 2
Principal Distribution Amount allocated to that
Class of Certificates for that Distribution
Date
---------------------------------------------------
entire Loan Group 2 Principal Distribution Amount
for that Distribution Date
The portion of the Prepayment Premium or yield maintenance charge remaining
after the payment of the amount calculated as described above will be
distributed to the holders of the Class X-1 and Class X-2 Certificates.
The "Discount Rate" means the yield (compounded monthly) for "This Week" as
reported by the Federal Reserve Board in Federal Reserve Statistical Release
H.15(519) for the constant maturity treasury having a maturity coterminous with
the Maturity Date of such Mortgage Loan as of the Determination Date. If there
is no Discount Rate for instruments having a maturity coterminous with the
remaining term to maturity of the relevant Mortgage Loan, then the Discount Rate
will be equal to the linear interpolation of the yields of the constant maturity
treasuries with maturities next longer and shorter than such remaining term to
maturity.
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For the sole purpose of determining which Class receives Prepayment
Premiums and yield maintenance premiums from Loan Group 1 and which class
receives principal from Loan Group 2, the following paragraph shall apply:
The principal from Loan Group 1 shall be treated as if it is distributed
before the Group 2 principal, except with respect to Class A-1A. The
principal from Loan Group 1 distributed to Class A-1A will be treated as if
it is distributed after the principal from Loan Group 2. The principal from
Loan Group 2 distributed to the Class A-1A shall be treated as if it is
distributed before the Loan Group 1 principal. The principal from Loan
Group 2 distributed to classes other than Class A-1A shall be treated as if
it is distributed after the Loan Group 1 principal.
The Prepayment Premiums, if any, collected on the Mortgage Loans during any
Collection Period may not be sufficient to fully compensate Certificateholders
of any Class for any loss in yield attributable to the related prepayments of
principal.
REALIZED LOSSES
The Certificate Balance of the Certificates will be reduced without
distribution on any Distribution Date to the extent of any Realized Loss
allocated to the applicable Class of Certificates with respect to such
Distribution Date. As referred to herein, the "Realized Loss" with respect to
any Distribution Date shall mean the amount, if any, by which the aggregate
Certificate Balance of the Regular Certificates (other than the Class X-1 and
Class X-2 Certificates) after giving effect to distributions made on such
Distribution Date exceeds the aggregate Stated Principal Balance of the Mortgage
Loans immediately following the Determination Date preceding such Distribution
Date. Any such Realized Losses will be applied to the Classes of Certificates in
the following order, until the Certificate Balance of each is reduced to zero:
FIRST, to the Class P Certificates, SECOND, to the Class O Certificates, THIRD,
to the Class N Certificates, FOURTH, to the Class M Certificates, FIFTH, to the
Class L Certificates, SIXTH to the Class K Certificates, SEVENTH, to the Class J
Certificates, EIGHTH, to the Class H Certificates, NINTH, to the Class G
Certificates, TENTH, to the Class F Certificates, ELEVENTH, to the Class E
Certificates, TWELFTH, to the Class D Certificates, THIRTEENTH, to the Class C
Certificates, FOURTEENTH, to the Class B Certificates, and FINALLY, PRO RATA, to
the Class A-1, Class A-2 and Class A-1A Certificates based on their respective
Certificate Balances. Any amounts recovered in respect of any such amounts
previously allocated as Realized Losses will be distributed to the Classes of
Principal Balance Certificates in reverse order of allocation of such Realized
Losses thereto. Shortfalls in Available Funds resulting from interest on
Advances (to the extent not covered by Default Interest and late charges),
additional servicing compensation (including the special servicing fee),
extraordinary expenses of the Trust and other additional expenses of the Trust,
a reduction of the interest rate of a Mortgage Loan by a bankruptcy court
pursuant to a plan of reorganization or pursuant to any of its equitable powers,
a reduction in interest rate or a forgiveness of principal of a Mortgage Loan as
described under "The Pooling and Servicing Agreement--Modifications," in this
prospectus supplement or otherwise, will be allocated in the same manner as
Realized Losses. Excess Prepayment Interest Shortfalls, as described under
"--Prepayment Interest Shortfalls" in this prospectus supplement, will be
allocated to, and be deemed distributed to, each Class of Certificates, PRO
RATA, based upon amounts distributable in respect of interest to each such Class
(without giving effect to any such allocation of Excess Prepayment Interest
Shortfall). The Notional Balances of the Class X-1 and Class X-2 Certificates
will be reduced to reflect reductions in the Certificate Balances of the Classes
of Principal Balance Certificates that are included in the calculation of such
Notional Balances, as set forth above, as a result of write-offs in respect of
final recovery determinations in respect of liquidation of defaulted Mortgage
Loans.
The "Stated Principal Balance" of each Mortgage Loan will generally equal
the Cut-off Date Principal Balance thereof (or in the case of a Replacement
Mortgage Loan, the outstanding principal balance as of the related date of
substitution), reduced (to not less than zero) on each Distribution Date by (i)
all payments or other collections (or Advances in lieu thereof) of principal of
such Mortgage Loan that have been distributed on the Certificates on such
Distribution Date or applied to any other payments required under the Pooling
and Servicing Agreement and (ii) any principal forgiven by the Special Servicer
and other principal losses realized in respect of such Mortgage Loan during the
related Collection Period.
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PREPAYMENT INTEREST SHORTFALLS
For any Distribution Date, a "Prepayment Interest Shortfall" will arise
with respect to any Mortgage Loan if a mortgagor makes a full Principal
Prepayment or a Balloon Payment during the related Collection Period, and the
date such payment was made (or, in the case of a Balloon Payment, the date
through which interest thereon accrues) occurred prior to the Due Date for such
Mortgage Loan in the related Collection Period. Such a shortfall arises because
the amount of interest which accrues on the amount of such Principal Prepayment
or the principal portion of a Balloon Payment, as the case may be, will be less
than the corresponding amount of interest accruing on the Certificates and fees
payable to the Trustee, the Bond Administrator and the Servicer. In such case,
the Prepayment Interest Shortfall will generally equal the excess of (a) the
aggregate amount of interest which would have accrued on the Stated Principal
Balance of such Mortgage Loan for the one month period ending on such Due Date
if such Principal Prepayment or Balloon Payment had not been made over (b) the
aggregate interest that did so accrue through the date such payment was made.
In any case in which a Principal Prepayment in full or in part or a Balloon
Payment is made during any Collection Period after the Due Date for a Mortgage
Loan in the related Collection Period, "Prepayment Interest Excess" will arise
since the amount of interest which accrues on the amount of such Principal
Prepayment or the principal portion of a Balloon Payment will exceed the
corresponding amount of interest accruing on the Certificates and fees payable
to the Trustee and the Servicer.
To the extent that the aggregate of such Prepayment Interest Shortfalls for
all Mortgage Loans that are not specially serviced exceed such Prepayment
Interest Excess for such Mortgage Loans as of any Distribution Date ("Net
Prepayment Interest Shortfall"), such amount will reduce the aggregate Master
Servicing Fee (but not the fees payable to the Special Servicer in the case of
Specially Serviced Mortgage Loans and not the Trustee Fee) in an amount
necessary to offset such Net Prepayment Interest Shortfalls. See "The Pooling
and Servicing Agreement--Servicing Compensation and Payment of Expenses" in this
prospectus supplement. The aggregate Prepayment Interest Shortfalls in excess of
the sum of (i) the aggregate Prepayment Interest Excess and (ii) the aggregate
Master Servicing Fee ("Excess Prepayment Interest Shortfall") will generally be
allocated to each Class of Certificates, PRO RATA, based on interest amounts
distributable (without giving effect to any such allocation of Excess Prepayment
Interest Shortfall) to each such Class.
To the extent that such Prepayment Interest Excess for all Mortgage Loans
exceeds such Prepayment Interest Shortfalls for all Mortgage Loans as of any
Distribution Date, such excess amount (the "Net Prepayment Interest Excess")
will be payable to the Servicer as additional compensation.
SUBORDINATION
As a means of providing a certain amount of protection to the holders of
the Class A-1, Class A-2, Class A-1A, Class X-1 and Class X-2 Certificates
(except as set forth below) against losses associated with delinquent and
defaulted Mortgage Loans, the rights of the holders of the Class B, Class C,
Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M,
Class N, Class O and Class P Certificates to receive distributions of interest
and principal (if applicable) with respect to the Mortgage Loans, as applicable,
will be subordinated to such rights of the holders of the Class A-1, Class A-2,
Class A-1A, Class X-1 and Class X-2 Certificates. The Class B Certificates will
be likewise protected by the subordination of the Class C, Class D, Class E,
Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class O
and Class P Certificates. The Class C Certificates will be likewise protected by
the subordination of the Class D, Class E, Class F, Class G, Class H, Class J,
Class K, Class L, Class M, Class N, Class O and Class P Certificates. The Class
D Certificates will be likewise protected by the subordination of the Class E,
Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class O
and Class P Certificates. The Class E Certificates will be likewise protected by
the subordination of the Class F, Class G, Class H, Class J, Class K, Class L,
Class M, Class N, Class O and Class P Certificates. This subordination will be
effected in two ways: (i) by the preferential right of the holders of a Class of
Regular Certificates to receive on any Distribution Date the amounts of interest
and principal, distributable in respect of such Regular Certificates on such
date prior to any distribution being made on such Distribution Date in respect
of any Classes of Regular Certificates subordinate
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thereto, and (ii) by the allocation of Realized Losses (as defined herein),
FIRST, to the Class P Certificates, SECOND, to the Class O Certificates, THIRD,
to the Class N Certificates, FOURTH, to the Class M Certificates, FIFTH to the
Class L Certificates, SIXTH, to the Class K Certificates, SEVENTH, to the Class
J Certificates, EIGHTH, to the Class H Certificates, NINTH, to the Class G
Certificates, TENTH, to the Class F Certificates, ELEVENTH, to the Class E
Certificates, TWELFTH, to the Class D Certificates, THIRTEENTH, to the Class C
Certificates, FOURTEENTH, to the Class B Certificates, and FINALLY, PRO RATA, to
the Class A-1, Class A-2 and Class A-1A Certificates based on their respective
Certificate Balances for Realized Losses. No other form of credit enhancement
will be available for the benefit of the holders of the Offered Certificates.
Allocation to the Class A-1, Class A-2 and Class A-1A Certificates
(collectively, the "Class A Certificates") will have the effect of reducing the
aggregate Cerificate Balance of the Class A Certificates at a proportionately
faster rate than the rate at which the aggregate Stated Principal Balance of the
pool of mortgage loans will reduce. Thus, as principal is distributed to the
holders of the Class A Certificates, the percentage interest in the trust fund
evidenced by the Class A Certificates will be decreased (with a corresponding
increase in the percentage interest in the trust fund evidenced by the
Subordinate Certificates), thereby increasing, relative to their respective
Certificate Balances, the subordination afforded the Class A Certificates by the
subordinate certificates.
APPRAISAL REDUCTIONS
With respect to any Mortgage Loan other than the Non-Serviced Mortgage
Loans, on the first Distribution Date following the earliest of (i) the date on
which such Mortgage Loan becomes a Modified Mortgage Loan (as defined below),
(ii) the 90th day following the occurrence of any uncured delinquency in Monthly
Payments with respect to such Mortgage Loan, (iii) receipt of notice that the
related borrower has filed a bankruptcy petition or the date on which a receiver
is appointed and continues in such capacity or the 60th day after the related
borrower becomes the subject of involuntary bankruptcy proceedings and such
proceedings are not dismissed in respect of the Mortgaged Property securing such
Mortgage Loan, (iv) the date on which the Mortgaged Property securing such
Mortgage Loan becomes an REO Property and (v) 60 days after the third
anniversary of any extension of a Mortgage Loan (any of (i), (ii), (iii), (iv)
and (v), an "Appraisal Reduction Event"), an Appraisal Reduction Amount will be
calculated. The "Appraisal Reduction Amount" for any Distribution Date and for
any Mortgage Loan as to which any Appraisal Reduction Event has occurred will be
an amount equal to the excess of (a) the outstanding Stated Principal Balance of
such Mortgage Loan over (b) the excess of (i) 90% of the sum of the appraised
values (net of any prior liens but including all escrows and reserves (other
than escrows and reserves for taxes and insurance)) of the related Mortgaged
Properties as determined by independent MAI appraisals (the costs of which shall
be paid by the Servicer or the Special Servicer as an Advance) or, in the case
of Mortgage Loans having a principal balance under $2,000,000, 90% of the sum of
the estimated values of the related Mortgaged Properties, as described below
over (ii) the sum of (A) to the extent not previously advanced by the Servicer
or the Trustee, all unpaid interest on such Mortgage Loan at a per annum rate
equal to the Mortgage Rate, (B) all unreimbursed Property Advances, the
principal portion of all unreimbursed P&I Advances and all unpaid interest on
Advances at the Advance Rate in respect of such Mortgage Loan, (C) any other
unpaid additional Trust expenses in respect of such Mortgage Loan and (D) all
currently due and unpaid real estate taxes, ground rents and assessments and
insurance premiums and all other amounts due and unpaid under the Mortgage Loan
(which taxes, premiums (net of any escrows or reserves therefor) and other
amounts have not been the subject of an Advance by the Servicer, the Special
Servicer or the Trustee). If no independent MAI appraisal has been obtained
within twelve months prior to the first Distribution Date on or after an
Appraisal Reduction Event has occurred, the Special Servicer will be required to
estimate the value of the related Mortgaged Properties and such estimate will be
used for purposes of the Appraisal Reduction Amount. Notwithstanding the
foregoing, within 60 days after the Appraisal Reduction Event (or in the case of
an Appraisal Reduction Event occurring by reason of clause (ii) of the
definition thereof, 30 days) (i) with respect to Mortgage Loans having a
principal balance of $2,000,000 or higher, the Special Servicer will be required
to obtain an independent MAI appraisal, and (ii) for Mortgage Loans having a
principal balance under $2,000,000, the Special Servicer will be required, at
its option, (A) to provide its good faith estimate (a "Small Loan Appraisal
Estimate") of the value of the Mortgaged Properties within the same time period
as an
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appraisal would otherwise be required and such Small Loan Appraisal Estimate
will be used in lieu of an independent MAI Appraisal to calculate an Appraisal
Reduction Amount for such Mortgage Loans, or (B) to obtain, with the consent of
the Directing Certificateholder, an Updated Appraisal. On the first Distribution
Date occurring on or after the delivery of such independent MAI appraisal, the
Special Servicer will be required to adjust the Appraisal Reduction Amount to
take into account such appraisal (regardless of whether the independent MAI
appraisal is higher or lower than the Small Loan Appraisal Estimate). To the
extent required in the Pooling and Servicing Agreement, Appraisal Reduction
Amounts will be recalculated annually based on Updated Appraisals.
Contemporaneously with the earliest of (i) the effective date of any
modification of the stated maturity, Mortgage Rate, principal balance or
amortization terms of any Mortgage Loan, any extension of the Maturity Date of a
Mortgage Loan or consent to the release of any Mortgaged Property or REO
Property from the lien of the related Mortgage other than pursuant to the terms
of the Mortgage Loan, (ii) the occurrence of an Appraisal Reduction Event, (iii)
a default in the payment of a Balloon Payment for which an extension has not
been granted or (iv) the date on which the Special Servicer, consistent with the
Servicing Standard, requests an Updated Appraisal, the Special Servicer will be
required to obtain an appraisal (or a letter update for an existing appraisal
which is less than two years old) of the Mortgaged Property, or REO Property, as
the case may be, from an independent appraiser who is a member of the Appraiser
Institute (an "Updated Appraisal") or a Small Loan Appraisal Estimate, as
applicable, PROVIDED, that, the Special Servicer will not be required to obtain
an Updated Appraisal or Small Loan Appraisal Estimate of any Mortgaged Property
with respect to which there exists an appraisal or Small Loan Appraisal Estimate
which is less than twelve months old. The Special Servicer will be required to
update, on an annual basis, each Small Loan Appraisal Estimate or Updated
Appraisal for so long as the related Mortgage Loan remains specially serviced.
In the event that an Appraisal Reduction Event occurs with respect to a
Mortgage Loan, the amount advanced by the Servicer with respect to delinquent
payments of interest for such Mortgage Loan will be reduced as described under
"The Pooling and Servicing Agreement--Advances" in this prospectus supplement.
The Westfield Shoppingtown Portfolio Loan is subject to provisions in the
GECCMC Series 2002-3 PSA relating to appraisal reductions that are substantially
similar to the provisions set forth above. The existence of an appraisal
reduction under the GECCMC Series 2002-3 PSA in respect of the Westfield
Shoppingtown Portfolio Loan will proportionately reduce the 2002-3 Master
Servicer's or the Trustee's, as the case may be, obligation to make principal
and interest advances on the Westfield Shoppingtown Portfolio Loan and will
generally have the effect of reducing the amount otherwise available for current
distributions to the holders of the most subordinate Class or Classes of
Certificates. Any such reduction on the Westfield Shoppingtown Portfolio Whole
Loan will generally be allocated, FIRST, to the holder of the Westfield
Shoppingtown Portfolio B Note, SECOND, to the Westfield Shoppingtown Portfolio
A-3B Loan Component, and THEN, to the holders of the Westfield Shoppingtown
Portfolio Loan, the Westfield Shoppingtown Portfolio A-1 Note and the Westfield
Shoppingtown Portfolio Loan Component A-3A.
The Chandler Fashion Center Loan is subject to provisions in the GMAC
Series 2003-C1 PSA relating to appraisal reductions that are substantially
similar to the provisions set forth above. The existence of an appraisal
reduction under the GMAC Series 2003-C1 PSA in respect of the Chandler Fashion
Center Loan will proportionately reduce the Servicer's or the Trustee's, as the
case may be, obligation to make principal and interest advances on the Chandler
Fashion Center Loan and will generally have the effect of reducing the amount
otherwise available for current distributions to the holders of the most
subordinate Class or Classes of Certificates. Any such reduction on the Chandler
Fashion Center Whole Loan will generally be allocated, FIRST, to the holder of
the Chandler Fashion Center B Note and, THEN, to the Chandler Fashion Center A
Notes (which include the Trust as the holder of the Chandler Fashion Center
Loan), PRO RATA, based on each Chandler Fashion Center A Note's outstanding
principal balance.
A "Modified Mortgage Loan" is any Specially Serviced Mortgage Loan which
has been modified by the Special Servicer in a manner that: (a) affects the
amount or timing of any payment of principal or interest due thereon (other
than, or in addition to, bringing current Monthly Payments with respect to
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such Mortgage Loan); (b) except as expressly contemplated by the related
Mortgage, results in a release of the lien of the Mortgage on any material
portion of the related Mortgaged Property without a corresponding principal
prepayment in an amount not less than the fair market value (as is) of the
property to be released; or (c) in the reasonable good faith judgment of the
Special Servicer, otherwise materially impairs the security for such Mortgage
Loan or reduces the likelihood of timely payment of amounts due thereon.
DELIVERY, FORM AND DENOMINATION
The Offered Certificates will be issuable in registered form, in minimum
denominations of Certificate Balance of (i) $10,000 with respect to the Class
A-1 and Class A-2 Certificates and multiples of $1 in excess thereof; and (ii)
$25,000 with respect to Classes B, C, D and E Certificates and multiples of $1
in excess thereof.
The Offered Certificates will initially be represented by one or more
global Certificates for each such Class registered in the name of the nominee of
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 in the prospectus under "Description of the
Certificates--Book Entry Registration and Definitive Certificates." Unless and
until Definitive Certificates are issued, all references to actions by holders
of the Offered Certificates will refer to actions taken by DTC upon instructions
received from holders of Offered Certificates through its participating
organizations (together with Clearstream Banking, societe anonyme
("Clearstream") and Euroclear participating organizations, the "Participants"),
and all references herein 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 responsible for distributing any report,
statement or other information has been provided with the name of the beneficial
owner of a Certificate (or the prospective transferee of such beneficial owner),
such report, statement or other information will be provided to such beneficial
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 Bond Administrator will
initially serve as certificate registrar (in such capacity, the "Certificate
Registrar") for purposes of recording and otherwise providing for the
registration of the Offered Certificates.
A "Certificateholder" under the Pooling and Servicing Agreement will be the
person in whose name a Certificate is registered in the certificate register
maintained pursuant to the Pooling and Servicing Agreement, except that solely
for the purpose of giving any consent or taking any action pursuant to the
Pooling and Servicing Agreement, any Certificate registered in the name of the
Depositor, the Servicer, the Special Servicer, the Trustee (in its individual
capacity), the Bond Administrator, a manager of a Mortgaged Property, a
mortgagor or any person affiliated with the Depositor, the Servicer, the Special
Servicer, the Trustee, the Bond Administrator, such manager or a mortgagor will
be deemed not to be outstanding and the Voting Rights to which it is entitled
will not be taken into account in determining whether the requisite percentage
of Voting Rights necessary to effect any such consent or take any such action
has been obtained; PROVIDED, HOWEVER, that for purposes of obtaining the consent
of Certificateholders to an amendment to the Pooling and Servicing Agreement,
any Certificates beneficially owned by the Servicer or Special Servicer or an
affiliate will be deemed to be outstanding, PROVIDED that such amendment does
not relate to compensation of the Servicer or Special Servicer or otherwise
benefit the Servicer or the Special Servicer in any material respect; PROVIDED,
FURTHER, that for purposes of obtaining the consent of Certificateholders to any
action proposed to be taken by the Special Servicer with respect to a Specially
Serviced Mortgage Loan, any Certificates beneficially owned by the Special
Servicer or an affiliate will be deemed not to be outstanding, PROVIDED FURTHER,
HOWEVER, that such restrictions will not apply to the exercise of the Special
Servicer's rights, if any, as a member of the Controlling Class. Notwithstanding
the foregoing, solely for purposes of providing or distributing any reports,
statements or other information pursuant to
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the Pooling and Servicing Agreement, a Certificateholder will include any
beneficial owner (or prospective transferee of a beneficial owner) to the extent
that the party required or permitted to provide or distribute such report,
statement or other information has been provided with the name of such
beneficial owner (or prospective transferee). The Percentage Interest of any
Class of Offered Certificate will be equal to the percentage obtained by
dividing the denomination of such Certificate by the aggregate initial
Certificate Balance of such Class of Certificates. See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates" in the
prospectus.
BOOK-ENTRY REGISTRATION
Holders of Offered Certificates may hold their Certificates through DTC (in
the United States) or Clearstream or Euroclear (in Europe) if they are
Participants of such system, or indirectly through organizations that are
participants in such systems. Clearstream and Euroclear will hold omnibus
positions on behalf of the Clearstream Participants and the Euroclear
Participants, respectively, through customers' securities accounts in
Clearstream's and Euroclear's names on the books of their respective
depositaries (collectively, the "Depositaries") which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on the
books of DTC. DTC is a limited purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to Section 17A of the Securities Exchange Act of
1934, as amended. DTC was created to hold securities for its Participants and to
facilitate the clearance and settlement of securities transactions between
Participants through electronic computerized book-entries, thereby eliminating
the need for physical movement of certificates. Participants include securities
brokers and dealers, banks, trust companies and clearing corporations. Indirect
access to the DTC system also is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants").
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Clearstream Participants and Euroclear Participants will occur
in accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly through Clearstream Participants or
Euroclear Participants, on the other, will be effected in DTC in accordance with
DTC rules on behalf of the relevant European international clearing system by
its Depositary; however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system in accordance with its rules and procedures. If the
transaction complies with all relevant requirements, Euroclear or Clearstream,
as the case may be, will then deliver instructions to the Depository to take
action to effect final settlement on its behalf.
Because of time-zone differences, 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, Offered Certificates may do so only through Participants and
Indirect Participants. In addition, holders of Offered Certificates will receive
all distributions of principal and interest from the Bond Administrator through
the Participants who in turn will receive them from DTC. Under a book-entry
format, holders of Offered Certificates may experience some delay in their
receipt of payments, reports and notices, since such payments, reports
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and notices will be forwarded by the Bond Administrator to Cede & Co., as
nominee for DTC. DTC will forward such payments, reports and notices to its
Participants, which thereafter will forward them to Indirect Participants,
Clearstream, Euroclear or holders of Offered Certificates.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Offered Certificates among Participants on whose behalf it acts with respect to
the Offered Certificates and to receive and transmit distributions of principal
of, and interest on, the Offered Certificates. Participants and Indirect
Participants with which the holders of Offered Certificates 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
holders of Offered Certificates. Accordingly, although the holders of Offered
Certificates will not possess the Offered Certificates, the Rules provide a
mechanism by which Participants will receive payments on Offered Certificates
and will be able to transfer their interest.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a holder of
Offered Certificates to pledge such Certificates to persons or entities that do
not participate in the DTC system, or to otherwise act with respect to such
Certificates, may be limited due to the lack of a physical certificate for such
Certificates.
DTC has advised the Depositor that it will take any action permitted to be
taken by a holder of an Offered Certificate under the Pooling and Servicing
Agreement only at the direction of one or more Participants to whose accounts
with DTC the Offered Certificates are credited. DTC may take conflicting actions
with respect to other undivided interests to the extent that such actions are
taken on behalf of Participants whose holdings include such undivided interests.
Clearstream is incorporated under the laws of Luxembourg as a professional
depository. 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.
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.
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.
Although DTC, Euroclear and Clearstream have implemented the foregoing
procedures in order to facilitate transfers of interests in Global Certificates
among Participants of DTC, Euroclear and Clearstream, they are under no
obligation to perform or to continue to comply with such procedures, and such
procedures may be discontinued at any time. None of the Depositor, the Trustee,
the Bond Administrator, the Servicer, the Special Servicer or the Underwriters
will have any responsibility for the performance by DTC, Euroclear or
Clearstream or their respective direct or indirect Participants of their
respective obligations under the rules and procedures governing their
operations.
The information herein concerning DTC, Clearstream and Euroclear and their
book-entry systems has been obtained from sources believed to be reliable, but
the Depositor takes no responsibility for the accuracy or completeness thereof.
DEFINITIVE CERTIFICATES
Definitive Certificates will be delivered to beneficial owners of the
Offered Certificates ("Certificate Owners") (or their nominees) only if (i) DTC
is no longer willing or able properly to discharge its responsibilities as
depository with respect to the Book-Entry Certificates, and the Depositor is
unable to
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locate a qualified successor, (ii) the Depositor, at its sole option, elects to
terminate the book-entry system through DTC with respect to some or all of any
Class or Classes of Certificates, or (iii) after the occurrence of an Event of
Default under the Pooling and Servicing Agreement, Certificate Owners
representing a majority in principal amount of the Book-Entry Certificates then
outstanding advise the Bond Administrator and DTC through DTC Participants in
writing that the continuation of a book-entry system through DTC (or a successor
thereto) is no longer in the best interest of Certificate Owners.
Upon the occurrence of any of the events described in clauses (i) through
(iii) in the immediately preceding paragraph, the Bond Administrator is required
to notify all affected Certificateholders (through DTC and related DTC
Participants) of the availability through DTC of Definitive Certificates. Upon
delivery of Definitive Certificates, the Trustee, the Bond Administrator, the
Certificate Registrar and the Servicer will recognize the holders of such
Definitive Certificates as holders under the Pooling and Servicing Agreement
("Holders"). Distributions of principal and interest on the Definitive
Certificates will be made by the Bond Administrator directly to Holders of
Definitive Certificates in accordance with the procedures set forth in the
Prospectus and the Pooling and Servicing Agreement.
Upon the occurrence of any of the events described in clauses (i) through
(iii) of the second preceding paragraph, requests for transfer of Definitive
Certificates will be required to be submitted directly to the Certificate
Registrar in a form acceptable to the Certificate Registrar (such as the forms
which will appear on the back of the certificate representing a Definitive
Certificate), signed by the Holder or such Holder's legal representative and
accompanied by the Definitive Certificate or Certificates for which transfer is
being requested. The Bond Administrator will be appointed as the initial
Certificate Registrar.
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YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
GENERAL. The yield on any Offered Certificate will depend on: (i) the
Pass-Through Rate in effect from time to time for such Certificate; (ii) the
price paid for such Certificate and the rate and timing of payments of principal
on such Certificate; and (iii) the aggregate amount of distributions on such
Certificate.
PASS-THROUGH RATE. The Pass-Through Rate for the Class A-1 and Class A-2
Certificates will be fixed. The Pass-Through Rates applicable to the Class B,
Class C, Class D and Class E Certificates for any Distribution Date will equal
one of (i) a fixed rate, (ii) a rate equal to the lesser of the initial
Pass-Through Rate for such Class and the Weighted Average Net Mortgage
Pass-Through Rate for such Distribution Date, (iii) a rate equal to the Weighted
Average Net Mortgage Pass-Through Rate less a specified percentage or (iv) a
rate equal to the Weighted Average Net Mortgage Pass-Through Rate. Accordingly,
the yield on the Offered Certificates (other than the Class A-1 and Class A-2
Certificates) will be sensitive to changes in the relative composition of the
Mortgage Loans as a result of scheduled amortization, voluntary prepayments,
liquidations of Mortgage Loans following default and repurchases of Mortgage
Loans. Losses or payments of principal on the Mortgage Loans with higher Net
Mortgage Rates could result in a reduction in the Weighted Average Net Mortgage
Pass-Through Rate, thereby, to the extent that the Weighted Average Net Mortgage
Pass-Through Rate is reduced below the specified fixed rate with respect to the
Class B, Class C, Class D and Class E Certificates, reducing the Pass-Through
Rates on such Classes of Offered Certificates.
See "Yield and Maturity Considerations" in the prospectus, "Description of
the Offered Certificates" and "Description of the Mortgage Pool" in this
prospectus supplement and "--Rate and Timing of Principal Payments" below.
RATE AND TIMING OF PRINCIPAL PAYMENTS. The yield to holders of the Offered
Certificates will be affected by the rate and timing of principal payments on
the Mortgage Loans (including principal prepayments on the Mortgage Loans
resulting from both voluntary prepayments by the mortgagors and involuntary
liquidations). The rate and timing of principal payments on the Mortgage Loans
will in turn be affected by, among other things, the amortization schedules
thereof, the dates on which Balloon Payments are due and the rate and timing of
principal prepayments and other unscheduled collections thereon (including for
this purpose, collections made in connection with liquidations of Mortgage Loans
due to defaults, casualties or condemnations affecting the Mortgaged Properties,
or purchases of Mortgage Loans out of the Trust). Prepayments and, assuming the
respective stated maturity dates thereof have not occurred, liquidations and
purchases of the Mortgage Loans, will result in distributions on the Principal
Balance Certificates of amounts that otherwise would have been distributed over
the remaining terms of the Mortgage Loans. Defaults on the Mortgage Loans,
particularly at or near their stated maturity dates, may result in significant
delays in payments of principal on the Mortgage Loans (and, accordingly, on the
Principal Balance Certificates) while work-outs are negotiated or foreclosures
are completed. See "The Pooling and Servicing Agreement--Amendment" and
"--Modifications" in this prospectus supplement and "Description of the Pooling
Agreements--Realization Upon Defaulted Mortgage Loans" and "Certain Legal
Aspects of the Mortgage Loans--Foreclosure" in the prospectus. Because the rate
of principal payments on the Mortgage Loans will depend on future events and a
variety of factors (as described below), no assurance can be given as to such
rate or the rate of principal prepayments in particular. The Depositor is not
aware of any relevant publicly available or authoritative statistics with
respect to the historical prepayment experience of a large group of mortgage
loans comparable to the Mortgage Loans.
The extent to which the yield to maturity of an Offered Certificate may
vary from the anticipated yield will depend upon the degree to which such
Certificate is purchased at a discount or premium and when, and to what degree,
payments of principal on the Mortgage Loans are in turn distributed on or
otherwise result in the reduction of the Certificate Balance of such
Certificate. An investor should consider, in the case of an Offered Certificate
purchased at a discount, the risk that a slower than anticipated rate of
principal payments on such Certificate could result in an actual yield to such
investor
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that is lower than the anticipated yield and, in the case of an Offered
Certificate purchased at a premium, the risk that a faster than anticipated rate
of principal payments on such Certificate could result in an actual yield to
such investor that is lower than the anticipated yield. In general, the earlier
a payment of principal is made on an Offered Certificate purchased at a discount
or premium, the greater will be the effect on an investor's yield to maturity.
As a result, the effect on an investor's yield of principal payments on such
investor's Offered Certificates occurring at a rate higher (or lower) than the
rate anticipated by the investor during any particular period would not be fully
offset by a subsequent like reduction (or increase) in the rate of principal
payments.
LOSSES AND SHORTFALLS. The yield to holders of the Offered Certificates
will also depend on the extent to which such holders are required to bear the
effects of any losses or shortfalls on the Mortgage Loans. Losses and other
shortfalls on the Mortgage Loans will generally be borne: first, by the holders
of the respective Classes of Subordinate Certificates, in reverse alphabetical
order of Class designation, to the extent of amounts otherwise distributable in
respect of their Certificates; and then, by the holders of the Offered
Certificates. Further, any Net Prepayment Interest Shortfall for each
Distribution Date will be allocated on such Distribution Date among each Class
of Certificates, pro rata, in accordance with the respective Interest Accrual
Amounts for each such Class of Certificates for such Distribution Date.
CERTAIN RELEVANT FACTORS. The rate and timing of principal payments and
defaults and the severity of losses on the Mortgage Loans may be affected by a
number of factors, including, without limitation, prevailing interest rates, the
terms of the Mortgage Loans (for example, Prepayment Premiums, prepayment
lock-out periods and amortization terms that require Balloon Payments), the
demographics and relative economic vitality of the areas in which the Mortgaged
Properties are located and the general supply and demand for comparable
residential and/or commercial space in such areas, the quality of management of
the Mortgaged Properties, the servicing of the Mortgage Loans, possible changes
in tax laws and other opportunities for investment. See "Risk Factors" and
"Description of the Mortgage Pool" in this prospectus supplement and "Risk
Factors" and "Yield and Maturity Considerations--Yield and Prepayment
Considerations" in the prospectus.
The rate of prepayment on the Mortgage Loan is likely to be affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below a mortgage
coupon, a borrower may have an increased incentive to refinance its mortgage
loan. If a Mortgage Loan is not in a lock-out period, the Prepayment Premium, if
any, in respect of such Mortgage Loan may not be sufficient economic
disincentive to prevent the related borrower from voluntarily prepaying the loan
as part of a refinancing thereof. See "Description of the Mortgage Pool--Certain
Terms and Conditions of the Mortgage Loans" in this prospectus supplement.
DELAY IN PAYMENT OF DISTRIBUTIONS. Because monthly distributions will not
be made to Certificateholders until a date that is scheduled to be at least 10
days following the end of the related Interest Accrual Period, the effective
yield to the holders of the Offered Certificates will be lower than the yield
that would otherwise be produced by the applicable Pass-Through Rates and
purchase prices (assuming such prices did not account for such delay).
UNPAID INTEREST. As described under "Description of the Offered
Certificates--Distributions" in this prospectus supplement, if the portion of
the Available Funds to be distributed in respect of interest on any Class of
Offered Certificates on any Distribution Date is less than the respective
Interest Accrual Amount for such Class, the shortfall will be distributable to
holders of such Class of Certificates on subsequent Distribution Dates, to the
extent of available funds. Any such shortfall will not bear interest, however,
and will therefore negatively affect the yield to maturity of such Class of
Certificates for so long as it is outstanding.
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 allocable to principal of such Certificate is distributed to the
investor. For purposes of this prospectus supplement, the weighted average life
of a Principal Balance Certificate is determined by (i) multiplying the amount
of each principal distribution
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thereon by the number of years from the Closing Date to the related Distribution
Date, (ii) summing the results and (iii) dividing the sum by the aggregate
amount of the reductions in the Certificate Balance of such Certificate.
Accordingly, the weighted average life of any such Certificate will be
influenced by, among other things, the rate at which principal of the Mortgage
Loans is paid or otherwise collected or advanced and the extent to which such
payments, collections or advances of principal are in turn applied in reduction
of the Certificate Balance of the Class of Certificates to which such
Certificate belongs. If the Balloon Payment on a Balloon Loan having a Due Date
after the Determination Date in any month is received on the stated maturity
date thereof, the excess of such payment over the related Assumed Monthly
Payment will not be included in the Available Funds until the Distribution Date
in the following month. Therefore, the weighted average life of the Principal
Balance Certificates may be extended.
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this prospectus supplement is the Constant Prepayment
Rate ("CPR") model. The CPR Model assumes that a group of mortgage loans
experiences prepayments each month at a specified constant annual rate. As used
in each of the following sets of tables with respect to any particular Class,
the column headed "0%" assumes that none of the Mortgage Loans is prepaid before
maturity. The columns headed "25%," "50%," "75%," and "100%" assume that no
prepayments are made on any Mortgage Loan during such Mortgage Loan's prepayment
lock-out or defeasance period, if any, or during such Mortgage Loan's yield
maintenance period, if any, and are otherwise made on each of the Mortgage Loans
at the indicated CPR percentages. There is no assurance, however, that
prepayments of the Mortgage Loans (whether or not in a prepayment lock-out or
defeasance period or a yield maintenance period) will conform to any particular
CPR percentages, and no representation is made that the Mortgage Loans will
prepay in accordance with the assumptions at any of the CPR percentages shown or
at any other particular prepayment rate, that all the Mortgage Loans will prepay
in accordance with the assumptions at the same rate or that Mortgage Loans that
are in a prepayment lock-out or defeasance period or a yield maintenance period
will not prepay as a result of involuntary liquidations upon default or
otherwise. A "prepayment lock-out period" is any period during which the terms
of the Mortgage Loan prohibit voluntary prepayments on the part of the borrower.
A "defeasance period" is any period during which the borrower may, under the
terms of the Mortgage Loan, exercise a Defeasance Option. A "yield maintenance
period" is any period during which the terms of the Mortgage Loan provide that
voluntary prepayments be accompanied by a Prepayment Premium calculated on the
basis of a yield maintenance formula.
The following tables indicate the percentage of the initial Certificate
Balance of each Class of Offered Certificates that would be outstanding after
each of the dates shown at the indicated CPR percentages and the corresponding
weighted average life of each such Class of Certificates. The tables have been
prepared on the basis of the information set forth herein under "Description of
the Mortgage Pool--Additional Loan Information" and on Annex A to this
prospectus supplement and the following assumptions (collectively, the "Modeling
Assumptions"): (i) the initial Certificate Balance and the Pass-Through Rate for
each Class of Certificates are as set forth herein, (ii) the scheduled Monthly
Payments for each Mortgage Loan are based on such Mortgage Loan's Cut-off Date
Balance, stated monthly principal and interest payments, and the Mortgage Rate
in effect as of the Cut-off Date for such Mortgage Loan, (iii) all scheduled
Monthly Payments (including Balloon Payments) are assumed to be timely received
on the first day of each month commencing in July 2003, (iv) there are no
delinquencies or losses in respect of the Mortgage Loans, there are no
extensions of maturity in respect of the Mortgage Loans, there are no Appraisal
Reductions with respect to the Mortgage Loans and there are no casualties or
condemnations affecting the Mortgaged Properties, (v) prepayments are made on
each of the Mortgage Loans at the indicated CPR percentages set forth in the
table (without regard to any limitations in such Mortgage Loans on partial
voluntary principal prepayments) (except to the extent modified below by the
assumption numbered (xiii)), (vi) all Mortgage Loans accrue interest under the
method as specified in Annex A, (vii) no party exercises its right of optional
termination described herein, (viii) no Mortgage Loan is required to be
repurchased by the related Mortgage Loan Seller, (ix) no Prepayment Interest
Shortfalls are incurred and no Prepayment Premiums are collected, (x) there are
no additional Trust expenses, (xi) distributions on the Certificates are made on
the 10th day of each month, commencing in July 2003, (xii) no prepayments are
received as to any Mortgage Loan during such
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Mortgage Loan's prepayment lock-out period or defeasance period, if any, or
yield maintenance period, if any, and (xiii) the Closing Date is June 25, 2003.
To the extent that the Mortgage Loans have characteristics or experience
performance that differs from those assumed in preparing the tables set forth
below, the Class A-1, Class A-2, Class B, Class C, Class D and Class E
Certificates may mature earlier or later than indicated by the tables. It is
highly unlikely that the Mortgage Loans will prepay or perform in accordance
with the Modeling Assumptions at any constant rate until maturity or that all
the Mortgage Loans will prepay in accordance with the Modeling Assumptions or at
the same rate. In particular, certain of the Mortgage Loans may not permit
voluntary partial prepayments. In addition, variations in the actual prepayment
experience and the balance of the specific Mortgage Loans that prepay may
increase or decrease the percentages of initial Certificate Balances (and
weighted average lives) shown in the following tables. Such variations may occur
even if the average prepayment experience of the Mortgage Loans were to equal
any of the specified CPR percentages. In addition, there can be no assurance
that the actual pre-tax yields on, or any other payment characteristics of, any
Class of Offered Certificates will correspond to any of the information shown in
the yield tables herein, or that the aggregate purchase prices of the Offered
Certificates will be as assumed. Accordingly, investors must make their own
decisions as to the appropriate assumptions (including prepayment assumptions)
to be used in deciding whether to purchase the Offered Certificates.
Investors are urged to conduct their own analyses of the rates at which the
Mortgage Loans may be expected to prepay.
Based on the Modeling Assumptions, the following tables indicate the
resulting weighted average lives of the Class A-1, Class A-2, Class B, Class C,
Class D and Class E Certificates and set forth the percentage of the initial
Certificate Balance of each such Class of Certificates that would be outstanding
after the Closing Date and each of the Distribution Dates shown under the
applicable assumptions at the indicated CPR percentages.
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS A-1 CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE--OTHERWISE AT
INDICATED CPR
DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------------- ----------- ----------- ----------- ----------- -----------
Initial ................................. 100 100 100 100 100
June, 2004 .............................. 95 95 95 95 95
June, 2005 .............................. 90 90 90 90 90
June, 2006 .............................. 84 84 84 84 84
June, 2007 .............................. 79 79 79 79 79
June, 2008 .............................. 49 49 49 49 49
June, 2009 .............................. 42 42 42 42 42
June, 2010 .............................. 35 35 35 35 35
June, 2011 .............................. 28 28 28 28 28
June, 2012 .............................. 17 14 9 2 0
June, 2013 .............................. 0 0 0 0 0
Weighted Average Life (in years) ........ 5.70 5.68 5.65 5.63 5.56
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PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS A-2 CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE--OTHERWISE AT
INDICATED CPR
DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------------- ----------- ----------- ----------- ----------- -----------
Initial ................................. 100 100 100 100 100
June, 2004 .............................. 100 100 100 100 100
June, 2005 .............................. 100 100 100 100 100
June, 2006 .............................. 100 100 100 100 100
June, 2007 .............................. 100 100 100 100 100
June, 2008 .............................. 100 100 100 100 100
June, 2009 .............................. 100 100 100 100 100
June, 2010 .............................. 100 100 100 100 100
June, 2011 .............................. 100 100 100 100 100
June, 2012 .............................. 100 100 100 100 80
June, 2013 .............................. 0 0 0 0 0
Weighted Average Life (in years) ........ 9.71 9.70 9.69 9.66 9.44
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS B CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE--OTHERWISE AT
INDICATED CPR
DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------------- ----------- ----------- ----------- ----------- -----------
Initial ................................. 100 100 100 100 100
June, 2004 .............................. 100 100 100 100 100
June, 2005 .............................. 100 100 100 100 100
June, 2006 .............................. 100 100 100 100 100
June, 2007 .............................. 100 100 100 100 100
June, 2008 .............................. 100 100 100 100 100
June, 2009 .............................. 100 100 100 100 100
June, 2010 .............................. 100 100 100 100 100
June, 2011 .............................. 100 100 100 100 100
June, 2012 .............................. 100 100 100 100 100
June, 2013 .............................. 0 0 0 0 0
Weighted Average Life (in years) ........ 9.96 9.96 9.96 9.96 9.71
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS C CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE--OTHERWISE AT
INDICATED CPR
DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------------- ----------- ----------- ----------- ----------- -----------
Initial ................................. 100 100 100 100 100
June, 2004 .............................. 100 100 100 100 100
June, 2005 .............................. 100 100 100 100 100
June, 2006 .............................. 100 100 100 100 100
June, 2007 .............................. 100 100 100 100 100
June, 2008 .............................. 100 100 100 100 100
June, 2009 .............................. 100 100 100 100 100
June, 2010 .............................. 100 100 100 100 100
June, 2011 .............................. 100 100 100 100 100
June, 2012 .............................. 100 100 100 100 100
June, 2013 .............................. 0 0 0 0 0
Weighted Average Life (in years) ........ 9.96 9.96 9.96 9.96 9.79
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PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS D CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE--OTHERWISE AT
INDICATED CPR
DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------------- ----------- ----------- ----------- ----------- -----------
Initial ................................. 100 100 100 100 100
June, 2004 .............................. 100 100 100 100 100
June, 2005 .............................. 100 100 100 100 100
June, 2006 .............................. 100 100 100 100 100
June, 2007 .............................. 100 100 100 100 100
June, 2008 .............................. 100 100 100 100 100
June, 2009 .............................. 100 100 100 100 100
June, 2010 .............................. 100 100 100 100 100
June, 2011 .............................. 100 100 100 100 100
June, 2012 .............................. 100 100 100 100 100
June, 2013 .............................. 63 56 46 32 0
June, 2014 .............................. 0 0 0 0 0
Weighted Average Life (in years) ........ 10.01 10.00 10.00 9.99 9.79
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS E CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE--OTHERWISE AT
INDICATED CPR
DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------------- ----------- ----------- ----------- ----------- -----------
Initial ................................. 100 100 100 100 100
June, 2004 .............................. 100 100 100 100 100
June, 2005 .............................. 100 100 100 100 100
June, 2006 .............................. 100 100 100 100 100
June, 2007 .............................. 100 100 100 100 100
June, 2008 .............................. 100 100 100 100 100
June, 2009 .............................. 100 100 100 100 100
June, 2010 .............................. 100 100 100 100 100
June, 2011 .............................. 100 100 100 100 100
June, 2012 .............................. 100 100 100 100 100
June, 2013 .............................. 100 100 100 100 25
June, 2014 .............................. 0 0 0 0 0
Weighted Average Life (in years) ........ 10.10 10.10 10.09 10.09 9.90
CERTAIN PRICE/YIELD TABLES
The tables set forth below show the corporate bond equivalent ("CBE") yield
and weighted average life in years with respect to each Class of Offered
Certificates under the Modeling Assumptions.
The yields set forth in the following tables were calculated by determining
the monthly discount rates which, when applied to the assumed stream of cash
flows to be paid on each Class of Offered Certificates, would cause the
discounted present value of such assumed stream of cash flows as of __________,
2003 to equal the assumed purchase prices, plus accrued interest at the
applicable Pass-Through Rate as stated on the cover of this prospectus
supplement from and including _____ 1, 2003 to but excluding the Closing Date,
and converting such monthly rates to semi-annual corporate bond equivalent
rates. Such calculation does not take into account variations that may occur in
the interest rates at which investors may be able to reinvest funds received by
them as reductions of the Certificate Balances of such Classes of Offered
Certificates and consequently does not purport to reflect the return on any
investment in such Classes of Offered Certificates when such reinvestment rates
are considered. Purchase prices are expressed in 32nds and interpreted as a
percentage of the initial Certificate Balance of the specified Class (I.E.,
______ means ______%) and are exclusive of accrued interest.
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PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL
PAYMENT DATE AND LAST PRINCIPAL PAYMENT DATE FOR THE
CLASS A-1 CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE--OTHERWISE AT
INDICATED CPR
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------------- ----------- ----------- ----------- ----------- -----------
..................................
..................................
..................................
..................................
..................................
..................................
..................................
..................................
..................................
Weighted Average Life (yrs.) ............
First Principal Payment Date ............
Last Principal Payment Date .............
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL
PAYMENT DATE AND LAST PRINCIPAL PAYMENT DATE FOR THE
CLASS A-2 CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE--OTHERWISE AT
INDICATED CPR
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------------- ----------- ----------- ----------- ----------- -----------
..................................
..................................
..................................
..................................
..................................
..................................
..................................
..................................
..................................
Weighted Average Life (yrs.) ............
First Principal Payment Date ............
Last Principal Payment Date .............
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL
PAYMENT DATE AND LAST PRINCIPAL PAYMENT DATE FOR THE
CLASS B CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE--OTHERWISE AT
INDICATED CPR
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------------- ----------- ----------- ----------- ----------- -----------
..................................
..................................
..................................
..................................
..................................
..................................
..................................
..................................
..................................
Weighted Average Life (yrs.) ............
First Principal Payment Date ............
Last Principal Payment Date .............
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PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL
PAYMENT DATE AND LAST PRINCIPAL PAYMENT DATE FOR THE
CLASS C CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE--OTHERWISE
AT INDICATED CPR
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------------- ----------- ----------- ----------- ----------- -----------
..................................
..................................
..................................
..................................
..................................
..................................
..................................
..................................
..................................
Weighted Average Life (yrs.) ............
First Principal Payment Date ............
Last Principal Payment Date .............
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL
PAYMENT DATE AND LAST PRINCIPAL PAYMENT DATE FOR THE
CLASS D CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE--OTHERWISE AT
INDICATED CPR
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------------- ----------- ----------- ----------- ----------- -----------
..................................
..................................
..................................
..................................
..................................
..................................
..................................
..................................
..................................
Weighted Average Life (yrs.) ............
First Principal Payment Date ............
Last Principal Payment Date .............
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL
PAYMENT DATE AND LAST PRINCIPAL PAYMENT DATE FOR THE
CLASS E CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE--OTHERWISE AT
INDICATED CPR
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------------- ----------- ----------- ----------- ----------- -----------
..................................
..................................
..................................
..................................
..................................
..................................
..................................
..................................
..................................
Weighted Average Life (yrs.) ............
First Principal Payment Date ............
Last Principal Payment Date .............
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THE POOLING AND SERVICING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement, to be dated as of June 1, 2003 (the "Pooling and Servicing
Agreement"), by and among the Depositor, the Servicer, the Special Servicer, the
Trustee and the Bond Administrator.
Reference is made to the prospectus for important information in addition
to that set forth in this prospectus supplement regarding the terms of the
Pooling and Servicing Agreement and terms and conditions of the Offered
Certificates. The Bond Administrator has informed the Depositor that it will
provide to a prospective or actual holder of an Offered Certificate at the
expense of the requesting party, upon written request, a copy (without exhibits)
of the Pooling and Servicing Agreement. Requests should be addressed to LaSalle
Bank National Association, 135 South LaSalle Street, Chicago, Illinois 60603,
Attention: Asset Backed Securities Trust Services Group--COMM 2003-LNB1.
ASSIGNMENT OF THE MORTGAGE LOANS
The Depositor will purchase the Mortgage Loans to be included in the
Mortgage Pool on or before the Closing Date from GACC and LaSalle pursuant to
two separate Mortgage Loan Purchase Agreements (the "Mortgage Loan Purchase
Agreements"). See "Description of the Mortgage Pool--The Mortgage Loan Sellers"
in this prospectus supplement.
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 GACC and LaSalle in respect of
breaches of representations and warranties regarding the Mortgage Loans, to the
Trustee for the benefit of the holders of the Certificates. On or prior to the
Closing Date, the Depositor will deliver to the custodian designated by the
Trustee (the "Custodian"), with respect to each Mortgage Loan, the Note, the
Mortgage and certain other documents and instruments (the "Mortgage Loan
Documents"). The Custodian will hold such documents in trust for the benefit of
the holders of the Certificates. The Custodian is obligated to review certain
documents for each Mortgage Loan within 60 days after the later of the Closing
Date or actual receipt (but not later than 120 days after the Closing Date) and
report any missing documents or certain types of defects therein to the
Depositor, the Servicer, the Special Servicer, the Directing Certificateholder
and the related Mortgage Loan Seller. Each of the Mortgage Loan Sellers will
retain a third party vendor (which may be the Trustee or the Custodian) to
complete the assignment and recording of the related Mortgage Loan Documents.
The Mortgage Loan Sellers will be required to effect (at the expense of the
related Mortgage Loan Seller) the assignment and recordation of the Mortgage
Loan Documents until the assignment and recordation of all Mortgage Loan
Documents has been completed.
REPRESENTATIONS AND WARRANTIES; REPURCHASE; SUBSTITUTION
In the Pooling and Servicing Agreement, the Depositor will assign the
representations and warranties made by GACC and LaSalle to the Depositor in the
Mortgage Loan Purchase Agreements to the Trustee for the benefit of
Certificateholders.
In their respective Mortgage Loan Purchase Agreements, each of GACC and
LaSalle will represent and warrant with respect to its respective Mortgage
Loans, subject to certain exceptions set forth in the Mortgage Loan Purchase
Agreements, as of the Closing Date, or as of such other date specifically
provided in the representation and warranty, among other things, generally to
the effect that:
(1) the information pertaining to each Mortgage Loan set forth in the
schedule of Mortgage Loans attached to the applicable Mortgage Loan
Purchase Agreement was true and correct in all material respects as of the
Cut-off Date;
(2) immediately prior to the sale, transfer and assignment to the
Depositor, the Mortgage Loan Seller had good title to, and was the sole
owner of, each Mortgage Loan, and the Mortgage Loan Seller is transferring
such Mortgage Loan free and clear of any and all liens, pledges, charges,
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security interests, participation interests and/or of any other interests
or encumbrances of any nature whatsoever;
(3) the proceeds of each Mortgage Loan have been fully disbursed
(except in those cases where the full amount of the Mortgage Loan has been
disbursed but a portion thereof is being held in escrow or reserve accounts
pending the satisfaction of certain conditions relating to leasing, repairs
or other matters with respect to the related Mortgaged Property), and there
is no obligation for future advances with respect thereto;
(4) each related Mortgage Note, Mortgage and the assignment of leases
(if it is a document separate from the Mortgage) executed in connection
with such Mortgage Loan are legal, valid and binding obligations of the
related borrower or guarantor (subject to any non-recourse provisions
therein and any state anti-deficiency legislation or market value limit
deficiency legislation), enforceable in accordance with their terms, except
with respect to provisions relating to Default Interest, late fees,
additional interest, yield maintenance premiums or Prepayment Premiums and
except as such enforcement may be limited by bankruptcy, insolvency,
receivership, reorganization, moratorium, redemption, liquidation or other
laws affecting the enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law);
(5) each assignment of leases creates a valid, collateral or first
priority assignment of, or a valid perfected first priority security
interest in, certain rights under the related leases, subject to a license
granted to the related borrower to exercise certain rights and to perform
certain obligations of the lessor under such leases;
(6) there is no right of offset, abatement, diminution, or rescission
or valid defense or counterclaim with respect to any of the related
Mortgage Note, Mortgage(s) or other agreements executed in connection
therewith, subject to the limitations on enforcement set forth in (4)
above, as of the Closing Date, to the Mortgage Loan Seller's actual
knowledge, no such rights have been asserted;
(7) each related assignment of mortgage and assignment of assignment
of leases constitutes the legal, valid, binding and enforceable assignment
from the Mortgage Loan Seller, subject to the limitations on enforcement
set forth in (4) above;
(8) each related Mortgage is a legal, valid and enforceable first lien
on the related Mortgaged Property subject only to title exceptions, none of
which, individually or in the aggregate, materially and adversely affects
the value of the Mortgaged Property;
(9) all taxes and governmental assessments or charges or water or
sewer bills that prior to the Cut-off Date became due and owing in respect
of each related Mortgaged Property have been paid, or if in dispute, an
escrow of funds in an amount sufficient to cover such payments has been
established;
(10) in reliance on engineering reports, to the Mortgage Loan Seller's
knowledge as of the Closing Date, each Mortgaged Property is free and clear
of any damage that would materially and adversely affect its value as
security for such Mortgage Loan;
(11) the Mortgaged Property is covered by a title insurance policy
insuring that the related Mortgage is a valid first lien subject only to
title exceptions. No claims have been made under such title insurance
policy. Such title insurance policy is in full force and effect;
(12) as of the date of the origination of each Mortgage Loan, the
related Mortgaged Property was insured by all insurance coverage required
under each related Mortgage and such insurance is in full force and effect;
(13) other than payments due but not yet 30 days or more delinquent
there exists no material default, breach, violation or event of
acceleration under the related Mortgage Note or each related Mortgage;
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(14) each Mortgage Loan is not, and in the prior 12 months (or since
the date of origination if such Mortgage Loan has been originated within
the past 12 months) has not been, 30 days or more past due in respect of
any Periodic Payment without giving effect to any applicable grace or cure
period;
(15) no Mortgaged Property, nor any material portion thereof, is the
subject of and no borrower is a debtor in any state or federal bankruptcy
or insolvency or similar proceeding;
(16) the Mortgage Loan does not permit the related Mortgaged Property
or any interest therein, including any ownership interest in the Mortgagor,
to be encumbered by any mortgage lien or other encumbrance except the
related Mortgage or the Mortgage of another Mortgage Loan without the prior
written consent of the holder thereof; and
(17) since origination, no portion of the related Mortgaged Property
has been released from the lien of the related Mortgage, in any manner
which materially and adversely affects the value, use or operation of the
Mortgage Loan or materially interferes with the security intended to be
provided by such Mortgage.
The Pooling and Servicing Agreement requires that the Custodian, the
Servicer, the Special Servicer, the Trustee or the Bond Administrator must
notify the Depositor, the Bond Administrator, the affected Mortgage Loan Seller,
the Directing Certificateholder, the Custodian, the Servicer, the Special
Servicer and the Trustee, as applicable, upon its becoming aware of any breach
of any representation or warranty contained in the above clauses that materially
and adversely affects the value of such Mortgage Loan, the related Mortgaged
Property or the interests of, the Trustee or any holders of the Certificates
therein. Each of the Mortgage Loan Purchase Agreements provides that, with
respect to any such Mortgage Loan, within 90 days following the earlier of its
receipt of notice from the Servicer, the Special Servicer, the Trustee, the
Custodian or the Bond Administrator or its discovery of such breach, the
affected Mortgage Loan Seller shall either (a) repurchase such Mortgage Loan at
an amount equal to the sum of (1) the outstanding principal balance of the
Mortgage Loan as of the date of purchase, (2) all accrued and unpaid interest on
the Mortgage Loan at the related mortgage rate in effect from time to time, to
but not including the Due Date in the month of purchase, (3) all related
unreimbursed Property Advances plus accrued and unpaid interest on related
Advances at the Advance Rate and unpaid Special Servicing Fees and Workout Fees
allocable to the Mortgage Loan, (4) any payable Liquidation Fee, as specified
below in "-- Special Servicing -- Special Servicing Compensation" and (5) all
reasonable out-of-pocket expenses reasonably incurred or to be incurred by the
Servicer, the Special Servicer, the Depositor and the Trustee in respect of the
defect or breach giving rise to the repurchase obligation, including any
expenses arising out of the enforcement of the repurchase obligation (such
price, the "Repurchase Price") or (b) substitute, within two years of the
Closing Date, a Qualified Substitute Mortgage Loan (a "Replacement Mortgage
Loan") for the affected Mortgage Loan, (the "Removed Mortgage Loan") and pay any
shortfall amount equal to the excess of the Repurchase Price of the Mortgage
Loan calculated as of the date of substitution over the stated principal balance
of the Qualified Substitute Mortgage Loan as of the date of substitution;
PROVIDED, that the applicable Mortgage Loan Seller generally has an additional
period (as set forth in the Pooling and Servicing Agreement) to cure the
material defect or material breach if such material defect or material breach is
not capable of being cured within the initial 90-day period, the Mortgage Loan
Seller is diligently proceeding with that cure, and such material defect or
material breach is not related to the Mortgage Loan not being a "qualified
mortgage" within the meaning of Section 860G(a)(3) of the Code. In addition, the
applicable Mortgage Loan Seller will have an additional 90 days to cure the
material breach or material defect if the Mortgage Loan Seller has commenced and
is diligently proceeding with the cure of such material breach or material
defect and the failure to cure such material breach or material defect is solely
the result of a delay in the return of documents from the local filing or
recording authorities. See "The Pooling and Servicing Agreement-Servicing
Compensation and Payment of Expenses" in this prospectus supplement.
A "Qualifying Substitute Mortgage Loan" is a Mortgage Loan that, among
other things: (i) has a Stated Principal Balance of not more than the Stated
Principal Balance of the related Removed Mortgage Loan, (ii) accrues interest at
a rate of interest at least equal to that of the related Removed
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Mortgage Loan, (iii) has a remaining term to stated maturity of not greater
than, and not more than two years less than, the related Removed Mortgage Loan
and (iv) is approved by the Directing Certificateholder.
The obligations of GACC and LaSalle to repurchase, substitute or cure
constitute the sole remedies available to holders of Certificates or the Trustee
for a breach of a representation or warranty by GACC or LaSalle with respect to
its Mortgage Loan. None of the Servicer, the Special Servicer, the Trustee or
the Bond Administrator will be obligated to purchase or substitute a Mortgage
Loan if GACC or LaSalle defaults on its obligation to repurchase, substitute or
cure, and no assurance can be given that GACC or LaSalle will fulfill such
obligations. No assurance can be given that GACC or LaSalle will perform any
obligation to cure or repurchase a Mortgage Loan for a breach of any
representation referred to in the third preceding paragraph. If such obligation
is not met as to a Mortgage Loan that is not a "qualified mortgage" within the
meaning of Section 860G(a)(3) of the Code, the Upper-Tier REMIC, the Lower-Tier
REMIC and the related Loan REMIC may fail to qualify to be treated as REMICs for
federal income tax purposes.
SERVICING OF THE MORTGAGE LOANS; COLLECTION OF PAYMENTS
The Pooling and Servicing Agreement requires the Servicer and Special
Servicer to service and administer the Mortgage Loans (other than the Westfield
Shoppingtown Portfolio Loan, which will be serviced pursuant to the GECCMC
Series 2002-3 PSA, and the Chandler Fashion Center Loan, which will be serviced
pursuant to the GMAC Series 2003-C1 PSA) on behalf of the Trust solely in the
best interests of and for the benefit of all of the Certificateholders (as
determined by the Servicer or Special Servicer, as the case may be, in the
exercise of its reasonable judgment) in accordance with applicable law, the
terms of the Pooling and Servicing Agreement and the Mortgage Loans and to the
extent not inconsistent with the foregoing, further as follows: (1) with the
same care, skill and diligence as is normal and usual in its general mortgage
servicing and REO property management activities on behalf of third parties or
on behalf of itself, whichever is higher, with respect to mortgage loans and REO
properties that are comparable to those for which it is responsible under the
Pooling and Servicing Agreement and (2) with a view to the timely collection of
all scheduled payments of principal and interest under the Mortgage Loans or, if
a Mortgage Loan comes into and continues in default and if, in the good faith
and reasonable judgment of the Special Servicer, no satisfactory arrangements
can be made for the collection of the delinquent payments, the maximization of
the recovery on such mortgage loan to the Certificateholders (as a collective
whole) on a present value basis (the relevant discounting of anticipated
collections that will be distributable to Certificateholders to be performed at
the related net mortgage rate); and (3) without regard to (A) any relationship
that the Servicer or Special Servicer, as applicable, or any affiliate thereof
may have with the related borrower, (B) the ownership of any Certificate by the
Servicer or Special Servicer, as applicable, or by any affiliate thereof, (C)
the Servicer's obligation to make Advances or the Special Servicer's obligation
to direct to the Servicer to make Advances, as applicable, and (D) the right of
the Servicer or Special Servicer, as applicable (or any affiliate thereof), to
receive reimbursement of costs, or the sufficiency of any compensation payable
to it, hereunder or with respect to any particular transaction (the "Servicing
Standard"). The Servicer and the Special Servicer are permitted, at their own
expense, to employ subservicers, agents or attorneys in performing any of their
respective obligations under the Pooling and Servicing Agreement, but will not
thereby be relieved of any such obligation, and will be responsible for the acts
and omissions of any such subservicers, agents or attorneys. The Pooling and
Servicing Agreement provides, however, that neither the Servicer, the Special
Servicer nor any of their respective directors, officers, employees members,
managers or agents shall have any liability to the Trust or the
Certificateholders for taking any action or refraining from taking an action in
good faith, or for errors in judgment. The foregoing provision would not protect
the Servicer or the Special Servicer for the breach of its representations or
warranties in the Pooling and Servicing Agreement, the breach of certain
specified covenants therein or any liability by reason of willful misconduct,
bad faith, fraud or negligence in the performance of its duties or by reason of
its reckless disregard of obligations or duties under the Pooling and Servicing
Agreement.
The Pooling and Servicing Agreement requires the Servicer or the Special
Servicer, as applicable, to make reasonable efforts to collect all payments
called for under the terms and provisions of the
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Mortgage Loans (other than the Non-Serviced Mortgage Loans), to the extent such
procedures are consistent with the Servicing Standard. Consistent with the
above, the Servicer or Special Servicer may, in its discretion, waive any late
payment charge in connection with any delinquent Monthly Payment or Balloon
Payment with respect to any Mortgage Loan.
ADVANCES
Except with respect to the Westfield Shoppingtown Portfolio Loan, the
Servicer will be obligated to advance, on the business day immediately preceding
a Distribution Date (the "Servicer Remittance Date") an amount (each such
amount, a "P&I Advance") equal to the amount not received in respect of the
Monthly Payment or Assumed Monthly Payment on a Mortgage Loan (with interest at
the Net Mortgage Pass-Through Rate plus the Trustee Fee Rate) that was
delinquent as of the close of business on the immediately preceding Due Date
(and which delinquent payment has not been received as of the Servicer
Remittance Date), or, in the event of a default in the payment of amounts due on
the maturity date of a Mortgage Loan, the amount equal to the Monthly Payment or
portion thereof or the Assumed Monthly Payment not received that was due prior
to the maturity date; PROVIDED, HOWEVER, the Servicer will not be required to
make an Advance to the extent it determines that such Advance would not be
ultimately recoverable from late payments, condemnation proceeds, net insurance
proceeds, net liquidation proceeds and other collections with respect to the
related Mortgage Loan. P&IAdvances made in respect of mortgage loans which have
a grace period that expires after the Determination Date will not begin to
accrue interest until the day succeeding the expiration date of any applicable
grace period; PROVIDED that if such P&IAdvance is not reimbursed from
collections received by the related borrower by the end of the applicable grace
period, interest on such Advance will accrue from the date such Advance is made.
P&I Advances are intended to maintain a regular flow of scheduled interest
and principal payments to holders of the Certificates entitled thereto, rather
than to guarantee or insure against losses. Neither the Servicer nor the Trustee
will be required or permitted to make a P&I Advance for Default Interest or
Balloon Payments. The Special Servicer will not be required or permitted to make
any P&I Advance. The amount required to be advanced in respect of delinquent
Monthly Payments or Assumed Scheduled Payments on a Mortgage Loan that has been
subject to an Appraisal Reduction Event will equal the product of (a) the amount
that would be required to be advanced by the Servicer without giving effect to
such Appraisal Reduction Event and (b) a fraction, the numerator of which is the
Stated Principal Balance of the Mortgage Loan (as of the last day of the related
Collection Period) less any Appraisal Reduction Amounts thereof and the
denominator of which is the Stated Principal Balance (as of the last day of the
related Collection Period).
With respect to the Chandler Fashion Center Loan, if the 2003-C1 Master
Servicer determines in accordance with the servicing standard set forth in the
GMAC Series 2003-C1 PSA that a principal or interest advance with respect to the
Chandler Fashion Center A-1 Loan will not ultimately be recoverable from related
proceeds collected on that mortgage loan and consequently, the 2003-C1 Master
Servicer does not make such principal or interest advance, the Servicer will not
make any related P&I Advance with respect to the Chandler Fashion Center Loan
under the Pooling and Servicing Agreement.
The 2002-3 Master Servicer will be required to make P&I Advances with
respect to the Westfield Shoppingtown Portfolio Loan, on terms substantially
similar but not identical to those set forth above.
In addition to P&I Advances, the Servicer will also be obligated (subject
to the limitations described herein and except with respect to the Non-Serviced
Loans) to make advances ("Property Advances," and together with P&I Advances,
"Advances") 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 the related Mortgage, enforce the terms of any Mortgage
Loan or to protect, manage and maintain each related Mortgaged Property. The
Special Servicer, at its option, may make any Property Advance to be made on any
Specially Serviced Mortgage Loan.
The 2002-3 Master Servicer will be obligated to make Property Advances with
respect to the Westfield Shoppingtown Portfolio Whole Loan. The 2003-C1 Master
Servicer will be obligated to make Property Advances with respect to the
Chandler Fashion Center Whole Loan.
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To the extent the Servicer or the Special Servicer fails to make an Advance
it is required (or, in the case of the Special Servicer, permitted) to make
under the Pooling and Servicing Agreement, the Trustee, subject to a
determination of recoverability, will make such required Advance pursuant to the
terms of the Pooling and Servicing Agreement. The Trustee will be entitled to
rely conclusively on any non-recoverability determination of the Servicer or the
Special Servicer, as applicable. To the extent the 2002-3 Master Servicer fails
to make a principal or interest advance with respect to the Westfield
Shoppingtown Portfolio Loan it is required to make under the GECCMC Series
2002-3 PSA, the Trustee, subject to a determination of recoverability, will make
such required P&I Advance pursuant to the terms of the Pooling and Servicing
Agreement. The Trustee will be entitled to rely conclusively on any
non-recoverability determination of the 2002-3 Master Servicer. See "--The
Trustee and the Bond Administrator" below. The Trustee, as back-up advancer,
will be required to maintain a long-term unsecured debt rating from S&P of at
least "A-" and a short-term unsecured debt rating from S&Pof at least "A-1" (or
such other rating permitted by S&P).
The Servicer, the Special Servicer or the Trustee, as applicable, will be
entitled to reimbursement for any Advance made by it in an amount equal to the
amount of such Advance (i) from late payments on the related Mortgage Loan by
the mortgagor, (ii) from insurance proceeds, condemnation proceeds, liquidation
proceeds from the sale of the related Specially Serviced Mortgage Loan or the
related Mortgaged Property or other collections relating to the Mortgage Loan or
(iii) upon determining in good faith that such Advance is not recoverable in the
manner described in the preceding two clauses, from any other amounts from time
to time on deposit in the Collection Account. The Servicer, the Special Servicer
or the Trustee, as applicable, will be entitled to payment of interest on any
Advance made by it in an amount equal to the amount of interest accrued thereon
at the Advance Rate (i) from the amount of Default Interest on the related
Mortgage Loan by the mortgagor, (ii) from late payment fees on the related
Mortgage Loan by the mortgagor, and (iii) upon determining in good faith that
such interest is not recoverable in the manner described in the preceding two
clauses, from any other amounts from time to time on deposit in the Collection
Account.
The Servicer, the Special Servicer and the Trustee will each be entitled to
receive interest on Advances at a per annum rate equal to the Prime Rate (the
"Advance Rate"), and the Servicer will be authorized to pay itself, the Special
Servicer or the Trustee, as applicable, such interest monthly prior to any
payment to holders of Certificates, PROVIDED that no interest shall accrue and
be payable on any P&I Advances until the grace period for a late payment by the
underlying borrower has expired. To the extent that the payment of such interest
at the Advance Rate results in a shortfall in amounts otherwise payable on one
or more Classes of Certificates on the next Distribution Date, the Servicer or
the Trustee, as applicable, will be obligated to make a cash advance to cover
such shortfall, but only to the extent the Servicer or the Trustee, as
applicable, concludes that, with respect to each such Advance, such Advance can
be recovered from amounts payable on or in respect of the Mortgage Loan to which
the Advance is related. If the interest on such Advance is not recovered from
Default Interest and late charges on such Mortgage Loan, a shortfall will result
which will have the same effect as a Realized Loss. The "Prime Rate" is the
rate, for any day, set forth as such in the "Money Rates" section of The Wall
Street Journal, Eastern Edition.
The obligation of the Servicer or the Trustee, as applicable, to make
Advances (or the right of the Special Servicer to make Property Advances) with
respect to any Mortgage Loan pursuant to the Pooling and Servicing Agreement
continues through the foreclosure of such Mortgage Loan and until the
liquidation of the Mortgage Loan or disposition of the related REO Properties.
P&I Advances are intended to provide a limited amount of liquidity, not to
guarantee or insure against losses. None of the Servicer, the Special Servicer
or the Trustee will be required to make any Advance that it determines in its
good faith business judgment will not be recoverable by the Servicer, the
Special Servicer or the Trustee, as applicable, out of related late payments
(including late payment fees), insurance proceeds, liquidation proceeds and
other collections with respect to the Mortgage Loan as to which such Advances
are to be made. In addition, if the Servicer, the Special Servicer or the
Trustee, as applicable, determines in its good faith business judgment that any
Advance previously made will not be recoverable from the foregoing sources, then
the Servicer, the Special Servicer or the Trustee, as applicable, will be
entitled to reimburse itself for such Advance, plus interest thereon, out of
amounts
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payable on or in respect of all of the Mortgage Loans prior to distributions on
the Certificates. Any such judgment or determination with respect to the
recoverability of Advances must be evidenced by an officers' certificate
delivered to the Depositor, the Bond Administrator and the Trustee in the case
of the Servicer and the Special Servicer, and delivered to the Depositor, the
Servicer and the Bond Administrator in the case of the Trustee, setting forth
such judgment or determination of nonrecoverability and the considerations of
the Servicer, the Special Servicer or the Trustee, as applicable, forming the
basis of such determination (including but not limited to information selected
by the person making such determination in its good faith discretion such as
related income and expense statements, rent rolls, occupancy status, property
inspections, inquiries by the Servicer, the Special Servicer or the Trustee, as
applicable, and an independent appraisal performed in accordance with Appraiser
Institute standards conducted within the past twelve months on the applicable
Mortgaged Property).
With respect to the payment of insurance premiums and delinquent tax
assessments, neither the Servicer nor the Trustee, as applicable, will be
required to make an Advance for such amounts if such Advance would not be
recoverable, except as set forth below. In such case, the Servicer will be
required to notify the Special Servicer of its determination that such Advance
would not be recoverable. Upon receipt of such notice, the Special Servicer will
be required to determine (with the reasonable assistance of the Servicer)
whether or not payment of such amount would nonetheless be in the best interests
of the Certificateholders. If the Special Servicer determines that such payment
would be in the best interests of the Certificateholders, the Special Servicer
will be required to direct the Servicer to make such payment, who will then be
required to make such payment from the Collection Account to the extent of
available funds.
Subject to certain limitations and terms in the Pooling and Servicing
Agreement, certain amounts payable to the Servicer, the Special Servicer or the
Trustee, as applicable, as reimbursements for Property Advances or P&I Advances
or amounts payable to such parties as an additional trust expense on any
Servicer Remittance Date; at such party's option; may be deferred by such party
over two or more Servicer Remittance Dates (not to exceed 6 months).
ACCOUNTS
COLLECTION ACCOUNT.The Servicer will establish and maintain one or more
segregated accounts (the "Collection Account") pursuant to the Pooling and
Servicing Agreement, and will be required to deposit into the Collection Account
all payments in respect of the Mortgage Loans (other than the Non-Serviced
Mortgage Loans), other than amounts permitted to be withheld by the Servicer or
amounts to be deposited into any Reserve Account.
DISTRIBUTION ACCOUNTS.The Bond Administrator will establish and maintain
one or more segregated accounts (the "Distribution Account") in the name of the
Trustee for the benefit of the holders of Certificates. With respect to each
Distribution Date, the Servicer will remit on or before each Servicer Remittance
Date to the Bond Administrator, and the Bond Administrator will deposit into the
Distribution Account, to the extent of funds on deposit in the Collection
Account, on the Servicer Remittance Date an aggregate amount of immediately
available funds equal to the sum of (i) the Available Funds (including all P&I
Advances) and (ii) the Trustee Fee (which includes the Bond Administrator Fee).
To the extent the Servicer fails to do so, the Trustee will deposit all P&I
Advances into the Distribution Account as described herein. See "Description of
the Offered Certificates--Distributions" in this prospectus supplement.
INTEREST RESERVE ACCOUNT.The Bond Administrator will establish and maintain
an "Interest Reserve Account" in the name of the Trustee for the benefit of the
holders of the Certificates. With respect to each Distribution Date occurring in
February and each Distribution Date occurring in any January which occurs in a
year that is not a leap year, unless such Distribution Date is the final
Distribution Date there shall be deposited, in respect of each Mortgage Loan
that does not accrue interest on the basis of a 360-day year of twelve 30-day
months, an amount equal to one day's interest at the related Mortgage Rate (net
of any Servicing Fee payable therefrom) on the respective Stated Principal
Balance as of the immediately preceding Due Date, to the extent a Monthly
Payment or P&I
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Advance is made in respect thereof (all amounts so deposited in any consecutive
January (if applicable) and February, "Withheld Amounts"). With respect to each
Distribution Date occurring in March, an amount is required to be withdrawn from
the Interest Reserve Account in respect of each such Mortgage Loan equal to the
related Withheld Amounts from the preceding January (if applicable) and
February, if any, and deposited into the Distribution Account.
The Bond Administrator will also establish and maintain one or more
segregated accounts or sub-accounts for the "Lower-Tier Distribution Account,"
the "Upper-Tier Distribution Account," the "Default Interest Distribution
Account" and the "Excess Liquidation Proceeds Account," each in the name of the
Trustee for the benefit of the holders of the Certificates.
The Collection Account, the Lower-Tier Distribution Account, the Upper-Tier
Distribution Account, the Default Interest Distribution Account and the Excess
Liquidation Proceeds Account will be held in the name of the Trustee (or the
Servicer or Bond Administrator on behalf of the Trustee) on behalf of the
holders of Certificates and the Servicer will be authorized to make withdrawals
from the Collection Account. Each of the Collection Account, any REO Account,
the Lower-Tier Distribution Account, the Upper-Tier Distribution Account, the
Default Interest Distribution Account and the Excess Liquidation Proceeds
Account will be either (i) (A) an account or accounts maintained with a
depository institution or trust company the short-term unsecured debt
obligations or commercial paper of which are rated at least "A-1" by S&P and
"P-1" by Moody's in the case of accounts in which deposits have a maturity of 30
days or less or, in the case of accounts in which deposits have a maturity of
more than 30 days, the long term unsecured debt obligations of which are rated
at least "Aa3" by Moody's and "AA-" by S&P or (B) as to which the Bond
Administrator has received written confirmation from each of the Rating Agencies
that holding funds in such account would not cause any Rating Agency to qualify,
withdraw or downgrade any of its then-current ratings on the Certificates or
(ii) a segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity which, in the case of a state chartered depository institution, is
subject to regulations substantially similar to 12 C.F.R. Section 9.10(b),
having in either case a combined capital surplus of at least $50,000,000 and
subject to supervision or examination by federal and state authority, or (iii)
any other account that, as evidenced by a written confirmation from each Rating
Agency that such account would not, in and of itself, cause a downgrade,
qualification or withdrawal of the then-current ratings assigned to the
Certificates, which may be an account maintained with the Trustee, the Bond
Administrator or the Servicer.
Amounts on deposit in the Collection Account and any REO Account may be
invested in certain United States government securities and other high-quality
investments specified in the Pooling and Servicing Agreement ("Permitted
Investments"). Interest or other income earned on funds in the Collection
Account will be paid to the Servicer (except to the extent required to be paid
to the related borrower) as additional servicing compensation and interest or
other income earned on funds in any REO Account will be payable to the Special
Servicer.
WITHDRAWALS FROM THE COLLECTION ACCOUNT
The Servicer may make withdrawals from the Collection Account for the
following purposes, to the extent permitted and in the priorities provided in
the Pooling and Servicing Agreement: (i) to remit on each Servicer Remittance
Date to the Bond Administrator for its deposit (A) to the Distribution Account
an amount equal to the sum of (I) Available Funds and any Prepayment Premiums
and (II) the Trustee Fee for such Distribution Date, (B) to the Distribution
Account for deposit into the Default Interest Distribution Account an amount
equal to the Net Default Interest allocable to the Mortgage Loans received in
the related Collection Period, and (C) to the Distribution Account for deposit
into the Excess Liquidation Proceeds Account an amount equal to the Excess
Liquidation Proceeds allocable to the Mortgage Loans received in the related
Collection Period, if any; (ii) to pay or reimburse the Servicer, the Special
Servicer or the Trustee, as applicable, for Advances made by any of them and, if
applicable, interest on Advances (PROVIDED, that the Trustee will have priority
with respect to such payment or reimbursement), the Servicer's and the Special
Servicer's right to reimbursement for items described in this clause (ii) being
limited as described in this prospectus supplement under "--Advances"; (iii) to
pay on each Servicer Remittance Date to the Servicer and the Special Servicer as
compensation the
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aggregate unpaid Servicing Compensation, Special Servicing Fee, Workout Fee,
Liquidation Fee, and any other servicing or special servicing compensation in
respect of the immediately preceding calendar month; (iv) to pay on or before
each Distribution Date to the related Mortgage Loan Seller with respect to each
Mortgage Loan or REO Property that has previously been purchased or repurchased
by it pursuant to the Pooling and Servicing Agreement, all amounts received
thereon during the related Collection Period and subsequent to the date as of
which the amount required to effect such purchase or repurchase was determined;
(v) to the extent not reimbursed or paid pursuant to any of the above clauses,
to reimburse or pay the Servicer, the Special Servicer, the Trustee, the Bond
Administrator and/or the Depositor for unpaid servicing compensation (in the
case of the Servicer, the Special Servicer or the Trustee) and certain other
unreimbursed expenses incurred by such persons pursuant to and to the extent
reimbursable under the Pooling and Servicing Agreement and to satisfy any
indemnification obligations of the Trust under the Pooling and Servicing
Agreement; (vi) to pay to the Bond Administrator amounts requested by it to pay
taxes on certain net income with respect to REO Properties; (vii) to withdraw
any amount deposited into the Collection Account that was not required to be
deposited therein; and (viii) to clear and terminate the Collection Account
pursuant to a plan for termination and liquidation of the Trust.
ENFORCEMENT OF "DUE-ON-SALE" AND "DUE-ON-ENCUMBRANCE" CLAUSES
In general, the Mortgage Loans contain provisions in the nature of
"due-on-sale" clauses, which by their terms (a) provide that the Mortgage Loans
shall (or may at the mortgagee's option) become due and payable upon the sale or
other transfer of an interest in the related Mortgaged Property or (b) provide
that the Mortgage Loans may not be assumed without the consent of the related
mortgagee in connection with any such sale or other transfer. The Servicer or
the Special Servicer, as applicable, will not be required to enforce any such
due-on-sale clauses and in connection therewith will not be required to (i)
accelerate payments thereon or (ii) withhold its consent to such an assumption
if (x) such provision is not exercisable under applicable law or such provision
is reasonably likely to result in meritorious legal action by the borrower or
(y) the Servicer or the Special Servicer, as applicable, determines, in
accordance with the Servicing Standard, that granting such consent would be
likely to result in a greater recovery, on a present value basis (discounting at
the related Mortgage Rate), than would enforcement of such clause. If the
Servicer or the Special Servicer, as applicable, determines that (i) granting
such consent would be likely to result in a greater recovery, or (ii) such
provisions are not legally enforceable, the Servicer or the Special Servicer, as
applicable, is authorized to take or enter into an assumption agreement from or
with the proposed transferee as obligor thereon PROVIDED that (a) the credit
status of the prospective transferee is in compliance with the Servicer's or
Special Servicer's, as applicable, regular commercial mortgage origination or
servicing standards and criteria and the terms of the related Mortgage and (b)
the Servicer or the Special Servicer, as applicable, has received written
confirmation that such assumption or substitution would not, in and of itself,
cause a downgrade, qualification or withdrawal of the then-current ratings
assigned to the Certificates from (i) S&P with respect to Mortgage Loans that
(A) represent more than 5% of the then-current aggregate Stated Principal
Balance of the Mortgage Loans (taking into account for the purposes of this
calculation, in the case of any such Mortgage Loan with respect to which the
related borrower or its affiliate is a borrower with respect to one or more
other Mortgage Loans, such other Mortgage Loans), (B) have a Stated Principal
Balance that is more than $35,000,000 or (C) are among the ten largest Mortgage
Loans in the Trust (based on unpaid principal balance), or (ii) Moody's with
respect to any Mortgage Loan that is one of the ten largest Mortgage Loans in
the Trust (based on its then unpaid principal balance). The Servicer or Special
Servicer may not approve an assumption or substitution without requiring the
related borrower to pay any fees owed to the Rating Agencies associated with the
approval of such assumption or substitution unless the related Mortgage Loan
Documents expressly prohibit the Servicer or Special Servicer from requiring
such payment, in which case such fees will be a Trust Fund expense. No
assumption agreement may contain any terms that are different from any term of
any Mortgage or related Note, except pursuant to the provisions described under
"--Realization Upon Defaulted Mortgage Loans" and "--Modifications" in this
prospectus supplement. The Special Servicer will have the right to consent to
any assumption of a Mortgage Loan that is not a Specially Serviced Mortgage
Loan; PROVIDED, HOWEVER, that the Special Servicer will also be required to
obtain the consent of the
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Directing Certificateholder to any such assumption, in each case, to the extent
described in this prospectus supplement under "--Special Servicing."
In general, the Mortgage Loans contain provisions in the nature of a
"due-on-encumbrance" clause which by their terms (a) provide that the Mortgage
Loans shall (or may at the mortgagee's option) become due and payable upon the
creation of any lien or other encumbrance on the related Mortgaged Property, or
(b) require the consent of the related mortgagee to the creation of any such
lien or other encumbrance on the related Mortgaged Property. The Servicer or the
Special Servicer, as applicable, will not be required to enforce such
due-on-encumbrance clauses and in connection therewith will not be required to
(i) accelerate payments thereon or (ii) withhold its consent to such lien or
encumbrance if the Servicer or the Special Servicer, as applicable, (A)
determines, in accordance with the Servicing Standard, that such enforcement
would not be in the best interests of the Trust and (B) receives prior written
confirmation from S&P and Moody's that granting such consent would not, in and
of itself, cause a downgrade, qualification or withdrawal of any of the
then-current ratings assigned to the Certificates; PROVIDED, that in the case of
S&P, such confirmation shall only be required with respect to any Mortgage Loan
that (1) represents 2% or more of the Stated Principal Balance of all of the
Mortgage Loans held by the Trust Fund, (2) has a Stated Principal Balance
greater than $20 million, (3) is one of the ten largest mortgage loans based on
Stated Principal Balance, (4) has a loan-to-value ratio (which includes
additional debt of the related borrower, if any) that is greater than or equal
to 85% or (5) has a Debt Service Coverage Ratio (which includes additional debt
of the related borrower, if any) that is less than 1.20x or, in the case of
Moody's, such confirmation shall only be required with respect to any Mortgage
Loan that is one of the ten largest Mortgage Loans in the Trust (based on its
then unpaid principal balance). The Special Servicer will have the right to
consent to the waiver of any due-on-encumbrance clauses with regard to any
Mortgage Loan that is not a Specially Serviced Mortgage Loan, and the Special
Servicer will also be required to obtain the consent of the Directing
Certificateholder to any such waiver of a due-on-encumbrance clause, to the
extent described in this prospectus supplement under "--Special Servicing." See
"Certain Legal Aspects of Mortgage Loans--Due-on-Sale and Due-on-Encumbrance
Provisions" in the prospectus.
DEFEASANCE
Prior to permitting release of any Mortgaged Property, to the extent not
inconsistent with the related Mortgage Loan, the Pooling and Servicing Agreement
requires the Servicer to obtain, to the extent permissible under the related
Mortgage Loan Documents, written confirmation from each Rating Agency that such
release would not, in and of itself, result in a downgrade, qualification or
withdrawal of the then-current ratings assigned to the Certificates. In
addition, the Pooling and Servicing Agreement requires the Servicer to, in
accordance with the Servicing Standard, enforce provisions in the related
Mortgage Loan Documents requiring the borrower to pay all reasonable expenses
associated with a defeasance.
INSPECTIONS
The Servicer (or with respect to any Specially Serviced Mortgage Loan and
REO Property, the Special Servicer) is required to inspect or cause to be
inspected each Mortgaged Property at such times and in such manner as are
consistent with the Servicing Standards described herein, but in any event is
required to inspect each Mortgaged Property securing a Note, with a Stated
Principal Balance (or in the case of a Note secured by more than one Mortgaged
Property, having an Allocated Loan Amount) of (a) $2,000,000 or more at least
once every twelve months and (b) less than $2,000,000 at least once every 24
months, in each case commencing in 2004; PROVIDED, HOWEVER, that if any Mortgage
Loan becomes a Specially Serviced Mortgage Loan, the Special Servicer is
required to inspect or cause to be inspected the related Mortgaged Property as
soon as practicable but in no event more than 60 days after the Mortgage Loan
becomes a Specially Serviced Mortgage Loan and annually thereafter for so long
as the Mortgage Loan remains a Specially Serviced Mortgage Loan. The reasonable
cost of each such inspection performed by the Special Servicer will be paid by
the Servicer as a Property Advance or if such Property Advance would not be
recoverable, as a Trust expense. The Servicer or the Special Servicer, as
applicable, will be required to prepare a written report of the inspection
describing, among
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other things, the condition of and any damage to the Mortgaged Property and
specifying the existence of any material vacancies in the Mortgaged Property of
any sale, transfer or abandonment of the Mortgaged Property of which it has
actual knowledge, of any material adverse change in the condition of the
Mortgaged Property, or of any visible material waste committed on the Mortgaged
Property.
INSURANCE POLICIES
In the case of each Mortgage Loan (but excluding any Mortgage Loan as to
which the related Mortgaged Property has become an REO Property), the Servicer
will be required to use reasonable efforts consistent with the Servicing
Standard to cause the related borrower to maintain (including identifying the
extent to which such borrower is maintaining insurance coverage and, if such
borrower does not so maintain, the Servicer will be required to itself cause to
be maintained) for the related Mortgaged Property:
(i) a fire and casualty extended coverage insurance policy which
does not provide for reduction due to depreciation, in an amount that
is at least equal to the lesser of the full replacement cost of the
improvements securing the Mortgage Loan or the outstanding principal
balance of the Mortgage Loan, but, in any event, in an amount
sufficient to avoid the application of any co-insurance clause, and
(ii) all other insurance coverage as is required (including, but
not limited to, coverage for acts of terrorism), subject to applicable
law, under the related Mortgage Loan Documents,
PROVIDED, HOWEVER, that:
(i) the Servicer will not be required to maintain any earthquake
or environmental insurance policy on any Mortgaged Property unless
such insurance policy was in effect at the time of the origination of
such Mortgage Loan and is available at commercially reasonable rates
(and if the Servicer does not cause the borrower to maintain or itself
maintain such earthquake or environmental insurance policy on any
Mortgaged Property, the Special Servicer will have the right, but not
the duty, to obtain (in accordance with the Servicing Standard), at
the Trust's expense, earthquake or environmental insurance on any
Mortgaged Property securing an REO Property so long as such insurance
is available at commercially reasonable rates);
(ii) if and to the extent that any Mortgage Loan grants the lender
thereunder any discretion (by way of consent, approval or otherwise)
as to the insurance provider from whom the related borrower is to
obtain the requisite insurance coverage, the Servicer must (to the
extent consistent with the Servicing Standard) require the related
borrower to obtain the requisite insurance coverage;
(iii) the Servicer will have no obligation beyond using its
reasonable efforts consistent with the Servicing Standard to enforce
those insurance requirements against any borrower; PROVIDED, HOWEVER,
that this will not limit the Servicer's obligation to obtain and
maintain a force-placed insurance policy as set forth in the Pooling
and Servicing Agreement;
(iv) except as provided below, in no event will the Servicer be
required to cause the borrower to maintain, or itself obtain,
insurance coverage that the Servicer has determined is either (A) not
available at any rate or (B) not available at commercially reasonable
rates and the related 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 the related Mortgaged
Property is located (in each case, as determined by the Servicer in
accordance with the Servicing Standard, which will be entitled to
rely, at its own expense, on insurance consultants in making such
determination) (and the related determinations by the Servicer will be
required to be made not less frequently than annually);
(v) the reasonable efforts of the Servicer to cause a borrower to
maintain insurance must be conducted in a manner that takes into
account the insurance that would then be available to the Servicer on
a force placed basis;
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(vi) to the extent the Servicer itself is required to maintain
insurance that the borrower does not maintain, the Servicer will not
be required to maintain insurance other than what is available on a
force-placed basis (and this limitation is not to be construed to
modify the other limits set forth in clause (iv) above); and
(vii) any explicit terrorism insurance requirements contained in
the related Mortgage Loan Documents are required to be enforced by the
Servicer in accordance with the Servicing Standard (unless the Special
Servicer and the Directing Certificateholder have consented to a
waiver (including a waiver to permit the Servicer to accept insurance
that does not comply with specific requirements contained in the
mortgage loan documents) in writing of that provision in accordance
with the Servicing Standard);
PROVIDED, HOWEVER, that any determination by the Servicer that a particular
type of insurance is not available at commercially reasonable rates shall be
subject to the approval of the Directing Certificateholder and, PROVIDED,
FURTHER, that the Servicer will not be permitted to obtain insurance on a
force-placed basis with respect to terrorism insurance without the consent of
the Directing Certificateholder.
Notwithstanding the provision described in clause (iv) above, the Servicer
must, prior to availing itself of any limitation described in that clause with
respect to any Mortgage Loan, obtain the approval or disapproval of the Special
Servicer and the Directing Certificateholder (and, in connection therewith, the
Special Servicer will be required to comply with any applicable provisions of
the Pooling and Servicing Agreement described herein under "--Modifications" and
"--Special Servicing"). The Servicer will be entitled to conclusively rely on
the determination of the Special Servicer.
In addition, you should assume that the Pooling and Servicing Agreement
will prohibit the Servicer from making various determinations that it is
otherwise authorized to make in connection with its efforts to maintain
insurance or cause insurance to be maintained unless it obtains the consent of
the Special Servicer and that the Special Servicer will not be permitted to
consent to those determinations unless the Special Servicer has complied with
any applicable provisions of the Pooling and Servicing Agreement described
herein under "--Modifications" and "--Special Servicing." The Pooling and
Servicing Agreement may also provide for the Special Servicer to fulfill the
duties otherwise imposed on the Servicer as described above with respect to a
particular Mortgage Loan if the Special Servicer has a consent right described
above and disapproves the proposed determination, or if certain other
circumstances occur in connection with an insurance-related determination by the
Servicer, with respect to that Mortgage Loan.
With respect to each Specially Serviced Mortgage Loan and REO Property, the
Special Servicer will generally be required to use reasonable efforts,
consistent with the Servicing Standard, to maintain (and, in the case of
Specially Serviced Mortgage Loans, the Special Servicer will be required to
itself maintain, subject to the right of the Special Servicer to (i) direct the
Servicer to make a Property Advance for the costs associated with coverage that
the Special Servicer determines to maintain, in which case the Servicer will be
required to make that Property Advance (subject to the recoverability
determination and Property Advance procedures described in this prospectus
supplement) or (ii) direct the Servicer to cause that coverage to be maintained
under the Servicer's force-placed insurance policy, in which case that Servicer
will be required to so cause that coverage to be maintained to the extent that
the identified coverage is available under the Servicer's existing force-placed
policy (a) a fire and casualty extended coverage insurance policy, which does
not provide for reduction due to depreciation, in an amount that is at least
equal to the lesser of the full replacement value of the Mortgaged Property or
the Stated Principal Balance of the Mortgage Loan (or such greater amount of
coverage required by the Mortgage Loan documents (unless such amount is not
available or the Directing Certificateholder has consented to a lower amount)),
but, in any event, in an amount sufficient to avoid the application of any
co-insurance clause, (b) a comprehensive general liability insurance policy with
coverage comparable to that which would be required under prudent lending
requirements and in an amount not less than $1 million per occurrence and (c) to
the extent consistent with the Servicing Standard, a business interruption or
rental loss insurance covering revenues or rents for a period of at least twelve
months. However, the Special Servicer will not be required in any event to
maintain or obtain (or direct
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the Servicer to maintain or obtain) insurance coverage described in this
paragraph beyond what is reasonably available at a cost customarily acceptable
and consistent with the Servicing Standard.
If either (x) the Servicer or the Special Servicer obtains and maintains,
or causes to be obtained and maintained, a blanket policy or master force-placed
policy insuring against hazard losses on all of the mortgage loans or REO
Properties, as applicable, as to which it is the Servicer or the Special
Servicer, as the case may be, then, to the extent such policy (i) is obtained
from an insurer meeting certain criteria set forth in the Pooling and Servicing
Agreement, and (ii) provides protection equivalent to the individual policies
otherwise required or (y) the Servicer or Special Servicer has long-term
unsecured debt obligations that are rated not lower than "A" by S&P and "A2" by
Moody's and the Servicer or Special Servicer self-insures for its obligation to
maintain the individual policies otherwise required, then the Servicer or
Special Servicer, as the case may be, will conclusively be deemed to have
satisfied its obligation to cause hazard insurance to be maintained on the
related mortgaged properties or REO Properties, as applicable. Such a blanket or
master force-placed policy may contain a deductible clause (not in excess of a
customary amount), in which case the Servicer or the Special Servicer, as the
case may be, that maintains such policy shall, if there shall not have been
maintained on any Mortgaged Property or REO Property thereunder a hazard
insurance policy complying with the requirements described above, and there
shall have been one or more losses that would have been covered by such an
individual policy, promptly deposit into the Collection Account, from its own
funds, the amount not otherwise payable under the blanket or master force-placed
policy in connection with such loss or losses because of such deductible clause
to the extent that any such deductible exceeds the deductible limitation that
pertained to the related Mortgage Loan (or, in the absence of any such
deductible limitation, the deductible limitation for an individual policy which
is consistent with the Servicing Standard).
The costs of the insurance premiums may be recovered by the Servicer or the
Special Servicer, as applicable, from reimbursements received from the related
borrower or, if the borrower does not pay those amounts, as a Property Advance
(to the extent that such Property Advances are not nonrecoverable advances) as
set forth in the Pooling and Servicing Agreement. However, even if such Property
Advance would be a nonrecoverable advance, the Servicer or the Special Servicer,
as applicable, may make such payments using funds held in the Collection Account
or may be permitted or required to make such Property Advance, subject to
certain conditions set forth in the Pooling and Servicing Agreement.
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.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement requires the Servicer to cause a
nationally recognized firm of independent public accountants, which is a member
of the American Institute of Certified Public Accountants, to furnish to the
Bond Administrator, the Depositor and the Rating Agencies on or before March 15
of each year, beginning March 15, 2004, a statement to the effect that such firm
has examined certain documents and records relating to the servicing of similar
mortgage loans for the preceding twelve months and that on the basis of their
examination, conducted substantially in compliance with generally accepted
auditing standards and the Uniform Single Attestation Program for Mortgage
Bankers or the Audit Program for Mortgages serviced for Freddie Mac, such
servicing has been conducted in compliance with similar agreements except for
such significant exceptions or errors in records that, in the opinion of such
firm, generally accepted auditing standards and the Uniform Single Attestation
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
Freddie Mac require it to report, in which case such exceptions and errors shall
be so reported.
The Pooling and Servicing Agreement also requires the Servicer to deliver
to the Bond Administrator, the Depositor and the Rating Agencies on or before
March 15 of each year, beginning March 15, 2004, an officer's certificate of the
Servicer stating that, to the best of such officer's knowledge, the Servicer has
fulfilled its obligations under the Pooling and Servicing Agreement
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throughout the preceding year or, if there has been a default, specifying each
default known to such officer and the action proposed to be taken with respect
thereto.
CERTAIN MATTERS REGARDING THE DEPOSITOR, THE SERVICER AND THE SPECIAL SERVICER
Each of the Servicer and Special Servicer may assign its rights and
delegate its duties and obligations under the Pooling and Servicing Agreement in
connection with the sale or transfer of a substantial portion of its mortgage
servicing or asset management portfolio, PROVIDED that certain conditions are
satisfied including obtaining the consent of the Trustee and Bond Administrator
and written confirmation of each Rating Agency that such assignment or
delegation will not cause a qualification, withdrawal or downgrading of the
then-current ratings assigned to the Certificates. The Pooling and Servicing
Agreement provides that the Servicer or Special Servicer may not otherwise
resign from its obligations and duties as Servicer or Special Servicer
thereunder, except upon either (a) the determination that performance of its
duties is no longer permissible under applicable law and PROVIDED that such
determination is evidenced by an opinion of counsel delivered to the Trustee and
the Bond Administrator or (b) the appointment of, and the acceptance of the
appointment by, a successor and receipt by the Trustee of written confirmation
from each of S&P and Moody's that the resignation and appointment will, in and
of itself, not cause a downgrade, withdrawal or qualification of the
then-current rating assigned by S&P or Moody's or any other applicable rating
agency to any class of Certificates. No such resignation may become effective
until the Trustee or a successor Servicer or Special Servicer has assumed the
obligations of the Servicer or Special Servicer under the Pooling and Servicing
Agreement. The Trustee or any other successor Servicer or Special Servicer
assuming the obligations of the Servicer or Special Servicer under the Pooling
and Servicing Agreement will be entitled to the compensation to which the
Servicer or Special Servicer would have been entitled. If no successor Servicer
or Special Servicer can be obtained to perform such obligations for such
compensation, additional amounts payable to such successor Servicer or Special
Servicer will be treated as Realized Losses. In addition, the Pooling and
Servicing Agreement provides that the Trustee is permitted to remove the
Servicer or the Special Servicer upon receipt of notice from Moody's that if
such Servicer or Special Servicer is not removed there is the risk of a
downgrade, qualification or withdrawal of the then-current rating of any Class
of Certificates.
The Pooling and Servicing Agreement also provides that none of the
Depositor, the Servicer or the Special Servicer, or any director, officer,
employee, member, manager or agent (including subservicers) of the Depositor,
the Servicer or the Special Servicer will be under any liability to the Trust,
or the holders of Certificates for any action taken or for refraining from the
taking of any action in good faith pursuant to the Pooling and Servicing
Agreement (including actions taken at the direction of the Controlling Class),
or for errors in judgment; PROVIDED, HOWEVER, that none of the Depositor, the
Servicer or the Special Servicer or any director, officer, employee, member,
manager or agent (including subservicers) of the Depositor, the Servicer and the
Special Servicer will be protected against any breach of its representations and
warranties made in the Pooling and Servicing Agreement or any liability which
would otherwise be imposed by reason of willful misconduct, bad faith, fraud or
negligence (or in the case of the Servicer, by reason of any specific liability
imposed for a breach of the Servicing Standard) in the performance of duties
thereunder or by reason of reckless disregard of obligations and duties
thereunder. The Pooling and Servicing Agreement further provides that the
Depositor, the Servicer and the Special Servicer and any director, officer,
employee, member, manager or agent (including subservicers) of the Depositor,
the Servicer and the Special Servicer will be entitled to indemnification by the
Trust for any loss, liability or expense incurred in connection with any claim
or legal action relating to the Pooling and Servicing Agreement or the
Certificates, other than any loss, liability or expense (i) incurred by reason
of willful misconduct, bad faith, fraud or negligence (or in the case of the
Servicer, by reason of any specific liability imposed for a breach of the
Servicing Standard) in the performance of duties thereunder or by reason of
reckless disregard of obligations and duties thereunder, (ii) imposed by any
taxing authority if such loss, liability or expense is not specifically
reimbursable pursuant to the terms of the Pooling and Servicing Agreement or
(iii) in the case of the Depositor and any of its directors, officers, members,
managers, employees and agents, any violation by any of them of any state or
federal securities law.
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In addition, the Pooling and Servicing Agreement provides that none of the
Depositor, the Servicer or the Special Servicer will be under any obligation to
appear in, prosecute or defend any legal action unless such action is related to
its duties under the Pooling and Servicing Agreement and which in its opinion
does not expose it to any expense or liability. The Depositor, the Servicer or
the Special Servicer may, however, in its discretion undertake any such action
which it may deem necessary or desirable with respect to the Pooling and
Servicing Agreement and the rights and duties of the parties thereto and the
interests of the holders of Certificates thereunder. In such event, the legal
expenses and costs of such action and any liability resulting therefrom will be
expenses, costs and liabilities of the Trust, and the Depositor, the Servicer
and the Special Servicer will be entitled to be reimbursed therefor and to
charge the Collection Account.
The Depositor is not obligated to monitor or supervise the performance of
the Servicer, the Special Servicer, the Trustee or the Bond Administrator under
the Pooling and Servicing Agreement. The Depositor may, but is not obligated to,
enforce the obligations of the Servicer or the Special Servicer under the
Pooling and Servicing Agreement and may, but is not obligated to, perform or
cause a designee to perform any defaulted obligation of the Servicer or the
Special Servicer or exercise any right of the Servicer or the Special Servicer
under the Pooling and Servicing Agreement. In the event the Depositor undertakes
any such action, it will be reimbursed by the Trust from the Collection Account
to the extent not recoverable from the Servicer or Special Servicer, as
applicable. Any such action by the Depositor will not relieve the Servicer or
the Special Servicer of its obligations under the Pooling and Servicing
Agreement.
Any person into which the Servicer, the Special Servicer or the Depositor
may be merged or consolidated, or any person resulting from any merger or
consolidation to which the Servicer, Special Servicer or the Depositor is a
party, or any person succeeding to the business of the Servicer, Special
Servicer or the Depositor, will be the successor of the Servicer, the Special
Servicer or the Depositor under the Pooling and Servicing Agreement, and shall
be deemed to have assumed all of the liabilities and obligations of the
Servicer, the Special Servicer or the Depositor under the Pooling and Servicing
Agreement if each of the Rating Agencies has confirmed in writing that such
merger or consolidation or transfer of assets or succession, in and of itself,
will not cause a downgrade, qualification or withdrawal of the then-current
ratings assigned by such Rating Agency for any Class of Certificates.
EVENTS OF DEFAULT
"Events of Default" under the Pooling and Servicing Agreement with respect
to the Servicer or the Special Servicer, as the case may be, will include,
without limitation:
(a) (i) any failure by the Servicer to make a required deposit to
the Collection Account on the day such deposit was first required to
be made, which failure is not remedied within one business day, or
(ii) any failure by the Servicer to deposit into, or remit to the Bond
Administrator for deposit into, the Distribution Account any amount
required to be so deposited or remitted (including any required P&I
Advance, unless the Servicer determines that such P&I Advance would
not be recoverable), which failure is not remedied (with interest) by
11:00 a.m. (New York City time) on the relevant Distribution Date;
(b) any failure by the Special Servicer to deposit into the REO
Account on the day such deposit is required to be made by the Special
Servicer on the day such remittance is required to be made, or to
remit to the Servicer for deposit in the Collection Account any such
remittance required to be made, under the Pooling and Servicing
Agreement; PROVIDED, HOWEVER, that the failure of the Special Servicer
to remit such remittance to the Servicer will not be an Event of
Default if such failure is remedied within one business day and if the
Special Servicer has compensated the Servicer for any loss of income
on such amount suffered by the Servicer due to and caused by the late
remittance of the Special Servicer and reimbursed the Trust for any
resulting advance interest due to the Servicer;
(c) any failure by the Servicer or the Special Servicer duly to
observe or perform in any material respect any of its other covenants
or obligations under the Pooling and Servicing Agreement, which
failure continues unremedied for 30 days (45 days in the case of
failure to pay
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the premium for any insurance policy required to be force-placed by
the Servicer pursuant to the Pooling and Servicing Agreement, after
written notice of the failure has been given to the Servicer or the
Special Servicer, as the case may be, by any other party to the
Pooling and Servicing Agreement, or to the Servicer or the Special
Servicer, as the case may be, with a copy to each other party to the
related Pooling and Servicing Agreement, by the Certificateholders of
any Class, evidencing, as to that Class, Percentage Interests
aggregating not less than 25%; PROVIDED, HOWEVER, if that failure is
capable of being cured and the Servicer or Special Servicer, as
applicable, is diligently pursuing that cure, that 45-day period will
be extended an additional 30 days;
(d) any breach on the part of the Servicer or the Special Servicer
of any representation or warranty in the Pooling and Servicing
Agreement which materially and adversely affects the interests of any
Class of Certificateholders and which continues unremedied for a
period of 30 days after the date on which notice of that breach,
requiring the same to be remedied, will have been given to the
Servicer or the Special Servicer, as the case may be, by the Depositor
or the Trustee, or to the Servicer, the Special Servicer, the
Depositor and the Trustee by the holders of Certificates of any Class
evidencing, as to that Class, Percentage Interests aggregating not
less than 25%; PROVIDED, HOWEVER, if that breach is capable of being
cured and the Servicer or Special Servicer, as applicable, is
diligently pursuing that cure, that 30-day period will be extended an
additional 30 days;
(e) certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings in
respect of or relating to the Servicer or the Special Servicer, and
certain actions by or on behalf of the Servicer or the Special
Servicer indicating its insolvency or inability to pay its
obligations;
(f) Moody's places the rating of any Class of Certificates on
"watchlist" status for possible ratings downgrade or withdrawal (or
Moody's has downgraded or withdrawn its rating for any Class of
Certificates) citing servicing concerns with respect to the Master
Servicer or Special Servicer, as the case may be, as the sole cause or
a material factor in such rating action, and, in the case of watch
status, such watch is not withdrawn by Moody's within 60 days; and
(g) the Trust has received written notice from S&P to the effect
that the Servicer or the Special Servicer is removed from S&P's
approved master servicer list or special servicer list, as the case
may be, and either (i) not reinstated within 60 days of removal or
(ii) any of the ratings assigned to the Certificates are qualified,
downgraded or withdrawn in connection with such removal, whichever is
earlier.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default with respect to the Servicer or the Special
Servicer, as applicable, occurs, then the Trustee may, and at the direction of
the holders of Certificates evidencing at least 25% of the aggregate Voting
Rights of all Certificateholders, the Trustee will be required to, terminate all
of the rights and obligations of the Servicer as servicer or the Special
Servicer as special servicer under the Pooling and Servicing Agreement and in
and to the Trust. Notwithstanding the foregoing, upon any termination of the
Servicer or the Special Servicer, as applicable, under the Pooling and Servicing
Agreement, the Servicer or the Special Servicer, as applicable, will continue to
be entitled to receive all accrued and unpaid servicing compensation through the
date of termination plus all Advances and interest thereon as provided in the
Pooling and Servicing Agreement. In the event that the Servicer is also the
Special Servicer and the Servicer is terminated, the Servicer will also be
terminated as Special Servicer.
On and after the date of termination following an Event of Default by the
Servicer or the Special Servicer, the Trustee will succeed to all authority and
power of the Servicer (and the Special Servicer if the Special Servicer is also
the Servicer) under the Pooling and Servicing Agreement (and any sub-servicing
agreements) and will be entitled to the compensation arrangements to which the
Servicer (and the Special Servicer if the Servicer is also the Special Servicer)
would have been entitled. If the Trustee is unwilling or unable so to act, or if
the holders of Certificates evidencing at least 25% of the aggregate Voting
Rights of all Certificateholders so request, or if the Trustee shall not be an
"approved" servicer by any of the Rating Agencies for mortgage pools similar to
the Trust, the Trustee must
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appoint, or petition a court of competent jurisdiction for the appointment of, a
mortgage loan servicing institution the appointment of which will not result in
the downgrading, qualification or withdrawal of the rating or ratings then
assigned to any Class of Certificates as evidenced in writing by each Rating
Agency to act as successor to the Servicer or the Special Servicer, as
applicable, under the Pooling and Servicing Agreement. Pending such appointment,
the Trustee is obligated to act in such capacity. The Trustee and any such
successor may agree upon the servicing compensation to be paid.
If the Special Servicer is not the Servicer and an Event of Default with
respect to the Special Servicer occurs, upon the termination of the Special
Servicer the Servicer will succeed to all the power and authority of the Special
Servicer under the Pooling and Servicing Agreement (PROVIDED that such
succession would not result in the downgrading, qualification or withdrawal of
the rating or ratings then assigned to any Class of Certificates as evidenced in
writing by each Rating Agency) and will be entitled to the compensation to which
the Special Servicer would have been entitled.
No Certificateholder will have any right under the Pooling and Servicing
Agreement to institute any proceeding with respect to the Pooling and Servicing
Agreement or the Mortgage Loans, unless, with respect to the Pooling and
Servicing Agreement, such holder previously shall have given to the Trustee a
written notice of a default under the Pooling and Servicing Agreement, and of
the continuance thereof, and unless also the holders of Certificates of any
Class affected thereby evidencing Percentage Interests of at least 25% of such
Class shall have made written request of the Trustee to institute such
proceeding in its capacity as Trustee under the Pooling and Servicing Agreement
and shall have offered to the Trustee such reasonable security or indemnity as
it may require against the costs, expenses and liabilities to be incurred
therein or thereby, and the Trustee, for 60 days after its receipt of such
notice, request and offer of indemnity, shall have neglected or refused to
institute such proceeding.
The Trustee will have no obligation to make any investigation of matters
arising under the Pooling and Servicing Agreement or to institute, conduct or
defend any litigation thereunder or in relation thereto at the request, order or
direction of any of the holders of Certificates, unless such holders of
Certificates shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred therein or
thereby.
AMENDMENT
The Pooling and Servicing Agreement may be amended at any time by the
Depositor, the Servicer, the Special Servicer, the Trustee and the Bond
Administrator without the consent of any of the holders of Certificates (i) to
cure any ambiguity; (ii) to cause the provisions therein to conform or be
consistent with or in furtherance of the statements herein made with respect to
the Certificates, the Trust or the Pooling and Servicing Agreement or to correct
or supplement any provisions therein which may be defective or inconsistent with
any other provisions therein; (iii) to amend any provision thereof to the extent
necessary or desirable to maintain the rating or ratings then assigned to each
Class of Certificates (PROVIDED, that such amendment does not adversely affect
in any material respect the interests of any Certificateholder not consenting
thereto); and (iv) to amend or supplement a provision, or to supplement any
provisions therein to the extent not inconsistent with the provisions of the
Pooling and Servicing Agreement, or any other change which will not adversely
affect in any material respect the interests of any Certificateholder not
consenting thereto, as evidenced in writing by an opinion of counsel or, if
solely affecting any Certificateholder, confirmation in writing from each Rating
Agency that such amendment will not result in a qualification, withdrawal or
downgrading of the then-current ratings assigned to the Certificates. The
Pooling and Servicing Agreement requires that no such amendment shall cause the
Upper-Tier REMIC or the Lower-Tier REMIC to fail to qualify as a REMIC.
The Pooling and Servicing Agreement may also be amended from time to time
by the Depositor, the Servicer, the Special Servicer, the Trustee and the Bond
Administrator with the consent of the holders of Certificates evidencing at
least 66-2/3% of the Percentage Interests of each Class of Certificates affected
thereby for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Pooling and Servicing Agreement or
modifying in any manner the rights of the holders of Certificates; PROVIDED,
HOWEVER, that no such amendment may (i) reduce in any manner the amount of, or
delay the timing of, payments received on the Mortgage Loans which are
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required to be distributed on any Certificate; (ii) alter the obligations of the
Servicer or the Trustee to make a P&I Advance or of the Servicer, the Special
Servicer or the Trustee to make a Property Advance or alter the Servicing
Standard set forth in the Pooling and Servicing Agreement; (iii) change the
percentages of Voting Rights of holders of Certificates which are required to
consent to any action or inaction under the Pooling and Servicing Agreement; or
(iv) amend the section in the Pooling and Servicing Agreement relating to the
amendment of the Pooling and Servicing Agreement, in each case, without the
consent of the holders of all Certificates representing all the Percentage
Interests of the Class or Classes affected thereby.
VOTING RIGHTS
At all times during the term of the Pooling and Servicing Agreement, 98% of
the voting rights for the Certificates (the "Voting Rights") shall be allocated
among the holders of the respective Classes of Regular Certificates (other than
the Class X-1 and Class X-2 Certificates) in proportion to the Certificate
Balances of their Certificates, and 2% of the Voting Rights shall be allocated
among the holders of the Class X-1 and Class X-2 Certificates. Voting Rights
allocated to a Class of Certificateholders shall be allocated among such
Certificateholders in proportion to the Percentage Interests in such Class
evidenced by their respective Certificates.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
If a default on a Mortgage Loan (other than a Non-Serviced Mortgage Loan)
has occurred or, in the Special Servicer's judgment, a payment default is
imminent, then, pursuant to the Pooling and Servicing Agreement, the Special
Servicer, on behalf of the Trustee, may, to the extent consistent with the
related Asset Status Report, at any time institute foreclosure proceedings,
exercise any power of sale contained in the related Mortgage, obtain a deed in
lieu of foreclosure, or otherwise acquire title to the related Mortgaged
Property, by operation of law or otherwise. The Special Servicer is not
permitted, however, to 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 previously
received a report prepared by a person who regularly conducts environmental
audits (which report will be an expense of the Trust) and either:
(i) such report indicates that (a) the Mortgaged Property is in
compliance with applicable environmental laws and regulations and (b)
there are no circumstances or conditions present at the 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 applicable
environmental laws and regulations; or
(ii) the Special Servicer, based solely (as to environmental
matters and related costs) on the information set forth in such
report, determines that taking such actions as are necessary to bring
the Mortgaged Property into compliance with applicable environmental
laws and regulations and/or taking the actions contemplated by clause
(i) above, that it would be in the best economic interest of the
Trust, than not taking such actions.
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 Trust will become liable for a material adverse environmental condition
at the Mortgaged Property. However, there can be no assurance that the
requirements of the Pooling and Servicing Agreement will effectively insulate
the Trust from potential liability for a materially adverse environmental
condition at any Mortgaged Property.
The Pooling and Servicing Agreement contains provisions requiring, within
60 days after a Mortgage Loan (other than a Non-Serviced Mortgage Loan) becomes
a Defaulted Mortgage Loan (or, in the case of a Balloon Loan as to which the
Servicer has received and the Directing Certificateholder has
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approved a written refinancing commitment, 150 days after such Balloon Loan
becomes a Defaulted Mortgage Loan), the Special Servicer to determine the fair
value of the Mortgage Loan in accordance with the Servicing Standard. A
"Defaulted Mortgage Loan" is a Mortgage Loan which is delinquent at least 60
days in respect of its Monthly Payments or more than 30 days delinquent in
respect of its balloon payment, if any, in either case such delinquency to be
determined without giving effect to any grace period permitted by the related
Mortgage Loan Documents and without regard to any acceleration of payments under
the Mortgage Loan. The Special Servicer will be required to recalculate, if
necessary, from time to time, but not less often than every 90 days, its
determination of the fair value of a Defaulted Mortgage Loan based upon changed
circumstances, new information or otherwise, in accordance with the Servicing
Standard. The Special Servicer will be permitted to retain, at the expense of
the Trust Fund, an independent third party to assist the Special Servicer in
determining such fair value and will be permitted to conclusively rely, to the
extent it is reasonable to do so in accordance with the Servicing Standard, on
the opinion of such third party in making such determination.
In the event a Mortgage Loan becomes a Defaulted Mortgage Loan, the
Directing Certificateholder, and certain other entities specified in the Pooling
and Servicing Agreement (only if the Directing Certificateholder, or such other
entity, as applicable, is not an affiliate of the related Mortgage Loan Seller)
will each have an assignable option to purchase (a "Purchase Option") the
Defaulted Mortgage Loan from the Trust Fund at a price (the "Option Price")
equal to (i) the outstanding principal balance of the Defaulted Mortgage Loan as
of the date of purchase, plus all accrued and unpaid interest on such balance
plus all related unreimbursed Property Advances and accrued and unpaid interest
on related Advances, plus all related fees and expenses, if the Special Servicer
has not yet determined the fair value of the Defaulted Mortgage Loan, or (ii)
the fair value of the Defaulted Mortgage Loan as determined by the Special
Servicer, if the Special Servicer has made such fair value determination.
Unless and until the Purchase Option with respect to a Defaulted Mortgage
Loan is exercised, the Special Servicer will be required to pursue such other
resolution strategies available under the Pooling and Servicing Agreement,
including workout and foreclosure, as are consistent with the Servicing
Standard, but the Special Servicer will not be permitted to sell the Defaulted
Mortgage Loan other than pursuant to the exercise of the Purchase Option.
If not exercised sooner, the Purchase Option with respect to any Defaulted
Mortgage Loan will automatically terminate upon (i) the related borrower's cure
of all defaults on the Defaulted Mortgage Loan, (ii) the acquisition by, or on
behalf of, the Trust Fund of title to the related Mortgaged Property through
foreclosure or deed in lieu of foreclosure, (iii) the modification or pay-off
(full or discounted) of the Defaulted Mortgage Loan in connection with a workout
or (iv) upon a repurchase of a Defaulted Mortgage Loan by the applicable
Mortgage Loan Seller due to the Mortgage Loan Seller's breach of a
representation with respect to such Defaulted Mortgage Loan. In addition, the
Purchase Option with respect to a Defaulted Mortgage Loan held by any person
will terminate upon the exercise of the Purchase Option by any other holder of a
Purchase Option or in the case of a Non-Serviced Mortgage, upon the exercise by
the holder of one of the Companion Loans as described in " -- Servicing of the
Non-Serviced Mortgage Loans -- Certain Rights of the Holder of the Westfield
Shoppingtown Portfolio B Note -- Option to Purchase Westfield Shoppingtown
Portfolio A Notes" and "Certain Rights of the Holder of the Chandler Fashion
Center B Note-- Option to Purchase Chandler Fashion Center A Notes."
If (a) a Purchase Option is exercised with respect to a Defaulted Mortgage
Loan and the person expected to acquire the Defaulted Mortgage Loan pursuant to
such exercise is the Special Servicer or, if the Directing Certificateholder is
affiliated with the Special Servicer, the Directing Certificateholder, or any
affiliate of any of them (in other words, the Purchase Option has not been
assigned to another unaffiliated person) and (b) the Option Price is based on
the Special Servicer's determination of the fair value of the Defaulted Mortgage
Loan, the Servicer will be required to determine, in accordance with the
Servicing Standard, whether the Option Price represents a fair price. The
Servicer will be required to retain, at the expense of the Trust Fund, an
independent third party who is an MAI qualified appraiser or an independent
third party that is of recognized standing having experience in evaluating the
value of defaulted mortgage loans in accordance with the Pooling and Servicing
Agreement, to assist the Servicer to determine if the Option Price represents a
fair price for the Defaulted Mortgage Loan. In
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making such determination and absent manifest error, the Servicer will be
entitled to conclusively rely on the opinion of such person in accordance with
the terms of the Pooling and Servicing Agreement.
If title to any Mortgaged Property is acquired by the Trust, the Special
Servicer, on behalf of the Trust, will be required to sell the Mortgaged
Property prior to the close of the third calendar year following the year in
which the Trust acquires such Mortgaged Property, unless (i) the Internal
Revenue Service grants an extension of time to sell such property or (ii) the
Trustee receives an opinion of independent counsel to the effect that the
holding of the property by the Trust beyond such period will not result in the
imposition of a tax on the Trust or cause the Trust (or any designated portion
thereof) 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, the Special Servicer will generally be required to attempt to sell
any Mortgaged Property so acquired on the same terms and conditions it would if
it were the owner. If title to any Mortgaged Property is acquired by the Special
Servicer on behalf of the Trust, the Special Servicer will also be required to
ensure that the Mortgaged Property is administered so that it constitutes
"foreclosure property" within the meaning of Code Section 860G(a)(8) at all
times that the sale of such property does not result in the receipt by the Trust
of any income from non-permitted assets as described in Code Section
860F(a)(2)(B) with respect to such property. If the Trust acquires title to any
Mortgaged Property, the Special Servicer, on behalf of the Trust, generally will
be required to retain an independent contractor to manage and operate such
property. The retention of an independent contractor, however, will not relieve
the Special Servicer of its obligation to manage such Mortgaged Property as
required under the Pooling and Servicing Agreement.
In general, the Special Servicer will be obligated to cause any Mortgaged
Property acquired as REO Property to be operated and managed in a manner that
would, in its good faith and reasonable judgment and to the extent commercially
feasible, maximize the Trust's net after-tax proceeds from such property. After
the Special Servicer reviews the operation of such property and consults with
the Bond Administrator to determine the Trust's federal income tax reporting
position with respect to income it is anticipated that the Trust would derive
from such property, the Special Servicer could determine, pursuant to the
Pooling and Servicing Agreement, that it would not be commercially feasible to
manage and operate such property in a manner that would avoid the imposition of
a tax on "net income from foreclosure property" within the meaning of the REMIC
Regulations (such tax referred to herein as the "REO Tax"). To the extent that
income the Trust receives from an REO Property is subject to a tax on "net
income from foreclosure property," such income would be subject to federal tax
at the highest marginal corporate tax rate (currently 35%). The determination as
to whether income from an REO Property would be subject to an REO Tax will
depend on the specific facts and circumstances relating to the management and
operation of each REO Property. Any REO Tax imposed on the Trust's income from
an REO Property would reduce the amount available for distribution to
Certificateholders. Certificateholders are advised to consult their own tax
advisors regarding the possible imposition of the REO Tax in connection with the
operation of commercial REO Properties by REMICs. The Special Servicer will be
required to sell any REO Property acquired on behalf of the Trust within the
time period and in the manner described above.
Under the Pooling and Servicing Agreement, the Special Servicer is required
to establish and maintain one or more REO Accounts, to be held on behalf of the
Trustee in trust for the benefit of the Certificateholders, for the retention of
revenues, Liquidation Proceeds (net of related liquidation expenses) other than
Excess Liquidation Proceeds and insurance proceeds derived from each REO
Property. The Special Servicer is required to use the funds in the REO Account
to pay for the proper operation, management, maintenance, disposition and
liquidation of any REO Property, but only to the extent of amounts on deposit in
the REO Account relate to such REO Property. To the extent that amounts in the
REO Account in respect of any REO Property are insufficient to make such
payments, the Servicer is required to make a Property Advance, unless it
determines such Property Advance would be nonrecoverable. Within one business
day following the end of each Collection Period, the Special Servicer is
required to deposit all amounts received in respect of each REO Property during
such Collection Period, net of any amounts withdrawn to make any permitted
disbursements, to the Collection Account, PROVIDED that the Special Servicer may
retain in the REO Account permitted reserves.
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Under the Pooling and Servicing Agreement, the Bond Administrator is
required to establish and maintain an Excess Liquidation Proceeds Account, to be
held on behalf of the Trustee for the benefit of the Certificateholders. Upon
the disposition of any REO Property as described above, to the extent that
Liquidation Proceeds (net of related liquidation expenses of such Mortgage Loan
or related REO Property) exceed the amount that would have been received if a
principal payment and all other amounts due with respect to such Mortgage Loan
has been paid in full on the Due Date immediately following the date on which
proceeds were received (such excess being "Excess Liquidation Proceeds"), such
amount will be deposited in the Excess Liquidation Proceeds Account for
distribution as provided in the Pooling and Servicing Agreement.
MODIFICATIONS
The Special Servicer may agree to any modification, waiver or amendment of
any term of, forgive interest on and principal of, capitalize interest on,
permit the release, addition or substitution of collateral securing any Mortgage
Loan (other than any Non-Serviced Mortgage Loan), and/or permit the release of
the borrower on or any guarantor of any Mortgage Loan and/or permit any change
in the management company or franchise with respect to any Mortgaged Property
(each of the foregoing, a "Modification") without the consent of the Trustee or
any Certificateholder (other than the Directing Certificateholder), subject,
however, to each of the following limitations, conditions and restrictions:
(i) other than with respect to the waiver of late payment charges
or waivers in connection with "due-on-sale" or "due-on-encumbrance"
clauses in the Mortgage Loans, as described under the heading
"--Enforcement of "Due-on-Sale" and "Due-on-Encumbrance" Clauses"
above, the Special Servicer may not agree to any modification, waiver
or amendment of any term of, or take any of the other above referenced
actions with respect to, any Mortgage Loan that would affect the
amount or timing of any related payment of principal, interest or
other amount payable thereunder or, as applicable, in the Special
Servicer's good faith and reasonable judgment, would materially impair
the security for such Mortgage Loan or reduce the likelihood of timely
payment of amounts due thereon or materially alter, substitute or
increase the security for such Mortgage Loan (other than the
alteration or construction of improvements thereon) or any guarantee
or other credit enhancement with respect thereto (other than the
substitution of a similar commercially available credit enhancement
contract), unless, with respect to a Specially Serviced Mortgage Loan,
in the Special Servicer's judgment, a material default on such
Mortgage Loan has occurred or a default in respect of payment on such
Mortgage Loan is reasonably foreseeable, and such modification,
waiver, amendment or other action is reasonably likely to produce a
greater recovery to Certificateholders on a present value basis than
would liquidation;
(ii) the Special Servicer may not extend the maturity of any
Specially Serviced Mortgage Loan to a date occurring later than the
earlier of (A) two years prior to the Rated Final Distribution Date
and (B) if the Specially Serviced Mortgage Loan is secured by a ground
lease, the date 20 years prior to the expiration of the term of such
ground lease (or 10 years prior to the expiration of such ground lease
with the consent of the Directing Certificateholder if the Special
Servicer gives due consideration to the remaining term of the ground
lease);
(iii) the Special Servicer shall not make or permit any
modification, waiver or amendment of any term of any Mortgage Loan
that is not in default or with respect to which default is not
reasonably foreseeable that would (A) be a "significant modification"
of such Mortgage Loan within the meaning of Treasury Regulations
Section 1.860G-2(b) or (B) cause any Mortgage Loan to cease to be a
"qualified mortgage" within the meaning of Section 860G(a)(3) of the
Code (PROVIDED that the Special Servicer shall not be liable for
judgments as regards decisions made under this subsection which were
made in good faith and, unless it would constitute bad faith or
negligence to do so, the Special Servicer may rely on opinions of
counsel in making such decisions);
(iv) the Special Servicer shall not permit any borrower to add or
substitute any collateral for an outstanding Mortgage Loan, which
collateral constitutes real property, unless (i) the Special
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Servicer shall have first determined in its good faith and reasonable
judgment, based upon a Phase I environmental assessment (and such
additional environmental testing as the Special Servicer, as
applicable, deems necessary and appropriate), that such additional or
substitute collateral is in compliance with applicable environmental
laws and regulations and that there are no circumstances or conditions
present with respect to such new collateral relating to the use,
management or disposal of any hazardous materials for which
investigation, testing, monitoring, containment, clean-up or
remediation would be required under any then applicable environmental
laws and/or regulations and (ii) such addition/and or substitution
would not result in the downgrade, qualification or withdrawal of the
rating then assigned by any Rating Agency to any Class of
Certificates; and
(v) with limited exceptions, the Special Servicer shall not
release any collateral securing an outstanding Mortgage Loan; PROVIDED
that notwithstanding clauses (i) through (v) above, the Special
Servicer will not be required to oppose the confirmation of a plan in
any bankruptcy or similar proceeding involving a borrower if in its
reasonable and good faith judgment such opposition would not
ultimately prevent the confirmation of such plan or one substantially
similar.
The Special Servicer is required to obtain the consent of the Directing
Certificateholder to any Modification to the extent described under "--Special
Servicing--The Special Servicer" below.
Subject to the provisions of the Pooling and Servicing Agreement, the
Servicer, with the consent of the Directing Certificateholder, may extend the
maturity of any Mortgage Loan with an original term to maturity of 5 years or
less for up to two six-month extensions; PROVIDED, HOWEVER, that the related
borrower is in default with respect to the Mortgage Loan or, in the judgment of
the Servicer, such default is reasonably foreseeable.
OPTIONAL TERMINATION
Any holder of Certificates representing greater than 50% of the Percentage
Interest of the then Controlling Class, and, if such holder does not exercise
its option, the Servicer, and if the Servicer does not exercise its option, the
Special Servicer; will have the option to purchase all of the Mortgage Loans and
all property acquired in respect of any Mortgage Loan remaining in the Trust,
and thereby effect termination of the Trust and early retirement of the then
outstanding Certificates, on any Distribution Date on which the aggregate Stated
Principal Balance of the Mortgage Loans remaining in the Trust is less than 1%
of the aggregate principal balance of such Mortgage Loans as of the Cut-off
Date. The purchase price payable upon the exercise of such option on such a
Distribution Date will be an amount equal to the greater of (i) the sum of (A)
100% of the outstanding principal balance of each Mortgage Loan included in the
Trust as of the last day of the month preceding such Distribution Date (less any
P&I Advances previously made on account of principal); (B) the fair market value
of all other property included in the Trust as of the last day of the month
preceding such Distribution Date, as determined by an independent appraiser as
of a date not more than 30 days prior to the last day of the month preceding
such Distribution Date; (C) all unpaid interest accrued on such principal
balance of each such Mortgage Loan (including any Mortgage Loans as to which
title to the related Mortgaged Property has been acquired) at the Mortgage Rate
(plus the Excess Rate, to the extent applicable) to the last day of the month
preceding such Distribution Date (less any P&I Advances previously made on
account of interest); and (D) unreimbursed Advances (with interest thereon),
unpaid Servicing Fees and Trustee Fees and unpaid Trust expenses and (ii) the
aggregate fair market value of the Mortgage Loans and all other property
acquired in respect of any Mortgage Loan in the Trust, on the last day of the
month preceding such Distribution Date, as determined by an independent
appraiser acceptable to the Servicer, together with one month's interest thereon
at the Mortgage Rate. The Trust may also be terminated in connection with an
exchange by a sole remaining Certificateholder of all the then outstanding
Certificates, including the interest only certificates (PROVIDED, HOWEVER, that
the Class A through Class E certificates are no longer outstanding), for the
Mortgage Loans remaining in the Trust.
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THE TRUSTEE AND THE BOND ADMINISTRATOR
Wells Fargo Bank Minnesota, N.A. ("Wells Fargo Bank") will act as Trustee
pursuant to the Pooling Agreement. Wells Fargo Bank Minnesota, N.A., a direct,
wholly owned subsidiary of Wells Fargo & Co., is a national banking association
originally chartered in 1872 and is engaged in a wide range of activities
typical of a national bank. Wells Fargo Bank's principal office is located at
Wells Fargo Center, Sixth and Marquette, Minneapolis, Minnesota 55479-0113.
Wells Fargo Bank conducts its trustee administration services at its offices in
Columbia, Maryland. Its address there is 9062 Old Annapolis Road, Columbia,
Maryland 21045-1951. In addition, Wells Fargo Bank maintains a customer service
help desk at (301) 815-6600.
LaSalle Bank National Association will serve as Bond Administrator. In
addition, LaSalle Bank National Association will serve as paying agent and
registrar for the Certificates. The Bond Administrator Fee will equal a portion
of the fee calculated at the Trustee Fee Rate as described in the Pooling and
Servicing Agreement. The office of LaSalle Bank National Association responsible
for performing its duties under the Pooling and Servicing Agreement is located
at 135 South LaSalle Street, Suite 1625, Chicago, Illinois 60603, Attention:
Asset-Backed Securities Trust Services Group, COMM 2003-LNB1. LaSalle Bank
National Association is a Mortgage Loan Seller and an affiliate of ABN AMRO
Incorporated, one of the Underwriters.
The Trustee and the Bond Administrator may resign at any time by giving
written notice to the Depositor, the Bond Administrator (in the case of the
Trustee), the Servicer, the Special Servicer, the Trustee (in the case of the
Bond Administrator) and the Rating Agencies, PROVIDED that no such resignation
shall be effective until a successor has been appointed. Upon such notice, the
Servicer will appoint a successor trustee and the Trustee will appoint a
successor Bond Administrator (which may be the Trustee). If no successor trustee
or successor Bond Administrator is appointed within 30 days after the giving of
such notice of resignation, the resigning Trustee or Bond Administrator may
petition the court for appointment of a successor trustee or successor Bond
Administrator.
The Servicer or the Depositor may remove the Trustee or the Bond
Administrator if, among other things, the Trustee or the Bond Administrator
ceases to be eligible to continue as such under the Pooling and Servicing
Agreement or if at any time the Trustee or the Bond Administrator becomes
incapable of acting, or is adjudged bankrupt or insolvent, or a receiver of the
Trustee or the Bond Administrator or their property is appointed or any public
officer takes charge or control of the Trustee or the Bond Administrator or of
their property. The holders of Certificates evidencing aggregate Voting Rights
of at least 50% of all Certificateholders may remove the Trustee or the Bond
Administrator upon written notice to the Depositor, the Servicer, the Trustee
and the Bond Administrator. Any resignation or removal of the Trustee or the
Bond Administrator and appointment of a successor trustee or successor bond
administrator will not become effective until acceptance of the appointment by
the successor trustee or successor bond administrator. Notwithstanding the
foregoing, upon any termination of the Trustee or the Bond Administrator under
the Pooling and Servicing Agreement, the Trustee or Bond Administrator, as
applicable, will continue to be entitled to receive from the Trust all accrued
and unpaid compensation and expenses through the date of termination plus, in
the case of the Trustee, the reimbursement of all Advances made by the Trustee
and interest thereon as provided in the Pooling and Servicing Agreement. In
addition, if the Trustee or the Bond Administrator is terminated without cause,
the terminating party is required to pay all of the expenses of the Trustee or
the Bond Administrator necessary to effect the transfer of its responsibilities
to the successor trustee or successor bond administrator, as applicable. Any
successor trustee or bond administrator must have a combined capital and surplus
of at least $50,000,000, have debt ratings that satisfy certain criteria set
forth in the Pooling and Servicing Agreement and, so long as any Certificates
are rated by Moody's, such appointment must not result in the downgrade,
qualification or withdrawal of the then-current ratings assigned to the
Certificates, as evidenced in writing by Moody's.
Pursuant to the Pooling and Servicing Agreement, the Trustee will be paid
from the Distribution Account a monthly fee equal to a portion of the fee
calculated at the Trustee Fee Rate as described in the Pooling and Servicing
Agreement (the "Trustee Fee"), which constitutes a portion of the Servicing Fee.
Pursuant to the Pooling and Servicing Agreement, the Bond Administrator will be
paid from the
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Distribution Account a monthly fee equal to a portion of the fee calculated at
the Bond Administrator Fee Rate as described in the Pooling and Servicing
Agreement (the "Bond Administrator Fee"), which constitutes a portion of the
Servicing Fee.
The Trust will indemnify the Trustee and the Bond Administrator against any
and all losses, liabilities, damages, claims or unanticipated expenses
(including reasonable attorneys' fees) arising in respect of the Pooling and
Servicing Agreement or the Certificates other than those resulting from the
fraud, negligence, bad faith or willful misconduct of the Trustee or the Bond
Administrator, as applicable, or to the extent such party is indemnified
pursuant to the second succeeding sentence. Neither the Trustee nor the Bond
Administrator will be required to expend or risk its own funds or otherwise
incur financial liability in the performance of any of its duties under the
Pooling and Servicing Agreement, or in the exercise of any of its rights or
powers, if in the Trustee's or Bond Administrator's opinion, as applicable, the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it. Each of the Servicer, the Special Servicer, the
Depositor, the Paying Agent, the Certificate Registrar and the Custodian will
indemnify the Trustee, the Bond Administrator and certain related parties for
similar losses incurred related to the willful misconduct, bad faith, fraud
and/or negligence in the performance of each such party's respective duties
under the Pooling and Servicing Agreement or by reason of reckless disregard of
its obligations and duties under the Pooling and Servicing Agreement.
At any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust or property securing the same is
located, the Trustee will have the power to appoint one or more persons or
entities approved by the Trustee to act (at the expense of the Trustee) as
co-trustee or co-trustees, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of the Trust, and to vest in such
co-trustee or separate trustee such powers, duties, obligations, rights and
trusts as the Trustee may consider necessary or desirable. Except as required by
applicable law, the appointment of a co-trustee or separate trustee will not
relieve the Trustee of its responsibilities, obligations and liabilities under
the Pooling and Servicing Agreement to the extent set forth therein.
The Bond Administrator will be the REMIC Administrator, as described in the
prospectus. See "Description of the Pooling Agreements--Certain Matters
Regarding the Servicer, the Special Servicer, the REMIC Administrator and the
Depositor" in the prospectus.
DUTIES OF THE TRUSTEE
The Trustee (except for the information under the first paragraph of "--The
Trustee and the Bond Administrator" above) will make no representation as to the
validity or sufficiency of the Pooling and Servicing Agreement, the Certificates
or the Mortgage Loans, this prospectus supplement or related documents. The
Trustee will not be accountable for the use or application by the Depositor, the
Servicer or the Special Servicer of any Certificates issued to it or of the
proceeds of such Certificates, or for the use of or application of any funds
paid to the Depositor, the Servicer or the Special Servicer in respect of the
assignment of the Mortgage Loans to the Trust, or any funds deposited in or
withdrawn from the Lock Box Accounts, Reserve Accounts, Collection Account,
Distribution Account, Interest Reserve Account or any other account maintained
by or on behalf of the Servicer, the Special Servicer or the Bond Administrator,
nor will the Trustee be required to perform, or be responsible for the manner of
performance of, any of the obligations of the Servicer or the Special Servicer
under the Pooling and Servicing Agreement (unless the Trustee has assumed the
duties of the Servicer or the Special Servicer as described above under
"--Rights Upon Event of Default").
If no Event of Default has occurred, and after the curing of all Events of
Default which may have occurred, the Trustee is required to perform only those
duties specifically required under the Pooling and Servicing Agreement. Upon
receipt of the various certificates, reports or other instruments required to be
furnished to it, the Trustee is required to examine such documents and to
determine whether they conform on their face to the requirements of the Pooling
and Servicing Agreement to the extent set forth therein.
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THE SERVICER
GMAC Commercial Mortgage Corporation ("GMACCM") will be responsible for
servicing the Mortgage Loans (other than the Non-Serviced Mortgage Loans)
pursuant to the Pooling and Servicing Agreement. GMACCM is also responsible for
servicing the Chandler Fashion Center Loan pursuant to the GMAC Series 2003-C1
PSA.
As of March 31, 2003, GMACCM was the master servicer of a portfolio of
multifamily and commercial loans totaling approximately $134.9 billion in
aggregate outstanding principal balance. GMACCM's executive offices are located
at 200 Witmer Road, Horsham, Pennsylvania 19044.
The information set forth herein concerning GMACCM, as master servicer, has
been provided by it. Accordingly, neither the Depositor nor the Underwriters
make any representation or warranty as to the accuracy or completeness of such
information.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Pursuant to the Pooling and Servicing Agreement, the Servicer will be
entitled to withdraw the Master Servicing Fee monthly from the Collection
Account. The "Master Servicing Fee" will be payable monthly and will accrue at
0.03% per annum with respect to each Mortgage Loan other than the Non-Serviced
Mortgage Loans (the "Master Servicing Fee Rate"). The "Servicing Fee" will be
payable monthly on a loan-by-loan basis and will accrue at a percentage rate per
annum (the "Servicing Fee Rate") set forth on Annex A-1 to this prospectus
supplement for each Mortgage Loan and will include the Master Servicing Fee, the
Trustee Fee, the Bond Administrator Fee, and any fee for primary servicing
functions (which varies loan by loan). The Master Servicing Fee will be retained
by the Servicer from payments and collections (including insurance proceeds,
condemnation proceeds and liquidation proceeds) in respect of such Mortgage
Loan. The Servicer will also be entitled to retain as additional servicing
compensation (together with the Master Servicing Fee, "Servicing Compensation")
(i) all investment income earned on amounts on deposit in the Collection
Account, the Interest Reserve Account, the Excess Liquidation Proceeds Account
and certain Reserve Accounts (to the extent consistent with the related Mortgage
Loan), (ii) to the extent permitted by applicable law and the related Mortgage
Loans, 50% of any loan modification, extension and assumption fees (for as long
as the Mortgage Loan is not a Specially Serviced Mortgage Loan at which point
the Special Servicer will receive 100% of such fees), loan service transaction
fees, beneficiary statement charges, or similar items (but not including
Prepayment Premiums), (iii) Net Prepayment Interest Excess, if any, and (iv) any
late payment charges collected by the Servicer during a Collection Period on any
non-Specially Serviced Mortgage Loan remaining after application thereof to
reimburse interest on Advances and to reimburse the Trust for certain expenses
of the Trust. If the Mortgage Loan is a Specially Serviced Mortgage Loan, the
Special Servicer will be entitled to the full amount of any modification,
extension or assumption fees, as described below under "--Special Servicing."
The Master Servicing Fee, the Trustee Fee and the Bond Administrator Fee will
accrue on a basis of twelve months of 30 days each.
In connection with any Net Prepayment Interest Shortfall, the Servicer will
be obligated to reduce its Servicing Compensation as provided in this prospectus
supplement under "Description of the Offered
Certificates--Distributions--Prepayment Interest Shortfall."
The Servicer will pay all expenses incurred in connection with its
responsibilities under the Pooling and Servicing Agreement (subject to
reimbursement as described in the Pooling and Servicing Agreement). The Bond
Administrator will withdraw monthly from the Distribution Account the portion of
the Servicing Fee payable to the Trustee and the Bond Administrator.
SPECIAL SERVICING
THE SPECIAL SERVICER.Lennar Partners, Inc., a Florida corporation
("Lennar") and a subsidiary of LNR Property Corporation ("LNR"), will initially
be appointed as special servicer of all of the Mortgage Loans other than the
Non-Serviced Mortgage Loans (the "Special Servicer").
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The principal executive offices of Lennar are located at 1601 Washington
Avenue, Miami Beach, Florida, 33139, and its telephone number is (305) 695-5600.
LNR, its subsidiaries and affiliates are involved in the real estate investment,
finance and management business and engage principally in (i) purchasing,
enhancing, repositioning and/or developing commercial real estate properties,
(ii) purchasing and originating high yielding loans backed by commercial real
estate properties, and (iii) investing in, and managing as special servicer,
unrated and non-investment grade rated commercial mortgage-backed securities
("CMBS").
Lennar and its affiliates have regional offices located across the country
in Florida, Georgia, Oregon and California and in Europe in London, England and
Paris, France.
As of November 30, 2002, Lennar and its affiliates were managing a
portfolio which included an original count of 13,900 assets in most states
across the country and in Europe (France and the United Kingdom) with an
original face value of over $85 billion, most of which are commercial real
estate assets. Included in this managed portfolio are $83 billion of commercial
real estate assets representing 103 securitization transactions, for which
Lennar is master servicer or special servicer.
The Special Servicer may elect to subservice some or all of its special
servicing duties with respect to each of the Mortgage Loans subject to the
consent of the Directing Certificateholder.
The Pooling and Servicing Agreement will provide that more than one Special
Servicer may be appointed, but only one Special Servicer may specially service
any Mortgage Loan.
THE DIRECTING CERTIFICATEHOLDER.The Directing Certificateholder or the
holder or holders of Certificates entitled to more than 50% of the Voting Rights
allocated to the Controlling Class may at any time with or without cause
terminate substantially all of the rights and duties of the Special Servicer and
appoint a replacement to perform such duties under substantially the same terms
and conditions as applicable to the Special Servicer. Such holder(s) shall
designate a replacement to so serve by the delivery to the Trustee of a written
notice stating such designation. The Trustee shall, promptly after receiving any
such notice, so notify the Rating Agencies. If the designated replacement is
acceptable to the Trustee, which approval may not be unreasonably withheld, the
designated replacement shall become the replacement Special Servicer as of the
date the Trustee shall have received: (i) written confirmation from each Rating
Agency stating that if the designated replacement were to serve as Special
Servicer under the Pooling and Servicing Agreement, none of the then-current
rating of any of the outstanding Classes of the Certificates would be qualified,
downgraded or withdrawn as a result thereof; (ii) a written acceptance of all
obligations of such replacement Special Servicer, executed by the designated
replacement; and (iii) an opinion of counsel to the effect that the designation
of such replacement to serve as Special Servicer is in compliance with the
Pooling and Servicing Agreement, that the designated replacement will be bound
by the terms of the Pooling and Servicing Agreement and that the Pooling and
Servicing Agreement will be enforceable against such designated replacement in
accordance with its terms. The prior Special Servicer shall be deemed to have
resigned from its duties under the Pooling and Servicing Agreement in respect of
Specially Serviced Mortgage Loans and REO Properties simultaneously with such
designated replacement's becoming the Special Servicer under the Pooling and
Servicing Agreement. Any replacement Special Servicer may be similarly so
replaced by the holder or holders of Certificates entitled to more than 50% of
the Voting Rights allocated to the Controlling Class.
The "Controlling Class" will be, as of any date of determination, the Class
of Principal Balance Certificates with the latest alphabetical Class designation
that has a then aggregate Certificate Balance at least equal to 25% of the
initial aggregate Certificate Balance of such Class of Principal Balance
Certificates as of the Closing Date. As of the Closing Date, the Controlling
Class will be the Class P Certificates. For purposes of determining the
Controlling Class, the Class A-1, Class A-2 and Class A-1A Certificates
collectively will be treated as one Class.
The "Directing Certificateholder" will be the Controlling Class
Certificateholder selected by more than 50% of the Controlling Class
Certificateholders, by Certificate Balance, as certified by the Bond
Administrator from time to time; PROVIDED, HOWEVER, that (i) absent such
selection, or (ii) until a Directing Certificateholder is so selected or (iii)
upon receipt of a notice from a majority of the Controlling Class
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Certificateholders, by Certificate Balance, that a Directing Certificateholder
is no longer designated, theontrolling Class Certificateholder that owns the
largest aggregate Certificate Balance of the Controlling Class will be the
Directing Certificateholder.
A "Controlling Class Certificateholder" is each holder (or Certificate
Owner, if applicable) of a Certificate of the Controlling Class as certified to
the Bond Administrator from time to time by such holder (or Certificate Owner).
SERVICING TRANSFER EVENT.The duties of the Special Servicer relate to
Specially Serviced Mortgage Loans and to any REO Property. The Pooling and
Servicing Agreement will define a "Specially Serviced Mortgage Loan" to include
any Mortgage Loan (other than any Non-Serviced Mortgage Loan) with respect to
which: (i) either (x) with respect to any Mortgage Loan other than a Balloon
Loan, a payment default shall have occurred on such Mortgage at its Maturity
Date or, if the Maturity Date of such Mortgage has been extended in accordance
herewith, a payment default occurs on such Mortgage Loan at its extended
Maturity Date or (y) with respect to a Balloon Loan, a payment default shall
have occurred with respect to the related Balloon Payment and, with the consent
of the Directing Certificateholder, shall have continued for a period of at
least 30 days, as may be extended by the Special Servicer, with the consent of
the Directing Certificateholder for an additional 60-day period; PROVIDED,
HOWEVER, that if (a) the related borrower continues to make its Assumed
Scheduled Payment and within 30 days after such default delivers a statement to
the effect that it is diligently pursuing refinancing, (b) no other Servicing
Transfer Event shall have occurred with respect to such Mortgage Loan and (c)
within 90 days after such default, the related borrower delivers a binding
financing commitment reasonably acceptable to the Special Servicer and the
Directing Certificateholder and provided further, the Special Servicer, with the
consent of the Directing Certificateholder once an acceptable binding financing
commitment has been received within such 90 day period, may extend such period
for a period not to exceed 120 days after such default; (ii) any Monthly Payment
(other than a Balloon Payment) is 60 days or more delinquent; (iii) the date
upon which the Servicer or Special Servicer (with the Directing
Certificateholder's consent) determines that a payment default is imminent and
is not likely to be cured by the related borrower within 60 days or, except as
provided in clause (i) (y) above in, the case of a Balloon Payment, for at least
30 days, (iv) the date upon which a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises in an involuntary case
under any present or future federal or state bankruptcy, insolvency or similar
law, or the appointment of a conservator, receiver or liquidator in any
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs, and
being entered against the related borrower, provided that if such decree or
order shall have been dismissed, discharged or stayed within 60 days thereafter,
the Mortgage Loan shall no longer be a Specially Serviced Mortgage Loan and no
Special Servicing Fees shall be payable with respect thereto; (v) the related
borrower will consent to the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings of or relating to such borrower of or
relating to all or substantially all of its property; (vi) the related borrower
will admit in writing its inability to pay its debts generally as they become
due, file a petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of its creditors, or
voluntarily suspend payment of its obligations; (vii) a default of which the
Servicer has notice (other than a failure by such related borrower to pay
principal or interest) and which in the opinion of the Servicer materially and
adversely affects the interests of the Certificateholders has occurred and
remained unremedied for the applicable grace period specified in such Loan (or
if no grace period is specified for those defaults which are capable of cure, 60
days); or (viii) the Servicer or Special Servicer has received notice of the
foreclosure or proposed foreclosure of any lien on the related Mortgaged
Property; PROVIDED, HOWEVER, that a Mortgage Loan will cease to be a Specially
Serviced Mortgage Loan (each, a "Corrected Mortgage Loan") (i) with respect to
the circumstances described in clauses (i), (ii), and (vii) above, when the
borrower thereunder has brought the Mortgage Loan current and thereafter made
three consecutive full and timely monthly payments, including pursuant to any
workout of the Mortgage Loan, (ii) with respect to the circumstances described
in clause (iii), (iv) and (v) above, when such circumstances cease to exist in
the good faith judgment of the Special Servicer or with respect to the
circumstances described in clause (vi) above, when such default is cured;
provided, in each case, that at that time no circumstance exists (as described
above) that would cause the Mortgage Loan to
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continue to be characterized as a Specially Serviced Mortgage Loan. With respect
to the circumstancesdescribed in clause (vii) above, if the related borrower
continues to make its Assumed Scheduled Payment and diligently pursues
refinancing, the Servicer will not be required to transfer its servicing
responsibilities with respect to such balloon loan until 90 days (or, if the
borrower has produced a written refinancing commitment that is reasonably
acceptable to the Special Servicer and the Directing Certificateholder has given
its consent, 150 days) following the date payment was due.
ASSET STATUS REPORT.The Special Servicer will prepare a report (an "Asset
Status Report") for each Mortgage Loan which becomes a Specially Serviced
Mortgage Loan not later than 30 days after the servicing of such Mortgage Loan
is transferred to the Special Servicer. Each Asset Status Report will be
delivered to the Servicer, the Directing Certificateholder and the Rating
Agencies. If the Directing Certificateholder does not disapprove an Asset Status
Report within 10 business days, the Special Servicer shall implement the
recommended action as outlined in such Asset Status Report; PROVIDED, HOWEVER,
that the Special Servicer may not take any actions that are contrary to
applicable law or the terms of the applicable Mortgage Loan Documents. The
Directing Certificateholder may object to any Asset Status Report within 10
business days of receipt; PROVIDED, HOWEVER, that the Special Servicer will be
required to implement the recommended action as outlined in the Asset Status
Report if it makes a determination in accordance with the Servicing Standard
that the objection is not in the best interests of all the Certificateholders.
If the Directing Certificateholder disapproves such Asset Status Report and the
Special Servicer has not made the affirmative determination described above, the
Special Servicer will revise such Asset Status Report as soon as practicable
thereafter, but in no event later than 30 business days after such disapproval.
In any event, if the Directing Certificateholder does not approve an Asset
Status Report within 60 business days from the first submission of an Asset
Status Report, the Special Servicer may act upon the most recently submitted
form of Asset Status Report and in compliance with the Servicing Standard. The
Directing Certificateholder is required to act promptly in order to finalize the
Asset Status Report. The Special Servicer will revise such Asset Status Report
until the Directing Certificateholder fails to disapprove such revised Asset
Status Report as described above or until the Special Servicer makes a
determination, consistent with the Servicing Standard, that such objection is
not in the best interests of all the Certificateholders.
CERTAIN RIGHTS OF THE DIRECTING CERTIFICATEHOLDERIn addition to its rights
and obligations with respect to Specially Serviced Mortgage Loans, the Special
Servicer has the right to approve any Modification, whether or not the
applicable Mortgage Loan is a Specially Serviced Mortgage Loan, to the extent
described above under "--Modifications" and to approve any waivers of
due-on-sale or due-on-encumbrance clauses as described above under
"--Enforcement of "Due-on-Sale" and "Due-on Encumbrance" Clauses," whether or
not the applicable Mortgage Loan is a Specially Serviced Mortgage Loan. With
respect to non-Specially Serviced Mortgage Loans, the Servicer must notify the
Special Servicer of any request for approval (a "Request for Approval") received
relating to the Special Servicer's above-referenced approval rights and forward
to the Special Servicer its written recommendation, analysis and any other
information or documents reasonably requested by the Special Servicer (to the
extent such information or documents are in the Servicer's possession). The
Special Servicer will have 10 business days to analyze and make a recommendation
with respect to a Request for Approval with respect to a non-Specially Serviced
Mortgage Loan and, immediately following such 10 business day period, is
required to notify the Directing Certificateholder of such Request for Approval
and its recommendation with respect thereto. Following such notice, the
Directing Certificateholder will have 5 business days to approve any
recommendation of the Special Servicer relating to any Request for Approval. In
any event, if the Directing Certificateholder does not respond to a Request for
Approval within the required 5 business days, the Special Servicer may deem its
recommendation approved by the Directing Certificateholder. With respect to a
Specially Serviced Mortgage Loan, the Special Servicer shall use the Asset
Status Report procedures described above to address requests for approvals of
Modifications or waivers of due-on-sale or due-on-encumbrance clauses.
The Controlling Class may have conflicts of interest with other Classes of
Certificates or with the Trust. The Directing Certificateholder has no duty to
act in the interests of any Class other than the Controlling Class.
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The Special Servicer will not be required to take or refrain from taking
any action pursuant to instructions from the Directing Certificateholder that
would cause it to violate applicable law, the Pooling and Servicing Agreement,
including the Servicing Standard, or the REMIC Regulations.
The Servicer and the Special Servicer, as applicable, will be required to
discuss with the Directing Certificateholder, on a monthly basis, the
performance of any Mortgage Loan which is a Specially Serviced Mortgage Loan, is
delinquent, has been placed on a "Watch List" or has been identified by the
Servicer or Special Servicer, as exhibiting deteriorating performance.
SPECIAL SERVICING COMPENSATION.Pursuant to the Pooling and Servicing
Agreement, the Special Servicer will be entitled to certain fees including a
special servicing fee, payable with respect to each Collection Period, equal to
0.25% per annum of the Stated Principal Balance of each related Specially
Serviced Mortgage Loan (the "Special Servicing Fee"). A "Workout Fee" will in
general be payable to the Special Servicer with respect to each Mortgage Loan
(other than any Non-Serviced Mortgage Loan) that ceases to be a Specially
Serviced Mortgage Loan pursuant to the definition thereof. As to each such
Mortgage Loan (other than any Non-Serviced Mortgage Loan), the Workout Fee will
be payable out of, and will be calculated by application of a "Workout Fee Rate"
of 1.0% to, each collection of interest and principal (including scheduled
payments, prepayments, Balloon Payments and payments at maturity) received on
such Mortgage Loan for so long as it remains a Corrected Mortgage Loan. The
Workout Fee with respect to any such Mortgage Loan will cease to be payable if
such loan again becomes a Specially Serviced Mortgage Loan or if the related
Mortgaged Property becomes an REO Property; PROVIDED that a new Workout Fee will
become payable if and when such Mortgage Loan again ceases to be a Specially
Serviced Mortgage Loan. If the Special Servicer is terminated (other than for
cause) or resigns with respect to any or all of its servicing duties, it shall
retain the right to receive any and all Workout Fees payable with respect to
Mortgage Loans that cease to be Specially Serviced Mortgage Loans during the
period that it had responsibility for servicing Specially Serviced Mortgage
Loans and that had ceased being Specially Serviced Mortgage Loans at the time of
such termination or resignation (and the successor Special Servicer shall not be
entitled to any portion of such Workout Fees), in each case until the Workout
Fee for any such loan ceases to be payable in accordance with the preceding
sentence. A "Liquidation Fee" will be payable to the Special Servicer with
respect to each Specially Serviced Mortgage Loan as to which the Servicer
obtains a full, partial, or discounted payoff from the related borrower and,
except as otherwise described below, with respect to any Specially Serviced
Mortgage Loan or REO Property as to which the Special Servicer recovered any
proceeds ("Liquidation Proceeds"). As to each such Specially Serviced Mortgage
Loan and REO Property, the Liquidation Fee will be payable from, and will be
calculated by application of a "Liquidation Fee Rate" of 1.0% to, the related
payment or proceeds; PROVIDED, HOWEVER, that with respect to a mortgage loan
that has been repurchased by the Mortgage Loan Seller after the expiration of
the 90-day period described above under " -- Representations and Warranties;
Repurchase; Substitution", such Liquidation Fee Rate will be 0.25%.
Notwithstanding anything to the contrary described above, no Liquidation Fee
will be payable based on, or out of, Liquidation Proceeds received in connection
with the purchase of any Specially Serviced Mortgage Loan or REO Property by the
Servicer, the Special Servicer, any Mortgage Loan Seller or any holder of
Certificates evidencing a majority interest in the Controlling Class or the
purchase of all of the Mortgage Loans and REO Properties by the Servicer or the
majority holder of the then Controlling Class in connection with the termination
of the Trust. If, however, Liquidation Proceeds are received with respect to any
Specially Serviced Mortgage Loan to which the Special Servicer is properly
entitled to a Workout Fee, such Workout Fee will be payable based on and out of
the portion of such Liquidation Proceeds that constitute principal and/or
interest. In addition, the Special Servicer will be entitled to receive (i) any
loan modification, extension and assumption fees related to the Specially
Serviced Mortgage Loans, (ii) any income earned on deposits in the REO Accounts,
(iii) 50% of any modification, extension and assumption fees of non-Specially
Serviced Mortgage Loans, and (iv) any late payment charges collected by the
Servicer during a Collection Period on any Specially Serviced Mortgage Loan
remaining after application thereof during such Collection Period to reimburse
interest on Advances and to reimburse the Trust for certain expenses of the
Trust.
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SERVICING OF THE NON-SERVICED MORTGAGE LOANS
GENERAL
The Westfield Shoppingtown Portfolio Loan, the related Companion Loans and
any related REO Property are being serviced under the GECCMC Series 2002-3 PSA.
The Chandler Fashion Center Loan, the related Companion Loans and any related
REO Property are being serviced under the GMAC Series 2003-C1 PSA (an "Other
PSA" and collectively with the GECCMCSeries 2002-3 PSA, the "Other PSAs"). These
Other PSAs provide for servicing in a manner acceptable for rated transactions
similar in nature to this securitization. The servicing arrangements under the
Other PSAs are generally similar but not identical to the servicing arrangements
under the Pooling and Servicing Agreement.
Except in the case of P&I Advances on the Chandler Fashion Center Loan as
described under "The Pooling and Servicing Agreement--Advances" in this
prospectus supplement, advances and remittances of collections with respect to
each Non-Serviced Mortgage Loan will be made pursuant to the applicable Other
PSA by the related master servicer or other paying agent under such Other PSA.
CERTAIN RIGHTS OF THE HOLDER OF THE WESTFIELD SHOPPINGTOWN PORTFOLIO B NOTE
The holder of the Westfield Shoppingtown Portfolio B Note will have certain
rights and powers with respect to the Westfield Shoppingtown Portfolio Loan,
pursuant to the Westfield Shoppingtown Portfolio Co-Lender Agreement and the
GECCMC Series 2002-3 PSA. Certain of such rights are set forth below:
CONSULTATION AND CONSENT RIGHTS.Pursuant to the related intercreditor
agreement, for so long as the holder of the Westfield Shoppingtown Portfolio B
Note is the "controlling holder" under the related intercreditor agreement (as
described below), neither the 2002-3 Master Servicer nor the 2002-3 Special
Servicer will, in general, be permitted to take any of the following actions
with respect to the Westfield Shoppingtown Portfolio Whole Loan as to which the
holder of the Westfield Shoppingtown B Note has objected in writing within 10
business days of having been notified in writing of the particular action and
having been provided with all reasonably requested information with respect to
the particular action:
o any foreclosure upon or comparable conversion, which may include
acquisition of a Westfield Shoppingtown Portfolio Mortgaged Property
if the Westfield Shoppingtown Portfolio Whole Loan comes into and
continues in default;
o any modification, extension, amendment or waiver of a monetary term,
including the timing of payments, or any material non-monetary term
(including any material term relating to insurance) of the Westfield
Shoppingtown Portfolio Loan;
o any proposed sale of a related REO Property, other than in connection
with the termination of the Trust as described under "Description of
the Pooling and Servicing Agreement-Optional Termination" in this
prospectus supplement;
o any acceptance of a discounted payoff with respect to the Westfield
Shoppingtown Portfolio A-1 Note (or if such note is no longer
outstanding, then the Westfield Shoppingtown Portfolio Loan);
o any determination to bring a Westfield Shoppingtown Portfolio
Mortgaged Property, into compliance with applicable environmental laws
or to otherwise address hazardous materials located at that property;
o any release of collateral for the Westfield Shoppingtown Portfolio
Loan, (other than in accordance with the terms of, or upon
satisfaction of, that mortgage loan), other than releases in the
nature of a curb cut, a non-material easement, right-of-way or other
non-material portion of the collateral securing the Westfield
Shoppingtown Portfolio Whole Loan;
o any acceptance of substitute or additional collateral for the
Westfield Shoppingtown Portfolio Loan, other than in accordance with
the terms of that mortgage loan;
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o any waiver of a due-on-sale or due-on-encumbrance clause with respect
to the Westfield Shoppingtown Portfolio Loan;
o any acceptance of an assumption agreement releasing a borrower from
liability under the Westfield Shoppingtown Portfolio Loan; and
o any renewal or replacement of the then-existing insurance policies (to
the extent such renewal or replacement policy does not comply with the
terms of the related mortgage loan documents) or any waiver,
modification or amendment of any insurance requirements under the
mortgage loan documents.
In addition, the holder of the Westfield Shoppingtown Portfolio B Note may
direct the 2002-3 Master Servicer or the 2002-3 Special Servicer, as applicable,
to take, or to refrain from taking, any action with respect to the servicing
and/or administration of the Westfield Shoppingtown Portfolio Loan that the
Westfield Shoppingtown B Noteholder may consider advisable or as to which
provision is otherwise made in the GECCMC Series 2002-3 PSA.
Notwithstanding the foregoing, no advice, direction or objection given or
made by the holder of the Westfield Shoppingtown Portfolio B Note, as
contemplated by either of the two proceeding paragraphs, may require or cause
the 2002-3 Master Servicer or the 2002-3 Special Servicer to violate any other
provision of the GECCMC Series 2002-3 PSA (including the 2002-3 Master
Servicer's and the 2002-3 Special Servicer's obligation to act in accordance
with the Servicing Standard (as defined in the GECCMC Series 2002-3 PSA)), the
related Mortgage Loan Documents or applicable law. Furthermore, the 2002-3
Special Servicer will not be obligated to seek approval from the holder of the
Westfield Shoppingtown Portfolio B Note for any actions to be taken by the
2002-3 Master Servicer or the 2002-3 Special Servicer if--
(i) the 2002-3 Master Servicer or 2002-3 Special Servicer, as
applicable, has, as described above, notified the holder of the
Westfield Shoppingtown Portfolio B Note in writing of various actions
that the 2002-3 Master Servicer or 2002-3 Special Servicer, as
applicable, proposes to take with respect to the workout or
liquidation of the Westfield Shoppingtown Portfolio A-1 Note (or if
such note is no longer outstanding, then the Westfield Shoppingtown
Portfolio Loan), and
(ii) for 60 days following the first of those notices, the holder
of the Westfield Shoppingtown Portfolio B Note has objected to all of
those proposed actions and has failed to suggest any alternative
actions that the 2002-3 Master Servicer or the 2002-3 Special Servicer
considers to be consistent with the Servicing Standard (as defined in
the GECCMC Series 2002-3 PSA).
Also, notwithstanding the foregoing, if the unpaid principal amount of the
Westfield Shoppingtown Portfolio B Note, net of any existing related Appraisal
Reduction Amount (as defined in the GECCMC Series 2002-3 PSA) with respect to
the Westfield Shoppingtown Portfolio Whole Loan (calculated with respect to the
Westfield Shoppingtown Portfolio Whole Loan as if it were a single mortgage
loan), is less than 25% of the original unpaid principal amount of the Westfield
Shoppingtown Portfolio B Note, then the holder of the Westfield Shoppingtown
Portfolio B Note will not be entitled to exercise any of the rights and powers
described above with respect to the Westfield Shoppingtown Portfolio Whole Loan
and, instead, the holder of the majority interest in the then controlling class
under the GECCMC Series 2002-3 PSA or its designee will be entitled to exercise
those rights and powers with respect to the Westfield Shoppingtown Portfolio
Whole Loan until the Westfield Shoppingtown Portfolio A-1 Note has been repaid
in full. Upon the repayment in full of the Westfield Shoppingtown Portfolio A-1
Note, the Directing Certificateholder as described in this prospectus supplement
will be entitled to exercise such rights.
OPTION TO PURCHASE WESTFIELD SHOPPINGTOWN PORTFOLIO A NOTES.If the
Westfield Shoppingtown Portfolio Loan has become a Specially Serviced Mortgage
Loan (as defined in the GECCMC Series 2002-3 PSA) and, any scheduled payment of
principal and/or interest on the Westfield Shoppingtown Portfolio Loan or any
other Westfield Shoppingtown Portfolio Note is at least 60 days delinquent, the
holder of the Westfield Shoppingtown Portfolio B Note or its designee will be
entitled to purchase the Westfield Shoppingtown Portfolio Loan from the Trust at
a price generally equal to the outstanding
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principal balance thereof, together with interest accrued and unpaid thereon,
accrued and unpaid servicing compensation, unreimbursed advances (with interest
thereon) made with respect thereto and all expenses associated with such
purchase. This purchase option will terminate upon the foreclosure of a
Westfield Shoppingtown Portfolio Mortgaged Property or the acceptance of a deed
in lieu of foreclosure with respect to a Westfield Shoppingtown Portfolio
Mortgaged Property.
CERTAIN RIGHTS OF THE HOLDER OF THE CHANDLER FASHION CENTER B NOTE
The holder of the Chandler Fashion Center B Note will have certain rights
and powers with respect to the Chandler Fashion Center Whole Loan, pursuant to
the Chandler Fashion Center Intercreditor Agreement and the GMAC Series 2003-C1
PSA. Certain of such rights are set forth below:
CONSULTATION AND CONSENT RIGHTS; OPERATING ADVISOR.The holder of the
Chandler Fashion Center B Note, unless such holder is an affiliate of the
related borrower, will have the right at any time to appoint, and to remove and
replace, a Chandler Fashion Center operating advisor with respect to the
Chandler Fashion Center Loan (the "Chandler Fashion Center Operating Advisor").
Unless a Chandler Fashion Center Change of Control Event has occurred and is
continuing, then, at all times when a Chandler Fashion Center Operating Advisor
is serving with respect to the Chandler Fashion Center Whole Loan, (i) the
2003-C1 Special Servicer will be required to consult with the Chandler Fashion
Center Operating Advisor upon the occurrence of any event of default for such
mortgage loan under the related mortgage loan documents to consider alternative
actions recommended by the Chandler Fashion Center Operating Advisor and to
consult with the Chandler Fashion Center Operating Advisor with respect to
certain determinations made by the 2003-C1 Special Servicer pursuant to the GMAC
Series 2003-C1 PSA, (ii) at any time (whether or not an event of default for
such mortgage loan under the related mortgage loan documents has occurred) the
2003-C1 Master Servicer and the 2003-C1 Special Servicer will be required to
consult with the Chandler Fashion Center Operating Advisor (1) with respect to
proposals to take any significant action with respect to such Chandler Fashion
Center Loan and the related mortgaged property and to consider alternative
actions recommended by the Chandler Fashion Center Operating Advisor and (2) to
the extent that the related Mortgage Loan Documents grant the lender the right
to approve budgets for the related Mortgaged Property, prior to approving any
such budget and (iii) prior to taking any of the following actions with respect
to the Chandler Fashion Center Loan, the 2003-C1 Master Servicer and the 2003-C1
Special Servicer will notify in writing the Chandler Fashion Center Operating
Advisor of any proposal to take any of such actions (and provide such Chandler
Fashion Center Operating Advisor with such information reasonably requested as
may be necessary in the reasonable judgment of such Chandler Fashion Center
Operating Advisor in order to make a judgment) and receive the written approval
of such Chandler Fashion Center Operating Advisor (which approval may be
withheld in its sole discretion) with respect to:
o any modification or waiver of any term of the related Mortgage Loan
Documents that relates to the maturity date, mortgage rate, principal
balance, amortization term, payment frequency, any provision requiring
the payment of a prepayment premium, exit fee or yield maintenance
charge, or a modification or waiver of any provision which restricts
the related borrower from incurring additional indebtedness or from
transferring the related mortgaged property;
o any modification or amendment of, or waiver that would result in a
discounted pay-off;
o any proposed or actual foreclosure upon or comparable conversion
(which may include acquisitions of an REO Property) of the ownership
of the property securing such specially serviced mortgage loan as
comes into and continues in default;
o any proposed or actual sale of the related REO property (other than in
connection with the termination of the trust fund formed pursuant to
the GMAC Series 2003-C1 PSA or pursuant to the fair value option
governed by such pooling and servicing agreement);
o any release of the related borrower, any guarantor or other obligor
from liability;
o any waiver of a "due-on-sale" or "due-on-encumbrance" clause;
o any determination to bring the related REO property into compliance
with applicable environmental laws or to otherwise address hazardous
materials located at an REO property;
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o any acceptance of substitute or additional collateral for such
mortgage loan unless required by the underlying loan documents;
o adoption or approval of a plan in a bankruptcy of the borrower;
o consenting to the execution, termination or renewal of any major lease
at the related Mortgaged Property; or
o any renewal or replacement of the then-existing insurance policies (to
the extent the lender's approval is required under the related
mortgage loan documents) or any waiver, modification or amendment of
any insurance requirements under the related mortgage loan documents;
PROVIDED that, in the event that the related Chandler Fashion Center
Operating Advisor fails to notify the 2003-C1 Special Servicer or the 2003-C1
Master Servicer, as applicable, of its approval or disapproval of any such
proposed action within 10 business days of delivery to such Chandler Fashion
Center Operating Advisor by the 2003-C1 Special Servicer or 2003-C1 Master
Servicer, as applicable, of written notice of such a proposed action, together
with the information reasonably requested by such Chandler Fashion Center
Operating Advisor, such action shall be deemed to have been approved by such
Chandler Fashion Center Operating Advisor.
Notwithstanding any direction to, or approval or disapproval of, or right
to give direction to or to approve or disapprove, an action of, the 2003-C1
Special Servicer or the 2003-C1 Master Servicer by the Chandler Fashion Center
Operating Advisor, in no event shall the 2003-C1 Master Servicer or the 2003-C1
Special Servicer take any action or refrain from taking any action which would
violate any law of any applicable jurisdiction, be inconsistent with the
servicing standard set forth in the GMAC Series 2003-C1 PSA, violate the REMIC
provisions or violate any other provisions of the GMAC Series 2003-C1 PSA or the
related Mortgage Loan Documents.
Upon the occurrence and continuance of a Chandler Fashion Center Change of
Control Event, the Directing Certificateholder and the majority holder of the
then controlling class pursuant to the GMAC Series 2003-C1 PSA (the "Other
Directing Certificateholder") will instead concurrently be entitled to exercise
the foregoing rights and powers of the Chandler Fashion Center Operating
Advisor, but in the event that the Directing Certificateholder and such Other
Directing Certificateholder give conflicting consents or directions to the
2003-C1 Master Servicer or the 2003-C1 Special Servicer, as applicable, and both
such directions satisfy the servicing standard set forth in the GMAC Series
2003-C1 PSA (as determined by an operating advisor jointly appointed by the
Directing Certificateholder and such Other Directing Certificateholder), the
2003-C1 Master Servicer or the 2003-C1 Special Servicer, as applicable, will be
required to follow the directions of such jointly appointed operating advisor.
CURE RIGHTS.in the event that the borrower fails to make any payment of
principal or interest on the Chandler Fashion Center Loan, resulting in a
monetary event of default, the holder of the Chandler Fashion Center B Note,
PROVIDED that it is not an affiliate of the borrower, will have the right to
cure such monetary event of default within five business days following the
first notice of such monetary event of default subject to certain limitations
set forth in the GMAC Series 2003-C1 PSA.
OPTION TO PURCHASE CHANDLER FASHION CENTER A NOTES.The holder of the
Chandler Fashion Center B Note has the option of purchasing the Chandler Fashion
Center Loan from the Trust, together with the Chandler Fashion Center A-1 Note,
(a) so long as a Chandler Fashion Center Change of Control Event has occurred
and is continuing or (b) at any time that the Chandler Fashion Center Whole Loan
is a specially serviced mortgage loan (as defined in the GMACSeries 2003-C1
PSA), PROVIDED that no foreclosure sale by power of sale or delivery of a deed
in lieu of foreclosure with respect to the related Mortgaged Property has
occurred. The purchase price paid by the Chandler Fashion Center B Note will
generally equal the aggregate outstanding principal balance of the Chandler
Fashion Center Loan and the Chandler Fashion Center A-1 Note, together with
accrued and unpaid interest thereon (excluding default interest), any
unreimbursed advances, together with unreimbursed interest thereon, relating to
the Chandler Fashion Center Whole Loan, and, if such purchase price is being
paid more than 90 days after the event giving rise to the holder of the Chandler
Fashion Center B Note's purchase, a 1% liquidation fee.
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TERMINATION OF THE SPECIAL SERVICER.So long as no Chandler Fashion Center B
Note Change of Control Event has occurred and is continuing, the holder of the
Chandler Fashion Center B Note is permitted to terminate, at its expense, the
special servicer for the Chandler Fashion Center Whole Loan at any time with or
without cause, and to appoint a replacement special servicer, subject to
satisfaction of the conditions contained in the GMAC Series 2003-C1 PSA.
SERVICER AND SPECIAL SERVICER PERMITTED TO BUY CERTIFICATES
GMACCM, the initial Servicer and LNR, the initial Special Servicer, are
permitted to purchase any Class of Certificates. Such a purchase by the Servicer
or Special Servicer could cause a conflict relating to the Servicer's or Special
Servicer's duties pursuant to the Pooling and Servicing Agreement and the
Servicer's or Special Servicer's interest as a holder of Certificates,
especially to the extent that certain actions or events have a disproportionate
effect on one or more Classes of Certificates. The Pooling and Servicing
Agreement provides that the Servicer or Special Servicer will administer the
Mortgage Loans in accordance with the Servicing Standard, without regard to
ownership of any Certificate by the Servicer or Special Servicer or any
affiliate thereof.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
BOND ADMINISTRATOR REPORTS
Based on information provided in monthly reports prepared by the Servicer
and the Special Servicer and delivered to the Bond Administrator, the Bond
Administrator will prepare and make available on each Distribution Date to each
Certificateholder, the Depositor, the Servicer, the Special Servicer, the
Trustee, each Underwriter, each Rating Agency and, if requested, any potential
investors in the Certificates (i) a statement (a "Distribution Date Statement"),
(ii) a report containing information regarding the Mortgage Loans as of the end
of the related Collection Period, which report shall contain substantially the
categories of information regarding the Mortgage Loans set forth in this
prospectus supplement in the tables under the caption "Description of the
Mortgage Pool-Certain Terms and Conditions of the Mortgage Loans" and (iii) a
statement with respect to the Extended Due Date Mortgage Loans (as well as the
other Mortgage Loans) reflecting collections of Monthly Payments received by the
Servicer after the related Determination Date but prior to the Servicer
Remittance Date (which the Servicer will provide to the Bond Administrator on
the Servicer Remittance Date).
Certain information regarding the Mortgage Loans will be made accessible at
the website maintained by LaSalle Bank National Association at www.etrustee.net
or such other mechanism as the Bond Administrator may have in place from time to
time.
After all of the Certificates have been sold by the Underwriters, certain
information will be made accessible on the website maintained by the Servicer as
the Servicer may have in place from time to time.
SERVICER REPORTS
The Servicer is required to deliver to the Bond Administrator prior to each
Distribution Date, and the Bond Administrator is to make available to each
Certificateholder, the Depositor, each Underwriter, each Rating Agency, the
Special Servicer, the Directing Certificateholder and, if requested, any
potential investor in the Certificates, on each Distribution Date, the following
six CMSA reports:
(a) A "Comparative Financial Status Report" setting forth, to the
extent such information is provided by the related borrowers, among
other things, the occupancy, revenue, underwritten net operating
income or net cash flow and DSCR for each Mortgaged Property as of the
current Determination Date for each of the following three periods:
(i) the most current trailing twelve months or year to date, (ii) the
previous two full fiscal years (if made available to the Servicer),
and (iii) the "base year" (representing the original underwriting
information used as of the Cut-off Date).
(b) A "Delinquent Loan Status Report" setting forth, among other
things, those Mortgage Loans which, as of the close of business on the
Determination Date immediately preceding the
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respective Distribution Date, were delinquent 30 days to 59 days, 60
days to 89 days, 90 days or more, current but specially serviced, or
in foreclosure but not REO Property.
(c) An "Historical Loan Modification Report" setting forth, among
other things, those Mortgage Loans which, as of the close of business
on the Determination Date immediately preceding the respective
Distribution Date, have been modified pursuant to the Pooling and
Servicing Agreement (i) during the related Collection Period and (ii)
since the Cut-off Date, showing the original and the revised terms
thereof.
(d) An "Historical Liquidation Report" setting forth, among other
things, as of the close of business on the Determination Date
immediately preceding the respective Distribution Date, (i) the
aggregate amount of net liquidation proceeds, both for the current
period and historically, and (ii) the amount of Realized Losses
occurring during the related Collection Period, set forth on a
Mortgage Loan-by-Mortgage Loan basis.
(e) An "REO Status Report" setting forth, among other things, with
respect to each REO Property that was included in the Trust as of the
close of business on the Determination Date immediately preceding the
respective Distribution Date, (i) the acquisition date of such REO
Property, and (ii) the value of the REO Property based on the most
recent appraisal or other valuation thereof available to the Special
Servicer as of such date of determination (including any prepared
internally by the Special Servicer).
(f) A "Watch List" as of the close of business on the
Determination Date immediately preceding the respective Distribution
Date setting forth, among other things, any Mortgage Loan that is in
jeopardy of becoming a Specially Serviced Mortgage Loan.
Subject to the receipt of necessary information from any subservicer, such
loan-by-loan listing will be made available electronically in the form of the
standard CMSA Reports; PROVIDED, HOWEVER, the Bond Administrator will provide
Certificateholders with a written copy of such report upon request. The
information that pertains to Specially Serviced Mortgage Loans and REO
Properties reflected in such reports shall be based solely upon the reports
delivered by the Special Servicer to the Servicer no later than four business
day prior to the related Servicer Remittance Date. Absent manifest error, none
of the Servicer, the Special Servicer, the Bond Administrator or the Trustee
shall be responsible for the accuracy or completeness of any information
supplied to it by a borrower or third party that is included in any reports,
statements, materials or information prepared or provided by the Servicer, the
Special Servicer, the Bond Administrator or the Trustee, as applicable.
The Trustee, the Bond Administrator, the Servicer and the Special Servicer
will be indemnified by the Trust against any loss, liability or expense incurred
in connection with any claim or legal action relating to any statement or
omission based upon information supplied by a borrower or third party under a
Mortgage Loan and reasonably relied upon by such party.
The Servicer is also required to deliver to the Bond Administrator and the
Rating Agencies the following materials:
(a) Annually, on or before June 30 of each year, commencing with
June 30, 2003, with respect to each Mortgaged Property and REO
Property, an "Operating Statement Analysis Report" together with
copies of the related operating statements and rent rolls (but only if
the related borrower is required by the Mortgage to deliver, or has
otherwise agreed to provide such information) for such Mortgaged
Property or REO Property for the preceding calendar year-end, if
available. The Servicer (or the Special Servicer in the case of
Specially Serviced Mortgage Loans and REO Properties) is required to
use its best reasonable efforts to obtain annual and other periodic
operating statements and related rent rolls and promptly update the
Operating Statement Analysis Report.
(b) Within 60 days of receipt by the Servicer (or within 45 days
of receipt by the Special Servicer with respect to any Specially
Serviced Mortgage Loan or REO Property) of annual year-end operating
statements, if any, with respect to any Mortgaged Property or REO
Property, an "NOI Adjustment Worksheet" for such Mortgaged Property
(with the annual operating
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statements attached thereto as an exhibit), presenting the
computations made in accordance with the methodology described in the
Pooling and Servicing Agreement to "normalize" the full year-end net
operating income or net cash flow and debt service coverage numbers
used by the Servicer or Special Servicer in the other reports
referenced above.
The Bond Administrator is to make available a copy of each Operating
Statement Analysis Report and NOI Adjustment Worksheet that it receives from the
Servicer upon request to the Depositor, each Underwriter, the Directing
Certificateholder, each Rating Agency, the Certificateholders and the Special
Servicer promptly after its receipt thereof. Any potential investor in the
Certificates may obtain a copy of any NOI Adjustment Worksheet for a Mortgaged
Property or REO Property in the possession of the Bond Administrator upon
request.
In addition, within a reasonable period of time after the end of each
calendar year, the Bond Administrator is required to send to each person who at
any time during the calendar year was a Certificateholder of record, a report
summarizing on an annual basis (if appropriate) certain items provided to
Certificateholders in the monthly Distribution Date Statements and such other
information as may be reasonably required to enable such Certificateholders to
prepare their federal income tax returns. The Bond Administrator will also make
available information regarding the amount of original issue discount accrued on
each Class of Certificate held by persons other than holders exempted from the
reporting requirements and information regarding the expenses of the Trust.
OTHER INFORMATION
The Pooling and Servicing Agreement requires that the Bond Administrator
make available at its offices, during normal business hours, for review by any
Holder of a Certificate, the Depositor, the Servicer, the Special Servicer, any
Rating Agency or any potential investor in the Certificates, originals or copies
of, among other things, the following items (except to the extent not permitted
by applicable law or under any of the Mortgage Loan Documents): (i) the Pooling
and Servicing Agreement and any amendments thereto, (ii) all Distribution Date
Statements made available to holders of the relevant Class of Offered
Certificates since the Closing Date, (iii) all annual officers' certificates and
accountants' reports delivered by the Servicer and the Special Servicer to the
Bond Administrator since the Closing Date regarding compliance with the relevant
agreements, (iv) the most recent property inspection report prepared by or on
behalf of the Servicer or the Special Servicer with respect to each Mortgaged
Property and delivered to the Bond Administrator, (v) the most recent annual (or
more frequent, if available) operating statements, rent rolls (to the extent
such rent rolls have been made available by the related borrower) and/or lease
summaries and retail "sales information," if any, collected by or on behalf of
the Servicer or the Special Servicer with respect to each Mortgaged Property and
delivered to the Bond Administrator, (vi) any and all modifications, waivers and
amendments of the terms of a Mortgage Loan entered into by the Servicer and/or
the Special Servicer and delivered to the Bond Administrator, and (vii) any and
all officers' certificates and other evidence delivered to or by the Bond
Administrator to support the Servicer's, the Special Servicer's or the
Trustee's, as the case may be, determination that any Advance, if made, would
not be recoverable. Copies of any and all of the foregoing items will be
available upon request at the expense of the requesting party from the Bond
Administrator to the extent such documents are in the Bond Administrator's
possession.
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USE OF PROCEEDS
The net proceeds from the sale of Offered Certificates will be used by the
Depositor to pay part of the purchase price of the Mortgage Loans.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary and the discussion in the Prospectus under the
heading "Certain Federal Income Tax Consequences--Federal Income Tax
Consequences for REMIC Certificates" are a general discussion of the anticipated
material federal income tax consequences of the purchase, ownership and
disposition of the Offered Certificates and constitute the opinion of
Cadwalader, Wickersham & Taft LLP as to the accuracy of matters discussed herein
and therein. The summary below and such discussion in the Prospectus do not
purport to address all federal income tax consequences that may be applicable to
particular categories of investors, some of which may be subject to special
rules. In addition, such summary and such discussion do not address state, local
or foreign tax issues with respect to the acquisition, ownership or disposition
of the Offered Certificates. The authorities on which such summary and such
discussion are based are subject to change or differing interpretations, and any
such change or interpretation could apply retroactively. Such summary and such
discussion are based on the applicable provisions of the Code, as well as
regulations (the "REMIC Regulations") promulgated by the U.S. Department of the
Treasury as of the date hereof. Investors should consult their own tax advisors
in determining the federal, state, local, foreign or any other tax consequences
to them of the purchase, ownership and disposition of Certificates.
Elections will be made to treat designated portions of the Trust, exclusive
of the Mortgage Loans held in the Loan REMICs, and proceeds thereof (such
nonexcluded portion of the Trust, the "Trust REMICs"), as two separate REMICs
within the meaning of Code Section 860D. The Lower-Tier REMIC will hold the
Mortgage Loans (exclusive of the Default Interest and the Mortgage Loans held in
the Loan REMICs), and the "regular interests" issued by the Loan REMICs,
proceeds thereof held in the Collection Account, the Interest Reserve Account,
the Lower-Tier Distribution Account, the Excess Liquidation Proceeds Account and
any REO Property, and will issue several uncertificated classes of regular
interests (the "Lower-Tier Regular Interests") to the Upper-Tier REMIC and the
Class LR Certificates, which will represent the sole class of residual interests
in the Lower-Tier REMIC and each Loan REMIC. The Upper-Tier REMIC will hold the
Lower-Tier Regular Interests and the Upper-Tier Distribution Account in which
distributions on the Lower-Tier Regular Interests will be deposited, and will
issue the Class X-1, Class X-2, Class A-1, Class A-2, Class A-1A, Class B, Class
C, Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class
M, Class N, Class O and Class P Certificates (the "Regular Certificates") as
classes of regular interests and the Class R Certificates as the sole class of
residual interests in the Upper-Tier REMIC. Qualification as a REMIC requires
ongoing compliance with certain conditions. Assuming (i) the making of
appropriate elections, (ii) compliance with the Pooling and Servicing Agreement,
(iii) compliance with the GECCMCSeries 2002-3 PSAand the GMACSeries 2003-C1 PSA
and the continuing qualification of the REMICs formed thereunder and (iv)
compliance with any changes in the law, including any amendments to the Code or
applicable temporary or final regulations of the United States Department of the
Treasury ("Treasury Regulations") thereunder, in the opinion of Cadwalader,
Wickersham & Taft LLP, the Lower-Tier REMIC and the Upper-Tier REMIC will each
qualify as a REMIC. References in this discussion to the "REMIC" will, unless
the context dictates otherwise, refer to each of the Upper-Tier REMIC, the
Lower-Tier REMIC and each Loan REMIC.
The Offered Certificates will be treated as "loans . . . secured by an
interest in real property which is . . . residential real property" within the
meaning of Section 7701(a)(19)(C) of the Code, for domestic building and loan
associations (but only to the extent of the allocable portion of the Mortgage
Loans secured by multifamily properties or mobile home parks). As of the Cut-off
Date, Mortgage Loans secured by multifamily properties or manufactured housing
community properties represent approximately 23.69% of the Mortgage Loans by
Initial Outstanding Pool Balance.
The Offered Certificates will be treated as "real estate assets," within
the meaning of Section 856(c)(5)(B) of the Code, for real estate investment
trusts and interest thereon will be treated as "interest on mortgages on real
property," within the meaning of Section 856(c)(3)(B) of the Code, to the extent
described in the prospectus under the heading "Certain Federal Income Tax
Consequences--
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Federal Income Tax Consequences for REMIC Certificates--Status of REMIC
Certificates." Mortgage Loans which have been defeased with U.S. Treasury
obligations will not qualify for the foregoing treatments.
The Offered Certificates will be treated as "regular interests" in the
Upper-Tier REMIC and therefore generally will be treated as newly originated
debt instruments for federal income tax purposes. Beneficial owners of the
Offered Certificates will be required to report income on such regular interests
in accordance with the accrual method of accounting.
The IRS has issued Treasury Regulations under Sections 1271 to 1275 of the
Code generally addressing the treatment of debt instruments issued with original
issue discount (the "OID Regulations"). Purchasers of the Offered Certificates
should be aware that the OID Regulations and Section 1272(a)(6) of the Code do
not adequately address certain issues relevant to, or are not applicable to,
prepayable securities such as the Offered Certificates. The OID Regulations in
some circumstances permit the holder of a debt instrument to recognize original
issue discount under a method that differs from that of the issuer. Accordingly,
it is possible that holders of Certificates may be able to select a method for
recognizing original issue discount that differs from that used by the Bond
Administrator in preparing reports to Certificateholders and the IRS.
Prospective purchasers of Certificates are advised to consult their tax advisors
concerning the treatment of any original issue discount with respect to
purchased Certificates. See "Certain Federal Income Tax Consequences--Federal
Income Tax Consequences for REMIC Certificates--Taxation of Regular
Certificates--Original Issue Discount" in the prospectus.
Whether any holder of any such Class of Certificates will be treated as
holding a Certificate with amortizable bond premium will depend on such
Certificateholder's purchase price and the distributions remaining to be made on
such Certificate at the time of its acquisition by such Certificateholder. It is
anticipated that the Offered Certificates will be issued [at a premium] for
federal income tax purposes. Holders of each such Class of Certificates should
consult their tax advisors regarding the possibility of making an election to
amortize such premium. See "Certain Federal Income Tax Consequences--Federal
Income Tax Consequences for REMIC Certificates--Taxation of Regular
Certificates--Premium" in the prospectus.
For purposes of accruing original issue discount, if any, determining
whether such original issue discount is DE MINIMIS and amortizing any premium,
the Prepayment Assumption will be 0% CPR. See "Yield and Maturity
Considerations" in this prospectus supplement. No representation is made as to
the rate, if any, at which the Mortgage Loans will prepay.
Prepayment Premiums actually collected on the Mortgage Loans will be
distributed to the holders of each Class of Certificates entitled thereto as
described herein. It is not entirely clear under the Code when the amount of a
Prepayment Premium should be taxed to the holder of a Class of Certificates
entitled to a Prepayment Premium. For federal income tax reporting purposes,
Prepayment Premiums will be treated as income to the holders of a Class of
Certificates entitled to Prepayment Premiums only after the Servicer's actual
receipt of a Prepayment Premium as to which such Class of Certificates is
entitled under the terms of the Pooling and Servicing Agreement. It appears that
Prepayment Premiums are to be treated as ordinary income rather than capital
gain. However, the correct characterization of such income is not entirely clear
and Certificateholders should consult their tax advisors concerning the
treatment of Prepayment Premiums.
For a discussion of the tax consequences of the acquisition ownership and
disposition of Offered Certificates by any person who is not a citizen or
resident of the United States, a corporation or partnership or other entity
created or organized in or under the laws of the United States, any state
thereof or the District of Columbia or is a foreign estate or trust, see
"Certain Federal Income Tax Consequences--Federal Income Tax Consequences for
REMIC Certificates--Taxation of Certain Foreign Investors--Regular Certificates"
in the prospectus.
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ERISA CONSIDERATIONS
The purchase by or transfer to an employee benefit plan or other retirement
arrangement, including an individual retirement account or a Keogh plan, which
is subject to Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or Section 4975 of the Code, or a governmental plan (as
defined in Section 3(32) of ERISA) that is subject to any federal, state or
local law ("Similar Law") which is, to a material extent, similar to the
foregoing provisions of ERISA or the Code (each, a "Plan"), or a collective
investment fund in which such Plans are invested, an insurance company using the
assets of separate accounts or general accounts which include assets of Plans
(or which are deemed pursuant to ERISA or any Similar Law to include assets of
Plans) or other Persons acting on behalf of any such Plan or using the assets of
any such Plan to acquire the Offered Certificates may constitute or give rise to
a prohibited transaction under ERISA or the Code or Similar Law. There are
certain exemptions issued by the United States Department of Labor (the
"Department") that may be applicable to an investment by a Plan in the Offered
Certificates. The Department has granted to each of the co-lead managers an
administrative exemption (Deutsche Bank Securities Inc. as Department Final
Authorization Number 97-03E, as amended by Prohibited Transaction Exemption
("PTE") 2002-41 (the "DBS Exemption"), and ABN AMRO Incorporated as Department
Final Authorization Number 98-08E, as amended by PTE 2002-41 (the "ABN
Exemption" and collectively with the DBS Exemption, the "Exemption")), for
certain mortgage-backed and asset-backed certificates underwritten in whole or
in part by the co-lead managers. The Exemption might be applicable to the
initial purchase, the holding, and the subsequent resale by a Plan of certain
certificates, such as the Offered Certificates, underwritten by the co-lead
managers, representing interests in pass-through trusts that consist of certain
receivables, loans and other obligations, provided that the conditions and
requirements of the Exemption are satisfied. The loans described in the
Exemption include mortgage loans such as the Mortgage Loans. However, it should
be noted that in issuing the Exemption, the Department may not have considered
interests in pools of the exact nature as some of the Offered Certificates.
Among the conditions that must be satisfied for the Exemption to apply to
the acquisition, holding and resale of the Offered Certificates are the
following:
(1) The acquisition of Offered Certificates by a Plan is on terms
(including the price for the Certificates) that are at least as favorable
to the Plan as they would be in an arm's length transaction with an
unrelated party;
(2) The Offered Certificates acquired by the Plan have received a
rating at the time of such acquisition that is one of the four highest
generic rating categories from any of S&P, Moody's and Fitch;
(3) The Trustee must not be an affiliate of any other member of the
Restricted Group (as defined below) other than an Underwriter;
(4) The sum of all payments made to and retained by the co-lead
managers in connection with the distribution of Offered Certificates
represents not more than reasonable compensation for underwriting the
Certificates. The sum of all payments made to and retained by the Depositor
pursuant to the assignment of the Mortgage Loans to the Trust represents
not more than the fair market value of such Mortgage Loans. The sum of all
payments made to and retained by the Servicer and any other servicer
represents not more than reasonable compensation for such person's services
under the Pooling and Servicing Agreement and reimbursement of such
person's reasonable expenses in connection therewith; and
(5) The Plan investing in the certificates is an "accredited investor"
as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the Securities Act of 1933.
The Trust must also meet the following requirements:
(a) the corpus of the Trust must consist solely of assets of the
type that have been included in other investment pools;
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(b) certificates in such other investment pools must have been
rated in one of the four highest rating categories of S&P, Moody's and
Fitch for at least one year prior to the Plan's acquisition of the
Offered Certificates pursuant to the Exemption; and
(c) certificates evidencing interests in such other investment
pools must have been purchased by investors other than Plans for at
least one year prior to any Plan's acquisition of the Offered
Certificates pursuant to the Exemption.
If all of the conditions of the Exemption are met, then whether or not a
Plan's assets would be deemed to include an ownership interest in the Mortgage
Loans in the Mortgage Pool, the acquisition, holding and resale by Plans of the
Offered Certificates with respect to which the conditions were met would be
exempt from the prohibited transaction provisions of ERISA and the Code to the
extent indicated in the Exemption.
Moreover, the Exemption can provide relief from certain
self-dealing/conflict of interest prohibited transactions that may occur if a
Plan fiduciary causes a Plan to acquire certificates in a trust holding
receivables, loans or obligations on which the fiduciary (or its affiliate) is
an obligor, PROVIDED that, among other requirements, (a) in the case of an
acquisition in connection with the initial issuance of certificates, at least
fifty percent of each class of certificates in which Plans have invested is
acquired by persons independent of the Restricted Group (as defined below) and
at least fifty percent of the aggregate interest in the Trust is acquired by
persons independent of the Restricted Group (as defined below); (b) such
fiduciary (or its affiliate) is an obligor with respect to five percent or less
of the fair market value of the obligations contained in the Trust; (c) the
Plan's investment in certificates of any class does not exceed twenty-five
percent of all of the certificates of that class outstanding at the time of the
acquisitions; and (d) immediately after the acquisition no more than twenty-five
percent of the assets of the Plan with respect to which such person is a
fiduciary are invested in certificates representing an interest in one or more
trusts containing assets sold or serviced by the same entity.
The Exemption does not apply to the purchasing or holding of Offered
Certificates by Plans sponsored by the Depositor, the Underwriters, the Trustee,
the Servicer, any obligor with respect to Mortgage Loans included in the Trust
constituting more than five percent of the aggregate unamortized principal
balance of the assets in the Trust, or any affiliate of such parties (the
"Restricted Group").
The co-lead managers believe that the conditions to the applicability of
their respective Exemption will generally be met with respect to the Offered
Certificates, other than possibly those conditions which are dependent on facts
unknown to the co-lead managers 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 Certificates. However, before purchasing an
Offered Certificate, a fiduciary of a Plan should make its own determination as
to the availability of the exemptive relief provided by the Exemption or the
availability of any other prohibited transaction exemptions or similar exemption
under Similar Law, and whether the conditions of any such exemption will be
applicable to such purchase. As noted above, the Department, in granting the
Exemption, may not have considered interests in pools of the exact nature as
some of the Offered Certificates. A fiduciary of a Plan that is a governmental
plan should make its own determination as to the need for and the availability
of any exemptive relief under any Similar Law.
Any fiduciary of a Plan considering whether to purchase an Offered
Certificate should also carefully review with its own legal advisors the
applicability of the fiduciary duty and prohibited transaction provisions of
ERISA and the Code to such investment. See "Certain ERISA Considerations" in the
prospectus.
The sale of Offered Certificates to a Plan is in no respect a
representation by the Depositor or the Underwriters that this investment meets
all relevant legal requirements with respect to investments by Plans generally
or any particular Plan, or that this investment is appropriate for Plans
generally or any particular Plan.
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LEGAL INVESTMENT
The Certificates will not constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended.
No representation is made as to the proper characterization of the Offered
Certificates for legal investment purposes, financial institution regulatory
purposes, or other purposes, or as to the ability of particular investors to
purchase the Offered Certificates under applicable legal investment or other
restrictions. These uncertainties may adversely affect the liquidity of the
Offered Certificates. Accordingly, all institutions whose investment activities
are subject to legal investment laws and regulations, regulatory capital
requirements or review by regulatory authorities should consult with their own
legal advisors in determining whether and to what extent the Offered
Certificates constitute a legal investment or are subject to investment, capital
or other restrictions.
See "Legal Investment" in the prospectus.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in an Underwriting Agreement,
dated June __, 2003 (the "Underwriting Agreement"), Deutsche Bank Securities
Inc. ("DBS"), ABN AMRO Incorporated ("ABN"), Banc of America Securities LLC
("BOA"), J.P. Morgan Securities Inc. ("JPM") and Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("ML") (collectively, the "Underwriters") have agreed to
purchase and the Depositor has agreed to sell to the Underwriters the Offered
Certificates. It is expected that delivery of the Offered Certificates will be
made only in book-entry form through the Same Day Funds Settlement System of DTC
on or about June __, 2003, against payment therefor in immediately available
funds. DBS and ABN will act as co-lead managers of the offering of the Offered
Certificates and BOA, JPM and ML are acting as co-managers and underwriters of
the offering of Offered Certificates. DBS is acting as sole bookrunner of the
offering.
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase the approximate percentage
of the Certificate Balance of the Offered Certificates set forth below:
MERRILL LYNCH,
DEUTSCHE BANK ABN AMRO BANC OF AMERICA J.P. MORGAN PIERCE, FENNER &
CLASS SECURITIES INC. INCORPORATED SECURITIES LLC SECURITIES INC. SMITH INCORPORATED
- ---- --------------- ------------ --------------- --------------- ------------------
Class A-1 ........................ ____% ____% ____% ____% ____%
Class A-2 ........................ ____% ____% ____% ____% ____%
Class B .......................... ____% ____% ____% ____% ____%
Class C .......................... ____% ____% ____% ____% ____%
Class D .......................... ____% ____% ____% ____% ____%
Class E .......................... ____% ____% ____% ____% ____%
The Underwriting Agreement provides that the obligation of each Underwriter
to pay for and accept delivery of its Offered Certificates is subject to, among
other things, the receipt of certain legal opinions and to the conditions, among
others, that no stop order suspending the effectiveness of the Depositor's
Registration Statement shall be in effect, and that no proceedings for such
purpose shall be pending before or threatened by the Securities and Exchange
Commission.
The distribution of the Offered Certificates by the Underwriters may be
effected from time to time in one or more negotiated transactions, or otherwise,
at varying prices to be determined at the time of sale. Proceeds to the
Depositor from the sale of the Offered Certificates, before deducting expenses
payable by the Depositor, will be approximately ____% of the aggregate
Certificate Balance of the Offered Certificates, plus accrued interest. Each
Underwriter may effect such transactions by selling its Offered Certificates to
or through dealers, and such dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Underwriter for whom
they act as agent. In connection with the sale of the Offered Certificates, each
Underwriter may be deemed to have received compensation from the Depositor in
the form of underwriting compensation. Each Underwriter and any dealers that
participate with such Underwriter in the distribution of the Offered
Certificates may be deemed to be underwriters and any profit on the resale of
the Offered Certificates positioned by
S-177
them may be deemed to be underwriting discounts and commissions under the
Securities Act of 1933, as amended.
DBS is an affiliate of GACC and ABN is an affiliate of LaSalle.
The Underwriting Agreement or a separate indemnification agreement provides
that the Depositor and GACC will indemnify the Underwriters, and that under
limited circumstances the Underwriters will indemnify the Depositor, against
certain civil liabilities under the Securities Act of 1933, as amended, or
contribute to payments to be made in respect thereof.
There can be no assurance that a secondary market for the Offered
Certificates will develop or, if it does develop, that it will continue. The
primary source of ongoing information available to investors concerning the
Offered Certificates will be the reports distributed by the Bond Administrator
discussed in this prospectus supplement under "The Pooling and Servicing
Agreement--Reports to Certificateholders; Available Information." Except as
described in this prospectus supplement under "The Pooling and Servicing
Agreement--Reports to Certificateholders; Available Information," there can be
no assurance that any additional information regarding the Offered Certificates
will be available through any other source. In addition, the Depositor is 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 such 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.
LEGAL MATTERS
The validity of the Offered Certificates and the material federal income
tax consequences of investing in the Offered Certificates will be passed upon
for the Depositor by Cadwalader, Wickersham & Taft LLP, New York, New York.
Certain legal matters with respect to the Offered Certificates will be passed
upon for the Underwriters by Cadwalader, Wickersham & Taft LLP, New York, New
York.
RATINGS
It is a condition to the issuance of the Offered Certificates that (i) the
Class A-1 and Class A-2 Certificates be rated "AAA" by Standard & Poor's Rating
Services, a division of The McGraw-Hill Companies ("S&P"), and "Aaa" by Moody's
Investors Services, Inc. ("Moody's" and together with S&P, the "Rating
Agencies"), (ii) the Class B Certificates be rated at least "AA" by S&P and
"Aa2" by Moody's, (iii) the Class C Certificates be rated at least "AA-" by S&P
and "Aa3" by Moody's, (iv) the Class D Certificates be rated at least "A" by S&P
and "A2" by Moody's, and (v) the Class E Certificates be rated at least "A-" by
S&P and "A3" by Moody's. The Rated Final Distribution Date of each Class of
Certificates is the Distribution Date in June, 2038.
The Rating Agencies' ratings on mortgage pass-through certificates address
the likelihood of the timely payment of interest and the ultimate repayment of
principal by the Rated Final Distribution Date. The Rating Agencies' ratings
take into consideration the credit quality of the Mortgage Pool, structural and
legal aspects associated with the Certificates, and the extent to which the
payment stream in the Mortgage Pool is adequate to make payments required under
the Certificates. Ratings on mortgage pass-through certificates do not, however,
represent an assessment of the likelihood, timing or frequency of principal
prepayments (both voluntary and involuntary) by mortgagors, or the degree to
which such prepayments might differ from those originally anticipated. The
security ratings do not address the possibility that Certificateholders might
suffer a lower than anticipated yield. In addition, ratings on mortgage
pass-through certificates do not address the likelihood of receipt of Prepayment
Premiums, Default Interest or the timing or frequency of the receipt thereof. In
general, the ratings thus address credit risk and not prepayment risk. Also, a
security rating does not represent any assessment of the yield to maturity that
investors may experience. The ratings do not address the fact that the
Pass-Through Rates of the Offered Certificates to the extent that they are based
on the Weighted Average Net Mortgage Pass-Through Rate may be affected by
changes thereon.
There can be no assurance as to whether any rating agency not requested to
rate the Offered Certificates will nonetheless issue a rating and, if so, what
such rating would be. A rating assigned to
S-178
the Offered Certificates by a rating agency that has not been requested by the
Depositor to do so may be lower than the rating assigned by the Rating Agencies
pursuant to the Depositor's request.
The rating of the Offered Certificates should be evaluated independently
from similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision or
withdrawal at any time by the assigning rating agency.
S-179
INDEX OF PRINCIPAL TERMS
1669 Collins Avenue, Miami Beach
Land Loan .......................................................S-81
2002-3 Master Servicer .............................................S-62
2002-3 Special Servicer ............................................S-62
2003-C1 Master Servicer ............................................S-69
2003-C1 Special Servicer ...........................................S-69
75 Rockefeller Plaza Loan ..........................................S-60
75 Rockefeller Plaza Mortgaged Property ............................S-61
ABN S-177 ABN Exemption .....................................S-22, S-175
ADA S-46 Advance Rate .............................................S-142
Advances ..........................................................S-141
Agency .............................................................S-68
Annual Debt Service ................................................S-88
Appraisal Reduction Amount ...........................S-20, S-114, S-123
Appraisal Reduction Event .........................................S-123
Appraisal Reduction Events .........................................S-20
Appraised Value ....................................................S-88
Asset Status Report ...............................................S-164
Assumed Final Distribution Date .....................................S-3
Assumed Scheduled Payment .........................................S-115
Available Funds ...................................................S-111
Balloon Balance ....................................................S-89
Balloon Loans ......................................................S-37
Balloon Payments ...................................................S-37
BJ's ...............................................................S-75
Blackacre ..........................................................S-74
Blackacre Gateway ...........................................S-75, S-108
BOA S-177 Bond Administrator Fee ..................................S-160
CBE S-134 Certificate Balance .....................................S-110
Certificate Owners ................................................S-127
Certificate Registrar .............................................S-125
Certificateholder .................................................S-125
Chandler Fashion Center A Loans ....................................S-69
Chandler Fashion Center A-1 Note ...................................S-69
Chandler Fashion Center A-2 Note ...................................S-69
Chandler Fashion Center B Note .....................................S-69
Chandler Fashion Center Conversion Space ...........................S-72
Chandler Fashion Center Intercreditor
Agreement .......................................................S-69
Chandler Fashion Center Loan ..................................S-7, S-69
Chandler Fashion Center Mortgaged
Property ........................................................S-69
Chandler Fashion Center Operating
Advisor ........................................................S-168
Chandler Fashion Center Release Parcel .............................S-72
Chandler Fashion Center TI Allowance
Letter of Credit ................................................S-73
Chandler Fashion Center Trigger Period .............................S-72
Chandler Fashion Center Whole Loan .................................S-69
Class .............................................................S-110
Clearstream .................................................S-23, S-125
Clearstream Participants ..........................................S-127
CMBS ..............................................................S-162
Code ...............................................................S-22
Collateral Substitution Deposit ...................................S-107
Collection Account ................................................S-143
Collection Period .................................................S-113
Collins Avenue Mortgaged Property ..................................S-81
Companion Loan .....................................................S-39
Companion Loans .............................................S-39, S-107
Controlling Class .................................................S-162
Controlling Class Certificateholder ...............................S-163
Corrected Mortgage Loan ...........................................S-163
CPR ...............................................................S-131
Crossover Date ....................................................S-120
Current LTV ........................................................S-88
Custodian .........................................................S-137
Cut-off Date .......................................................S-51
Cut-off Date Loan-to-Value Ratio ...................................S-88
Cut-off Date LTV ...................................................S-88
Cut-off Date LTV Ratio .............................................S-88
Cut-off Date Principal Balance .....................................S-51
DBR ................................................................S-81
DBR Lease ..........................................................S-81
DBS ...............................................................S-177
DBS Exemption ...............................................S-22, S-175
Debt Service Coverage Ratio ........................................S-88
Default Interest ..................................................S-113
Default Rate ......................................................S-113
Defaulted Mortgage Loan ...........................................S-155
Defeasance Lock-Out Period ........................................S-107
Defeasance Option .................................................S-107
Definitive Certificate ............................................S-125
Delinquency .......................................................S-114
Department ........................................................S-175
Depositaries ......................................................S-126
Depositor ..........................................................S-51
Determination Date ................................................S-113
Directing Certificateholder .......................................S-162
Discount Rate .....................................................S-120
Discount Rate Fraction ............................................S-120
Distribution Account ..............................................S-143
Distribution Date .................................................S-111
Distribution Date Statement .......................................S-170
DSCR ...............................................................S-88
S-180
DTC ................................................................S-23
Due Date ..........................................................S-114
EIS ..........................................................S-36, S-73
Empirian Luxury Towers .............................................S-78
Empirian Luxury Towers Loan ........................................S-78
Empirian Luxury Towers Mortgaged
Property ........................................................S-78
ERISA .............................................................S-175
Euroclear ..........................................................S-23
Euroclear Participants ............................................S-127
Events of Default .................................................S-151
Excess Liquidation Proceeds .......................................S-157
Excess Prepayment Interest Shortfall ..............................S-122
Exemption ...................................................S-22, S-175
Form 8-K ..........................................................S-109
GAAP ...............................................................S-87
GACC ...............................................................S-54
Gateway Center BJ's Loan ...........................................S-73
Gateway Center BJ's Mortgaged Property .............................S-73
Gateway Sponsor ....................................................S-74
GECCMC Series 2002-3 PSA ...........................................S-62
GLA ................................................................S-89
GMAC Series 2003-C1 PSA ............................................S-69
GMACCM ............................................................S-161
Group 1 Principal Distribution Amount .............................S-115
Group 2 Principal Distribution Amount .............................S-115
GSA ................................................................S-79
Holders ...........................................................S-128
Hotel Building .....................................................S-81
Hotel Unit .........................................................S-81
Indirect Participants .............................................S-126
Initial Loan Group 1 Balance .......................................S-51
Initial Loan Group 2 Balance .......................................S-51
Initial Outstanding Pool Balance ...................................S-51
Interest Accrual Amount ...........................................S-113
Interest Accrual Period ...........................................S-114
Interest Deposit Amount ............................................S-51
Interest Reserve Account ..........................................S-143
Interest Shortfall ................................................S-114
JPM ...............................................................S-177
LaSalle ............................................................S-54
Lennar ............................................................S-161
Liquidation Fee ...................................................S-165
Liquidation Fee Rate ..............................................S-165
Liquidation Proceeds ..............................................S-165
LNR ...............................................................S-161
Loan Group 1 .......................................................S-51
Loan Group 2 .......................................................S-51
Loan Groups ........................................................S-51
Loan REMIC .........................................................S-64
Lock-Out Period ...................................................S-106
Lower-Tier Regular Interests ......................................S-173
Lower-Tier REMIC ...................................................S-21
LTV ................................................................S-88
MAI ................................................................S-56
Master Servicing Fee ..............................................S-161
Master Servicing Fee Rate .........................................S-161
ML S-177
Modeling Assumptions ..............................................S-131
Modification ......................................................S-157
Modified Mortgage Loan ............................................S-124
Monthly Payment ...................................................S-112
Moody's ...........................................................S-178
Mortgage ...........................................................S-51
Mortgage Loan ......................................................S-51
Mortgage Loan Documents ...........................................S-137
Mortgage Loan Purchase Agreement ...................................S-55
Mortgage Loan Purchase Agreements .................................S-137
Mortgage Loan Sellers ..............................................S-54
Mortgage Loans .....................................................S-51
Mortgage Pool ......................................................S-51
Mortgage Rate ...............................................S-89, S-114
Mortgaged Properties ...............................................S-51
Mortgaged Property .................................................S-51
Net Default Interest ..............................................S-113
Net Mortgage Pass-Through Rate ....................................S-114
Net Prepayment Interest Excess ....................................S-122
Net Prepayment Interest Shortfall .................................S-122
Net REO Proceeds ..................................................S-113
Non-Serviced Mortgage Loan ....................................S-7, S-39
Non-Serviced Mortgage Loans ........................................S-39
Note ...............................................................S-51
Notional Balance ..................................................S-111
Offered Certificates .........................................S-9, S-110
OID Regulations ...................................................S-174
Option Price ......................................................S-155
Other Owners ...................................................... S-80
P&I Advance .................................................S-19, S-141
Palladium at Birmingham Loan .......................................S-76
Palladium Theater and Retail .......................................S-76
Parking Trigger Event ..............................................S-80
Participants ......................................................S-125
Pass-Through Rate ...........................................S-10, S-114
PCBs ...............................................................S-36
Percentage Interest ...............................................S-111
Permitted Investments .............................................S-144
Plan ..............................................................S-175
Pooling and Servicing Agreement ...................................S-137
Prepayment Interest Excess ........................................S-122
Prepayment Interest Shortfall .....................................S-122
Prime Rate ........................................................S-142
Principal Allocation Fraction .....................................S-120
Principal Balance Certificate .....................................S-110
Principal Balance Certificates ....................................S-110
Principal Distribution Amount .....................................S-115
Principal Prepayments .............................................S-113
S-181
Private Certificates .........................................S-9, S-110
Property Advances .................................................S-141
PTE .........................................................S-22, S-175
Purchase Option ...................................................S-155
Qualifying Substitute Mortgage Loan ...............................S-139
Realized Loss .....................................................S-121
Record Date .......................................................S-111
Redland Center Loan ................................................S-79
Redland Center Mortgaged Property ............................S-79, S-80
Regular Certificates ..............................................S-173
Related Borrower Loan Groups ......................................S-109
Release Date ......................................................S-107
REMIC .............................................................S-173
REMIC Regulations .................................................S-173
Removed Mortgage Loan .............................................S-139
REO Account .......................................................S-110
REO Loan ..........................................................S-115
REO Property ......................................................S-110
REO Tax ...........................................................S-156
Replacement Mortgage Loan .........................................S-139
Repurchase Price ..................................................S-139
Request for Approval ..............................................S-164
Reserve Accounts ...................................................S-55
Restricted Group ..................................................S-176
Rollover Reserve ...................................................S-75
Rollover Reserve Payments ..........................................S-80
Rollover Reserve Trigger Event .....................................S-80
Rules .............................................................S-127
S&P ...............................................................S-178
Scheduled Maturity Date LTV ........................................S-89
Servicer Remittance Date ..........................................S-141
Servicing Compensation ............................................S-161
Servicing Fee .....................................................S-161
Servicing Fee Rate ..........................................S-89, S-161
Servicing Standard ................................................S-140
Sierra Vista Mall Loan .............................................S-84
Sierra Vista Mall Mortgaged Property .........................S-84, S-85
Similar Law .......................................................S-175
Single-Tenant Mortgage Loan .......................................S-109
Small Loan Appraisal Estimate .....................................S-123
Special Servicer ..................................................S-161
Special Servicing Fee .............................................S-165
Sq. Ft. ............................................................S-89
Square Feet ........................................................S-89
Stated Principal Balance ..........................................S-121
Term to Maturity ...................................................S-89
Terms and Conditions ..............................................S-127
The Reserve at Sugarloaf Loan ......................................S-83
The Reserve at Sugarloaf Mortgaged
Property ........................................................S-84
TI/LC ..............................................................S-77
TRC ..........................................................S-74, S-77
TRCLP .............................................................S-108
Treasury Regulations ..............................................S-173
Trust .........................................................S-9, S-51
Trust REMICs ......................................................S-173
Trustee Fee .......................................................S-159
TWI ................................................................S-60
TWI Lease ..........................................................S-60
Underwriters ......................................................S-177
Underwriting Agreement ............................................S-177
Underwritten NCF ...................................................S-87
Underwritten NCF DSCR ..............................................S-88
Underwritten Net Cash Flow .........................................S-87
Units ..............................................................S-89
Unscheduled Payments ..............................................S-113
Updated Appraisal .................................................S-124
Upper-Tier REMIC ...................................................S-21
UW NCF .............................................................S-87
UW NCF DSCR ........................................................S-88
Voting Rights .....................................................S-154
WALP ...............................................................S-66
Weighted Average Net Mortgage
Pass-Through Rate ..............................................S-114
Wells Fargo Bank ..................................................S-159
Westfield Shoppingtown Galleria at
Roseville Property ..............................................S-62
Westfield Shoppingtown MainPlace
KLST Site .......................................................S-68
Westfield Shoppingtown MainPlace
Outparcels ......................................................S-67
Westfield Shoppingtown MainPlace
Participation Agreement .........................................S-68
Westfield Shoppingtown MainPlace
Property ...........................................................S-62
Westfield Shoppingtown MainPlace
TSI Loan ........................................................S-68
Westfield Shoppingtown Portfolio ....................................S-7
Westfield Shoppingtown Portfolio A Notes ...........................S-62
Westfield Shoppingtown Portfolio A-1 Note ..........................S-62
Westfield Shoppingtown Portfolio A-2 Note ..........................S-62
Westfield Shoppingtown Portfolio A-3 Note ..........................S-62
Westfield Shoppingtown Portfolio
A-3A Loan Component .............................................S-62
Westfield Shoppingtown Portfolio
A-3B Loan Component .............................................S-62
Westfield Shoppingtown Portfolio
Amortization Scheduled Balance ..................................S-65
Westfield Shoppingtown Portfolio B Note ............................S-62
Westfield Shoppingtown Portfolio
Co-Lender Agreement ..............................................S-62
Westfield Shoppingtown Portfolio
Developer ..........................................................S-67
Westfield Shoppingtown Portfolio
DSCR Event ......................................................S-66
Westfield Shoppingtown Portfolio Guarantor .........................S-66
S-182
Westfield Shoppingtown Portfolio
Guarantor Liquidity Event .......................................S-66
Westfield Shoppingtown Portfolio
L/C Issuing Bank ................................................S-67
Westfield Shoppingtown Portfolio Loan .........................S-7, S-62
Westfield Shoppingtown Portfolio
Mortgaged Properties ............................................S-62
Westfield Shoppingtown Portfolio Notes .............................S-62
Westfield Shoppingtown Portfolio
Prepayment Allocation Ratio .....................................S-65
Westfield Shoppingtown Portfolio Whole
Loan ............................................................S-62
Willits Retail .....................................................S-76
Withheld Amounts ..................................................S-144
Workout Fee .......................................................S-165
Workout Fee Rate ..................................................S-165
S-183
COMM 2003-LNB1
ANNEX A-1 - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED
PROPERTIES
% OF % OF APPLICABLE MORTGAGE
INITIAL POOL LOAN GROUP LOAN GROUP # OF LOAN
ID PROPERTY NAME BALANCE ONE OR TWO BALANCE PROPERTIES SELLER (1)
- -------------------------------------------------------------------------------------------------------------------------------
1 75 Rockefeller Plaza (8)(9) 7.68% 1 9.80% 1 GACC
2 Westfield Shoppingtown Portfolio (10) 7.04% 1 8.98% 2 GACC
2A SHOPPINGTOWN MAINPLACE 3.63% 1 4.64% GACC
2B SHOPPINGTOWN GALLERIA AT ROSEVILLE 3.40% 1 4.34% GACC
3 Chandler Fashion Center 6.40% 1 8.17% 1 GACC
- -------------------------------------------------------------------------------------------------------------------------------
4 Gateway Center BJ's 5.37% 1 6.84% 1 GACC
5 Palladium at Birmingham 4.61% 1 5.88% 1 GACC
6 Empirian Luxury Towers 4.50% 2 20.84% 1 GACC
7 Redland Center 3.31% 1 4.22% 1 GACC
8 1669 Collins Avenue, Miami Beach Land 3.18% 1 4.05% 1 GACC
- -------------------------------------------------------------------------------------------------------------------------------
9 The Reserve at Sugarloaf 3.12% 2 14.45% 1 GACC
10 Sierra Vista Mall 2.82% 1 3.60% 1 GACC
11 Copley Corporate Center 2.51% 1 3.20% 1 GACC
12 IAC JFK Building B (11) 2.30% 1 2.94% 1 LaSalle
13 IAC JFK Building A 1.95% 1 2.49% 1 LaSalle
- -------------------------------------------------------------------------------------------------------------------------------
14 Desert Crossing T.J. Maxx 1.92% 1 2.45% 1 GACC
15 GSA - Charleston 1.65% 1 2.11% 1 LaSalle
16 Shaw's Merrimack (9)(16) 1.62% 1 2.06% 1 GACC
17 Hampton Inn & Holiday Inn (9)(10) 1.57% 1 2.00% 2 GACC
17A HOLIDAY INN 0.92% 1 1.18% GACC
- -------------------------------------------------------------------------------------------------------------------------------
17B HAMPTON INN 0.64% 1 0.82% GACC
18 Nittany Pointe 1.50% 1 1.92% 1 GACC
19 Delray Square 1.40% 1 1.78% 1 GACC
20 Desert Crossing Office Depot 1.12% 1 1.43% 1 GACC
21 Pembrook Place Apartments 1.03% 2 4.79% 1 LaSalle
- -------------------------------------------------------------------------------------------------------------------------------
22 Regal Townhomes 0.99% 2 4.59% 1 GACC
23 GSA - Clarksburg 0.98% 1 1.25% 1 LaSalle
24 Playtogs Shopping Center - NY 0.93% 1 1.18% 1 LaSalle
25 Independence Tower 0.90% 1 1.15% 1 LaSalle
26 Biltmore Station 0.89% 1 1.13% 1 GACC
- -------------------------------------------------------------------------------------------------------------------------------
27 Park West Two Office Building 0.87% 1 1.12% 1 GACC
28 Plaza Almeria 0.87% 1 1.10% 1 GACC
29 Waters Inlet Apartments 0.85% 2 3.93% 1 LaSalle
30 Fredericksburg Shopping Center (9) 0.83% 1 1.06% 1 GACC
31 Willow Dayton Apartments - Phase II 0.83% 2 3.83% 1 LaSalle
- -------------------------------------------------------------------------------------------------------------------------------
32 3134 North Clark Street 0.77% 1 0.98% 1 LaSalle
33 University Village Apartments 0.75% 2 3.47% 1 LaSalle
34 Beltline - Royal Ridge Portfolio (10) 0.73% 1 0.93% 2 LaSalle
34A ROYAL RIDGE 0.38% 1 0.49% LASALLE
34B BELTLINE 0.34% 1 0.44% LASALLE
- -------------------------------------------------------------------------------------------------------------------------------
35 Orbseal Building 0.72% 1 0.92% 1 LaSalle
36 The Prospect Building 0.71% 1 0.90% 1 GACC
37 Hamilton Station IV 0.67% 2 3.10% 1 LaSalle
38 Willow Dayton Apartments - Phase I (13) 0.65% 2 3.01% 1 LaSalle
39 American House of Westland 0.65% 1 0.82% 1 LaSalle
- -------------------------------------------------------------------------------------------------------------------------------
40 Fountain Park Plaza I & II 0.60% 1 0.76% 1 LaSalle
41 Country Lakes Townhome Apartments 0.59% 2 2.71% 1 LaSalle
42 Buschwood III (14) 0.54% 1 0.69% 1 LaSalle
43 Eagle Creek Apartments 0.54% 2 2.50% 1 LaSalle
44 HighPointe Apartments 0.53% 2 2.46% 1 LaSalle
- -------------------------------------------------------------------------------------------------------------------------------
45 Commerce Square Center (9) 0.51% 1 0.66% 1 GACC
46 Offices at Pennington Point 0.51% 1 0.66% 1 GACC
47 Reedville Commons 0.51% 2 2.38% 1 LaSalle
48 Shadowood West Apartments 0.51% 2 2.35% 1 LaSalle
49 Innova Centers (10) 0.51% 1 0.65% 2 GACC
- -------------------------------------------------------------------------------------------------------------------------------
49A INNOVA CENTER - EAST COBB 0.28% 1 0.36% GACC
49B INNOVA CENTER - NORTHPOINT 0.23% 1 0.29% GACC
50 Walgreens - Cincinnati 0.50% 1 0.64% 1 LaSalle
51 Venture In Resort 0.50% 2 2.32% 1 LaSalle
52 Hidden Lakes Apartments 0.50% 2 2.32% 1 LaSalle
- -------------------------------------------------------------------------------------------------------------------------------
53 Sunshine Village MHP 0.49% 2 2.27% 1 LaSalle
54 Falcon Lair Apartments 0.47% 2 2.19% 1 LaSalle
55 Northeast Plaza 0.46% 1 0.58% 1 LaSalle
56 Walgreens - Canton Mart 0.45% 1 0.57% 1 GACC
CUT-OFF GENERAL DETAILED INTEREST
ORIGINAL DATE PROPERTY PROPERTY INTEREST SERVICING ACCRUAL
ID BALANCE BALANCE TYPE TYPE RATE FEE RATE BASIS
- ------------------------------------------------------------------------------------------------------------------------------------
1 65,000,000 65,000,000 Office CBD 4.6650% 0.03290% Actual/360
2 60,000,000 59,549,050 Retail Anchored 6.0500% 0.03290% Actual/360
2A 30,985,915 30,753,031 RETAIL ANCHORED
2B 29,014,085 28,796,020 RETAIL ANCHORED
3 54,635,000 54,181,450 Retail Anchored 5.1400% 0.03290% 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
4 45,400,000 45,400,000 Retail Anchored 5.4300% 0.03290% Actual/360
5 39,000,000 39,000,000 Retail Anchored 5.6300% 0.03290% Actual/360
6 38,100,000 38,063,492 Multifamily Conventional 5.4300% 0.05290% Actual/360
7 28,000,000 27,975,125 Office Suburban 5.7320% 0.03290% Actual/360
8 27,000,000 26,885,252 Land Land 5.7000% 0.03290% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
9 26,400,000 26,400,000 Multifamily Conventional 5.4900% 0.03290% Actual/360
10 24,000,000 23,861,975 Retail Anchored 5.1500% 0.06290% Actual/360
11 21,200,000 21,200,000 Office CBD 5.3600% 0.03290% Actual/360
12 19,500,000 19,483,795 Industrial Industrial 5.9900% 0.03290% Actual/360
13 16,500,000 16,486,288 Industrial Industrial 5.9900% 0.03290% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
14 16,320,000 16,252,317 Retail Anchored 5.8300% 0.03290% Actual/360
15 14,000,000 13,987,588 Office CBD 5.7400% 0.08290% Actual/360
16 13,666,000 13,666,000 Retail CTL 5.6000% 0.03290% Actual/360
17 13,250,000 13,250,000 Hotel Various 6.3500% 0.03290% Actual/360
17A 7,797,566 7,797,566 HOTEL FULL SERVICE
- ------------------------------------------------------------------------------------------------------------------------------------
17B 5,452,434 5,452,434 HOTEL LIMITED SERVICE
18 12,750,000 12,725,076 Multifamily Student Housing 5.7000% 0.06290% Actual/360
19 11,850,000 11,819,793 Retail Anchored 6.1900% 0.03290% Actual/360
20 9,530,000 9,490,477 Retail Anchored 5.8300% 0.03290% Actual/360
21 8,750,000 8,742,053 Multifamily Conventional 5.6450% 0.03290% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
22 8,400,000 8,392,381 Multifamily Conventional 5.6500% 0.06290% Actual/360
23 8,325,000 8,317,619 Office CBD 5.7400% 0.08290% Actual/360
24 7,865,000 7,854,463 Retail Anchored 5.7500% 0.03290% Actual/360
25 7,660,000 7,650,309 Office Suburban 6.0450% 0.11290% Actual/360
26 7,500,000 7,490,706 Mixed Use Office/Retail 6.1500% 0.03290% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
27 7,400,000 7,400,000 Office Suburban 6.3000% 0.03290% Actual/360
28 7,325,000 7,325,000 Mixed Use Retail/Office 5.7500% 0.08290% Actual/360
29 7,200,000 7,186,078 Multifamily Conventional 5.7500% 0.03290% Actual/360
30 7,000,000 7,000,000 Retail Anchored 5.4000% 0.03290% Actual/360
31 7,000,000 6,993,489 Multifamily Conventional 5.5500% 0.03290% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
32 6,500,000 6,500,000 Retail Anchored 5.5000% 0.03290% Actual/360
33 6,350,000 6,344,240 Multifamily Student Housing 5.6500% 0.03290% Actual/360
34 6,150,000 6,138,495 Industrial Office/Warehouse 5.9000% 0.09290% Actual/360
34A 3,228,319 3,222,279 INDUSTRIAL OFFICE/WAREHOUSE
34B 2,921,681 2,916,216 INDUSTRIAL OFFICE/WAREHOUSE
- ------------------------------------------------------------------------------------------------------------------------------------
35 6,175,000 6,092,806 Industrial Office/Warehouse 7.2500% 0.08290% Actual/360
36 6,000,000 5,995,053 Office Suburban 6.0200% 0.03290% Actual/360
37 5,684,000 5,667,120 Multifamily Conventional 5.5000% 0.03290% Actual/360
38 5,500,000 5,494,730 Multifamily Conventional 5.4300% 0.03290% Actual/360
39 5,500,000 5,466,631 Senior Housing Independent Living 6.5000% 0.03290% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
40 5,100,000 5,049,861 Office Suburban 6.7930% 0.08290% Actual/360
41 5,000,000 4,950,410 Multifamily Conventional 6.0000% 0.03290% Actual/360
42 4,600,000 4,591,900 Office Suburban 6.1700% 0.09290% Actual/360
43 4,570,000 4,565,237 Multifamily Conventional 5.0820% 0.03290% Actual/360
44 4,500,000 4,500,000 Multifamily Conventional 5.5000% 0.03290% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
45 4,350,000 4,350,000 Retail Anchored 5.2700% 0.03290% Actual/360
46 4,350,000 4,346,535 Office Suburban 6.1500% 0.03290% Actual/360
47 4,350,000 4,341,119 Multifamily Conventional 5.5000% 0.03290% Actual/360
48 4,320,000 4,301,640 Multifamily Conventional 5.7000% 0.03290% Actual/360
49 4,300,000 4,294,619 Office Suburban 6.1000% 0.03290% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
49A 2,386,817 2,383,830 OFFICE SUBURBAN
49B 1,913,183 1,910,789 OFFICE SUBURBAN
50 4,250,000 4,250,000 Retail Anchored 5.2850% 0.03290% Actual/360
51 4,250,000 4,245,473 Manufactured Housing Manufactured Housing 4.9900% 0.03290% Actual/360
52 4,250,000 4,231,938 Multifamily Conventional 5.7000% 0.03290% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
53 4,160,000 4,151,507 Manufactured Housing Manufactured Housing 5.5000% 0.03290% Actual/360
54 4,000,000 3,992,266 Multifamily Conventional 5.7500% 0.03290% Actual/360
55 3,860,000 3,856,237 Retail Anchored 5.3600% 0.10290% Actual/360
56 3,800,000 3,800,000 Retail CTL 6.1700% 0.03290% Actual/360
ORIGINAL STATED REMAINING ORIGINAL REMAINING FIRST ANNUAL MONTHLY
TERM TO MATURITY TERM TO MATURITY AMORTIZATION AMORTIZATION PAYMENT MATURITY DEBT DEBT
ID (MOS.) (2) (MOS.) TERM (MOS.) TERM (MOS.) DATE (2) DATE SERVICE (3) SERVICE (3)
- ----------------------------------------------------------------------------------------------------------------------------------
1 134 134 0 0 07/01/2003 08/01/2014 3,082,788 256,899
2 120 112 360 352 11/01/2002 10/01/2012 4,339,936 361,661
2A
2B
3 120 113 360 353 12/01/2002 11/01/2012 3,575,819 297,985
- ----------------------------------------------------------------------------------------------------------------------------------
4 120 120 360 360 07/01/2003 06/01/2013 3,069,430 255,786
5 120 120 360 360 07/01/2003 06/01/2013 2,695,550 224,629
6 120 119 360 359 06/01/2003 05/01/2013 2,575,887 214,657
7 120 119 360 359 06/01/2003 05/01/2013 1,956,964 163,080
8 120 116 360 356 03/01/2003 02/01/2013 1,880,497 156,708
- ----------------------------------------------------------------------------------------------------------------------------------
9 120 120 360 360 07/01/2003 06/01/2013 1,796,768 149,731
10 60 55 360 355 02/01/2003 01/01/2008 1,572,555 131,046
11 120 120 360 360 07/01/2003 06/01/2013 1,422,189 118,516
12 120 119 360 359 06/01/2003 05/01/2013 1,401,444 116,787
13 120 119 360 359 06/01/2003 05/01/2013 1,185,837 98,820
- ----------------------------------------------------------------------------------------------------------------------------------
14 120 116 360 356 03/01/2003 02/01/2013 1,152,841 96,070
15 120 119 360 359 06/01/2003 05/01/2013 979,335 81,611
16 248 248 247 247 07/01/2003 02/01/2024 1,038,220 86,518
17 121 121 300 300 07/01/2003 07/01/2013 1,058,724 88,227
17A
- ----------------------------------------------------------------------------------------------------------------------------------
17B
18 120 118 360 358 05/01/2003 04/01/2013 888,013 74,001
19 120 117 360 357 04/01/2003 03/01/2013 870,008 72,501
20 120 116 360 356 03/01/2003 02/01/2013 673,197 56,100
21 120 119 360 359 06/01/2003 05/01/2013 605,766 50,480
- ----------------------------------------------------------------------------------------------------------------------------------
22 84 83 360 359 06/01/2003 05/01/2010 581,854 48,488
23 120 119 360 359 06/01/2003 05/01/2013 582,355 48,530
24 60 59 300 299 06/01/2003 05/01/2008 593,751 49,479
25 120 119 300 299 06/01/2003 05/01/2013 594,773 49,564
26 120 119 300 299 06/01/2003 05/01/2013 588,151 49,013
- ----------------------------------------------------------------------------------------------------------------------------------
27 120 120 300 300 07/01/2003 06/01/2013 588,534 49,045
28 120 120 360 360 07/01/2003 06/01/2013 512,961 42,747
29 120 118 360 358 05/01/2003 04/01/2013 504,207 42,017
30 121 121 360 360 07/01/2003 07/01/2013 471,686 39,307
31 120 119 360 359 06/01/2003 05/01/2013 479,581 39,965
- ----------------------------------------------------------------------------------------------------------------------------------
32 120 119 300 300 06/01/2003 05/01/2013 478,988 39,916
33 120 119 360 359 06/01/2003 05/01/2013 439,854 36,654
34 60 58 360 358 05/01/2003 04/01/2008 437,735 36,478
34A
34B
- ----------------------------------------------------------------------------------------------------------------------------------
35 120 102 360 342 01/01/2002 12/01/2011 505,493 42,124
36 120 119 360 359 06/01/2003 05/01/2013 432,603 36,050
37 126 124 300 298 05/01/2003 10/01/2013 418,857 34,905
38 120 119 360 359 06/01/2003 05/01/2013 371,847 30,987
39 120 113 360 353 12/01/2002 11/01/2012 417,165 34,764
- ----------------------------------------------------------------------------------------------------------------------------------
40 120 112 300 292 11/01/2002 10/01/2012 424,501 35,375
41 120 113 300 293 12/01/2002 11/01/2012 386,581 32,215
42 120 118 360 358 05/01/2003 04/01/2013 337,009 28,084
43 60 59 360 359 06/01/2003 05/01/2008 297,147 24,762
44 120 120 360 360 07/01/2003 06/01/2013 306,606 25,551
- ----------------------------------------------------------------------------------------------------------------------------------
45 121 121 360 360 07/01/2003 07/01/2013 288,897 24,075
46 120 119 360 359 06/01/2003 05/01/2013 318,017 26,501
47 120 118 360 358 05/01/2003 04/01/2013 296,386 24,699
48 120 116 360 356 03/01/2003 02/01/2013 300,880 25,073
49 120 119 300 299 06/01/2003 05/01/2013 335,621 27,968
- ----------------------------------------------------------------------------------------------------------------------------------
49A
49B
50 120 120 360 360 07/01/2003 06/01/2013 282,730 23,561
51 60 59 360 359 06/01/2003 05/01/2008 273,467 22,789
52 120 116 360 356 03/01/2003 02/01/2013 296,004 24,667
- ----------------------------------------------------------------------------------------------------------------------------------
53 120 118 360 358 05/01/2003 04/01/2013 283,440 23,620
54 120 118 360 358 05/01/2003 04/01/2013 280,115 23,343
55 60 59 360 359 06/01/2003 05/01/2008 258,946 21,579
56 213 213 213 213 07/01/2003 03/01/2021 355,110 29,592
REMAINING CROSSED
INTEREST ONLY ARD WITH GRACE PAYMENT
ID PERIOD (MOS.) (2) LOCKBOX (4) (YES/NO) OTHER LOANS DSCR (3)(5) PERIOD DATE
- --------------------------------------------------------------------------------------------------------------------------------
1 134 Hard No No 2.02 5 1
2 - Hard No No 2.40 0 1
2A
2B
3 - Hard No No 2.93 5 1
- --------------------------------------------------------------------------------------------------------------------------------
4 - Hard No No 1.43 5 1
5 - Hard No No 1.31 5 1
6 - Soft at Closing, Springing Hard No No 1.37 5 1
7 - Hard No No 1.27 5 1
8 - Hard No No 1.06 5 1
- --------------------------------------------------------------------------------------------------------------------------------
9 36 No No No 1.23 5 1
10 - Hard No No 1.56 5 1
11 12 Soft at Closing, Springing Hard No No 1.51 5 1
12 - Springing Hard No No 1.41 5 1
13 - Springing Hard No No 1.41 5 1
- --------------------------------------------------------------------------------------------------------------------------------
14 - Soft at Closing, Springing Hard No No 1.30 5 1
15 - Springing Hard No No 1.44 5 1
16 1 Hard No No 1.05 5 1
17 1 No No No 1.71 5 1
17A
- --------------------------------------------------------------------------------------------------------------------------------
17B
18 - No No No 1.52 5 1
19 - Soft at Closing, Springing Hard No No 1.36 5 1
20 - Soft at Closing, Springing Hard No No 1.27 5 1
21 - Springing Hard No No 1.37 5 1
- --------------------------------------------------------------------------------------------------------------------------------
22 - No No No 1.23 5 1
23 - Springing Hard No No 1.46 5 1
24 - Springing Hard No No 1.48 5 1
25 - Springing Hard No No 1.40 5 1
26 - No No No 1.30 5 1
- --------------------------------------------------------------------------------------------------------------------------------
27 - No No No 1.40 5 1
28 - No No No 1.31 5 1
29 - Springing Hard No No 1.43 5 1
30 1 Soft at Closing, Springing Hard No No 1.44 5 1
31 - Springing Hard No No 1.45 5 1
- --------------------------------------------------------------------------------------------------------------------------------
32 7 Springing Hard No No 1.91 5 1
33 - Springing Hard No No 1.43 5 1
34 - Springing Hard No No 1.55 5 1
34A
34B
- --------------------------------------------------------------------------------------------------------------------------------
35 - Springing Hard No No 1.60 5 1
36 - No No No 1.50 5 1
37 - Springing Hard No No 1.35 5 1
38 - Springing Hard No No 1.51 5 1
39 - Springing Hard No No 1.43 5 1
- --------------------------------------------------------------------------------------------------------------------------------
40 - Springing Hard No No 1.32 5 1
41 - Springing Hard No No 1.25 5 1
42 - Springing Hard No No 1.32 5 1
43 - Springing Hard No No 1.48 5 1
44 - Springing Hard No No 1.43 5 1
- --------------------------------------------------------------------------------------------------------------------------------
45 1 No No No 1.49 5 1
46 - No No No 1.31 5 1
47 - Springing Hard No No 1.49 5 1
48 - Springing Hard No No 1.47 5 1
49 - No No No 1.39 5 1
- --------------------------------------------------------------------------------------------------------------------------------
49A
49B
50 - Springing Hard No No 1.68 5 1
51 - Springing Hard No No 1.68 5 1
52 - Springing Hard No No 1.42 5 1
- --------------------------------------------------------------------------------------------------------------------------------
53 - Springing Hard No No 1.46 5 1
54 - Springing Hard No No 1.48 5 1
55 - Springing Hard No No 1.59 5 1
56 - Hard No No 1.25 5 1
CUT-OFF LTV
APPRAISED DATE LTV RATIO AT
ID VALUE (6) RATIO (5) MATURITY (5) ADDRESS CITY
- ------------------------------------------------------------------------------------------------------------------------------------
1 130,000,000 50.00% 50.00% 75 Rockefeller Plaza New York
2 378,500,000 45.79% 39.10% Various Various
2A 195,000,000 2800 NORTH MAIN STREET SANTA ANA
2B 183,500,000 1151 GALLERIA BOULEVARD ROSEVILLE
3 270,000,000 40.95% 33.73% 3111 West Chandler Boulevard Chandler
- ------------------------------------------------------------------------------------------------------------------------------------
4 56,800,000 79.93% 66.64% 339, 355, 455 and 505 Gateway Drive Brooklyn
5 48,800,000 79.92% 67.04% 250 North Old Woodward Avenue Birmingham
6 47,700,000 79.80% 66.60% 633 West Rittenhouse Street Philadelphia
7 35,500,000 78.80% 66.38% 540 Gaither Road Rockville
8 30,500,000 88.15% 74.40% 1669 Collins Avenue Miami Beach
- ------------------------------------------------------------------------------------------------------------------------------------
9 33,250,000 79.40% 71.03% 2605 Meadow Church Road Duluth
10 32,500,000 73.42% 68.25% 1050 Shaw Avenue Clovis
11 29,100,000 72.85% 62.14% 5855 Copley Drive San Diego
12 24,500,000 79.53% 67.50% 230-39 International Airport Center Drive Jamaica
13 21,000,000 78.51% 66.64% 230-19 International Airport Center Drive Jamaica
- ------------------------------------------------------------------------------------------------------------------------------------
14 20,400,000 79.67% 67.50% 72-399, 72-449, 72-459 & 72-469 Highway 111 Palm Desert
15 18,200,000 76.85% 64.75% 500 Quarrier Street Charleston
16 14,870,000 91.90% 0.00% 570 Daniel Webster Highway Merrimack
17 22,600,000 58.63% 45.95% 1813 & 1815 West Mercury Boulevard Hampton
17A 13,300,000 1815 WEST MERCURY BOULEVARD HAMPTON
- ------------------------------------------------------------------------------------------------------------------------------------
17B 9,300,000 1813 WEST MERCURY BOULEVARD HAMPTON
18 16,500,000 77.12% 64.96% 200 Campus View Drive Altoona
19 15,800,000 74.81% 63.98% 14600 Military Trail Delray Beach
20 12,220,000 77.66% 65.80% 72-339, 72-345, 72-349, 72-355 & 72-359 Highway 111 Palm Desert
21 10,950,000 79.84% 67.07% 2775 Stowmarket Avenue Rockford
- ------------------------------------------------------------------------------------------------------------------------------------
22 10,500,000 79.93% 71.81% 2251 Pleasant View Drive Marion
23 10,830,000 76.80% 64.71% 320 West Pike Street Clarksburg
24 12,100,000 64.91% 58.56% 128-146 Dolson Avenue Middletown
25 10,300,000 74.27% 57.70% 4801 East Independence Boulevard Charlotte
26 10,350,000 72.37% 56.42% 2 Hendersonville Road Asheville
- ------------------------------------------------------------------------------------------------------------------------------------
27 9,900,000 74.75% 58.48% 2000 Cliff Mine Road Pittsburgh
28 10,500,000 69.76% 58.74% 301 Main Street Huntington Beach
29 9,000,000 79.85% 67.36% 6100 Arlington Expressway Jacksonville
30 8,800,000 79.55% 66.26% 501-543 Jefferson Davis Highway Fredericksburg
31 10,100,000 69.24% 58.00% 1720 North Halsted, 1818 North Halsted, 1717 North Dayton Chicago
- ------------------------------------------------------------------------------------------------------------------------------------
32 11,000,000 59.09% 46.17% 3134 North Clark Street Chicago
33 8,200,000 77.37% 65.01% 1203 West Main Street Central
34 9,600,000 63.94% 59.86% Various Irving
34A 5,039,326 8333 ROYAL RIDGE PARKWAY IRVING
34B 4,560,674 6440 BELTLINE ROAD IRVING
- ------------------------------------------------------------------------------------------------------------------------------------
35 9,500,000 64.13% 57.05% 201 Highway 10 East Richmond
36 8,000,000 74.94% 63.66% 1501 North University Avenue Little Rock
37 7,400,000 76.58% 57.27% 2700 Double Churches Road Columbus
38 8,350,000 65.81% 54.92% Various (12) Chicago
39 7,340,000 74.48% 64.47% 39201 Joy Road Westland
- ------------------------------------------------------------------------------------------------------------------------------------
40 6,950,000 72.66% 58.33% 2900-3000 Interstate 35 South Austin
41 7,000,000 70.72% 55.31% 2910 White Knight Boulevard Indianapolis
42 6,400,000 71.75% 61.27% 3350 Buschwood Park Drive Tampa
43 5,700,000 80.09% 74.05% 4280 South Lee Street Buford
44 5,900,000 76.27% 63.73% 700 Vista Court #1 Allegan
- ------------------------------------------------------------------------------------------------------------------------------------
45 5,660,000 76.86% 63.75% 2306 South Jefferson Avenue Mt. Pleasant
46 5,900,000 73.67% 62.82% 23 Route 31 North & 2 Tree Farm Road Pennington
47 6,060,000 71.64% 59.98% 18505 Southwest Stubblefield Way Beaverton
48 5,400,000 79.66% 67.23% 4344 West Highland Drive Macon
49 5,765,000 74.49% 57.98% Various Various
- ------------------------------------------------------------------------------------------------------------------------------------
49A 3,200,000 2501 EAST PIEDMONT ROAD MARIETTA
49B 2,565,000 11080 OLD ROSWELL ROAD ALPHARETTA
50 5,900,000 72.03% 59.78% 8212 Colerain Avenue Colerain
51 5,600,000 75.81% 70.00% 270 North Clark Road Show Low
52 5,300,000 79.85% 67.39% 180 Hidden Lakes Court Macon
- ------------------------------------------------------------------------------------------------------------------------------------
53 5,150,000 80.61% 67.49% 2765 10th Avenue North Lake Worth
54 5,400,000 73.93% 62.37% 625 31st Avenue North Columbus
55 5,000,000 77.12% 71.59% 14485 Greenwell Springs Road Baton Rouge
56 5,560,000 68.35% 0.00% 1497 Canton Mart Road Jackson
NET UNITS LOAN PER NET PREPAYMENT
YEAR YEAR RENTABLE OF RENTABLE AREA PROVISIONS
ID COUNTY STATE ZIP CODE BUILT RENOVATED AREA SF/UNITS (7) MEASURE SF/UNITS (# OF PAYMENTS) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
1 New York NY 10019 1947 2003 578,241 Sq. Ft. 112 L(24),D(106),O(4)
2 Various CA Various Various Various 1,346,894 Sq. Ft. 44 L(26),D(87),O(7)
2A ORANGE CA 92705 1987 1992 884,228 SQ. FT. 35
2B PLACER CA 95678 2000 462,666 SQ. FT. 62
3 Maricopa AZ 85226 2001 630,570 Sq. Ft. 86 L(30),D(83),O(7)
- ------------------------------------------------------------------------------------------------------------------------------------
4 Kings NY 11239 2002 152,500 Sq. Ft. 298 L(24),D(92),O(4)
5 Oakland MI 48009 2003 149,873 Sq. Ft. 260 L(24),D(92),O(4)
6 Philadelphia PA 19144 1950 1998 570 Units 66,778 L(25),D(91),O(4)
7 Montgomery MD 20850 2003 133,895 Sq. Ft. 209 L(25),D(91),O(4)
8 Miami-Dade FL 33139 163,350 Sq. Ft. 165 L(28),D(88),O(4)
- ------------------------------------------------------------------------------------------------------------------------------------
9 Gwinnett GA 30097 2001 333 Units 79,279 L(24),D(92),O(4)
10 Fresno CA 93612 1989 1999 588,643 Sq. Ft. 41 L(29),D(27),O(4)
11 San Diego CA 92111 2001 120,553 Sq. Ft. 176 L(24),D(92),O(4)
12 Queens NY 11413 2002 107,762 Sq. Ft. 181 L(35),D(82),O(3)
13 Queens NY 11413 2002 99,521 Sq. Ft. 166 L(35),D(82),O(3)
- ------------------------------------------------------------------------------------------------------------------------------------
14 Riverside CA 92260 1995 136,576 Sq. Ft. 119 L(28),D(88),O(4)
15 Kanawha WV 25301 1959 1999 90,050 Sq. Ft. 155 L(35),D(82),O(3)
16 Hillsborough NH 03054 2003 65,000 Sq. Ft. 210 L(24),D(223),O(1)
17 Hampton City VA 23666 Various 2002 451 Rooms 29,379 L(24),D(93),O(4)
17A HAMPTON CITY VA 23666 1962 2002 320 ROOMS 24,367
- ------------------------------------------------------------------------------------------------------------------------------------
17B HAMPTON CITY VA 23666 1986 2002 131 ROOMS 41,622
18 Blair PA 16601 2000 156 Units 81,571 L(26),D(90),O(4)
19 Palm Beach FL 33484 1989 151,036 Sq. Ft. 78 L(27),D(89),O(4)
20 Riverside CA 92260 1995 66,221 Sq. Ft. 143 L(28),D(88),O(4)
21 Winnebago IL 61109 2002 136 Units 64,280 L(35),D(82),O(3)
- ------------------------------------------------------------------------------------------------------------------------------------
22 Linn IA 52302 2002 168 Units 49,955 L(25),D(55),O(4)
23 Harrison WV 26301 1999 55,443 Sq. Ft. 150 L(35),D(82),O(3)
24 Orange NY 10940 1988 2001 197,023 Sq. Ft. 40 L(35),D(22),O(3)
25 Mecklenburg NC 28212 1971 107,236 Sq. Ft. 71 L(35),D(82),O(3)
26 Buncombe NC 28803 1917 2000 102,277 Sq. Ft. 73 L(25),D(91),O(4)
- ------------------------------------------------------------------------------------------------------------------------------------
27 Allegheny PA 15275 1980 1997 93,742 Sq. Ft. 79 L(24),D(92),O(4)
28 Orange CA 92648 1999 36,370 Sq. Ft. 201 L(24),D(92),O(4)
29 Duval FL 32211 1970 2002 205 Units 35,054 L(35),D(82),O(3)
30 Fredericksburg City VA 22401 1960 1992 102,262 Sq. Ft. 68 L(24),D(93),O(4)
31 Cook IL 60614 1984 87 Units 80,385 L(35),D(82),O(3)
- ------------------------------------------------------------------------------------------------------------------------------------
32 Cook IL 60657 1988 53,420 Sq. Ft. 122 L(35),D(82),O(3)
33 Pickens SC 29630 2002 72 Units 88,114 L(35),D(82),O(3)
34 Dallas TX 75063 2000 83,735 Sq. Ft. 73 L(35),D(22),O(3)
34A DALLAS TX 75063 2000 43,955 SQ. FT. 73
34B DALLAS TX 75063 2000 39,780 SQ. FT. 73
- ------------------------------------------------------------------------------------------------------------------------------------
35 Ray MO 64085 1996 266,585 Sq. Ft. 23 L(42),D(75),O(3)
36 Pulaski AR 72207 1974 112,349 Sq. Ft. 53 L(25),D(91),O(4)
37 Muscogee GA 31909 2002 102 Units 55,560 L(35),D(88),O(3)
38 Cook IL 60614 Vintage 1978 56 Units 98,120 L(35),D(82),O(3)
39 Wayne MI 48185 1990 82 Units 66,666 L(35),D(82),O(3)
- ------------------------------------------------------------------------------------------------------------------------------------
40 Travis TX 78704 1974 1994 75,375 Sq. Ft. 67 L(35),D(82),O(3)
41 Marion IN 46229 1974 184 Units 26,904 L(35),D(82),O(3)
42 Hillsborough FL 33618 1989 77,095 Sq. Ft. 60 L(35),D(82),O(3)
43 Gwinnett GA 30518 1973 114 Units 40,046 L(35),D(22),O(3)
44 Allegan MI 49010 2002 120 Units 37,500 L(35),D(82),O(3)
- ------------------------------------------------------------------------------------------------------------------------------------
45 Titus TX 75455 1973 2000 72,451 Sq. Ft. 60 L(24),D(93),O(4)
46 Mercer NJ 08534 1996 1999 29,657 Sq. Ft. 147 L(25),D(91),O(4)
47 Washington OR 97006 2002 88 Units 49,331 L(35),D(82),O(3)
48 Bibb GA 31210 1985 152 Units 28,300 L(35),D(82),O(3)
49 Various GA Various Various Various 38,791 Sq. Ft. 111 L(25),D(91),O(4)
- ------------------------------------------------------------------------------------------------------------------------------------
49A COBB GA 30062 1996 2000 18,191 SQ. FT. 131
49B FULTON GA 30004 1997 20,600 SQ. FT. 93
50 Hamilton OH 45239 2002 14,490 Sq. Ft. 293 L(35),D(82),O(3)
51 Navajo AZ 85901 1985 1999 389 Pads 10,914 L(35),D(22),O(3)
52 Bibb GA 31204 1990 144 Units 29,388 L(35),D(82),O(3)
- ------------------------------------------------------------------------------------------------------------------------------------
53 Palm Beach FL 33461 1950's 1980 170 Pads 24,421 L(35),D(82),O(3)
54 Lowndes MS 39705 1983 2001 152 Units 26,265 L(35),D(82),O(3)
55 East Baton Rouge LA 70739 1982 89,224 Sq. Ft. 43 L(35),D(22),O(3)
56 Hinds MS 39211 2001 15,120 Sq. Ft. 251 L(24),D(188),O(1)
FOURTH FOURTH MOST THIRD
MOST RECENT RECENT NOI MOST RECENT
ID PROPERTY NAME NOI DATE NOI
- -----------------------------------------------------------------------------------------------------
1 75 Rockefeller Plaza (8)(9)(10)
2 Westfield Shoppingtown Portfolio 32,412,707
2A SHOPPINGTOWN MAINPLACE 16,882,898
2B SHOPPINGTOWN GALLERIA AT ROSEVILLE 15,529,809
3 Chandler Fashion Center
- -----------------------------------------------------------------------------------------------------
4 Gateway Center BJ's
5 Palladium at Birmingham
6 Empirian Luxury Towers 3,689,137
7 Redland Center
8 1669 Collins Avenue, Miami Beach Land 2,000,000 12/31/2000 2,000,000
- -----------------------------------------------------------------------------------------------------
9 The Reserve at Sugarloaf
10 Sierra Vista Mall 2,853,024 T-12 11/30/2000 3,217,442
11 Copley Corporate Center
12 IAC JFK Building B (11)
13 IAC JFK Building A
- -----------------------------------------------------------------------------------------------------
14 Desert Crossing T.J. Maxx 1,568,455
15 GSA - Charleston 1,421,906 12/31/2000 1,357,336
16 Shaw's Merrimack (9)(16)
17 Hampton Inn & Holiday Inn (9)(10) 1,792,465 12/31/2000 1,943,178
17A HOLIDAY INN 1,040,233 12/31/2000 1,068,638
- -----------------------------------------------------------------------------------------------------
17B HAMPTON INN 752,232 12/31/2000 874,540
18 Nittany Pointe 1,161,693
19 Delray Square 1,339,903 12/31/2000 1,332,480
20 Desert Crossing Office Depot 820,116
21 Pembrook Place Apartments 173,948 12/31/2000 247,187
- -----------------------------------------------------------------------------------------------------
22 Regal Townhomes
23 GSA - Clarksburg 871,301 12/31/2000 829,811
24 Playtogs Shopping Center - NY 510,958
25 Independence Tower 872,334 12/31/2000 824,842
26 Biltmore Station 745,331 12/31/2000 781,085
- -----------------------------------------------------------------------------------------------------
27 Park West Two Office Building 865,521
28 Plaza Almeria 221,589 12/31/2000 409,328
29 Waters Inlet Apartments 259,242
30 Fredericksburg Shopping Center (9) 649,625 12/31/2000 677,250
31 Willow Dayton Apartments - Phase II 771,629 12/31/2000 764,302
- -----------------------------------------------------------------------------------------------------
32 3134 North Clark Street 653,210 12/31/2000 629,896
33 University Village Apartments
34 Beltline - Royal Ridge Portfolio (10) 576,968
34A ROYAL RIDGE
34B BELTLINE
- -----------------------------------------------------------------------------------------------------
35 Orbseal Building
36 The Prospect Building 823,876
37 Hamilton Station IV
38 Willow Dayton Apartments - Phase I (13) 639,441 12/31/2000 695,477
39 American House of Westland 538,212 12/31/2000 645,484
- -----------------------------------------------------------------------------------------------------
40 Fountain Park Plaza I & II 619,426 12/31/2000 728,090
41 Country Lakes Townhome Apartments 441,981 12/31/2000 428,032
42 Buschwood III (14) 254,827 12/31/2000 310,208
43 Eagle Creek Apartments 453,857 12/31/2000 514,576
44 HighPointe Apartments
- -----------------------------------------------------------------------------------------------------
45 Commerce Square Center (9) 120,445 12/31/2000 444,302
46 Offices at Pennington Point 456,277
47 Reedville Commons
48 Shadowood West Apartments
49 Innova Centers (10) 491,554
- -----------------------------------------------------------------------------------------------------
49A INNOVA CENTER - EAST COBB 217,103
49B INNOVA CENTER - NORTHPOINT 274,451
50 Walgreens - Cincinnati
51 Venture In Resort
52 Hidden Lakes Apartments
- -----------------------------------------------------------------------------------------------------
53 Sunshine Village MHP 390,359 12/31/2000 372,324
54 Falcon Lair Apartments 495,659 12/31/2000 481,865
55 Northeast Plaza 507,216 12/31/2000 555,498
56 Walgreens - Canton Mart
THIRD MOST SECOND SECOND MOST MOST RECENT
RECENT NOI MOST RECENT RECENT NOI MOST RECENT NOI UNDERWRITTEN UNDERWRITTEN UNDERWRITTEN
ID DATE NOI DATE NOI DATE NOI REVENUE EGI
- ------------------------------------------------------------------------------------------------------------------------------------
1 6,228,077 6,228,077 6,228,077
2 12/31/2001 30,288,450 12/31/2002 31,478,657 27,766,408 46,749,529
2A 12/31/2001 15,447,907 12/31/2002 15,856,968 13,583,264 23,622,770
2B 12/31/2001 14,840,543 12/31/2002 15,621,689 14,183,144 23,126,759
3 21,030,221 12/31/2002 21,979,596 20,879,400 31,366,418
- ------------------------------------------------------------------------------------------------------------------------------------
4 3,968,380 Ann. 12/31/2002 4,537,434 4,690,302 5,808,064
5 1,956,991 12/31/2002 3,628,100 3,960,254 5,345,531
6 12/31/2001 3,727,694 12/31/2002 3,780,418 T-12 3/31/2003 3,661,727 4,765,768 5,593,491
7 2,640,894 3,478,226 3,658,226
8 12/31/2001 2,000,000 12/31/2002 2,000,000 2,000,000 2,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
9 2,235,294 Ann. 4/30/2003 2,272,576 3,372,108 3,628,708
10 T-12 11/30/2001 3,585,339 T-12 10/31/2002 2,741,772 3,132,491 6,115,469
11 1,502,285 12/31/2002 1,480,985 T-12 3/31/2003 2,236,567 2,290,269 3,136,976
12 2,016,021 2,018,637 2,253,845
13 1,707,151 1,721,369 1,973,932
- ------------------------------------------------------------------------------------------------------------------------------------
14 12/31/2001 1,661,029 12/31/2002 1,606,539 1,728,648 2,161,589
15 12/31/2001 1,404,803 12/31/2002 1,434,133 1,998,170 2,106,849
16 1,093,000 1,105,000 1,202,500
17 12/31/2001 2,809,191 12/31/2002 2,428,067 T-12 4/26/2003 2,237,433 8,284,327 10,667,333
17A 12/31/2001 1,735,369 12/31/2002 1,451,106 T-12 4/26/2003 1,372,404 5,817,288 8,170,198
- ------------------------------------------------------------------------------------------------------------------------------------
17B 12/31/2001 1,073,822 12/31/2002 976,961 T-12 4/26/2003 865,029 2,467,039 2,497,135
18 12/31/2001 1,446,613 12/31/2002 1,420,793 T-12 2/28/2003 1,396,115 2,282,980 2,332,865
19 12/31/2001 1,546,520 12/31/2002 1,321,696 1,730,185 1,872,335
20 12/31/2001 649,934 12/31/2002 911,804 979,909 1,213,042
21 12/31/2001 609,766 12/31/2002 862,497 1,295,081 1,325,398
- ------------------------------------------------------------------------------------------------------------------------------------
22 820,800 T-12 2/28/2003 755,512 1,142,918 1,164,296
23 12/31/2001 801,906 12/31/2002 859,956 1,285,788 1,287,788
24 T-6 12/31/2001 1,132,384 T-12 11/30/2002 996,380 1,430,420 1,847,537
25 12/31/2001 988,723 12/31/2002 970,618 T-12 1/31/2003 970,428 1,400,561 1,588,896
26 12/31/2001 889,241 12/31/2002 870,604 1,081,806 1,214,206
- ------------------------------------------------------------------------------------------------------------------------------------
27 12/31/2001 1,023,982 12/31/2002 1,051,330 T-12 2/28/2003 1,003,408 1,557,641 1,620,424
28 12/31/2001 630,651 12/31/2002 724,934 937,824 1,205,776
29 12/31/2001 628,175 12/31/2002 770,383 1,257,181 1,347,911
30 12/31/2001 681,500 12/31/2002 733,100 T-12 2/28/2003 774,246 888,490 1,098,071
31 12/31/2001 744,891 12/31/2002 716,882 1,240,860 1,341,961
- ------------------------------------------------------------------------------------------------------------------------------------
32 12/31/2001 545,846 12/31/2002 958,369 957,258 1,295,207
33 295,624 T-5 1/31/2003 655,725 853,130 878,130
34 12/31/2001 785,119 12/31/2002 818,259 T-12 2/28/2003 764,696 830,104 1,185,994
34A
34B
- ------------------------------------------------------------------------------------------------------------------------------------
35 914,107 914,106 1,297,264
36 12/31/2001 753,019 12/31/2002 797,906 T-12 2/28/2003 781,239 1,401,994 1,529,221
37 484,663 Ann. 02/2002-12/2002 590,049 894,617 927,285
38 12/31/2001 619,253 12/31/2002 596,942 1,058,062 1,144,496
39 12/31/2001 576,608 12/31/2002 617,028 1,435,024 1,509,986
- ------------------------------------------------------------------------------------------------------------------------------------
40 12/31/2001 586,227 T-12 2/28/2003 663,787 1,111,584 1,150,913
41 12/31/2001 534,480 T-12 2/28/2003 529,837 1,187,322 1,225,919
42 12/31/2001 508,387 12/31/2002 543,210 1,049,630 1,071,161
43 12/31/2001 506,387 12/31/2002 468,563 710,950 773,198
44 403,316 12/31/2002 468,086 871,326 889,945
- ------------------------------------------------------------------------------------------------------------------------------------
45 12/31/2001 509,634 12/31/2002 479,522 516,395 627,046
46 12/31/2001 463,308 12/31/2002 452,417 457,333 631,130
47 282,144 12/31/2002 462,298 672,084 722,784
48 319,659 T-12 2/28/2003 479,886 868,451 906,084
49 12/31/2001 617,850 12/31/2002 630,261 T-12 2/28/2003 519,356 694,553 739,353
- ------------------------------------------------------------------------------------------------------------------------------------
49A 12/31/2001 316,205 12/31/2002 223,140 357,751 402,551
49B 12/31/2001 301,645 12/31/2002 296,216 336,802 336,802
50 476,040 492,000 492,000
51 501,976 12/31/2002 511,875 T-12 2/28/2003 477,780 584,522 750,713
52 321,861 T-12 2/28/2003 457,194 820,206 856,259
- ------------------------------------------------------------------------------------------------------------------------------------
53 12/31/2001 401,037 12/31/2002 422,885 650,212 650,212
54 12/31/2001 435,325 12/31/2002 433,668 T-12 1/31/2003 455,153 895,966 906,622
55 12/31/2001 566,071 12/31/2002 482,360 547,527 701,135
56 448,000 448,000 448,000
UNDERWRITTEN UNDERWRITTEN UNDERWRITTEN UNDERWRITTEN LEASE
ID EXPENSES RESERVES TI/LC NET CASH FLOW LARGEST TENANT SF EXPIRATION
- ------------------------------------------------------------------------------------------------------------------------------------
1 - - - 6,228,077 AOL TimeWarner, Inc. 578,241 07/31/2014
2 15,270,872 182,774 598,315 30,697,568
2A 7,765,802 90,364 326,708 15,439,896 NORDSTROM (GROUND LEASE) 150,500 08/31/2037
2B 7,505,070 92,410 271,608 15,257,672 CRATE & BARREL 36,223 08/31/2010
3 9,386,822 126,174 494,910 21,358,512 Harkins Theatres 85,625 10/18/2016
- ------------------------------------------------------------------------------------------------------------------------------------
4 1,270,630 30,500 130,671 4,376,263 BJ's Wholesale Club 128,995 09/30/2027
5 1,717,431 30,001 58,707 3,539,392 Palladium Theater 73,500 11/30/2021
6 1,931,765 142,500 - 3,519,227
7 1,017,332 26,779 129,291 2,484,824 GSA (Department of Health and Human Services) 133,895 03/22/2013
8 - - - 2,000,000 DiLido Beach Resort, Ltd. 163,350 09/09/2128
- ------------------------------------------------------------------------------------------------------------------------------------
9 1,356,132 66,600 - 2,205,976
10 3,373,697 116,185 172,412 2,453,175 Sears 116,641 10/31/2014
11 900,409 24,111 60,277 2,152,180 Household Finance 80,281 05/31/2016
12 237,823 10,776 26,464 1,978,781 Exel Global Logistics 67,145 01/31/2013
13 266,781 9,952 24,440 1,672,759 Nippon 47,814 04/30/2013
- ------------------------------------------------------------------------------------------------------------------------------------
14 555,050 27,315 86,250 1,492,975 Bed, Bath & Beyond 39,874 01/31/2006
15 672,716 24,232 - 1,409,901 United States General Services Administration 90,050 12/09/2019
16 109,500 - - 1,093,000 Shaw's Supermarkets, Inc. 65,000 02/29/2024
17 8,429,900 426,693 - 1,810,740
17A 6,797,794 326,808 - 1,045,596
- ------------------------------------------------------------------------------------------------------------------------------------
17B 1,632,106 99,885 - 765,144
18 936,750 46,800 - 1,349,315
19 550,639 30,215 111,603 1,179,878 Consolidated Stores dba Big Lots 30,000 01/31/2006
20 301,238 13,244 40,827 857,733 Office Depot 28,603 09/30/2010
21 462,902 34,000 - 828,497
- ------------------------------------------------------------------------------------------------------------------------------------
22 408,784 37,800 - 717,712
23 427,832 11,089 - 848,868 United States General Services Administration 55,443 01/27/2019
24 851,157 29,553 88,371 878,456 Redners Market, Inc. 53,484 10/31/2016
25 618,468 21,447 114,936 834,045 California Gold Executive Suites 10,804 01/31/2004
26 343,602 20,445 84,558 765,601 Interiors Marketplace 13,456 12/31/2015
- ------------------------------------------------------------------------------------------------------------------------------------
27 617,016 18,748 163,563 821,097 Dick's Sporting Goods 27,679 02/28/2005
28 480,841 7,274 44,087 673,573 Inka Grill 4,910 06/30/2010
29 577,529 51,250 - 719,133
30 323,825 20,452 74,340 679,454 Food Lion 29,000 07/31/2012
31 625,079 22,359 - 694,523
- ------------------------------------------------------------------------------------------------------------------------------------
32 336,839 10,684 31,155 916,530 Sportmart 47,582 12/31/2015
33 222,405 25,200 - 630,525
34 421,298 12,527 74,820 677,349
34A CITICORP CREDIT SERVICES 43,955 04/30/2006
34B PAYCHEX, INC. 20,460 10/31/2007
- ------------------------------------------------------------------------------------------------------------------------------------
35 383,157 39,385 66,738 807,984 Orbseal 266,585 09/30/2021
36 747,982 23,531 108,217 649,491 Rector, Phillips, Morse, Inc. 13,808 01/31/2005
37 337,236 25,500 - 564,549
38 547,554 22,800 11,341 562,801
39 892,959 20,500 - 596,528
- ------------------------------------------------------------------------------------------------------------------------------------
40 487,126 15,075 87,348 561,364 Texas Parks & Wildlife 18,102 01/31/2008
41 696,081 46,445 - 483,392
42 527,951 12,365 87,429 443,416 Southeastern Staffing 17,102 07/31/2010
43 304,635 28,500 - 440,063
44 421,859 30,000 - 438,086
- ------------------------------------------------------------------------------------------------------------------------------------
45 147,524 14,490 35,614 429,418 Goody's 25,200 08/31/2010
46 178,713 5,931 30,128 416,358 Arete, Inc. 2,814 12/26/2005
47 260,486 22,000 - 440,298
48 426,198 38,000 - 441,886
49 219,997 8,668 44,052 466,636
- ------------------------------------------------------------------------------------------------------------------------------------
49A 179,411 4,548 23,081 195,511 ESCRIBE 1,570 03/31/2003
49B 40,586 4,120 20,971 271,125 E-LITIGATION CONSULTING 3,150 09/30/2005
50 15,960 2,174 - 473,866 Walgreens 14,490 03/14/2022
51 272,933 19,450 - 458,330
52 399,066 36,000 - 421,194
- ------------------------------------------------------------------------------------------------------------------------------------
53 227,327 8,500 - 414,385
54 451,469 39,824 - 415,329
55 218,775 13,384 56,211 412,765 A&P Superfresh - Sav A Center 42,130 05/31/2007
56 - 2,873 - 445,127 Walgreens 15,120 03/31/2021
LEASE LEASE
ID 2ND LARGEST TENANT SF EXPIRATION 3RD LARGEST TENANT SF EXPIRATION
- ------------------------------------------------------------------------------------------------------------------------------------
1
2
2A ROBINSON'S-MAY WOMEN'S (GROUND LEASE) 142,500 04/19/2020 ROBINSON'S-MAY MEN'S (GROUND LEASE) 142,500 08/31/2037
2B COPELAND'S SPORTS 31,164 01/31/2011 BORDERS BOOKS & Music 25,120 01/31/2016
3 Barnes & Noble 28,441 10/31/2011 The Gap 20,000 01/31/2007
- ------------------------------------------------------------------------------------------------------------------------------------
4 Red Lobster 8,096 10/31/2017 Olive Garden 8,062 10/31/2017
5 Tower Records 17,500 04/30/2017 City Cellar/Blue Martini 14,872 02/28/2013
6
7
8
- ------------------------------------------------------------------------------------------------------------------------------------
9
10 Target (Ground Lease) 109,648 12/31/2008 Gottschalks (Ground Lease) 99,539 10/31/2018
11 Kaiser 22,525 05/31/2008 UCSD 17,747 12/31/2007
12 Kintetsu World Express 40,617 10/31/2010
13 Hankyu 34,648 03/31/2013 Vandergrift Forwarding Co., Inc. 3,384 01/30/2013
- ------------------------------------------------------------------------------------------------------------------------------------
14 Marshalls 35,137 01/31/2016 T.J. Maxx 35,132 03/31/2005
15
16
17
17A
- ------------------------------------------------------------------------------------------------------------------------------------
17B
18
19 World Gym 26,290 05/31/2008 Palm Beach Workforce 14,365 07/31/2004
20 Pier 1 Imports 14,172 05/30/2013 Western Warehouse 13,986 08/31/2005
21
- ------------------------------------------------------------------------------------------------------------------------------------
22
23
24 Middletown Discount Cinemas 13,809 05/30/2006 Book Avenue 13,700 12/31/2013
25 Michael R. Bare, Inc. aka Nationwide Insurance 7,266 02/28/2009 MBSI of the Carolinas, Inc. 5,089 06/30/2003
26 Mountain Health Care 13,000 12/31/2003 Buncombe City Child Support 10,000 02/28/2004
- ------------------------------------------------------------------------------------------------------------------------------------
27 Fidelity National Lender 15,711 09/30/2007 Reliant Energy 13,854 03/31/2005
28 Astra Oil 4,815 10/31/2004 REMAX 3,256 03/31/2005
29
30 Mary Washington Hospital Thrift 11,875 07/31/2007 Family Dollar 8,484 12/31/2008
31
- ------------------------------------------------------------------------------------------------------------------------------------
32 Blockbuster Video 5,838 02/28/2009
33
34
34A
34B U.S. GOVERNMENT/NAVY 12,099 09/15/2007 TYCO 7,000 10/31/2005
- ------------------------------------------------------------------------------------------------------------------------------------
35
36 A.G. Edwards & Sons 7,562 04/30/2006 Hospice Home Care 5,857 02/28/2005
37
38
39
- ------------------------------------------------------------------------------------------------------------------------------------
40 Southwest Key Program 16,655 04/30/2005 Texas Federation of Teachers 8,814 06/30/2004
41
42 Arbitration Forums 14,058 09/30/2008 General Services Administration 9,075 07/08/2006
43
44
- ------------------------------------------------------------------------------------------------------------------------------------
45 Staples 23,861 09/30/2015 Dollar Tree 9,000 07/30/2006
46 Hopewell Physical Therapy 2,370 07/08/2004 Independent Traveler 2,153 07/06/2005
47
48
49
- ------------------------------------------------------------------------------------------------------------------------------------
49A TODD MALLOY/ THE BOTTOM LINE 1,310 01/31/2004 ICON PRODUCTION 1,310 10/31/2003
49B INNOVA CONNECT 2,200 12/31/2005 VETERNS MORTGAGE 1,700 06/30/2003
50
51
52
- ------------------------------------------------------------------------------------------------------------------------------------
53
54
55 Eckerd 8,640 06/30/2007 Dollar General 8,234 04/30/2006
56
UPFRONT ONGOING
OCCUPANCY OCCUPANCY ACTUAL REPLACEMENT ACTUAL REPLACEMENT UPFRONT MONTHLY
ID RATE AS-OF DATE RESERVES RESERVES TI/LC TI/LC
- -----------------------------------------------------------------------------------------------------------------------------------
1 100.00% 06/01/2003 - - - 62,500
2 94.73% Various - 15,178 (Westfield Guaranty) - 5,913 (Westfield Guaranty)
2A 94.90% 05/31/2003
2B 94.42% 04/30/2003
3 98.52% 12/31/2002 - - 2,200,000 LOC -
- -----------------------------------------------------------------------------------------------------------------------------------
4 100.00% 04/25/2003 - 200 - -
5 82.18% 05/06/2003 - 1,500 1,341,723 4,900
6 96.67% 04/14/2003 - 11,875 - -
7 100.00% 06/01/2003 - 2,232 - -
8 100.00% 06/01/2003 - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
9 90.39% 04/10/2003 - 5,500 - -
10 98.24% 04/30/2003 - 4,652 172,412 14,368
11 100.00% 04/14/2003 - 1,507 - 5,024
12 100.00% 03/31/2003 - 898 - 2,205
13 86.26% 03/31/2003 - 829 - 2,037
- -----------------------------------------------------------------------------------------------------------------------------------
14 100.00% 01/31/2003 - 2,276 - 7,068
15 100.00% 06/01/2003 - 2,020 - -
16 100.00% 06/01/2003 - - - -
17 75.65% 12/31/2002 - 40,122 - -
17A 78.50% 12/31/2002
- -----------------------------------------------------------------------------------------------------------------------------------
17B 69.16% 12/31/2002
18 95.67% 03/03/2003 - 3,900 - -
19 93.38% 02/06/2003 - 2,518 - 9,321
20 100.00% 01/31/2003 - 1,104 - 3,402
21 91.91% 02/28/2003 - 2,833 - -
- -----------------------------------------------------------------------------------------------------------------------------------
22 98.81% 04/01/2003 - 3,150 - -
23 100.00% 06/01/2003 - 924 - -
24 93.50% 04/15/2003 - 2,463 - 12,500
25 90.56% 01/28/2003 - 1,788 160,000 9,578
26 88.02% 03/28/2003 - 1,711 400,000 5,383
- -----------------------------------------------------------------------------------------------------------------------------------
27 96.69% 03/09/2003 - 1,563 1,600,000 LOC 13,630
28 100.00% 05/01/2003 - 607 - 3,674
29 92.20% 12/31/2002 - 4,271 - -
30 92.88% 04/01/2003 - 1,705 - 6,136
31 91.95% 03/13/2003 - 1,866 - -
- -----------------------------------------------------------------------------------------------------------------------------------
32 100.00% 02/28/2003 - 895 - 1,936
33 92.94% 02/28/2003 - 2,100 - -
34 99.74% 03/03/2003 - 1,045 450,000 -
34A 100.00% 03/03/2003
34B 99.44% 03/03/2003
- -----------------------------------------------------------------------------------------------------------------------------------
35 100.00% 06/01/2003 - 5,553 - 3,333
36 89.17% 04/24/2003 - 1,960 500,000 11,159
37 98.04% 04/28/2003 - 2,125 - -
38 89.29% 01/31/2003 - 1,900 - -
39 90.24% 03/20/2003 - 1,709 - -
- -----------------------------------------------------------------------------------------------------------------------------------
40 95.46% 02/28/2003 - 1,256 - 7,538
41 88.04% 02/28/2003 - 3,871 - -
42 89.63% 02/28/2003 - 1,030 - 6,811
43 97.37% 04/15/2003 - 2,375 - -
44 95.83% 05/01/2003 - 2,500 - -
- -----------------------------------------------------------------------------------------------------------------------------------
45 100.00% 03/24/2003 - 876 - 4,463
46 97.82% 04/16/2003 - 495 150,000 2,520
47 93.18% 12/23/2002 - 1,833 - -
48 94.08% 12/17/2002 - 3,167 - -
49 95.27% Various - 745 - 3,720
- -----------------------------------------------------------------------------------------------------------------------------------
49A 94.04% 02/10/2003
49B 96.36% 02/08/2003
50 100.00% 06/01/2003 - 181 - -
51 100.00% 04/15/2003 - 1,621 - -
52 91.67% 05/06/2003 - 3,000 - -
- -----------------------------------------------------------------------------------------------------------------------------------
53 94.12% 02/28/2003 - 631 - -
54 93.42% 03/17/2003 - 3,320 - -
55 94.87% 02/28/2003 63,300 1,116 120,000 6,735
56 100.00% 06/01/2003 - 239 - -
UPFRONT ENVIRONMENTAL
MONTHLY TAX MONTHLY INSURANCE ENGINEERING REPORT ENGINEERING APPRAISAL
ID ESCROW ESCROW RESERVE DATE REPORT DATE AS-OF DATE (6)
- -------------------------------------------------------------------------------------------------------------------------------
1 - - - 04/28/2003 04/30/2003 06/01/2003
2 288,240 48,323 (Westfield Guaranty) - Various 08/30/2002 Various
2A 08/12/2002 08/30/2002 08/07/2002
2B 08/13/2002 08/30/2002 08/12/2002
3 163,635 - - 10/01/2002 10/14/2002 10/01/2002
- -------------------------------------------------------------------------------------------------------------------------------
4 707 2,439 - 01/24/2003 01/21/2003 01/27/2003
5 68,791 7,580 - 01/14/2003 01/14/2003 01/01/2004
6 31,855 7,667 3,750 03/04/2003 03/04/2003 02/12/2003
7 11,885 2,566 - 03/10/2003 03/10/2003 03/03/2003
8 - - - 01/13/2003 NAP 11/25/2002
- -------------------------------------------------------------------------------------------------------------------------------
9 26,920 4,139 - 04/30/2003 04/30/2003 05/07/2003
10 79,520 11,988 - 09/26/2002 09/26/2002 08/07/2002
11 26,658 3,891 - 04/09/2003 04/09/2003 06/01/2003
12 - - - 04/25/2003 04/21/2003 03/03/2003
13 - - - 04/25/2003 04/21/2003 03/03/2003
- -------------------------------------------------------------------------------------------------------------------------------
14 16,989 2,326 - 12/02/2002 12/02/2002 11/15/2002
15 18,838 831 13,750 03/13/2003 03/13/2003 02/27/2003
16 - - - 05/06/2003 05/07/2003 04/22/2003
17 26,456 3,053 17,500 04/16/2003 04/16/2003 04/08/2003
17A 04/16/2003 04/16/2003 04/08/2003
- -------------------------------------------------------------------------------------------------------------------------------
17B 04/16/2003 04/16/2003 04/08/2003
18 9,707 5,969 - 03/14/2003 03/14/2003 03/06/2003
19 15,115 5,005 - 11/25/2002 11/27/2002 01/03/2003
20 8,653 1,149 - 12/02/2002 12/02/2002 04/01/2003
21 7,318 1,203 1,360 02/07/2003 02/07/2003 02/10/2003
- -------------------------------------------------------------------------------------------------------------------------------
22 16,738 2,596 - 03/21/2003 03/21/2003 02/21/2003
23 10,189 1,095 - 03/07/2003 03/07/2003 02/28/2003
24 39,635 2,857 6,500 03/31/2003 04/23/2003 01/31/2003
25 6,586 1,379 - 01/07/2003 01/07/2003 01/07/2003
26 4,744 2,450 25,000 03/24/2003 03/24/2003 03/18/2003
- -------------------------------------------------------------------------------------------------------------------------------
27 14,909 494 5,000 03/07/2003 03/07/2003 03/07/2003
28 5,753 652 - 03/21/2003 03/21/2003 03/06/2003
29 8,343 3,798 6,250 11/12/2002 02/24/2003 10/22/2002
30 6,479 3,331 4,375 01/29/2003 01/29/2003 01/23/2003
31 20,966 3,458 6,250 02/18/2003 02/18/2003 02/14/2003
- -------------------------------------------------------------------------------------------------------------------------------
32 20,870 940 750 03/09/2003 03/09/2003 03/07/2003
33 2,843 2,375 - 02/20/2003 03/16/2003 09/01/2003
34 16,459 1,537 - 02/12/2003 02/12/2003 02/13/2003
34A 02/12/2003 02/12/2003 02/13/2003
34B 02/12/2003 02/12/2003 02/13/2003
- -------------------------------------------------------------------------------------------------------------------------------
35 - - 34,375 08/17/2001 08/24/2001 02/20/2003
36 5,968 3,151 6,250 03/13/2003 03/13/2003 03/04/2003
37 7,472 2,038 - 10/21/2002 10/18/2002 10/18/2002
38 15,090 1,547 15,825 02/19/2003 02/19/2003 02/14/2003
39 6,075 1,857 10,500 08/31/2002 08/31/2002 08/15/2002
- -------------------------------------------------------------------------------------------------------------------------------
40 11,369 596 - 07/31/2002 07/31/2002 07/24/2002
41 11,657 3,511 69,438 08/27/2002 08/27/2002 09/06/2002
42 9,874 1,897 5,625 01/30/2003 01/30/2003 01/31/2003
43 2,741 1,566 938 03/17/2003 03/17/2003 04/15/2003
44 11,093 2,001 - 01/22/2003 01/22/2003 03/10/2003
- -------------------------------------------------------------------------------------------------------------------------------
45 4,896 1,240 - 04/29/2003 04/29/2003 04/08/2003
46 7,427 720 1,313 04/02/2003 04/17/2003 03/24/2003
47 4,339 853 - 02/06/2003 02/06/2003 01/08/2003
48 5,567 2,641 13,063 12/11/2002 12/11/2002 10/23/2002
49 2,870 652 - Various 04/04/2003 Various
- -------------------------------------------------------------------------------------------------------------------------------
49A 12/11/2002 04/04/2003 12/13/2002
49B 12/10/2002 04/04/2003 12/07/2002
50 - - - 04/10/2003 04/10/2003 03/28/2003
51 1,760 889 - 01/22/2003 01/23/2003 03/25/2003
52 5,516 2,491 13,938 12/06/2002 12/06/2002 10/23/2002
- -------------------------------------------------------------------------------------------------------------------------------
53 7,430 1,835 - 02/17/2003 02/17/2003 01/31/2003
54 4,038 5,355 117,596 02/12/2003 02/12/2003 02/25/2003
55 5,597 4,167 16,700 01/10/2003 04/08/2003 02/24/2003
56 - - - 05/02/2003 05/02/2003 04/24/2003
ID SPONSOR
- ----------------------------------------------------------------------------------------------------------------
1 75 Plaza Holdings LLC
2 Westfield America, Inc.
2A
2B
3 The Macerich Company
- ----------------------------------------------------------------------------------------------------------------
4 The Related Companies, L.P., Blackacre Capital Management LLC
5 The Related Companies, L.P.
6 Ezra S. Beyman
7 Stephen A. Goldberg
8 Alfredo Lowenstein
- ----------------------------------------------------------------------------------------------------------------
9 Milton Fine
10 James H. Huelskamp
11 Pacifica Real Estate Group, LLC
12 International Airport Centers L.L.C.
13 International Airport Centers L.L.C.
- ----------------------------------------------------------------------------------------------------------------
14 Stephen W. Rebeil
15 Gen-Net Lease Income Trust, Inc.
16 Stephen R. Weiner
17 Alan Meltzer
17A
- ----------------------------------------------------------------------------------------------------------------
17B
18 Resource Properties, Inc.
19 Ephraim Hasenfeld
20 Stephen W. Rebeil
21 William Charles Investments, Inc., William Charles Real Estate Investments, L.L.C., Timothy R. McDonnell
- ----------------------------------------------------------------------------------------------------------------
22 Barry Smith
23 Gen-Net Lease Income Trust, Inc.
24 Daniel Massry
25 James N. Maddox, Thomas F. Corcoran
26 Purser Biltmore Group LLC
- ----------------------------------------------------------------------------------------------------------------
27 Joseph A. Massaro, Jr., David E. Massaro
28 John H. Tillotson, Jr.
29 Daniel E. Lubeck, Paul A. Lester, Sheldon Lowe
30 Stephen Wienstein, Andrew Glick, Seymour Zuckerman, Alan Zuckerman
31 Churchview Building Corporation
- ----------------------------------------------------------------------------------------------------------------
32 Andrew Hochberg, John Lowenstein
33 Kirk A. Preiss, David Helfrich, Robert T. Herrington
34 Anthony W. Thompson
34A
34B
- ----------------------------------------------------------------------------------------------------------------
35 Corporate Property Associates 12, Inc.
36 Loyd Walker, Beverly Roachell, Rector Phillips Morse, Inc.
37 George C. Woodruff, Jr. , Laurie Waldrop, Julie Smith
38 Churchview Building Corporation
39 First Centrum Corporation, Thomas R. Runquist
- ----------------------------------------------------------------------------------------------------------------
40 John M. Lewis, Daniel D. Dower, Michael J. Powers, III, Susan B. Schweikert
41 Carl J. Van Rooy, John T. Watson
42 Anthony W. Thompson
43 Ramesh K. Naik, William S. Fan
44 Daniel Hibma, Roger J. Lucas, Paul A. Land
- ----------------------------------------------------------------------------------------------------------------
45 John Culpepper III
46 Sheri A. Costantini
47 Eric S. Busch, Fancho Fee Stubblefield, Jr.
48 Robert G. Lewis, Jr., Jerry L. Stephens
49 Raymond J. Palermo
- ----------------------------------------------------------------------------------------------------------------
49A
49B
50 Charles Townsend, Douglas S. Hayden, Steven J. Hemberger
51 Barry L. Haase, Philip S. Moreau
52 Robert G. Lewis, Jr., Jerry L. Stephens
- ----------------------------------------------------------------------------------------------------------------
53 Henry Forrest, Edward M. Forrest, Elizabeth T. Forrest, Elsie Gordon, Robert Henry Branton
54 Thomas E. Sisson
55 Patrick K. Dempsey, James M. Cope, Robert A. Whelan
56 Craig M. Ripley
COMM 2003-LNB1
ANNEX A-1 - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED
PROPERTIES
% OF % OF APPLICABLE
INITIAL POOL LOAN GROUP LOAN GROUP # OF
ID PROPERTY NAME BALANCE ONE OR TWO BALANCE PROPERTIES
- ------------------------------------------------------------------------------------------------------------------------------------
57 Mesa Verde Resort 0.43% 2 2.01% 1
- ------------------------------------------------------------------------------------------------------------------------------------
58 Fountain Park Plaza III 0.43% 1 0.54% 1
59 Park Lane Terrace Apartments 0.42% 2 1.96% 1
60 Walgreens - Austin 0.42% 1 0.54% 1
61 Walgreens - Dallas 0.42% 1 0.53% 1
62 Walgreens - Douglasville 0.40% 1 0.51% 1
- ------------------------------------------------------------------------------------------------------------------------------------
63 Walgreens - 47th & Western 0.40% 1 0.51% 1
64 Crystal Lake MHC 0.40% 1 0.51% 1
65 Parker Valley Center 0.39% 1 0.50% 1
66 Eckerd - Philadelphia 0.38% 1 0.48% 1
67 Sandpainter Apartments 0.37% 2 1.71% 1
- ------------------------------------------------------------------------------------------------------------------------------------
68 Walgreens - Lake Harbour (16) 0.33% 1 0.43% 1
69 Walgreens - Thomasville 0.33% 1 0.42% 1
70 Courtyard Apartments 0.30% 2 1.38% 1
71 Shadowood Apartments 0.28% 2 1.31% 1
72 CVS - Greenfield 0.28% 1 0.35% 1
- ------------------------------------------------------------------------------------------------------------------------------------
73 Eckerd - Laurens 0.27% 1 0.34% 1
74 Sav-On - Cypress 0.27% 1 0.34% 1
75 Atrium Building 0.25% 1 0.32% 1
76 Old Navy - Lafayette 0.25% 1 0.32% 1
77 Brookwood 0.25% 2 1.17% 1
- ------------------------------------------------------------------------------------------------------------------------------------
78 CVS - Hagerstown 0.25% 1 0.32% 1
79 Village Apartments 0.25% 2 1.14% 1
80 CVS - Florence, AL 0.20% 1 0.25% 1
81 Eckerd - Waco 0.20% 1 0.25% 1
82 Mid-Bay Club Apartments (15) 0.19% 1 0.25% 1
- ------------------------------------------------------------------------------------------------------------------------------------
83 Aztec & Oakhill MHP Portfolio (10) 0.19% 2 0.90% 2
83A AZTEC MOBILE HOME PARK 0.12% 2 0.55%
83B OAKHILL MOBILE HOME PARK 0.08% 2 0.35%
84 Tifton Shopping Plaza 0.19% 1 0.24% 1
85 Parkcrest Apartments II 0.19% 2 0.88% 1
- ------------------------------------------------------------------------------------------------------------------------------------
86 Sadler Apartments 0.19% 2 0.87% 1
87 Grayshire Apartments 0.18% 2 0.84% 1
88 Southern Manor, Southern Place East & Southern Place West Apartments 0.18% 2 0.82% 3
89 Camelot & Bienville Apartments Portfolio (10) 0.17% 2 0.79% 2
89A CAMELOT APARTMENTS 0.12% 2 0.55%
- ------------------------------------------------------------------------------------------------------------------------------------
89B BIENVILLE APARTMENTS 0.05% 2 0.24%
90 Oakridge Shopping Center 0.17% 1 0.21% 1
91 Castlebury Court & Monticello Apartments Portfolio (10) 0.15% 2 0.71% 2
91A MONTICELLO APARTMENTS 0.09% 2 0.42%
91B CASTLEBURY COURT 0.06% 2 0.29%
- ------------------------------------------------------------------------------------------------------------------------------------
92 Ocean Springs Shopping Plaza 0.14% 1 0.17% 1
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE CUT-OFF GENERAL DETAILED
LOAN ORIGINAL DATE PROPERTY PROPERTY INTEREST
ID SELLER (1) BALANCE BALANCE TYPE TYPE RATE
- -----------------------------------------------------------------------------------------------------------------------------
57 LaSalle 3,680,000 3,676,034 Manufactured Housing Manufactured Housing 4.9400%
- -----------------------------------------------------------------------------------------------------------------------------
58 LaSalle 3,650,000 3,614,731 Office Suburban 6.8930%
59 LaSalle 3,600,000 3,589,228 Multifamily Conventional 5.5000%
60 LaSalle 3,565,000 3,565,000 Retail Anchored 5.6500%
61 LaSalle 3,550,000 3,543,305 Retail Anchored 5.8620%
62 GACC 3,400,000 3,400,000 Retail CTL 6.0000%
- -----------------------------------------------------------------------------------------------------------------------------
63 LaSalle 3,390,000 3,387,153 Retail Anchored 5.9500%
64 LaSalle 3,360,000 3,357,029 Manufactured Housing Manufactured Housing 5.7500%
65 LaSalle 3,300,000 3,291,323 Retail Shadow Anchored 6.0600%
66 LaSalle 3,200,000 3,200,000 Retail Anchored 6.1500%
67 LaSalle 3,120,000 3,117,248 Multifamily Conventional 5.7600%
- -----------------------------------------------------------------------------------------------------------------------------
68 GACC 2,832,411 2,832,411 Retail CTL 6.2300%
69 LaSalle 2,813,000 2,807,968 Retail Anchored 6.1000%
70 LaSalle 2,520,000 2,512,460 Multifamily Conventional 5.5000%
71 LaSalle 2,400,000 2,389,800 Multifamily Conventional 5.7000%
72 LaSalle 2,335,000 2,330,680 Retail Anchored 5.9500%
- -----------------------------------------------------------------------------------------------------------------------------
73 LaSalle 2,256,750 2,256,750 Retail Anchored 5.8880%
74 LaSalle 2,250,000 2,245,602 Land Land 5.7000%
75 LaSalle 2,165,000 2,151,120 Office Suburban 6.6500%
76 LaSalle 2,145,000 2,145,000 Retail Anchored 5.7500%
77 LaSalle 2,140,000 2,130,905 Multifamily Conventional 5.7000%
- -----------------------------------------------------------------------------------------------------------------------------
78 LaSalle 2,120,000 2,117,294 Retail Anchored 6.0000%
79 LaSalle 2,080,000 2,077,187 Multifamily Conventional 5.7000%
80 LaSalle 1,685,000 1,681,917 Retail Anchored 6.0000%
81 LaSalle 1,650,000 1,650,000 Retail Anchored 6.1500%
82 GACC 1,650,000 1,648,587 Multifamily Conventional 5.8750%
- -----------------------------------------------------------------------------------------------------------------------------
83 LaSalle 1,650,000 1,639,111 Manufactured Housing Manufactured Housing 6.1000%
83A LASALLE 1,004,887 998,256 MANUFACTURED HOUSING MANUFACTURED HOUSING
83B LASALLE 645,113 640,855 MANUFACTURED HOUSING MANUFACTURED HOUSING
84 LaSalle 1,610,000 1,606,793 Retail Shadow Anchored 6.0200%
85 LaSalle 1,600,000 1,600,000 Multifamily Conventional 5.7500%
- -----------------------------------------------------------------------------------------------------------------------------
86 LaSalle 1,600,000 1,593,574 Multifamily Conventional 6.0000%
87 LaSalle 1,550,000 1,540,559 Multifamily Conventional 5.7000%
88 LaSalle 1,500,000 1,500,000 Multifamily Conventional 6.0000%
89 LaSalle 1,450,000 1,448,102 Multifamily Conventional 5.8700%
89A LASALLE 1,013,253 1,011,927 MULTIFAMILY CONVENTIONAL
- -----------------------------------------------------------------------------------------------------------------------------
89B LASALLE 436,747 436,175 MULTIFAMILY CONVENTIONAL
90 LaSalle 1,400,000 1,396,503 Retail Unanchored 6.5000%
91 LaSalle 1,300,000 1,298,836 Multifamily Conventional 5.7000%
91A LASALLE 771,186 770,496 MULTIFAMILY CONVENTIONAL
91B LASALLE 528,814 528,340 MULTIFAMILY CONVENTIONAL
- -----------------------------------------------------------------------------------------------------------------------------
92 LaSalle 1,150,000 1,147,709 Retail Shadow Anchored 6.0200%
- -----------------------------------------------------------------------------------------------------------------------------
INTEREST ORIGINAL STATED REMAINING ORIGINAL REMAINING FIRST
SERVICING ACCRUAL TERM TO MATURITY TERM TO MATURITY AMORTIZATION AMORTIZATION PAYMENT
ID FEE RATE BASIS (MOS.) (2) (MOS.) TERM (MOS.) TERM (MOS.) DATE (2)
- -----------------------------------------------------------------------------------------------------------------------------------
57 0.03290% Actual/360 60 59 360 359 06/01/2003
- -----------------------------------------------------------------------------------------------------------------------------------
58 0.09290% Actual/360 120 112 300 292 11/01/2002
59 0.03290% Actual/360 120 117 360 357 04/01/2003
60 0.03290% Actual/360 120 120 360 360 07/01/2003
61 0.03290% Actual/360 120 118 360 358 05/01/2003
62 0.03290% Actual/360 240 240 240 240 07/01/2003
- -----------------------------------------------------------------------------------------------------------------------------------
63 0.03290% Actual/360 120 119 360 359 06/01/2003
64 0.03290% Actual/360 120 119 360 359 06/01/2003
65 0.09290% Actual/360 120 117 360 357 04/01/2003
66 0.03290% Actual/360 120 120 360 360 07/01/2003
67 0.11290% Actual/360 120 119 360 359 06/01/2003
- -----------------------------------------------------------------------------------------------------------------------------------
68 0.03290% Actual/360 219 219 219 219 07/01/2003
69 0.03290% Actual/360 120 118 360 358 05/01/2003
70 0.03290% Actual/360 120 117 360 357 04/01/2003
71 0.03290% Actual/360 120 116 360 356 03/01/2003
72 0.03290% Actual/360 120 118 360 358 05/01/2003
- -----------------------------------------------------------------------------------------------------------------------------------
73 0.03290% Actual/360 120 120 300 300 07/01/2003
74 0.03290% Actual/360 120 118 360 358 05/01/2003
75 0.03290% Actual/360 120 115 300 295 02/01/2003
76 0.03290% Actual/360 84 84 300 300 07/01/2003
77 0.03290% Actual/360 120 116 360 356 03/01/2003
- -----------------------------------------------------------------------------------------------------------------------------------
78 0.03290% Actual/360 120 119 300 299 06/01/2003
79 0.03290% Actual/360 84 83 300 299 06/01/2003
80 0.03290% Actual/360 120 118 360 358 05/01/2003
81 0.03290% Actual/360 120 120 300 300 07/01/2003
82 0.03290% Actual/360 120 119 360 359 06/01/2003
- -----------------------------------------------------------------------------------------------------------------------------------
83 0.13290% Actual/360 120 113 360 353 12/01/2002
83A
83B
84 0.03290% Actual/360 120 119 240 239 06/01/2003
85 0.03290% Actual/360 120 120 360 360 07/01/2003
- -----------------------------------------------------------------------------------------------------------------------------------
86 0.03290% Actual/360 120 117 300 297 04/01/2003
87 0.03290% Actual/360 120 116 300 296 03/01/2003
88 0.11290% Actual/360 120 120 300 300 07/01/2003
89 0.11290% Actual/360 120 119 300 299 06/01/2003
89A
- -----------------------------------------------------------------------------------------------------------------------------------
89B
90 0.03290% Actual/360 120 118 300 298 05/01/2003
91 0.09290% Actual/360 120 119 360 359 06/01/2003
91A
91B
- -----------------------------------------------------------------------------------------------------------------------------------
92 0.03290% Actual/360 120 119 240 239 06/01/2003
- -----------------------------------------------------------------------------------------------------------------------------------
ANNUAL MONTHLY REMAINING CROSSED
MATURITY DEBT DEBT INTEREST ONLY ARD WITH
ID DATE SERVICE (3) SERVICE (3) PERIOD (MOS.) (2) LOCKBOX (4) (YES/NO) OTHER LOANS
- -----------------------------------------------------------------------------------------------------------------------------------
57 05/01/2008 235,444 19,620 - Springing Hard No No
- -----------------------------------------------------------------------------------------------------------------------------------
58 10/01/2012 306,586 25,549 - Springing Hard No No
59 03/01/2013 245,285 20,440 - Springing Hard No No
60 06/01/2013 246,942 20,578 - Springing Hard No No
61 04/01/2013 251,628 20,969 - Springing Hard No No
62 06/01/2023 294,367 24,531 - Hard No No
- -----------------------------------------------------------------------------------------------------------------------------------
63 05/01/2013 242,591 20,216 - Springing Hard No No
64 05/01/2013 235,297 19,608 - Springing Hard No No
65 03/01/2013 238,952 19,913 - Springing Hard No No
66 06/01/2013 233,944 19,495 - Springing Hard No No
67 05/01/2013 218,728 18,227 - Springing Hard No No
- -----------------------------------------------------------------------------------------------------------------------------------
68 09/01/2021 267,459 22,288 - Hard No No
69 04/01/2013 204,560 17,047 - Springing Hard No No
70 03/01/2013 171,699 14,308 - Springing Hard No No
71 02/01/2013 167,155 13,930 - Springing Hard No No
72 04/01/2013 167,094 13,925 - Springing Hard No No
- -----------------------------------------------------------------------------------------------------------------------------------
73 06/01/2013 172,626 14,385 - Springing Hard No No
74 04/01/2013 156,708 13,059 - Springing Hard No No
75 01/01/2013 177,862 14,822 - Springing Hard No No
76 06/01/2010 161,932 13,494 - Springing Hard No No
77 02/01/2013 149,047 12,421 - Springing Hard No No
- -----------------------------------------------------------------------------------------------------------------------------------
78 05/01/2013 163,910 13,659 - Springing Hard No No
79 05/01/2010 156,272 13,023 - Springing Hard No No
80 04/01/2013 121,229 10,102 - Springing Hard No No
81 06/01/2013 129,393 10,783 - Springing Hard No No
82 05/01/2013 117,124 9,760 - No No No
- -----------------------------------------------------------------------------------------------------------------------------------
83 11/01/2012 119,987 9,999 - Springing Hard No No
83A
83B
84 05/01/2013 138,637 11,553 - Springing Hard No No
85 06/01/2013 112,046 9,337 - Springing Hard No No
- -----------------------------------------------------------------------------------------------------------------------------------
86 03/01/2013 123,706 10,309 - Springing Hard No No
87 02/01/2013 116,452 9,704 - Springing Hard No No
88 06/01/2013 115,974 9,665 - Springing Hard No No
89 05/01/2013 110,730 9,227 - Springing Hard No No
89A
- -----------------------------------------------------------------------------------------------------------------------------------
89B
90 04/01/2013 113,435 9,453 - Springing Hard No No
91 05/01/2013 90,543 7,545 - Springing Hard No No
91A
91B
- -----------------------------------------------------------------------------------------------------------------------------------
92 05/01/2013 99,027 8,252 - Springing Hard No No
- -----------------------------------------------------------------------------------------------------------------------------------
CUT-OFF LTV
GRACE PAYMENT APPRAISED DATE LTV RATIO AT
ID DSCR (3)(5) PERIOD DATE VALUE (6) RATIO (5) MATURITY (5)
- --------------------------------------------------------------------------------------------------------
57 1.66 5 1 4,800,000 76.58% 70.65%
- --------------------------------------------------------------------------------------------------------
58 1.29 5 1 5,100,000 70.88% 57.07%
59 1.47 5 1 4,850,000 74.00% 62.02%
60 1.48 5 1 4,900,000 72.76% 61.07%
61 1.47 5 1 4,600,000 77.03% 65.20%
62 1.18 5 1 4,300,000 79.07% 0.00%
- --------------------------------------------------------------------------------------------------------
63 1.43 5 1 4,600,000 73.63% 62.43%
64 1.59 5 1 4,540,000 73.94% 62.32%
65 1.48 5 1 4,420,000 74.46% 63.45%
66 1.46 5 1 4,400,000 72.73% 61.96%
67 1.32 5 1 4,000,000 77.93% 65.70%
- --------------------------------------------------------------------------------------------------------
68 1.15 5 1 3,750,000 75.53% 0.00%
69 1.42 5 1 3,850,000 72.93% 62.16%
70 1.45 5 1 3,450,000 72.82% 61.04%
71 1.29 5 1 3,450,000 69.27% 58.46%
72 1.50 5 1 3,200,000 72.83% 61.81%
- --------------------------------------------------------------------------------------------------------
73 1.33 5 1 2,900,000 77.82% 60.05%
74 1.62 5 1 3,700,000 60.69% 51.12%
75 1.33 5 1 2,870,000 74.95% 59.68%
76 1.46 5 1 3,130,000 68.53% 58.40%
77 1.43 5 1 2,675,000 79.66% 67.23%
- --------------------------------------------------------------------------------------------------------
78 1.33 5 1 2,730,000 77.56% 60.16%
79 1.43 5 1 2,700,000 76.93% 65.58%
80 1.43 5 1 2,300,000 73.13% 62.15%
81 1.46 5 1 2,365,000 69.77% 54.31%
82 1.28 5 1 2,400,000 64.52% 58.11%
- --------------------------------------------------------------------------------------------------------
83 1.86 5 1 2,600,000 63.04% 53.98%
83A 1,583,459
83B 1,016,541
84 1.31 5 1 2,250,000 71.41% 46.97%
85 1.50 5 1 2,200,000 72.73% 61.23%
- --------------------------------------------------------------------------------------------------------
86 1.32 5 1 2,000,000 79.68% 61.98%
87 1.52 5 1 2,125,000 72.50% 55.90%
88 1.51 5 1 2,000,000 75.00% 58.09%
89 1.43 5 1 1,900,000 76.22% 58.86%
89A 1,327,711
- --------------------------------------------------------------------------------------------------------
89B 572,289
90 1.49 5 1 2,400,000 58.19% 45.94%
91 1.47 5 1 1,625,000 79.93% 67.26%
91A 963,983
91B 661,017
- --------------------------------------------------------------------------------------------------------
92 1.27 5 1 1,550,000 74.05% 48.70%
- --------------------------------------------------------------------------------------------------------
ID ADDRESS CITY COUNTY STATE ZIP CODE
- ---------------------------------------------------------------------------------------------------------------------------------
57 3479 South 4th Avenue Yuma Yuma AZ 85365
- ---------------------------------------------------------------------------------------------------------------------------------
58 2800 Interstate 35 South Austin Travis TX 78704
59 6808 - 6864 Larmanda Dallas Dallas TX 75231
60 6911 Ranch Road 620 North Austin Travis TX 78732
61 1060 West Camp Wisdom Road Dallas Dallas TX 75232
62 9465 Highway 5 Douglasville Douglas GA 30135
- ---------------------------------------------------------------------------------------------------------------------------------
63 4710 South Western Avenue Chicago Cook IL 60609
64 1330 Hanover Road Troy Township Delaware OH 43015
65 11211 South Dransfeldt Road Parker Douglas CO 80134
66 10101 - 10115 Bustleton Avenue Philadelphia Philadelphia PA 19116
67 2225 West Indian School Road Phoenix Maricopa AZ 85015
- ---------------------------------------------------------------------------------------------------------------------------------
68 6910 Old Canton Road Ridgeland Madison MS 39157
69 1015 Randolph Street Thomasville Davidson NC 27361
70 300 Crockett Street Austin Travis TX 78704
71 200 Engracia Drive Warner Robins Houston GA 31088
72 9360 Greenfield Road Detroit Wayne MI 48228
- ---------------------------------------------------------------------------------------------------------------------------------
73 1031 Hillcrest Drive Laurens Laurens SC 29360
74 5501 Ball Road Cypress Orange CA 90630
75 10601-10801 Lomas Boulevard Northeast Albuquerque Bernalillo NM 87112
76 119 Tucker Drive Lafayette Lafayette LA 70503
77 3141 Brookwood Drive Macon Bibb GA 31204
- ---------------------------------------------------------------------------------------------------------------------------------
78 34 North Cannon Street Hagerstown Washington MD 21740
79 82 Jerome Road Uncasville New London CT 06382
80 1501 Florence Boulevard Florence Lauderdale AL 35630
81 2415 North 18th Street Waco McLennan TX 76708
82 11950 North Bayshore Drive North Miami Miami-Dade FL 33181
- ---------------------------------------------------------------------------------------------------------------------------------
83 Various Kyle Hays TX 78640
83A 291 ROLAND LANE KYLE HAYS TX 78640
83B 501 ROLAND LANE KYLE HAYS TX 78640
84 1900 US Highway 82 West Tifton Tift GA 31794
85 1961 Parkcrest Drive Wyoming Kent MI 49509
- ---------------------------------------------------------------------------------------------------------------------------------
86 1564 Beach Boulevard Biloxi Harrison MS 39530
87 1968 Clinton Road Macon Bibb GA 31211
88 3275-3279 Southern, 3467-3469 Southern, 3285-3295 Southern Memphis Shelby TN 38111
89 Various Natchez Adams MS 39120
89A 156 JEFFERSON DAVIS BOULEVARD NATCHEZ ADAMS MS 39120
- ---------------------------------------------------------------------------------------------------------------------------------
89B 500 NORTH COMMERCE STREET NATCHEZ ADAMS MS 39120
90 10700 - 10724 West Oklahoma Avenue West Allis Milwaukee WI 53227
91 Various Tulsa Tulsa OK 74105
91A 2639 EAST 51ST STREET TULSA TULSA OK 74105
91B 2735 EAST 51ST STREET TULSA TULSA OK 74105
- ---------------------------------------------------------------------------------------------------------------------------------
92 3921 Bienville Boulevard Ocean Springs Jackson MS 39564
- ---------------------------------------------------------------------------------------------------------------------------------
NET UNITS LOAN PER NET PREPAYMENT
YEAR YEAR RENTABLE OF RENTABLE AREA PROVISIONS
ID BUILT RENOVATED AREA SF/UNITS (7) MEASURE SF/UNITS (# OF PAYMENTS) (2)
- ------------------------------------------------------------------------------------------------------------------------
57 1984 345 Pads 10,655 L(35),D(22),O(3)
- ------------------------------------------------------------------------------------------------------------------------
58 1976 1994 56,584 Sq. Ft. 64 L(35),D(82),O(3)
59 1971 1999 152 Units 23,613 L(35),D(82),O(3)
60 2002 14,490 Sq. Ft. 246 L(35),D(83),O(2)
61 2001 15,120 Sq. Ft. 234 L(35),D(82),O(3)
62 2003 14,490 Sq. Ft. 235 L(24),D(215),O(1)
- ------------------------------------------------------------------------------------------------------------------------
63 2001 13,905 Sq. Ft. 244 L(35),D(82),O(3)
64 1970 1992 175 Pads 19,183 L(35),D(82),O(3)
65 2002 21,040 Sq. Ft. 156 L(35),D(82),O(3)
66 1999 10,908 Sq. Ft. 293 L(35),D(82),O(3)
67 1979 116 Units 26,873 L(35),D(82),O(3)
- ------------------------------------------------------------------------------------------------------------------------
68 2001 14,420 Sq. Ft. 196 L(24),D(194),O(1)
69 2002 13,650 Sq. Ft. 206 L(35),D(82),O(3)
70 1966 1991 67 Units 37,499 L(35),D(82),O(3)
71 1984 80 Units 29,873 L(35),D(82),O(3)
72 1999 10,880 Sq. Ft. 214 L(35),D(82),O(3)
- ------------------------------------------------------------------------------------------------------------------------
73 1999 11,200 Sq. Ft. 202 L(35),D(82),O(3)
74 56,858 Sq. Ft. 39 L(35),D(82),O(3)
75 1973 1996 49,750 Sq. Ft. 43 L(35),D(82),O(3)
76 2002 20,000 Sq. Ft. 107 L(35),D(46),O(3)
77 1952 1995 100 Units 21,309 L(35),D(82),O(3)
- ------------------------------------------------------------------------------------------------------------------------
78 2001 10,690 Sq. Ft. 198 L(35),D(82),O(3)
79 1970 54 Units 38,466 L(35),D(46),O(3)
80 2000 10,125 Sq. Ft. 166 L(35),D(82),O(3)
81 1999 10,908 Sq. Ft. 151 L(35),D(82),O(3)
82 1964 27 Units 61,059 L(25),D(91),O(4)
- ------------------------------------------------------------------------------------------------------------------------
83 Various 133 Pads 12,324 L(35),D(82),O(3)
83A 1978 81 PADS 12,324
83B 1972 52 PADS 12,324
84 2002 18,900 Sq. Ft. 85 L(35),D(82),O(3)
85 2001 28 Units 57,143 L(35),D(82),O(3)
- ------------------------------------------------------------------------------------------------------------------------
86 1950 1982 59 Units 27,010 L(35),D(82),O(3)
87 1968 83 Units 18,561 L(35),D(82),O(3)
88 1985 80 Units 18,750 L(35),D(82),O(3)
89 Various 1999 83 Units 17,447 L(35),D(82),O(3)
89A 1968 1999 58 UNITS 17,447
- ------------------------------------------------------------------------------------------------------------------------
89B 1965 1999 25 UNITS 17,447
90 1984 27,512 Sq. Ft. 51 L(35),D(82),O(3)
91 1968 2001 59 Units 22,014 L(35),D(82),O(3)
91A 1968 2001 35 UNITS 22,014
91B 1968 2001 24 UNITS 22,014
- ------------------------------------------------------------------------------------------------------------------------
92 2001 14,409 Sq. Ft. 80 L(35),D(82),O(3)
- ------------------------------------------------------------------------------------------------------------------------
FOURTH FOURTH MOST THIRD THIRD MOST
MOST RECENT RECENT NOI MOST RECENT RECENT NOI
ID PROPERTY NAME NOI DATE NOI DATE
- ------------------------------------------------------------------------------------------------------------------------------------
57 Mesa Verde Resort 420,262 12/31/2001
- ------------------------------------------------------------------------------------------------------------------------------------
58 Fountain Park Plaza III 455,225 12/31/2000 479,389 12/31/2001
59 Park Lane Terrace Apartments 419,852 12/31/2000 461,139 12/31/2001
60 Walgreens - Austin
61 Walgreens - Dallas
62 Walgreens - Douglasville
- ------------------------------------------------------------------------------------------------------------------------------------
63 Walgreens - 47th & Western
64 Crystal Lake MHC 414,102 12/31/2000 430,597 12/31/2001
65 Parker Valley Center
66 Eckerd - Philadelphia 299,552 12/31/2001
67 Sandpainter Apartments 325,668 12/31/2000 349,614 12/31/2001
- ------------------------------------------------------------------------------------------------------------------------------------
68 Walgreens - Lake Harbour (16)
69 Walgreens - Thomasville
70 Courtyard Apartments 295,678 12/31/2000 327,569 12/31/2001
71 Shadowood Apartments
72 CVS - Greenfield
- ------------------------------------------------------------------------------------------------------------------------------------
73 Eckerd - Laurens
74 Sav-On - Cypress
75 Atrium Building 10,267 12/31/2000 131,140 12/31/2001
76 Old Navy - Lafayette
77 Brookwood
- ------------------------------------------------------------------------------------------------------------------------------------
78 CVS - Hagerstown 211,842 12/31/2001
79 Village Apartments 265,168 12/31/2000 260,182 12/31/2001
80 CVS - Florence, AL
81 Eckerd - Waco
82 Mid-Bay Club Apartments (15) 167,528 12/31/2001
- ------------------------------------------------------------------------------------------------------------------------------------
83 Aztec & Oakhill MHP Portfolio (10) 215,090 12/31/2000 232,748 12/31/2001
83A AZTEC MOBILE HOME PARK
83B OAKHILL MOBILE HOME PARK
84 Tifton Shopping Plaza
85 Parkcrest Apartments II 139,930 12/31/2001
- ------------------------------------------------------------------------------------------------------------------------------------
86 Sadler Apartments 189,388 12/31/2000 203,431 12/31/2001
87 Grayshire Apartments
88 Southern Manor, Southern Place East & Southern Place West Apartments 296,094 12/31/2000 271,485 12/31/2001
89 Camelot & Bienville Apartments Portfolio (10) 128,914 12/31/2000 145,528 12/31/2001
89A CAMELOT APARTMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
89B BIENVILLE APARTMENTS
90 Oakridge Shopping Center 228,807 12/31/2000 247,617 12/31/2001
91 Castlebury Court & Monticello Apartments Portfolio (10) 153,312 12/31/2000 126,616 12/31/2001
91A MONTICELLO APARTMENTS
91B CASTLEBURY COURT
- ------------------------------------------------------------------------------------------------------------------------------------
92 Ocean Springs Shopping Plaza
- ------------------------------------------------------------------------------------------------------------------------------------
SECOND SECOND MOST MOST RECENT
MOST RECENT RECENT NOI MOST RECENT NOI UNDERWRITTEN UNDERWRITTEN UNDERWRITTEN UNDERWRITTEN
ID NOI DATE NOI DATE NOI REVENUE EGI EXPENSES
- --------------------------------------------------------------------------------------------------------------------------------
57 427,725 12/31/2002 441,082 T-12 2/28/2003 408,908 610,951 689,085 280,178
- --------------------------------------------------------------------------------------------------------------------------------
58 394,134 T-12 2/28/2003 472,347 827,936 920,569 448,222
59 442,848 T-12 11/30/2002 398,658 1,074,180 1,098,294 699,636
60 367,400 380,000 380,000 12,600
61 385,000 12/31/2002 372,250 385,000 385,000 12,750
62 347,760 347,760 347,760 -
- --------------------------------------------------------------------------------------------------------------------------------
63 348,000 360,000 360,000 12,000
64 419,805 12/31/2002 426,626 T-12 2/28/2003 383,186 539,400 577,040 193,854
65 378,467 399,213 507,989 129,521
66 365,332 12/31/2002 348,083 390,968 359,690 11,607
67 320,214 12/31/2002 314,230 T-12 1/31/2003 319,752 579,033 611,116 291,364
- --------------------------------------------------------------------------------------------------------------------------------
68 310,400 363,200 363,200 52,800
69 291,740 302,000 302,000 10,260
70 287,463 Ann. 12/31/2002 265,475 542,200 557,999 292,524
71 264,213 T-12 2/28/2003 235,457 451,241 468,373 232,916
72 251,559 260,576 260,576 9,017
- --------------------------------------------------------------------------------------------------------------------------------
73 233,579 248,251 240,803 7,224
74 254,625 262,500 262,500 7,875
75 250,675 T-12 3/31/2003 298,754 481,181 490,797 192,043
76 251,355 256,680 317,919 66,564
77 120,985 T-12 11/30/2002 238,667 505,278 518,301 279,634
- --------------------------------------------------------------------------------------------------------------------------------
78 235,811 12/31/2002 219,605 228,312 243,560 23,955
79 224,609 12/31/2002 240,339 439,123 443,955 203,616
80 175,278 182,250 192,411 17,133
81 218,582 T-12 4/30/2003 196,123 218,582 202,188 6,066
82 172,676 12/31/2002 172,750 T-12 4/30/2003 147,878 247,836 250,355 102,477
- --------------------------------------------------------------------------------------------------------------------------------
83 229,116 T-12 06/30/2002 229,379 322,080 353,814 124,435
83A
83B
84 198,332 207,047 234,158 35,826
85 238,270 12/31/2002 175,375 314,464 318,212 142,837
- --------------------------------------------------------------------------------------------------------------------------------
86 223,044 T-12 11/30/2002 178,133 294,935 302,785 124,652
87 68,156 Ann. 2/28/2003 198,001 408,614 421,851 223,850
88 276,828 12/31/2002 200,477 425,316 434,620 234,143
89 168,107 12/31/2002 178,683 367,728 378,994 200,311
89A
- --------------------------------------------------------------------------------------------------------------------------------
89B
90 249,257 12/31/2002 194,897 274,118 366,777 171,880
91 148,562 12/31/2002 148,207 327,142 329,856 181,649
91A
91B
- --------------------------------------------------------------------------------------------------------------------------------
92 137,303 141,361 177,204 39,901
- --------------------------------------------------------------------------------------------------------------------------------
UNDERWRITTEN UNDERWRITTEN UNDERWRITTEN LEASE
ID RESERVES TI/LC NET CASH FLOW LARGEST TENANT SF EXPIRATION
- ------------------------------------------------------------------------------------------------------------------------------
57 17,250 - 391,658
- ------------------------------------------------------------------------------------------------------------------------------
58 11,310 65,367 395,670 Texas Dept. of Transportation 10,587 01/31/2008
59 38,000 - 360,658
60 2,174 - 365,227 Walgreens 14,490 02/28/2022
61 2,268 - 369,982 Walgreens 15,120 09/30/2020
62 - - 347,760 Walgreens 14,490 05/31/2028
- ------------------------------------------------------------------------------------------------------------------------------
63 2,086 - 345,914 Walgreens 13,905 11/30/2020
64 8,750 - 374,436
65 3,156 20,981 354,330 Junz Japanese Restaurant 3,719 11/30/2010
66 1,636 5,456 340,991 Eckerd 10,908 12/16/2018
67 31,900 - 287,852
- ------------------------------------------------------------------------------------------------------------------------------
68 2,740 - 307,660 Walgreens 14,420 09/30/2021
69 2,048 - 289,693 Walgreens 13,650 09/30/2027
70 16,750 - 248,725
71 20,000 - 215,457
72 1,632 - 249,927 CVS 10,880 01/31/2020
- ------------------------------------------------------------------------------------------------------------------------------
73 1,680 2,235 229,664 Eckerd 11,200 12/31/2018
74 - - 254,625 Sav-On / Albertson's 56,858 01/17/2027
75 7,463 53,951 237,341 The Albuquerque Clinic 4,721 05/31/2005
76 3,000 12,078 236,278 Old Navy 20,000 10/03/2012
77 25,000 - 213,667
- ------------------------------------------------------------------------------------------------------------------------------
78 1,604 - 218,002 CVS 10,690 01/31/2021
79 16,783 - 223,555
80 1,519 - 173,759 CVS 10,125 01/31/2021
81 1,636 5,433 189,053 Eckerd 10,908 05/31/2019
82 6,750 - 141,128
- ------------------------------------------------------------------------------------------------------------------------------
83 6,650 - 222,729
83A
83B
84 2,835 13,281 182,216 Cato 4,680 01/31/2008
85 7,000 - 168,375
- ------------------------------------------------------------------------------------------------------------------------------
86 14,750 - 163,383
87 20,750 - 177,251
88 24,800 - 175,677
89 20,750 - 157,933
89A
- ------------------------------------------------------------------------------------------------------------------------------
89B
90 4,817 20,549 169,531 A Touch of Country 8,126 04/30/2005
91 14,750 - 133,457
91A
91B
- ------------------------------------------------------------------------------------------------------------------------------
92 2,174 9,390 125,740 Dollar Tree 5,994 04/30/2008
- ------------------------------------------------------------------------------------------------------------------------------
LEASE LEASE OCCUPANCY
ID 2ND LARGEST TENANT SF EXPIRATION 3RD LARGEST TENANT SF EXPIRATION RATE
- ------------------------------------------------------------------------------------------------------------------------------------
57 91.30%
- ------------------------------------------------------------------------------------------------------------------------------------
58 Renal Treatment Centers, Inc. 6,749 10/31/2005 Spectrum Consulting Group 4,124 05/31/2003 96.89%
59 91.45%
60 100.00%
61 100.00%
62 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
63 100.00%
64 86.86%
65 Mattress Depot 2,521 10/31/2008 Orthodontic Centers of America 2,276 12/31/2008 91.41%
66 100.00%
67 90.52%
- ------------------------------------------------------------------------------------------------------------------------------------
68 100.00%
69 100.00%
70 97.01%
71 78.75%
72 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
73 100.00%
74 100.00%
75 Rhino Corp 3,862 07/31/2003 COPD 3,755 09/30/2005 84.30%
76 100.00%
77 93.00%
- ------------------------------------------------------------------------------------------------------------------------------------
78 100.00%
79 96.30%
80 100.00%
81 100.00%
82 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
83 90.98%
83A 90.12%
83B 92.31%
84 It's Fashion 3,420 01/31/2008 Shoe Show 3,150 01/31/2008 100.00%
85 96.43%
- ------------------------------------------------------------------------------------------------------------------------------------
86 98.31%
87 89.16%
88 96.25%
89 95.18%
89A 93.10%
- ------------------------------------------------------------------------------------------------------------------------------------
89B 100.00%
90 First Weber Realtors 5,125 12/31/2003 iColiseum Internet Cafe 2,799 05/31/2005 90.26%
91 91.53%
91A 85.71%
91B 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
92 Hibbett Sporting Goods 5,624 09/30/2006 Radio Shack 2,791 02/28/2007 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
UPFRONT ONGOING
OCCUPANCY ACTUAL REPLACEMENT ACTUAL REPLACEMENT UPFRONT MONTHLY MONTHLY TAX
ID AS-OF DATE RESERVES RESERVES TI/LC TI/LC ESCROW
- ------------------------------------------------------------------------------------------------------------------------
57 05/01/2003 - 1,438 - - 3,196
- ------------------------------------------------------------------------------------------------------------------------
58 02/28/2003 - 925 - 5,607 8,746
59 04/26/2003 - 3,167 - - 7,297
60 06/01/2003 - 182 - - -
61 06/01/2003 - 189 - - 4,727
62 06/01/2003 - - - - -
- ------------------------------------------------------------------------------------------------------------------------
63 06/01/2003 - 173 - - -
64 02/28/2003 - 729 - - 3,284
65 03/31/2003 - 263 - 1,754 5,532
66 06/01/2003 - 136 - 455 -
67 04/01/2003 - 2,659 - - 2,869
- ------------------------------------------------------------------------------------------------------------------------
68 06/01/2003 - 228 - - -
69 06/01/2003 - 171 - - -
70 12/31/2002 - 1,396 - - 6,456
71 02/28/2003 - 1,667 - - 2,843
72 03/31/2003 - 138 - - -
- ------------------------------------------------------------------------------------------------------------------------
73 06/01/2003 - 136 - 182 -
74 06/01/2003 - - - - -
75 12/30/2002 - 625 15,000 4,500 1,754
76 06/01/2003 - 250 - 1,007 2,436
77 12/17/2002 - 2,083 - - 2,387
- ------------------------------------------------------------------------------------------------------------------------
78 06/01/2003 - 134 - - -
79 04/01/2003 - 1,153 - - 5,217
80 06/01/2003 - 127 - - -
81 06/01/2003 - 141 - 470 -
82 05/01/2003 - 563 - - 2,798
- ------------------------------------------------------------------------------------------------------------------------
83 03/31/2003 - 555 - - 1,309
83A 03/31/2003
83B 03/31/2003
84 01/31/2003 - 237 - 1,107 1,234
85 03/01/2003 - 584 - - 4,639
- ------------------------------------------------------------------------------------------------------------------------
86 01/31/2003 - 1,230 - - 1,734
87 03/20/2003 - 1,729 - - 1,870
88 02/19/2003 - 2,070 - - 4,590
89 02/28/2003 - 1,730 - - 2,375
89A 02/28/2003
- ------------------------------------------------------------------------------------------------------------------------
89B 02/28/2003
90 01/20/2003 - 402 40,000 1,713 4,712
91 02/28/2003 - 1,230 - - 1,199
91A 02/28/2003
91B 02/28/2003
- ------------------------------------------------------------------------------------------------------------------------
92 01/30/2003 - 182 - 783 1,901
- ------------------------------------------------------------------------------------------------------------------------
UPFRONT ENVIRONMENTAL
MONTHLY INSURANCE ENGINEERING REPORT ENGINEERING APPRAISAL
ID ESCROW RESERVE DATE REPORT DATE AS-OF DATE (6)
- -------------------------------------------------------------------------------------------------------
57 566 - 01/22/2003 01/23/2003 03/25/2003
- -------------------------------------------------------------------------------------------------------
58 811 - 07/31/2002 07/31/2002 07/24/2002
59 2,710 2,750 01/23/2003 01/23/2003 01/21/2003
60 368 - 02/26/2003 02/26/2003 03/01/2003
61 173 - 02/10/2003 01/30/2003 02/02/2003
62 - - 03/21/2003 03/21/2003 03/10/2003
- -------------------------------------------------------------------------------------------------------
63 - - 03/09/2003 03/09/2003 03/22/2003
64 294 - 02/20/2003 02/20/2003 02/10/2003
65 105 - 01/16/2003 01/16/2003 01/29/2003
66 - - 04/02/2003 09/23/2002 03/04/2003
67 1,796 1,000 02/19/2003 02/19/2003 02/24/2003
- -------------------------------------------------------------------------------------------------------
68 - - 05/02/2003 05/02/2003 04/25/2003
69 155 10,000 01/07/2003 01/07/2003 01/08/2003
70 1,091 1,000 02/03/2003 02/03/2003 12/30/2002
71 1,457 - 11/06/2002 11/06/2002 10/23/2002
72 - - 01/29/2003 01/29/2003 01/04/2003
- -------------------------------------------------------------------------------------------------------
73 - 263 05/09/2003 05/09/2003 04/28/2003
74 - - 02/12/2003 NAP 01/29/2003
75 934 30,625 12/30/2002 11/11/2002 11/25/2002
76 260 1,625 03/11/2003 03/11/2003 02/24/2003
77 1,807 4,750 11/04/2002 11/04/2002 10/24/2002
- -------------------------------------------------------------------------------------------------------
78 - - 02/12/2003 02/04/2003 12/23/2002
79 1,765 33,813 03/12/2003 01/07/2003 01/21/2003
80 - 1,250 02/07/2003 02/07/2003 02/03/2003
81 127 250 03/18/2003 03/18/2003 03/12/2003
82 2,444 950 04/11/2003 04/11/2003 04/10/2003
- -------------------------------------------------------------------------------------------------------
83 473 35,938 09/23/2002 09/23/2002 09/13/2002
83A 09/23/2002 09/23/2002 09/13/2002
83B 09/23/2002 09/23/2002 09/13/2002
84 329 1,500 12/09/2002 12/09/2002 12/13/2002
85 657 - 01/21/2003 01/21/2003 01/27/2003
- -------------------------------------------------------------------------------------------------------
86 1,580 - 12/12/2002 12/12/2002 12/17/2002
87 3,173 20,875 11/04/2002 11/04/2002 10/24/2002
88 1,355 24,063 03/17/2003 03/17/2003 03/14/2003
89 1,394 10,938 04/08/2003 04/08/2003 01/28/2003
89A 04/08/2003 04/08/2003 01/28/2003
- -------------------------------------------------------------------------------------------------------
89B 04/08/2003 04/08/2003 01/28/2003
90 442 8,350 01/28/2003 02/06/2003 01/29/2003
91 1,300 5,600 03/19/2003 03/19/2003 03/06/2003
91A 03/19/2003 03/19/2003 03/06/2003
91B 03/19/2003 03/19/2003 03/06/2003
- -------------------------------------------------------------------------------------------------------
92 283 - 12/11/2002 12/11/2002 12/19/2002
- -------------------------------------------------------------------------------------------------------
ID SPONSOR
- --------------------------------------------------------------------------------------------------------
57 Barry L. Haase, Philip S. Moreau
- --------------------------------------------------------------------------------------------------------
58 John M. Lewis, Daniel D. Dower, Michael J. Powers, III, Susan B. Schweikert
59 John E. Autry, Leasing Lifestyles, Inc., Monarch Properties, Inc., Westmark Management Company
60 Todd W. Lillibridge
61 Wayne M. Kao
62 Aziz Ali Dhanani
- --------------------------------------------------------------------------------------------------------
63 Harris Rittoff, Marshall Okmin
64 Sam Misuraca, Mario Rea
65 David J. Faestel
66 Henry Herskowitz
67 Robert F. Barton
- --------------------------------------------------------------------------------------------------------
68 Craig M. Ripley
69 William N. Hunter
70 Benchmark Group, Inc.
71 Robert G. Lewis, Jr., Jerry L. Stephens
72 Mark A. Thomas, Anthony J. Ferlito
- --------------------------------------------------------------------------------------------------------
73 Bernard Leviton
74 William W. Bock, Jr.
75 Richard Hanna, Peter Naumberg
76 Joseph Robert Prestifilippo
77 Robert G. Lewis, Jr., Jerry L. Stephens
- --------------------------------------------------------------------------------------------------------
78 Neal Brad Thomason, Gregory V. Hurley
79 Louis A. Tallarini
80 William A. Wilson, Wilson Asset Management, L.P.
81 Gerald R. Comstock
82 William R. Prevatel, William E. Prevatel, Eileen M. Prevatel
- --------------------------------------------------------------------------------------------------------
83 Kirk L. Saunders, Phillip R. Amos, American Value Communities #2, L.L.C.
83A
83B
84 Kevin M. Brewton, Larry H. Patterson, George S. Currin
85 Daniel Hibma, Roger J. Lucas, Paul A. Land
- --------------------------------------------------------------------------------------------------------
86 Charles T. Spinks
87 Robert G. Lewis, Jr., Jerry L. Stephens
88 Jerome B. Makowsky, Neil E. Ringel
89 Benjamin G. Newman, Jr., Ronald D. Riches, Martin S. Greene, Eugene D. Fink
89A
- --------------------------------------------------------------------------------------------------------
89B
90 Thomas J. Redmond
91 Keith W. Whitehouse, James S. Coder
91A
91B
- --------------------------------------------------------------------------------------------------------
92 Larry H. Patterson, George S. Currin
- --------------------------------------------------------------------------------------------------------
COMM 2003-LNB1
ANNEX A-2 - CERTAIN CHARACTERISTICS OF THE MULTIFAMILY AND MANUFACTURED HOUSING
LOANS
% OF % OF APPLICABLE
INITIAL POOL LOAN GROUP LOAN GROUP
ID PROPERTY NAME BALANCE ONE OR TWO BALANCE
- ------------------------------------------------------------------------------------------------------------------------------------
6 Empirian Luxury Towers 4.50% 2 20.84%
9 The Reserve at Sugarloaf 3.12% 2 14.45%
18 Nittany Pointe 1.50% 1 1.92%
21 Pembrook Place Apartments 1.03% 2 4.79%
22 Regal Townhomes 0.99% 2 4.59%
29 Waters Inlet Apartments 0.85% 2 3.93%
31 Willow Dayton Apartments - Phase II 0.83% 2 3.83%
33 University Village Apartments 0.75% 2 3.47%
37 Hamilton Station IV 0.67% 2 3.10%
38 Willow Dayton Apartments - Phase I (4) 0.65% 2 3.01%
41 Country Lakes Townhome Apartments 0.59% 2 2.71%
43 Eagle Creek Apartments 0.54% 2 2.50%
44 HighPointe Apartments 0.53% 2 2.46%
47 Reedville Commons 0.51% 2 2.38%
48 Shadowood West Apartments 0.51% 2 2.35%
51 Venture In Resort 0.50% 2 2.32%
52 Hidden Lakes Apartments 0.50% 2 2.32%
53 Sunshine Village MHP 0.49% 2 2.27%
54 Falcon Lair Apartments 0.47% 2 2.19%
57 Mesa Verde Resort 0.43% 2 2.01%
59 Park Lane Terrace Apartments 0.42% 2 1.96%
64 Crystal Lake MHC 0.40% 1 0.51%
67 Sandpainter Apartments 0.37% 2 1.71%
70 Courtyard Apartments 0.30% 2 1.38%
71 Shadowood Apartments 0.28% 2 1.31%
77 Brookwood 0.25% 2 1.17%
79 Village Apartments 0.25% 2 1.14%
82 Mid-Bay Club Apartments 0.19% 1 0.25%
83 Aztec & Oakhill MHP Portfolio (2) 0.19% 2 0.90%
83A AZTEC MOBILE HOME PARK 0.12% 2 0.55%
83B OAKHILL MOBILE HOME PARK 0.08% 2 0.35%
85 Parkcrest Apartments II 0.19% 2 0.88%
86 Sadler Apartments 0.19% 2 0.87%
87 Grayshire Apartments 0.18% 2 0.84%
88 Southern Manor, Southern Place East & Southern Place West Apartments 0.18% 2 0.82%
89 Camelot & Bienville Apartments Portfolio (2) 0.17% 2 0.79%
89A CAMELOT APARTMENTS 0.12% 2 0.55%
89B BIENVILLE APARTMENTS 0.05% 2 0.24%
91 Castlebury Court & Monticello Apartments Portfolio (2) 0.15% 2 0.71%
91A MONTICELLO APARTMENTS 0.09% 2 0.42%
91B CASTLEBURY COURT 0.06% 2 0.29%
MORTGAGE CUT-OFF GENERAL DETAILED
# OF LOAN DATE PROPERTY PROPERTY
ID PROPERTIES SELLER (1) BALANCE TYPE TYPE
- ---------------------------------------------------------------------------------------------------------------------------------
6 1 GACC 38,063,492 Multifamily Conventional
9 1 GACC 26,400,000 Multifamily Conventional
18 1 GACC 12,725,076 Multifamily Student Housing
21 1 LaSalle 8,742,053 Multifamily Conventional
22 1 GACC 8,392,381 Multifamily Conventional
29 1 LaSalle 7,186,078 Multifamily Conventional
31 1 LaSalle 6,993,489 Multifamily Conventional
33 1 LaSalle 6,344,240 Multifamily Student Housing
37 1 LaSalle 5,667,120 Multifamily Conventional
38 1 LaSalle 5,494,730 Multifamily Conventional
41 1 LaSalle 4,950,410 Multifamily Conventional
43 1 LaSalle 4,565,237 Multifamily Conventional
44 1 LaSalle 4,500,000 Multifamily Conventional
47 1 LaSalle 4,341,119 Multifamily Conventional
48 1 LaSalle 4,301,640 Multifamily Conventional
51 1 LaSalle 4,245,473 Manufactured Housing Manufactured Housing
52 1 LaSalle 4,231,938 Multifamily Conventional
53 1 LaSalle 4,151,507 Manufactured Housing Manufactured Housing
54 1 LaSalle 3,992,266 Multifamily Conventional
57 1 LaSalle 3,676,034 Manufactured Housing Manufactured Housing
59 1 LaSalle 3,589,228 Multifamily Conventional
64 1 LaSalle 3,357,029 Manufactured Housing Manufactured Housing
67 1 LaSalle 3,117,248 Multifamily Conventional
70 1 LaSalle 2,512,460 Multifamily Conventional
71 1 LaSalle 2,389,800 Multifamily Conventional
77 1 LaSalle 2,130,905 Multifamily Conventional
79 1 LaSalle 2,077,187 Multifamily Conventional
82 1 GACC 1,648,587 Multifamily Conventional
83 2 LaSalle 1,639,111 Manufactured Housing Manufactured Housing
83A LASALLE 998,256 MANUFACTURED HOUSING MANUFACTURED HOUSING
83B LASALLE 640,855 MANUFACTURED HOUSING MANUFACTURED HOUSING
85 1 LaSalle 1,600,000 Multifamily Conventional
86 1 LaSalle 1,593,574 Multifamily Conventional
87 1 LaSalle 1,540,559 Multifamily Conventional
88 3 LaSalle 1,500,000 Multifamily Conventional
89 2 LaSalle 1,448,102 Multifamily Conventional
89A LASALLE 1,011,927 MULTIFAMILY CONVENTIONAL
89B LASALLE 436,175 MULTIFAMILY CONVENTIONAL
91 2 LaSalle 1,298,836 Multifamily Conventional
91A LASALLE 770,496 MULTIFAMILY CONVENTIONAL
91B LASALLE 528,340 MULTIFAMILY CONVENTIONAL
ID ADDRESS CITY COUNTY STATE ZIP CODE
- ------------------------------------------------------------------------------------------------------------------------------------
6 633 West Rittenhouse Street Philadelphia Philadelphia PA 19144
9 2605 Meadow Church Road Duluth Gwinnett GA 30097
18 200 Campus View Drive Altoona Blair PA 16601
21 2775 Stowmarket Avenue Rockford Winnebago IL 61109
22 2251 Pleasant View Drive Marion Linn IA 52302
29 6100 Arlington Expressway Jacksonville Duval FL 32211
31 1720 North Halsted, 1818 North Halsted, 1717 North Dayton Chicago Cook IL 60614
33 1203 West Main Street Central Pickens SC 29630
37 2700 Double Churches Road Columbus Muscogee GA 31909
38 Various (3) Chicago Cook IL 60614
41 2910 White Knight Boulevard Indianapolis Marion IN 46229
43 4280 South Lee Street Buford Gwinnett GA 30518
44 700 Vista Court #1 Allegan Allegan MI 49010
47 18505 Southwest Stubblefield Way Beaverton Washington OR 97006
48 4344 West Highland Drive Macon Bibb GA 31210
51 270 North Clark Road Show Low Navajo AZ 85901
52 180 Hidden Lakes Court Macon Bibb GA 31204
53 2765 10th Avenue North Lake Worth Palm Beach FL 33461
54 625 31st Avenue North Columbus Lowndes MS 39705
57 3479 South 4th Avenue Yuma Yuma AZ 85365
59 6808 - 6864 Larmanda Dallas Dallas TX 75231
64 1330 Hanover Road Troy Township Delaware OH 43015
67 2225 West Indian School Road Phoenix Maricopa AZ 85015
70 300 Crockett Street Austin Travis TX 78704
71 200 Engracia Drive Warner Robins Houston GA 31088
77 3141 Brookwood Drive Macon Bibb GA 31204
79 82 Jerome Road Uncasville New London CT 06382
82 11950 North Bayshore Drive North Miami Miami-Dade FL 33181
83 Various Kyle Hays TX 78640
83A 291 ROLAND LANE KYLE HAYS TX 78640
83B 501 ROLAND LANE KYLE HAYS TX 78640
85 1961 Parkcrest Drive Wyoming Kent MI 49509
86 1564 Beach Boulevard Biloxi Harrison MS 39530
87 1968 Clinton Road Macon Bibb GA 31211
88 3275-3279 Southern, 3467-3469 Southern, 3285-3295 Southern Memphis Shelby TN 38111
89 Various Natchez Adams MS 39120
89A 156 JEFFERSON DAVIS BOULEVARD NATCHEZ ADAMS MS 39120
89B 500 NORTH COMMERCE STREET NATCHEZ ADAMS MS 39120
91 Various Tulsa Tulsa OK 74105
91A 2639 EAST 51ST STREET TULSA TULSA OK 74105
91B 2735 EAST 51ST STREET TULSA TULSA OK 74105
NET LOAN PER NET
RENTABLE RENTABLE AREA OCCUPANCY OCCUPANCY ELEVATOR(S) UTILITIES
ID UNITS/PADS UNITS/PADS RATE AS-OF DATE (YES/NO) PAID BY TENANT
- ----------------------------------------------------------------------------------------------------------------------------------
6 570 66,778 96.67% 04/14/2003 Yes None
9 333 79,279 90.39% 04/10/2003 No Electric, Gas, Water, Sewer
18 156 81,571 95.67% 03/03/2003 No Electric, Gas, Water
21 136 64,280 91.91% 02/28/2003 No Electric, Gas
22 168 49,955 98.81% 04/01/2003 No Electric, Gas, Water
29 205 35,054 92.20% 12/31/2002 No Electric, Water, Sewer
31 87 80,385 91.95% 03/13/2003 Yes Electric, Gas, Water, Sewer
33 72 88,114 92.94% 02/28/2003 No Electric
37 102 55,560 98.04% 04/28/2003 No Electric
38 56 98,120 89.29% 01/31/2003 No Electric, Gas, Water, Sewer
41 184 26,904 88.04% 02/28/2003 No Electric
43 114 40,046 97.37% 04/15/2003 No Electric, Gas, Water, Sewer
44 120 37,500 95.83% 05/01/2003 No Electric
47 88 49,331 93.18% 12/23/2002 No Electric
48 152 28,300 94.08% 12/17/2002 No Electric
51 389 10,914 100.00% 04/15/2003 No Electric
52 144 29,388 91.67% 05/06/2003 No Electric
53 170 24,421 94.12% 02/28/2003 No Electric, Water
54 152 26,265 93.42% 03/17/2003 No Electric, Gas
57 345 10,655 91.30% 05/01/2003 No Electric
59 152 23,613 91.45% 04/26/2003 No None
64 175 19,183 86.86% 02/28/2003 No Electric, Water
67 116 26,873 90.52% 04/01/2003 No Electric
70 67 37,499 97.01% 12/31/2002 No Electric
71 80 29,873 78.75% 02/28/2003 No Electric
77 100 21,309 93.00% 12/17/2002 No Electric, Gas
79 54 38,466 96.30% 04/01/2003 No Electric
82 27 61,059 100.00% 05/01/2003 Yes Electric, Gas
83 133 12,324 90.98% 03/31/2003 No Electric, Gas, Water, Sewer
83A 81 12,324 90.12% 03/31/2003 NO ELECTRIC, GAS, WATER, SEWER
83B 52 12,324 92.31% 03/31/2003 NO ELECTRIC, GAS, WATER, SEWER
85 28 57,143 96.43% 03/01/2003 No Electric
86 59 27,010 98.31% 01/31/2003 No Electric
87 83 18,561 89.16% 03/20/2003 No Electric
88 80 18,750 96.25% 02/19/2003 No Electric, Water, Sewer
89 83 17,447 95.18% 02/28/2003 No Electric
89A 58 17,447 93.10% 02/28/2003 NO ELECTRIC
89B 25 17,447 100.00% 02/28/2003 NO ELECTRIC
91 59 22,014 91.53% 02/28/2003 No None
91A 35 22,014 85.71% 02/28/2003 NO NONE
91B 24 22,014 100.00% 02/28/2003 NO NONE
STUDIOS / PADS 1 BEDROOM 2 BEDROOM
------------------------------------- ----------------------------------- ----------------------------------
# AVG RENT PER MAX # AVG RENT PER MAX # AVG RENT PER MAX
ID UNITS MO. ($) RENT ($) UNITS MO. ($) RENT ($) UNITS MO. ($) RENT ($)
- ----------------------------------------------------------------------------------------------------------------------------
6 49 530 700 287 654 800 230 836 1,095
9 110 853 900 173 1,090 1,355
18
21 18 753 760 72 816 865
22 156 660 775
29 24 450 470 76 571 640 105 647 675
31 33 1,148 1,250 54 1,371 1,675
33
37 26 645 645 68 808 820
38 37 1,162 1,250 18 1,581 1,710
41 92 616 625
43 114 563 625
44 24 602 699 96 691 789
47 26 648 680 62 744 780
48 48 450 460 80 560 560
51
52 52 468 500 72 566 600
53
54 48 490 510 104 590 610
57
59 51 521 530 83 670 680
64
67 24 380 380 64 460 460 28 589 610
70 36 642 659 16 798 834
71 16 535 535 64 635 635
77 60 425 425 40 525 525
79 16 665 695 38 774 835
82 19 818 850 8 950 950
83
83A
83B
85 14 899 899
86 3 350 350 35 410 525 19 542 595
87 2 395 395 73 502 535
88 1 409 409 79 504 559
89 38 351 400 45 435 560
89A 29 355 400 29 472 560
89B 9 336 350 16 369 400
91 24 539 560 29 640 650
91A 18 539 560 17 640 650
91B 6 539 550 12 640 640
3 BEDROOM 4 BEDROOM
----------------------------------- -------------------------------------
# AVG RENT PER MAX # AVG RENT PER MAX
ID UNITS MO. ($) RENT ($) UNITS MO. ($) RENT ($)
- -------------------------------------------------------------------------------------
6 4 1,518 1,690
9 38 1,422 1,510 12 1,956 1,975
18 156 1,596 1,596
21 46 982 1,090
22 12 850 850
29
31
33 24 929 1,035 48 1,123 1,512
37 8 985 985
38 1 1,880 1,880
41 92 655 725
43
44
47
48 24 625 625
51
52 20 660 660
53
54
57
59 18 837 900
64
67
70 15 983 999
71
77
79
82
83
83A
83B
85 14 1,095 1,095
86 2 650 650
87 8 585 595
88
89
89A
89B
91 6 650 700
91A
91B 6 650 700
FOOTNOTES FOR THE ANNEX A-1
1 GACC - German American Capital Corporation, LaSalle - LaSalle Bank National
Association
2 For the purposes of mortgage loan calculations in the prospectus
supplement, Hampton Inn & Holiday Inn, Fredericksburg Shopping Center and
Commerce Square Center loans have an Original Term to Maturity of 120
months, Shaw's Merrimack loan has an Original Term to Maturity of 247
months and 75 Rockefeller Plaza loan has an Original Term to Maturity of
133 months, which is calculated using the 8/1/2003 First Payment Date and
their respective Maturity Dates. For the purposes of this Annex A, the
Original Term to Maturity, First Payment Date, Remaining Interest Only
Period, and Prepayment Provisions for these loans were adjusted to include
an additional 1 month interest-only payment to reflect the interest payment
the Trust will receive on 7/1/2003.
3 Annual Debt Service, Monthly Debt Service and DSCR for loans with partial
interest-only periods are shown after the expiration of the interest-only
period. For the Westfield Shoppingtown Portfolio loan, a complete
amortization schedule for the Westfield Shoppingtown Portfolio loan is on
Annex A-3.
4 "Hard" means each tenant transfers its rent directly to the Lock Box
Account; "Soft" means each tenant transfers its rent to the related
borrower or property manager who then is required to transfer the funds
into the Lock Box Account; "Soft at Closing, Springing Hard" means that a
Soft Lock Box exists at closing, but upon the occurrence of a trigger
event, as defined in the related loan documents, each tenant will be
required to transfer its rent directly to the Lock Box Account; "Springing
Hard" means that a Lock Box is not in use at closing, but upon occurrence
of a trigger event, as defined in the related loan documents, each tenant
will be required to transfer its rent directly to the Lock Box Account.
5 For purposes of calculating Cut-off Date LTV Ratio and LTV Ratio at
Maturity, the loan amounts used for the Westfield Shoppingtown Portfolio
and Chandler Fashion Center loans are the aggregate principal balance of
(a) such mortgage loans and (b) the other mortgage loans or portions
thereof in the split loan structure that are pari passu in right of payment
with such mortgage loans. For purposes of calculating DSCR, the Annual Debt
Service used for the Westfield Shoppingtown Portfolio and Chandler Fashion
Center loans are the product of (a) the Monthly Debt Service payments as of
the Cut-off Date of (i) such mortgage loans and (ii) the other mortgage
loans or portions thereof in the split loan structure that are pari passu
in right of payment with such mortgage loans, multiplied by (b) 12.
6 For those loans indicating an Appraisal As-of Date beyond the Cut-off Date,
the Appraised Value and the corresponding Appraisal As-of Date are based on
stabilization.
7 Net Rentable Area SF/Units includes square footage for ground lease
tenants.
8 The Monthly Debt Service for the 75 Rockefeller Plaza Mortgage Loan is the
average of the first 12 interest-only payments.
9 Not closed as of the Cut-off Date. The Cut-off Date for such loan will be
its Note Date.
10 One loan secured by multiple properties.
11 In regards to the IAC JFK Building B loan, the Ground Lessors signed the
Mortgage and have the right to purchase the property.
12 The Willow Dayton Apartments - Phase I loan consists of multiple buildings
with the following addresses: 1732 N. Halsted Street, 1800 North Halsted
Street, 1802 North Halsted Street, 1816 North Halsted Street, 1732 North
Dayton Street, 1801 North Dayton Street, 818 West Willow Street, 820 West
Willow Street.
13 Net Rentable Area SF/Units for the Willow Dayton Apartments - Phase I
excludes seven small commercial units.
14 The 2nd Largest Tenant SF for the Buschwood III loan will change to 14,058
as of 10/01/2003.
15 The Mid-Bay Club Apartments loan DSCR, Cut-off Date LTV Ratio and LTV Ratio
at Maturity were adjusted to net the $100,000 holdback from the Cut-off
Date Balance.
16 In regards to the Shaw's Merrimack loan, the loan provides for a step up in
the Monthly Debt Service payments to $93,032.62 in March 2009, $100,004.98
in March 2014 and $107,486.27 in March 2019. In regards to the Walgreens -
Lake Harbour loan, the loan provides for a step down in the Monthly Debt
Service payments to $21,940.52 in September 2006, $21,592.79 in September
2011 and $21,245.06 in September 2016.
FOOTNOTES FOR THE ANNEX A-2
1 GACC - German American Capital Corporation, LaSalle - LaSalle Bank National
Association
2 One loan secured by multiple properties.
3 The Willow Dayton Apartments - Phase I loan consists of multiple buildings
with the following addresses: 1732 N. Halsted Street, 1800 North Halsted
Street, 1802 North Halsted Street, 1816 North Halsted Street, 1732 North
Dayton Street, 1801 North Dayton Street, 818 West Willow Street, 820 West
Willow Street.
4 Net Rentable Area SF/Units for the Willow Dayton Apartments - Phase I
excludes seven small commercial units.
ANNEX A-3
AMORTIZATION SCHEDULE OF THE
WESTFIELD SHOPPINGTOWN PORTFOLIO MORTGAGE LOAN
PERIOD DATE BALANCE PRINCIPAL
- ------------------ -------------------------------- ------------------------------ ----------------------------
0 10/1/02 $ 60,000,000.00
1 11/1/02 59,950,922.00 $ 49,078.00
2 12/1/02 59,891,513.22 59,408.77
3 1/1/03 59,841,870.04 49,643.19
4 2/1/03 59,791,968.22 49,901.82
5 3/1/03 59,711,661.31 80,306.91
6 4/1/03 59,661,081.14 50,580.17
7 5/1/03 59,600,211.09 60,870.05
8 6/1/03 59,549,050.30 51,160.79
9 7/1/03 59,487,615.42 61,434.87
10 8/1/03 59,435,868.04 51,747.38
11 9/1/03 59,383,851.06 52,016.97
12 10/1/03 59,321,583.31 62,267.75
13 11/1/03 59,268,970.94 52,612.37
14 12/1/03 59,206,124.00 62,846.94
15 1/1/04 59,152,910.13 53,213.88
16 2/1/04 59,099,419.02 53,491.11
17 3/1/04 59,025,785.27 73,633.75
18 4/1/04 58,971,631.88 54,153.39
19 5/1/04 58,907,285.85 64,346.03
20 6/1/04 58,852,515.11 54,770.74
21 7/1/04 58,787,568.54 64,946.57
22 8/1/04 58,732,174.10 55,394.43
23 9/1/04 58,676,491.08 55,683.02
24 10/1/04 58,610,657.05 65,834.03
25 11/1/04 58,554,340.96 56,316.09
26 12/1/04 58,487,891.09 66,449.87
27 1/1/05 58,430,935.42 56,955.67
28 2/1/05 58,373,683.02 57,252.39
29 3/1/05 58,286,702.30 86,980.73
30 4/1/05 58,228,698.49 58,003.81
31 5/1/05 58,160,606.84 68,091.65
32 6/1/05 58,101,946.11 58,660.73
33 7/1/05 58,033,215.42 68,730.69
34 8/1/05 57,973,891.01 59,324.40
35 9/1/05 57,914,257.54 59,633.47
36 10/1/05 57,844,580.59 69,676.95
37 11/1/05 57,784,273.45 60,307.14
38 12/1/05 57,713,941.16 70,332.29
39 1/1/06 57,652,953.42 60,987.73
40 2/1/06 57,591,647.96 61,305.46
41 3/1/06 57,500,987.32 90,660.64
42 4/1/06 57,438,890.15 62,097.17
43 5/1/06 57,366,816.56 72,073.60
PERIOD DATE BALANCE PRINCIPAL
- ------------------ -------------------------------- ------------------------------ ----------------------------
44 6/1/06 57,304,020.40 62,796.16
45 7/1/06 57,231,266.83 72,753.57
46 8/1/06 57,167,764.50 63,502.33
47 9/1/06 57,103,931.33 63,833.16
48 10/1/06 57,030,168.98 73,762.35
49 11/1/06 56,965,618.99 64,550.00
50 12/1/06 56,891,159.31 74,459.67
51 1/1/07 56,825,885.11 65,274.20
52 2/1/07 56,760,270.85 65,614.26
53 3/1/07 56,665,698.12 94,572.73
54 4/1/07 56,599,249.33 66,448.79
55 5/1/07 56,522,942.54 76,306.79
56 6/1/07 56,455,750.04 67,192.51
57 7/1/07 56,378,719.77 77,030.26
58 8/1/07 56,310,775.91 67,943.87
59 9/1/07 56,242,478.07 68,297.84
60 10/1/07 56,164,372.56 78,105.51
61 11/1/07 56,095,312.00 69,060.56
62 12/1/07 56,016,464.53 78,847.47
63 1/1/08 55,946,633.42 69,831.12
64 2/1/08 55,876,438.50 70,194.92
65 3/1/08 55,787,097.19 89,341.31
66 4/1/08 55,716,071.14 71,026.06
67 5/1/08 55,635,311.66 80,759.48
68 6/1/08 55,563,494.84 71,816.82
69 7/1/08 55,481,966.12 81,528.72
70 8/1/08 55,409,350.42 72,615.70
71 9/1/08 55,336,356.41 72,994.01
72 10/1/08 55,253,682.53 82,673.87
73 11/1/08 55,179,877.53 73,805.00
74 12/1/08 55,096,414.75 83,462.79
75 1/1/09 55,021,790.43 74,624.32
76 2/1/09 54,946,777.33 75,013.09
77 3/1/09 54,843,671.11 103,106.22
78 4/1/09 54,767,730.07 75,941.04
79 5/1/09 54,682,189.37 85,540.70
80 6/1/09 54,605,407.05 76,782.32
81 7/1/09 54,519,047.97 86,359.08
82 8/1/09 54,441,415.73 77,632.24
83 9/1/09 54,363,379.05 78,036.68
84 10/1/09 54,275,799.75 87,579.30
85 11/1/09 54,196,900.25 78,899.50
86 12/1/09 54,108,481.62 88,418.63
87 1/1/10 54,028,710.44 79,771.18
88 2/1/10 53,948,523.68 80,186.76
89 3/1/10 53,840,720.12 107,803.56
90 4/1/10 53,759,553.98 81,166.14
91 5/1/10 53,668,930.39 90,623.59
92 6/1/10 53,586,869.27 82,061.12
93 7/1/10 53,495,375.07 91,494.20
PERIOD DATE BALANCE PRINCIPAL
- ------------------ -------------------------------- ------------------------------ ----------------------------
94 8/1/10 53,412,409.78 82,965.29
95 9/1/10 53,329,012.26 83,397.52
96 10/1/10 53,236,218.03 92,794.23
97 11/1/10 53,151,902.60 84,315.43
98 12/1/10 53,058,215.44 93,687.16
99 1/1/11 52,972,972.66 85,242.77
100 2/1/11 52,887,285.80 85,686.86
101 3/1/11 52,774,488.53 112,797.28
102 4/1/11 52,687,767.61 86,720.91
103 5/1/11 52,591,740.44 96,027.17
104 6/1/11 52,504,067.46 87,672.98
105 7/1/11 52,407,114.13 96,953.33
106 8/1/11 52,318,479.30 88,634.83
107 9/1/11 52,229,382.71 89,096.59
108 10/1/11 52,131,044.51 98,338.20
109 11/1/11 52,040,971.43 90,073.08
110 12/1/11 51,941,683.33 99,288.11
111 1/1/12 51,850,623.73 91,059.59
112 2/1/12 51,759,089.74 91,533.99
113 3/1/12 51,649,682.08 109,407.66
114 4/1/12 51,557,101.24 92,580.84
115 5/1/12 51,455,373.62 101,727.62
116 6/1/12 51,361,780.49 93,593.13
117 7/1/12 51,259,068.13 102,712.36
118 8/1/12 51,164,452.30 94,615.83
119 9/1/12 51,069,343.55 95,108.75
120 10/1/12 50,965,156.82 104,186.73
[THIS PAGE INTENTIONALLY LEFT BLANK]
ANNEX B
CMBS NEW ISSUE
STRUCTURAL AND COLLATERAL TERM SHEET
------------------------------------
$580,872,000
(APPROXIMATE OFFERED CERTIFICATES)
$846,037,514
(APPROXIMATE TOTAL COLLATERAL BALANCE)
COMM 2003-LNB1
------------------------------------
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES
GERMAN AMERICAN CAPITAL CORPORATION
LASALLE BANK NATIONAL ASSOCIATION
MORTGAGE LOAN SELLERS
------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
CLASS APPROX. SIZE INITIAL PASS- RATINGS SUBORDINATION PRINCIPAL ASSUMED FINAL
(FACE) THROUGH RATE (S&P / MOODY'S) LEVELS WAL (YRS.) WINDOW (MO.) DISTRIBUTION DATE
- ----------------------------------------------------------------------------------------------------------------------------
A-1 $162,434,000 % AAA/Aaa 18.125% 5.70 7/03-10/12 10/10/2012
A-2 $347,583,000 % AAA/Aaa 18.125% 9.71 10/12-6/13 6/10/2013
B $28,553,000 % AA/Aa2 14.750% 9.96 6/13-6/13 6/10/2013
C $12,691,000 % AA-/Aa3 13.250% 9.96 6/13-6/13 6/10/2013
D $19,036,000 % A/A2 11.000% 10.01 6/13-7/13 7/10/2013
E $10,575,000 % A-/A3 9.750% 10.10 7/13-10/13 10/10/2013
DEUTSCHE BANK SECURITIES ABN AMRO INCORPORATED
Sole Book Running and Co-Lead Manager Co-Lead Manager
BANC OF AMERICA SECURITIES LLC JPMORGAN MERRILL LYNCH & CO.
Co-Manager Co-Manager Co-Manager
------------
JUNE 9, 2003
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-1
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
TRANSACTION FEATURES
> SELLERS:
NO. OF CUT-OFF DATE %
SELLERS LOANS BALANCE OF POOL
---------------------------------------------------------------------------------------------------------
German American Capital Corporation 30 $572,995,298 67.73%
LaSalle Bank National Association 62 273,042,215 32.27
=========================================================================================================
TOTAL: 92 $846,037,514 100.00%
---------------------------------------------------------------------------------------------------------
> LOAN POOL:
o Average Cut-off Date Balance: $9,196,060
o Largest Mortgage Loan by Cut-off Date Balance:
$65,000,000 (SHADOW RATED A- / A3 BY S&P / MOODY'S)
o Five largest and ten largest loans by Cut-off Date Balance:
31.10% and 48.03% of pool, respectively
> CREDIT STATISTICS:
o Weighted average underwritten DSCR of 1.64x
o Weighted average cut-off date LTV ratio of 69.00%; weighted
average balloon LTV ratio of 58.88%
> PROPERTY TYPES:
[THE FOLLOWING DATA IS PRESENTED AS A PIE GRAPH IN THE PRINTED DOCUMENT]
RETAIL 41.75%
MULTIFAMILY(1) 23.69%
OFFICE 21.46%
INDUSTRIAL 5.70%
LAND 3.44%
MIXED USE(2) 1.75%
HOTEL 1.57%
SENIOR HOUSING 0.65%
(1) Consists of Multifamily (21.67%) and Manufactured Housing (2.02%).
(2) Consists of Office and Retail components.
> CALL PROTECTION: (AS APPLICABLE)
o 100.00% of the pool has a lockout period ranging from 24 to
42 payments from origination, then defeasance.
> BOND INFORMATION:
o Cash flows are expected to be modeled by TREPP, CONQUEST
and INTEX and are expected to be available on BLOOMBERG.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-2
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
OFFERED CERTIFICATES
ASSUMED FINAL INITIAL
CLASS INITIAL CERTIFICATE SUBORDINATION RATINGS AVERAGE PRINCIPAL DISTRIBUTION PASS-THROUGH
BALANCE(1) LEVELS (S&P/MOODY'S) LIFE (YRS.)(2) WINDOW (MO.)(2) DATE(2) RATE (APPROX.)(3)
- -----------------------------------------------------------------------------------------------------------------------------------
A-1(4) $162,434,000 18.125%(5) AAA/Aaa 5.70 7/03-10/12 October 10, 2012 %
A-2(4) $347,583,000 18.125%(5) AAA/Aaa 9.71 10/12-6/13 June 10, 2013 %
B $ 28,553,000 14.750% AA/Aa2 9.96 6/13-6/13 June 10, 2013 %
C $ 12,691,000 13.250% AA-/Aa3 9.96 6/13-6/13 June 10, 2013 %
D $ 19,036,000 11.000% A/A2 10.01 6/13-7/13 July 10, 2013 %
E $ 10,575,000 9.750% A-/A3 10.10 7/13-10/13 October 10, 2013 %
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
PRIVATE CERTIFICATES(6)
ASSUMED FINAL INITIAL
CLASS INITIAL CERTIFICATE SUBORDINATION RATINGS AVERAGE PRINCIPAL DISTRIBUTION PASS-THROUGH
BALANCE(1) LEVELS (S&P/MOODY'S) LIFE (YRS.)(2) WINDOW (MO.)(2) DATE(2) RATE (APPROX.)(3)
- -----------------------------------------------------------------------------------------------------------------------------------
X-1(7) $846,037,513 NA AAA/Aaa NA NA February 10, 2024 %
X-2(7) $817,601,000 NA AAA/Aaa NA NA June 10, 2010 %
A-1A(4) $182,676,000 18.125%(5) AAA/Aaa 8.70 7/03-6/13 June 10, 2013 %
F $ 10,576,000 8.500% BBB+/Baa1 10.93 10/13-8/14 August 10, 2014 %
G $ 8,460,000 7.500% BBB/Baa2 11.13 8/14-8/14 August 10, 2014 %
H $ 12,691,000 6.000% BBB-/Baa3 11.13 8/14-8/14 August 10, 2014 %
J $ 16,921,000 4.000% BB+/Ba1 11.13 8/14-8/14 August 10, 2014 %
K $ 4,230,000 3.500% BB/Ba2 11.13 8/14-8/14 August 10, 2014 %
L $ 5,287,000 2.875% BB-/Ba3 11.13 8/14-8/14 August 10, 2014 %
M $ 4,231,000 2.375% B+/B1 11.13 8/14-8/14 August 10, 2014 %
N $ 4,230,000 1.875% B/B2 11.13 8/14-8/14 August 10, 2014 %
O $ 3,172,000 1.500% B-/B3 11.54 8/14-1/16 January 10, 2016 %
P $ 12,691,513 0.000% NR/NR 16.58 1/16-2/24 February 10, 2024 %
- -----------------------------------------------------------------------------------------------------------------------------------
NOTES:
(1) Subject to a permitted variance of plus or minus 5%.
(2) Based on the structuring assumptions, assuming 0% CPR, described in the
Prospectus Supplement.
(3) The Class A-1, A-2 and A-1A Certificates will accrue interest at a fixed
rate. The Class B, C, D, E, F, G and H Certificates will each accrue
interest at either (i) a fixed rate, (ii) a fixed rate subject to a cap at
the weighted average net mortgage interest rate, (iii) a rate equal to the
weighted average net mortgage interest rate less a specified percentage or
(iv) a rate equal to the weighted average net mortgage interest rate. The
Class J, K, L, M, N, O and P Certificates will accrue interest at a fixed
rate subject to a Net WAC Cap.
(4) For purposes of making distributions to the Class A-1, Class A-2 and Class
A-1A certificates, the pool of mortgage loans will be deemed to consist of
two distinct loan groups, Loan Group 1 and Loan Group 2. Loan Group 1 will
consist of 60 mortgage loans, representing approximately 78.41% of the
aggregate principal balance of the pool of mortgage loans as of the cut-off
date. Loan Group 2 will consist of 32 mortgage loans, representing
approximately 21.59% of the aggregate principal balance of the pool of
mortgage loans as of the cut-off date. Loan Group 2 will include
approximately 92.16% of all the mortgage loans secured by multifamily
properties and approximately 80.33% of all the mortgage loans secured by
manufactured housing properties.
Generally, the Class A-1, Class A-2 certificates will only be entitled to
receive distributions of principal collected or advanced in respect of
mortgage loans in Loan Group 1 until the certificate principal balance of
the Class A-1A certificates has been reduced to zero, and the Class A-1A
certificates will only be entitled to receive distributions of principal
collected or advanced in respect of mortgage loans in Loan Group 2 until
the certificate principal balance of the Class A-2 certificates has been
reduced to zero. However, on and after any distribution date on which the
certificate principal balances of the Class B through Class P certificates
have been reduced to zero, distributions of principal collected or advanced
in respect of the pool of mortgage loans will be distributed to the Class
A-1, Class A-2 and Class A-1A certificates, pro rata.
(5) Represents the approximate credit support for the Class A-1, Class A-2, and
Class A-1A Certificates in the aggregate.
(6) Certificates to be offered privately pursuant to Rule 144A and Regulation
S.
(7) Each of the properties referred to herein as Westfield Shoppingtown
Portfolio and Chandler Fashion Center also secure a subordinate note that
is held outside of the trust. The Class X Certificates were structured
assuming that such subordinate notes absorb any loss prior to the related
mortgage loan that is held in the trust. For more information regarding
these loans see "Description of the Mortgage Pool--Description of the Ten
Largest Mortgage Loans--The Westfield Shoppingtown Portfolio Loan" and
"--The Chandler Fashion Center Loan" in the Prospectus Supplement.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-3
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- ------------------------------------------------------------------------------------------------------------------------------------
I. ISSUE CHARACTERISTICS
ISSUE TYPE: Public: Classes A-1, A-2, B, C, D and E (the "Offered Certificates").
Private (Rule 144A, Regulation S): Classes X-1, X-2, A-1A, F, G, H, J, K, L, M, N, O and P.
SECURITIES OFFERED: $580,872,000 monthly pay, multi-class, sequential pay commercial mortgage REMIC Pass-Through
Certificates, consisting of six fixed-rate principal and interest classes (Classes A-1, A-2, B, C, D and
E).
MORTGAGE POOL: The Mortgage Pool consists of 92 Mortgage Loans with an aggregate balance as of the Cut-Off Date of
$846,037,514. The Mortgage Loans are secured by 99 properties located throughout 31 states. The
Mortgage Pool will be deemed to consist of 2 loan groups ("Loan Group 1" and "Loan Group 2"). Loan
Group 1 consists of (i) all of the Mortgage Loans that are not secured by Mortgaged Properties that are
multifamily properties and/or manufactured housing properties, (ii) 2 Mortgage Loans that are secured by
Mortgaged Properties that are multifamily properties and (iii) 1 Mortgage Loan that is secured by a
Mortgaged Property that is a manufactured housing property. Loan Group 1 consists of 60 Mortgage Loans,
with an aggregate Cut-Off Date balance of $663,361,297. Loan Group 2 consists of 28 Mortgage Loans that
are secured by Mortgaged Properties that are multifamily properties and 4 Mortgage Loans that are secured
by Mortgaged Properties that are manufactured housing properties. Loan Group 2 consists of 32 Mortgage
Loans, with an aggregate Cut-Off Date balance of $182,676,217.
SELLERS: German American Capital Corporation (GACC); and LaSalle Bank National Association (LaSalle)
BOOKRUNNER: Deutsche Bank Securities Inc.
CO-LEAD MANAGERS: Deutsche Bank Securities Inc. and ABN AMRO Incorporated.
CO-MANAGERS: Banc of America Securities LLC, J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
MASTER SERVICER: GMAC Commercial Mortgage Corporation, with respect to all of the mortgage loans other than the Westfield
Shoppingtown Portfolio Loan and GEMSA Loan Services, L.P., a Delaware limited partnership, with respect
to the Westfield Shoppingtown Portfolio Loan.
SPECIAL SERVICER: Lennar Partners, Inc., with respect to all of the mortgage loans other than the Westfield Shoppingtown
Portfolio Loan and the Chandler Fashion Center Loan, KeyCorp Real Estate Capital Markets, Inc., with
respect to the Westfield Shoppingtown Portfolio Loan and GMAC Commercial Mortgage Corporation, with
respect to the Chandler Fashion Center Loan.
TRUSTEE: Wells Fargo Bank Minnesota, N.A.
BOND ADMINISTRATOR: LaSalle Bank National Association.
CUT-OFF DATE: June 1, 2003 (except in the case of the mortgage loans known as 75 Rockefeller Plaza, Shaw's Merrimack,
Hampton Inn & Holiday Inn, Fredericksburg Shopping Center and Commerce Square Center, the respective
loan closing date in June 2003).
EXPECTED CLOSING DATE: On or about June , 2003.
DISTRIBUTION DATES: The 10th day of each month or, if such 10th day is not a business day, the business day immediately
following such 10th day, beginning in July, 2003.
MINIMUM DENOMINATIONS: $10,000 with respect to the Class A-1 and A-2 Certificates and $25,000 with respect to the Class B,
Class C, Class D and Class E Certificates and in multiples of $1 thereafter.
SETTLEMENT TERMS: DTC, Euroclear and Clearstream, same day funds, with accrued interest.
ERISA/SMMEA STATUS: Classes A-1, A-2, B, C, D and E are expected to be ERISA eligible. No Class of Certificates is SMMEA
eligible.
RATING AGENCIES: The Offered Certificates will be rated by Standard & Poor's and Moody's.
RISK FACTORS: THE CERTIFICATES INVOLVE CERTAIN RISKS AND MAY NOT BE SUITABLE FOR ALL INVESTORS. SEE
THE "RISK FACTORS" SECTION OF THE PROSPECTUS SUPPLEMENT AND THE "RISK FACTORS"
SECTION OF THE PROSPECTUS.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-4
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
II. STRUCTURE CHARACTERISTICS
The Class A, B, C, D, E, F, G and H Certificates are multi-class, sequential-pay
REMIC pass-through certificates, which pay monthly distributions. Among the
Class A Certificates, Class A-1, A-2 generally receive distributions from Loan
Group 1 until Class A-1A has been reduced to zero. Class A-1A generally receives
distributions from Loan Group 2 until Class A-2 has been reduced to zero. The
Class J, K, L, M, N, O and P Certificates will accrue interest at a fixed rate
subject to a Net WAC Cap. The Class X-1 and X-2 Certificates will accrue
interest at a variable rate.
[THE FOLLOWING DATA IS PRESENTED AS A BAR GRAPH IN THE PRINTED DOCUMENT]
CLASS A-1(1) $162.4MM
CLASS A-2(2) $347.6MM
CLASS A-1A(1)(2) $182.7MM
CLASS B $28.6MM
CLASS C $12.7MM
CLASS D $19.0MM
CLASS E $10.6MM
CLASS F(1) $10.6MM
CLASS G(1) $8.5MM
CLASS H(1) $12.7MM
CLASS J(1) $16.9MM
CLASS K(1) $4.2MM
CLASS L(1) $5.3MM
CLASS M-P(1) $24.3MM
(1) Offered privately pursuant to Rule 144A and Regulation S.
(2) For purposes of making distributions to the Class A-1, Class A-2 and Class
A-1A certificates, the pool of mortgage loans will be deemed to consist of
two distinct loan groups, Loan Group 1 and Loan Group 2. Loan Group 1 will
consist of 60 mortgage loans, representing approximately 78.41% of the
aggregate principal balance of the pool of mortgage loans as of the cut-off
date. Loan Group 2 will consist of 32 mortgage loans, representing
approximately 21.59% of the aggregate principal balance of the pool of
mortgage loans as of the cut-off date. Loan Group 2 will include
approximately 92.16% of all the mortgage loans secured by multifamily
properties and approximately 80.33% of all the mortgage loans secured by
manufactured housing properties.
Generally, the Class A-1, Class A-2 certificates will only be entitled to
receive distributions of principal collected or advanced in respect of
mortgage loans in Loan Group 1 until the certificate principal balance of
the Class A-1A certificates has been reduced to zero, and the Class A-1A
certificates will only be entitled to receive distributions of principal
collected or advanced in respect of mortgage loans in Loan Group 2 until
the certificate principal balance of the Class A-2 certificates has been
reduced to zero. However, on and after any distribution date on which the
certificate principal balances of the Class B through Class P certificates
have been reduced to zero, distributions of principal collected or advanced
in respect of the pool of mortgage loans will be distributed to the Class
A-1, Class A-2 and Class A-1A certificates, pro rata.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-5
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
III. FULL COLLATERAL CHARACTERISTICS
CUT-OFF DATE BALANCE ($)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- --------------------------------------------------------------------------------
1,147,709 - 2,000,000 13 19,751,692 2.33
2,000,001 - 4,000,000 26 77,386,731 9.15
4,000,001 - 6,000,000 18 84,793,773 10.02
6,000,001 - 8,000,000 12 83,975,588 9.93
8,000,001 - 10,000,000 4 34,942,529 4.13
10,000,001 - 15,000,000 5 65,448,456 7.74
15,000,001 - 20,000,000 3 52,222,400 6.17
20,000,001 - 30,000,000 5 126,322,352 14.93
30,000,001 - 40,000,000 2 77,063,492 9.11
40,000,001 - 60,000,000 3 159,130,500 18.81
60,000,001 - 65,000,000 1 65,000,000 7.68
- --------------------------------------------------------------------------------
TOTAL: 92 846,037,514 100.00
- --------------------------------------------------------------------------------
Min: 1,147,709 Max: 65,000,000 Average: 9,196,060
- --------------------------------------------------------------------------------
MORTGAGE RATE (%)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- --------------------------------------------------------------------------------
4.665 - 4.999 3 72,921,507 8.62
5.000 - 5.249 3 82,608,662 9.76
5.250 - 5.499 9 156,014,459 18.44
5.500 - 5.749 27 228,071,724 26.96
5.750 - 5.999 19 119,043,034 14.07
6.000 - 6.249 23 142,956,476 16.90
6.250 - 6.499 2 20,650,000 2.44
6.500 - 6.749 3 9,014,254 1.07
6.750 - 6.999 2 8,664,592 1.02
7.000 - 7.250 1 6,092,806 0.72
- --------------------------------------------------------------------------------
TOTAL: 92 846,037,514 100.00
- --------------------------------------------------------------------------------
Min: 4.665 Max: 7.250 Wtd Avg: 5.810
- --------------------------------------------------------------------------------
CUT-OFF DATE LOAN-TO-VALUE RATIO (%)(a)(b)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- --------------------------------------------------------------------------------
41.0 - 45.0 1 54,181,450 6.40
45.1 - 50.0 2 124,549,050 14.72
50.1 - 60.0 3 21,146,503 2.50
60.1 - 65.0 5 23,373,463 2.76
65.1 - 70.0 6 25,998,019 3.07
70.1 - 75.0 33 169,584,848 20.04
75.1 - 80.0 35 370,223,408 43.76
80.1 - 80.6 1 4,151,507 0.49
- --------------------------------------------------------------------------------
TOTAL: 86 793,208,249 93.76
- --------------------------------------------------------------------------------
Min: 41.0 Max: 80.6 Wtd Avg: 69.0
- --------------------------------------------------------------------------------
(a) Calculated on loan balances after netting out a holdback amount for one
loan (0.19% of the pool balance).
(b) Excludes 4 CTL loans and 2 Land loans from the calculations.
STATE
- --------------------------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
PROPERTIES BALANCE ($) POOL
- --------------------------------------------------------------------------------
New York 5 154,224,547 18.23
California 8 139,924,421 16.54
SOUTHERN CALIFORNIA 6 87,266,426 10.31
NORTHERN CALIFORNIA 2 52,657,995 6.22
Arizona 4 65,220,205 7.71
Pennsylvania 4 61,388,568 7.26
Georgia 12 60,528,611 7.15
Florida 6 56,283,118 6.65
Michigan 5 52,897,312 6.25
Texas 12 35,652,192 4.21
Illinois 5 31,117,425 3.68
Maryland 2 30,092,419 3.56
West Virginia 2 22,305,207 2.64
Other States (a) 34 136,403,491 16.12
- --------------------------------------------------------------------------------
TOTAL: 99 846,037,514 100.00
- --------------------------------------------------------------------------------
(a) Includes 20 states.
ORIGINAL TERM TO STATED MATURITY (MOS)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- --------------------------------------------------------------------------------
60 - 60 7 54,197,915 6.41
61 - 84 3 12,614,567 1.49
85 - 120 73 660,259,500 78.04
121 - 200 5 95,267,120 11.26
201 - 248 4 23,698,411 2.80
- --------------------------------------------------------------------------------
TOTAL: 92 846,037,514 100.00
- --------------------------------------------------------------------------------
Min: 60 Max: 248 Wtd Avg: 120
- --------------------------------------------------------------------------------
LOAN-TO-VALUE RATIO AT MATURITY (%)(a)(b)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- --------------------------------------------------------------------------------
33.7 - 40.0 2 113,730,500 13.44
40.1 - 50.0 6 88,901,005 10.51
50.1 - 55.0 3 8,783,841 1.04
55.1 - 60.0 23 104,193,047 12.32
60.1 - 65.0 26 142,670,328 16.86
65.1 - 70.0 21 288,039,639 34.05
70.1 - 74.0 5 46,889,889 5.54
- --------------------------------------------------------------------------------
TOTAL: 86 793,208,249 93.76
- --------------------------------------------------------------------------------
Min: 33.7 Max: 74.0 Wtd Avg: 58.9
- --------------------------------------------------------------------------------
(a) Calculated on loan balances after netting out a holdback amount for one
loan (0.19% of the pool balance).
(b) Excludes 4 CTL loans and 2 Land loans from the calculations.
REMAINING TERM TO STATED MATURITY (MOS)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- --------------------------------------------------------------------------------
55 - 60 7 54,197,915 6.41
61 - 84 3 12,614,567 1.49
85 - 120 73 660,259,500 78.04
121 - 200 5 95,267,120 11.26
201 - 248 4 23,698,411 2.80
- --------------------------------------------------------------------------------
TOTAL: 92 846,037,514 100.00
- --------------------------------------------------------------------------------
Min: 55 Max: 248 Wtd Avg: 118
- --------------------------------------------------------------------------------
DEBT SERVICE COVERAGE RATIOS (x)(a)(b)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- --------------------------------------------------------------------------------
1.22+ - 1.25 2 34,792,381 4.11
1.25+ - 1.30 8 67,469,155 7.97
1.30+ - 1.35 13 86,313,901 10.20
1.35+ - 1.40 5 70,319,956 8.31
1.40+ - 1.45 19 160,776,048 19.00
1.45+ - 1.50 18 67,883,728 8.02
1.50+ - 1.55 8 56,193,913 6.64
1.55+ - 1.60 4 37,168,048 4.39
1.60+ - 1.70 3 12,171,507 1.44
1.70+ - 1.80 1 13,250,000 1.57
1.80+ - 2.40 3 73,139,111 8.64
2.40+ - 2.93 2 113,730,500 13.44
- --------------------------------------------------------------------------------
TOTAL: 86 793,208,249 93.76
- --------------------------------------------------------------------------------
Min: 1.23 Max: 2.93 Wtd Avg: 1.64
- --------------------------------------------------------------------------------
(a) Calculated on loan balances after netting out a holdback amount for one
loan (0.19% of the pool balance).
(b) Excludes 4 CTL loans and 2 Land loans from the calculations.
PROPERTY TYPE
- --------------------------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
PROPERTIES BALANCE ($) POOL
- --------------------------------------------------------------------------------
Retail 34 353,191,571 41.75
ANCHORED 29 328,096,657 38.78
UNANCHORED 1 1,396,503 0.17
CTL 4 23,698,411 2.80
Multifamily 38 200,406,908 23.69
MULTIFAMILY 32 183,337,755 21.67
MANUFACTURED HOUSING 6 17,069,154 2.02
Office 15 181,574,459 21.46
Industrial 5 48,201,385 5.70
Land 2 29,130,854 3.44
Mixed Use 2 14,815,706 1.75
Hotel 2 13,250,000 1.57
Senior Housing 1 5,466,631 0.65
- --------------------------------------------------------------------------------
TOTAL: 99 846,037,514 100.00
- --------------------------------------------------------------------------------
LOANS WITH RESERVE REQUIREMENTS (a)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- --------------------------------------------------------------------------------
Replacement 86 680,659,210 80.45
Taxes 72 658,898,597 77.88
Insurance 74 612,740,115 72.42
TI/LC (b) 36 400,539,610 74.90
- --------------------------------------------------------------------------------
(a) Includes upfront or on-going reserves.
(b) Based only on portion of pool secured by retail, office and industrial
properties.
ALL NUMERICAL INFORMATION CONCERNING THE MORTGAGE LOANS IS APPROXIMATE. ALL
WEIGHTED AVERAGE INFORMATION REGARDING THE MORTGAGE LOANS REFLECTS THE WEIGHTING
OF THE LOANS BASED ON THEIR OUTSTANDING PRINCIPAL BALANCES AS OF THE CUT-OFF
DATE. STATE AND PROPERTY TYPE TABLES REFLECT ALLOCATED LOAN AMOUNTS IN THE CASE
OF MORTGAGE LOANS SECURED BY MULTIPLE PROPERTIES. SUM OF COLUMNS MAY NOT MATCH
"TOTAL" DUE TO ROUNDING.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-6
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
IV. LOAN GROUP 1 CHARACTERISTICS
CUT-OFF DATE BALANCE ($)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE % OF
MORTGAGE CUT-OFF DATE LOAN
LOANS BALANCE ($) GROUP
- --------------------------------------------------------------------------------
1,147,709 - 2,000,000 6 9,131,510 1.38
2,000,001 - 4,000,000 18 53,901,603 8.13
4,000,001 - 6,000,000 8 38,344,599 5.78
6,000,001 - 8,000,000 9 63,451,780 9.57
8,000,001 - 10,000,000 2 17,808,096 2.68
10,000,001 - 15,000,000 5 65,448,456 9.87
15,000,001 - 20,000,000 3 52,222,400 7.87
20,000,001 - 30,000,000 4 99,922,352 15.06
30,000,001 - 40,000,000 1 39,000,000 5.88
40,000,001 - 60,000,000 3 159,130,500 23.99
60,000,001 - 65,000,000 1 65,000,000 9.80
- --------------------------------------------------------------------------------
TOTAL: 60 663,361,297 100.00
- --------------------------------------------------------------------------------
Min: 1,147,709 Max: 65,000,000 Average: 11,056,022
- --------------------------------------------------------------------------------
MORTGAGE RATE (%)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE % OF
MORTGAGE CUT-OFF DATE LOAN
LOANS BALANCE ($) GROUP
- --------------------------------------------------------------------------------
4.665 - 5.249 3 143,043,426 21.56
5.250 - 5.499 6 86,056,237 12.97
5.500 - 5.749 10 154,867,260 23.35
5.750 - 5.999 14 101,699,340 15.33
6.000 - 6.249 19 133,273,381 20.09
6.250 - 6.499 2 20,650,000 3.11
6.500 - 6.749 3 9,014,254 1.36
6.750 - 6.999 2 8,664,592 1.31
7.000 - 7.250 1 6,092,806 0.92
- --------------------------------------------------------------------------------
TOTAL: 60 663,361,297 100.00
- --------------------------------------------------------------------------------
Min: 4.665 Max: 7.250 Wtd Avg: 5.653
- --------------------------------------------------------------------------------
CUT-OFF DATE LOAN-TO-VALUE RATIO (%)(a)(b)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE % OF
MORTGAGE CUT-OFF DATE LOAN
LOANS BALANCE ($) GROUP
- --------------------------------------------------------------------------------
41.0 - 45.0 1 54,181,450 8.17
45.1 - 50.0 2 124,549,050 18.78
50.1 - 60.0 3 21,146,503 3.19
60.1 - 65.0 4 21,734,352 3.28
65.1 - 70.0 3 11,120,000 1.68
70.1 - 75.0 25 145,558,806 21.94
75.1 - 79.9 16 232,241,870 35.01
- --------------------------------------------------------------------------------
TOTAL: 54 610,532,032 92.04
- --------------------------------------------------------------------------------
Min: 41.0 Max: 79.9 Wtd Avg: 66.5
- --------------------------------------------------------------------------------
(a) Calculated on loan balances after netting out a holdback amount for one
loan (0.25% of the Loan Group balance).
(b) Excludes 4 CTL loans and 2 Land loans from the calculations.
STATE
- --------------------------------------------------------------------------------
NO. OF AGGREGATE % OF
MORTGAGE CUT-OFF DATE LOAN
LOANS BALANCE ($) GROUP
- --------------------------------------------------------------------------------
New York 5 154,224,547 23.25
California 8 139,924,421 21.09
SOUTHERN CALIFORNIA 6 87,266,426 13.16
NORTHERN CALIFORNIA 2 52,657,995 7.94
Arizona 1 54,181,450 8.17
Michigan 3 46,797,312 7.05
Florida 4 44,945,532 6.78
Other States (a) 43 223,288,035 33.66
- --------------------------------------------------------------------------------
TOTAL: 64 663,361,297 100.00
- --------------------------------------------------------------------------------
(a) Includes 20 states.
ORIGINAL TERM TO STATED MATURITY (MOS)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE % OF
MORTGAGE CUT-OFF DATE LOAN
LOANS BALANCE ($) GROUP
- --------------------------------------------------------------------------------
60 - 60 4 41,711,172 6.29
61 - 84 1 2,145,000 0.32
85 - 120 47 506,206,714 76.31
121 - 200 4 89,600,000 13.51
201 - 248 4 23,698,411 3.57
- --------------------------------------------------------------------------------
TOTAL: 60 663,361,297 100.00
- --------------------------------------------------------------------------------
Min: 60 Max: 248 Wtd Avg: 122
- --------------------------------------------------------------------------------
LOAN-TO-VALUE RATIO AT MATURITY (%)(a)(b)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE % OF
MORTGAGE CUT-OFF DATE LOAN
LOANS BALANCE ($) GROUP
- --------------------------------------------------------------------------------
33.7 - 40.0 2 113,730,500 17.14
40.1 - 50.0 6 88,901,005 13.40
50.1 - 55.0 1 1,650,000 0.25
55.1 - 60.0 15 75,362,447 11.36
60.1 - 65.0 19 118,538,560 17.87
65.1 - 70.0 10 208,493,282 31.43
70.1 - 71.6 1 3,856,237 0.58
- --------------------------------------------------------------------------------
TOTAL: 54 610,532,032 92.04
- --------------------------------------------------------------------------------
Min: 33.7 Max: 71.6 Wtd Avg: 56.9
- --------------------------------------------------------------------------------
(a) Calculated on loan balances after netting out a holdback amount for one
loan (0.25% of the Loan Group balance).
(b) Excludes 4 CTL loans and 2 Land loans from the calculations.
PROPERTY TYPE
- --------------------------------------------------------------------------------
NO. OF AGGREGATE % OF
MORTGAGE CUT-OFF DATE LOAN
PROPERTIES BALANCE ($) GROUP
- --------------------------------------------------------------------------------
Retail 34 353,191,571 53.24
ANCHORED 29 328,096,657 49.46
UNANCHORED 1 1,396,503 0.21
CTL 4 23,698,411 3.57
Multifamily 3 17,730,691 2.67
MULTIFAMILY 2 14,373,663 2.17
MANUFACTURED HOUSING 1 3,357,029 0.51
Office 15 181,574,459 27.37
Industrial 5 48,201,385 7.27
Land 2 29,130,854 4.39
Mixed Use 2 14,815,706 2.23
Hotel 2 13,250,000 2.00
Senior Housing 1 5,466,631 0.82
- --------------------------------------------------------------------------------
TOTAL: 64 663,361,297 100.00
- --------------------------------------------------------------------------------
REMAINING TERM TO STATED MATURITY (MOS)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE % OF
MORTGAGE CUT-OFF DATE LOAN
LOANS BALANCE ($) GROUP
- --------------------------------------------------------------------------------
55 - 60 4 41,711,172 6.29
61 - 84 1 2,145,000 0.32
85 - 120 47 506,206,714 76.31
121 - 200 4 89,600,000 13.51
201 - 248 4 23,698,411 3.57
- --------------------------------------------------------------------------------
TOTAL: 60 663,361,297 100.00
- --------------------------------------------------------------------------------
Min: 55 Max: 248 Wtd Avg: 118
- --------------------------------------------------------------------------------
DEBT SERVICE COVERAGE RATIOS (X)(a)(b)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE % OF
MORTGAGE CUT-OFF DATE LOAN
LOANS BALANCE ($) GROUP
- --------------------------------------------------------------------------------
1.27+ - 1.30 6 60,128,945 9.06
1.30+ - 1.35 10 75,935,959 11.45
1.35+ - 1.40 3 23,514,411 3.54
1.40+ - 1.45 10 123,351,649 18.59
1.45+ - 1.50 11 41,643,895 6.28
1.50+ - 1.55 4 46,058,624 6.94
1.55+ - 1.60 4 37,168,048 5.60
1.60+ - 1.70 1 4,250,000 0.64
1.70+ - 1.80 1 13,250,000 2.00
1.80+ - 2.40 2 71,500,000 10.78
2.40+ - 2.93 2 113,730,500 17.14
- --------------------------------------------------------------------------------
TOTAL: 54 610,532,032 92.04
- --------------------------------------------------------------------------------
Min: 1.27 Max: 2.93 Wtd Avg: 1.72
- --------------------------------------------------------------------------------
(a) Calculated on loan balances after netting out a holdback amount for one
loan (0.25% of the Loan Group balance).
(b) Excludes 4 CTL loans and 2 Land loans from the calculations.
ALL NUMERICAL INFORMATION CONCERNING THE MORTGAGE LOANS IS APPROXIMATE. ALL
WEIGHTED AVERAGE INFORMATION REGARDING THE MORTGAGE LOANS REFLECTS THE WEIGHTING
OF THE LOANS BASED ON THEIR OUTSTANDING PRINCIPAL BALANCES AS OF THE CUT-OFF
DATE. STATE AND PROPERTY TYPE TABLES REFLECT ALLOCATED LOAN AMOUNTS IN THE CASE
OF MORTGAGE LOANS SECURED BY MULTIPLE PROPERTIES. SUM OF COLUMNS MAY NOT MATCH
"TOTAL" DUE TO ROUNDING.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-7
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
V. LOAN GROUP 2 CHARACTERISTICS
CUT-OFF DATE BALANCE ($)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE % OF
MORTGAGE CUT-OFF DATE LOAN
LOANS BALANCE ($) GROUP
- --------------------------------------------------------------------------------
1,298,836 - 2,000,000 7 10,620,182 5.81
2,000,001 - 4,000,000 8 23,485,128 12.86
4,000,001 - 6,000,000 10 46,449,174 25.43
6,000,001 - 8,000,000 3 20,523,807 11.24
8,000,001 - 10,000,000 2 17,134,434 9.38
20,000,001 - 30,000,000 1 26,400,000 14.45
30,000,001 - 38,063,492 1 38,063,492 20.84
- --------------------------------------------------------------------------------
TOTAL: 32 182,676,217 100.00
- --------------------------------------------------------------------------------
Min: 1,298,836 Max: 38,063,492 Average: 5,708,632
- --------------------------------------------------------------------------------
MORTGAGE RATE (%)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE % OF
MORTGAGE CUT-OFF DATE LOAN
LOANS BALANCE ($) GROUP
- --------------------------------------------------------------------------------
4.940 - 4.999 2 7,921,507 4.34
5.000 - 5.249 1 4,565,237 2.50
5.250 - 5.499 3 69,958,222 38.30
5.500 - 5.749 17 73,204,463 40.07
5.750 - 5.999 5 17,343,694 9.49
6.000 - 6.100 4 9,683,095 5.30
- --------------------------------------------------------------------------------
TOTAL: 32 182,676,217 100.00
- --------------------------------------------------------------------------------
Min: 4.940 Max: 6.100 Wtd Avg: 5.541
- --------------------------------------------------------------------------------
CUT-OFF DATE LOAN-TO-VALUE RATIO (%)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE % OF
MORTGAGE CUT-OFF DATE LOAN
LOANS BALANCE ($) GROUP
- --------------------------------------------------------------------------------
63.0 - 65.0 1 1,639,111 0.90
65.1 - 70.0 3 14,878,019 8.14
70.1 - 75.0 8 24,026,042 13.15
75.1 - 80.0 19 137,981,538 75.53
80.1 - 80.6 1 4,151,507 2.27
- --------------------------------------------------------------------------------
TOTAL: 32 182,676,217 100.00
- --------------------------------------------------------------------------------
Min: 63.0 Max: 80.6 Wtd Avg: 77.2
- --------------------------------------------------------------------------------
STATE
- --------------------------------------------------------------------------------
NO. OF AGGREGATE % OF
MORTGAGE CUT-OFF DATE LOAN
PROPERTIES BALANCE ($) GROUP
- --------------------------------------------------------------------------------
Georgia 8 51,227,200 28.04
Pennsylvania 1 38,063,492 20.84
Illinois 3 21,230,272 11.62
Florida 2 11,337,586 6.21
Arizona 3 11,038,755 6.04
Iowa 1 8,392,381 4.59
Texas 4 7,740,799 4.24
Other States (a) 13 33,645,733 18.42
- --------------------------------------------------------------------------------
TOTAL: 35 182,676,217 100.00
- --------------------------------------------------------------------------------
ORIGINAL TERM TO STATED MATURITY (MOS)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE % OF
MORTGAGE CUT-OFF DATE LOAN
LOANS BALANCE ($) GROUP
- --------------------------------------------------------------------------------
60 - 60 3 12,486,744 6.84
61 - 84 2 10,469,567 5.73
85 - 120 26 154,052,786 84.33
121 - 126 1 5,667,120 3.10
- --------------------------------------------------------------------------------
TOTAL: 32 182,676,217 100.00
- --------------------------------------------------------------------------------
Min: 60 Max: 126 Wtd Avg: 114
- --------------------------------------------------------------------------------
LOAN-TO-VALUE RATIO AT MATURITY (%)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE % OF
MORTGAGE CUT-OFF DATE LOAN
LOANS BALANCE ($) GROUP
- --------------------------------------------------------------------------------
54.0 - 55.0 2 7,133,841 3.91
55.1 - 60.0 8 28,830,600 15.78
60.1 - 65.0 7 24,131,768 13.21
65.1 - 70.0 11 79,546,357 43.54
70.1 - 74.0 4 43,033,651 23.56
- --------------------------------------------------------------------------------
TOTAL: 32 182,676,217 100.00
- --------------------------------------------------------------------------------
Min: 54.0 Max: 74.0 Wtd Avg: 65.6
- --------------------------------------------------------------------------------
PROPERTY TYPE
- --------------------------------------------------------------------------------
NO. OF AGGREGATE % OF
MORTGAGE CUT-OFF DATE LOAN
PROPERTIES BALANCE ($) GROUP
- --------------------------------------------------------------------------------
Multifamily 30 168,964,092 92.49
Manufactured Housing 5 13,712,125 7.51
- --------------------------------------------------------------------------------
TOTAL: 35 182,676,217 100.00
- --------------------------------------------------------------------------------
REMAINING TERM TO STATED MATURITY (MOS)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE % OF
MORTGAGE CUT-OFF DATE LOAN
LOANS BALANCE ($) GROUP
- --------------------------------------------------------------------------------
59 - 60 3 12,486,744 6.84
61 - 84 2 10,469,567 5.73
85 - 120 26 154,052,786 84.33
121 - 124 1 5,667,120 3.10
- --------------------------------------------------------------------------------
TOTAL: 32 182,676,217 100.00
- --------------------------------------------------------------------------------
Min: 59 Max: 124 Wtd Avg: 113
- --------------------------------------------------------------------------------
DEBT SERVICE COVERAGE RATIOS (x)
- --------------------------------------------------------------------------------
NO. OF AGGREGATE % OF
MORTGAGE CUT-OFF DATE LOAN
LOANS BALANCE ($) GROUP
- --------------------------------------------------------------------------------
1.23+ - 1.25 2 34,792,381 19.05
1.25+ - 1.30 2 7,340,210 4.02
1.30+ - 1.35 3 10,377,942 5.68
1.35+ - 1.40 2 46,805,545 25.62
1.40+ - 1.45 9 37,424,399 20.49
1.45+ - 1.50 7 26,239,834 14.36
1.50+ - 1.60 4 10,135,289 5.55
1.60+ - 1.80 2 7,921,507 4.34
1.80+ - 1.86 1 1,639,111 0.90
- --------------------------------------------------------------------------------
TOTAL: 32 182,676,217 100.00
- --------------------------------------------------------------------------------
Min: 1.23 Max: 1.86 Wtd Avg: 1.39
- --------------------------------------------------------------------------------
(a) Includes 8 states
ALL NUMERICAL INFORMATION CONCERNING THE MORTGAGE LOANS IS APPROXIMATE. ALL
WEIGHTED AVERAGE INFORMATION REGARDING THE MORTGAGE LOANS REFLECTS THE WEIGHTING
OF THE LOANS BASED ON THEIR OUTSTANDING PRINCIPAL BALANCES AS OF THE CUT-OFF
DATE. STATE AND PROPERTY TYPE TABLES REFLECT ALLOCATED LOAN AMOUNTS IN THE CASE
OF MORTGAGE LOANS SECURED BY MULTIPLE PROPERTIES. SUM OF COLUMNS MAY NOT MATCH
"TOTAL" DUE TO ROUNDING.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-8
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
VI. LARGE LOAN DESCRIPTIONS
TEN LARGEST LOANS
% OF
PROPERTY CUT-OFF DATE APPLICABLE
NO. PROPERTY NAME CITY STATE TYPE BALANCE % OF POOL LOAN GROUP (2) UNITS/SF
- ------------------------------------------------------------------------------------------------------------------------------
1. 75 Rockefeller Plaza New York NY Office $ 65,000,000 7.68% 9.80% 578,241
- ------------------------------------------------------------------------------------------------------------------------------
2. Westfield Shoppingtown Various CA Retail 59,549,050 7.04% 8.98% 1,346,894
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------
3. Chandler Fashion Center Chandler AZ Retail 54,181,450 6.40% 8.17% 630,570
- ------------------------------------------------------------------------------------------------------------------------------
4. Gateway Center BJ's Brooklyn NY Retail 45,400,000 5.37% 6.84% 152,500
- ------------------------------------------------------------------------------------------------------------------------------
5. Palladium at Birmingham Birmingham MI Retail 39,000,000 4.61% 5.88% 149,873
- ------------------------------------------------------------------------------------------------------------------------------
6. Empirian Luxury Towers Philadelphia PA Multifamily 38,063,492 4.50% 20.84% 570
- ------------------------------------------------------------------------------------------------------------------------------
7. Redland Center Rockville MD Office 27,975,125 3.31% 4.22% 133,895
- ------------------------------------------------------------------------------------------------------------------------------
8. 1669 Collins Avenue, Miami Miami Beach FL Land 26,885,252 3.18% 4.05% 163,350
Beach Land
- ------------------------------------------------------------------------------------------------------------------------------
9. The Reserve at Sugarloaf Duluth GA Multifamily 26,400,000 3.12% 14.45% 333
- ------------------------------------------------------------------------------------------------------------------------------
10. Sierra Vista Mall Clovis CA Retail 23,861,975 2.82% 3.60% 588,643
==============================================================================================================================
TOTAL/WEIGHTED AVERAGES $406,316,344 48.03%
LOAN PER CUT-OFF BALLOON
NO. UNIT/SF DSCR(1) DATE LTV (1) LTV (1)
- ------------------------------------------------------------------------------------
1. 112.41 2.02x 50.00% 50.00%
- ------------------------------------------------------------------------------------
2. 44.21 2.40x 45.79% 39.10%
- ------------------------------------------------------------------------------------
3. 85.92 2.93x 40.95% 33.73%
- ------------------------------------------------------------------------------------
4. 297.70 1.43x 79.93% 66.64%
- ------------------------------------------------------------------------------------
5. 260.22 1.31x 79.92% 67.04%
- ------------------------------------------------------------------------------------
6. 66,778.06 1.37x 79.80% 66.60%
- ------------------------------------------------------------------------------------
7. 208.93 1.27x 78.80% 66.38%
- ------------------------------------------------------------------------------------
8. 164.59 1.06x 88.15% 74.40%
- ------------------------------------------------------------------------------------
9. 79,279.28 1.23x 79.40% 71.03%
- ------------------------------------------------------------------------------------
10. 40.54 1.56x 73.42% 68.25%
====================================================================================
TOTAL/WEIGHTED AVERAGES 1.86x 63.34% 55.19%
(1) For purposes of calculating Cut-Off Date LTV Ratio, Balloon LTV Ratio and
DSCR, the loan amount used for the Westfield Shoppingtown Portfolio
Mortgage Loan and the Chandler Fashion Center Mortgage Loan is the
principal balance of the Mortgage Loan included in the trust and their
respective companion loans that are pari passu to the subject Mortgage
Loans.
(2) Loan Nos. 1-5, 7-8 and 10 are in Loan Group 1 and Loan Nos. 6 and 9 are in
Loan Group 2.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-9
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
75 ROCKEFELLER PLAZA
BALANCE: $65,000,000
DSCR: 2.02x
LTV: 50.0%
- --------------------------------------------------------------------------------
[GRAPHICS OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-10
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
75 ROCKEFELLER PLAZA
BALANCE: $65,000,000
DSCR: 2.02x
LTV: 50.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
- --------------------------------------------------------------------------------
LOAN SELLER: GACC
LOAN PURPOSE: Refinance
SHADOW RATING (S/M): A-/A3
ORIGINAL TMA BALANCE: $65,000,000
CUT-OFF TMA BALANCE: $65,000,000
% BY INITIAL UPB: 7.68%
INTEREST RATE: 4.6650%
PAYMENT DATE: 1st of each month
FIRST PAYMENT DATE: July 1, 2003
MATURITY DATE: August 1, 2014
AMORTIZATION: None
CALL PROTECTION: Lockout for 24 months from
securitization date, then defeasance is
permitted. On and after May 1, 2014,
prepayment can be made without
penalty.
SPONSOR: 75 Plaza Holdings LLC
BORROWER: 75 Plaza LLC
ADDITIONAL FINANCING: None
LOCKBOX: Hard
INITIAL RESERVES: None
MONTHLY RESERVES: TI/LC: $62,500
- --------------------------------------------------------------------------------
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
LOAN BALANCE/SQ.FT.: $112.41
BALLOON BALANCE/SQ.FT.: $112.41
LTV: 50.0%
BALLOON LTV: 50.0%
DSCR: 2.02x
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/PORTFOLIO: Single Asset
PROPERTY TYPE: Office
COLLATERAL: Fee simple and leasehold interest in
an thirty-three story office building.
LOCATION: New York, NY
YEAR BUILT/RENOVATED: 1947/2003
TOTAL AREA: 578,241 sq. ft.(1)
PROPERTY MANAGEMENT: An affiliate of the Tenant.
OCCUPANCY (AS OF 06/01/03): 100.0%
UNDERWRITTEN
NET CASH FLOW: $6,228,077
APPRAISED VALUE: $130,000,000
APPRAISAL DATES: June 1, 2003
1. Re-measured sq. ft. assuming AOL Time Warner vacates; 560,298 sq. ft.
currently.
- --------------------------------------------------------------------------------------------------------------------------------
MAJOR TENANT
- --------------------------------------------------------------------------------------------------------------------------------
TENANT % NRSF RENT PSF LEASE EXPIRATION RATINGS (S/M/F) % BELOW MARKET RENTS(1)
- --------------------------------------------------------------------------------------------------------------------------------
AOL Time Warner 100.0% $10.77 07/31/2014 BBB+/Baa1/BBB+ 79.0%
- --------------------------------------------------------------------------------------------------------------------------------
1. Per a CB Richard Ellis 1Q2003 market report providing a $51.21 rental rate.
THE 75 ROCKEFELLER PLAZA LOAN
THE LOAN. The 75 Rockefeller Plaza Loan is secured by a first mortgage on 75
Rockefeller Plaza located in New York, New York, closing the view along
Rockefeller Plaza to the north.
THE BORROWER. The borrower will be a single-purpose, bankruptcy-remote entity
sponsored by 75 Plaza Holdings LLC, an entity backed by a high net worth family
with extensive holdings in retailing, real estate, corporate services and
publishing.
THE PROPERTY. 75 Rockefeller Plaza was built in 1947 for the Esso Oil Company.
Although built several years after the "original" Rockefeller Center was
completed (1940), the exterior follows the standard pattern of vertical
limestone of the other Rockefeller Center buildings south of 51st Street. The
33-story building, which closes the view along Rockefeller Plaza to the north
with 10-story wings on the east and west sides. At the time of its completion,
the building was the tallest completely air-conditioned building in New York
City, and the first such building in Rockefeller Center. The high-ceiling
entrance lobby has marble decor and glass walls facing Rockefeller Plaza.
The property is located in Midtown Manhattan at the northern end of Rockefeller
Center on 51st Street between 5th and 6th Avenues. The surrounding neighborhood
(the Rockefeller Center sub-market) is one of Manhattan's most popular and
prestigious office locations. Many of New York's finest office towers,
restaurants, hotels and other attractions are located within blocks of the
property.
This information has been prepared solely for information purposes and is
not an offer to buy or sell or solicitation of an offer to buy or sell any
security or instrument or to participate in any trading strategy. No
representation or warranty can be given with respect to the accuracy or
completeness of the information, or that any future offer of securities
will conform to the terms hereof. If any such offer of securities is made,
it will be made pursuant to a definitive Prospectus and Prospectus
Supplement, prepared by the Depositor, which will contain material
information not contained herein and to which prospective purchasers are
referred. In the event of any such offering, this information shall be
deemed superseded in its entirety by such Prospectus and Prospectus
Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE ONLY
AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan
Securities Inc. (the "Underwriters") disclaim any and all liability
relating to this information, including without limitation, any express or
implied representations or warranties for, statements contained in, and
omissions from, this information. This information should only be
considered after reading the Statement Regarding Assumptions as to
Securities, Pricing Estimates, and Other Information (the "Statement")
which is attached. Do not use or rely on this information if you have not
received the Statement. You may obtain a copy of the Statement from your
sales representative.
B-11
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
75 ROCKEFELLER PLAZA
BALANCE: $65,000,000
DSCR: 2.02x
LTV: 50.0%
- --------------------------------------------------------------------------------
Per the Cushman & Wakefield appraisal dated June 1, 2003, the replacement cost
of the property is $174.1 million which equates to a Loan-to-Replacement Cost of
37.34%.
SIGNIFICANT TENANTS. The entire building is under a NNN lease to AOL Time Warner
(rated Baa1, BBB+ and BBB+ by Moody's, S&P and Fitch, respectively). AOL Time
Warner is a Fortune 500 company with approximately $41 billion in annual
revenues and over $115 billion in assets as of December 31, 2002. There is a
TI/LC reserve that will build during the loan term to mitigate any rollover risk
associated with the fact that the lease is co-terminus with the loan. As of the
cut-off date, the NNN lease rate is $6,228,077 per annum ($10.77psf - 79.0%
below current market rents) until July 31, 2007 at which time the rate increases
to $7,216,011 per annum ($12.48psf - 75.6% below current market rents) for the
remainder of the loan term.
Approximately 86,120 sq. ft. of the building is being subleased to Chase
Manhattan Bank (rated Aa3, AA- and A+ by Moody's, S&P and Fitch, respectively),
Au Bon Pain, 75 Rockefeller Cafe and other small ground-level retail tenants.
From discussions with the tenant, the space occupied by AOL TimeWarner's
corporate offices (approximately 250,000 sq.ft.) will relocate in 2004 to their
new building under construction in Columbus Circle. The remaining space occupied
by Warner Brothers and Electra Records (subsidiaries of AOL TimeWarner) will
remain in their space. AOL TimeWarner will be subleasing its space that is
vacated by the corporate offices. AOL TimeWarner makes a significant profit from
subleasing its space at market rental rates, none of which is paid to the
borrower.
THE MARKET. The Midtown Manhattan office market is currently the largest market
in Manhattan and contains over 262 million square feet of space in more than 800
properties, with Class A space accounting for over 65% of the total inventory.
The Midtown North office sub-market remains the strongest in Manhattan, in terms
of low vacancy and increasing market rents. Per a recent CB Richard Ellis 1Q03
market report, the overall Midtown North vacancy rate was 8.9% (versus overall
Manhattan rate of 10.7%). As of the first quarter of 2003, the Midtown-North
sub-market contained 173,924,523 square feet of office space and the average
direct primary asking rental rate was $48.60. The subject property is located in
the Rockefeller Center sub-market which at 5.9%, has the lowest vacancy rates in
Manhattan. As of the first quarter of 2003, the Rockefeller Center sub-market
contained 24,091,645 square feet of office space and the average direct primary
asking rental rate was $51.21.
PROPERTY MANAGEMENT. The property is managed by an affiliate of the Tenant (AOL
Time Warner).
CURRENT MEZZANINE OR SUBORDINATE INDEBTEDNESS. None.
FUTURE MEZZANINE OR SUBORDINATE INDEBTEDNESS. Not Allowed.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-12
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
75 ROCKEFELLER PLAZA
BALANCE: $65,000,000
DSCR: 2.02x
LTV: 50.0%
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-13
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
WESTFIELD SHOPPINGTOWN PORTFOLIO
BALANCE: $59,549,050
DSCR(1): 2.40x
LTV(1): 45.8%
- --------------------------------------------------------------------------------
WESTFIELD SHOPPINGTOWN GALLERIA AT ROSEVILLE
[GRAPHICS OMITTED]
WESTFIELD SHOPPINGTOWN MAINPLACE
[GRAPHICS OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-14
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
WESTFIELD SHOPPINGTOWN PORTFOLIO
BALANCE: $59,549,050
DSCR(1): 2.40x
LTV(1): 45.8%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
- --------------------------------------------------------------------------------
LOAN SELLER: GACC
LOAN PURPOSE: Refinance
SHADOW RATING (S/M): AAA/Aa2
ORIGINAL TMA BALANCE: $60,000,000
CUT-OFF TMA BALANCE: $59,549,0501
% BY INITIAL UPB: 7.04%
INTEREST RATE: 6.0500%
PAYMENT DATE: 1st of each month
FIRST PAYMENT DATE: November 1, 2002
MATURITY DATE: October 1, 2012
AMORTIZATION: 360 Months
CALL PROTECTION: Lockout for 24 months from the
securitization date of the A-1 note
(12/03/02), then defeasance is permitted.
On and after April 1, 2012, prepayment
can be made without penalty.
SPONSOR: Westfield America, Inc.
BORROWER: Roseville Shoppingtown LLC and MainPlace
Shoppingtown LLC
PARI PASSU DEBT: $113,770,648, shadow rated AAA/AAA (S/F),
held outside of trust
SUBORDINATE DEBT: $38,079,430, shadow rated BBB/BBB (S/F),
held outside of trust. A $10.3MM
subordinated second mortgage in the form
of a letter of credit.
LOCKBOX: Hard
INITIAL RESERVES: Tax: $1,729,442
Insurance: $193,293(2)
MONTHLY RESERVES: Tax: $288,240
Insurance: $48,323(2)
TI/LC: $5,913(2)
Replacement: $15,178(2)
1. The subject $59,549,050 represents the A-2 note in a $211,399,129 loan. An
A-1 note (with a current loan amount of $96,270,965; in the GECCMC 2002-3
transaction) and an A-3 note (with a current loan amount of $17,499,683) are
pari passu with the A-2 note; a B note (with a current loan amount of
$38,079,430) is subordinate to the A-1, A-2 and A-3 notes. The A-1, A-3 and B
notes are not included in the trust. All LTV and DSCR numbers are based on
the combined A-1, A-2 and A-3 notes.
2. Westfield America, Inc. has posted a corporate guaranty in lieu of cash
reserves. In the event that the First Mortgage DSCR drops below 1.20x, the
Borrower will be required to post all cash reserves that would have been
required from the First Payment Date and monthly reserves on an ongoing
basis.
- --------------------------------------------------------------------------------
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
TRUST
MORTGAGE FIRST
ASSET(1) MORTGAGE
- --------------------------------------------------------------------------------
LOAN BALANCE/SQ.FT.: $128.68 $156.95
BALLOON BALANCE/SQ.FT.: $109.88 $134.33
LTV: 45.8% 55.9%
BALLOON LTV: 39.1% 47.8%
DSCR: 2.40x 1.99x
SHADOW RATING: AAA/Aa2 (S/M) BBB/BBB (S/F)
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/PORTFOLIO: Portfolio
PROPERTY TYPE: Anchored Retail: Super-Regional Malls
COLLATERAL: Fee simple interest in two super-regional malls.
LOCATION: 1) Shoppingtown Galleria at Roseville
Roseville, CA
(Sacramento MSA)
2) Shoppingtown MainPlace
Santa Ana, CA
(Orange County MSA)
YEAR BUILT/RENOVATED: 1) 2000/NAP
2) 1987/1992
COLLATERAL AREA/TOTAL AREA: 1) 462,666 sq.ft./1,034,710 sq.ft.
2) 884,228 sq.ft./1,109,228 sq.ft.
Total) 1,346,894 sq.ft./2,143,938 sq.ft.
PROPERTY MANAGEMENT: Westfield Corporation, Inc., an affiliate of the
Borrower
COLLATERAL/MALL
OCCUPANCY (AS OF VARIOUS): 94.7%/96.7%
UNDERWRITTEN
NET CASH FLOW: $30,697,568
APPRAISED VALUE: 1) $183,500,000
2) $195,000,000 Total) $378,500,000
APPRAISAL DATES: 1) August 12, 2002
2) August 7, 2002
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-15
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
WESTFIELD SHOPPINGTOWN PORTFOLIO
BALANCE: $59,549,050
DSCR(1): 2.40x
LTV(1): 45.8%
- --------------------------------------------------------------------------------
THE WESTFIELD SHOPPINGTOWN PORTFOLIO
THE LOAN. The Westfield Shoppingtown Portfolio Loan is a $211.4 million first
mortgage loan, secured by the borrowers' fee simple interest in 462,666 sq.ft.
and 884,228 sq.ft. of inline space in two Class A super-regional malls located
in Roseville, CA and Santa Ana, CA, respectively. The first mortgage loan is
evidenced by four notes. One of the notes is the $59.5MM Trust Mortgage Asset,
shadow rated AAA/Aa2 by S&P/Moody's. Outside of the trust, there is $113.8MM of
debt (shadow rated AAA/AAA by S&P/Fitch) which is pari passu to the Trust
Mortgage Asset, and $38.1MM of debt (shadow rated BBB/BBB by S&P/Fitch) which is
subordinate to the Trust Mortgage Asset.
THE BORROWERS. The borrowers, Roseville Shoppingtown LLC and MainPlace
Shoppingtown LLC, are bankruptcy-remote, single-purpose entities sponsored by
Westfield America, Inc. The sponsor has approximately $137 million of cash
equity in the transaction (based on the May 2002 purchase price of $350MM from
Rodamco). Westfield Holdings is a developer, architect, builder, property
manager and funds manager for a $32 billion global portfolio of shopping center
assets that comprises almost 93 million sq.ft. of space and includes
approximately 17,100 retail businesses in 112 shopping centers in four
countries. Westfield Group's U.S. operations include the Westfield America Trust
portfolio of 62 shopping centers encompassing approximately 63.5 million sq.ft.
of retail space in 14 states, with approximately 8,600 stores. Westfield America
Trust, as of 12/31/02, had assets totaling approximately $11.4 billion and a
market capitalization of approximately $4.7 billion. Westfield America, Inc. is
a repeat sponsor of a Deutsche Bank borrower.
PROPERTY MANAGEMENT. The property manager is Westfield Corporation, Inc., an
affiliate of the Borrower.
CITY OF ROSEVILLE LETTER OF CREDIT. A $10.3MM letter of credit was provided by
an affiliate of GACC to cover future payments to the City of Roseville for
certain development fees owed to the City. The letter of credit is secured by a
subordinated second mortgage on the Shoppingtown Galleria at Roseville which is
coterminous with the First Mortgage. The second mortgage is fully subordinate to
the First Mortgage and is subject to an intercreditor agreement.
FUTURE MEZZANINE OR SUBORDINATE INDEBTEDNESS. Not Allowed.
THE SHOPPINGTOWN GALLERIA AT ROSEVILLE
THE PROPERTY. The Shoppingtown Galleria at Roseville is a 1,034,710 sq.ft.
two-level Class A super-regional mall located in the Sacramento, CA market.
462,666 sq.ft. of inline space serves as collateral for the loan. The property
was completed in 2000. The mall is anchored by four department stores:
Nordstrom, Macy's, JC Penney and Sears, each of which own their own stores and
are not part of the loan collateral. The property features more than 4,900
surface parking spaces, which equates to approximately 4.8 spaces per 1,000
sq.ft. of GLA. The property has good access and exposure from Interstate 80 and
other major arterials.
SIGNIFICANT TENANTS.
- --------------------------------------------------------------------------------------------------------------------------------
ANCHOR TENANTS
- --------------------------------------------------------------------------------------------------------------------------------
AREA
TENANTS RATING (S/M/F) (SQ.FT.) % OF TOTAL OWNERSHIP INTEREST 2002 SALES PSF 2002 TOTAL SALES
- --------------------------------------------------------------------------------------------------------------------------------
Macy's(1) BBB+/Baa1/BBB+ 180,000 17.4% Anchor Owned $249 $44,820,000
- --------------------------------------------------------------------------------------------------------------------------------
Nordstrom A-/Baa1/- 144,000 13.9% Anchor Owned $243 $35,055,000
- --------------------------------------------------------------------------------------------------------------------------------
JC Penney BB+/Ba3/BB 125,445 12.1% Anchor Owned $176 $22,021,000
- --------------------------------------------------------------------------------------------------------------------------------
Sears BBB+/Baa1/BBB+ 122,599 11.8% Anchor Owned $235 $28,859,000
- --------------------------------------------------------------------------------------------------------------------------------
1. Ratings of parent, Federated Department Stores.
- --------------------------------------------------------------------------------------------------------------------------------
2002 SALES PSF OCC. COST PSF AS % OF SALES
- --------------------------------------------------------------------------------------------------------------------------------
Inline Tenants $378 $47.32 12.52%
- --------------------------------------------------------------------------------------------------------------------------------
The inline collateral is 94.4% occupied by more than 120 tenants including many
national retailers. The three largest inline tenants are Crate & Barrel,
Copeland's Sports, and Borders Books & Music. Average inline sales are $378psf.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-16
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
WESTFIELD SHOPPINGTOWN PORTFOLIO
BALANCE: $59,549,050
DSCR(1): 2.40x
LTV(1): 45.8%
- --------------------------------------------------------------------------------
THE MARKET. The Shoppingtown Galleria at Roseville property is located within
the Sacramento, CA MSA. The center is located in Placer County less than one
mile from the junction of Interstate 80 and State Highway 65 amid the rapidly
growing northeastern corridor of the greater Sacramento area. With a primary
trade area population of 565,747, the Shoppingtown Galleria at Roseville's
market area has an average household income of $71,411, projected to grow to
more than $85,594 by 2006. In 2001, the retail market within the City of
Roseville experienced growth (up 8.4% from 2000) as well as stable rents
($35.26psf). According to CB Richard Ellis, the 3Q2002 Roseville sub-market's
retail vacancy rate was 1.7% and the total GLA was 4.2 million square feet.
THE SHOPPINGTOWN MAINPLACE
THE PROPERTY. The Shoppingtown MainPlace is a 1,109,228 sq.ft. two-level Class A
super-regional mall located in the Orange County, CA MSA. 448,728 sq.ft. of
inline space and 435,500 of anchor space under a ground lease serves as
collateral for the loan. The majority of the property was constructed in 1987
and expanded in 1992. The mall is anchored by Macy's, Nordstom, and two
Robinson's-May stores (Men's and Women's), all of which are under long-term
ground leases except for Macy's, which owns their own store. The property
features more than 5,000 surface parking spaces, which equates to approximately
4.5 spaces per 1,000 sq.ft. of GLA. The property is strategically located near
Interstate 5, and Highways 22, 55 and 57 which provide good access from all
directions to the property.
SIGNIFICANT TENANTS.
- --------------------------------------------------------------------------------------------------------------------------------
ANCHOR TENANTS
- --------------------------------------------------------------------------------------------------------------------------------
AREA
TENANTS RATING (S/M/F) (SQ.FT.) % OF TOTAL OWNERSHIP INTEREST 2002 SALES PSF 2002 TOTAL SALES
- --------------------------------------------------------------------------------------------------------------------------------
Macy's(1) BBB+/Baa1/BBB+ 225,000 20.3% Anchor Owned $154 $34,540,000
- --------------------------------------------------------------------------------------------------------------------------------
Nordstrom A-/Baa1/- 150,500 13.6% Ground Lease $326 $49,086,000
- --------------------------------------------------------------------------------------------------------------------------------
Robinson's-May Women's(2) A/A2/BBB+ 142,500 12.8% Ground Lease $1673 $47,582,0003
- --------------------------------------------------------------------------------------------------------------------------------
Robinson's-May Men's(2) A/A2/BBB+ 142,500 12.8% Ground Lease $1673 $47,582,0003
- --------------------------------------------------------------------------------------------------------------------------------
1. Ratings of parent, Federated Department Stores.
2. Ratings of parent, May Department Stores Company.
3. The sales numbers were provided on a combined basis for both stores.
- --------------------------------------------------------------------------------------------------------------------------------
2002 SALES PSF OCC. COST PSF AS % OF SALES
- --------------------------------------------------------------------------------------------------------------------------------
Inline Tenants $357 $48.07 13.46%
- --------------------------------------------------------------------------------------------------------------------------------
The collateral space is 94.9% occupied by more than 150 tenants including many
national retailers. The three largest inline tenants are MainPlace Theaters,
Crate & Barrel, and Barnes & Noble. Average inline sales are $357psf.
THE MARKET. The Shoppingtown MainPlace property is located within the Orange
County, CA MSA. The center is situated at the intersection of Interstate 5 and
Highway 22 in affluent Orange County where it draws on the high density trade
area population as well as consumers from the north and northwest where
significant growth is occurring. The malls' primary trade area has a population
of 2.8 million people, with average household incomes of $85,823 projected to
grow to $99,251 by 2006. Santa Ana, the second largest city in Orange County and
the ninth largest city in California by population, is comprised of an area of
27.4 miles. Orange County has 42 miles of coastline, nine beaches and three
harbors. Overall, Orange County has 10 public and 7 private
colleges/universities. Major airports include John Wayne Airport and Fullerton
Muncipal. In 2001, the retail market within the City of Santa Ana experienced
growth (up 3.1% from 2000) as well as stable rents ($38.33psf). According to CB
Richard Ellis, the 3Q2002 Central Orange County sub-market's retail vacancy rate
was 5.9% and the total GLA was 23.3 million sq.ft.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-17
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
WESTFIELD SHOPPINGTOWN PORTFOLIO
BALANCE: $59,549,050
DSCR(1): 2.40x
LTV(1): 45.8%
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-18
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
WESTFIELD SHOPPINGTOWN PORTFOLIO
BALANCE: $59,549,050
DSCR(1): 2.40x
LTV(1): 45.8%
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-19
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
CHANDLER FASHION CENTER
BALANCE: $54,181,450
DSCR(1): 2.93x
LTV(1): 41.0%
- --------------------------------------------------------------------------------
[GRAPHICS OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-20
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
CHANDLER FASHION CENTER
BALANCE: $54,181,450
DSCR(1): 2.93x
LTV(1): 41.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
- --------------------------------------------------------------------------------
LOAN SELLER: GACC
LOAN PURPOSE: Refinance
SHADOW RATING (S/M): AAA/Aa2
ORIGINAL TMA BALANCE: $54,635,000(1)
CUT-OFF TMA BALANCE: $54,181,450
% BY INITIAL UPB: 6.40%
INTEREST RATE: 5.1400%
PAYMENT DATE: 1st of each month
FIRST PAYMENT DATE: December 1, 2002
MATURITY DATE: November 1, 2012
AMORTIZATION: 360 Months
CALL PROTECTION: Lockout for 24 months from the securitization
date of the A-1 note (05/01/03), then
defeasance is permitted. On and after May 1,
2012, prepayment can be made without penalty.
SPONSOR: The Macerich Company
BORROWER: TWC Chandler LLC
PARI PASSU DEBT: $56,392,938 shadow rated AAA/Aa2 (S/M), held
outside of trust.
SUBORDINATE DEBT: $71,987,139 B-Note, held outside of trust.
LOCKBOX: Hard
INITIAL RESERVES: Tax: $490,906
TI/LC: $2,200,000 LOC
MONTHLY RESERVES: Tax: $163,635
1. The subject $54,635,000 represents the A-2 note in a $184,000,000 loan. An
A-1 note (with an original loan amount of $56,865,000; in GMAC 2003-C1
transaction) is pari passu with the A-2 note; a B note (with an original
loan amount of $72,500,000) is subordinate to the A-1 note and the A-2
note. The A-1 note and the B note are not included in the trust. All LTV
and DSCR numbers are based on the combined A-1 note and A-2 note.
- --------------------------------------------------------------------------------
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
TRUST
MORTGAGE FIRST
ASSET(1) MORTGAGE
- --------------------------------------------------------------------------------
LOAN BALANCE/SQ.FT.: $175.36 $289.52
BALLOON BALANCE/SQ.FT.: $144.44 $240.65
LTV: 41.0% 67.6%
BALLOON LTV: 33.7% 56.2%
DSCR: 2.93x 1.71x
SHADOW RATINGS (S/M): AAA/Aa2
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/PORTFOLIO: Single Asset
PROPERTY TYPE: Anchored Retail
COLLATERAL: Fee simple interest in a super-regional
mall.
LOCATION: Chandler, AZ
YEAR BUILT/RENOVATED: 2001/NAP
COLLATERAL AREA/TOTAL AREA: 630,570 sq. ft./1,307,230 sq. ft.
PROPERTY MANAGEMENT: Macerich Westcor Management LLC, an
affiliate of the Borrower.
COLLATERAL/MALL OCCUPANCY
(AS OF 12/31/02): 98.5%/99.3%
UNDERWRITTEN
NET CASH FLOW: $21,358,512
APPRAISED VALUE: $270,000,000
APPRAISAL DATE: October 1, 2002
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ANCHOR TENANTS
- --------------------------------------------------------------------------------------------------------------------------------
AREA
TENANTS RATING (S/M/F) (SQ.FT.) % OF TOTAL OWNERSHIP INTEREST
- --------------------------------------------------------------------------------------------------------------------------------
Dillard's BB+/Ba3/- 200,208 15.3% Anchor Owned
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Robinson's-May(1) A/A2/BBB+ 191,500 14.6% Anchor Owned
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Nordstrom A-/Baa1/- 143,920 11.0% Anchor Owned
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Sears BBB+/Baa1/BBB+ 141,032 10.8% Anchor Owned
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1. Ratings of parent, Federated Department Stores.
2002 SALES PSF OCC. COST PSF AS % OF SALES
- --------------------------------------------------------------------------------------------------------------------------------
Inline Tenants $389 $34.76 8.94%
- --------------------------------------------------------------------------------------------------------------------------------
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-21
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
CHANDLER FASHION CENTER
BALANCE: $54,181,450
DSCR(1): 2.93x
LTV(1): 41.0%
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THE CHANDLER FASHION CENTER LOAN
THE LOAN. The Chandler Fashion Center Loan is secured by a first mortgage on
Chandler Fashion Center, a 1,307,230 sq.ft. (collateral 630,570 square feet)
two-level enclosed regional mall located in Chandler, Arizona, approximately 19
miles southeast of the Phoenix CBD. The first mortgage loan is evidenced by
three notes. One of the notes is the $54,635,000 Trust Mortgage Asset, shadow
rated AAA/Aa2 by S&P/Moody's, respectively. Outside of the trust, there is
$56,865,000 of debt (shadow rated AAA/Aa2 by S&P/Moody's) which is pari passu to
the Trust Mortgage Asset, and $72,500,000 of debt in the form of a B Note which
is subordinate to the Trust Mortgage Asset.
THE BORROWER. The borrower is TWC Chandler LLC a bankruptcy-remote,
single-purpose entity sponsored by The Macerich Company (NYSE: MAC). The
sponsor, The Macerich Company, acquired the subject property in conjunction with
its acquisition of Westcor Realty Limited Partnership in July 2002. Macerich
purchased Westcor for approximately $1.475 billion. The Macerich Company, a
fully integrated self-managed and self-administered real estate investment
trust, focuses on the acquisition, leasing, management and redevelopment of
regional malls and community centers throughout the United States. Macerich owns
interests in 56 malls and 20 community centers in 21 states, aggregating 58
million square feet of GLA. Macerich is one of the largest owners/operators of
regional malls in the United States and the largest in the Western United
States. For the past 29 years, Macerich has carved out a niche in the regional
mall industry by acquiring dominant regional malls and subsequently transforming
those properties through redevelopment, leasing, management and marketing into
even more dominant malls. Macerich malls are operated as an integral part of the
communities they serve, functioning as the Town Center within each market. As of
December 31, 2002, Macerich had assets totaling $3.7B, mortgages and notes
payable totaling $2.3B, and cash and cash equivalents totaling $53.6M. The
portfolio-wide occupancy was 98.5%, up from 92.4% at December 31, 2001. The
Macerich Company is a repeat sponsor of a Deutsche Bank borrower.
THE PROPERTY. The Chandler Fashion Center is a 1,307,230 sq.ft. super-regional
mall, which is the focal point of a 320-acre urban village that also contains
two large power centers (Chandler Festival and Chandler Gateway) totaling over
800,000 sq.ft. The mall was constructed in 2001 by Kitchell Contractors, Inc.
and opened for business in October 2001. The mall is located in Chandler,
Arizona, 19 miles southeast of downtown Phoenix. The mall sits on 101.2 acres
(46.75 acres of which are part of the collateral) and includes 6,155 parking
spaces, which equates to approximately 4.75 spaces per 1,000 sq.ft. of GLA. The
mall is the dominant retail center in the trade area, with in line sales of
$389psf (YE 12/31/02). The mall is anchored by four department stores:
Dillard's, Robinson's-May, Nordstrom and Sears, each of which own their own
stores and are not part of the loan collateral.
SIGNIFICANT TENANTS. The loan collateral is 98.5% (mall including anchors is
99.3%) occupied by approximately 200 tenants. The Mall is anchored by Dillard's,
Robinson-May, Nordstrom and Sears. The three largest collateral tenants are:
Harkins Theatres, Barnes & Noble and The Gap.
Harkins Theatres occupies 85,625 sq. ft. (13.6% of total area) under a lease
with a rent of $14.00psf expiring October 2016. Founded in 1933 in Tempe,
Arizona, Harkins Theatres is the largest family run theatre company in the U.S.
Harkins has over 200 screens in 22 different theatres primarily located
throughout the Southwest. Since opening in October of 2001, the subject theatre
has averaged $527,000 in sales per screen.
Barnes & Noble (NYSE: BKS; rated BB and Ba2 by S&P and Moody's, respectively)
occupies 28,441 sq. ft. (4.5% of total area) under a lease with a rent of
$16.16psf expiring October 2011. As one of the nations largest bookstores,
Barnes & Noble Inc. operates approximately 900 stores in 49 states. Barnes &
Noble, Inc. is primarily engaged in the business of retailing of books and
magazines, however, they also operate videogame and entertainment-software
stores. For the 12-months ending 01/31/03, Barnes & Noble Inc. had net sales of
$5.269 billion and had total assets of approximately $3.0 billion.
The Gap (NYSE: GAP; rated BB+ and Ba3 by S&P and Moody's, respectively) occupies
20,000 sq. ft. (3.2% of total area) under a lease with a rent of $30.00psf
expiring January 2007. The Gap, Inc. is a global specialty retailer, which
operates stores selling casual apparel, personal care and other accessories for
men, women and children. The Company operates stores in the United States,
Canada, the United Kingdom, France, Germany and Japan. Company brands include
Gap, Banana Republic and Old Navy. Gap Inc. operates more than 4,250 stores
worldwide. For the 12-months ending 01/31/03, The Gap had net sales of $14.455
billion and had total assets of $9.9 billion.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-22
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
CHANDLER FASHION CENTER
BALANCE: $54,181,450
DSCR(1): 2.93x
LTV(1): 41.0%
- --------------------------------------------------------------------------------
THE MARKET. The Chandler Fashion Center property is located within the Phoenix,
AZ MSA, in the town of Chandler. Including the subject, there are seven regional
malls in metro Phoenix providing a total supply of 8.5 million sq. ft.
Occupancies at these malls are strong, with an overall average occupancy of 98%
and an average inline occupancy of 95%. This is 16% above the national average.
The property, which opened in October 2001, represents the newest shopping
center in the market. Prior to that, Arizona Mills was the most recently
constructed regional mall, which opened in 1997 in the southern sector of metro
Phoenix. There are three regional malls in the Mesa/Chandler submarket that are
direct competitors of the subject: Superstition Springs Center (18.8 miles
northeast of subject), Fiesta Mall, and Arizona Mills. Superstition Springs is a
1,300,000 sq.ft. center also owned by Macerich, built in 1990, and is anchored
by Dillard's, JC Penney, Mervyn's, Robinson's-May, and Sears. Fiesta Mall (8.3
miles north of subject) is a 1,036,878 sq.ft. center is owned by L&B group,
built in 1979, and anchored by Macy's, Dillard's, Robinson's-May, and Sears.
Arizona Mills (9.6 miles northwest of subject) consists of manufacturer outlets,
including anchors OFF 5th Saks Fifth Avenue Outlet and Last Call From Neiman
Marcus.
PROPERTY MANAGEMENT. The property manager is Macerich Westcor Management LLC, an
affiliate of the Borrower.
CURRENT MEZZANINE OR SUBORDINATE INDEBTEDNESS. $71,987,139 B-Note, held outside
of trust.
FUTURE MEZZANINE OR SUBORDINATE INDEBTEDNESS. Not Allowed.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-23
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
CHANDLER FASHION CENTER
BALANCE: $54,181,450
DSCR(1): 2.93x
LTV(1): 41.0%
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-24
[THIS PAGE INTENTIONALLY LEFT BLANK]
B-25
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
GATEWAY CENTER BJ'S
BALANCE: $45,400,000
DSCR: 1.43x
LTV: 79.9%
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[GRAPHICS OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-26
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
GATEWAY CENTER BJ'S
BALANCE: $45,400,000
DSCR: 1.43x
LTV: 79.9%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
- --------------------------------------------------------------------------------
LOAN SELLER: GACC
LOAN PURPOSE: Refinance
ORIGINAL PRINCIPAL BALANCE: $45,400,000
CUT-OFF PRINCIPAL BALANCE: $45,400,000
% BY INITIAL UPB: 5.37%
INTEREST RATE: 5.4300%
PAYMENT DATE: 1st of each month
FIRST PAYMENT DATE: July 1, 2003
MATURITY DATE: June 1, 2013
AMORTIZATION: 360 Months
CALL PROTECTION: Lockout for 24 months from securitization
date, then defeasance is permitted. On and
after March 1, 2013, prepayment can be made
without penalty.
SPONSOR: The Related Companies, L.P. and Blackacre
Capital Management LLC.
BORROWER: Gateway Center Properties I, L.L.C.
ADDITIONAL FINANCING: None
LOCKBOX: Hard
INITIAL RESERVES: Tax: $4,947
Insurance: $14,928
MONTHLY RESERVES: Tax: $707
Insurance: $2,439
Replacement: $200
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FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
LOAN BALANCE/SQ.FT.: $297.70
BALLOON BALANCE/SQ.FT.: $248.19
LTV: 79.9%
BALLOON LTV: 66.6%
DSCR: 1.43x
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PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/PORTFOLIO: Single Asset
PROPERTY TYPE: Anchored Retail
COLLATERAL: Fee simple interest in a anchored retail
center.
LOCATION: Brooklyn, NY
YEAR BUILT/RENOVATED: 2002/NAP
TOTAL AREA: 152,500 sq. ft.
PROPERTY MANAGEMENT: Related Retail Management Corp., an affiliate
of the Borrower.
OCCUPANCY (AS OF 04/25/03): 100.0%
UNDERWRITTEN
NET CASH FLOW: $4,376,263
APPRAISED VALUE: $56,800,000
APPRAISAL DATE: 1/27/03
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MAJOR TENANTS
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TENANT % NRSF RENT PSF LEASE EXPIRATION RATINGS (S/M/F)
- ------------------------------------------------------------------------------------------------------------------------------
BJ's Wholesale Club 84.6% $31.75 09/30/27 BBB-/-/-2
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Red Lobster1 5.3% $24.70 10/31/17 BBB+/Baa1/BBB+
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Olive Garden1 5.3% $24.81 10/31/17 BBB+/ Baa1 / BBB+
- ------------------------------------------------------------------------------------------------------------------------------
1. Red Lobster and Olive Garden are owned by Darden Restaurants, Inc.
2. Shadow rating.
THE GATEWAY CENTER BJ'S LOAN
THE LOAN. The Gateway Center BJ's Loan is secured by a first mortgage on Gateway
Center BJ's, a 152,500 sq.ft. power/community center located in Brooklyn, New
York, approximately 12 miles east of Manhattan and five miles west of JFK
Airport.
THE BORROWER. The Borrower, Gateway Center Properties I, L.L.C., is a
single-purpose, bankruptcy-remote entity for which a non-consolidation opinion
was obtained. The loan sponsors are The Related Companies, L.P. and Blackacre
Capital Management LLC. Founded in 1972, The Related Companies, L.P. is one of
the nation's largest diversified real estate organizations specializing in
financial services and property development and management. The company oversees
approximately $11 billion in real estate comprised of over 1,100 properties
located in 47 states. As of September 2002, The Related Companies, L.P. had a
net worth of $188 million and liquid assets of $61 million. The Related
Companies, L.P. is a repeat sponsor of a Deutsche Bank borrower. Blackacre
Capital Management LLC is a private real estate
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-27
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
GATEWAY CENTER BJ'S
BALANCE: $45,400,000
DSCR: 1.43x
LTV: 79.9%
- --------------------------------------------------------------------------------
investment management firm formed in 1994. Blackacre is affiliated with Cerberus
Partners LP. Blackacre Capital Management LLC is a repeat sponsor of a Deutsche
Bank borrower.
THE PROPERTY. Gateway Center BJ's is a 152,500 square foot portion of Gateway
Center, a 100% occupied power/community center located just off the Belt Parkway
in Brooklyn, New York. The entire Gateway Center consists of a 47.99-acre parcel
of land improved with 638,992sf of "big box" stores, in-line space, and
restaurant pad sites. The property is located approximately 12 miles east of
Manhattan and five miles west of JFK Airport. Gateway Center is highly visible
from the Belt Parkway (a major 6-lane expressway with an average daily traffic
count of 150,000 cars), and is easily accessed via the new Borrower-built Belt
Parkway interchange (Exit 15). The entire Gateway site is improved with thirteen
one-story buildings (ten big box stores and three restaurant pad buildings), all
built between 2000 and 2002. Gateway Center has on-site surface parking for
2,797 cars, a ratio of 4.38 spaces per 1,000sf of NRA.
SIGNIFICANT TENANTS. The loan collateral is 100.0% occupied by 4 tenants. The
three largest tenants are: BJ's Wholesale Club, Red Lobster and Olive Garden.
Approximately 95.2% of the center's Total Area is leased to investment grade
tenants with long-term leases. The Gateway Center BJ's is shadow-anchored by
other tenants of the Gateway Center including Target, Home Depot, Marshall's,
Babies `R Us, Staples, and Bed, Bath & Beyond.
BJ's Wholesale Club (NYSE: BJ) occupies 128,995 sq. ft. (84.6% of total area)
under a lease with a rent of $31.75psf expiring in September 2027. BJ's
Wholesale Club is a warehouse club operator in the eastern United States, with
over 140 stores as of 4/7/2003 in 16 states. The company has over 6.9 million
members. For the fiscal year ending February 2003, BJ's reported total revenue
of $5.86 billion, and a net operating income of $145.8 million. As of 2/1/03,
the company had total assets of $1.48 billion, and shareholder's equity of
$740.8 million.
Red Lobster occupies 8,096 sq. ft. (5.3% of total area) under a lease with a
rent of $24.70psf expiring in October 2017. Olive Garden occupies 8,062 sq. ft.
(5.3% of total area) under a lease with a rent of $24.81psf expiring in October
2017. Darden Restaurants, Inc. (NYSE: DRI; rated BBB+, Baa1 and BBB+ by S&P,
Moody's and Fitch, respectively) operates both Olive Garden restaurants (lease
expires in 2017) and Red Lobster restaurants (lease expires in 2017). For the
fiscal year ending May 26, 2002, DRI reported total revenue of $4.37 billion and
net operating income of $237.8 million. As of 5/26/02, the company had total
current assets of $449.5 million and shareholders' equity of $1.13 billion.
THE MARKET. The property is located within Brooklyn's Community District 5 which
includes the neighborhoods of East New York, Starrett City, Spring Creek, New
Lots and Highland Park. Gateway Center is located in the Spring Creek
neighborhood, a densely populated residential neighborhood. Population within a
three-mile radius of the subject (its primary trade area) is estimated at
521,554, and, within a five-mile radius (the secondary trade area), the
population is estimated at 1.67 million as of 2002.
The appraiser indicated that the retail market in Brooklyn is strong with
vacancy rates averaging 5.0%. The appraiser surveyed ten shopping centers in New
York City and found that occupancy rates ranged from 97% to 100%. Rents at the
subject property range from $24.70psf to $31.75psf and average $30.96psf. The
appraiser found that retail rents in Brooklyn range from $27.00psf to $49.00psf,
and estimates a fair market rent for the subject space at $35.00psf.
PROPERTY MANAGEMENT. Related Retail Management Corp., an affiliate of the
Borrower.
CURRENT MEZZANINE OR SUBORDINATE INDEBTEDNESS. None.
FUTURE MEZZANINE OR SUBORDINATE INDEBTEDNESS. Future mezzanine debt is permitted
subject to the following requirements: (i) 30 days prior written notice; (ii)
security may only consist of a pledge of the non-managing members interests in
the Borrower; (iii) the combined DSCR of the aggregate debt may not be less than
1.15x; (iv) the LTV on the aggregate debt may not exceed 85%; (v) mezzanine
lender must be approved by trustee and must execute a subordination and
standstill agreement acceptable to trustee; (vi) mezzanine debt cannot be
crossed with any other loan or property; (vii) terms, conditions, and structure
of mezzanine debt must be approved by trustee in its reasonable discretion; and
(viii) rating agency confirmation that the additional indebtedness will not
cause a downgrade to any of the bonds.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-28
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
GATEWAY CENTER BJ'S
BALANCE: $45,400,000
DSCR: 1.43x
LTV: 79.9%
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-29
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
PALLADIUM AT BIRMINGHAM
BALANCE: $39,000,000
DSCR: 1.31x
LTV: 79.9%
- --------------------------------------------------------------------------------
PALLADIUM THEATER AND RETAIL
[GRAPHIC OMITTED]
WILLITS RETAIL
[GRAPHIC OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-30
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
PALLADIUM AT BIRMINGHAM
BALANCE: $39,000,000
DSCR: 1.31x
LTV: 79.9%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
- --------------------------------------------------------------------------------
LOAN SELLER: GACC
LOAN PURPOSE: Refinance
ORIGINAL PRINCIPAL BALANCE: $39,000,000
CUT-OFF PRINCIPAL BALANCE: $39,000,000
% BY INITIAL UPB: 4.61%
INTEREST RATE: 5.6300%
PAYMENT DATE: 1st of each month
FIRST PAYMENT DATE: July 1, 2003
MATURITY DATE: June 1, 2013
AMORTIZATION: 360 Months
CALL PROTECTION: Lockout for 24 months from securitization
date, then defeasance is permitted. On and
after March 1, 2013, prepayment can be
made without penalty.
SPONSOR: The Related Companies, L.P.
BORROWER: Crowley-Willits Retail, L.L.C.
ADDITIONAL FINANCING: None
LOCKBOX: Hard
INITIAL RESERVES: Tax: $615,077
Insurance: $59,716
TI/LC: $1,341,723(1)
MONTHLY RESERVES: Tax: $68,791
Insurance: $7,580
TI/LC: $4,900
Replacement: $1,500
1. For TI/LC expenditures related to Illusions by Sheri Spa and the three
remaining vacant suites.
- --------------------------------------------------------------------------------
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
LOAN BALANCE/SQ.FT.: $260.22
BALLOON BALANCE/SQ.FT.: $218.29
LTV: 79.9%
BALLOON LTV: 67.0%
DSCR: 1.31x
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/PORTFOLIO: Single Asset
PROPERTY TYPE: Anchored Retail
COLLATERAL: Fee simple interest in an anchored retail
center
LOCATION: Birmingham, MI
YEAR BUILT/RENOVATED: 2003/NAP
TOTAL AREA: 149,873 sq. ft.
PROPERTY MANAGEMENT: Brenmar Management Company, Inc. and The
Habitat Company
OCCUPANCY (AS OF 05/06/03): 82.2%
UNDERWRITTEN
NET CASH FLOW: $3,539,392
APPRAISED VALUE: $48,800,000
APPRAISAL DATE: January 1, 2004
- ---------------------------------------------------------------------------------------------------------------------------
MAJOR TENANTS
- ---------------------------------------------------------------------------------------------------------------------------
TENANT % NRSF RENT PSF LEASE EXPIRATION
- ---------------------------------------------------------------------------------------------------------------------------
Palladium Theater 49.0% $24.49 11/30/21
- ---------------------------------------------------------------------------------------------------------------------------
Tower Records1 11.7% $30.00 04/30/17
- ---------------------------------------------------------------------------------------------------------------------------
City Cellar/Blue Martini 9.9% $33.00 02/28/13
- ---------------------------------------------------------------------------------------------------------------------------
Buca di Beppo 6.3% $33.98 10/31/13
- ---------------------------------------------------------------------------------------------------------------------------
1. Tower Records' lease is signed by MTS, Inc., a privately-held company.
THE PALLADIUM AT BIRMINGHAM LOAN
THE LOAN. The Palladium at Birmingham Loan is secured by a first mortgage on
Palladium at Birmingham, a 149,873 sq. ft. entertainment/retail center located
in downtown Birmingham, Michigan, approximately 15 miles northwest of downtown
Detroit.
THE BORROWER. The Borrower, Crowley-Willits Retail, L.L.C., is a single-purpose,
bankruptcy-remote entity for which a non-consolidation opinion was obtained. The
loan sponsor is The Related Companies, L.P. Founded in 1972, The Related
Companies L.P. is one of the nation's largest diversified real estate
organizations specializing in financial services and property development and
management. Founded in 1972,
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-31
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
PALLADIUM AT BIRMINGHAM
BALANCE: $39,000,000
DSCR: 1.31x
LTV: 79.9%
- --------------------------------------------------------------------------------
the company currently oversees approximately $11 billion in real estate
comprised of over 1,100 properties located in 47 states. As of September 2002,
The Related Companies L.P. had a net worth of $188 million and liquid assets of
$61 million. The Related Companies L.P. is a repeat sponsor of a Deutsche Bank
borrower.
THE PROPERTY. The Palladium at Birmingham loan is secured by a 149,873 sq. ft.
entertainment/retail center located in downtown Birmingham, Michigan. Palladium
at Birmingham, consists of two entertainment/retail buildings, Palladium Theater
and Retail and Willits Retail. The buildings are located approximately one block
apart in downtown Birmingham, Oakland County, Michigan, an affluent residential
community located approximately 15 miles northwest of downtown Detroit.
Related Urban Development, an affiliate of the sponsor, is a national developer
of mixed-use and entertainment-enhanced retail projects. Related Urban
Development's latest project is The Palladium at AOL Time Warner Center, the
retail and restaurant component of the 2.8 million sq. ft. development at
Columbus Circle in Manhattan.
Palladium Theater and Retail consists of a newly constructed four-story building
(one below-grade level and three above-grade levels) totaling 124,477 sq. ft. of
net rentable area. Willits Retail consists of three first floor retail
condominium units totaling 25,396 sq. ft. located in a five-story newly
constructed residential building. Construction started in 2001 with the last
unit to be completed in 2003. The upper floors of the building contain 55 luxury
condominium units (80% sold as of year-end 2002 at an average price of
$962,000/unit) that are not part of the loan collateral. Willits Retail is
currently 72.9% leased to Mitchell's Fishmarket and Sherri Day Spa. Mitchell's
has opened for business and Sherri Day Spa is scheduled to take occupancy by
mid-2003. Palladium Theater and Retail is currently 92.7% leased.
SIGNIFICANT TENANTS. Palladium Theater and Retail is 92.7% leased to four
tenants. Willits Retail is currently 72.9% leased to two tenants. The two
largest tenants are Palladium Theater and Tower Records.
Palladium Theater occupies 73,500 sq. ft. (49.0% of total area) under a ground
lease with a rent of $24.49psf expiring in November 2021. The theater is leased
to Uptown Theatres, L.L.C. on a 20-year lease expiring in 2021. For 2002, the
first year of operation, the Palladium Theater had strong sales of $658,235 per
screen. The Uptown Palladium 12 features the latest in state-of-the-art
projection and sound equipment, exclusive high back seats with custom
Tempur-Pedic cushions, a Premiere Entertainment auditorium - a Detroit area
first, wall to wall curved screens, stadium seating, as well as a giant,
two-story mural in the cinema lobby.
Uptown Theaters, LLC is an entity controlled by Michael Ilitch whom in 2002,
Forbes Magazine ranked as the 381st wealthiest individual in the United States
(net worth of $575 million). Mr. Ilitch founded the Little Caesar Pizza chain,
owns the Fox Theater in Detroit (which hosts Broadway plays, musical events,
etc.), and owns the Detroit Red Wings hockey team and the Detroit Tigers
baseball team. Uptown Theaters, LLC has provided the Borrower with a $6.0
million Letter of Credit (equivalent to 40 months of rent) to guarantee the
lease through the first 17 years. At closing, the Borrower will assign the
Letter of Credit to Lender as additional collateral.
Tower Records occupies 17,500 sq. ft. (11.7% of total area) under a lease with a
rent of $30.00psf expiring in April 2017. Tower Records' lease is signed by MTS,
Inc., a privately-held company and one of the largest music retailers in the
world. The company currently operates 119 stores worldwide, including 16
international stores in four countries.
THE MARKET. Birmingham is an upscale community located in Oakland County,
approximately 15 miles northwest of Detroit. It has a pedestrian-friendly
downtown area with shops, restaurants, hotels, movie theaters, condominiums,
homes, art galleries, antique shops, and numerous other businesses. There are 22
parks, 20 outdoor tennis courts, nine baseball diamonds, two golf courses, an
ice arena, a soccer field and a lake within the Birmingham city limits.
The City of Birmingham encompasses 4.5 square miles with a 2000 population of
20,204 people and 9,383 households. The downtown area is filled with shops, art
galleries, restaurants, services and a variety of cultural events scheduled
throughout the year. The city is the hub for the affluent suburban communities
of Oakland County which include Bloomfield Hills, Bloomfield Township,
Franklin/Bingham Farms, and West Bloomfield. The Birmingham-Bloomfield area
encompasses 40 square miles in the heart of Oakland County, the second
wealthiest county in the U.S. in terms of per capita income. The 2001 population
estimate for the total trade area was 539,500, with 96,200 people located in the
primary trade area. As of 2001, the average household income within a three- and
five-mile radius was $132,080 and $119,016, respectively, which is significantly
higher than the Detroit metropolitan area average of $53,774.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-32
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
PALLADIUM AT BIRMINGHAM
BALANCE: $39,000,000
DSCR: 1.31x
LTV: 79.9%
- --------------------------------------------------------------------------------
The subject area is well served by a variety of transportation systems. Rail and
air access to the area is convenient, with Amtrak passenger trains stopping in
Birmingham three times daily. Detroit Metropolitan International Airport is a
40-minute drive from Birmingham, and within Oakland County, the nearby
Oakland-Pontiac Airport serves as a hub for corporate flights and cargo
shipments. The city has good transportation linkages on N. Old Woodward Avenue,
the major north-south thoroughfare stretching from downtown Detroit to Pontiac,
Michigan.
With the exception of the largest tenant, Palladium Theater, which pays rent of
$24.49psf, all tenants at Palladium at Birmingham pay rents ranging from
$28.00psf to $40.00psf. According to the appraiser, movie theater rents range
from approximately $15psf to $25psf. Leases at the property represent a mix of
NNN, net, gross and modified gross leases. The property's rents on an adjusted
NNN basis range from $24.49psf to $40.00psf. The nine comparable properties (all
located in downtown Birmingham) have NNN rents ranging from $24.00psf to
$38.00psf.
PROPERTY MANAGEMENT. The Palladium Retail property is managed by Brenmar
Management Company, Inc. It is anticipated that the Willits Retail property will
be managed by The Habitat Company. The Willits Retail property is currently
managed by the borrower.
CURRENT MEZZANINE OR SUBORDINATE INDEBTEDNESS. None.
FUTURE MEZZANINE OR SUBORDINATE INDEBTEDNESS. Not Allowed.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-33
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
PALLADIUM AT BIRMINGHAM
BALANCE: $39,000,000
DSCR: 1.31x
LTV: 79.9%
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-34
[THIS PAGE INTENTIONALLY LEFT BLANK]
B-35
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
EMPIRIAN LUXURY TOWERS
BALANCE: $38,063,492
DSCR: 1.37x
LTV: 79.8%
- --------------------------------------------------------------------------------
[GRAPHICS OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-36
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
EMPIRIAN LUXURY TOWERS
BALANCE: $38,063,492
DSCR: 1.37x
LTV: 79.8%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
- --------------------------------------------------------------------------------
LOAN SELLER: GACC
LOAN PURPOSE: Refinance
ORIGINAL PRINCIPAL BALANCE: $38,100,000
CUT-OFF PRINCIPAL BALANCE: $38,063,492
% BY INITIAL UPB: 4.50%
INTEREST RATE: 5.4300%
PAYMENT DATE: 1st of each month
FIRST PAYMENT DATE: June 1, 2003
MATURITY DATE: May 1, 2013
AMORTIZATION: 360 Months
CALL PROTECTION: Lockout for 24 months from securitiza-tion
date, then defeasance is permitted. On and
after February 1, 2013, prepay-ment can be
made without penalty.
SPONSOR: Ezra S. Beyman
BORROWER: Park Drive Group, LP
ADDITIONAL FINANCING: None
LOCKBOX: Soft at Closing, Springing Hard
INITIAL RESERVES: Tax: $127,420
Insurance: $53,667
Engineering: $3,750
MONTHLY RESERVES: Tax: $31,855
Insurance: $7,667
Replacement: $11,875
- --------------------------------------------------------------------------------
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
LOAN BALANCE/UNIT: $66,778
BALLOON BALANCE/UNIT: $55,731
LTV: 79.8%
BALLOON LTV: 66.6%
DSCR: 1.37x
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/PORTFOLIO: Single Asset
PROPERTY TYPE: Multifamily
COLLATERAL: Fee simple interest in a multifamily
property situated on a 14.8-acre site.
LOCATION: Philadelphia, PA
YEAR BUILT/RENOVATED: 1950/1998
TOTAL UNITS: 570
PROPERTY MANAGEMENT: Royal Management Company
OCCUPANCY (04/14/03): 96.7%
UNDERWRITTEN
NET CASH FLOW: $3,519,227
APPRAISED VALUE: $47,700,000
APPRAISAL DATE: February 12, 2003
- -------------------------------------------------------------------------------------------------------------------------------
PROPERTY DESCRIPTION
- -------------------------------------------------------------------------------------------------------------------------------
UNIT TYPE NUMBER OF UNITS AVERAGE SQUARE FEET/UNIT AVERAGE RENT (PER MONTH)
- -------------------------------------------------------------------------------------------------------------------------------
Studio 49 289 $530
- -------------------------------------------------------------------------------------------------------------------------------
One Bedroom 287 638 $654
- -------------------------------------------------------------------------------------------------------------------------------
Two Bedroom 230 950 $836
- -------------------------------------------------------------------------------------------------------------------------------
Four Bedroom 4 1,966 $1,518
- -------------------------------------------------------------------------------------------------------------------------------
THE EMPIRIAN LUXURY TOWERS LOAN
THE LOAN. The Empirian Luxury Towers Loan is secured by a first mortgage on the
Empirian Luxury Towers, a 570-unit, multifamily property situated on a 14.8-acre
site and located in Philadelphia, Pennsylvania.
THE BORROWER. The borrower, Park Drive Group, LP is a single-purpose,
bankruptcy-remote entity for which a non-consolidation opinion was obtained. The
sponsor of the borrower is Ezra S. Beyman, a New York-based real estate investor
with over 20 years of real estate experience. Mr. Beyman is President and owner
of Empire Equity Group, a mortgage brokerage group formed in 1984 that is
involved in the acquisition, renovation and management of commercial real estate
properties. Empire's real estate portfolio includes 1,350 apartment units. As of
June 30, 2002, Mr. Beyman had a net worth of $103.3 million including liquidity
of $5.17 million. Ezra Beyman is a repeat sponsor of various Deutsche Bank
loans.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-37
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
EMPIRIAN LUXURY TOWERS
BALANCE: $38,063,492
DSCR: 1.37x
LTV: 79.8%
- --------------------------------------------------------------------------------
THE PROPERTY. Empirian Luxury Towers is a high rise, multifamily apartment
complex comprised of two interconnected 12-story apartment buildings containing
570 units situated on a 14.8-acre site approximately 8 miles northwest of the
Philadelphia CBD. There are 49 studio units (289 sq. ft. in size), 287
one-bedroom/one-bath units (239 are 633 sq. ft. in size; 48 are 663 sq. ft. in
size), and 230 two-bedroom/one-bath units (182 are 983 sq. ft. in size; 48 are
826 sq. ft. in size). There are also 4 four-bedroom/two-bath units that are each
1,966 sq. ft. in size. Total net rentable area is 437,955 sq. ft. including
14,265 sq. ft. of commercial lobby space (a deli, a dry cleaner, a hair salon
and a dentist). The buildings are constructed of concrete with brick exterior
walls and flat asphalt roofs. The buildings were built in 1950, and were most
recently renovated in 1998 by the Borrower. Renovations included new elevators,
landscaping upgrades, lobby renovation, life safety equipment repairs, roof
repairs, common area renovations and unit renovations including new appliances,
carpeting and kitchen cabinets. The cost of the renovation was approximately
$3,108,356 ($5,453/unit). Amenities at the subject include a swimming pool with
patio, lighted tennis courts at the rear of the complex, a gated entrance, a
laundry facility and indoor garage parking. Parking is provided for a total 623
vehicles (1.09 spaces per unit) with 207 covered spaces and 416 outdoor spaces.
THE MARKET. The property is located in the Germantown section of Philadelphia,
approximately 8 miles northwest of the CBD. The Germantown neighborhood is
located at the southern section of Northwest Philadelphia which also includes
other neighborhoods identified as Mt. Airy, Chestnut Hill and Oak Lane.
Germantown had a population of 80,592 and a median household income of $44,746
as of 2002. Germantown is over 90% developed and consists primarily of
residential development, including single family homes and apartment complexes.
In addition, Germantown contains a large number of institutions of higher
education including two universities, three colleges and several medical
campuses. Commercial development in the area is located along the primary
arterials.
The property is located on a primary arterial that provides direct access to US
1 (approximately one-half mile south of the property) as well as I-76 (via US
1). US 1 is a major commercial corridor containing a mix of office, retail,
hotel and apartment buildings. A public bus route runs directly in front of the
property and a public rail transportation station is located just to the rear of
the property. In addition, the property is located on a hill, directly
overlooking Fairmount Park, the largest public park in Philadelphia, containing
tennis courts, a jogging trail and a football field.
The Empirian Luxury Towers are part of the metropolitan Philadelphia apartment
market, which had an inventory of approximately 193,752 units and a 2.8% vacancy
rate as of 3rd quarter 2002. The appraiser identified six apartment communities
containing 2,763 units that compete directly with the subject that have an
average occupancy of 95.5%. Currently, there are no new apartment complexes
proposed or under construction in the subject neighborhood that would compete
with the subject property. Market rent for studio units ranges from $550 - $691;
the average rent for the subject's studio units is $530. Market rent for
1-bedroom units ranges from $660 - $1,280; the average rent for the subject's
1-bedroom units is $654. Market rent for 2-bedroom units ranges from $870 -
$1,635; the average rent for the subject's 2-bedroom units is $836. Market rent
for 4-bedroom units is $2,520; the average rent for the subject's 4-bedroom
units is $1,518.
PROPERTY MANAGEMENT. Royal Management Company, an affiliate of the Borrower.
CURRENT MEZZANINE OR SUBORDINATE INDEBTEDNESS. None
FUTURE MEZZANINE OR SUBORDINATE INDEBTEDNESS. Not Allowed.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-38
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
EMPIRIAN LUXURY TOWERS
BALANCE: $38,063,492
DSCR: 1.37x
LTV: 79.8%
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-39
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
REDLAND CENTER
BALANCE: $27,975,125
DSCR: 1.27x
LTV: 78.8%
- --------------------------------------------------------------------------------
[GRAPHICS OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-40
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
REDLAND CENTER
BALANCE: $27,975,125
DSCR: 1.27x
LTV: 78.8%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
- --------------------------------------------------------------------------------
LOAN SELLER: GACC
LOAN PURPOSE: Refinance
ORIGINAL TMA BALANCE: $28,000,000
CUT-OFF TMA BALANCE: $27,975,125
% BY INITIAL UPB: 3.31%
INTEREST RATE: 5.7320%
PAYMENT DATE: 1st of each month
FIRST PAYMENT DATE: June 1, 2003
MATURITY DATE: May 1, 2013
AMORTIZATION: 360 Months
CALL PROTECTION: Lockout for 24 months from securitization
date, then defeasance is permitted. On and
after February 1, 2013, prepayment can be
made without penalty.
SPONSOR: Stephen A. Goldberg
BORROWER: Redland Tech Center, L.L.C.
ADDITIONAL FINANCING: None
LOCKBOX: Hard
INITIAL RESERVES: Tax: $106,962
Insurance: $5,131
MONTHLY RESERVES: Tax: $11,885
Insurance: $2,566
Replacement: $2,232
- --------------------------------------------------------------------------------
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
LOAN BALANCE/SQ.FT.: $208.93
BALLOON BALANCE/SQ.FT.: $175.99
LTV: 78.8%
BALLOON LTV: 66.4%
DSCR: 1.27x
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/PORTFOLIO: Single Asset
PROPERTY TYPE: Office
COLLATERAL: Fee simple interest in a six-story,
Class A office building.
LOCATION: Rockville, MD
YEAR BUILT/RENOVATED: 2003/NA
TOTAL AREA: 133,895 sq. ft.
PROPERTY MANAGEMENT: Cassidy & Pinkard, Inc.
OCCUPANCY (AS OF 06/01/03): 100.0%
UNDERWRITTEN
NET CASH FLOW: $2,484,824
APPRAISED VALUE: $35,500,000
APPRAISAL DATES: March 3, 2003
- -----------------------------------------------------------------------------------------------------------------------------
MAJOR TENANTS
- -----------------------------------------------------------------------------------------------------------------------------
TENANT % NRSF RENT PSF LEASE EXPIRATION RATINGS (S/M/F)
- -----------------------------------------------------------------------------------------------------------------------------
GSA (Department of Health and Human Services) 100.0% $28.68 03/22/13 AAA/Aaa/AAA1
- -----------------------------------------------------------------------------------------------------------------------------
1. Implied Rating.
THE REDLAND CENTER LOAN
THE LOAN. The Redland Center loan is secured by a first mortgage on Redland
Center, a newly constructed 6-story, 133,895 sq. ft. Class A office condominium
located in Rockville, Maryland, approximately 20 miles northwest of Washington,
DC. The borrower is required to make deposits of $800,000 into the TI/LC reserve
at least 30 days prior to the first day of the eighth, ninth and tenth loan
years (aggregate of $2.4 million or $17.93psf), or post a letter of credit in
the required amounts. If Borrower fails to either deposit these funds or to post
the Letter of Credit, a full cash flow sweep is triggered for the remainder of
the loan term, or until the amount in the reserve equals $2.4 million, whichever
occurs first. The cash flow sweep may also be discontinued if: (a) the GSA has
renewed its lease for a minimum term of 5 years at a rental rate comparable to
the rent due under the current GSA lease, or (b) a replacement tenant of
comparable creditworthiness leases the GSA space at a similar rental rate and
for a minimum term of 5 years. There will also be a cash flow sweep if, at the
end of the first loan year, parking income is less than $180,000 based on
trailing 3-month parking income annualized.
THE BORROWER. The Borrower, Redland Tech Center, L.L.C. is a single-purpose,
bankruptcy-remote entity for which a non-consolidation opinion was obtained. The
sponsor of the loan is Stephen A. Goldberg. In 1963, Mr. Goldberg founded The
Stephen A. Goldberg Company, a privately held, real estate investment and
management company that controls over 75 partnerships and corporations employing
400
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-41
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
REDLAND CENTER
BALANCE: $27,975,125
DSCR: 1.27x
LTV: 78.8%
- --------------------------------------------------------------------------------
individuals, and that in 2000, generated combined revenue in excess of $50
million. The company has completed approximately $1.5 billion worth of real
estate and financing transactions and is presently managing over $300 million
worth of development projects. The company's extensive real estate experience
includes the financing and/or development of over 2.0 million sq. ft. of Class A
office space in the District of Columbia. As of 12/31/02, Stephen Goldberg
reported a net worth of $135.5 million including liquidity of $5.3 million.
THE PROPERTY. The subject property is a new, 6-story, Class A office condominium
building containing 133,895 sq. ft. of net rentable area which is Phase I of
three phases. Situated on a 12.1-acre site, the subject is located within
Redland Technology Park, a 27.5-acre, three-building office condominium complex
being developed by the sponsor. The remaining two buildings are proposed, and
will contain an aggregate of approximately 350,000 sq. ft. of Class `A' office.
Completed in the first quarter of 2003, the property is a modern office
building. The lobby has a high quality finish that includes wood-clad walls and
polished granite flooring. Paved areas provide parking for approximately 455
vehicles (3.4 spaces per 1,000 sq. ft. of net rentable area). There are also
plans for a 1,095-car garage to be built within Redland Technology Park. The
garage will be shared by the three buildings under the condominium ownership
structure.
The property provides access to major local and regional highways and is located
one mile east of the Shady Grove Road/I-270 interchange. I-270 (the Dwight
Eisenhower Freeway) is a primary north/south traffic artery in Montgomery
County, which starts at the Capital Beltway and extends northwestward to
Frederick, Maryland. Redland Boulevard provides east/west access to the subject
neighborhood and connects with Frederick Road (Route 355) approximately one mile
east of the subject.
SIGNIFICANT TENANTS. The Redland Center is 100% leased to the federal
government's General Services Administration (`GSA') for a term of 10 years
(lease expires 3/22/13). The occupant of the building is the Department of
Health and Human Services. The lease is not subject to annual appropriations and
there are no early termination provisions.
The subject is the headquarters for the Agency for Healthcare Research and
Quality. The space is 100% utilized as office. The AHRQ was created in December
1989 as the Agency for Health Care Policy and Research (AHCPR), a Public Health
Service agency in the Department of Health and Human Services (HHS). Reporting
to the HHS Secretary, the Agency was reauthorized on December 6, 1999, as the
Agency for Healthcare Research and Quality. Sister agencies include the National
Institutes of Health, the Centers for Disease Control and Prevention, the Food
and Drug Administration, the Health Care Financing Administration, and the
Health Resources and Services Administration. The mission of AHRQ is to support
research designed to improve the outcomes and quality of health care, reduce its
costs, address patient safety and medical errors, and broaden access to
effective services. The research sponsored, conducted, and disseminated by the
Agency for Healthcare Research and Quality (AHRQ) provides information that
helps people make better decisions about health care. The AHRQ has a staff of
over 400 personnel which will be located at the subject.
THE MARKET. The property is located in Montgomery County's North Rockville
office sub-market, which includes 64 buildings containing 6.4 million sq. ft. of
competitive, multi-tenant office space. As of year-end 2002, this sub-market had
a direct vacancy rate of 13.24%. To determine market rental rates for Class A
space in this market, the appraiser identified seven comparable office
properties located within the Rockville and North Rockville area. Rental rates
at these properties ranged from $27.00psf to $35.50psf. The subject property's
GSA tenant pays rent that is at the lower end of general market rents. As of
year-end 2002, the overall average lease rate in North Rockville is $28.03psf,
the fourth highest average rental rate of 18 suburban Maryland sub-markets.
PROPERTY MANAGEMENT. Redland Center will be managed by Cassidy & Pinkard, Inc.,
a third-party management company. Cassidy & Pinkard serves the Mid-Atlantic
Region, primarily Washington, D.C., and currently manages over 4.1 million
square feet of office space in the Washington, D.C. metropolitan area.
CURRENT MEZZANINE OR SUBORDINATE INDEBTEDNESS. None.
FUTURE MEZZANINE OR SUBORDINATE INDEBTEDNESS. Not Allowed.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-42
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
REDLAND CENTER
BALANCE: $27,975,125
DSCR: 1.27x
LTV: 78.8%
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-43
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
1669 COLLINS AVENUE, MIAMI BEACH LAND
BALANCE: $26,885,252
DSCR: 1.06x
LTV: 88.1%
- --------------------------------------------------------------------------------
[GRAPHICS OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-44
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
1669 COLLINS AVENUE, MIAMI BEACH LAND
BALANCE: $26,885,252
DSCR: 1.06x
LTV: 88.1%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
- --------------------------------------------------------------------------------
LOAN SELLER: GACC
LOAN PURPOSE: Refinance
SHADOW RATING (M/S): Aa1/BBB
ORIGINAL PRINCIPAL BALANCE: $27,000,000
CUT-OFF PRINCIPAL BALANCE: $26,885,252
% BY INITIAL UPB: 3.18%
INTEREST RATE: 5.7000%
PAYMENT DATE: 1st of each month
FIRST PAYMENT DATE: March 1, 2003
MATURITY DATE: February 1, 2013
AMORTIZATION: 360 Months
CALL PROTECTION: Lockout for 24 months from securitization
date, then defeasance is permitted. On and
after November 1, 2012, prepayment can be
made without penalty.
SPONSOR: Alfredo Lowenstein
BORROWER: Di Lido Beach Hotel Corporation
ADDITIONAL FINANCING: None
LOCKBOX: Hard
INITIAL RESERVES: None
MONTHLY RESERVES: None
- --------------------------------------------------------------------------------
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
LOAN BALANCE/SQ.FT.: $164.59
BALLOON BALANCE/SQ.FT.: $138.91
LTV (LAND + IMPROVEMENTS): 11.5%
LTV (LAND): 88.1%
BLTV (LAND + IMPROVEMENTS): 9.7%
BLTV (LAND): 74.4%
DSCR: 1.06x
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/PORTFOLIO: Single Asset
PROPERTY TYPE: Land
COLLATERAL: Leased fee interest in land improved
with the Ritz Carlton Miami Beach Hotel,
as encumbered by the long-term lease.
The hotel is under construction and not
part of the collateral.
LOCATION: Miami Beach, FL
YEAR BUILT/RENOVATED: NAP
TOTAL AREA: 163,350 sq. ft.
PROPERTY MANAGEMENT: NAP
OCCUPANCY (AS OF 06/01/03): 100.0%
UNDERWRITTEN
NET CASH FLOW: $2,000,000
APPRAISED VALUE
(LAND + IMPROVEMENTS): $233,200,000
(LAND): $30,500,000
APPRAISAL DATE
(LAND + IMPROVEMENTS): December 1, 2003
(LAND): November 25, 2002
THE 1669 COLLINS AVENUE, MIAMI BEACH LAND LOAN
THE LOAN. The 1669 Collins Avenue, Miami Beach Land loan is secured by the
leased fee interest in the land beneath the Ritz-Carlton Hotel, an 11-story,
beachfront, 376-room, full-service, luxury hotel located in Miami Beach,
Florida. Improvements on the land are under construction and not part of the
collateral.
THE BORROWER. The Borrower, Di Lido Beach Hotel Corporation is a single-purpose,
bankruptcy-remote entity for which a non-consolidation opinion was obtained. The
Borrower is 100% owned by Lionstone Group, Inc, which, in turn, is 100% owned by
Lionstone Group (Barbados) Ltd. Alfredo Lowenstein, the loan sponsor, owns 100%
of the Lionstone Group (Barbados). Lionstone Group, Inc. currently owns and
manages over 2,500 hotel rooms. Alfredo Lowenstein has been investing,
developing and operating various types of real estate since 1971 including
hotels, restaurant, and shopping centers. As of 01/01/2002, Mr. Lowenstein's
stated net worth was $115 million.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-45
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
1669 COLLINS AVENUE, MIAMI BEACH LAND
BALANCE: $26,885,252
DSCR: 1.06x
LTV: 88.1%
- --------------------------------------------------------------------------------
THE PROPERTY. The subject collateral is approximately a 3.75-acre parcel of land
(163,350 sq.ft.) located at the corner of Collins Avenue and Lincoln Road in
Miami Beach, Florida. The site is improved with the original Di Lido Hotel,
which is currently being redeveloped into a 376-room Ritz Carlton Hotel. The
redevelopment of the Ritz-Carlton Hotel entails a gut renovation of the existing
facility (preserving much of the exterior walls of the old hotel) and the
addition of three stories. The redevelopment is approximately 70% complete and
is scheduled to open in the Fall of 2003.
The site is located within the Historic Art Deco District and represents one of
the premier beachfront locations in Miami Beach. The property has excellent
frontage and visibility along both Collins Avenue (227 feet of frontage) and
Lincoln Road (400 feet of frontage), and has 280 feet of frontage along the
Atlantic Ocean. The neighborhood surrounding the property is characterized by a
mix of mid- to high-rise hotels, residential towers, retail stores, restaurants,
and low-rise residential buildings along Collins Avenue. The property's
neighborhood is bordered on the east by the Atlantic Ocean, on the south by the
Government Cut inlet to Biscayne Bay, the Intracoastal Waterway to the west, and
25th Street to the north. More specifically, the property is located at the
northeastern corner of the intersection of Lincoln Road and Collins Avenue.
Surrounding uses or improvements include a high-rise condominium building and
the Loews Miami Beach Hotel to the south across Lincoln Road, retail stores and
restaurants to the west across Collins Avenue (also known as Route A1A), several
hotels to the north along Collins Avenue (including the Sagamore, the National,
and the Delano), and the Atlantic Ocean to the east. The site further benefits
from its close proximity to Ocean Drive and to Washington Avenue, two major
destinations for shopping, restaurants and nightclubs.
In addition to the three floors being added to the existing 8-story structure,
the Ritz Carlton redevelopment will also include two new 3-story `lanai'
guestroom buildings at poolside. Upon completion, the hotel will feature 376
guestrooms, a 150-seat cafe/restaurant, a 90-seat restaurant, a lobby
bar/lounge, a poolside bar and grill, 19,200 square feet of meeting space, a
13,000 square foot health/fitness facility, a heated outdoor swimming pool, and
17 poolside cabanas. There will also be a two-level, 258-car parking garage
incorporated within the hotel structure. In addition, a public parking garage is
located just south of the property on Collins Avenue.
The improvements (exclusive of the land) are valued at $202.7 million upon
stabilization, and the market value of the leased fee interest in the land is
currently estimated at $30.5 million. The ground lease calls for base rent of $2
million annually with annual CPI adjustments.
THE MARKET. The subject is located in the historic Art Deco District of Miami
Beach. The property is set directly on Miami Beach overlooking the Atlantic
Ocean. Conveniently located 20 minutes from Miami International Airport and 10
minutes from the Port of Miami. The subject site is located approximately one
mile north of Ocean Drive, Miami Beach's main tourist attraction that contains
South Beach nightlife and Art Deco walking tours. Located one block west of the
subject site is Washington Avenue, home to trendy clothing stores, restaurants,
and nightclubs that are frequented by tourists and locals.
The area, further known as `South Beach', is popular with locals as well as
tourists. Lincoln Road, a 10-block pedestrian shopping, dining and entertainment
area is immediately to the west of the property. The improvements will be a
luxury, full-service hotel. Indicative of the demand for full-service hotels is
the Loews Miami Beach Hotel. Through October 2002, Loew's had an occupancy rate
of 72%, an ADR of $219, and revenue per available room (`RevPar') of $148.
As a result of the weakening economy and the terrorist attacks on September 11,
2001, occupancy for the subject's competitive set decreased by 13.4% from 2000
to 2001, according to HVS International. This downturn occurred during the
normally strong meeting and group winter season. Despite this decline, overall
occupancy has rebounded 14.2% from 2001 to 2002 and 17.7% during the first two
months of 2003 as compared to the first two months of 2002.
PROPERTY MANAGEMENT. NAP
CURRENT MEZZANINE OR SUBORDINATE INDEBTEDNESS. None.
FUTURE MEZZANINE OR SUBORDINATE INDEBTEDNESS. Not Allowed.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-46
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
1669 COLLINS AVENUE, MIAMI BEACH LAND
BALANCE: $26,885,252
DSCR: 1.06x
LTV: 88.1%
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-47
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
THE RESERVE AT SUGARLOAF
BALANCE: $26,400,000
DSCR: 1.23x
LTV: 79.4%
- --------------------------------------------------------------------------------
[GRAPHICS OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-48
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
THE RESERVE AT SUGARLOAF
BALANCE: $26,400,000
DSCR: 1.23x
LTV: 79.4%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
- --------------------------------------------------------------------------------
LOAN SELLER: GACC
LOAN PURPOSE: Refinance
ORIGINAL PRINCIPAL BALANCE: $26,400,000
CUT-OFF PRINCIPAL BALANCE: $26,400,000
% BY INITIAL UPB: 3.12%
INTEREST RATE: 5.4900%
PAYMENT DATE: 1st of each month
FIRST PAYMENT DATE: July 1, 2003
MATURITY DATE: June 1, 2013
AMORTIZATION: 360 Months
CALL PROTECTION: Lockout for 24 months from securitization
date, then defeasance is permitted. On and
after March 1, 2013, prepayment can be made
without penalty.
SPONSOR: Milton Fine
BORROWER: SRF-FFC Sugarloaf LLC
ADDITIONAL FINANCING: None
LOCKBOX: None
INITIAL RESERVES: Tax: $242,281
Insurance: $33,111
MONTHLY RESERVES: Tax: $26,920
Insurance: $4,139
Replacement: $5,550(1)
1. The Borrower is required to make on-going monthly deposits in the amount of
$5,550 for the first three years of the loan term and $6,938 for the
remainder of the loan term, thereafter.
- --------------------------------------------------------------------------------
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
LOAN BALANCE/UNIT: $79,279
BALLOON BALANCE/UNIT: $70,920
LTV: 79.4%
BALLOON LTV: 71.0%
DSCR: 1.23x
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/PORTFOLIO: Single Asset
PROPERTY TYPE: Multifamily
COLLATERAL: Fee simple interest in a Class A,
luxury, gated, garden-style
apartment complex.
LOCATION: Duluth, GA
YEAR BUILT/RENOVATED: 2001/NAP
TOTAL UNITS: 333
PROPERTY MANAGEMENT: Atlantic Realty Partners, Inc., an
affiliate of the Borrower.
OCCUPANCY (04/10/03): 90.4%
UNDERWRITTEN
NET CASH FLOW: $2,205,976
APPRAISED VALUE: $33,250,000
APPRAISAL DATE: May 7, 2003
- -------------------------------------------------------------------------------------------------------------------------------
PROPERTY DESCRIPTION
- -------------------------------------------------------------------------------------------------------------------------------
UNIT TYPE NUMBER OF UNITS AVERAGE SQUARE FEET/UNIT AVERAGE RENT (PER MONTH)
- -------------------------------------------------------------------------------------------------------------------------------
One Bedroom 110 813 $853
- -------------------------------------------------------------------------------------------------------------------------------
Two Bedroom 173 1,320 $1,090
- -------------------------------------------------------------------------------------------------------------------------------
Three Bedroom 38 1,603 $1,422
- -------------------------------------------------------------------------------------------------------------------------------
Four Bedroom 12 2,295 $1,956
- -------------------------------------------------------------------------------------------------------------------------------
THE RESERVE AT SUGARLOAF
THE LOAN. The Reserve at Sugarloaf is secured by a first mortgage on The Reserve
at Sugarloaf, a 333-unit, Class A, multifamily community located in Duluth,
Georgia.
THE BORROWER. The Borrower, SRF-FFC Sugarloaf LLC is a single-purpose entity.
The loan sponsor is Milton Fine, former Chairman and co-founder of Interstate
Hotels Corporation ("IHC"). Formed in 1960, IHC developed, acquired and operated
over 230 hotels throughout the US, including numerous Marriott Hotels. IHC was
once the largest hotel management company in the US until its acquisition by
Wyndham International in 1998 for $2.1 billion. Currently, Milton Fine is
Chairman of FFC Capital, which invests in all types of
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-49
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
THE RESERVE AT SUGARLOAF
BALANCE: $26,400,000
DSCR: 1.23x
LTV: 79.4%
- --------------------------------------------------------------------------------
commercial and multifamily real estate. Mr. Fine is on the Board of Directors of
Wyndham International and is a Trustee of the Carnegie Institute, the Pittsburgh
Symphony and the New Museum of Contemporary Art in New York. As of 12/31/02, Mr.
Fine had a net worth exceeding $124 million and liquid assets of approximately
$59 million.
THE PROPERTY. The property is located approximately 28 miles northeast of
Atlanta's CBD off of I-85. The property consists of 23 three-story buildings
totaling 333-units situated on a 26-acre site located adjacent to the Sugarloaf
Country Club. Unit mix consists of 110 one-bedroom, one-bath units, 28
two-bedroom, one-bath units, 145 two-bedroom, two-bath units, 38 three-bedroom,
two-bath units, and 12 four-bedroom, 21/2-bath, 3-story townhouse units. Average
unit size is 1,220 sq. ft. Unit amenities include designer kitchen appliances,
built-in microwave, breakfast bar, washer/dryer connections, nine-foot ceilings,
crown molding, wood burning fireplace, oversize garden bathtubs, freestanding
showers, designer color packages, intrusion alarms and high speed computer and
cable wiring. All units are equipped with a sprinkler system. Community
amenities include resort-style swimming pool with grill cabana, 24-hour business
center with computers, copier and fax machine, clubhouse, 24-hour fitness center
with a children's playroom, professional putting green, lighted tennis courts,
numerous picnic areas, a playground, gated access, an amphitheatre, coin
operated laundry rooms and a car wash facility. All units are individually
metered, and tenants pay all utilities. Parking is provided for 667 vehicles (2
spaces per unit).
THE MARKET. The subject is located in the Duluth submarket of Gwinnett County.
As of year-end 2002, Class A properties in the Duluth submarket had a 91.2%
occupancy rate and an effective rent of $717. The submarket outperformed the
Atlanta apartment market which had an 88.8% overall occupancy rate. It also
outperformed the Gwinnett County Class A apartment market, which had a 2002
average occupancy of 89.8% and effective rent of $665. Average rental rates at
the subject property are $853 for 1-bedrooms units, $1,090 for 2-bedroom units,
$1,422 for 3-bedroom units and $1,956 for 4-bedroom units, which is consistent
with the market.
The subject is located within the thirteen county Atlanta MSA, one of the
fastest growing major metropolitan areas in the country over the past 30 years.
Between 1980 and 1999 the Atlanta MSA experienced a population growth rate
nearly three times that of the United States. Gwinnett County is one of the
fastest growing areas in Georgia. The population in Gwinnett County grew 67%
from 1990 to 2000. Claritas, Inc. forecasts an additional 26.5% in growth in the
period 2000 to 2007. 81% of the households in the area have incomes in excess of
$50,000. Between 1998 and 2003, Gwinnett County realized employment growth at an
average annual compound rate of 5.37%, 118% higher than the Atlanta MSA's
average annual growth rate of 2.46% for the same time period. Per capita income
in Gwinnett County grew at an average annual growth rate of 1.86% between 1998
and 2003, compared to 1.46% for the Atlanta MSA. Population within a 3-mile
radius of the subject grew 179% between 1990 and 2002, from 14,394 to 40,223. In
2003, average household income within Gwinnett County was $90,548.
The I-85 Corridor, which leads into downtown Atlanta and extends northeast
towards the Carolinas, has recently become a major area of commercial and retail
development. In addition, three major shopping centers including the 1.2 million
square foot Discover Mills, (a regional mall and entertainment complex less than
one mile from the subject) were completed in 2001. The subject is located
directly across from the Sugarloaf Country Club, home to the BellSouth Classic
TPC Golf Tournament, with its 27-hole, Greg Norman designed golf course, and
adjacent to Gwinnett County Civic and Cultural Center.
PROPERTY MANAGEMENT. Atlantic Realty Partners, Inc., an affiliate of the
Borrower.
CURRENT MEZZANINE OR SUBORDINATE INDEBTEDNESS. None
FUTURE MEZZANINE OR SUBORDINATE INDEBTEDNESS. Not Allowed.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-50
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
THE RESERVE AT SUGARLOAF
BALANCE: $26,400,000
DSCR: 1.23x
LTV: 79.4%
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-51
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
SIERRA VISTA MALL
BALANCE: $23,861,975
DSCR: 1.56x
LTV: 73.4%
- --------------------------------------------------------------------------------
[GRAPHICS OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-52
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
SIERRA VISTA MALL
BALANCE: $23,861,975
DSCR: 1.56x
LTV: 73.4%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
- --------------------------------------------------------------------------------
LOAN SELLER: GACC
LOAN PURPOSE: Acquisition
ORIGINAL PRINCIPAL BALANCE: $24,000,000
CUT-OFF PRINCIPAL BALANCE: $23,861,975
% BY INITIAL UPB: 2.82%
INTEREST RATE: 5.1500%
PAYMENT DATE: 1st of each month
FIRST PAYMENT DATE: February 1, 2003
MATURITY DATE: January 1, 2008
AMORTIZATION: 360 Months
CALL PROTECTION: Lockout for 24 months from securitization
date, then defeasance is permitted. On
and after October 1, 2007, prepayment can
be made without penalty.
SPONSOR: James H. Huelskamp
BORROWER: SV Landvalue 27, LLC, SV 5 Souls, LLC,
SV Cuyama Valley, LLC
ADDITIONAL FINANCING: None
LOCKBOX: Hard
INITIAL RESERVES: Tax: $397,600
Insurance: $35,965
TI/LC: $172,412
MONTHLY RESERVES: Tax: $79,520
Insurance: $11,988
TI/LC: $14,368
Replacement: $4,652
- --------------------------------------------------------------------------------
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
LOAN BALANCE/SQ.FT.: $40.54
BALLOON BALANCE/SQ.FT.: $37.68
LTV: 73.4%
BALLOON LTV: 68.3%
DSCR: 1.56x
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/PORTFOLIO: Single Asset
PROPERTY TYPE: Anchored Retail
COLLATERAL: Fee simple and leasehold interest
in an enclosed, anchored retail center.
LOCATION: Clovis, CA
YEAR BUILT/RENOVATED: 1989/1999
TOTAL AREA: 588,643 sq. ft.
PROPERTY MANAGEMENT: Land Value Management, LLC
OCCUPANCY (AS OF 04/30/03): 98.2%
UNDERWRITTEN
NET CASH FLOW: $2,453,175
APPRAISED VALUE: $32,500,000
APPRAISAL DATE: August 7, 2002
- ---------------------------------------------------------------------------------------------------------------------------------
ANCHOR TENANTS
- ---------------------------------------------------------------------------------------------------------------------------------
AREA
TENANTS RATING (S/M/F) (SQ.FT.) % OF TOTAL OWNERSHIP INTEREST 2002 SALES PSF 2002 TOTAL SALES
- ---------------------------------------------------------------------------------------------------------------------------------
Sears BBB+/Baa1/BBB+ 116,641 19.8% Collateral $193 $22,546,411
Target A+/A2/A 109,648 18.6% Ground Lease $301 $33,000,000
Gottschalks -/-/- 99,539 16.9% Ground Lease $220 $21,900,000
Mervyn's(1) A+/A2/A 75,088 12.8% Ground Lease $260 $19,500,000
- ---------------------------------------------------------------------------------------------------------------------------------
1. Ratings of parent company, Target Corporation.
- ---------------------------------------------------------------------------------------------------------------------------------
2002 SALES PSF OCC. COST PSF AS % OF SALES
- ---------------------------------------------------------------------------------------------------------------------------------
Inline Tenants $214.88 $8.89 4.13%
- ---------------------------------------------------------------------------------------------------------------------------------
THE SIERRA VISTA LOAN
THE LOAN. The Sierra Vista Loan is secured by a first mortgage on Sierra Vista
Mall, a 588,643 sq.ft., one-story regional mall located in Clovis, California.
THE BORROWER. The Borrowers, SV LandValue 27, LLC (62.502%), SV 5 Souls, LLC
(31.525%) and SV Cuyama Valley, LLC (5.973%), each single-member Delaware
limited liability companies are single-purpose, bankruptcy-remote entities for
which non-consolidation opinions were obtained. The sole member of SV LandValue
27, LLC is LandValue 27, LLC, an entity controlled by James Huelskamp. Mr.
Huelskamp is a real estate investor and operator based in Fresno, CA. He
founded, owns, and operates LandValue Management, LLC, a full-service real
estate management company. During 2001, Mr. Huelskamp (through affiliated
companies) purchased a 245,000 sq.ft.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-53
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
SIERRA VISTA MALL
BALANCE: $23,861,975
DSCR: 1.56x
LTV: 73.4%
- --------------------------------------------------------------------------------
shopping center, also located in the Fresno, California area, together with two
developable parcels, in a transaction valued in excess of $30 million. Prior to
2001, Mr. Huelskamp was employed by DivcoWest Group as a Vice President and
Asset Manager. At DivcoWest, Mr. Huelskamp oversaw the operation and performance
of the company's retail and office portfolios, and was responsible for internal
and external management. As of 10/01/02, Mr. Huelskamp had a stated net worth of
$5.82 million.As of 10/01/02, Mr. Huelskamp had a stated net worth of $5.82
million. James Huelskamp is a repeat sponsor of a Deutsche Bank borrower.
THE PROPERTY. Sierra Vista Mall is a 588,643 sq. ft., one-story enclosed
regional shopping mall (plus pad sites) located within the City of Clovis,
Fresno County, California. The Mall was constructed in 1989 (steel frame and
concrete panel construction) and renovated and expanded in 1999 with the
addition of the Sears store. The mall has four (4) anchor tenants: Sears
(116,641 sq. ft.; 20% of NRA, collateral), a freestanding Target store (109,648
sq. ft.; 19% of NRA, ground lease), Gottschalks (99,539 sq. ft.; 17% of NRA,
ground lease) and Mervyn's (75,088 sq. ft. 13% of NRA, ground lease).
The 73.06-acre site provides parking for 3,513 vehicles (6 spaces per 1,000 sq.
ft. of NRA) and is bounded by Shaw Avenue to the north, Gettysburg Avenue to the
south, Clovis Avenue to the west and Sierra Vista Parkway to the east. Shaw
Avenue is the major east/west arterial in the area; it provides quick access to
the area's primary freeways (U.S. 99, Highway 161 and the 41 Freeway). North
Clovis Avenue is the area's primary north/south arterial. SIGNIFICANT TENANTS.
The loan collateral is 98.2% occupied by approximately 80 tenants. The three
largest collateral tenants are: Sears, Target and Gottschalks. Approximately
53.8% of the center's Total Area is leased to investment grade tenants with
long-term leases.
Sears (NYSE: S; rated BBB+, Baa1 and BBB+ by S&P, Moody's and Fitch,
respectively) occupies 116,641 sq. ft. (19.8% of total area) under a lease with
a rent of $4.83psf expiring in October 2014. Sears' lease of land and
improvements at Sierra Vista Mall expires in 2014, however, there are six 5-year
renewal options. Sales at the subject were reported to be $185psf in 2001, up
10% from 2000, the first year of operation. Sears pays percentage rent only.
Rent paid in 2002 was the equivalent of $4.83psf. The overall occupancy cost for
Sears was approximately 2.5% in 2001. Target Corp. (NYSE: TGT; rated A+, Aa2 and
A by S&P, Moody's and Fitch, respectively) occupies 109,648 sq. ft. (18.6% of
total area) under a ground lease with a rent of $2.61psf expiring in December
2008. Target Corp. is headquartered in Minneapolis and is a general merchandise
retailer that operates over 1,107 stores throughout the U.S. Target owns its own
store at Sierra Vista Mall. Its sub-ground lease with the Borrower expires in
2008, however, there are (6) 4-year renewal options. Sales for 2001 were
reported to be $308psf, and Target's occupancy cost is a very low 0.77%. Target
recently (8/02) exercised its right to build a garden center at the subject in
August 2002. It also plans a $5 million renovation beginning in the first half
of 2003.
Gottschalks (NYSE: GOT) occupies 99,539 sq. ft. (16.9% of total area) under a
ground lease with a rent of $6.43psf expiring in November 2018. Headquartered in
nearby Fresno, CA, Gottschalks is a regional department and specialty store
chain that operates over 73 stores in California, Washington, Alaska, Idaho,
Oregon, and Nevada. Gottschalks owns it own store at Sierra Vista Mall. Its
sub-ground lease with the Borrower expires in 2018. Sales at the subject were
approximately $218psf in 2001, and Gottschalks occupancy cost was approximately
3.2%.
THE MARKET. According to market data provided by Marcus & Millchap Realtors, the
Fresno/Clovis metropolitan area contains approximately 16 million square feet of
retail space. Fresno has a retail vacancy rate of approximately 8%
(approximately 1% to 3% for anchor tenants and 10% for in-line and pad tenants).
Market rents for in-line space range from $14.00psf to $44.00psf, depending on
tenant size and location. The appraiser estimates market rent of $32.00psf for
tenants less than 1,000sf in size. Market rent for suites between 1,000sf and
3,000sf in size is estimated at $21.00psf. Market rent for suites between 3,000
sq. ft. and 5,000 sq. ft. is estimated at $15.00psf. Market rent for suites
greater than 5,000 sq. ft. is estimated at $10.00psf. The appraiser estimates
market rent of $17.40psf for pad site tenants. The in-line tenants at the
property generally pay rents equivalent to the market rental rates. Anchor
spaces including theatre rents are estimated to have a market rate rent of
$5.75psf. The property's anchor tenants pay, on average, below-market rents of
approximately $4.00psf.
The City of Clovis is part of the larger Fresno MSA and is a major retailing hub
in the region. The subject primarily draws customers from within a 5-mile radius
of the center. The secondary trade area extends to a 10-mile radius. As of 2002,
the population in these trade areas was estimated at 226,750 and 565,380,
respectively, representing increases in population (since 1990) of 22.8% and
21.0% respectively. The estimated 2002 average household income was $53,094
within a 5-mile radius of the subject and $53,397 within a 10-mile radius.
PROPERTY MANAGEMENT. LandValue Management, LLC, an affiliate of the primary
sponsor of the loan.
CURRENT MEZZANINE OR SUBORDINATE INDEBTEDNESS. None.
FUTURE MEZZANINE OR SUBORDINATE INDEBTEDNESS. Future mezzanine debt is permitted
subject to the following requirements: (i) security may only consist of a pledge
of a members interest in the Borrower; (ii) the combined DSCR of the aggregate
debt may not be less than 1.15x, prior to completion of Theater/Anchor site,
1.25x after completion; (iii) the LTV on the aggregate debt may not exceed 90%,
prior to completion of Theater/Anchor site, 75% after completion; (iv) mezzanine
lender must be approved by lender and must execute a subordination and
standstill agreement acceptable to lender; (v) mezzanine debt cannot be crossed
with any other loan or property; (vi) terms, conditions, and structure of
mezzanine debt must be approved by lender in its reasonable discretion; and
(vii) rating agency confirmation that the additional indebtedness will not cause
a downgrade to any of the bonds.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-54
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
SIERRA VISTA MALL
BALANCE: $23,861,975
DSCR: 1.56x
LTV: 73.4%
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-55
$580,872,000 (APPROXIMATE)
COMM 2003-LNB1
STATEMENT REGARDING ASSUMPTIONS AS TO
SECURITIES, PRICING ESTIMATES AND OTHER INFORMATION
The information contained in the attached materials (the "Information") may
include various forms of performance analysis, security characteristics and
securities pricing estimates for the securities addressed. Please read and
understand this entire statement before utilizing the Information. The
Information is provided solely by Deutsche Bank Securities Inc., ABN AMRO
Incorporated, Banc of America Securities LLC, Merrill Lynch, Pierce, Fenner &
Smith Incorporated and J.P. Morgan Securities Inc. (the "Underwriters") not as
agent for any issuer, and although it may be based on data supplied to it by an
issuer, the issuer has not participated in its preparation and makes no
representations regarding its accuracy or completeness. Should you receive
Information that refers to the "Statement Regarding Assumptions and Other
Information", please refer to this statement instead.
The Information is illustrative and is not intended to predict actual results
which may differ substantially from those reflected in the Information.
Performance analysis is based on certain assumptions with respect to significant
factors that may prove not to be as assumed. You should understand the
assumptions and evaluate whether they are appropriate for your purposes.
Performance results are based on mathematical models that use inputs to
calculate results. As with all models, results may vary significantly depending
upon the value of the inputs given. Inputs to these models include but are not
limited to: prepayment expectations (econometric prepayment models, single
expected lifetime prepayments or a vector of periodic prepayments), interest
rate assumptions (parallel and nonparallel changes for different maturity
instruments), collateral assumptions (actual pool level data, aggregated pool
level data, reported factors or imputed factors), volatility assumptions
(historically observed or implied current) and reported information (paydown
factors, rate resets and trustee statements). Models used in any analysis may be
proprietary making the results difficult for any third party to reproduce.
Contact your registered representative for detailed explanations of any modeling
techniques employed in the Information.
The Information addresses only certain aspects of the applicable security's
characteristics and thus does not provide a complete assessment. As such, the
Information may not reflect the impact of all structural characteristics of the
security, including call events and cash flow priorities at all prepayment
speeds and/or interest rates. You should consider whether the behavior of these
securities should be tested at assumptions different from those included in the
Information. The assumptions underlying the Information, including structure and
collateral, may be modified from time to time to reflect changed circumstances.
Any investment decision should be based only on the data in the prospectus and
prospectus supplement ("Offering Documents") and the then current version of the
Information. The Offering Documents contain data that is current as of their
publication date and after publication may no longer be complete or current.
Contact your registered representative for the Offering Documents, current
Information or additional materials, including other models for performance
analysis, which are likely to produce different results, and any further
explanation regarding the information.
Any pricing estimates an Underwriter has supplied at your request (a) represent
its view, at the time determined, of the investment value of the securities
between the estimated bid and offer levels, the spread between which may be
significant due to market volatility or illiquidity, (b) do not constitute a bid
by any person for any security, (c) may not constitute prices at which the
securities could have been purchased or sold in any market, (d) have not been
confirmed by actual trades, may vary from the value such Underwriter assigns any
such security while in its inventory, and may not take into account the size of
a position you have in the security, and (e) may have been derived from matrix
pricing that uses data relating to other securities whose prices are more
readily ascertainable to produce a hypothetical price based on the estimated
yield spread relationship between the securities.
General Information: The data underlying the Information has been obtained from
sources that the Underwriters believe are reliable, but the Underwriters do not
guarantee the accuracy of the underlying data or computations based thereon. The
Underwriters and/or individuals thereof may have positions in these securities
while the Information is circulating or during such period may engage in
transactions with the issuer or its affiliates. Each Underwriter acts as
principal in transactions with you, and accordingly, you must determine the
appropriateness for you of such transactions and address any legal, tax or
accounting considerations applicable to you. An Underwriter shall not be a
fiduciary or advisor unless it has agreed in writing to receive compensation
specifically to act in such capacities. If you are subject to ERISA, the
Information is being furnished on the condition that it will not form a primary
basis for any investment decision. The Information is not a solicitation of any
transaction in securities which may be made only by prospectus when required by
law, in which event you may obtain such prospectus from your registered
representative.
This information has been prepared solely for information purposes and is not an
offer to buy or sell or solicitation of an offer to buy or sell any security or
instrument or to participate in any trading strategy. No representation or
warranty can be given with respect to the accuracy or completeness of the
information, or that any future offer of securities will conform to the terms
hereof. If any such offer of securities is made, it will be made pursuant to a
definitive Prospectus and Prospectus Supplement, prepared by the Depositor,
which will contain material information not contained herein and to which
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded in its entirety by such Prospectus and
Prospectus Supplement. ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE MADE
ONLY AFTER REVIEWING SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT. Deutsche Bank
Securities Inc., ABN AMRO Incorporated, Banc of America Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation, any express or implied representations or
warranties for, statements contained in, and omissions from, this information.
This information should only be considered after reading the Statement Regarding
Assumptions as to Securities, Pricing Estimates, and Other Information (the
"Statement") which is attached. Do not use or rely on this information if you
have not received the Statement. You may obtain a copy of the Statement from
your sales representative.
B-56
ANNEX C
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in limited circumstances, the globally offered COMM 2003-LNB1
Commercial Mortgage Pass-Through Certificates, Series 2003-LNB1 (the "global
securities") will be available only in book-entry form. Investors in the global
securities may hold those global securities through any of DTC, Clearstream or
Euroclear. The global securities will be tradable as home market instruments in
both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same day funds. Terms used but not defined in
this Annex D have the meanings assigned to them in the prospectus supplement and
the prospectus.
Secondary market trading between investors holding global securities
through Clearstream and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional Eurobond practice (I.E., seven calendar day settlement).
Secondary market trading between investors holding global securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Clearstream or Euroclear and DTC
participants holding certificates will be effected on a delivery-against-payment
basis through the respective depositaries of Clearstream and Euroclear (in that
capacity) and as DTC participants.
Non-U.S. holders (as described below) of global securities will be subject
to U.S. withholding taxes unless those holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All global securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the global securities will
be represented through financial institutions acting on their behalf as direct
and indirect participants in DTC. As a result, Clearstream and Euroclear will
hold positions on behalf of their participants through their respective
depositaries, which in turn will hold those positions in accounts as DTC
participants.
Investors electing to hold their global securities through DTC will follow
the settlement practices applicable to similar issues of pass-through
certificates. Investors' securities custody accounts will be credited with their
holdings against payment in same-day funds on the settlement date.
Investors electing to hold their global securities through Clearstream or
Euroclear accounts will follow the settlement procedures applicable to
conventional Eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global securities will be credited to the
securities custody accounts on the settlement date against payments in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
participants will be settled using the procedures applicable to similar issues
of pass-through certificates in same-day funds.
TRADING BETWEEN CLEARSTREAM OR EUROCLEAR PARTICIPANTS. Secondary market
trading between Clearstream participants or Euroclear participants will be
settled using the procedures applicable to conventional Eurobonds in same-day
funds.
TRADING BETWEEN DTC SELLER AND CLEARSTREAM OR EUROCLEAR PURCHASER. When
global securities are to be transferred from the account of a DTC participant to
the account of a Clearstream participant or a Euroclear participant, the
purchaser will send instructions to Clearstream or Euroclear through a
Clearstream participant or Euroclear participant at least one business day
before settlement. Clearstream or Euroclear will instruct the respective
depositary, as the case may be, to receive the
C-1
global securities against payment. Payment will include interest accrued on the
global securities from and including the last coupon payment date to and
excluding the settlement date. Payment will then be made by the respective
depositary to the DTC participant's account against delivery of the global
securities. After settlement has been completed, the global securities will be
credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the Clearstream participant's or
Euroclear participant's account. The global securities credit will appear the
next day (European time) and the cash debit will be back-valued to, and the
interest on the Global Securities will accrue from, the value date (which would
be the preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (I.E., the trade fails), the Clearstream or
Euroclear cash debit will be valued instead as of the actual settlement date.
Clearstream participants and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to pre-position
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Clearstream or Euroclear. Under
this approach, they may take on credit exposure to Clearstream or Euroclear
until the global securities are credited to their accounts one day later.
As an alternative, if Clearstream or Euroclear has extended a line of
credit to them, Clearstream participants or Euroclear participants can elect not
to pre-position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, Clearstream participants or Euroclear
participants purchasing global securities would incur overdraft charges for one
day, assuming they cleared the overdraft when the global securities were
credited to their accounts. However, interest on the global securities would
accrue from the value date. Therefore, in many cases the investment income on
the global securities earned during that one day period may substantially reduce
or offset the amount of the overdraft charges, although this result will depend
on each Clearstream participant's or Euroclear participant's particular cost of
funds.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending global securities to
the respective depositary for the benefit of Clearstream participants or
Euroclear participants. The sale proceeds will be available to the DTC seller on
the settlement date. Thus, to the DTC participant a cross-market transaction
will settle no differently than a trade between two DTC participants.
TRADING BETWEEN CLEARSTREAM OR EUROCLEAR SELLER AND DTC PURCHASER. Due to
time zone differences in their favor, Clearstream participants and Euroclear
participants may employ their customary procedures for transactions in which
global securities are to be transferred by the respective clearing system,
through the respective depositary, to a DTC participant. The seller will send
instructions to Clearstream or Euroclear through a Clearstream participant or
Euroclear participant at least one business day before settlement. In these
cases, Clearstream or Euroclear will instruct the respective depositary, as
appropriate, to deliver the bonds to the DTC participant's account against
payment. Payment will include interest accrued on the global securities from and
including the last coupon payment date to and excluding the settlement date. The
payment will then be reflected in the account of the Clearstream participant or
Euroclear participant the following day, and receipt of the cash proceeds in the
Clearstream participant's or Euroclear participant's account would be
back-valued to the value date (which would be the preceding day, when settlement
occurred in New York). Should the Clearstream participant or Euroclear
participant have a line of credit with its respective clearing system and elect
to be in debit in anticipation of receipt of the sale proceeds in its account,
the back-valuation will extinguish any overdraft charges incurred over that
one-day period. If settlement is not completed on the intended value date (I.E.,
the trade fails), receipt of the cash proceeds in the Clearstream participant's
or Euroclear participant's account would instead be valued as of the actual
settlement date. Finally, day traders that use Clearstream or Euroclear and that
purchase global securities from DTC participants for delivery to Clearstream
participants or Euroclear participants should note that these trades would
automatically fail on the sale side unless affirmative action were taken. At
least three techniques should be readily available to eliminate this potential
problem:
(a) borrowing through Clearstream or Euroclear for one day (until the
purchase side of the day trade is reflected in their Clearstream or
Euroclear accounts) in accordance with the clearing system's customary
procedures;
C-2
(b) borrowing the global securities in the U.S. from a DTC participant
no later than one day before settlement, which would give the global
securities sufficient time to be reflected in their Clearstream or
Euroclear account to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC participant is at
least one day before the value date for the sale to the Clearstream
participant or Euroclear participant.
U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of global securities holding securities through
Clearstream or Euroclear (or through DTC if the holder has an address outside
the U.S.) will be subject to the 30% U.S. withholding tax that generally applies
to payments of interest (including original issue discount) on registered debt
issued by U.S. persons, unless (1) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business in the chain of intermediaries between that beneficial owner and the
U.S. entity required to withhold tax complies with applicable certification
requirements and (2) that beneficial owner takes one of the following steps to
obtain an exemption or reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS (FORM W-8BEN). Beneficial owners of
certificates that are non-U.S. persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8BEN (Certificate of Foreign Status)
or substitute form. If the information shown on Form W-8BEN changes, a new Form
W-8BEN must be filed within 30 days of that change.
EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM
W-8ECI). A non-U.S. person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States can obtain an exemption from the
withholding tax by filing Form W-8ECI (Exemption from Withholding of Tax on
Income Effectively Connected with the Conduct of a Trade or Business in the
United States) or substitute form.
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES
(FORM W-8BEN). Non-U.S. Persons that are beneficial owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form W-8BEN (Ownership,
Exemption or Reduced Rate Certificate) or substitute form. Form W-8BEN may be
filed by the Beneficial Owner or his agent.
EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The beneficial owner of a
global security or, in the case of a Form W-8BEN or a Form W-8ECI filer, his
agent, files by submitting the appropriate form to the person through whom it
holds (the clearing agency, in the case of persons holding directly on the books
of the clearing agency). Form W-8BEN and Form W-8BEN are effective for three
calendar years and Form W-8ECI is effective for one calendar year.
The term "U.S. person"means (1) a citizen or resident of the United States,
(2) a corporation or partnership organized in or under the laws of the United
States, any state thereof or the District of Columbia, including any entity
treated as a corporation or partnership for federal income tax purposes, (3) an
estate the income of which is includable in gross income for United States tax
purposes, regardless of its source or (4) a trust if a court within the United
States is able to exercise primary supervision of the administration of the
Trust and one or more United States fiduciaries have the authority to control
all substantial decisions of the trust. This summary does not deal with all
aspects of U.S. federal income tax withholding that may be relevant to foreign
holders of the global securities. Investors are advised to consult their own tax
advisors for specific tax advice concerning their holding and disposing of the
global securities.
C-3
DEUTSCHE MORTGAGE & ASSET RECEIVING CORPORATION
MORTGAGE PASS-THROUGH CERTIFICATES, ISSUABLE IN SERIES
The mortgage pass-through certificates offered hereby (the "Offered
Certificates") and by the supplements hereto (each, a "Prospectus Supplement")
will be offered from time to time in series. The Offered Certificates of any
series, together with any other mortgage pass-through certificates of such
series, are collectively referred to herein as the "Certificates."
Each series of Certificates will represent in the aggregate the entire
beneficial ownership interest in a trust fund (with respect to any series, the
"Trust Fund") to be formed by Deutsche Mortgage & Asset Receiving Corporation
(the "Depositor") and including a segregated pool (a "Mortgage Asset Pool") of
various types of multifamily and commercial mortgage loans ("Mortgage Loans"),
mortgage-backed securities ("MBS") that evidence interests in, or that are
secured by pledges of, one or more of various types of multifamily or commercial
mortgage loans, or a combination of Mortgage Loans and MBS (collectively,
"Mortgage Assets"). The Mortgage Loans in (and the mortgage loans underlying the
MBS in) any Trust Fund will be secured by first or junior liens on, or security
interests in, one or more of the following types of real property: (i)
Multifamily Properties (as defined herein) units and mobile home parks; and (ii)
commercial properties consisting of office buildings, Retail Properties (as
defined herein), hotels and motels, health care-related facilities, recreational
vehicle parks, warehouse facilities, mini-warehouse facilities, self-storage
facilities, industrial facilities, parking lots, restaurants, mixed use
properties (that is, any combination of the foregoing), and unimproved land. To
the extent described in the Prospectus Supplement, Retail Properties and
Multifamily Properties will represent security for a material concentration of
the Mortgage Loans in (or the mortgage loans underlying the MBS in) any Trust
Fund, based on principal balance at the time such Trust Fund is formed. If so
specified in the related Prospectus Supplement, the Trust Fund for a series of
Certificates may also include letters of credit, surety bonds, insurance
policies, guarantees, reserve funds, guaranteed investment contracts, interest
rate exchange agreements or interest rate cap or floor agreements designed to
reduce the effects of interest rate fluctuations on the Mortgage Assets. See
"Description of the Trust Funds," "Description of the Certificates" and
"Description of Credit Support."
The yield on each class of Certificates of a series will be affected by,
among other things, the rate of payment of principal (including prepayments) on
the Mortgage Assets in the related Trust Fund and the timing of receipt of such
payments as described herein and in the related Prospectus Supplement. See
"Yield and Maturity Considerations." A Trust Fund may be subject to early
termination under the circumstances described herein and in the related
Prospectus Supplement. See "Description of the Certificates--Termination;
Retirement of the Certificates."
(COVER CONTINUED ON NEXT PAGE)
- --------------------------------------------------------------------------------
PROCEEDS OF THE ASSETS IN THE RELATED TRUST FUND WILL BE THE SOLE SOURCE OF
PAYMENTS ON THE OFFERED CERTIFICATES. THE OFFERED CERTIFICATES WILL NOT
REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR, DEUTSCHE BANK AG OR ANY
OF THEIR AFFILIATES. NEITHER THE OFFERED CERTIFICATES NOR THE MORTGAGE ASSETS
WILL BE GUARANTEED OR INSURED BY THE DEPOSITOR OR ANY OF ITS AFFILIATES OR,
UNLESS OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT, BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION APPEARING ON PAGE 8
HEREIN UNDER THE CAPTION "RISK FACTORS" AND SUCH INFORMATION AS MAY BE SET FORTH
UNDER THE CAPTION "RISK FACTORS" IN THE RELATED PROSPECTUS SUPPLEMENT BEFORE
PURCHASING ANY OFFERED CERTIFICATE.
The Offered Certificates of any series may be offered through one or more
different methods, including offerings through underwriters, as described under
"Method of Distribution" and in the related Prospectus Supplement.
There will be no secondary market for the Offered Certificates of any
series prior to the offering thereof. There can be no assurance that a secondary
market for any Offered Certificates will develop or, if it does develop, that it
will continue. Unless otherwise provided in the related Prospectus Supplement,
the Certificates will not be listed on any securities exchange.
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of the Offered Certificates of any series unless
accompanied by the Prospectus Supplement for such series.
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The date of this Prospectus is June 9, 2003
(cover continued)
As described in the related Prospectus Supplement, the Certificates of each
series, including the Offered Certificates of such series, may consist of one or
more classes of Certificates that: (i) provide for the accrual of interest
thereon based on a fixed, variable or adjustable interest rate; (ii) are senior
or subordinate to one or more other classes of Certificates in entitlement to
certain distributions on the Certificates; (iii) are entitled to distributions
of principal, with disproportionate, nominal or no distributions of interest;
(iv) are entitled to distributions of interest, with disproportionate, nominal
or no distributions of principal; (v) provide for distributions of interest
thereon or principal thereof that commence only following the occurrence of
certain events, such as the retirement of one or more other classes of
Certificates of such series; (vi) provide for distributions of principal thereof
to be made, from time to time or for designated periods, at a rate that is
faster (and, in some cases, substantially faster) or slower (and, in some cases,
substantially slower) than the rate at which payments or other collections of
principal are received on the Mortgage Assets in the related Trust Fund; or
(vii) provide for distributions of principal thereof to be made, subject to
available funds, based on a specified principal payment schedule or other
methodology. Distributions in respect of the Certificates of each series will be
made on a monthly, quarterly, semi-annual, annual or other periodic basis as
specified in the related Prospectus Supplement. See "Description of the
Certificates."
If so provided in the related Prospectus Supplement, one or more elections
may be made to treat the related Trust Fund and/or the assets thereof or a
designated portion thereof as a "real estate mortgage investment conduit" (each,
a "REMIC") for federal income tax purposes. If applicable, the Prospectus
Supplement for a series of Certificates will specify which class or classes of
such series of Certificates will be considered to be regular interests in the
related REMIC and which class of Certificates or other interests will be
designated as the residual interest in the related REMIC. See "Certain Federal
Income Tax Consequences."
An Index of Principal Definitions is included at the end of this Prospectus
specifying the location of definitions of important or frequently used defined
terms.
ii
PROSPECTUS SUPPLEMENT
As more particularly described herein, the Prospectus Supplement relating
to each series of Offered Certificates will, among other things, set forth, as
and to the extent appropriate: (i) a description of the class or classes of such
Offered Certificates, including the payment provisions with respect to each such
class, the aggregate principal amount, if any, of each such class, the rate at
which interest accrues from time to time, if at all, with respect to each such
class or the method of determining such rate, and whether interest with respect
to each such class will accrue from time to time on its aggregate principal
amount, if any, or on a specified notional amount, if at all; (ii) information
with respect to any other classes of Certificates of the same series; (iii) the
respective dates on which distributions are to be made; (iv) information as to
the assets, including the Mortgage Assets, constituting the related Trust Fund
(all such assets, with respect to the Certificates of any series, the "Trust
Assets"); (v) the circumstances, if any, under which the related Trust Fund may
be subject to early termination; (vi) additional information with respect to the
method of distribution of such Offered Certificates; (vii) whether one or more
REMIC elections will be made and the designation of the "regular interests" and
"residual interests" in each REMIC to be created and the identity of the person
(the "REMIC Administrator") responsible for the various tax-related duties in
respect of each REMIC to be created; (viii) the initial percentage ownership
interest in the related Trust Fund to be evidenced by each class of Certificates
of such series; (ix) information concerning the Trustee (as defined herein) of
the related Trust Fund; (x) if the related Trust Fund includes Mortgage Loans,
information concerning the Master Servicer and any Special Servicer (each as
defined herein) of such Mortgage Loans and the circumstances under which all or
a portion, as specified, of the servicing of a Mortgage Loan would transfer from
the Master Servicer to the Special Servicer; (xi) information as to the nature
and extent of subordination of any class of Certificates of such series,
including a class of Offered Certificates; and (xii) whether such Offered
Certificates will be initially issued in definitive or book-entry form.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus forms a part)
under the Securities Act of 1933, as amended, with respect to the Offered
Certificates. This Prospectus and the Prospectus Supplement relating to each
series of Offered Certificates contain summaries of the material terms of the
documents referred to herein and therein, but do not contain all of the
information set forth in the Registration Statement pursuant to the rules and
regulations of the Commission. For further information, reference is made to
such Registration Statement and the exhibits thereto. Such Registration
Statement and exhibits can be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at its Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its Regional
Offices located as follows: Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; New York Regional Office,
233 Broadway, New York, New York 10279. Copies of such material can also be
obtained electronically through the Commission's Electronic Data Gathering,
Analysis and Retrieval system at the Commission's Web site (http://www.sec.gov).
No dealer, salesman, or other person has been authorized to give any
information, or to make any representations, other than those contained in this
Prospectus or any related Prospectus Supplement, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Depositor or any other person. Neither the delivery of this Prospectus or
any related Prospectus Supplement nor any sale made hereunder or thereunder
shall under any circumstances create an implication that there has been no
change in the information herein since the date hereof or therein since the date
thereof. This Prospectus and any related Prospectus Supplement are not an offer
to sell or a solicitation of an offer to buy any security in any jurisdiction in
which it is unlawful to make such offer or solicitation.
The Master Servicer, the Trustee or another specified person will cause to
be provided to registered holders of the Offered Certificates of each series
periodic unaudited reports concerning the related Trust Fund. If beneficial
interests in a class or series of Offered Certificates are being held and
iii
transferred in book-entry format through the facilities of The Depository Trust
Company ("DTC") as described herein, then unless otherwise provided in the
related Prospectus Supplement, such reports will be sent on behalf of the
related Trust Fund to a nominee of DTC as the registered holder of the Offered
Certificates. Conveyance of notices and other communications by DTC to its
participating organizations, and directly or indirectly through such
participating organizations to the beneficial owners of the applicable Offered
Certificates, will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to time. See
"Description of the Certificates--Reports to Certificateholders" and
"--Book-Entry Registration and Definitive Certificates."
The Depositor will file or cause to be filed with the Commission such
periodic reports with respect to each Trust Fund as are required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the Commission thereunder. In addition, because of the
limited number of Certificateholders expected for each series, the Depositor
anticipates that a significant portion of such reporting requirements will be
permanently suspended following the first fiscal year for the related Trust
Fund.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports filed
or caused to be filed by the Depositor with respect to a Trust Fund pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act of 1934, as amended, prior
to the termination of an offering of Offered Certificates evidencing interests
therein. The Depositor will provide or cause to be provided without charge to
each person to whom this Prospectus is delivered in connection with the offering
of one or more classes of Offered Certificates, upon written or oral request of
such person, a copy of any or all documents or reports incorporated herein by
reference, in each case to the extent such documents or reports relate to one or
more of such classes of such Offered Certificates, other than the exhibits to
such documents (unless such exhibits are specifically incorporated by reference
in such documents). Such requests to the Depositor should be directed in writing
to the Depositor at One International Place, Room 520, Boston, Massachusetts
02110, Attention: Secretary, or by telephone at (617) 951-7690.
iv
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT ..................................................... iii
AVAILABLE INFORMATION ..................................................... iii
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE ......................... iv
SUMMARY OF PROSPECTUS ..................................................... 1
RISK FACTORS .............................................................. 8
Limited Liquidity of Offered Certificates .............................. 8
Limited Assets ......................................................... 8
Credit Support Limitations ............................................. 9
Effect of Prepayments on Average Life of Certificates .................. 9
Effect of Prepayments on Yield of Certificates ......................... 10
Limited Nature of Ratings .............................................. 11
Certain Factors Affecting Delinquency,
Foreclosure and Loss of the
Mortgage Loans ....................................................... 11
Some Certificates may not be Appropriate
for Erisa Plans ...................................................... 15
Certain Federal Tax Considerations Regarding
Residual Certificates ................................................ 16
Certain Federal Tax Considerations
Regarding Original Issue Discount .................................... 16
Bankruptcy Proceedings Entail Certain Risks ............................ 16
Book-Entry System for Certain Classes may
Decrease Liquidity and Delay Payment ................................. 17
Inclusion of Delinquent and Nonperforming
Mortgage Loans in a Mortgage Asset
Pool ................................................................. 17
Termination ............................................................ 17
Risks Associated With Multifamily
Properties ........................................................... 18
Risks Associated With Retail Properties ................................ 18
DESCRIPTION OF THE TRUST FUNDS ............................................ 19
General ................................................................ 19
Mortgage Loans ......................................................... 19
MBS .................................................................... 23
Certificate Accounts ................................................... 24
Credit Support ......................................................... 25
Cash Flow Agreements ................................................... 25
YIELD AND MATURITY CONSIDERATIONS ......................................... 25
General ................................................................ 25
Pass-Through Rate ...................................................... 25
Payment Delays ......................................................... 25
Certain Shortfalls in Collections of Interest .......................... 26
Yield and Prepayment Considerations .................................... 26
Weighted Average Life and Maturity ..................................... 27
Other Factors Affecting Yield, Weighted
Average Life and Maturity ............................................ 28
THE DEPOSITOR ............................................................. 30
DEUTSCHE BANK AG .......................................................... 30
DESCRIPTION OF THE CERTIFICATES ........................................... 31
General ................................................................ 31
Distributions .......................................................... 31
Distributions of Interest on the
Certificates ......................................................... 32
Distributions of Principal of the
Certificates ......................................................... 33
Distributions on the Certificates in Respect
of Prepayment Premiums or in Respect of
Equity Participations ................................................ 33
Allocation of Losses and Shortfalls .................................... 34
Advances in Respect of Delinquencies ................................... 34
Reports to Certificateholders .......................................... 35
Voting Rights .......................................................... 36
Termination ............................................................ 36
Book-Entry Registration and Definitive
Certificates ......................................................... 37
DESCRIPTION OF THE POOLING
AGREEMENTS ............................................................. 38
General ................................................................ 38
Assignment of Mortgage Loans; Repurchases .............................. 39
Representations and Warranties;
Repurchases .......................................................... 40
Collection and Other Servicing Procedures .............................. 41
Sub-Servicers .......................................................... 43
Certificate Account .................................................... 43
Modifications, Waivers and Amendments of Mortgage Loans ................ 45
Realization Upon Defaulted Mortgage Loans .............................. 46
Hazard Insurance Policies .............................................. 47
Due-on-Sale and Due-on-Encumbrance
Provisions ........................................................... 48
Servicing Compensation and Payment of
Expenses ............................................................. 48
Evidence as to Compliance .............................................. 49
Certain Matters Regarding the Master
Servicer, the Special Servicer, the REMIC
Administrator and the Depositor ...................................... 49
Events of Default ...................................................... 50
Rights Upon Event of Default ........................................... 51
Amendment .............................................................. 52
List of Certificateholders ............................................. 52
The Trustee ............................................................ 53
v
Duties of the Trustee ................................................. 53
Certain Matters Regarding the Trustee ................................. 53
Resignation and Removal of the Trustee ................................ 53
DESCRIPTION OF CREDIT SUPPORT ............................................ 54
General ............................................................... 54
Subordinate Certificates .............................................. 54
Insurance or Guarantees with Respect to
Mortgage Loans ...................................................... 54
Letter of Credit ...................................................... 54
Certificate Insurance and Surety Bonds ................................ 55
Reserve Funds ......................................................... 55
Credit Support with Respect to MBS .................................... 55
Interest Rate Exchange, Cap and Floor
Agreements .......................................................... 56
CERTAIN LEGAL ASPECTS OF
MORTGAGE LOANS ........................................................ 56
General ............................................................... 56
Types of Mortgage Instruments ......................................... 56
Leases and Rents ...................................................... 57
Personalty ............................................................ 57
Foreclosure ........................................................... 57
Bankruptcy Laws ....................................................... 60
Environmental Considerations .......................................... 63
Due-on-Sale and Due-on-Encumbrance
Provisions .......................................................... 65
Junior Liens; Rights of Holders of
Senior Liens ........................................................ 65
Subordinate Financing ................................................. 65
Default Interest and Limitations on
Prepayments ......................................................... 66
Applicability of Usury Laws ........................................... 66
Certain Laws and Regulations .......................................... 66
Americans with Disabilities Act ....................................... 67
Soldiers' and Sailors' Civil Relief Act
of 1940 ............................................................. 67
Forfeitures in Drug and RICO Proceedings .............................. 67
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES .......................................................... 68
FEDERAL INCOME TAX CONSEQUENCES FOR
REMIC CERTIFICATES .................................................... 68
Status of REMIC Certificates .......................................... 68
Qualification as a REMIC .............................................. 69
Taxation of Regular Certificates ...................................... 71
Taxation of Residual Certificates ..................................... 77
Taxes That May Be Imposed on the
REMIC Pool .......................................................... 84
Liquidation of the REMIC Pool ......................................... 84
Administrative Matters ................................................ 85
Limitations on Deduction of Certain
Expenses ............................................................ 85
Taxation of Certain Foreign Investors ................................. 85
Backup Withholding .................................................... 86
Reporting Requirements ................................................ 87
FEDERAL INCOME TAX CONSEQUENCES FOR
CERTIFICATES AS TO WHICH NO REMIC
ELECTION IS MADE ...................................................... 87
Standard Certificates ................................................. 87
Stripped Certificates ................................................. 90
Reporting Requirements and Backup Withholding.......................... 93
Taxation of Certain Foreign Investors.................................. 93
STATE AND OTHER TAX CONSEQUENCES ......................................... 93
CERTAIN ERISA CONSIDERATIONS ............................................. 94
General ............................................................... 94
Plan Asset Regulations ................................................ 94
Prohibited Transaction Exemptions ..................................... 95
Tax Exempt Investors .................................................. 98
LEGAL INVESTMENT ......................................................... 98
USE OF PROCEEDS .......................................................... 99
METHOD OF DISTRIBUTION ................................................... 100
LEGAL MATTERS ............................................................ 101
FINANCIAL INFORMATION .................................................... 101
RATING ................................................................... 101
INDEX OF PRINCIPAL TERMS ................................................. 102
vi
SUMMARY OF PROSPECTUS
The following summary of certain pertinent information is qualified in its
entirety by reference to the more detailed information appearing elsewhere in
this Prospectus and by reference to the information with respect to each series
of Certificates contained in the Prospectus Supplement to be prepared and
delivered in connection with the offering of Offered Certificates of such
series. An Index of Principal Definitions is included at the end of this
Prospectus.
SECURITIES OFFERED ............... Mortgage pass-through certificates, issuable
in series.
DEPOSITOR ........................ Deutsche Mortgage & Asset Receiving
Corporation, a Delaware corporation. See
"The Depositor."
TRUSTEE .......................... The trustee (the "Trustee") for each series
of Certificates will be named in the related
Prospectus Supplement. See "Description of
the Pooling Agreements--The Trustee."
MASTER SERVICER .................. If a Trust Fund includes Mortgage Loans,
then the master servicer (the "Master
Servicer") for the corresponding series of
Certificates will be named in the related
Prospectus Supplement. See "Description of
the Pooling Agreements--Certain Matters
Regarding the Master Servicer, the Special
Servicer, the REMIC Administrator and the
Depositor."
SPECIAL SERVICER ................. If a Trust Fund includes Mortgage Loans,
then the special servicer (the "Special
Servicer") for the corresponding series of
Certificates will be named, or the
circumstances under which a Special Servicer
may be appointed will be described, in the
related Prospectus Supplement. See
"Description of the Pooling
Agreements--Collection and Other Servicing
Procedures."
MBS ADMINISTRATOR ................ If a Trust Fund includes MBS, then the
entity responsible for administering such
MBS (the "MBS Administrator") will be named
in the related Prospectus Supplement. If an
entity other than the Trustee and the Master
Servicer is the MBS Administrator, such
entity will be herein referred to as the
"Manager."
REMIC ADMINISTRATOR .............. The person (the "REMIC Administrator")
responsible for the various tax-related
administration duties for a series of
Certificates as to which one or more REMIC
elections have been made, will be named in
the related Prospectus Supplement. See
"Description of the Pooling
Agreements--Certain Matters Regarding the
Master Servicer, the Special Servicer, the
REMIC Administrator and the Depositor."
THE MORTGAGE ASSETS .............. The Mortgage Assets will be the primary
assets of any Trust Fund. The Mortgage
Assets with respect to each series of
Certificates will, in general, consist of a
pool of mortgage loans ("Mortgage Loans")
secured by first or junior liens on, or
security interests in, one or more of the
following types of real property: (i)
residential properties (each, a "Multifamily
Property") consisting of five or more rental
or cooperatively-owned dwelling units in
high-rise, mid-rise or garden apartment
buildings or other residential structures,
and mobile home parks; and (ii) commercial
properties ("Commercial Properties")
consisting of office buildings, retail
shopping facilities, such as shopping
centers, malls and individual
1
stores (each, a "Retail Property"), hotels
and motels, health care-related facilities
(such as hospitals, skilled nursing
facilities, nursing homes, congregate care
facilities and senior housing), recreational
vehicle parks, warehouse facilities,
mini-warehouse facilities, self-storage
facilities, industrial facilities, parking
lots, restaurants, mixed use properties
(that is, any combination of the foregoing),
and unimproved land. To the extent described
in the Prospectus Supplement, Retail
Properties and Multifamily Properties will
represent security for a material
concentration of the Mortgage Loans in any
Trust Fund, based on principal balance at
the time such Trust Fund is formed. The
Mortgage Loans will not be guaranteed or
insured by the Depositor or any of its
affiliates or, unless otherwise provided in
the related Prospectus Supplement, by any
governmental agency or instrumentality or by
any other person. If so specified in the
related Prospectus Supplement, some Mortgage
Loans may be delinquent or nonperforming as
of the date the related Trust Fund is
formed.
As and to the extent described in the
related Prospectus Supplement, a Mortgage
Loan (i) may provide for no accrual of
interest or for accrual of interest thereon
at an interest rate (a "Mortgage Rate") that
is fixed over its term or that adjusts from
time to time, or that may be converted at
the borrower's election from an adjustable
to a fixed Mortgage Rate, or from a fixed to
an adjustable Mortgage Rate, (ii) may
provide for level payments to maturity or
for payments that adjust from time to time
to accommodate changes in the Mortgage Rate
or to reflect the occurrence of certain
events, and may permit negative
amortization, (iii) may be fully amortizing
or may be partially amortizing or
nonamortizing, with a balloon payment due on
its stated maturity date, (iv) may prohibit
over its term or for a certain period
prepayments and/or require payment of a
premium or a yield maintenance payment in
connection with certain prepayments and (v)
may provide for payments of principal,
interest or both, on due dates that occur
monthly, quarterly, semi-annually or at such
other interval as is specified in the
related Prospectus Supplement. Each Mortgage
Loan will have had an original term to
maturity of not more than 40 years. No
Mortgage Loan will have been originated by
the Depositor. See "Description of the Trust
Funds--Mortgage Loans."
If any Mortgage Loan, or group of related
Mortgage Loans, constitutes a concentration
of credit risk, financial statements or
other financial information with respect to
the related Mortgaged Property or Mortgaged
Properties will be included in the related
Prospectus Supplement. See "Description of
the Trust Funds--Mortgage Loans--Mortgage
Loan Information in Prospectus Supplements."
If and to the extent specified in the
related Prospectus Supplement, the Mortgage
Assets with respect to a series of
Certificates may also include, or consist
of, mortgage participations, mortgage
pass-through certificates and/or other
mortgage-backed securities (collectively,
"MBS"), that evidence an
2
interest in, or are secured by a pledge of,
one or more mortgage loans that conform to
the descriptions of the Mortgage Loans
contained herein and which may or may not be
issued, insured or guaranteed by the United
States or an agency or instrumentality
thereof. See "Description of the Trust
Funds--MBS."
THE CERTIFICATES ................. Each series of Certificates will be issued
in one or more classes pursuant to a pooling
and servicing agreement or other agreement
specified in the related Prospectus
Supplement (in any case, a "Pooling
Agreement") and will represent in the
aggregate the entire beneficial ownership
interest in the related Trust Fund.
As described in the related Prospectus
Supplement, the Certificates of each series,
including the Offered Certificates of such
series, may consist of one or more classes
of Certificates that, among other things:
(i) are senior (collectively, "Senior
Certificates") or subordinate (collectively,
"Subordinate Certificates") to one or more
other classes of Certificates in entitlement
to certain distributions on the
Certificates; (ii) are entitled to
distributions of principal, with
disproportionate, nominal or no
distributions of interest (collectively,
"Stripped Principal Certificates"); (iii)
are entitled to distributions of interest,
with disproportionate, nominal or no
distributions of principal (collectively,
"Stripped Interest Certificates"); (iv)
provide for distributions of interest
thereon or principal thereof that commence
only after the occurrence of certain events,
such as the retirement of one or more other
classes of Certificates of such series; (v)
provide for distributions of principal
thereof to be made, from time to time or for
designated periods, at a rate that is faster
(and, in some cases, substantially faster)
or slower (and, in some cases, substantially
slower) than the rate at which payments or
other collections of principal are received
on the Mortgage Assets in the related Trust
Fund; (vi) provide for distribu- tions of
principal thereof to be made, subject to
available funds, based on a specified
principal payment schedule or other
methodology; or (vii) provide for
distribution based on collections on the
Mortgage Assets in the related Trust Fund
attributable to prepayment premiums, yield
maintenance payments or equity
participations.
If so specified in the related Prospectus
Supplement, a series of Certificates may
include one or more "Controlled Amortization
Classes," which will entitle the holders
thereof to receive principal distributions
according to a specified principal payment
schedule. Although prepayment risk cannot be
eliminated entirely for any class of
Certificates, a Controlled Amortization
Class will generally provide a relatively
stable cash flow so long as the actual rate
of prepayment on the Mortgage Loans in the
related Trust Fund remains relatively
constant at the rate, or within the range of
rates, of prepayment used to establish the
specific principal payment schedule for such
Certificates. Prepayment risk with respect
to a given Mortgage Asset Pool does not
disappear, however, and the stability
afforded to a Controlled Amortization Class
comes at the expense of one or more other
classes of the same series, any of which
other classes
3
may also be a class of Offered Certificates.
See "Risk Factors--Effect of Prepayments on
Average Life of Certificates" and "--Effect
of Prepayments on Yield of Certificates."
Each class of Certificates, other than
certain classes of Stripped Interest
Certificates and certain classes of Residual
Certificates (as defined herein), will have
an initial stated principal amount (a
"Certificate Balance"); and each class of
Certificates, other than certain classes of
Stripped Principal Certificates and certain
classes of Residual Certificates, will
accrue interest on its Certificate Balance
or, in the case of certain classes of
Stripped Interest Certificates, on a
notional amount (a "Notional Amount"), based
on a fixed, variable or adjustable interest
rate (a "Pass-Through Rate"). The related
Prospectus Supplement will specify the
Certificate Balance, Notional Amount and/or
Pass-Through Rate (or, in the case of a
variable or adjustable Pass-Through Rate,
the method for determining such rate), as
applicable, for each class of Offered
Certificates.
If so specified in the related Prospectus
Supplement, a class of Certificates may have
two or more component parts, each having
characteristics that are otherwise described
herein as being attributable to separate and
distinct classes.
The Certificates will not be guaranteed or
insured by the Depositor or any of its
affiliates, by any governmental agency or
instrumentality or by any other person or
entity, unless otherwise provided in the
related Prospectus Supplement. See "Risk
Factors--Limited Assets."
DISTRIBUTIONS OF INTEREST
ON THE CERTIFICATES .............. Interest on each class of Offered
Certificates (other than certain classes of
Stripped Principal Certificates and certain
classes of Residual Certificates) of each
series will accrue at the applicable
Pass-Through Rate on the Certificate Balance
or, in the case of certain classes of
Stripped Interest Certificates, the Notional
Amount thereof outstanding from time to time
and will be distributed to
Certificateholders as provided in the
related Prospectus Supplement (each of the
specified dates on which distributions are
to be made, a "Distribution Date").
Distributions of interest with respect to
one or more classes of Certificates
(collectively, "Accrual Certificates") may
not commence until the occurrence of certain
events, such as the retirement of one or
more other classes of Certificates, and
interest accrued with respect to a class of
Accrual Certificates prior to the occurrence
of such an event will either be added to the
Certificate Balance thereof or otherwise
deferred as described in the related
Prospectus Supplement. Distributions of
interest with respect to one or more classes
of Certificates may be reduced to the extent
of certain delinquencies, losses and other
contingencies described herein and in the
related Prospectus Supplement. See "Risk
Factors--Effect of Prepayments on Average
Life of Certificates" and "--Effect of
Prepayments on Yield of Certificates,"
"Yield and Maturity Considerations--Certain
Shortfalls in Collections of Interest" and
"Description of the
Certificates--Distributions of Interest on
the Certificates."
4
DISTRIBUTIONS OF PRINCIPAL
OF THE CERTIFICATES .............. Each class of Certificates of each series
(other than certain classes of Stripped
Interest Certificates and certain classes of
Residual Certificates) will have a
Certificate Balance. The Certificate Balance
of a class of Certificates outstanding from
time to time will represent the maximum
amount that the holders thereof are then
entitled to receive in respect of principal
from future cash flow on the assets in the
related Trust Fund. The initial aggregate
Certificate Balance of all classes of a
series of Certificates will not be greater
than the outstanding principal balance of
the related Mortgage Assets as of a
specified date (the "Cut-off Date"), after
application of scheduled payments due on or
before such date, whether or not received.
As and to the extent described in each
Prospectus Supplement, distributions of
principal with respect to the related series
of Certificates will be made on each
Distribution Date to the holders of the
class or classes of Certificates of such
series then entitled thereto until the
Certificate Balances of such Certificates
have been reduced to zero. Distributions of
principal with respect to one or more
classes of Certificates: (i) may be made at
a rate that is faster (and, in some cases,
substantially faster) or slower (and, in
some cases, substantially slower) than the
rate at which payments or other collections
of principal are received on the Mortgage
Assets in the related Trust Fund; (ii) may
not commence until the occurrence of certain
events, such as the retirement of one or
more other classes of Certificates of the
same series; (iii) may be made, subject to
certain limitations, based on a specified
principal payment schedule; or (iv) may be
contingent on the specified principal
payment schedule for another class of the
same series and the rate at which payments
and other collections of principal on the
Mortgage Assets in the related Trust Fund
are received. Unless otherwise specified in
the related Prospectus Supplement,
distributions of principal of any class of
Offered Certificates will be made on a pro
rata basis among all of the Certificates of
such class. See "Description of the
Certificates--Distributions of Principal of
the Certificates."
CREDIT SUPPORT AND
CASH FLOW AGREEMENTS ............. If so provided in the related Prospectus
Supplement, partial or full protection
against certain defaults and losses on the
Mortgage Assets in the related Trust Fund
may be provided to one or more classes of
Certificates of the related series in the
form of subordination of one or more other
classes of Certificates of such series,
which other classes may include one or more
classes of Offered Certificates, or by one
or more other types of credit support, which
may include a letter of credit, a surety
bond, an insurance policy, a guarantee, a
reserve fund, or a combination thereof (any
such coverage with respect to the
Certificates of any series, "Credit
Support"). If so provided in the related
Prospectus Supplement, a Trust Fund may
include: (i) guaranteed investment contracts
pursuant to which moneys held in the funds
and accounts established for the related
series will be invested at a specified rate;
or (ii) interest rate exchange agreements,
interest
5
rate cap or floor agreements, or other
agreements designed to reduce the effects of
interest rate fluctuations on the Mortgage
Assets or on one or more classes of
Certificates (any such agreement, in the
case of clause (i) or (ii), a "Cash Flow
Agreement"). Certain relevant information
regarding any applicable Credit Support or
Cash Flow Agreement will be set forth in the
Prospectus Supplement for a series of
Offered Certificates. See "Risk
Factors--Credit Support Limitations,"
"Description of the Trust Funds--Credit
Support" and "--Cash Flow Agreements" and
"Description of Credit Support."
ADVANCES ......................... If and to the extent provided in the related
Prospectus Supplement, if a Trust Fund
includes Mortgage Loans, the Master
Servicer, the Special Servicer, the Trustee,
any provider of Credit Support and/or any
other specified person may be obligated to
make, or have the option of making, certain
advances with respect to delinquent
scheduled payments of principal and/or
interest on such Mortgage Loans. Any such
advances made with respect to a particular
Mortgage Loan will be reimbursable from
subsequent recoveries in respect of such
Mortgage Loan and otherwise to the extent
described herein and in the related
Prospectus Supplement. See "Description of
the Certificates--Advances in Respect of
Delinquencies." If and to the extent
provided in the Prospectus Supplement for a
series of Certificates, any entity making
such advances may be entitled to receive
interest thereon for a specified period
during which certain or all of such advances
are outstanding, payable from amounts in the
related Trust Fund. See "Description of the
Certificates--Advances in Respect of
Delinquencies." If a Trust Fund includes
MBS, any comparable advancing obligation of
a party to the related Pooling Agreement, or
of a party to the related MBS Agreement,
will be described in the related Prospectus
Supplement.
OPTIONAL TERMINATION ............. If so specified in the related Prospectus
Supplement, a series of Certificates may be
subject to optional early termination
through the repurchase of the Mortgage
Assets in the related Trust Fund by the
party or parties specified therein, under
the circumstances and in the manner set
forth therein. If so provided in the related
Prospectus Supplement, upon the reduction of
the Certificate Balance of a specified class
or classes of Certificates by a specified
percentage or amount or upon a specified
date, a party specified therein may be
authorized or required to solicit bids for
the purchase of all of the Mortgage Assets
of the related Trust Fund, or of a
sufficient portion of such Mortgage Assets
to retire such class or classes, under the
circumstances and in the manner set forth
therein. See "Description of the
Certificates--Termination."
REGISTRATION OF BOOK-ENTRY
CERTIFICATES ..................... If so provided in the related Prospectus
Supplement, one or more classes of the
Offered Certificates of such series will be
offered in book-entry form through the
facilities of the Depository Trust Company.
Each class of book-entry Certificates will
be initially represented by one or more
global Certificates registered in the
6
name of a nominee of the Depository Trust
Company. No person acquiring an interest in
a class of book-entry Certificates will be
entitled to receive definitive Certificates
of that class in fully registered form,
except under the limited circumstances
described in this prospectus. See "Risk
Factors--Book-Entry System for Certain
Classes May Decrease Liquidity and Delay
Payment" and "Description of the
Certificates--Book-Entry Registration and
Definitive Certificates."
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES ..................... The Certificates of each series will
constitute or evidence ownership of either
(i) "regular interests" ("Regular
Certificates") and "residual interests"
("Residual Certificates") in a Trust Fund,
or a designated portion thereof, treated as
a REMIC under Sections 860A through 860G of
the Internal Revenue Code of 1986 (the
"Code"), or (ii) interests ("Grantor Trust
Certificates") in a Trust Fund treated as a
grantor trust under applicable provisions of
the Code. Investors are advised to consult
their tax advisors concerning the specific
tax consequences to them of the purchase,
ownership and disposition of the Offered
Certificates and to review "Certain Federal
Income Tax Consequences" herein and in the
related Prospectus Supplement.
ERISA CONSIDERATIONS ............. Fiduciaries of employee benefit plans and
certain other retirement plans and
arrangements, including individual
retirement accounts, annuities, Keogh plans,
and collective investment funds and separate
accounts in which such plans, accounts,
annuities or arrangements are invested, that
are subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Code,
should review with their legal advisors
whether the purchase or holding of Offered
Certificates could give rise to a
transaction that is prohibited or is not
otherwise permissible under ERISA or Section
4975 of the Code. See "ERISA Considerations"
herein and in the related Prospectus
Supplement.
LEGAL INVESTMENT ................. The Offered Certificates will constitute
"mortgage related securities" for purposes
of the Secondary Mortgage Market Enhancement
Act of 1984, as amended ("SMMEA"), only if
so specified in the related Prospectus
Supplement. Investors whose investment
activities are subject to legal investment
laws and regulations, regulatory capital
requirements, or review by regulatory
authorities should consult their legal
advisors to determine the suitability and
consequences of the purchase, ownership, and
sale of the Offered Certificates. See "Legal
Investment" herein and in the related
Prospectus Supplement.
RATING ........................... At their respective dates of issuance, each
class of Offered Certificates will be rated
not lower than investment grade by one or
more nationally recognized statistical
rating agencies (each, a "Rating Agency").
See "Rating" herein and in the related
Prospectus Supplement.
7
RISK FACTORS
In considering an investment in the Offered Certificates of any series,
investors should consider, among other things, the following risk factors and
any other factors set forth under the heading "Risk Factors" in the related
Prospectus Supplement. In general, to the extent that the factors discussed
below pertain to or are influenced by the characteristics or behavior of
Mortgage Loans included in a particular Trust Fund, they would similarly pertain
to and be influenced by the characteristics or behavior of the mortgage loans
underlying any MBS included in such Trust Fund.
LIMITED LIQUIDITY OF OFFERED CERTIFICATES
GENERAL. The Offered Certificates of any series may have limited or no
liquidity. Accordingly, an investor may be forced to bear the risk of its
investment in any Offered Certificates for an indefinite period of time. Lack of
liquidity could result in a substantial decrease in the market value of the
Offered Certificates. Furthermore, except to the extent described herein and in
the related Prospectus Supplement, Certificateholders will have no redemption
rights, and the Offered Certificates of each series are subject to early
retirement only under certain specified circumstances described herein and in
the related Prospectus Supplement. See "Description of the
Certificates--Termination."
LACK OF A SECONDARY MARKET. There can be no assurance that a secondary
market for the Offered Certificates of any series will develop or, if it does
develop, that it will provide holders with liquidity of investment or that it
will continue for as long as such Certificates remain outstanding. The
Prospectus Supplement for any series of Offered Certificates may indicate that
an underwriter specified therein intends to establish a secondary market in such
Offered Certificates; however, no underwriter will be obligated to do so. Any
such secondary market may provide less liquidity to investors than any
comparable market for securities that evidence interests in single-family
mortgage loans. Unless otherwise provided in the related Prospectus Supplement,
the Certificates will not be listed on any securities exchange.
LIMITED NATURE OF ONGOING INFORMATION. The primary source of ongoing
information regarding the Offered Certificates of any series, including
information regarding the status of the related Mortgage Assets and any Credit
Support for such Certificates, will be the periodic reports to
Certificateholders to be delivered pursuant to the related Pooling Agreement as
described herein under the heading "Description of the Certificates--Reports to
Certificateholders." There can be no assurance that any additional ongoing
information regarding the Offered Certificates of any series will be available
through any other source. The limited nature of such information in respect of a
series of Offered Certificates may adversely affect the liquidity thereof, even
if a secondary market for such Certificates does develop.
SENSITIVITY TO FLUCTUATIONS IN PREVAILING INTEREST RATES. Insofar as a
secondary market does develop with respect to any series of Offered Certificates
or class thereof, the market value of such Certificates will be affected by
several factors, including the perceived liquidity thereof, the anticipated cash
flow thereon (which may vary widely depending upon the prepayment and default
assumptions applied in respect of the underlying Mortgage Loans) and prevailing
interest rates. The price payable at any given time in respect of certain
classes of Offered Certificates (in particular, a class with a relatively long
average life, a Companion Class (as defined herein) or a class of Stripped
Interest Certificates or Stripped Principal Certificates) may be extremely
sensitive to small fluctuations in prevailing interest rates; and the relative
change in price for an Offered Certificate in response to an upward or downward
movement in prevailing interest rates may not necessarily equal the relative
change in price for such Offered Certificate in response to an equal but
opposite movement in such rates. Accordingly, the sale of Offered Certificates
by a holder in any secondary market that may develop may be at a discount from
the price paid by such holder. The Depositor is not aware of any source through
which price information about the Offered Certificates will be generally
available on an ongoing basis.
8
LIMITED ASSETS
Unless otherwise specified in the related Prospectus Supplement, neither
the Offered Certificates of any series nor the Mortgage Assets in the related
Trust Fund will be guaranteed or insured by the Depositor or any of its
affiliates, by any governmental agency or instrumentality or by any other person
or entity; and no Offered Certificate of any series will represent a claim
against or security interest in the Trust Funds for any other series.
Accordingly, if the related Trust Fund has insufficient assets to make payments
on a series of Offered Certificates, no other assets will be available for
payment of the deficiency, and the holders of one or more classes of such
Offered Certificates will be required to bear the consequent loss. Furthermore,
certain amounts on deposit from time to time in certain funds or accounts
constituting part of a Trust Fund, including the Certificate Account and any
accounts maintained as Credit Support, may be withdrawn under certain
conditions, if and to the extent described in the related Prospectus Supplement,
for purposes other than the payment of principal of or interest on the related
series of Certificates. If and to the extent so provided in the Prospectus
Supplement for a series of Certificates consisting of one or more classes of
Subordinate Certificates, on any Distribution Date in respect of which losses or
shortfalls in collections on the Mortgage Assets have been incurred, all or a
portion of the amount of such losses or shortfalls will be borne first by one or
more classes of the Subordinate Certificates, and, thereafter, by the remaining
classes of Certificates in the priority and manner and subject to the
limitations specified in such Prospectus Supplement.
CREDIT SUPPORT LIMITATIONS
LIMITATIONS REGARDING TYPES OF LOSSES COVERED. The Prospectus Supplement
for a series of Certificates will describe any Credit Support provided with
respect thereto. Use of Credit Support will be subject to the conditions and
limitations described herein and in the related Prospectus Supplement. Moreover,
such Credit Support may not cover all potential losses or risks; for example,
Credit Support may or may not cover loss by reason of fraud or negligence by a
mortgage loan originator or other parties. Any such losses not covered by Credit
Support may, at least in part, be allocated to one or more classes of Offered
Certificates.
DISPROPORTIONATE BENEFITS TO CERTAIN CLASSES AND SERIES. A series of
Certificates may include one or more classes of Subordinate Certificates (which
may include Offered Certificates), if so provided in the related Prospectus
Supplement. Although subordination is intended to reduce the likelihood of
temporary shortfalls and ultimate losses to holders of Senior Certificates, the
amount of subordination will be limited and may decline under certain
circumstances. In addition, if principal payments on one or more classes of
Offered Certificates of a series are made in a specified order of priority, any
related Credit Support may be exhausted before the principal of the later paid
classes of Offered Certificates of such series has been repaid in full. As a
result, the impact of losses and shortfalls experienced with respect to the
Mortgage Assets may fall primarily upon those classes of Subordinate
Certificates. Moreover, if a form of Credit Support covers the Offered
Certificates of more than one series and losses on the related Mortgage Assets
exceed the amount of such Credit Support, it is possible that the holders of
Offered Certificates of one (or more) such series will be disproportionately
benefited by such Credit Support to the detriment of the holders of Offered
Certificates of one (or more) other such series.
LIMITATIONS REGARDING THE AMOUNT OF CREDIT SUPPORT. The amount of any
applicable Credit Support supporting one or more classes of Offered
Certificates, including the subordination of one or more other classes of
Certificates, will be determined on the basis of criteria established by each
Rating Agency rating such classes of Certificates based on an assumed level of
defaults, delinquencies and losses on the underlying Mortgage Assets and certain
other factors. There can, however, be no assurance that the loss experience on
the related Mortgage Assets will not exceed such assumed levels. See
"Description of the Certificates--Allocation of Losses and Shortfalls" and
"Description of Credit Support." If the losses on the related Mortgage Assets do
exceed such assumed levels, the holders of one or more classes of Offered
Certificates will be required to bear such additional losses.
9
EFFECT OF PREPAYMENTS ON AVERAGE LIFE OF CERTIFICATES
As a result of prepayments on the Mortgage Loans in any Trust Fund, the
amount and timing of distributions of principal and/or interest on the Offered
Certificates of the related series may be highly unpredictable. Prepayments on
the Mortgage Loans in any Trust Fund will result in a faster rate of principal
payments on one or more classes of the related series of Certificates than if
payments on such Mortgage Loans were made as scheduled. Thus, the prepayment
experience on the Mortgage Loans in a Trust Fund may affect the average life of
one or more classes of Certificates of the related series, including a class of
Offered Certificates. The rate of principal payments on pools of mortgage loans
varies among pools and from time to time is influenced by a variety of economic,
demographic, geographic, social, tax and legal factors. For example, if
prevailing interest rates fall significantly below the Mortgage Rates borne by
the Mortgage Loans included in a Trust Fund, then, subject to the particular
terms of the Mortgage Loans (e.g., provisions that prohibit voluntary
prepayments during specified periods or impose penalties in connection
therewith) and the ability of borrowers to obtain new financing, principal
prepayments on such Mortgage Loans are likely to be higher than if prevailing
interest rates remain at or above the rates borne by those Mortgage Loans.
Conversely, if prevailing interest rates rise significantly above the Mortgage
Rates borne by the Mortgage Loans included in a Trust Fund, then principal
prepayments on such Mortgage Loans are likely to be lower than if prevailing
interest rates remain at or below the mortgage rates borne by those Mortgage
Loans. There can be no assurance as to the actual rate of prepayment on the
Mortgage Loans in any Trust Fund or that such rate of prepayment will conform to
any model described herein or in any Prospectus Supplement. As a result,
depending on the anticipated rate of prepayment for the Mortgage Loans in any
Trust Fund, the retirement of any class of Certificates of the related series
could occur significantly earlier or later, and the average life thereof could
be significantly shorter or longer, than expected.
The extent to which prepayments on the Mortgage Loans in any Trust Fund
ultimately affect the average life of any class of Certificates of the related
series will depend on the terms and provisions of such Certificates. A class of
Certificates, including a class of Offered Certificates, may provide that on any
Distribution Date the holders of such Certificates are entitled to a pro rata
share of the prepayments on the Mortgage Loans in the related Trust Fund that
are distributable on such date, to a disproportionately large share (which, in
some cases, may be all) of such prepayments, or to a disproportionately small
share (which, in some cases, may be none) of such prepayments. A class of
Certificates that entitles the holders thereof to a disproportionately large
share of the prepayments on the Mortgage Loans in the related Trust Fund
increases the likelihood of early retirement of such class ("Call Risk") if the
rate of prepayment is relatively fast; while a class of Certificates that
entitles the holders thereof to a disproportionately small share of the
prepayments on the Mortgage Loans in the related Trust Fund increases the
likelihood of an extended average life of such class ("Extension Risk") if the
rate of prepayment is relatively slow. As and to the extent described in the
related Prospectus Supplement, the respective entitlements of the various
classes of Certificateholders of any series to receive payments (and, in
particular, prepayments) of principal of the Mortgage Loans in the related Trust
Fund may vary based on the occurrence of certain events (e.g., the retirement of
one or more classes of Certificates of such series) or subject to certain
contingencies (e.g., prepayment and default rates with respect to such Mortgage
Loans).
A series of Certificates may include one or more Controlled Amortization
Classes, which will entitle the holders thereof to receive principal
distributions according to a specified principal payment schedule. Although
prepayment risk cannot be eliminated entirely for any class of Certificates, a
Controlled Amortization Class will generally provide a relatively stable cash
flow so long as the actual rate of prepayment on the Mortgage Loans in the
related Trust Fund remains relatively constant at the rate, or within the range
of rates, of prepayment used to establish the specific principal payment
schedule for such Certificates. Prepayment risk with respect to a given Mortgage
Asset Pool does not disappear, however, and the stability afforded to a
Controlled Amortization Class comes at the expense of one or more Companion
Classes of the same series, any of which Companion Classes may also be a class
of Offered Certificates. In general, and as more specifically described in the
related Prospectus Supplement, a Companion Class may entitle the holders thereof
to a disproportionately large share of prepayments on the Mortgage Loans in the
related Trust Fund when the rate of prepayment is relatively
10
fast, and/or may entitle the holders thereof to a disproportionately small share
of prepayments on the Mortgage Loans in the related Trust Fund when the rate of
prepayment is relatively slow. As and to the extent described in the related
Prospectus Supplement, a Companion Class absorbs some (but not all) of the Call
Risk and/or Extension Risk that would otherwise belong to the related Controlled
Amortization Class if all payments of principal of the Mortgage Loans in the
related Trust Fund were allocated on a pro rata basis.
EFFECT OF PREPAYMENTS ON YIELD OF CERTIFICATES
A series of Certificates may include one or more classes of Offered
Certificates offered at a premium or discount. Yields on such classes of
Certificates will be sensitive, and in some cases extremely sensitive, to
prepayments on the Mortgage Loans in the related Trust Fund and, where the
amount of interest payable withrespect to a class is disproportionately large,
as compared to the amount of principal, as with certain classes of Stripped
Interest Certificates, a holder might fail to recover its original investment
under some prepayment scenarios. 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 such Certificates are purchased at a discount or
premium and the amount and timing of distributions thereon. An investor should
consider, in the case of any Offered Certificate purchased at a discount, the
risk that a slower than anticipated rate of principal payments on the Mortgage
Loans could result in an actual yield to such investor that is lower than the
anticipated yield and, in the case of any Offered Certificate purchased at a
premium, the risk that a faster than anticipated rate of principal payments
could result in an actual yield to such investor that is lower than the
anticipated yield. See "Yield and Maturity Considerations."
LIMITED NATURE OF RATINGS
Any rating assigned by a Rating Agency to a class of Offered Certificates
will reflect only its assessment of the likelihood that holders of such Offered
Certificates will receive payments to which such Certificateholders are entitled
under the related Pooling Agreement. Such rating will not constitute an
assessment of the likelihood that principal prepayments on the related Mortgage
Loans will be made, the degree to which the rate of such prepayments might
differ from that originally anticipated or the likelihood of early optional
termination of the related Trust Fund. Furthermore, such rating will not address
the possibility that prepayment of the related Mortgage Loans at a higher or
lower rate than anticipated by an investor may cause such investor to experience
a lower than anticipated yield or that an investor that purchases an Offered
Certificate at a significant premium might fail to recover its initial
investment under certain prepayment scenarios. Hence, a rating assigned by a
Rating Agency does not guarantee or ensure the realization of any anticipated
yield on a class of Offered Certificates.
The amount, type and nature of Credit Support, if any, provided with
respect to a series of Certificates will be determined on the basis of criteria
established by each Rating Agency rating classes of the Certificates of such
series. Those criteria are sometimes based upon an actuarial analysis of the
behavior of mortgage loans in a larger group. However, there can be no assurance
that the historical data supporting any such actuarial analysis will accurately
reflect future experience, or that the data derived from a large pool of
mortgage loans will accurately predict the delinquency, foreclosure or loss
experience of any particular pool of Mortgage Loans. In other cases, such
criteria may be based upon determinations of the values of the Mortgaged
Properties that provide security for the Mortgage Loans. However, no assurance
can be given that those values will not decline in the future. As a result, the
Credit Support required in respect of the Offered Certificates of any series may
be insufficient to fully protect the holders thereof from losses on the related
Mortgage Asset Pool. See "Description of Credit Support" and "Rating."
CERTAIN FACTORS AFFECTING DELINQUENCY, FORECLOSURE AND LOSS OF THE MORTGAGE
LOANS
GENERAL. The payment performance of the Offered Certificates of any series
will be directly related to the payment performance of the underlying Mortgage
Loans. Set forth below is a discussion of certain factors that will affect the
full and timely payment of the Mortgage Loans in any Trust Fund. In
11
addition, a description of certain material considerations associated with
investments in mortgage loans is included herein under "Certain Legal Aspects of
Mortgage Loans."
The Offered Certificates will be directly or indirectly backed by mortgage
loans secured by multifamily and/or commercial properties. Mortgage loans made
on the security of multifamily or commercial property may have a greater
likelihood of delinquency and foreclosure, and a greater likelihood of loss in
the event thereof, than loans made on the security of an owner-occupied
single-family property. See "Description of the Trust Funds--Mortgage
Loans--Default and Loss Considerations with Respect to the Mortgage Loans."
Commercial and multifamily lending typically involved larger loans to single
borrowers or groups of related borrowers than single-family loans. The ability
of a borrower to repay a loan secured by an income-producing property typically
is dependent primarily upon the successful operation of such property rather
than upon the existence of independent income or assets of the borrower; thus,
the value of an income-producing property is directly related to the net
operating income derived from such property. If the net operating income of the
property is reduced (for example, if rental or occupancy rates decline or real
estate tax rates or other operating expenses increase), the borrower's ability
to repay the loan may be impaired. Commercial and multifamily real estate can be
affected significantly by the supply and demand in the market for the type of
property securing the loan and, therefore, may be subject to adverse economic
conditions. Market values may vary as a result of economic events or
governmental regulations outside the control of the borrower or lender that
impact the cash flow of the property. For example, some laws, such as the
Americans with Disabilities Act, may require modifications to properties, and
rent control laws may limit rent collections in the case of multifamily
properties. A number of the Mortgage Loans may be secured by liens on
owner-occupied Mortgaged Properties or on Mortgaged Properties leased to a
single tenant or a small number of significant tenants. Accordingly, a decline
in the financial condition of the borrower or a significant tenant, as
applicable, may have a disproportionately greater effect on the net operating
income from such Mortgaged Properties than would be the case with respect to
Mortgaged Properties with multiple tenants. Furthermore, the value of any
Mortgaged Property may be adversely affected by risks generally incident to
interests in real property, including changes in general or local economic
conditions and/or specific industry segments; declines in real estate values;
declines in rental or occupancy rates; increases in interest rates, real estate
tax rates and other operating expenses; changes in governmental rules,
regulations and fiscal policies, including environmental legislation; natural
disasters and civil disturbances such as earthquakes, hurricanes, floods,
eruptions, riots or other acts of God; and other circumstances, conditions or
events beyond the control of a Master Servicer or a Special Servicer. Additional
considerations may be presented by the type and use of a particular Mortgaged
Property. For instance, Mortgaged Properties that operate as hospitals and
nursing homes are subject to significant governmental regulation of the
ownership, operation, maintenance and financing of health care institutions.
Hotel and motel properties are often operated pursuant to franchise, management
or operating agreements that may be terminable by the franchisor or operator,
and the transferability of a hotel's operating, liquor and other licenses upon a
transfer of the hotel, whether through purchase or foreclosure, is subject to
local law requirements. The ability of a borrower to repay a Mortgage Loan
secured by shares allocable to one or more Cooperative dwelling units may depend
on the ability of the dwelling units to generate sufficient rental income, which
may be subject to rent control or stabilization laws, to cover both debt service
on the loan as well as maintenance charges to the Cooperative. Further, a
Mortgage Loan secured by Cooperative shares is subordinate to the mortgage, if
any, on the Cooperative apartment building.
The economic performance of Mortgage Loans that are secured by full service
hotels, limited service hotels, hotels associated with national franchise
chains, hotels associated with regional franchise chains and hotels that are not
affiliated with any franchise chain but may have their own brand identity, are
affected by various factors, 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), construction of competing
hotels or resorts, continuing expenditures for modernizing, refurbishing, and
maintaining existing facilities prior to the expiration of their anticipated
useful lives, deterioration in the financial strength or managerial capabilities
of the owner and operator of a hotel, and changes in travel patterns caused by
changes in access, energy prices, strikes, relocation of highways, the
construction of additional highways or other factors. Additionally, the hotel
and lodging
12
industry is generally seasonal in nature and this seasonality can be expected to
cause periodic fluctuations in room and other revenues, occupancy levels, room
rates and operating expenses. The demand for particular accommodations may also
be affected by changes in travel patterns caused by changes in energy prices,
strikes, relocation of highways, the construction of additional highways and
other factors.
The viability of any hotel property that is the franchisee of a national or
regional chain depends in part on the continued existence and financial strength
of the franchisor, the public perception of the franchise service mark and the
duration of the franchise licensing agreements. The transferability of franchise
license agreements may be restricted and, in the event of a foreclosure on that
hotel property, the property would not have the right to use the franchise
license without the franchisor's consent. Conversely, a lender may be unable to
remove a franchisor that it desires to replace following a foreclosure. Further,
in the event of a foreclosure on a hotel property, it is unlikely that the
Trustee (or Master Servicer or Special Servicer) or purchaser of that hotel
property would be entitled to the rights under any existing liquor license for
that hotel property. It is more likely that those persons would have to apply
for new licenses. We cannot assure you that a new license could be obtained or
that it could be obtained promptly.
Other multifamily properties, hotels, retail properties, office buildings,
manufactured housing properties, nursing homes and self-storage facilities
located in the areas of the Mortgaged Properties compete with the Mortgaged
Properties to attract residents and customers. The leasing of real estate is
highly competitive. The principal means of competition are price, location and
the nature and condition of the facility to be leased. A borrower under a
Mortgage Loan competes with all lessors and developers of comparable types of
real estate in the area in which the Mortgaged Property is located. Those
lessors or developers could have lower rentals, lower operating costs, more
favorable locations or better facilities. While a borrower under a Mortgage Loan
may renovate, refurbish or expand the Mortgaged Property to maintain it and
remain competitive, that renovation, refurbishment or expansion may itself
entail significant risk. Increased competition could adversely affect income
from and market value of the Mortgaged Properties. In addition, the business
conducted at each Mortgaged Property may face competition from other industries
and industry segments.
In addition, the concentration of default, foreclosure and loss risks in
individual Mortgage Loans in a particular Trust Fund will generally be greater
than for pools of single-family loans because Mortgage Loans in a Trust Fund
will generally consist of a smaller number of higher balance loans than would a
pool of single-family loans of comparable aggregate unpaid principal balance.
LIMITED RECOURSE NATURE OF THE MORTGAGE LOANS. It is anticipated that some
or all of the Mortgage Loans included in any Trust Fund will be nonrecourse
loans or loans for which recourse may be restricted or unenforceable. As to any
such Mortgage Loan, recourse in the event of borrower default will be limited to
the specific real property and other assets, if any, that were pledged to secure
the Mortgage Loan. However, even with respect to those Mortgage Loans that
provide for recourse against the borrower and its assets generally, there can be
no assurance that enforcement of such recourse provisions will be practicable,
or that the assets of the borrower will be sufficient to permit a recovery in
respect of a defaulted Mortgage Loan in excess of the liquidation value of the
related Mortgaged Property. See "Certain Legal Aspects of Mortgage
Loans--Foreclosure--Anti-Deficiency Legislation."
LIMITATIONS ON ENFORCEABILITY OF CROSS-COLLATERALIZATION. A Mortgage Pool
may include groups of Mortgage Loans which are cross-collateralized and
cross-defaulted. These arrangements are designed primarily to ensure that all of
the collateral pledged to secure the respective Mortgage Loans in a
cross-collateralized group, and the cash flows generated thereby, are available
to support debt service on, and ultimate repayment of, the aggregate
indebtedness evidenced by those Mortgage Loans. These arrangements thus seek to
reduce the risk that the inability of one or more of the Mortgaged Properties
securing any such group of Mortgage Loans to generate net operating income
sufficient to pay debt service will result in defaults and ultimate losses.
There may not be complete identity of ownership of the Mortgaged Properties
securing a group of cross-collateralized Mortgage Loans. In such an instance,
creditors of one or more of the related borrowers could challenge the
cross-collateralization arrangement as a fraudulent conveyance.
13
Generally, under federal and most state fraudulent conveyance statutes, the
incurring of an obligation or the transfer of property by a person will be
subject to avoidance under certain circumstances if 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 was an 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. Accordingly, a lien granted by a borrower to secure
repayment of another borrower's mortgage loan could be avoided if a court were
to determine that (i) such borrower was insolvent at the time of granting the
lien, was rendered insolvent by the granting of the lien, or 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 mortgaged property to be encumbered by
a lien securing the entire indebtedness represented by the other mortgage loan,
receive fair consideration or reasonably equivalent value for pledging such
mortgaged property for the equal benefit of the other borrower. If the lien is
avoided, the lender would lose the benefits afforded by such lien.
The cross-collateralized Mortgage Loans constituting any group thereof may
be secured by mortgage liens on Mortgaged Properties located in different
states. Because of various state laws governing foreclosure or the exercise of a
power of sale and because, in general, foreclosure actions are brought in state
court, and the courts of one state cannot exercise jurisdiction over property in
another state, it may be necessary upon a default under any such Mortgage Loan
to foreclose on the related Mortgaged Properties in a particular order rather
than simultaneously in order to ensure that the lien of the related Mortgages is
not impaired or released.
INCREASED RISK OF DEFAULT ASSOCIATED WITH BALLOON PAYMENTS. Certain of the
Mortgage Loans included in a Trust Fund may be non-amortizing or only partially
amortizing over their terms to maturity and, thus, will require substantial
payments of principal (that is, balloon payments) at their stated maturity.
Mortgage Loans of this type involve a greater likelihood of default than
self-amortizing loans because the ability of a borrower to make a balloon
payment typically will depend upon its ability either to refinance the loan or
to sell the related Mortgaged Property. The ability of a borrower to accomplish
either of these goals will be affected by a number of factors, including the
value of the related Mortgaged Property, the level of available Mortgage Rates
at the time of sale or refinancing, the borrower's equity in the related
Mortgaged Property, the financial condition and operating history of the
borrower and the related Mortgaged Property, tax laws, rent control laws (with
respect to certain residential properties), Medicaid and Medicare reimbursement
rates (with respect to hospitals and nursing homes), prevailing general economic
conditions and the availability of credit for loans secured by multifamily or
commercial, as the case may be, real properties generally. Neither the Depositor
nor any of its affiliates will be required to refinance any Mortgage Loan.
If and to the extent described herein and in the related Prospectus
Supplement, in order to maximize recoveries on defaulted Mortgage Loans, the
Master Servicer or the Special Servicer will be permitted (within prescribed
limits) to extend and modify Mortgage Loans that are in default or as to which a
payment default is imminent. See "Description of the Pooling
Agreements--Realization Upon Defaulted Mortgage Loans." While the Master
Servicer or the Special Servicer generally will be required to determine that
any such extension or modification is reasonably likely to produce a greater
recovery than liquidation, taking into account the time value of money, there
can be no assurance that any such extension or modification will in fact
increase the present value of receipts from or proceeds of the affected Mortgage
Loans.
LENDER DIFFICULTY IN COLLECTING RENTS UPON THE DEFAULT AND/OR BANKRUPTCY OF
BORROWER. Each Mortgage Loan included in any Trust Fund secured by Mortgaged
Property that is subject to leases typically will be secured by an assignment of
leases and rents pursuant to which the borrower assigns to the lender its right,
title and interest as landlord under the leases of the related Mortgaged
Property, and the income derived therefrom, 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 Mortgaged Property and obtain a judicial appointment of a
receiver before becoming entitled to
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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."
LIMITATIONS ON ENFORCEABILITY OF DUE-ON-SALE AND DEBT-ACCELERATION CLAUSES.
Mortgages may contain a due-on-sale clause, which permits the lender to
accelerate the maturity of the Mortgage Loan if the borrower sells, transfers or
conveys the related Mortgaged Property or its interest in the Mortgaged
Property. Mortgages also may include a debt-acceleration clause, which permits
the lender to accelerate the debt upon a monetary or nonmonetary default of the
mortgagor. Such clauses are generally enforceable subject to certain exceptions.
The courts of all states will enforce clauses providing for acceleration in the
event of a material payment default. The equity courts of any state, however,
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 acceleration unconscionable.
RISK OF LIABILITY ARISING FROM ENVIRONMENTAL CONDITIONS. Under federal law
and the laws of certain states, contamination of real property may give rise to
a lien on the property to assure or reimburse the costs of cleanup. In several
states, that lien has priority over an existing mortgage lien on that property.
In addition, under various federal, state and local laws, ordinances and
regulations, an owner or operator of real estate may be liable for the costs of
removal or remediation of hazardous substances or toxic substances on, in or
beneath the property. This liability may be imposed without regard to whether
the owner knew of, or was responsible for, the presence of those hazardous or
toxic substances. The costs of any required remediation and the owner or
operator's liability for them as to any property are generally not limited under
these laws, ordinances and regulations and could exceed the value of the
Mortgaged Property and the aggregate assets of the owner or operator. In
addition, as to the owners or operators of Mortgaged Properties that generate
hazardous substances that are disposed of at "off-site" locations, the owners or
operators may be held strictly, jointly and severally liable if there are
releases or threatened releases of hazardous substances at the off-site
locations where that person's hazardous substances were disposed. Two methods to
attempt to reduce the trust's potential exposure to cleanup costs are to
establish reserves for cleanup costs when they can be anticipated and estimated,
or to designate the trust as the named insured in specialized environmental
insurance that is designed for secured lenders. However, there can be no
assurance that reserves or environmental insurance will in fact be applicable or
adequate to cover all costs and any other liabilities that may eventually be
incurred.
Under some environmental laws, such as the federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, as
well as some state laws, a secured lender (such as the trust) may be liable as
an "owner" or "operator" for the costs of dealing with hazardous substances
affecting a borrower's property, if agents or employees of the lender have
participated in the management or operations of the borrower's property. This
liability could exist even if a previous owner caused the environmental damage.
The trust's potential exposure to liability for cleanup costs may increase if
the trust actually takes possession of a borrower's property, or control of its
day-to-day operations, as for example through the appointment of a receiver. See
"Certain Legal Aspects of Mortgage Loans--Environmental Considerations."
LACK OF INSURANCE COVERAGE FOR CERTAIN SPECIAL HAZARD LOSSES. Unless
otherwise specified in a Prospectus Supplement, the Master Servicer and Special
Servicer for the related Trust Fund will be required to cause the borrower on
each Mortgage Loan in such Trust Fund to maintain such insurance coverage in
respect of the related Mortgaged Property as is required under the related
Mortgage, including hazard insurance; provided that, as and to the extent
described herein and in the related Prospectus Supplement, each of the Master
Servicer and the Special Servicer may satisfy its obligation to cause hazard
insurance to be maintained with respect to any Mortgaged Property through
acquisition of a blanket policy. In general, the standard form of fire and
extended coverage policy covers physical damage to or destruction of the
improvements of the property by fire, lightning, explosion, smoke, windstorm and
hail, and riot, strike and civil commotion, subject to the conditions and
exclusions specified in each policy. Although the policies covering the
Mortgaged Properties will be underwritten by different insurers under different
state laws in accordance with different applicable state forms, and
15
therefore will not contain identical terms and conditions, most such policies
typically do not cover any physical damage resulting from war, revolution,
governmental actions, floods and other water-related causes, earth movement
(including earthquakes, landslides and mudflows), wet or dry rot, vermin,
domestic animals and certain other kinds of risks. Unless the related Mortgage
specifically requires the mortgagor to insure against physical damage arising
from such causes, then, to the extent any consequent losses are not covered by
Credit Support, such losses may be borne, at least in part, by the holders of
one or more classes of Offered Certificates of the related series. See
"Description of the Pooling Agreements--Hazard Insurance Policies."
RISKS OF GEOGRAPHIC CONCENTRATION. Certain geographic regions of the United
States from time to time will experience weaker regional economic conditions and
housing markets, and, consequently, will experience higher rates of loss and
delinquency than will be experienced on mortgage loans generally. For example, a
region's economic condition and housing market may be directly, or indirectly,
adversely affected by natural disasters or civil disturbances such as
earthquakes, hurricanes, floods, eruptions or riots. The economic impact of any
of these types of events may also be felt in areas beyond the region immediately
affected by the disaster or disturbance. The Mortgage Loans securing certain
series of Certificates may be concentrated in these regions, and such
concentration may present risk considerations in addition to those generally
present for similar mortgage-backed securities without such concentration.
SOME CERTIFICATES MAY NOT BE APPROPRIATE FOR ERISA PLANS
Generally, ERISA applies to investments made by employee benefit plans and
transactions involving the assets of those plans. Due to the complexity of
regulations that govern those plans, if you are subject to
ERISA you are urged to consult your own counsel regarding consequences under
ERISA of acquisition, ownership and disposition of the Offered Certificates of
any series. See "Certain ERISA Considerations."
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING RESIDUAL CERTIFICATES
If you hold certain classes of Certificates that constitute a residual
interest in a "real estate mortgage investment conduit" for federal income tax
purposes, you will be required to report on your federal income tax returns as
ordinary income your pro rata share of the taxable income of the REMIC,
regardless of the amount or timing of your receipt of cash payments, as
described in "Certain Federal Income Tax Consequences--Federal Income Tax
Consequences for REMIC Certificates." Accordingly, under certain circumstances,
if you hold Residual Certificates you may have taxable income and tax
liabilities arising from your investment during a taxable year in excess of the
cash received during that period. The requirement to report your pro rata share
of the taxable income and net loss of the REMIC will continue until the
principal balances of all classes of Certificates of the related series have
been reduced to zero, even though you have received full payment of your stated
interest and principal, if any. A portion, or, in certain circumstances, all, of
your share of the REMIC taxable income may be treated as "excess inclusion"
income to you, which generally, will not be subject to offset by losses from
other activities, if you are a tax-exempt holder, will be treated as unrelated
business taxable income, and if you are a foreign holder, will not qualify for
exemption from withholding tax.
If you are an individual and you hold a class of Residual Certificates, you
may be limited in your ability to deduct servicing fees and other expenses of
the REMIC. In addition, classes of Residual Certificates are subject to certain
restrictions on transfer. Because of the special tax treatment of classes of
Residual Certificates, the taxable income arising in a given year on a class of
Residual Certificates will not be equal to the taxable income associated with
investment in a corporate bond or stripped instrument having similar cash flow
characteristics and pre-tax yield. As a result, the after-tax yield on the
classes of Residual Certificates may be significantly less than that of a
corporate bond or stripped instrument having similar cash flow characteristics
or may be negative.
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CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING ORIGINAL ISSUE DISCOUNT
Certain classes of Certificates of a series may be issued with "original
issue discount" for federal income tax purposes, which generally will result in
recognition of some taxable income in advance of the receipt of cash
attributable to that income. See "Certain Federal Income Tax
Consequences--Taxation of Regular Certificates."
BANKRUPTCY PROCEEDINGS ENTAIL CERTAIN RISKS
Under the Bankruptcy Code, the filing of a petition in bankruptcy by or
against a borrower will stay the sale of the Mortgaged Property owned by that
borrower, as well as the commencement or continuation of a foreclosure action.
In addition, even if a court determines that the value of the Mortgaged Property
is less than the principal balance of the Mortgage Loan it secures, the court
may prevent a lender from foreclosing on the Mortgaged Property, subject to
certain protections available to the lender. As part of a restructuring plan, a
court also may reduce the amount of secured indebtedness to the then-current
value of the Mortgaged Property. This action would make the lender a general
unsecured creditor for the difference between the then-current value and the
amount of its outstanding mortgage indebtedness.
A bankruptcy court also may grant a debtor a reasonable time to cure a
payment default on a Mortgage Loan, reduce monthly payments due under a Mortgage
Loan, change the Mortgage Rate, or otherwise alter the Mortgage Loan's repayment
schedule.
Moreover, the filing of a petition in bankruptcy by, or on behalf of, a
junior lienholder may stay the senior lienholder from taking action to foreclose
on the junior lien. Additionally, the borrower's trustee or the borrower, as
debtor-in-possession, has certain special powers to avoid, subordinate or
disallow debts. In certain circumstances, the claims of the Trustee may be
subordinated to financing obtained by a debtor-in-possession subsequent to its
bankruptcy.
Under the Bankruptcy Code, the lender will be stayed from enforcing a
borrower's assignment of rents and leases. The Bankruptcy Code also may
interfere with the Trustee's ability to enforce lockbox
requirements. The legal proceedings necessary to resolve these issues can be
time consuming and costly and may significantly delay or diminish the receipt of
rents. Rents also may escape an assignment to the extent they are used by the
borrower to maintain the Mortgaged Property or for other court authorized
expenses.
As a result of the foregoing, the Trustee'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.
BOOK-ENTRY SYSTEM FOR CERTAIN CLASSES MAY DECREASE LIQUIDITY AND DELAY PAYMENT
If so provided in the related prospectus supplement, one or more classes of
the Offered Certificates of any series will be issued as Book-Entry
Certificates. Each class of Book-Entry Certificates will be initially
represented by one or more Certificates registered in the name of a nominee for
The Depository Trust Company, or DTC. Since transactions in the classes of
Book-Entry Certificates of any series generally can be effected only through The
Depository Trust Company, and its participating organizations the liquidity of
Book-Entry Certificates in secondary trading market that may develop may be
limited because investors may be unwilling to purchase Certificates for which
they cannot obtain physical Certificates, your ability to pledge Certificates to
persons or entities that do not participate in the DTC system, or otherwise to
take action in respect of the Certificates, may be limited due to lack of a
physical security representing the Certificates, your access to information
regarding the Certificates may be limited since conveyance of notices and other
communications by The Depository Trust Company to its participating
organizations, and directly and indirectly through those participating
organizations to you, will be governed by arrangements among them, subject to
any statutory or regulatory requirements as may be in effect at that time, and
you may experience some delay in receiving distributions of interest and
principal on your Certificates because distributions will be made by the Trustee
to DTC and DTC will then be required to credit those distributions to the
accounts of its
17
participating organizations and only then will they be credited to your account
either directly or indirectly through DTC's participating organizations. See
"Description of the Certificates--Book-Entry Registration and Definitive
Certificates."
INCLUSION OF DELINQUENT AND NONPERFORMING MORTGAGE LOANS IN A MORTGAGE ASSET
POOL
If so provided in the related Prospectus Supplement, the Trust Fund for a
particular series of Certificates may include Mortgage Loans that are past due
or are nonperforming. However, Mortgage Loans which are seriously delinquent
loans (that is, loans more than 60 days delinquent or as to which foreclosure
has been commenced) will not constitute a material concentration of the Mortgage
Loans in any Trust Fund, based on principal balance at the time such Trust Fund
is formed. If so specified in the related Prospectus Supplement, the servicing
of such Mortgage Loans will be performed by the Special Servicer; however, the
same entity may act as both Master Servicer and Special Servicer. Credit Support
provided with respect to a particular series of Certificates may not cover all
losses related to such delinquent or nonperforming Mortgage Loans, and investors
should consider the risk that the inclusion of such Mortgage Loans in the Trust
Fund may adversely affect the rate of defaults and prepayments in respect of the
subject Mortgage Asset Pool and the yield on the Offered Certificates of such
series. See "Description of the Trust Funds--Mortgage Loans--General."
TERMINATION
If so provided in the related Prospectus Supplement, upon the reduction of
the Certificate Balance of a specified class or classes of Certificates by a
specified percentage or amount or upon a specified date, a party designated
therein may be authorized or required to solicit bids for the purchase of all
the Mortgage Assets of the related Trust Fund, or of a sufficient portion of
such Mortgage Assets to retire such class or classes, under the circumstances
and in the manner set forth therein. The solicitation of bids will be conducted
in a commercially reasonable manner and, generally, assets will be sold at their
fair market value. In addition, if so specified in the related Prospectus
Supplement, upon the reduction of the aggregate principal balance of some or all
of the Mortgage Assets by a specified percentage, a party or parties designated
therein may be authorized to purchase such Mortgage Assets, generally at a price
equal to, in the case of any Mortgage Asset, the unpaid principal balance
thereof plus accrued interest (or, in some cases, at fair market value).
However, circumstances may arise in which such fair market value may be less
than the unpaid balance of the related Mortgage Assets, together with interest
thereon, sold and therefore, as a result of such a sale or purchase, the
Certificateholders of one or more Classes of Certificates may receive an amount
less than the Certificate Balance of, and accrued unpaid interest on, their
Certificates. See "Description of the Certificates--Termination."
RISKS ASSOCIATED WITH MULTIFAMILY PROPERTIES
Certain states regulate the relationship of an owner and its tenants.
Commonly, these laws require a written lease, good cause for eviction,
disclosure of fees, and notification to residents of changed land use, while
prohibiting unreasonable rules, retaliatory evictions, and restrictions on a
resident's choice of unit vendors. A few states offer more significant
protection. For example, there are provisions that limit the basis on which a
landlord may terminate a tenancy or increase its rent or prohibit a landlord
from terminating a tenancy solely by reason of the sale of the owner's building.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control on apartment buildings.
These ordinances may limit rent increases to fixed percentages, to percentages
of increases in the consumer price index, to increases set or approved by a
governmental agency, or in increases determined through mediation or binding
arbitration. In many cases, the rent control laws do not permit vacancy
decontrol. Local authority to impose rent control is pre-empted by state law in
certain states, and rent control is not imposed at the state level in those
states. In some states, however, local rent control ordinances are not
pre-empted for tenants having short-term or month-to-month leases, and
properties there may be subject to various forms of rent control with respect to
those tenants. Any limitations on a borrower's ability to raise
18
property rents may impair such borrower's ability to repay its Mortgage Loan
from its net operating income or the proceeds of a sale or refinancing of the
related Mortgaged Property.
RISKS ASSOCIATED WITH RETAIL PROPERTIES
The correlation between the success of tenant businesses and property value
is more direct with respect to Retail Properties than other types of commercial
property because a significant component of the total rent paid by retail
tenants is often tied to a percentage of gross sales. Retail Properties that are
not "anchored" have traditionally been perceived to be more risky than
"anchored" Retail Properties. See "Mortgage Loans -- Mortgage Loans Secured by
Retail Properties" herein. Furthermore, there is a greater correlation between
the success of tenant businesses and property value when the property is a
single tenant Retail Property.
Unlike office or hotel properties, Retail Properties also face competition
from sources outside a given real estate market. Catalogue retailers, home
shopping networks, shopping through Internet websites, telemarketing and outlet
centers all compete with more traditional Retail Properties for consumer
dollars. Continued growth of these alternative retail outlets (which are often
characterized by lower operating costs) could adversely affect the rents
collectible at the Retail Properties included in the Mortgage Pool.
19
DESCRIPTION OF THE TRUST FUNDS
GENERAL
The primary assets of each Trust Fund will consist of (i) various types of
multifamily or commercial mortgage loans ("Mortgage Loans"), (ii) mortgage
participations, pass-through certificates or other mortgage-backed securities
("MBS") that evidence interests in, or that are secured by pledges of, one or
more of various types of multifamily or commercial mortgage loans or (iii) a
combination of Mortgage Loans and MBS (collectively, "Mortgage Assets"). Each
Trust Fund will be established by the Depositor. Each Mortgage Asset will be
selected by the Depositor for inclusion in a Trust Fund from among those
purchased, either directly or indirectly, from a prior holder thereof (a
"Mortgage Asset Seller"), which prior holder may or may not be the originator of
such Mortgage Loan or the issuer of such MBS. The Mortgage Assets will not be
guaranteed or insured by the Depositor or any of its affiliates or, unless
otherwise provided in the related Prospectus Supplement, by any governmental
agency or instrumentality or by any other person. The discussion below under the
heading "--Mortgage Loans," unless otherwise noted, applies equally to mortgage
loans underlying any MBS included in a particular Trust Fund.
MORTGAGE LOANS
GENERAL. The Mortgage Loans will be evidenced by promissory notes (the
"Mortgage Notes") secured by mortgages, deeds of trust or similar security
instruments (the "Mortgages") that create first or junior liens on fee or
leasehold estates in properties (each, a "Mortgaged Property") consisting of one
or more of the following types of real property: (i) residential properties
("Multifamily Properties") consisting of five or more rental or
cooperatively-owned dwelling units in high-rise, mid-rise or garden apartment
buildings or other residential structures, and mobile home parks; and (ii)
commercial properties ("Commercial Properties") consisting of office buildings,
retail shopping facilities, such as shopping centers, malls and individual
stores (each, a "Retail Property"), hotels or motels, health care-related
facilities (such as hospitals, skilled nursing facilities, nursing homes,
congregate care facilities and senior housing), recreational vehicle parks,
warehouse facilities, mini-warehouse facilities, self-storage facilities,
industrial facilities, parking lots, restaurants, mixed use properties (that is,
any combination of the foregoing), and unimproved land. However, neither
restaurants nor health care-related facilities will represent security for a
material concentration of the Mortgage Loans in any Trust Fund, based on
principal balance at the time such Trust Fund is formed. The Multifamily
Properties may include mixed commercial and residential structures and apartment
buildings owned by private cooperative housing corporations ("Cooperatives").
Unless otherwise specified in the related Prospectus Supplement, each Mortgage
will create a first priority mortgage lien on a fee estate in a Mortgaged
Property. If a Mortgage creates a lien on a borrower's leasehold estate in a
property, then, unless otherwise specified in the related Prospectus Supplement,
the term of any such leasehold will exceed the term of the Mortgage Note by at
least ten years. Each Mortgage Loan will have been originated by a person (the
"Originator") other than the Depositor.
If so provided in the related Prospectus Supplement, Mortgage Assets for a
series of Certificates may include Mortgage Loans secured by junior liens, and
the loans secured by the related senior liens ("Senior Liens") may not be
included in the Mortgage Pool. The primary risk to holders of Mortgage Loans
secured by junior liens is the possibility that adequate funds will not be
received in connection with a foreclosure of the related Senior Liens to satisfy
fully both the Senior Liens and the Mortgage Loan. In the event that a holder of
a Senior Lien forecloses on a Mortgaged Property, the proceeds of the
foreclosure or similar sale will be applied first to the payment of court costs
and fees in connection with the foreclosure, second to real estate taxes, third
in satisfaction of all principal, interest, prepayment or acceleration
penalties, if any, and any other sums due and owing to the holder of the Senior
Liens. The claims of the holders of the Senior Liens will be satisfied in full
out of proceeds of the liquidation of the related Mortgage Property, if such
proceeds are sufficient, before the Trust Fund as holder of the junior lien
receives any payments in respect of the Mortgage Loan. If the Master Servicer
were to foreclose on any Mortgage Loan, it would do so subject to any related
Senior Liens. In order for the debt related to such Mortgage Loan to be paid in
full at such sale, a bidder at the foreclosure sale of
20
such Mortgage Loan would have to bid an amount sufficient to pay off all sums
due under the Mortgage Loan and any Senior Liens or purchase the Mortgaged
Property subject to such Senior Liens. In the event that such proceeds from a
foreclosure or similar sale of the related Mortgaged Property are insufficient
to satisfy all Senior Liens and the Mortgage Loan in the aggregate, the Trust
Fund, as the holder of the junior lien, and, accordingly, holders of one or more
classes of the Certificates of the related series bear (i) the risk of delay in
distributions while a deficiency judgment against the borrower is obtained and
(ii) the risk of loss if the deficiency judgment is not obtained and satisfied.
Moreover, deficiency judgments may not be available in certain jurisdic- tions,
or the particular Mortgage Loan may be a nonrecourse loan, which means that,
absent special facts, recourse in the case of default will be limited to the
Mortgaged Property and such other assets, if any, that were pledged to secure
repayment of the Mortgage Loan.
If so specified in the related Prospectus Supplement, the Mortgage Assets
for a particular series of Certificates may include Mortgage Loans that are
delinquent or nonperforming as of the date such Certificates are issued. In that
case, the related Prospectus Supplement will set forth, as to each such Mortgage
Loan, available information as to the period of such delinquency or
nonperformance, any forbearance arrangement then in effect, the condition of the
related Mortgaged Property and the ability of the Mortgaged Property to generate
income to service the mortgage debt. However, Mortgage Loans which are seriously
delinquent loans (that is, loans more than 60 days delinquent or as to which
foreclosure has been commenced) will not constitute a material concentration of
the Mortgage Loans in any Trust Fund, based on principal balance at the time
such Trust Fund is formed.
DEFAULT AND LOSS CONSIDERATIONS WITH RESPECT TO THE MORTGAGE LOANS.
Mortgage loans secured by liens on income-producing properties are substantially
different from loans made on the security of owner-occupied single-family homes.
The repayment of a loan secured by a lien on an income-producing property is
typically dependent upon the successful operation of such property (that is, its
ability to generate income). Moreover, as noted above, some or all of the
Mortgage Loans included in a particular Trust Fund may be nonrecourse loans.
Lenders typically look to the Debt Service Coverage Ratio of a loan secured
by income-producing property as an important factor in evaluating the likelihood
of default on such a loan. Unless otherwise defined in the related Prospectus
Supplement, the "Debt Service Coverage Ratio" of a Mortgage Loan at any given
time is the ratio of (i) the Net Operating Income derived from the related
Mortgaged Property for a twelve-month period to (ii) the annualized scheduled
payments of principal and/or interest on the Mortgage Loan and any other loans
senior thereto that are secured by the related Mortgaged Property. Unless
otherwise defined in the related Prospectus Supplement, "Net Operating Income"
means, for any given period, the total operating revenues derived from a
Mortgaged Property during such period, minus the total operating expenses
incurred in respect of such Mortgaged Property during such period other than (i)
noncash items such as depreciation and amortization, (ii) capital expenditures
and (iii) debt service on the related Mortgage Loan or on any other loans that
are secured by such Mortgaged Property. The Net Operating Income of a Mortgaged
Property will generally fluctuate over time and may or may not be sufficient to
cover debt service on the related Mortgage Loan at any given time. As the
primary source of the operating revenues of a nonowner occupied,
income-producing property, rental income (and, with respect to a Mortgage Loan
secured by a Cooperative apartment building, maintenance payments from
tenant-stockholders of a Cooperative) may be affected by the condition of the
applicable real estate market and/or area economy. In addition, properties
typically leased, occupied or used on a short-term basis, such as certain health
care-related facilities, hotels and motels, and mini-warehouse and self-storage
facilities, tend to be affected more rapidly by changes in market or business
conditions than do properties typically leased for longer periods, such as
warehouses, retail stores, office buildings and industrial facilities.
Commercial Properties may be owner-occupied or leased to a small number of
tenants. Thus, the Net Operating Income of such a Mortgaged Property may depend
substantially on the financial condition of the borrower or a tenant, and
Mortgage Loans secured by liens on such properties may pose a greater likelihood
of default and loss than loans secured by liens on Multifamily Properties or on
multi-tenant Commercial Properties.
Increases in operating expenses due to the general economic climate or
economic conditions in a locality or industry segment, such as increases in
interest rates, real estate tax rates, energy costs,
21
labor costs and other operating expenses, and/or to changes in governmental
rules, regulations and fiscal policies, may also affect the likelihood of
default on a Mortgage Loan. As may be further described in the related
Prospectus Supplement, in some cases leases of Mortgaged Properties may provide
that the lessee, rather than the borrower/landlord, is responsible for payment
of operating expenses ("Net Leases"). However, the existence of such "net of
expense" provisions will result in stable Net Operating Income to the
borrower/landlord only to the extent that the lessee is able to absorb operating
expense increases while continuing to make rent payments.
Lenders also look to the Loan-to-Value Ratio of a mortgage loan as a factor
in evaluating the likelihood of loss if a property must be liquidated following
a default. Unless otherwise defined in the related Prospectus Supplement, the
"Loan-to-Value Ratio" of a Mortgage Loan at any given time is the ratio
(expressed as a percentage) of (i) the then outstanding principal balance of the
Mortgage Loan and any other loans senior thereto that are secured by the related
Mortgaged Property to (ii) the Value of the related Mortgaged Property. Unless
otherwise specified in the related Prospectus Supplement, the "Value" of a
Mortgaged Property will be its fair market value as determined by an appraisal
of such property conducted by or on behalf of the Originator in connection with
the origination of such loan. The lower the Loan-to-Value Ratio, the greater the
percentage of the borrower's equity in a Mortgaged Property, and thus (a) the
greater the incentive of the borrower to perform under the terms of the related
Mortgage Loan (in order to protect such equity) and (b) the greater the cushion
provided to the lender against loss on liquidation following a default.
Loan-to-Value Ratios will not necessarily constitute an accurate measure of
the likelihood of liquidation loss in a pool of Mortgage Loans. For example, the
value of a Mortgaged Property as of the date of initial issuance of the related
series of Certificates may be less than the Value determined at loan
origination, and will likely continue to fluctuate from time to time based upon
certain factors including changes in economic conditions and the real estate
market. Moreover, even when current, an appraisal is not necessarily a reliable
estimate of value. Appraised values of income-producing properties are generally
based on the market comparison method (recent resale value of comparable
properties at the date of the appraisal), the cost replacement method (the cost
of replacing the property at such date), the income capitalization method (a
projection of value based upon the property's projected net cash flow), or upon
a selection from or interpolation of the values derived from such methods. Each
of these appraisal methods can present analytical difficulties. It is often
difficult to find truly comparable properties that have recently been sold; the
replacement cost of a property may have little to do with its current market
value; and income capitalization is inherently based on inexact projections of
income and expense and the selection of an appropriate capitalization rate and
discount rate. Where more than one of these appraisal methods are used and
provide significantly different results, an accurate determination of value and,
correspondingly, a reliable analysis of the likelihood of default and loss, is
even more difficult.
Although there may be multiple methods for determining the value of a
Mortgaged Property, value will in all cases be affected by property performance.
As a result, if a Mortgage Loan defaults because the income generated by the
related Mortgaged Property is insufficient to cover operating costs and expenses
and pay debt service, then the value of the Mortgaged Property will reflect such
and a liquidation loss may occur.
While the Depositor believes that the foregoing considerations are
important factors that generally distinguish loans secured by liens on
income-producing real estate from single-family mortgage loans, there can be no
assurance that all of such factors will in fact have been prudently considered
by the Originators of the Mortgage Loans, or that, for a particular Mortgage
Loan, they are complete or relevant. See "Risk Factors--Certain Factors
Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans--General" and
"--Certain Factors Affecting Delinquency, Foreclosure and Loss of the Mortgage
Loans--Increased Risk of Default Associated With Balloon Payments."
PAYMENT PROVISIONS OF THE MORTGAGE LOANS. All of the Mortgage Loans will
(i) have had original terms to maturity of not more than 40 years and (ii)
provide for scheduled payments of principal, interest or both, to be made on
specified dates ("Due Dates") that occur monthly, quarterly, semi-annually or
annually. A Mortgage Loan (i) may provide for no accrual of interest or for
accrual of interest
22
thereon at a Mortgage Rate that is fixed over its term or that adjusts from time
to time, or that may be converted at the borrower's election from an adjustable
to a fixed Mortgage Rate, or from a fixed to an adjustable Mortgage Rate, (ii)
may provide for level payments to maturity or for payments that adjust from time
to time to accommodate changes in the Mortgage Rate or to reflect the occurrence
of certain events, and may permit negative amortization, (iii) may be fully
amortizing or may be partially amortizing or nonamortizing, with a balloon
payment due on its stated maturity date, and (iv) may prohibit over its term or
for a certain period prepayments (the period of such prohibition, a "Lock-out
Period" and its date of expiration, a "Lock-out Date") and/or require payment of
a premium or a yield maintenance payment (a "Prepayment Premium") in connection
with certain prepayments, in each case as described in the related Prospectus
Supplement. A Mortgage Loan may also contain a provision that entitles the
lender to a share of appreciation of the related Mortgaged Property, or profits
realized from the operation or disposition of such Mortgaged Property or the
benefit, if any, resulting from the refinancing of the Mortgage Loan (any such
provision, an "Equity Participation"), as described in the related Prospectus
Supplement.
MORTGAGE LOAN INFORMATION IN PROSPECTUS SUPPLEMENTS. Each Prospectus
Supplement will contain certain information pertaining to the Mortgage Loans in
the related Trust Fund, which, to the extent then applicable, will generally
include the following: (i) the aggregate outstanding principal balance and the
largest, smallest and average outstanding principal balance of the Mortgage
Loans, (ii) the type or types of property that provide security for repayment of
the Mortgage Loans, (iii) the earliest and latest origination date and maturity
date of the Mortgage Loans, (iv) the original and remaining terms to maturity of
the Mortgage Loans, or the respective ranges thereof, and the weighted average
original and remaining terms to maturity of the Mortgage Loans, (v) the
Loan-to-Value Ratios of the Mortgage Loans (either at origination or as of a
more recent date), or the range thereof, and the weighted average of such
Loan-to-Value Ratios, (vi) the Mortgage Rates borne by the Mortgage Loans, or
the range thereof, and the weighted average Mortgage Rate borne by the Mortgage
Loans, (vii) with respect to Mortgage Loans with adjustable Mortgage Rates ("ARM
Loans"), the index or indices upon which such adjustments are based, the
adjustment dates, the range of gross margins and the weighted average gross
margin, and any limits on Mortgage Rate adjustments at the time of any
adjustment and over the life of the ARM Loan, (viii) information regarding the
payment characteristics of the Mortgage Loans, including, without limitation,
balloon payment and other amortization provisions, Lock-out Periods and
Prepayment Premiums, (ix) the Debt Service Coverage Ratios of the Mortgage Loans
(either at origination or as of a more recent date), or the range thereof, and
the weighted average of such Debt Service Coverage Ratios, and (x) the
geographic distribution of the Mortgaged Properties on a state-by-state basis.
In appropriate cases, the related Prospectus Supplement will also contain
certain information available to the Depositor that pertains to the provisions
of leases and the nature of tenants of the Mortgaged Properties. If the
Depositor is unable to provide the specific information described above at the
time Offered Certificates of a series are initially offered, more general
information of the nature described above will be provided in the related
Prospectus Supplement, and specific information will be set forth in a report
which will be available to purchasers of those Certificates at or before the
initial issuance thereof and will be filed as part of a Current Report on Form
8-K with the Commission within fifteen days following such issuance.
If any Mortgage Loan, or group of related Mortgage Loans, constitutes a
concentration of credit risk, financial statements or other financial
information with respect to the related Mortgaged Property or Mortgaged
Properties will be included in the related Prospectus Supplement.
If and to the extent available and relevant to an investment decision in
the Offered Certificates of the related series, information regarding the
prepayment experience of a Master Servicer's multifamily and/or commercial
mortgage loan servicing portfolio will be included in the related Prospectus
Supplement. However, many servicers do not maintain records regarding such
matters or, at least, not in a format that can be readily aggregated. In
addition, the relevant characteristics of a Master Servicer's servicing
portfolio may be so materially different from those of the related Mortgage
Asset Pool that such prepayment experience would not be meaningful to an
investor. For example, differences in geographic dispersion, property type
and/or loan terms (e.g., mortgage rates, terms to maturity and/or prepayment
restrictions) between the two pools of loans could render the Master Servicer's
23
prepayment experience irrelevant. Because of the nature of the assets to be
serviced and administered by a Special Servicer, no comparable prepayment
information will be presented with respect to the Special Servicer's multifamily
and/or commercial mortgage loan servicing portfolio.
MORTGAGE LOANS SECURED BY MULTIFAMILY PROPERTIES. Significant factors
determining the value and successful operation of a multifamily property are the
location of the property, the number of competing residential developments in
the local market (such as apartment buildings, manufactured housing communities
and site-built single family homes), the physical attributes of the multifamily
apartment building (such as its age and appearance) and state and local
regulations affecting such property. In addition, the successful operation of an
apartment building will depend upon other factors, such as its reputation, the
ability of management to provide adequate maintenance and insurance, and the
types of services it provides.
Certain states regulate the relationship of an owner and its tenants.
Commonly, these laws require a written lease, good cause for eviction,
disclosures 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 statues for coercive, abusive or unconscionable
leasing and sales practices. A few states offer more significant protection. For
example, there are provisions that limit the basis on which a landlord may
terminate a tenancy or increase its rent or prohibit a landlord from terminating
a tenancy solely by reason of the sale of the owner's building.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control on apartment buildings.
These ordinances may limit rent increases to fixed percentages, to percentages
of increases in the consumer price index, to increases set or approved by a
governmental agency, or to increases determined through mediation or binding
arbitration. In many cases, the rent control laws do not permit vacancy
decontrol. Local authority to impose rent control is pre-empted by state law in
certain states, and rent control is not imposed at the state level in those
states. In some states, however, local rent control ordinances are not
pre-empted for tenants having short-term or month-to-month leases, and
properties there may be subject to various forms of rent control with respect to
those tenants. Any limitations on a borrower's ability to raise property rents
may impair such borrower's ability to repay its Mortgage Loan from its net
operating income or the proceeds of a sale or refinancing of the related
Mortgaged Property.
Adverse economic conditions, either local or national, may limit the amount
of rent that can be charged and may result in a reduction in timely rent
payments or a reduction in occupancy levels. Occupancy and rent levels may also
be affected by construction of additional housing units, local military base or
factory closings and national and local politics, including current or future
rent stabilization and rent control laws and agreements. In addition, the level
of mortgage interest rates may encourage tenants to purchase single-family
housing. The location and construction quality of a particular building may
affect the occupancy level as well as the rents that may be charged for
individual units. The characteristics of a neighborhood may change over time or
in relation to newer developments.
MORTGAGE LOANS SECURED BY RETAIL PROPERTIES. Significant factors
determining the value of Retail Properties are the quality of the tenants as
well as fundamental aspects of real estate such as location and market
demographics. The correlation between the success of tenant businesses and
property value is more direct with respect to Retail Properties than other types
of commercial property because a significant component of the total rent paid by
retail tenants is often tied to a percentage of gross sales. Whether a Retail
Property is "anchored" or "unanchored" is also an important distinction. Retail
Properties that are anchored have traditionally been perceived to be less risky.
While there is no strict definition of an anchor, it is generally understood
that a retail anchor tenant is proportionately large in size and is vital in
attracting customers to the property. Furthermore, there is a greater
correlation between the success of tenant businesses and property value when the
property is a single tenant Retail Property.
Unlike office or hotel Properties, Retail Properties also face competition
from sources outside a given real estate market. Catalogue retailers, home
shopping networks, shopping through electronic
24
media, telemarketing and outlet centers all compete with more traditional Retail
Properties for consumer dollars. Continued growth of these alternative retail
outlets (which are often characterized by lower operating costs) could adversely
affect the rents collectible at the Retail Properties included in the Mortgage
Pool.
MBS
MBS may include (i) private-label (that is, not issued, insured or
guaranteed by the United States or any agency or instrumentality thereof)
mortgage participations, mortgage pass-through certificates or other
mortgage-backed securities or (ii) certificates issued and/or insured or
guaranteed by the Federal Home Loan Mortgage Corporation ("FHLMC"), the Federal
National Mortgage Association ("FNMA"), the Governmental National Mortgage
Association ("GNMA") or the Federal Agricultural Mortgage Corporation ("FAMC"),
provided that, unless otherwise specified in the related Prospectus Supplement,
each MBS will evidence an interest in, or will be secured by a pledge of,
mortgage loans that conform to the descriptions of the Mortgage Loans contained
herein.
Except in the case of a pro rata mortgage participation in a single
mortgage loan or a pool of mortgage loans, each MBS included in a Mortgage Asset
Pool: (a) either will (i) have been previously registered under the Securities
Act of 1933, as amended, (ii) be exempt from such registration requirements or
(iii) have been held for at least the holding period specified in Rule 144(k)
under the Securities Act of 1933, as amended; and (b) either (i) will have been
acquired (other than from the Depositor or an affiliate thereof) in bona fide
secondary market transactions or (ii) if so specified in the related Prospectus
Supplement, may be derived from the Depositor's (or an affiliate's) unsold
allotments from the Depositor (or an affiliate's) previous offerings.
Any MBS will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, an indenture or similar agreement
(an "MBS Agreement"). The issuer of the MBS (the "MBS Issuer") and/or the
servicer of the underlying mortgage loans (the "MBS Servicer") will be parties
to the MBS Agreement, generally together with a trustee (the "MBS Trustee") or,
in the alternative, with the original purchaser or purchasers of the MBS.
The MBS may have been issued in one or more classes with characteristics
similar to the classes of Certificates described herein. Distributions in
respect of the MBS will be made by the MBS Issuer, the MBS Servicer or the MBS
Trustee on the dates specified in the related Prospectus Supplement. The MBS
Issuer or the MBS Servicer or another person specified in the related Prospectus
Supplement may have the right or obligation to repurchase or substitute assets
underlying the MBS after a certain date or under other circumstances specified
in the related Prospectus Supplement.
Reserve funds, subordination or other credit support similar to that
described for the Certificates under "Description of Credit Support" may have
been provided with respect to the MBS. The type, characteristics and amount of
such credit support, if any, will be a function of the characteristics of the
underlying mortgage loans and other factors and generally will have been
established on the basis of the requirements of any rating agency that may have
assigned a rating to the MBS, or by the initial purchasers of the MBS.
The Prospectus Supplement for a series of Certificates that evidence
interests in MBS will specify: (i) the aggregate approximate initial and
outstanding principal amount(s) and type of the MBS to be included in the Trust
Fund, (ii) the original and remaining term(s) to stated maturity of the MBS, if
applicable, (iii) the pass-through or bond rate(s) of the MBS or the formula for
determining such rate(s), (iv) the payment characteristics of the MBS, (v) the
MBS Issuer, MBS Servicer and MBS Trustee, as applicable, of each of the MBS,
(vi) a description of the related credit support, if any, (vii) the
circumstances under which the related underlying mortgage loans, or the MBS
themselves, may be purchased prior to their maturity, (viii) the terms on which
mortgage loans may be substituted for those originally underlying the MBS, (ix)
the type of mortgage loans underlying the MBS and, to the extent appropriate
under the circumstances, such other information in respect of the underlying
mortgage loans described under "--Mortgage Loans--Mortgage Loan Information in
Prospectus Supplements," and (x) the characteristics of any cash flow agreements
that relate to the MBS.
25
If specified in the Prospectus Supplement for a series of Certificates, a
Trust Fund may contain one or more MBS issued by the Depositor that each
represent an interest in one or more mortgage loans. The Prospectus Supplement
for a series will contain the disclosure concerning the MBS described in the
preceding paragraph and, in particular, will disclose such mortgage loans
appropriately in light of the percentage of the aggregate principal balance of
all assets represented by the principal balance of the MBS.
The Depositor will provide the same information regarding the MBS in any
Trust Fund in its reports filed under the Exchange Act with respect to such
Trust Fund as was provided by the related MBS Issuer in its own such reports if
such MBS was publicly offered or the reports the related MBS Issuer provides the
related MBS Trustee if such MBS was privately issued.
CERTIFICATE ACCOUNTS
Each Trust Fund will include one or more accounts (collectively, the
"Certificate Account") established and maintained on behalf of the
Certificateholders into which all payments and collections received or advanced
with respect to the Mortgage Assets and other assets in the Trust Fund will be
deposited to the
extent described herein and in the related Prospectus Supplement. See
"Description of the Pooling Agreements--Certificate Account."
CREDIT SUPPORT
If so provided in the Prospectus Supplement for a series of Certificates,
partial or full protection against certain defaults and losses on the Mortgage
Assets in the related Trust Fund may be provided to one or more classes of
Certificates of such series in the form of subordination of one or more other
classes of Certificates of such series or by one or more other types of Credit
Support, which may include a letter of credit, a surety bond, an insurance
policy, a guarantee, a reserve fund, or any combination thereof. The amount and
types of such Credit Support, the identity of the entity providing it (if
applicable) and related information with respect to each type of Credit Support,
if any, will be set forth in the Prospectus Supplement for a series of
Certificates. See "Risk Factors--Credit Support Limitations" and "Description of
Credit Support."
CASH FLOW AGREEMENTS
If so provided in the Prospectus Supplement for a series of Certificates,
the related Trust Fund may include guaranteed investment contracts pursuant to
which moneys held in the funds and accounts established for such series will be
invested at a specified rate. The Trust Fund may also include interest rate
exchange agreements, interest rate cap or floor agreements, or other agreements
designed to reduce the effects of interest rate fluctuations on the Mortgage
Assets on one or more classes of Certificates. The principal terms of any such
Cash Flow Agreement, including, without limitation, provisions relating to the
timing, manner and amount of payments thereunder and provisions relating to the
termination thereof, will be described in the related Prospectus Supplement. The
related Prospectus Supplement will also identify the obligor under the Cash Flow
Agreement.
YIELD AND MATURITY CONSIDERATIONS
GENERAL
The yield on any Offered Certificate will depend on the price paid by the
Certificateholder, the Pass-Through Rate of the Certificate and the amount and
timing of distributions on the Certificate. See "Risk Factors--Effect of
Prepayments on Average Life of Certificates." The following discussion
contemplates a Trust Fund that consists solely of Mortgage Loans. While the
characteristics and behavior of mortgage loans underlying an MBS can generally
be expected to have the same effect on the yield to maturity and/or weighted
average life of a class of Certificates as will the characteristics and behavior
of comparable Mortgage Loans, the effect may differ due to the payment
characteristics of the MBS. If a Trust Fund includes MBS, the related Prospectus
Supplement will discuss the effect,
26
if any, that the payment characteristics of the MBS may have on the yield to
maturity and weighted average lives of the Offered Certificates of the related
series.
PASS-THROUGH RATE
The Certificates of any class within a series may have a fixed, variable or
adjustable Pass-Through Rate, which may or may not be based upon the interest
rates borne by the Mortgage Loans in the related Trust Fund. The Prospectus
Supplement with respect to any series of Certificates will specify the
Pass-Through Rate for each class of Offered Certificates of such series or, in
the case of a class of Offered Certificates with a variable or adjustable
Pass-Through Rate, the method of determining the Pass-Through Rate; the effect,
if any, of the prepayment of any Mortgage Loan on the Pass-Through Rate of one
or more classes of Offered Certificates; and whether the distributions of
interest on the Offered Certificates of any class will be dependent, in whole or
in part, on the performance of any obligor under a Cash Flow Agreement.
PAYMENT DELAYS
With respect to any series of Certificates, a period of time will elapse
between the date upon which payments on the Mortgage Loans in the related Trust
Fund are due and the Distribution Date on which such payments are passed through
to Certificateholders. That delay will effectively reduce the yield that would
otherwise be produced if payments on such Mortgage Loans were distributed to
Certificateholders on the date they were due.
CERTAIN SHORTFALLS IN COLLECTIONS OF INTEREST
When a principal prepayment in full or in part is made on a Mortgage Loan,
the borrower is generally charged interest on the amount of such prepayment only
through the date of such prepayment, instead of through the Due Date for the
next succeeding scheduled payment. However, interest accrued on any series of
Certificates and distributable thereon on any Distribution Date will generally
correspond to interest accrued on the Mortgage Loans to their respective Due
Dates during the related Due Period. A "Due Period" will be a specified time
period (generally corresponding in length to the period between Distribution
Dates) and all scheduled payments on the Mortgage Loans in the related Trust
Fund that are due during a given Due Period will, to the extent received by a
specified date (the "Determination Date") or otherwise advanced by the related
Master Servicer, Special Servicer or other specified person, be distributed to
the holders of the Certificates of such series on the next succeeding
Distribution Date. Consequently, if a prepayment on any Mortgage Loan is
distributable to Certificateholders on a particular Distribution Date, but such
prepayment is not accompanied by interest thereon to the Due Date for such
Mortgage Loan in the related Due Period, then the interest charged to the
borrower (net of servicing and administrative fees) may be less (such shortfall,
a "Prepayment Interest Shortfall") than the corresponding amount of interest
accrued and otherwise payable on the Certificates of the related series. If and
to the extent that any such shortfall is allocated to a class of Offered
Certificates, the yield thereon will be adversely affected. The Prospectus
Supplement for each series of Certificates will describe the manner in which any
such shortfalls will be allocated among the classes of such Certificates. The
related Prospectus Supplement will also describe any amounts available to offset
such shortfalls.
YIELD AND PREPAYMENT CONSIDERATIONS
A Certificate's yield to maturity will be affected by the rate of principal
payments on the Mortgage Loans in the related Trust Fund and the allocation
thereof to reduce the principal balance (or notional amount, if applicable) of
such Certificate. The rate of principal payments on the Mortgage Loans in any
Trust Fund will in turn be affected by the amortization schedules thereof
(which, in the case of ARM Loans, may change periodically to accommodate
adjustments to the Mortgage Rates thereon), the dates on which any balloon
payments are due, and the rate of principal prepayments thereon (including for
this purpose, voluntary prepayments by borrowers and also prepayments resulting
from liquidations of Mortgage Loans due to defaults, casualties or condemnations
affecting the related Mortgaged
27
Properties, or purchases of Mortgage Loans out of the related Trust Fund).
Because the rate of principal prepayments on the Mortgage Loans in any Trust
Fund will depend on future events and a variety of factors (as described below),
no assurance can be given as to such rate.
The extent to which the yield to maturity of a class of Offered
Certificates of any series may vary from the anticipated yield will depend upon
the degree to which they are purchased at a discount or premium and when, and to
what degree, payments of principal on the Mortgage Loans in the related Trust
Fund are in turn distributed on such Certificates (or, in the case of a class of
Stripped Interest Certificates, result in the reduction of the Notional Amount
thereof). An investor should consider, in the case of any Offered Certificate
purchased at a discount, the risk that a slower than anticipated rate of
principal payments on the Mortgage Loans in the related Trust Fund could result
in an actual yield to such investor that is lower than the anticipated yield
and, in the case of any Offered Certificate purchased at a premium, the risk
that a faster than anticipated rate of principal payments on such Mortgage Loans
could result in an actual yield to such investor that is lower than the
anticipated yield. In addition, if an investor purchases an Offered Certificate
at a discount (or premium), and principal payments are made in reduction of the
principal balance or notional amount of such investor's Offered Certificates at
a rate slower (or faster) than the rate anticipated by the investor during any
particular period, any consequent adverse effects on such investor's yield would
not be fully offset by a subsequent like increase (or decrease) in the rate of
principal payments.
In general, the Notional Amount of a class of Stripped Interest
Certificates will either (i) be based on the principal balances of some or all
of the Mortgage Assets in the related Trust Fund or (ii) equal the Certificate
Balances of one or more of the other classes of Certificates of the same series.
Accordingly, the yield on such Stripped Interest Certificates will be inversely
related to the rate at which payments and other collections of principal are
received on such Mortgage Assets or distributions are made in reduction of the
Certificate Balances of such classes of Certificates, as the case may be.
Consistent with the foregoing, if a class of Certificates of any series
consists of Stripped Interest Certificates or Stripped Principal Certificates, a
lower than anticipated rate of principal prepayments on the Mortgage Loans in
the related Trust Fund will negatively affect the yield to investors in Stripped
Principal Certificates, and a higher than anticipated rate of principal
prepayments on such Mortgage Loans will negatively affect the yield to investors
in Stripped Interest Certificates. If the Offered Certificates of a series
include any such Certificates, the related Prospectus Supplement will include a
table showing the effect of various constant assumed levels of prepayment on
yields on such Certificates. Such tables will be intended to illustrate the
sensitivity of yields to various constant assumed prepayment rates and will not
be intended to predict, or to provide information that will enable investors to
predict, yields or prepayment rates.
The extent of prepayments of principal of the Mortgage Loans in any Trust
Fund may be affected by a number of factors, including, without limitation, the
availability of mortgage credit, the relative economic vitality of the area in
which the Mortgaged Properties are located, the quality of management of the
Mortgaged Properties, the servicing of the Mortgage Loans, possible changes in
tax laws and other opportunities for investment. In general, those factors which
increase the attractiveness of selling a Mortgaged Property or refinancing a
Mortgage Loan or which enhance a borrower's ability to do so, as well as those
factors which increase the likelihood of default under a Mortgage Loan, would be
expected to cause the rate of prepayment in respect of any Mortgage Asset Pool
to accelerate. In contrast, those factors having an opposite effect would be
expected to cause the rate of prepayment of any Mortgage Asset Pool to slow.
The rate of principal payments on the Mortgage Loans in any Trust Fund may
also be affected by the existence of Lock-out Periods and requirements that
principal prepayments be accompanied by Prepayment Premiums, and by the extent
to which such provisions may be practicably enforced. To the extent enforceable,
such provisions could constitute either an absolute prohibition (in the case of
a Lock-out Period) or a disincentive (in the case of a Prepayment Premium) to a
borrower's voluntarily prepaying its Mortgage Loan, thereby slowing the rate of
prepayments.
The rate of prepayment on a 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. When the prevailing market
28
interest rate is below a mortgage coupon, a borrower may have an increased
incentive to refinance its mortgage loan. Even in the case of ARM Loans, as
prevailing market interest rates decline, and without regard to whether the
Mortgage Rates on such ARM Loans decline in a manner consistent therewith, the
related borrowers may have an increased incentive to refinance for purposes of
either (i) converting to a fixed rate loan and thereby "locking in" such rate or
(ii) taking advantage of a different index, margin or rate cap or floor on
another adjustable rate mortgage loan. Therefore, as prevailing market interest
rates decline, prepayment speeds would be expected to accelerate.
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 therein, 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. The Depositor
makes no representation as to the particular factors that will affect the
prepayment of the Mortgage Loans in any Trust Fund, as to the relative
importance of such factors, as to the percentage of the principal balance of
such Mortgage Loans that will be paid as of any date or as to the overall rate
of prepayment on such Mortgage Loans.
WEIGHTED AVERAGE LIFE AND MATURITY
The rate at which principal payments are received on the Mortgage Loans in
any Trust Fund will affect the ultimate maturity and the weighted average life
of one or more classes of the Certificates of such series. Unless otherwise
specified in the related Prospectus Supplement, weighted average life refers to
the average amount of time that will elapse from the date of issuance of an
instrument until each dollar allocable as principal of such instrument is repaid
to the investor.
The weighted average life and maturity of a class of Certificates of any
series will be influenced by the rate at which principal on the related Mortgage
Loans, whether in the form of scheduled amortization or prepayments (for this
purpose, the term "prepayment" includes voluntary prepayments by borrowers and
also prepayments resulting from liquidations of Mortgage Loans due to default,
casualties or condemnations affecting the related Mortgaged Properties and
purchases of Mortgage Loans out of the related Trust Fund), is paid to such
class. Prepayment rates on loans are commonly measured relative to a prepayment
standard or model, such as the Constant Prepayment Rate ("CPR") prepayment model
or the Standard Prepayment Assumption ("SPA") prepayment model. CPR represents
an assumed constant rate of prepayment each month (expressed as an annual
percentage) relative to the then outstanding principal balance of a pool of
mortgage loans for the life of such loans. SPA represents an assumed variable
rate of prepayment each month (expressed as an annual percentage) relative to
the then outstanding principal balance of a pool of mortgage loans, with
different prepayment assumptions often expressed as percentages of SPA. For
example, a prepayment assumption of 100% of SPA assumes prepayment rates of 0.2%
per annum of the then outstanding principal balance of such loans in the first
month of the life of the loans and an additional 0.2% per annum in each month
thereafter until the thirtieth month. Beginning in the thirtieth month, and in
each month thereafter during the life of the loans, 100% of SPA assumes a
constant prepayment rate of 6% per annum each month.
Neither CPR nor SPA nor any other prepayment model or assumption purports
to be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any particular pool of mortgage loans.
Moreover, the CPR and SPA models were developed based upon historical prepayment
experience for single-family mortgage loans. Thus, it is unlikely that the
prepayment experience of the Mortgage Loans included in any Trust Fund will
conform to any particular level of CPR or SPA.
The Prospectus Supplement with respect to each series of Certificates will
contain tables, if applicable, setting forth the projected weighted average life
of each class of Offered Certificates of such series with a Certificate Balance,
and the percentage of the initial Certificate Balance of each such class that
would be outstanding on specified Distribution Dates, based on the assumptions
stated in such Prospectus Supplement, including assumptions that prepayments on
the related Mortgage Loans are made at rates corresponding to various
percentages of CPR or SPA, or at such other rates specified
29
in such Prospectus Supplement. Such tables and assumptions will illustrate the
sensitivity of the weighted average lives of the Certificates to various assumed
prepayment rates and will not be intended to predict, or to provide information
that will enable investors to predict, the actual weighted average lives of the
Certificates.
OTHER FACTORS AFFECTING YIELD, WEIGHTED AVERAGE LIFE AND MATURITY
BALLOON PAYMENTS; EXTENSIONS OF MATURITY. Some or all of the Mortgage Loans
included in a particular Trust Fund may require that balloon payments be made at
maturity. Because the ability of a borrower to make a balloon payment typically
will depend upon its ability either to refinance the loan or to sell the related
Mortgaged Property, there is a possibility that Mortgage Loans that require
balloon payments may default at maturity, or that the maturity of such a
Mortgage Loan may be extended in connection with a workout. In the case of
defaults, recovery of proceeds may be delayed by, among other things, bankruptcy
of the borrower or adverse conditions in the market where the property is
located. In order to minimize losses on defaulted Mortgage Loans, the Master
Servicer or the Special Servicer, to the extent and under the circumstances set
forth herein and in the related Prospectus Supplement, may be authorized to
modify Mortgage Loans that are in default or as to which a payment default is
imminent. Any defaulted balloon payment or modification that extends the
maturity of a Mortgage Loan may delay distributions of principal on a class of
Offered Certificates and thereby extend the weighted average life of such
Certificates and, if such Certificates were purchased at a discount, reduce the
yield thereon.
NEGATIVE AMORTIZATION. The weighted average life of a class of Certificates
can be affected by Mortgage Loans that permit negative amortization to occur
(that is, Mortgage Loans that provide for the current payment of interest
calculated at a rate lower than the rate at which interest accrues thereon, with
the unpaid portion of such interest being added to the related principal
balance). Negative amortization on one or more Mortgage Loans in any Trust Fund
may result in negative amortization on the Offered Certificates of the related
series. The related Prospectus Supplement will describe, if applicable, the
manner in which negative amortization in respect of the Mortgage Loans in any
Trust Fund is allocated among the respective classes of Certificates of the
related series. The portion of any Mortgage Loan negative amortization allocated
to a class of Certificates may result in a deferral of some or all of the
interest payable thereon, which deferred interest may be added to the
Certificate Balance thereof. In addition, an ARM Loan that permits negative
amortization would be expected during a period of increasing interest rates to
amortize at a slower rate (and perhaps not at all) than if interest rates were
declining or were remaining constant. Such slower rate of Mortgage Loan
amortization would correspondingly be reflected in a slower rate of amortization
for one or more classes of Certificates of the related series. Accordingly, the
weighted average lives of Mortgage Loans that permit negative amortization (and
that of the classes of Certificates to which any such negative amortization
would be allocated or that would bear the effects of a slower rate of
amortization on such Mortgage Loans) may increase as a result of such feature.
Negative amortization may occur in respect of an ARM Loan that (i) limits
the amount by which its scheduled payment may adjust in response to a change in
its Mortgage Rate, (ii) provides that its scheduled payment will adjust less
frequently than its Mortgage Rate or (iii) provides for constant scheduled
payments notwithstanding adjustments to its Mortgage Rate. Accordingly, during a
period of declining interest rates, the scheduled payment on such a Mortgage
Loan may exceed the amount necessary to amortize the loan fully over its
remaining amortization schedule and pay interest at the then applicable Mortgage
Rate, thereby resulting in the accelerated amortization of such Mortgage Loan.
Any such acceleration in amortization of its principal balance will shorten the
weighted average life of such Mortgage Loan and, correspondingly, the weighted
average lives of those classes of Certificates entitled to a portion of the
principal payments on such Mortgage Loan.
The extent to which the yield on any Offered Certificate will be affected
by the inclusion in the related Trust Fund of Mortgage Loans that permit
negative amortization, will depend upon (i) whether such Offered Certificate was
purchased at a premium or a discount and (ii) the extent to which the payment
characteristics of such Mortgage Loans delay or accelerate the distributions of
principal on
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such Certificate (or, in the case of a Stripped Interest Certificate, delay or
accelerate the reduction of the notional amount thereof). See "--Yield and
Prepayment Considerations" above.
FORECLOSURES AND PAYMENT PLANS. The number of foreclosures and the
principal amount of the Mortgage Loans that are foreclosed in relation to the
number and principal amount of Mortgage Loans that are repaid in accordance with
their terms will affect the weighted average lives of those Mortgage Loans and,
accordingly, the weighted average lives of and yields on the Certificates of the
related series. Servicing decisions made with respect to the Mortgage Loans,
including the use of payment plans prior to a demand for acceleration and the
restructuring of Mortgage Loans in bankruptcy proceedings or otherwise, may also
have an effect upon the payment patterns of particular Mortgage Loans and thus
the weighted average lives of and yields on the Certificates of the related
series.
LOSSES AND SHORTFALLS ON THE MORTGAGE ASSETS. The yield to holders of the
Offered Certificates of any series will directly depend on the extent to which
such holders are required to bear the effects of any losses or shortfalls in
collections arising out of defaults on the Mortgage Loans in the related Trust
Fund and the timing of such losses and shortfalls. In general, the earlier that
any such loss or shortfall occurs, the greater will be the negative effect on
yield for any class of Certificates that is required to bear the effects
thereof.
The amount of any losses or shortfalls in collections on the Mortgage
Assets in any Trust Fund (to the extent not covered or offset by draws on any
reserve fund or under any instrument of Credit Support) will be allocated among
the respective classes of Certificates of the related series in the priority and
manner, and subject to the limitations, specified in the related Prospectus
Supplement. As described in the related Prospectus Supplement, such allocations
may be effected by (i) a reduction in the entitlements to interest and/or the
Certificate Balances of one or more such classes of Certificates and/or (ii)
establishing a priority of payments among such classes of Certificates.
The yield to maturity on a class of Subordinate Certificates may be
extremely sensitive to losses and shortfalls in collections on the Mortgage
Loans in the related Trust Fund.
ADDITIONAL CERTIFICATE AMORTIZATION. In addition to entitling the holders
thereof to a specified portion (which may during specified periods range from
none to all) of the principal payments received on the Mortgage Assets in the
related Trust Fund, one or more classes of Certificates of any series, including
one or more classes of Offered Certificates of such series, may provide for
distributions of principal thereof from (i) amounts attributable to interest
accrued but not currently distributable on one or more classes of Accrual
Certificates, (ii) Excess Funds or (iii) any other amounts described in the
related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, "Excess Funds" will, in general, represent that portion
of the amounts distributable in respect of the Certificates of any series on any
Distribution Date that represent (i) interest received or advanced on the
Mortgage Assets in the related Trust Fund that is in excess of the interest
currently accrued on the Certificates of such series, or (ii) Prepayment
Premiums, payments from Equity Participations or any other amounts received on
the Mortgage Assets in the related Trust Fund that do not constitute interest
thereon or principal thereof.
The amortization of any class of Certificates out of the sources described
in the preceding paragraph would shorten the weighted average life of such
Certificates and, if such Certificates were purchased at a premium, reduce the
yield thereon. The related Prospectus Supplement will discuss the relevant
factors to be considered in determining whether distributions of principal of
any class of Certificates out of such sources is likely to have any material
effect on the rate at which such Certificates are amortized and the consequent
yield with respect thereto.
THE DEPOSITOR
The Depositor is a special purpose corporation incorporated in the State of
Delaware on March 22, 1996, for the purpose of engaging in the business, among
other things, of acquiring and depositing mortgage assets in trust in exchange
for certificates evidencing interest in such trusts and selling or otherwise
distributing such certificates. The Depositor is not an affiliate of Deutsche
Bank AG. The principal executive offices of the Depositor are located at One
International Place, Room 520, Boston,
31
Massachusetts 02110. Its telephone number is (617) 951-7690. The Depositor's
capitalization is nominal. All of the shares of capital stock of the Depositor
are held by The Deutsche Mortgage & Asset Receiving Trust, a Massachusetts
charitable lead trust (the "DMARC Trust") formed by J H Management Corporation
and J H Holdings Corporation, both of which are Massachusetts corporations. J H
Holdings Corporation is the trustee of the DMARC Trust, which holds no assets
other than the stock of the Depositor. All of the stock of J H Holdings
Corporation and of J H Management Corporation is held by the 1960 Trust, an
independent charitable organization qualified under Section 501(c)(3) of the
Code, and operated for the benefit of a Massachusetts charitable institution.
None of the Depositor, J H Management Corporation, Deutsche Bank A.G. or
any of their respective affiliates will insure or guarantee distributions on the
Certificates of any series.
DEUTSCHE BANK AG
It is anticipated that the assets conveyed to the Trust Fund by the
Depositor will have been acquired by the Depositor from Deutsche Bank AG or an
affiliate thereof. Deutsche Bank AG is the largest banking institution in the
Federal Republic of Germany and one of the largest in the world. It is the
parent company of a group (the "Deutsche Bank Group") consisting of commercial
banks, investment banking and fund management companies, mortgage banks and
property finance companies, installment financing and leasing companies,
insurance companies, research and consultancy companies and other domestic and
foreign companies. The Deutsche Bank Group employs over 74,000 staff members at
more than 2,400 branches and offices around the world.
DESCRIPTION OF THE CERTIFICATES
GENERAL
Each series of Certificates will represent the entire beneficial ownership
interest in the Trust Fund created pursuant to the related Pooling Agreement. As
described in the related Prospectus Supplement, the Certificates of each series,
including the Offered Certificates of such series, may consist of one or more
classes of Certificates that, among other things: (i) provide for the accrual of
interest on the Certificate Balance or Notional Amount thereof at a fixed,
variable or adjustable rate; (ii) constitute Senior Certificates or Subordinate
Certificates; (iii) constitute Stripped Interest Certificates or Stripped
Principal Certificates; (iv) provide for distributions of interest thereon or
principal thereof that commence only after the occurrence of certain events,
such as the retirement of one or more other classes of Certificates of such
series; (v) provide for distributions of principal thereof to be made, from time
to time or for designated periods, at a rate that is faster (and, in some cases,
substantially faster) or slower (and, in some cases, substantially slower) than
the rate at which payments or other collections of principal are received on the
Mortgage Assets in the related Trust Fund; (vi) provide for distributions of
principal thereof to be made, subject to available funds, based on a specified
principal payment schedule or other methodology; or (vii) provide for
distributions based on collections on the Mortgage Assets in the related Trust
Fund attributable to Prepayment Premiums and Equity Participations.
If so specified in the related Prospectus Supplement, a class of
Certificates may have two or more component parts, each having characteristics
that are otherwise described herein as being attributable to separate and
distinct classes. For example, a class of Certificates may have a Certificate
Balance on which it accrues interest at a fixed, variable or adjustable rate.
Such class of Certificates may also have certain characteristics attributable to
Stripped Interest Certificates insofar as it may also entitle the holders
thereof to distributions of interest accrued on a Notional Amount at a different
fixed, variable or adjustable rate. In addition, a class of Certificates may
accrue interest on one portion of its Certificate Balance at one fixed, variable
or adjustable rate and on another portion of its Certificate Balance at a
different fixed, variable or adjustable rate.
Each class of Offered Certificates of a series will be issued in minimum
denominations corresponding to the principal balances or, in case of certain
classes of Stripped Interest Certificates or
32
Residual Certificates, notional amounts or percentage interests, specified in
the related Prospectus Supplement. As provided in the related Prospectus
Supplement, one or more classes of Offered Certificates of any series may be
issued in fully registered, definitive form (such Certificates, "Definitive
Certificates") or may be offered in book-entry format (such Certificates,
"Book-Entry Certificates") through the facilities of DTC. The Offered
Certificates of each series (if issued as Definitive Certificates) may be
transferred or exchanged, subject to any restrictions on transfer described in
the related Prospectus Supplement, at the location specified in the related
Prospectus Supplement, without the payment of any service charges, other than
any tax or other governmental charge payable in connection therewith. Interests
in a class of Book-Entry Certificates will be transferred on the book-entry
records of DTC and its participating organizations. If so specified in the
related Prospectus Supplement, arrangements may be made for clearance and
settlement through Clearstream Banking, societe anonyme or the Euroclear System,
if they are participants in DTC.
DISTRIBUTIONS
Distributions on the Certificates of each series will be made on each
Distribution Date from the Available Distribution Amount for such series and
such Distribution Date. Unless otherwise provided in the related Prospectus
Supplement, the "Available Distribution Amount" for any series of Certificates
and any Distribution Date will refer to the total of all payments or other
collections (or advances in lieu thereof) on, under or in respect of the
Mortgage Assets and any other assets included in the related Trust Fund that are
available for distribution to the holders of Certificates of such series on such
date. The particular components of the Available Distribution Amount for any
series and Distribution Date will be more specifically described in the related
Prospectus Supplement. In general, the Distribution Date for a series of
Certificates will be the 25th day of each month (or, if any such 25th day is not
a business day, the next succeeding business day), commencing in the month
immediately following the month in which such series of Certificates is issued.
Except as otherwise specified in the related Prospectus Supplement,
distributions on the Certificates of each series (other than the final
distribution in retirement of any such Certificate) will be made to the persons
in whose names such Certificates are registered at the close of business on the
last business day of the month preceding the month in which the applicable
Distribution Date occurs (the "Record Date"), and the amount of each
distribution will be determined as of the close of business on the date (the
"Determination Date") specified in the related Prospectus Supplement. All
distributions with respect to each class of Certificates on each Distribution
Date will be allocated pro rata among the outstanding Certificates in such class
in proportion to the respective Percentage Interests evidenced thereby unless
otherwise specified in the related Prospectus Supplement. Payments will be made
either by wire transfer in immediately available funds to the account of a
Certificateholder at a bank or other entity having appropriate facilities
therefor, if such Certificateholder has provided the person required to make
such payments with wiring instructions no later than the related Record Date or
such other date specified in the related Prospectus Supplement (and, if so
provided in the related Prospectus Supplement, such Certificateholder holds
Certificates in the requisite amount or denomination specified therein), or by
check mailed to the address of such Certificateholder as it appears on the
Certificate Register; provided, however, that the final distribution in
retirement of any class of Certificates (whether Definitive Certificates or
Book-Entry Certificates) will be made only upon presentation and surrender of
such Certificates at the location specified in the notice to Certificateholders
of such final distribution. The undivided percentage interest (the "Percentage
Interest") represented by an Offered Certificate of a particular class will be
equal to the percentage obtained by dividing the initial principal balance or
notional amount of such Certificate by the initial Certificate Balance or
Notional Amount of such class.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of Certificates of each series (other than certain classes of
Stripped Principal Certificates and certain classes of Residual Certificates
that have no Pass-Through Rate) may have a different Pass-Through Rate, which in
each case may be fixed, variable or adjustable. The related Prospectus
Supplement will specify the Pass-Through Rate or, in the case of a variable or
adjustable Pass-Through
33
Rate, the method for determining the Pass-Through Rate, for each class of
Offered Certificates. Unless otherwise specified in the related Prospectus
Supplement, interest on the Certificates of each series will be calculated on
the basis of a 360-day year consisting of twelve 30-day months.
Distributions of interest in respect of any class of Certificates (other
than a class of Accrual Certificates, which will be entitled to distributions of
accrued interest commencing only on the Distribution Date, or under the
circumstances, specified in the related Prospectus Supplement, and other than
any class of Stripped Principal Certificates or Residual Certificates that is
not entitled to any distributions of interest) will be made on each Distribution
Date based on the Accrued Certificate Interest for such class and such
Distribution Date, subject to the sufficiency of that portion, if any, of the
Available Distribution Amount allocable to such class on such Distribution Date.
Prior to the time interest is distributable on any class of Accrual
Certificates, the amount of Accrued Certificate Interest otherwise distributable
on such class will be added to the Certificate Balance thereof on each
Distribution Date or otherwise deferred as described in the related Prospectus
Supplement. With respect to each class of Certificates (other than certain
classes of Stripped Interest Certificates and certain classes of Residual
Certificates), the "Accrued Certificate Interest" for each Distribution Date
will be equal to interest at the applicable Pass-Through Rate accrued for a
specified period (generally the most recently ended calendar month) on the
outstanding Certificate Balance of such class of Certificates immediately prior
to such Distribution Date. Unless otherwise provided in the related Prospectus
Supplement, the Accrued Certificate Interest for each Distribution Date on a
class of Stripped Interest Certificates will be similarly calculated except that
it will accrue on a Notional Amount that is either (i) based on the principal
balances of some or all of the Mortgage Assets in the related Trust Fund or (ii)
equal to the Certificate Balances of one or more other classes of Certificates
of the same series. Reference to a Notional Amount with respect to a class of
Stripped Interest Certificates is solely for convenience in making certain
calculations and does not represent the right to receive any distributions of
principal. If so specified in the related Prospectus Supplement, the amount of
Accrued Certificate Interest that is otherwise distributable on (or, in the case
of Accrual Certificates, that may otherwise be added to the Certificate Balance
of) one or more classes of the Certificates of a series may be reduced to the
extent that any Prepayment Interest Shortfalls, as described under "Yield and
Maturity Considerations--Certain Shortfalls in Collections of Interest," exceed
the amount of any sums that are applied to offset the amount of such shortfalls.
The particular manner in which such shortfalls will be allocated among some or
all of the classes of Certificates of that series will be specified in the
related Prospectus Supplement. The related Prospectus Supplement will also
describe the extent to which the amount of Accrued Certificate Interest that is
otherwise distributable on (or, in the case of Accrual Certificates, that may
otherwise be added to the Certificate Balance of) a class of Offered
Certificates may be reduced as a result of any other contingencies, including
delinquencies, losses and deferred interest on or in respect of the Mortgage
Assets in the related Trust Fund. Unless otherwise provided in the related
Prospectus Supplement, any reduction in the amount of Accrued Certificate
Interest otherwise distributable on a class of Certificates by reason of the
allocation to such class of a portion of any deferred interest on or in respect
of the Mortgage Assets in the related Trust Fund will result in a corresponding
increase in the Certificate Balance of such class. See "Risk Factors--Effect of
Prepayments on Average Life of Certificates" and "--Effect of Prepayments on
Yield of Certificates" and "Yield and Maturity Considerations--Certain
Shortfalls in Collections of Interest."
DISTRIBUTIONS OF PRINCIPAL OF THE CERTIFICATES
Each class of Certificates of each series (other than certain classes of
Stripped Interest Certificates and certain classes of Residual Certificates)
will have a Certificate Balance, which, at any time, will equal the then maximum
amount that the holders of Certificates of such class will be entitled to
receive as principal out of the future cash flow on the Mortgage Assets and
other assets included in the related Trust Fund. The outstanding Certificate
Balance of a class of Certificates will be reduced by distributions of principal
made thereon from time to time and, if and to the extent so provided in the
related Prospectus Supplement, further by any losses incurred in respect of the
related Mortgage Assets allocated thereto from time to time. In turn, the
outstanding Certificate Balance of a class of Certificates may be increased as a
result of any deferred interest on or in respect of the related Mortgage Assets
being allocated thereto from time to time, and will be increased, in the case of
a class of Accrual
34
Certificates prior to the Distribution Date on which distributions of interest
thereon are required to commence, by the amount of any Accrued Certificate
Interest in respect thereof (reduced as described above). The initial aggregate
Certificate Balance of all classes of a series of Certificates will not be
greater than the aggregate outstanding principal balance of the related Mortgage
Assets as of a specified date (the "Cut-off Date"), after application of
scheduled payments due on or before such date, whether or not received. The
initial Certificate Balance of each class of a series of Certificates will be
specified in the related Prospectus Supplement. As and to the extent described
in the related Prospectus Supplement, distributions of principal with respect to
a series of Certificates will be made on each Distribution Date to the holders
of the class or classes of Certificates of such series entitled thereto until
the Certificate Balances of such Certificates have been reduced to zero.
Distributions of principal with respect to one or more classes of Certificates
may be made at a rate that is faster (and, in some cases, substantially faster)
than the rate at which payments or other collections of principal are received
on the Mortgage Assets in the related Trust Fund. Distributions of principal
with respect to one or more classes of Certificates may not commence until the
occurrence of certain events, such as the retirement of one or more other
classes of Certificates of the same series, or may be made at a rate that is
slower (and, in some cases, substantially slower) than the rate at which
payments or other collections of principal are received on the Mortgage Assets
in the related Trust Fund. Distributions of principal with respect to one or
more classes of Certificates (each such class, a "Controlled Amortization
Class") may be made, subject to available funds, based on a specified principal
payment schedule. Distributions of principal with respect to one or more other
classes of Certificates (each such class, a "Companion Class") may be contingent
on the specified principal payment schedule for a Controlled Amortization Class
of the same series and the rate at which payments and other collections of
principal on the Mortgage Assets in the related Trust Fund are received. Unless
otherwise specified in the related Prospectus Supplement, distributions of
principal of any class of Offered Certificates will be made on a pro rata basis
among all of the Certificates of such class.
DISTRIBUTIONS ON THE CERTIFICATES IN RESPECT OF PREPAYMENT PREMIUMS OR IN
RESPECT OF EQUITY PARTICIPATIONS
If so provided in the related Prospectus Supplement, Prepayment Premiums or
payments in respect of Equity Participations received on or in connection with
the Mortgage Assets in any Trust Fund will be distributed on each Distribution
Date to the holders of the class of Certificates of the related series entitled
thereto in accordance with the provisions described in such Prospectus
Supplement. Alternatively, such items may be retained by the Depositor or any of
its affiliates or by any other specified person and/or may be excluded as Trust
Assets.
ALLOCATION OF LOSSES AND SHORTFALLS
The amount of any losses or shortfalls in collections on the Mortgage
Assets in any Trust Fund (to the extent not covered or offset by draws on any
reserve fund or under any instrument of Credit Support) will be allocated among
the respective classes of Certificates of the related series in the priority and
manner, and subject to the limitations, specified in the related Prospectus
Supplement. As described in the related Prospectus Supplement, such allocations
may be effected by (i) a reduction in the entitlements to interest and/or the
Certificate Balances of one or more such classes of Certificates and/or (ii)
establishing a priority of payments among such classes of Certificates. See
"Description of Credit Support."
ADVANCES IN RESPECT OF DELINQUENCIES
If and to the extent provided in the related Prospectus Supplement, if a
Trust Fund includes Mortgage Loans, the Master Servicer, the Special Servicer,
the Trustee, any provider of Credit Support and/or any other specified person
may be obligated to advance, or have the option of advancing, on or before each
Distribution Date, from its or their own funds or from excess funds held in the
related Certificate Account that are not part of the Available Distribution
Amount for the related series of Certificates for such Distribution Date, an
amount up to the aggregate of any payments of principal (other
35
than the principal portion of any balloon payments) and interest that were due
on or in respect of such Mortgage Loans during the related Due Period and were
delinquent on the related Determination Date.
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of Certificates entitled
thereto, rather than to guarantee or insure against losses. Accordingly, all
advances made out of a specific entity's own funds will be reimbursable out of
related recoveries on the Mortgage Loans (including amounts drawn under any fund
or instrument constituting Credit Support) respecting which such advances were
made (as to any Mortgage Loan, "Related Proceeds") and such other specific
sources as may be identified in the related Prospectus Supplement, including, in
the case of a series that includes one or more classes of Subordinate
Certificates, if so identified, collections on other Mortgage Assets in the
related Trust Fund that would otherwise be distributable to the holders of one
or more classes of such Subordinate Certificates. No advance will be required to
be made by a Master Servicer, Special Servicer or Trustee if, in the judgment of
the Master Servicer, Special Servicer or Trustee, as the case may be, such
advance would not be recoverable from Related Proceeds or another specifically
identified source (any such advance, a "Nonrecoverable Advance"); and, if
previously made by a Master Servicer, Special Servicer or Trustee, a
Nonrecoverable Advance will be reimbursable thereto from any amounts in the
related Certificate Account prior to any distributions being made to the related
series of Certificateholders.
If advances have been made by a Master Servicer, Special Servicer, Trustee
or other entity from excess funds in a Certificate Account, such Master
Servicer, Special Servicer, Trustee or other entity, as the case may be, will be
required to replace such funds in such Certificate Account on or prior to any
future Distribution Date to the extent that funds in such Certificate Account on
such Distribution Date are less than payments required to be made to the related
series of Certificateholders on such date. If so specified in the related
Prospectus Supplement, the obligation of a Master Servicer, Special Servicer,
Trustee or other entity to make advances may be secured by a cash advance
reserve fund or a surety bond. If applicable, information regarding the
characteristics of, and the identity of any obligor on, any such surety bond,
will be set forth in the related Prospectus Supplement.
If and to the extent so provided in the related Prospectus Supplement, any
entity making advances will be entitled to receive interest on certain or all of
such advances for a specified period during which such advances are outstanding
at the rate specified in such Prospectus Supplement, and such entity will be
entitled to payment of such interest periodically from general collections on
the Mortgage Loans in the related Trust Fund prior to any payment to the related
series of Certificateholders or as otherwise provided in the related Pooling
Agreement and described in such Prospectus Supplement. The Prospectus Supplement
for any series of Certificates evidencing an interest in a Trust Fund that
includes MBS will describe any comparable advancing obligation of a party to the
related Pooling Agreement or of a party to the related MBS Agreement.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, together with the distribution to the holders of
each class of the Offered Certificates of a series, a Master Servicer, Manager
or Trustee, as provided in the related Prospectus Supplement, will forward to
each such holder, a statement (a "Distribution Date Statement") that, unless
otherwise provided in the related Prospectus Supplement, will set forth, among
other things, in each case to the extent applicable:
(i) the amount of such distribution to holders of such class of Offered
Certificates that was applied to reduce the Certificate Balance thereof;
(ii) the amount of such distribution to holders of such class of Offered
Certificates that was applied to pay Accrued Certificate Interest;
(iii) the amount, if any, of such distribution to holders of such class of
Offered Certificates that was allocable to (A) Prepayment Premiums and (B)
payments on account of Equity Participations;
(iv) the amount, if any, by which such distribution is less than the
amounts to which holders of such class of Offered Certificates are entitled;
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(v) if the related Trust Fund includes Mortgage Loans, the aggregate amount
of advances included in such distribution;
(vi) if the related Trust Fund includes Mortgage Loans, the amount of
servicing compensation received by the related Master Servicer (and, if payable
directly out of the related Trust Fund, by any Special Servicer and any
Sub-Servicer) and, if the related Trust Fund includes MBS, the amount of
administrative compensation received by the MBS Administrator;
(vii) information regarding the aggregate principal balance of the related
Mortgage Assets on or about such Distribution Date;
(viii) if the related Trust Fund includes Mortgage Loans, information
regarding the number and aggregate principal balance of such Mortgage Loans that
are delinquent;
(ix) if the related Trust Fund includes Mortgage Loans, information
regarding the aggregate amount of losses incurred and principal prepayments made
with respect to such Mortgage Loans during the related Prepayment Period (that
is, the specified period, generally corresponding in length to the period
between Distribution Dates, during which prepayments and other unscheduled
collections on the Mortgage Loans in the related Trust Fund must be received in
order to be distributed on a particular Distribution Date);
(x) the Certificate Balance or Notional Amount, as the case may be, of such
class of Certificates at the close of business on such Distribution Date,
separately identifying any reduction in such Certificate Balance or Notional
Amount due to the allocation of any losses in respect of the related Mortgage
Assets, any increase in such Certificate Balance or Notional Amount due to the
allocation of any negative amortization in respect of the related Mortgage
Assets and any increase in the Certificate Balance of a class of Accrual
Certificates, if any, in the event that Accrued Certificate Interest has been
added to such balance;
(xi) if such class of Offered Certificates has a variable Pass-Through Rate
or an adjustable Pass-Through Rate, the Pass-Through Rate applicable thereto for
such Distribution Date and, if determinable, for the next succeeding
Distribution Date;
(xii) the amount deposited in or withdrawn from any reserve fund on such
Distribution Date, and the amount remaining on deposit in such reserve fund as
of the close of business on such Distribution Date;
(xiii) if the related Trust Fund includes one or more instruments of Credit
Support, such as a letter of credit, an insurance policy and/or a surety bond,
the amount of coverage under each such instrument as of the close of business on
such Distribution Date; and
(xiv) the amount of Credit Support being afforded by any classes of
Subordinate Certificates.
In the case of information furnished pursuant to subclauses (i)-(iii)
above, the amounts will be expressed as a dollar amount per specified
denomination of the relevant class of Offered Certificates or as a percentage.
The Prospectus Supplement for each series of Certificates may describe
additional information to be included in reports to the holders of the Offered
Certificates of such series.
Within a reasonable period of time after the end of each calendar year, the
Master Servicer, Manager or Trustee for a series of Certificates, as the case
may be, will be required to furnish to each person who at any time during the
calendar year was a holder of an Offered Certificate of such series a statement
containing the information set forth in subclauses (i)-(iii) above, aggregated
for such calendar year or the applicable portion thereof during which such
person was a Certificateholder. Such obligation will be deemed to have been
satisfied to the extent that substantially comparable information is provided
pursuant to any requirements of the Code as are from time to time in force. See,
however, "--Book-Entry Registration and Definitive Certificates" below.
If the Trust Fund for a series of Certificates includes MBS, the ability of
the related Master Servicer, Manager or Trustee, as the case may be, to include
in any Distribution Date Statement information regarding the mortgage loans
underlying such MBS will depend on the reports received with respect to such
MBS. In such cases, the related Prospectus Supplement will describe the
loan-specific information
37
to be included in the Distribution Date Statements that will be forwarded to the
holders of the Offered Certificates of that series in connection with
distributions made to them. The Depositor will provide the same information with
respect to any MBSs in its own reports that were publicly offered and the
reports the related MBS Issuer provides to the Trustee if privately issued.
VOTING RIGHTS
The voting rights evidenced by each series of Certificates (as to such
series, the "Voting Rights") will be allocated among the respective classes of
such series in the manner described in the related Prospectus Supplement.
Certificateholders will generally not have a right to vote, except with
respect to required consents to certain amendments to the related Pooling
Agreement and as otherwise specified in the related Prospectus Supplement. See
"Description of the Pooling Agreements--Amendment." The holders of specified
amounts of Certificates of a particular series will have the right to act as a
group to remove the related Trustee and also upon the occurrence of certain
events which if continuing would constitute an Event of Default on the part of
the related Master Servicer, Special Servicer or REMIC Administrator. See
"Description of the Pooling Agreements--Events of Default," "--Rights Upon Event
of Default" and "--Resignation and Removal of the Trustee."
TERMINATION
The obligations created by the Pooling Agreement for each series of
Certificates will terminate following (i) the final payment or other liquidation
of the last Mortgage Asset subject thereto or the disposition of all property
acquired upon foreclosure of any Mortgage Loan subject thereto and (ii) the
payment (or provision for payment) to the Certificateholders of that series of
all amounts required to be paid to them pursuant to such Pooling Agreement.
Written notice of termination of a Pooling Agreement will be given to each
Certificateholder of the related series, and the final distribution will be made
only upon presentation and surrender of the Certificates of such series at the
location to be specified in the notice of termination.
If so specified in the related Prospectus Supplement, a series of
Certificates may be subject to optional early termination through the repurchase
of the Mortgage Assets in the related Trust Fund by the party or parties
specified therein, under the circumstances and in the manner set forth therein.
In addition, if so provided in the related Prospectus Supplement upon the
reduction of the Certificate Balance of a specified class or classes of
Certificates by a specified percentage or amount or upon a specified date, a
party designated therein may be authorized or required to solicit bids for the
purchase of all the Mortgage Assets of the related Trust Fund, or of a
sufficient portion of such Mortgage Assets to retire such class or classes,
under the circumstances and in the manner set forth therein. The solicitation of
bids will be conducted in a commercially reasonable manner and, generally,
assets will be sold at their fair market value. Circumstances may arise in which
such fair market value may be less than the unpaid balance of the Mortgage Loans
sold and therefore, as a result of such a sale, the Certificateholders of one or
more Classes of Certificates may receive an amount less than the Certificate
Balance of, and accrued unpaid interest on, their Certificates.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the Prospectus Supplement for a series of Certificates,
one or more classes of the Offered Certificates of such series will be offered
in book-entry format through the facilities of DTC, and each such class will be
represented by one or more global Certificates registered in the name of The
Depository Trust Company ("DTC") or its nominee. If so provided in the
Prospectus Supplement, arrangements may be made for clearance and settlement
through the Euroclear System or Clearstream Banking, societe anonyme, if they
are participants in DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking corporation" 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
38
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participating
organizations ("DTC Participants") and facilitate the clearance and settlement
of securities transactions between DTC Participants through electronic
computerized book-entry changes in their accounts, thereby eliminating the need
for physical movement of securities certificates. DTC Participants that maintain
accounts with DTC include securities brokers and dealers, banks, trust companies
and clearing corporations and may include other organizations. DTC is owned by a
number of DTC Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
banks, brokers, dealers and trust companies that directly or indirectly clear
through or maintain a custodial relationship with a DTC Participant that
maintains as account with DTC. The rules applicable to DTC and DTC Participants
are on file with the Commission.
Purchases of Book-Entry Certificates under the DTC system must be made by
or through, and will be recorded on the records of, the brokerage firm, bank,
thrift institution or other financial intermediary (each, a "Financial
Intermediary") that maintains the beneficial owner's account for such purpose.
In turn, the Financial Intermediary's ownership of such Certificates will be
recorded on the records of DTC (or of a participating firm that acts as agent
for the Financial Intermediary, whose interest will in turn be recorded on the
records of DTC, if the beneficial owner's Financial Intermediary is not a DTC
Participant). Therefore, the beneficial owner must rely on the foregoing
procedures to evidence its beneficial ownership of such Certificates. The
beneficial ownership interest of the owner of a Book-Entry Certificate (a
"Certificate Owner") may only be transferred by compliance with the rules,
regulations and procedures of such Financial Intermediaries and DTC
Participants.
DTC has no knowledge of the actual Certificate Owners; DTC's records
reflect only the identity of the DTC Participants to whose accounts such
Certificates are credited, which may or may not be the Certificate Owners. The
DTC Participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC Participants
and by DTC Participants to Financial Intermediaries and 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.
Distributions on the Book-Entry Certificates will be made to DTC. DTC's
practice is to credit DTC Participants' accounts on the related Distribution
Date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on such date.
Disbursement of such distributions by DTC Participants to Financial
Intermediaries and Certificate Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of each such DTC Participant (and not of DTC, the Depositor or
any Trustee, Master Servicer, Special Servicer or Manager), subject to any
statutory or regulatory requirements as may be in effect from time to time.
Accordingly, under a book-entry system, Certificate Owners may receive payments
after the related Distribution Date.
Unless otherwise provided in the related Prospectus Supplement, the only
"Certificateholder" (as such term is used in the related Pooling Agreement) of
Book-Entry Certificates will be the nominee of DTC, and the Certificate Owners
will not be recognized as Certificateholders under the Pooling Agreement.
Certificate Owners will be permitted to exercise the rights of
Certificateholders under the related Pooling Agreement only indirectly through
the DTC Participants who in turn will exercise their rights through DTC. The
Depositor has been informed that DTC will take action permitted to be taken by a
Certificateholder under a Pooling Agreement only at the direction of one or more
DTC Participants to whose account with DTC interests in the Book-Entry
Certificates are credited. DTC may take conflicting actions with respect to the
Book-Entry Certificates to the extent that such actions are taken on behalf of
Financial Intermediaries whose holdings include such Certificates.
Because DTC can act only on behalf of DTC Participants, who in turn act on
behalf of Financial Intermediaries and certain Certificate Owners, the ability
of a Certificate Owner to pledge its interest in Book-Entry Certificates to
persons or entities that do not participate in the DTC system, or otherwise
39
take actions in respect of its interest in Book-Entry Certificates, may be
limited due to the lack of a physical certificate evidencing such interest.
Unless otherwise specified in the related Prospectus Supplement,
Certificates initially issued in book-entry form will be issued as Definitive
Certificates to Certificate Owners or their nominees, rather than to DTC or its
nominee, only if (i) the Depositor advises the Trustee in writing that DTC is no
longer willing or able to discharge properly its responsibilities as depository
with respect to such Certificates and the Depositor is unable to locate a
qualified successor or (ii) the Depositor, at its option, elects to terminate
the book-entry system through DTC with respect to such Certificates. Upon the
occurrence of either of the events described in the preceding sentence, DTC will
be required to notify all DTC Participants of the availability through DTC of
Definitive Certificates. Upon surrender by DTC of the certificate or
certificates representing a class of Book-Entry Certificates, together with
instructions for registration, the Trustee for the related series or other
designated party will be required to issue to the Certificate Owners identified
in such instructions the Definitive Certificates to which they are entitled, and
thereafter the holders of such Definitive Certificates will be recognized as
"Certificateholders" under and within the meaning of the related Pooling
Agreement.
DESCRIPTION OF THE POOLING AGREEMENTS
GENERAL
The Certificates of each series will be issued pursuant to a Pooling
Agreement. In general, the parties to a Pooling Agreement will include the
Depositor, the Trustee, the Master Servicer, the Special Servicer and, if one or
more REMIC elections have been made with respect to the Trust Fund, the REMIC
Administrator. However, a Pooling Agreement that relates to a Trust Fund that
includes MBS may include a Manager as a party, but may not include a Master
Servicer, Special Servicer or other servicer as a party. All parties to each
Pooling Agreement under which Certificates of a series are issued will be
identified in the related Prospectus Supplement. If so specified in the related
Prospectus Supplement, the Mortgage Asset Seller or an affiliate thereof may
perform the functions of Master Servicer, Special Servicer, Manager or REMIC
Administrator. If so specified in the related Prospectus Supplement, the Master
Servicer may also perform the duties of Special Servicer, and the Master
Servicer, the Special Servicer or the Trustee may also perform the duties of
REMIC Administrator. Any party to a Pooling Agreement or any affiliate thereof
may own Certificates issued thereunder; however, except in limited circumstances
(including with respect to required consents to certain amendments to a Pooling
Agreement), Certificates issued thereunder that are held by the Master Servicer
or Special Servicer for the related Series will not be allocated Voting Rights.
A form of a pooling and servicing agreement has been filed as an exhibit to
the Registration Statement of which this Prospectus is a part. However, the
provisions of each Pooling Agreement will vary depending upon the nature of the
Certificates to be issued thereunder and the nature of the related Trust Fund.
The following summaries describe certain provisions that may appear in a Pooling
Agreement under which Certificates that evidence interests in Mortgage Loans
will be issued. The Prospectus Supplement for a series of Certificates will
describe any provision of the related Pooling Agreement that materially differs
from the description thereof contained in this Prospectus and, if the related
Trust Fund includes MBS, will summarize all of the material provisions of the
related Pooling Agreement. The summaries herein do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all of
the provisions of the Pooling Agreement for each series of Certificates and the
description of such provisions in the related Prospectus Supplement. The
Depositor will provide a copy of the Pooling Agreement (without exhibits) that
relates to any series of Certificates without charge upon written request of a
holder of a Certificate of such series addressed to it at its principal
executive offices specified herein under "The Depositor."
ASSIGNMENT OF MORTGAGE LOANS; REPURCHASES
At the time of issuance of any series of Certificates, the Depositor will
assign (or cause to be assigned) to the designated Trustee the Mortgage Loans to
be included in the related Trust Fund,
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together with, unless otherwise specified in the related Prospectus Supplement,
all principal and interest to be received on or with respect to such Mortgage
Loans after the Cut-off Date, other than principal and interest due on or before
the Cut-off Date. The Trustee will, concurrently with such assignment, deliver
the Certificates to or at the direction of the Depositor in exchange for the
Mortgage Loans and the other assets to be included in the Trust Fund for such
series. Each Mortgage Loan will be identified in a schedule appearing as an
exhibit to the related Pooling Agreement. Such schedule generally will include
detailed information that pertains to each Mortgage Loan included in the related
Trust Fund, which information will typically include the address of the related
Mortgaged Property and type of such property; the Mortgage Rate and, if
applicable, the applicable index, gross margin, adjustment date and any rate cap
information; the original and remaining term to maturity; the amortization term;
and the original and outstanding principal balance.
In addition, unless otherwise specified in the related Prospectus
Supplement, the Depositor will, as to each Mortgage Loan to be included in a
Trust Fund, deliver, or cause to be delivered, to the related Trustee (or to a
custodian appointed by the Trustee as described below) the Mortgage Note
endorsed, without recourse, either in blank or to the order of such Trustee (or
its nominee), the Mortgage with evidence of recording indicated thereon (except
for any Mortgage not returned from the public recording office), an assignment
of the Mortgage in blank or to the Trustee (or its nominee) in recordable form,
together with any intervening assignments of the Mortgage with evidence of
recording thereon (except for any such assignment not returned from the public
recording office), and, if applicable, any riders or modifications to such
Mortgage Note and Mortgage, together with certain other documents at such times
as set forth in the related Pooling Agreement. Such assignments may be blanket
assignments covering Mortgages on Mortgaged Properties located in the same
county, if permitted by law. Notwithstanding the foregoing, a Trust Fund may
include Mortgage Loans where the original Mortgage Note is not delivered to the
Trustee if the Depositor delivers, or causes to be delivered, to the related
Trustee (or such custodian) a copy or a duplicate original of the Mortgage Note,
together with an affidavit certifying that the original thereof has been lost or
destroyed. In addition, if the Depositor cannot deliver, with respect to any
Mortgage Loan, the Mortgage or any intervening assignment with evidence of
recording thereon concurrently with the execution and delivery of the related
Pooling Agreement because of a delay caused by the public recording office, the
Depositor will deliver, or cause to be delivered, to the related Trustee (or
such custodian) a true and correct photocopy of such Mortgage or assignment as
submitted for recording. The Depositor will deliver, or cause to be delivered,
to the related Trustee (or such custodian) such Mortgage or assignment with
evidence of recording indicated thereon after receipt thereof from the public
recording office. If the Depositor cannot deliver, with respect to any Mortgage
Loan, the Mortgage or any intervening assignment with evidence of recording
thereon concurrently with the execution and delivery of the related Pooling
Agreement because such Mortgage or assignment has been lost, the Depositor will
deliver, or cause to be delivered, to the related Trustee (or such custodian) a
true and correct photocopy of such Mortgage or assignment with evidence of
recording thereon. Unless otherwise specified in the related Prospectus
Supplement, assignments of Mortgage to the Trustee (or its nominee) will be
recorded in the appropriate public recording office, except in states where, in
the opinion of counsel acceptable to the Trustee, such recording is not required
to protect the Trustee's interests in the Mortgage Loan against the claim of any
subsequent transferee or any successor to or creditor of the Depositor or the
originator of such Mortgage Loan.
The Trustee (or a custodian appointed by the Trustee) for a series of
Certificates will be required to review the Mortgage Loan documents delivered to
it within a specified period of days after receipt thereof, and the Trustee (or
such custodian) will hold such documents in trust for the benefit of the
Certificateholders of such series. Unless otherwise specified in the related
Prospectus Supplement, if any such document is found to be missing or defective,
and such omission or defect, as the case may be, materially and adversely
affects the interests of the Certificateholders of the related series, the
Trustee (or such custodian) will be required to notify the Master Servicer, the
Special Servicer and the Depositor, and one of such persons will be required to
notify the relevant Mortgage Asset Seller. In that case, and if the Mortgage
Asset Seller cannot deliver the document or cure the defect within a specified
number of days after receipt of such notice, then, except as otherwise specified
below or in the related Prospectus Supplement, the Mortgage Asset Seller will be
obligated to repurchase the
41
related Mortgage Loan from the Trustee at a price generally equal to the unpaid
principal balance thereof, together with accrued but unpaid interest through a
date on or about the date of purchase, or at such other price as will be
specified in the related Prospectus Supplement (in any event, the "Purchase
Price"). If so provided in the Prospectus Supplement for a series of
Certificates, a Mortgage Asset Seller, in lieu of repurchasing a Mortgage Loan
as to which there is missing or defective loan documentation, will have the
option, exercisable upon certain conditions and/or within a specified period
after initial issuance of such series of Certificates, to replace such Mortgage
Loan with one or more other mortgage loans, in accordance with standards that
will be described in the Prospectus Supplement. Unless otherwise specified in
the related Prospectus Supplement, this repurchase or substitution obligation
will constitute the sole remedy to holders of the Certificates of any series or
to the related Trustee on their behalf for missing or defective Mortgage Loan
documentation, and neither the Depositor nor, unless it is the Mortgage Asset
Seller, the Master Servicer or the Special Servicer will be obligated to
purchase or replace a Mortgage Loan if a Mortgage Asset Seller defaults on its
obligation to do so.
The Trustee will be authorized at any time to appoint one or more
custodians pursuant to a custodial agreement to hold title to the Mortgage Loans
in any Trust Fund and to maintain possession of and, if applicable, to review
the documents relating to such Mortgage Loans, in any case as the agent of the
Trustee. The identity of any such custodian to be appointed on the date of
initial issuance of the Certificates will be set forth in the related Prospectus
Supplement.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
Unless otherwise provided in the Prospectus Supplement for a series of
Certificates, the Depositor will, with respect to each Mortgage Loan in the
related Trust Fund, make or assign, or cause to be made or assigned, certain
representations and warranties (the person making such representations and
warranties, the "Warranting Party") covering, by way of example: (i) the
accuracy of the information set forth for such Mortgage Loan on the schedule of
Mortgage Loans appearing as an exhibit to the related Pooling Agreement; (ii)
the enforceability of the related Mortgage Note and Mortgage and the existence
of title insurance insuring the lien priority of the related Mortgage; (iii) the
Warranting Party's title to the Mortgage Loan and the authority of the
Warranting Party to sell the Mortgage Loan; and (iv) the payment status of the
Mortgage Loan. It is expected that in most cases the Warranting Party will be
the Mortgage Asset Seller; however, the Warranting Party may also be an
affiliate of the Mortgage Asset Seller, the Depositor or an affiliate of the
Depositor, the Master Servicer, the Special Servicer or another person
acceptable to the Depositor. The Warranting Party, if other than the Mortgage
Asset Seller, will be identified in the related Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement, each
Pooling Agreement will provide that the Master Servicer and/or Trustee will be
required to notify promptly any Warranting Party of any breach of any
representation or warranty made by it in respect of a Mortgage Loan that
materially and adversely affects the interests of the Certificateholders of the
related series. If such Warranting Party cannot cure such breach within a
specified period following the date on which it was notified of such breach,
then, unless otherwise provided in the related Prospectus Supplement, it will be
obligated to repurchase such Mortgage Loan from the Trustee at the applicable
Purchase Price. If so provided in the Prospectus Supplement for a series of
Certificates, a Warranting Party, in lieu of repurchasing a Mortgage Loan as to
which a breach has occurred, will have the option, exercisable upon certain
conditions and/or within a specified period after initial issuance of such
series of Certificates, to replace such Mortgage Loan with one or more other
mortgage loans, in accordance with standards that will be described in the
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, this repurchase or substitution obligation will constitute the sole
remedy available to holders of the Certificates of any series or to the related
Trustee on their behalf for a breach of representation and warranty by a
Warranting Party, and neither the Depositor nor the Master Servicer, in either
case unless it is the Warranting Party, will be obligated to purchase or replace
a Mortgage Loan if a Warranting Party defaults on its obligation to do so.
In some cases, representations and warranties will have been made in
respect of a Mortgage Loan as of a date prior to the date upon which the related
series of Certificates is issued, and thus may not
42
address events that may occur following the date as of which they were made.
However, the Depositor will not include any Mortgage Loan in the Trust Fund for
any series of Certificates if anything has come to the Depositor's attention
that would cause it to believe that the representations and warranties made in
respect of such Mortgage Loan will not be accurate in all material respects as
of the date of issuance. The date as of which the representations and warranties
regarding the Mortgage Loans in any Trust Fund were made will be specified in
the related Prospectus Supplement.
COLLECTION AND OTHER SERVICING PROCEDURES
Unless otherwise specified in the related Prospectus Supplement, the Master
Servicer and the Special Servicer for any Mortgage Pool, directly or through
Sub-Servicers, will each be obligated under the related Pooling Agreement to
service and administer the Mortgage Loans in such Mortgage Pool for the benefit
of the related Certificateholders, in accordance with applicable law and further
in accordance with the terms of such Pooling Agreement, such Mortgage Loans and
any instrument of Credit Support included in the related Trust Fund. Subject to
the foregoing, the Master Servicer and the Special Servicer will each have full
power and authority to do any and all things in connection with such servicing
and administration that it may deem necessary and desirable.
As part of its servicing duties, each of the Master Servicer and the
Special Servicer will be required to make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans that it
services and will be obligated to follow such collection procedures as it would
follow with respect to mortgage loans that are comparable to such Mortgage Loans
and held for its own account, provided (i) such procedures are consistent with
the terms of the related Pooling Agreement and (ii) do not impair recovery under
any instrument of Credit Support included in the related Trust Fund. Consistent
with the foregoing, the Master Servicer and the Special Servicer will each be
permitted, in its discretion, unless otherwise specified in the related
Prospectus Supplement, to waive any Prepayment Premium, late payment charge or
other charge in connection with any Mortgage Loan.
The Master Servicer and the Special Servicer for any Trust Fund, either
separately or jointly, directly or through Sub-Servicers, will also be required
to perform as to the Mortgage Loans in such Trust Fund various other customary
functions of a servicer of comparable loans, including maintaining escrow or
impound accounts, if required under the related Pooling Agreement, for payment
of taxes, insurance premiums, ground rents and similar items, or otherwise
monitoring the timely payment of those items; attempting to collect delinquent
payments; supervising foreclosures; negotiating modifications; conducting
property inspections on a periodic or other basis; managing (or overseeing the
management of) Mortgaged Properties acquired on behalf of such Trust Fund
through foreclosure, deed-in-lieu of foreclosure or otherwise (each, an "REO
Property"); and maintaining servicing records relating to such Mortgage Loans.
The related Prospectus Supplement will specify when and the extent to which
servicing of a Mortgage Loan is to be transferred from the Master Servicer to
the Special Servicer. In general, and subject to the discussion in the related
Prospectus Supplement, a Special Servicer will be responsible for the servicing
and administration of: (i) Mortgage Loans that are delinquent in respect of a
specified number of scheduled payments; (ii) Mortgage Loans as to which the
related borrower has entered into or consented to bankruptcy, appointment of a
receiver or conservator or similar insolvency proceeding, or the related
borrower has become the subject of a decree or order for such a proceeding which
shall have remained in force undischarged or unstayed for a specified number of
days; and (iii) REO Properties. If so specified in the related Prospectus
Supplement, a Pooling Agreement also may provide that if a default on a Mortgage
Loan has occurred or, in the judgment of the related Master Servicer, a payment
default is reasonably foreseeable, the related Master Servicer may elect to
transfer the servicing thereof, in whole or in part, to the related Special
Servicer. Unless otherwise provided in the related Prospectus Supplement, when
the circumstances no longer warrant a Special Servicer's continuing to service a
particular Mortgage Loan (e.g., the related borrower is paying in accordance
with the forbearance arrangement entered into between the Special Servicer and
such borrower), the Master Servicer will resume the servicing duties with
respect thereto. If and to the extent provided in the related Pooling Agreement
and described in the related Prospectus Supplement, a Special Servicer may
perform certain limited duties in respect of Mortgage Loans for which the Master
Servicer is primarily responsible (including, if so specified, performing
property inspections and evaluating financial
43
statements); and a Master Servicer may perform certain limited duties in respect
of any Mortgage Loan for which the Special Servicer is primarily responsible
(including, if so specified, continuing to receive payments on such Mortgage
Loan (including amounts collected by the Special Servicer), making certain
calculations with respect to such Mortgage Loan and making remittances and
preparing certain reports to the Trustee and/or Certificateholders with respect
to such Mortgage Loan. Unless otherwise specified in the related Prospectus
Supplement, the Master Servicer will be responsible for filing and settling
claims in respect of particular Mortgage Loans under any applicable instrument
of Credit Support. See "Description of Credit Support."
A mortgagor's failure to make required Mortgage Loan payments may mean that
operating income is insufficient to service the mortgage debt, or may reflect
the diversion of that income from the servicing of the mortgage debt. In
addition, a mortgagor that is unable to make Mortgage Loan payments may also be
unable to make timely payment of taxes and otherwise to maintain and insure the
related Mortgaged Property. In general, the related Special Servicer will be
required to monitor any Mortgage Loan that is in default, evaluate whether the
causes of the default can be corrected over a reasonable period without
significant impairment of the value of the related Mortgaged Property, initiate
corrective action in cooperation with the Mortgagor if cure is likely, inspect
the related Mortgaged Property and take such other actions as it deems necessary
and appropriate. A significant period of time may elapse before the Special
Servicer is able to assess the success of any such corrective action or the need
for additional initiatives. The time within which the Special Servicer can make
the initial determination of appropriate action, evaluate the success of
corrective action, develop additional initiatives, institute foreclosure
proceedings and actually foreclose (or accept a deed to a Mortgaged Property in
lieu of foreclosure) on behalf of the Certificateholders of the related series
may vary considerably depending on the particular Mortgage Loan, the Mortgaged
Property, the mortgagor, the presence of an acceptable party to assume the
Mortgage Loan and the laws of the jurisdiction in which the Mortgaged Property
is located. If a mortgagor files a bankruptcy petition, the Special Servicer may
not be permitted to accelerate the maturity of the Mortgage Loan or to foreclose
on the related Mortgaged Property for a considerable period of time. See
"Certain Legal Aspects of Mortgage Loans--Bankruptcy Laws."
Mortgagors may, from time to time, request partial releases of the
Mortgaged Properties, easements, consents to alteration or demolition and other
similar matters. In general, the Master Servicer may approve such a request if
it has determined, exercising its business judgment in accordance with the
applicable servicing standard, that such approval will not adversely affect the
security for, or the timely and full collectability of, the related Mortgage
Loan. Any fee collected by the Master Servicer for processing such request will
be retained by the Master Servicer as additional servicing compensation.
In the case of Mortgage Loans secured by junior liens on the related
Mortgaged Properties, unless otherwise provided in the related Prospectus
Supplement, the Master Servicer will be required to file (or cause to be filed)
of record a request for notice of any action by a superior lienholder under the
Senior Lien for the protection of the related Trustee's interest, where
permitted by local law and whenever applicable state law does not require that a
junior lienholder be named as a party defendant in foreclosure proceedings in
order to foreclose such junior lienholder's equity of redemption. Unless
otherwise specified in the related Prospectus Supplement, the Master Servicer
also will be required to notify any superior lienholder in writing of the
existence of the Mortgage Loan and request notification of any action (as
described below) to be taken against the mortgagor or the Mortgaged Property by
the superior lienholder. If the Master Servicer is notified that any superior
lienholder has accelerated or intends to accelerate the obligations secured by
the related Senior Lien, or has declared or intends to declare a default under
the mortgage or the promissory note secured thereby, or has filed or intends to
file an election to have the related Mortgaged Property sold or foreclosed,
then, unless otherwise specified in the related Prospectus Supplement, the
Master Servicer and the Special Servicer will each be required to take, on
behalf of the related Trust Fund, whatever actions are necessary to protect the
interests of the related Certificateholders and/or to preserve the security of
the related Mortgage Loan, subject to the application of the REMIC Provisions.
Unless otherwise specified in the related Prospectus Supplement, the Master
Servicer or Special Servicer, as applicable, will be required to
44
advance the necessary funds to cure the default or reinstate the Senior Lien, if
such advance is in the best interests of the related Certificateholders and the
Master Servicer or Special Servicer, as applicable, determines such advances are
recoverable out of payments on or proceeds of the related Mortgage Loan.
SUB-SERVICERS
A Master Servicer or Special Servicer may delegate its servicing
obligations in respect of the Mortgage Loans serviced thereby to one or more
third-party servicers (each, a "Sub-Servicer"); provided that, unless otherwise
specified in the related Prospectus Supplement, such Master Servicer or Special
Servicer will remain obligated under the related Pooling Agreement. Unless
otherwise provided in the related Prospectus Supplement, each sub-servicing
agreement between a Master Servicer and a Sub-Servicer (a "Sub-Servicing
Agreement") must provide for servicing of the applicable Mortgage Loans
consistent with the related Pooling Agreement. The Master Servicer and Special
Servicer in respect of any Mortgage Asset Pool will each be required to monitor
the performance of Sub-Servicers retained by it and will have the right to
remove a Sub-Servicer retained by it at any time it considers such removal to be
in the best interests of Certificateholders.
Unless otherwise provided in the related Prospectus Supplement, a Master
Servicer or Special Servicer will be solely liable for all fees owed by it to
any Sub-Servicer, irrespective of whether the Master Servicer's or Special
Servicer's compensation pursuant to the related Pooling Agreement is sufficient
to pay such fees. Each Sub-Servicer will be reimbursed by the Master Servicer or
Special Servicer, as the case may be, that retained it for certain expenditures
which it makes, generally to the same extent such Master Servicer or Special
Servicer would be reimbursed under a Pooling Agreement. See "--Certificate
Account" and "--Servicing Compensation and Payment of Expenses."
CERTIFICATE ACCOUNT
GENERAL. The Master Servicer, the Trustee and/or the Special Servicer will,
as to each Trust Fund that includes Mortgage Loans, establish and maintain or
cause to be established and maintained the corresponding Certificate Account,
which will be established so as to comply with the standards of each Rating
Agency that has rated any one or more classes of Certificates of the related
series. A Certificate Account may be maintained as an interest-bearing or a
noninterest-bearing account and the funds held therein may be invested pending
each succeeding Distribution Date in United States government securities and
other investment grade obligations that are acceptable to each Rating Agency
that has rated any one or more classes of Certificates of the related series
("Permitted Investments"). Such Permitted Investments include federal funds,
uncertificated certificates of deposit, time deposits, bankers' acceptances and
repurchase agreements, certain United States dollar-denominated commercial
paper, units of money market funds that maintain a constant net asset value and
any other obligations or security acceptable to each Rating Agency. Unless
otherwise provided in the related Prospectus Supplement, any interest or other
income earned on funds in a Certificate Account will be paid to the related
Master Servicer, Trustee or Special Servicer as additional compensation. A
Certificate Account may be maintained with the related Master Servicer, Special
Servicer, Trustee or Mortgage Asset Seller or with a depository institution that
is an affiliate of any of the foregoing or of the Depositor, provided that it
complies with applicable Rating Agency standards. If permitted by the applicable
Rating Agency or Agencies, a Certificate Account may contain funds relating to
more than one series of mortgage pass-through certificates and may contain other
funds representing payments on mortgage loans owned by the related Master
Servicer or Special Servicer or serviced by either on behalf of others.
DEPOSITS. Unless otherwise provided in the related Pooling Agreement and
described in the related Prospectus Supplement, the following payments and
collections received or made by the Master Servicer, the Trustee or the Special
Servicer subsequent to the Cut-off Date (other than payments due on or before
the Cut-off Date) are to be deposited in the Certificate Account for each Trust
Fund that includes Mortgage Loans, within a certain period following receipt (in
the case of collections on or in respect of the Mortgage Loans) or otherwise as
provided in the related Pooling Agreement:
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(i) all payments on account of principal, including principal prepayments,
on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage Loans, including
any default interest collected, in each case net of any portion thereof retained
by the Master Servicer or the Special Servicer as its servicing compensation or
as compensation to the Trustee;
(iii) all proceeds received under any hazard, title or other insurance
policy that provides coverage with respect to a Mortgaged Property or the
related Mortgage Loan or in connection with the full or partial condemnation of
a Mortgaged Property (other than proceeds applied to the restoration of the
property or released to the related borrower) ("Insurance Proceeds" and
"Condemnation Proceeds," respectively) and all other amounts received and
retained in connection with the liquidation of defaulted Mortgage Loans or
property acquired in respect thereof, by foreclosure or otherwise (such amounts,
together with those amounts listed in clause (vii) below, "Liquidation
Proceeds"), together with the net operating income (less reasonable reserves for
future expenses) derived from the operation of any Mortgaged Properties acquired
by the Trust Fund through foreclosure or otherwise;
(iv) any amounts paid under any instrument or drawn from any fund that
constitutes Credit Support for the related series of Certificates;
(v) any advances made with respect to delinquent scheduled payments of
principal and interest on the Mortgage Loans;
(vi) any amounts paid under any Cash Flow Agreement;
(vii) all proceeds of the purchase of any Mortgage Loan, or property
acquired in respect thereof, by the Depositor, any Mortgage Asset Seller or any
other specified person as described under "--Assignment of Mortgage Loans;
Repurchases" and "--Representations and Warranties; Repurchases," all proceeds
of the purchase of any defaulted Mortgage Loan as described under "--Realization
Upon Defaulted Mortgage Loans," and all proceeds of any Mortgage Asset purchased
as described under "Description of the Certificates--Termination; Retirement of
Certificates";
(viii) to the extent that any such item does not constitute additional
servicing compensation to the Master Servicer or the Special Servicer and is not
otherwise retained by the Depositor or another specified person, any payments on
account of modification or assumption fees, late payment charges, Prepayment
Premiums or Equity Participations with respect to the Mortgage Loans;
(ix) all payments required to be deposited in the Certificate Account with
respect to any deductible clause in any blanket insurance policy as described
under "--Hazard Insurance Policies";
(x) any amount required to be deposited by the Master Servicer, the Special
Servicer or the Trustee in connection with losses realized on investments for
the benefit of the Master Servicer, the Special Servicer or the Trustee, as the
case may be, of funds held in the Certificate Account; and
(xi) any other amounts received on or in respect of the Mortgage Loans
required to be deposited in the Certificate Account as provided in the related
Pooling Agreement and described in the related Prospectus Supplement.
WITHDRAWALS. Unless otherwise provided in the related Pooling Agreement and
described in the related Prospectus Supplement, a Master Servicer, Trustee or
Special Servicer may make withdrawals from the Certificate Account for each
Trust Fund that includes Mortgage Loans for any of the following purposes:
(i) to make distributions to the Certificateholders on each Distribution
Date;
(ii) to pay the Master Servicer or the Special Servicer any servicing fees
not previously retained thereby, such payment to be made out of payments and
other collections of interest on the particular Mortgage Loans as to which such
fees were earned;
(iii) to reimburse the Master Servicer, the Special Servicer or any other
specified person for unreimbursed advances of delinquent scheduled payments of
principal and interest made by it, and certain unreimbursed servicing expenses
incurred by it, with respect to Mortgage Loans in the Trust Fund and properties
acquired in respect thereof, such reimbursement to be made out of amounts that
46
represent late payments collected on the particular Mortgage Loans, Liquidation
Proceeds, Insurance Proceeds and Condemnation Proceeds collected on the
particular Mortgage Loans and properties, and net income collected on the
particular properties, with respect to which such advances were made or such
expenses were incurred or out of amounts drawn under any form of Credit Support
with respect to such Mortgage Loans and properties, or if in the judgment of the
Master Servicer, the Special Servicer or such other person, as applicable, such
advances and/or expenses will not be recoverable from such amounts, such
reimbursement to be made from amounts collected on other Mortgage Loans in the
same Trust Fund or, if and to the extent so provided by the related Pooling
Agreement and described in the related Prospectus Supplement, only from that
portion of amounts collected on such other Mortgage Loans that is otherwise
distributable on one or more classes of Subordinate Certificates of the related
series;
(iv) if and to the extent described in the related Prospectus Supplement,
to pay the Master Servicer, the Special Servicer or any other specified person
interest accrued on the advances and servicing expenses described in clause
(iii) above incurred by it while such remain outstanding and unreimbursed;
(v) to pay for costs and expenses incurred by the Trust Fund for
environmental site assessments performed with respect to Mortgaged Properties
that constitute security for defaulted Mortgage Loans, and for any containment,
clean-up or remediation of hazardous wastes and materials present on such
Mortgaged Properties, as described under "--Realization Upon Defaulted Mortgage
Loans";
(vi) to reimburse the Master Servicer, the Special Servicer, the REMIC
Administrator, the Depositor, the Trustee, or any of their respective directors,
officers, employees and agents, as the case may be, for certain expenses, costs
and liabilities incurred thereby, as and to the extent described under
"--Certain Matters Regarding the Master Servicer, the Special Servicer, the
REMIC Administrator and the Depositor" and "--Certain Matters Regarding the
Trustee";
(vii) if and to the extent described in the related Prospectus Supplement,
to pay the fees of the Trustee, the REMIC Administrator and any provider of
Credit Support;
(viii) if and to the extent described in the related Prospectus Supplement,
to reimburse prior draws on any form of Credit Support;
(ix) to pay the Master Servicer, the Special Servicer or the Trustee, as
appropriate, interest and investment income earned in respect of amounts held in
the Certificate Account as additional compensation;
(x) to pay any servicing expenses not otherwise required to be advanced by
the Master Servicer, the Special Servicer or any other specified person;
(xi) if one or more elections have been made to treat the Trust Fund or
designated portions thereof as a REMIC, to pay any federal, state or local taxes
imposed on the Trust Fund or its assets or transactions, as and to the extent
described under "Certain Federal Income Tax Consequences-- REMICs--Prohibited
Transactions Tax and Other Taxes";
(xii) to pay for the cost of various opinions of counsel obtained pursuant
to the related Pooling Agreement for the benefit of Certificateholders;
(xiii) to make any other withdrawals permitted by the related Pooling
Agreement and described in the related Prospectus Supplement; and
(xiv) to clear and terminate the Certificate Account upon the termination
of the Trust Fund.
MODIFICATIONS, WAIVERS AND AMENDMENTS OF MORTGAGE LOANS
The Master Servicer and the Special Servicer may each agree to modify,
waive or amend any term of any Mortgage Loan serviced by it in a manner
consistent with the applicable Servicing Standard; provided that, unless
otherwise set forth in the related Prospectus Supplement, the modification,
waiver or amendment (i) will not affect the amount or timing of any scheduled
payments of principal or interest on the Mortgage Loan, (ii) will not, in the
judgment of the Master Servicer or the Special
47
Servicer, as the case may be, materially impair the security for the Mortgage
Loan or reduce the likelihood of timely payment of amounts due thereon and (iii)
will not adversely affect the coverage under any applicable instrument of Credit
Support. Unless otherwise provided in the related Prospectus Supplement, the
Special Servicer also may agree to any other modification, waiver or amendment
if, in its judgment, (i) a material default on the Mortgage Loan has occurred or
a payment default is imminent, (ii) such modification, waiver or amendment is
reasonably likely to produce a greater recovery with respect to the Mortgage
Loan, taking into account the time value of money, than would liquidation and
(iii) such modification, waiver or amendment will not adversely affect the
coverage under any applicable instrument of Credit Support.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
If a default on a Mortgage Loan has occurred or, in the Special Servicer's
judgment, a payment default is imminent, the Special Servicer, on behalf of the
Trustee, may at any time institute foreclosure proceedings, exercise any power
of sale contained in the related Mortgage, obtain a deed in lieu of foreclosure,
or otherwise acquire title to the related Mortgaged Property, by operation of
law or otherwise. Unless otherwise specified in the related Prospectus
Supplement, the Special Servicer may not, however, 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 related series of
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 previously received a report prepared by a
person who regularly conducts environmental audits (which report will be an
expense of the Trust Fund) and either:
(i) such report indicates that (a) the Mortgaged Property is in compliance
with applicable environmental laws and regulations and (b) there are no
circumstances or conditions present at the Mortgaged Property that have resulted
in any contamination for which investigation, testing, monitoring, containment,
clean-up or remediation could be required under any applicable environmental
laws and regulations; or
(ii) the Special Servicer, based solely (as to environmental matters and
related costs) on the information set forth in such report, determines that
taking such actions as are necessary to bring the Mortgaged Property into
compliance with applicable environmental laws and regulations and/or taking the
actions contemplated by clause (i)(b) above, is reasonably likely to produce a
greater recovery, taking into account the time value of money, than not taking
such actions. See "Certain Legal Aspects of Mortgage Loans--Environmental
Considerations."
A Pooling Agreement may grant to the Master Servicer, the Special Servicer,
a provider of Credit Support and/or the holder or holders of certain classes of
the related series of Certificates a right of first refusal to purchase from the
Trust Fund, at a predetermined price (which, if less than the Purchase Price,
will be specified in the related Prospectus Supplement), any Mortgage Loan as to
which a specified number of scheduled payments are delinquent. In addition,
unless otherwise specified in the related Prospectus Supplement, the Special
Servicer may offer to sell any defaulted Mortgage Loan if and when the Special
Servicer determines, consistent with its normal servicing procedures, that such
a sale would produce a greater recovery, taking into account the time value of
money, than would liquidation of the related Mortgaged Property. In the absence
of any such sale, the Special Servicer will generally be required to proceed
against the related Mortgaged Property, subject to the discussion above.
Unless otherwise provided in the related Prospectus Supplement, if title to
any Mortgaged Property is acquired by a Trust Fund as to which a REMIC election
has been made, the Special Servicer, on behalf of the Trust Fund, will be
required to sell the Mortgaged Property prior to the close of the third calendar
year beginning after the year of acquisition, unless (i) the Internal Revenue
Service (the "IRS") grants an extension of time to sell such property or (ii)
the Trustee receives an opinion of independent counsel to the effect that the
holding of the property by the Trust Fund beyond such period will not result in
the imposition of a tax on the Trust Fund or cause the Trust Fund (or any
designated portion
48
thereof) 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, the Special Servicer will generally be required to attempt to sell
any Mortgaged Property so acquired on the same terms and conditions it would if
it were the owner. Unless otherwise provided in the related Prospectus
Supplement, if title to any Mortgaged Property is acquired by a Trust Fund as to
which a REMIC election has been made, the Special Servicer will also be required
to ensure that the Mortgaged Property is administered so that it constitutes
"foreclosure property" within the meaning of Code Section 860G(a)(8) at all
times, that the sale of such property does not result in the receipt by the
Trust Fund of any income from nonpermitted assets as described in Code Section
860F(a)(2)(B), and that the Trust Fund does not derive any "net income from
foreclosure property" within the meaning of Code Section 860G(c)(2), with
respect to such property. If the Trust Fund acquires title to any Mortgaged
Property, the Special Servicer, on behalf of the Trust Fund, may retain an
independent contractor to manage and operate such property. The retention of an
independent contractor, however, will not relieve the Special Servicer of its
obligation to manage such Mortgaged Property as required under the related
Pooling Agreement.
If Liquidation Proceeds collected with respect to a defaulted Mortgage Loan
are less than the outstanding principal balance of the defaulted Mortgage Loan
plus interest accrued thereon plus the aggregate amount of reimbursable expenses
incurred by the Special Servicer and/or the Master Servicer in connection with
such Mortgage Loan, then, to the extent that such shortfall is not covered by
any instrument or fund constituting Credit Support, the Trust Fund will realize
a loss in the amount of such shortfall. The Special Servicer and/or the Master
Servicer will be entitled to reimbursement out of the Liquidation Proceeds
recovered on any defaulted Mortgage Loan, prior to the distribution of such
Liquidation Proceeds to Certificateholders, any and all amounts that represent
unpaid servicing compensation in respect of the Mortgage Loan, unreimbursed
servicing expenses incurred with respect to the Mortgage Loan and any
unreimbursed advances of delinquent payments made with respect to the Mortgage
Loan. In addition, if and to the extent set forth in the related Prospectus
Supplement, amounts otherwise distributable on the Certificates may be further
reduced by interest payable to the Master Servicer and/or Special Servicer on
such servicing expenses and advances.
If any Mortgaged Property suffers damage such that the proceeds, if any, of
the related hazard insurance policy are insufficient to restore fully the
damaged property, neither the Special Servicer nor the Master Servicer will be
required to expend its own funds to effect such restoration unless (and to the
extent not otherwise provided in the related Prospectus Supplement) it
determines (i) that such restoration will increase the proceeds to
Certificateholders on liquidation of the Mortgage Loan after reimbursement of
the Special Servicer or the Master Servicer, as the case may be, for its
expenses and (ii) that such expenses will be recoverable by it from related
Insurance Proceeds, Condemnation Proceeds, Liquidation Proceeds and/or amounts
drawn on any instrument or fund constituting Credit Support.
HAZARD INSURANCE POLICIES
Unless otherwise specified in the related Prospectus Supplement, each
Pooling Agreement will require the Master Servicer (or the Special Servicer with
respect to Mortgage Loans serviced thereby) to use reasonable efforts to cause
each Mortgage Loan borrower to maintain a hazard insurance policy that provides
for such coverage as is required under the related Mortgage or, if the Mortgage
permits the holder thereof to dictate to the borrower the insurance coverage to
be maintained on the related Mortgaged Property, such coverage as is consistent
with the Master Servicer's (or Special Servicer's) normal servicing procedures.
Unless otherwise specified in the related Prospectus Supplement, such coverage
generally will be in an amount equal to the lesser of the principal balance
owing on such Mortgage Loan and the replacement cost of the related Mortgaged
Property. The ability of a Master Servicer (or Special Servicer) to assure that
hazard insurance proceeds are appropriately applied may be dependent upon its
being named as an additional insured under any hazard insurance policy and under
any other insurance policy referred to below, or upon the extent to which
information concerning covered losses is furnished by borrowers. All amounts
collected by a Master Servicer (or Special Servicer) under any such policy
(except for amounts to be applied to the restoration or repair of the Mortgaged
Property or released to the borrower in accordance with the Master Servicer's
(or Special
49
Servicer's) normal servicing procedures and/or to the terms and conditions of
the related Mortgage and Mortgage Note) will be deposited in the related
Certificate Account. The Pooling Agreement may provide that the Master Servicer
(or Special Servicer) may satisfy its obligation to cause each borrower to
maintain such a hazard insurance policy by maintaining a blanket policy insuring
against hazard losses on the Mortgage Loans in a Trust Fund. If such blanket
policy contains a deductible clause, the Master Servicer (or Special Servicer)
will be required, in the event of a casualty covered by such blanket policy, to
deposit in the related Certificate Account all additional sums that would have
been deposited therein under an individual policy but were not because of such
deductible clause.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by fire,
lightning, explosion, smoke, windstorm and hail, and riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies covering the Mortgaged Properties will be underwritten by
different insurers under different state laws in accordance with different
applicable state forms, and therefore will not contain identical terms and
conditions, most such policies typically do not cover any physical damage
resulting from war, revolution, governmental actions, floods and other
water-related causes, earth movement (including earthquakes, landslides and
mudflows), wet or dry rot, vermin and domestic animals. Accordingly, a Mortgaged
Property may not be insured for losses arising from any such cause unless the
related Mortgage specifically requires, or permits the holder thereof to
require, such coverage.
The hazard insurance policies covering the Mortgaged Properties 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 property in order to recover
the full amount of any partial loss. If the insured's coverage falls below this
specified percentage, such clauses generally provide that the insurer's
liability in the event of partial loss does not exceed the lesser of (i) the
replacement cost of the improvements less physical depreciation and (ii) such
proportion of the loss as the amount of insurance carried bears to the specified
percentage of the full replacement cost of such improvements.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Mortgage Loans may contain a due-on-sale clause that
entitles the lender to accelerate payment of the Mortgage Loan upon any sale or
other transfer of the related Mortgaged Property made without the lender's
consent. Certain of the Mortgage Loans may also contain a due-on-encumbrance
clause that entitles the lender to accelerate the maturity of the Mortgage Loan
upon the creation of any other lien or encumbrance upon the Mortgaged Property.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer (or Special Servicer) will determine whether to exercise any right the
Trustee may have under any such provision in a manner consistent with the Master
Servicer's (or Special Servicer's) normal servicing procedures. Unless otherwise
specified in the related Prospectus Supplement, the Master Servicer or Special
Servicer, as applicable, will be entitled to retain as additional servicing
compensation any fee collected in connection with the permitted transfer of a
Mortgaged Property. See "Certain Legal Aspects of Mortgage Loans--Due-on-Sale
and Due-on-Encumbrance."
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the related Prospectus Supplement, a Master
Servicer's primary servicing compensation with respect to a series of
Certificates will come from the periodic payment to it of a specified portion of
the interest payments on each Mortgage Loan in the related Trust Fund, including
Mortgage Loans serviced by the related Special Servicer. If and to the extent
described in the related Prospectus Supplement, a Special Servicer's primary
compensation with respect to a series of Certificates may consist of any or all
of the following components: (i) a specified portion of the interest payments on
each Mortgage Loan in the related Trust Fund, whether or not serviced by it;
(ii) an additional specified portion of the interest payments on each Mortgage
Loan then currently serviced by it; and (iii) subject to any specified
limitations, a fixed percentage of some or all of the collections and
50
proceeds received with respect to each Mortgage Loan which was at any time
serviced by it, including Mortgage Loans for which servicing was returned to the
Master Servicer. Insofar as any portion of the Master Servicer's or Special
Servicer's compensation consists of a specified portion of the interest payments
on a Mortgage Loan, such compensation will generally be based on a percentage of
the principal balance of such Mortgage Loan outstanding from time to time and,
accordingly, will decrease with the amortization of the Mortgage Loan. As
additional compensation, a Master Servicer or Special Servicer may be entitled
to retain all or a portion of late payment charges, Prepayment Premiums,
modification fees and other fees collected from borrowers and any interest or
other income that may be earned on funds held in the related Certificate
Account. A more detailed description of each Master Servicer's and Special
Servicer's compensation will be provided in the related Prospectus Supplement.
Any Sub-Servicer will receive as its sub-servicing compensation a portion of the
servicing compensation to be paid to the Master Servicer or Special Servicer
that retained such Sub-Servicer.
In addition to amounts payable to any Sub-Servicer, a Master Servicer or
Special Servicer may be required, to the extent provided in the related
Prospectus Supplement, to pay from amounts that represent its servicing
compensation certain expenses incurred in connection with the administration of
the related Trust Fund, including, without limitation, payment of the fees and
disbursements of independent accountants, payment of fees and disbursements of
the Trustee and any custodians appointed thereby and payment of expenses
incurred in connection with distributions and reports to Certificateholders.
Certain other expenses, including certain expenses related to Mortgage Loan
defaults and liquidations and, to the extent so provided in the related
Prospectus Supplement, interest on such expenses at the rate specified therein,
may be required to be borne by the Trust Fund.
EVIDENCE AS TO COMPLIANCE
Unless otherwise specified in the related Prospectus Supplement, each
Pooling Agreement will provide that on or before a specified date in each year,
beginning the first such date that is at least a specified number of months
after the Cut-off Date, there will be furnished to the related Trustee a report
of a firm of independent certified public accountants stating that (i) it has
obtained a letter of representation regarding certain matters from the
management of the Master Servicer which includes an assertion that the Master
Servicer has complied with certain minimum mortgage loan servicing standards (to
the extent applicable to commercial and multifamily mortgage loans), identified
in the Uniform Single Attestation Program for Mortgage Bankers established by
the Mortgage Bankers Association of America, with respect to the Master
Servicer's servicing of commercial and multifamily mortgage loans during the
most recently completed calendar year and (ii) on the basis of an examination
conducted by such firm in accordance with standards established by the American
Institute of Certified Public Accountants, such representation is fairly stated
in all material respects, subject to such exceptions and other qualifications
that, in the opinion of such firm, such standards require it to report. In
rendering its report such firm may rely, as to the matters relating to the
direct servicing of commercial and multifamily mortgage loans by Sub-Servicers,
upon comparable reports of firms of independent public accountants rendered on
the basis of examinations conducted in accordance the same standards (rendered
within one year of such report) with respect to those Sub-Servicers. The
Prospectus Supplement may provide that additional reports of independent
certified public accountants relating to the servicing of mortgage loans may be
required to be delivered to the Trustee.
Each Pooling Agreement will also provide that, on or before a specified
date in each year, beginning the first such date that is at least a specified
number of months after the Cut-off Date, the Master Servicer and Special
Servicer shall each deliver to the related Trustee an annual statement signed by
one or more officers of the Master Servicer or the Special Servicer, as the case
may be, to the effect that, to the best knowledge of each such officer, the
Master Servicer or the Special Servicer, as the case may be, has fulfilled in
all material respects its obligations under the Pooling Agreement throughout the
preceding year or, if there has been a material default in the fulfillment of
any such obligation, such statement shall specify each such known default and
the nature and status thereof. Such statement may be provided as a single form
making the required statements as to more than one Pooling Agreement.
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Unless otherwise specified in the related Prospectus Supplement, copies of
the annual accountants' statement and the annual statement of officers of a
Master Servicer or Special Servicer may be obtained by Certificateholders upon
written request to the Trustee.
CERTAIN MATTERS REGARDING THE MASTER SERVICER, THE SPECIAL SERVICER, THE REMIC
ADMINISTRATOR AND THE DEPOSITOR
Unless otherwise specified in the Prospectus Supplement for a series of
Certificates, the related Pooling Agreement will permit the Master Servicer, the
Special Servicer and any REMIC Administrator to resign from its obligations
thereunder only upon (a) the appointment of, and the acceptance of such
appointment by, a successor thereto and receipt by the Trustee of written
confirmation from each applicable Rating Agency that such resignation and
appointment will not have an adverse effect on the rating assigned by such
Rating Agency to any class of Certificates of such series or (b) a determination
that such obligations are no longer permissible under applicable law or are in
material conflict by reason of applicable law with any other activities carried
on by it. No such resignation will become effective until the Trustee or other
successor has assumed the obligations and duties of the resigning Master
Servicer, Special Servicer or REMIC Administrator, as the case may be, under the
Pooling Agreement. The Master Servicer and Special Servicer for each Trust Fund
will be required to maintain a fidelity bond and errors and omissions policy or
their equivalent that provides coverage against losses that may be sustained as
a result of an officer's or employee's misappropriation of funds or errors and
omissions, subject to certain limitations as to amount of coverage, deductible
amounts, conditions, exclusions and exceptions permitted by the related Pooling
Agreement.
Unless otherwise specified in the related Prospectus Supplement, each
Pooling Agreement will further provide that none of the Master Servicer, the
Special Servicer, the REMIC Administrator, the Depositor or any director,
officer, employee or agent of any of them will be under any liability to the
related Trust Fund or Certificateholders for any action taken, or not taken, in
good faith pursuant to the Pooling Agreement or for errors in judgment;
provided, however, that none of the Master Servicer, the Special Servicer, the
REMIC Administrator, the Depositor or any such person will be protected against
any liability that would otherwise be imposed by reason of willful misfeasance,
bad faith or gross negligence in the performance of obligations or duties
thereunder or by reason of reckless disregard of such obligations and duties.
Unless otherwise specified in the related Prospectus Supplement, each Pooling
Agreement will further provide that the Master Servicer, the Special Servicer,
the REMIC Administrator, the Depositor and any director, officer, employee or
agent of any of them will be entitled to indemnification by the related Trust
Fund against any loss, liability or expense incurred in connection with any
legal action that relates to such Pooling Agreement or the related series of
Certificates; provided, however, that such indemnification will not extend to
any loss, liability or expense incurred by reason of willful misfeasance, bad
faith or gross negligence in the performance of obligations or duties under such
Pooling Agreement, or by reason of reckless disregard of such obligations or
duties. In addition, each Pooling Agreement will provide that none of the Master
Servicer, the Special Servicer, the REMIC Administrator or the Depositor will be
under any obligation to appear in, prosecute or defend any legal action that is
not incidental to its respective responsibilities under the Pooling Agreement
and that in its opinion may involve it in any expense or liability. However,
each of the Master Servicer, the Special Servicer, the REMIC Administrator and
the Depositor will be permitted, in the exercise of its discretion, to undertake
any such action that it may deem necessary or desirable with respect to the
enforcement and/or protection of the rights and duties of the parties to the
Pooling Agreement and the interests of the related series of Certificateholders
thereunder. In such event, the legal expenses and costs of such action, and any
liability resulting therefrom, will be expenses, costs and liabilities of the
related series of Certificateholders, and the Master Servicer, the Special
Servicer, the REMIC Administrator or the Depositor, as the case may be, will be
entitled to charge the related Certificate Account therefor.
Any person into which the Master Servicer, the Special Servicer, the REMIC
Administrator or the Depositor may be merged or consolidated, or any person
resulting from any merger or consolidation to which the Master Servicer, the
Special Servicer, the REMIC Administrator or the Depositor is a party, or
52
any person succeeding to the business of the Master Servicer, the Special
Servicer, the REMIC Administrator or the Depositor, will be the successor of the
Master Servicer, the Special Servicer, the REMIC Administrator or the Depositor,
as the case may be, under the related Pooling Agreement.
Unless otherwise specified in the related Prospectus Supplement, a REMIC
Administrator will be entitled to perform any of its duties under the related
Pooling Agreement either directly or by or through agents or attorneys, and the
REMIC Administrator will not be responsible for any willful misconduct or gross
negligence on the part of any such agent or attorney appointed by it with due
care.
EVENTS OF DEFAULT
Unless otherwise provided in the Prospectus Supplement for a series of
Certificates, "Events of Default" under the related Pooling Agreement will
include, without limitation, (i) any failure by the Master Servicer to
distribute or cause to be distributed to the Certificateholders of such series,
or to remit to the Trustee for distribution to such Certificateholders, any
amount required to be so distributed or remitted, which failure continues
unremedied for five days after written notice thereof has been given to the
Master Servicer by any other party to the related Pooling Agreement, or to the
Master Servicer, with a copy to each other party to the related Pooling
Agreement, by Certificateholders entitled to not less than 25% (or such other
percentage specified in the related Prospectus Supplement) of the Voting Rights
for such series; (ii) any failure by the Special Servicer to remit to the Master
Servicer or the Trustee, as applicable, any amount required to be so remitted,
which failure continues unremedied for five days after written notice thereof
has been given to the Special Servicer by any other party to the related Pooling
Agreement, or to the Special Servicer, with a copy to each other party to the
related Pooling Agreement, by the Certificateholders entitled to not less than
25% (or such other percentage specified in the related Prospectus Supplement) of
the Voting Rights of such series; (iii) any failure by the Master Servicer or
the Special Servicer duly to observe or perform in any material respect any of
its other covenants or obligations under the related Pooling Agreement, which
failure continues unremedied for sixty days after written notice thereof has
been given to the Master Servicer or the Special Servicer, as the case may be,
by any other party to the related Pooling Agreement, or to the Master Servicer
or the Special Servicer, as the case may be, with a copy to each other party to
the related Pooling Agreement, by Certificateholders entitled to not less than
25% (or such other percentage specified in the related Prospectus Supplement) of
the Voting Rights for such series; (iv) any failure by a REMIC Administrator (if
other than the Trustee) duly to observe or perform in any material respect any
of its covenants or obligations under the related Pooling Agreement, which
failure continues unremedied for sixty days after written notice thereof has
been given to the REMIC Administrator by any other party to the related Pooling
Agreement, or to the REMIC Administrator, with a copy to each other party to the
related Pooling Agreement, by Certificateholders entitled to not less than 25%
(or such other percentage specified in the related Prospectus Supplement) of the
Voting Rights for such series; and (v) certain events of insolvency,
readjustment of debt, marshalling of assets and liabilities, or similar
proceedings in respect of or relating to the Master Servicer, the Special
Servicer or the REMIC Administrator (if other than the Trustee), and certain
actions by or on behalf of the Master Servicer, the Special Servicer or the
REMIC Administrator (if other than the Trustee) indicating its insolvency or
inability to pay its obligations. Material variations to the foregoing Events of
Default (other than to add thereto or shorten cure periods or eliminate notice
requirements) will be specified in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, when a single entity
acts as Master Servicer, Special Servicer and REMIC Administrator, or in any two
of the foregoing capacities, for any Trust Fund, an Event of Default in one
capacity will constitute an Event of Default in each capacity.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default occurs with respect to the Master Servicer, the
Special Servicer or a REMIC Administrator under a Pooling Agreement, then, in
each and every such case, so long as the Event of Default remains unremedied,
the Depositor or the Trustee will be authorized, and at the direction of
Certificateholders of the related series entitled to not less than 51% (or such
other percentage specified in the related Prospectus Supplement) of the Voting
Rights for such series, the Trustee will be required,
53
to terminate all of the rights and obligations of the defaulting party as Master
Servicer, Special Servicer or REMIC Administrator, as applicable, under the
Pooling Agreement, whereupon the Trustee will succeed to all of the
responsibilities, duties and liabilities of the defaulting party as Master
Servicer, Special Servicer or REMIC Administrator, as applicable, under the
Pooling Agreement (except that if the defaulting party is required to make
advances thereunder regarding delinquent Mortgage Loans, but the Trustee is
prohibited by law from obligating itself to make such advances, or if the
related Prospectus Supplement so specifies, the Trustee will not be obligated to
make such advances) and will be entitled to similar compensation arrangements.
Unless otherwise specified in the related Prospectus Supplement, if the Trustee
is unwilling or unable so to act, it may (or, at the written request of
Certificateholders of the related series entitled to not less than 51% (or such
other percentage specified in the related Prospectus Supplement) of the Voting
Rights for such series, it will be required to) appoint, or petition a court of
competent jurisdiction to appoint, a loan servicing institution or other entity
that (unless otherwise provided in the related Prospectus Supplement) is
acceptable to each applicable Rating Agency to act as successor to the Master
Servicer, Special Servicer or REMIC Administrator, as the case may be, under the
Pooling Agreement. Pending such appointment, the Trustee will be obligated to
act in such capacity.
If the same entity is acting as both Trustee and REMIC Administrator, it
may be removed in both such capacities as described under "--Resignation and
Removal of the Trustee" below.
No Certificateholder will have any right under a Pooling Agreement to
institute any proceeding with respect to such Pooling Agreement unless such
holder previously has given to the Trustee written notice of default and the
continuance thereof and unless the holders of Certificates of any class
evidencing not less than 25% of the aggregate Percentage Interests constituting
such class have made written request upon the Trustee to institute such
proceeding in its own name as Trustee thereunder and have offered to the Trustee
reasonable indemnity and the Trustee for sixty days after receipt of such
request and indemnity has neglected or refused to institute any such proceeding.
However, the Trustee will be under no obligation to exercise any of the trusts
or powers vested in it by the Pooling Agreement or to institute, conduct or
defend any litigation thereunder or in relation thereto at the request, order or
direction of any of the holders of Certificates covered by such Pooling
Agreement, unless such Certificateholders have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby.
AMENDMENT
Except as otherwise specified in the related Prospectus Supplement, each
Pooling Agreement may be amended by the parties thereto, without the consent of
any of the holders of Certificates covered by such Pooling Agreement, (i) to
cure any ambiguity, (ii) to correct or supplement any provision therein which
may be inconsistent with any other provision therein or to correct any error,
(iii) to change the timing and/or nature of deposits in the Certificate Account,
provided that (A) such change would not adversely affect in any material respect
the interests of any Certificateholder, as evidenced by an opinion of counsel,
and (B) such change would not adversely affect the then-current rating of any
rated classes of Certificates, as evidenced by a letter from each applicable
Rating Agency, (iv) if a REMIC election has been made with respect to the
related Trust Fund, to modify, eliminate or add to any of its provisions (A) to
such extent as shall be necessary to maintain the qualification of the Trust
Fund (or any designated portion thereof) as a REMIC or to avoid or minimize the
risk of imposition of any tax on the related Trust Fund, provided that the
Trustee has received an opinion of counsel to the effect that (1) such action is
necessary or desirable to maintain such qualification or to avoid or minimize
such risk, and (2) such action will not adversely affect in any material respect
the interests of any holder of Certificates covered by the Pooling Agreement, or
(B) to restrict the transfer of the Residual Certificates, provided that the
Depositor has determined that the then-current ratings of the classes of the
Certificates that have been rated will not be adversely affected, as evidenced
by a letter from each applicable Rating Agency, and that any such amendment will
not give rise to any tax with respect to the transfer of the Residual
Certificates to a non-permitted transferee (See "Certain Federal Income Tax
Consequences--REMICs--Tax and Restrictions on Transfers of Residual Certificates
to Certain Organizations" herein), (v) to make any other provisions with respect
to matters or questions arising under such Pooling Agreement or any other
change, provided that such action will not adversely affect
54
in any material respect the interests of any Certificateholder, or (vi) to amend
specified provisions that are not material to holders of any class of
Certificates offered hereunder.
The Pooling Agreement may also be amended by the parties thereto with the
consent of the holders of Certificates of each class affected thereby
evidencing, in each case, not less than 66-2/3% (or such other percentage
specified in the related Prospectus Supplement) of the aggregate Percentage
Interests constituting such class for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of such Pooling
Agreement or of modifying in any manner the rights of the holders of
Certificates covered by such Pooling Agreement, except that no such amendment
may (i) reduce in any manner the amount of, or delay the timing of, payments
received on Mortgage Loans which are required to be distributed on a Certificate
of any class without the consent of the holder of such Certificate or (ii)
reduce the aforesaid percentage of Certificates of any class the holders of
which are required to consent to any such amendment without the consent of the
holders of all Certificates of such class covered by such Pooling Agreement then
outstanding.
Notwithstanding the foregoing, if a REMIC election has been made with
respect to the related Trust Fund, the Trustee will not be required to consent
to any amendment to a Pooling Agreement without having first received an opinion
of counsel to the effect that such amendment or the exercise of any power
granted to the Master Servicer, the Special Servicer, the Depositor, the Trustee
or any other specified person in accordance with such amendment will not result
in the imposition of a tax on the related Trust Fund or cause such Trust Fund
(or any designated portion thereof) to fail to qualify as a REMIC.
LIST OF CERTIFICATEHOLDERS
Unless otherwise specified in the related Prospectus Supplement, upon
written request of three or more Certificateholders of record made for purposes
of communicating with other holders of Certificates of the same series with
respect to their rights under the related Pooling Agreement, the Trustee or
other specified person will afford such Certificateholders access during normal
business hours to the most recent list of Certificateholders of that series held
by such person. If such list is as of a date more than 90 days prior to the date
of receipt of such Certificateholders' request, then such person, if not the
registrar for such series of Certificates, will be required to request from such
registrar a current list and to afford such requesting Certificateholders access
thereto promptly upon receipt.
THE TRUSTEE
The Trustee under each Pooling Agreement will be named in the related
Prospectus Supplement. The commercial bank, national banking association,
banking corporation or trust company that serves as Trustee may have typical
banking relationships with the Depositor and its affiliates and with any Master
Servicer, Special Servicer or REMIC Administrator and its affiliates.
DUTIES OF THE TRUSTEE
The Trustee for each series of Certificates will make no representation as
to the validity or sufficiency of the related Pooling Agreement, such
Certificates or any underlying Mortgage Asset or related document and will not
be accountable for the use or application by or on behalf of any Master Servicer
or Special Servicer of any funds paid to the Master Servicer or Special Servicer
in respect of the Certificates or the underlying Mortgage Assets. If no Event of
Default has occurred and is continuing, the Trustee for each series of
Certificates will be required to perform only those duties specifically required
under the related Pooling Agreement. However, upon receipt of any of the various
certificates, reports or other instruments required to be furnished to it
pursuant to the related Pooling Agreement, a Trustee will be required to examine
such documents and to determine whether they conform to the requirements of such
agreement.
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CERTAIN MATTERS REGARDING THE TRUSTEE
As and to the extent described in the related Prospectus Supplement, the
fees and normal disbursements of any Trustee may be the expense of the related
Master Servicer or other specified person or may be required to be borne by the
related Trust Fund.
Unless otherwise specified in the related Prospectus Supplement, the
Trustee for each series of Certificates will be entitled to indemnification,
from amounts held in the Certificate Account for such series, for any loss,
liability or expense incurred by the Trustee in connection with the Trustee's
acceptance or administration of its trusts under the related Pooling Agreement;
provided, however, that such indemnification will not extend to any loss
liability or expense incurred by reason of willful misfeasance, bad faith or
gross negligence on the part of the Trustee in the performance of its
obligations and duties thereunder, or by reason of its reckless disregard of
such obligations or duties.
Unless otherwise specified in the related Prospectus Supplement, the
Trustee for each series of Certificates will be entitled to execute any of its
trusts or powers under the related Pooling Agreement or perform any of this
duties thereunder either directly or by or through agents or attorneys, and the
Trustee will not be responsible for any willful misconduct or gross negligence
on the part of any such agent or attorney appointed by it with due care.
RESIGNATION AND REMOVAL OF THE TRUSTEE
The Trustee may resign at any time, in which event the Depositor will be
obligated to appoint a successor Trustee. The Depositor may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Pooling Agreement or if the Trustee becomes insolvent. Upon becoming aware of
such circumstances, the Depositor will be obligated to appoint a successor
Trustee. The Trustee may also be removed at any time by the holders of
Certificates of the applicable series evidencing not less than 51% (or such
other percentage specified in the related Prospectus Supplement) of the Voting
Rights for such series. Any resignation or removal of the Trustee and
appointment of a successor Trustee will not become effective until acceptance of
the appointment by the successor Trustee. Notwithstanding anything herein to the
contrary, if any entity is acting as both Trustee and REMIC Administrator, then
any resignation or removal of such entity as the Trustee will also constitute
the resignation or removal of such entity as REMIC Administrator, and the
successor trustee will serve as successor to the REMIC Administrator as well.
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DESCRIPTION OF CREDIT SUPPORT
GENERAL
Credit Support may be provided with respect to one or more classes of the
Certificates of any series or with respect to the related Mortgage Assets.
Credit Support may be in the form of a letter of credit, the subordination of
one or more classes of Certificates, the use of a surety bond, an insurance
policy or a guarantee, the establishment of one or more reserve funds, or any
combination of the foregoing. If and to the extent so provided in the related
Prospectus Supplement, any of the foregoing forms of Credit Support may provide
credit enhancement for more than one series of Certificates.
The Credit Support may not provide protection against all risks of loss and
will not guarantee payment to Certificateholders of all amounts to which they
are entitled under the related Pooling Agreement. If losses or shortfalls occur
that exceed the amount covered by the related Credit Support or that are of a
type not covered by such Credit Support, Certificateholders will bear their
allocable share of deficiencies. Moreover, if a form of Credit Support covers
the Offered Certificates of more than one series and losses on the related
Mortgage Assets exceed the amount of such Credit Support, it is possible that
the holders of Offered Certificates of one (or more) such series will be
disproportionately benefited by such Credit Support to the detriment of the
holders of Offered Certificates of one (or more) other such series.
If Credit Support is provided with respect to one or more classes of
Certificates of a series, or with respect to the related Mortgage Assets, the
related Prospectus Supplement will include a description of (i) the nature and
amount of coverage under such Credit Support, (ii) any conditions to payment
thereunder not otherwise described herein, (iii) the conditions (if any) under
which the amount of coverage under such Credit Support may be reduced and under
which such Credit Support may be terminated or replaced and (iv) the material
provisions relating to such Credit Support. Additionally, the related Prospectus
Supplement will set forth certain information with respect to the obligor, if
any, under any instrument of Credit Support. See "Risk Factors--Credit Support
Limitations."
SUBORDINATE CERTIFICATES
If so specified in the related Prospectus Supplement, one or more classes
of Certificates of a series may be Subordinate Certificates. To the extent
specified in the related Prospectus Supplement, the rights of the holders of
Subordinate Certificates to receive distributions from the Certificate Account
on any Distribution Date will be subordinated to the corresponding rights of the
holders of Senior Certificates. If so provided in the related Prospectus
Supplement, the subordination of a class may apply only in the event of certain
types of losses or shortfalls. The related Prospectus Supplement will set forth
information concerning the method and amount of subordination provided by a
class or classes of Subordinate Certificates in a series and the circumstances
under which such subordination will be available.
If the Mortgage Assets in any Trust Fund are divided into separate groups,
each supporting a separate class or classes of Certificates of the related
series, Credit Support may be provided by cross-support provisions requiring
that distributions be made on Senior Certificates evidencing interests in one
group of Mortgage Assets prior to distributions on Subordinate Certificates
evidencing interests in a different group of Mortgage Assets within the Trust
Fund. The Prospectus Supplement for a series that includes a cross-support
provision will describe the manner and conditions for applying such provisions.
INSURANCE OR GUARANTEES WITH RESPECT TO MORTGAGE LOANS
If so provided in the Prospectus Supplement for a series of Certificates,
Mortgage Loans included in the related Trust Fund will be covered for certain
default risks by insurance policies or guarantees. The related Prospectus
Supplement will describe the nature of such default risks and the extent of such
coverage.
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LETTER OF CREDIT
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by one or more letters of credit, issued by a
bank or other financial institution specified in such Prospectus Supplement (the
"Letter of Credit Bank"). Under a letter of credit, the Letter of Credit Bank
will be obligated to honor draws thereunder in an aggregate fixed dollar amount,
net of unreimbursed payments thereunder, generally equal to a percentage
specified in the related Prospectus Supplement of the aggregate principal
balance of some or all of the related Mortgage Assets on the related Cut-off
Date or of the initial aggregate Certificate Balance of one or more classes of
Certificates. If so specified in the related Prospectus Supplement, the letter
of credit may permit draws only in the event of certain types of losses and
shortfalls. The amount available under the letter of credit will, in all cases,
be reduced to the extent of the unreimbursed payments thereunder and may
otherwise be reduced as described in the related Prospectus Supplement. The
obligations of the Letter of Credit Bank under the letter of credit for each
series of Certificates will expire at the earlier of the date specified in the
related Prospectus Supplement or the termination of the Trust Fund.
CERTIFICATE INSURANCE AND SURETY BONDS
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by insurance policies or surety bonds provided
by one or more insurance companies or sureties. Such instruments may cover, with
respect to one or more classes of Certificates of the related series, timely
distributions of interest or distributions of principal on the basis of a
schedule of principal distributions set forth in or determined in the manner
specified in the related Prospectus Supplement. The related Prospectus
Supplement will describe any limitations on the draws that may be made under any
such instrument.
RESERVE FUNDS
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered (to the extent of available funds) by one or
more reserve funds in which cash, a letter of credit, Permitted Investments, a
demand note or a combination thereof will be deposited, in the amounts specified
in such Prospectus Supplement. If so specified in the related Prospectus
Supplement, the reserve fund for a series may also be funded over time by a
specified amount of certain collections received on the related Mortgage Assets.
Amounts on deposit in any reserve fund for a series will be applied for the
purposes, in the manner, and to the extent specified in the related Prospectus
Supplement. If so specified in the related Prospectus Supplement, reserve funds
may be established to provide protection only against certain types of losses
and shortfalls. Following each Distribution Date, amounts in a reserve fund in
excess of any amount required to be maintained therein may be released from the
reserve fund under the conditions and to the extent specified in the related
Prospectus Supplement.
If so specified in the related Prospectus Supplement, amounts deposited in
any reserve fund will be invested in Permitted Investments. Unless otherwise
specified in the related Prospectus Supplement, any reinvestment income or other
gain from such investments will be credited to the related reserve fund for such
series, and any loss resulting from such investments will be charged to such
reserve fund. However, such income may be payable to any related Master Servicer
or another service provider as additional compensation for its services. The
reserve fund, if any, for a series will not be a part of the Trust Fund unless
otherwise specified in the related Prospectus Supplement.
CREDIT SUPPORT WITH RESPECT TO MBS
If so provided in the Prospectus Supplement for a series of Certificates,
any MBS included in the related Trust Fund and/or the related underlying
mortgage loans may be covered by one or more of the types of Credit Support
described herein. The related Prospectus Supplement will specify, as to each
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such form of Credit Support, the information indicated above with respect
thereto, to the extent such information is material and available.
INTEREST RATE EXCHANGE, CAP AND FLOOR AGREEMENTS
If so specified in the Prospectus Supplement for a series of Certificates,
the related Trust Fund may include interest rate exchange agreements or interest
rate cap or floor agreements. These types of agreements may be used to limit the
exposure of the Trust Fund or investors in the Certificates to fluctuations in
interest rates and to situations where interest rates become higher or lower
than specified thresholds. Generally, an interest rate exchange agreement is a
contract between two parties to pay and receive, with a set frequency, interest
payments determined by applying the differential between two interest rates to
an agreed-upon notional principal. Generally, an interest rate cap agreement is
a contract pursuant to which one party agrees to reimburse another party for a
floating rate interest payment obligation, to the extent that the rate payable
at any time exceeds a specified cap. Generally, an interest rate floor agreement
is a contract pursuant to which one party agrees to reimburse another party in
the event that amounts owing to the latter party under a floating rate interest
payment obligation are payable at a rate which is less than a specified floor.
The specific provisions of these types of agreements will be described in the
related Prospectus Supplement.
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 (or
mortgage loans underlying any MBS) is situated. Accordingly, the summaries are
qualified in their entirety by reference to the applicable laws of those
jurisdictions. See "Description of the Trust Funds--Mortgage Loans." If a
significant percentage of Mortgage Loans (or mortgage loans underlying MBS), by
balance, are secured by properties in a particular jurisdiction, relevant local
laws, to the extent they vary materially from this discussion, will be discussed
in the Prospectus Supplement. For purposes of the following discussion,
"Mortgage Loan" includes a mortgage loan underlying an MBS.
GENERAL
Each Mortgage Loan will be evidenced by a note or bond 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 herein
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 subject 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
59
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 mortgage
note. In no event is the land trustee personally liable for the mortgage note
obligation. The mortgagee's authority under a mortgage, the trustee's authority
under a deed of trust and the grantee's authority under a deed to secure debt
are governed by the express provisions of the related instrument, the law of the
state in which the real property is located, 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 therefrom, 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 and motel room rates are considered accounts
receivable under the Uniform Commercial Code ("UCC"); in cases where hotels or
motels constitute loan security, the rates are generally pledged by the borrower
as additional security for the loan. In general, the lender must file financing
statements in order to perfect its security interest in the room rates and must
file continuation statements, generally every five years, to maintain perfection
of such security interest. In certain cases, Mortgage Loans secured by hotels or
motels may be included in a Trust Fund even if the security interest in the room
rates was not perfected or the requisite UCC filings were allowed to lapse. Even
if the lender's security interest in room rates 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 rates following a default. In the bankruptcy setting,
however, the lender will be stayed from enforcing its rights to collect room
rates, but those room rates constitute "cash collateral" and therefore cannot be
used by the bankruptcy debtor without a hearing or lender's consent or unless
the lender's interest in the room rates is given adequate protection (e.g., cash
payment for otherwise encumbered funds or a replacement lien on unencumbered
property, in either case equal in value to the amount of room rates that the
debtor proposes to use, or other similar relief). See "--Bankruptcy Laws."
PERSONALTY
In the case of certain types of mortgaged properties, such as hotels,
motels and nursing homes, 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 therein, and must
file continuation statements, generally every five years, to maintain that
perfection. In certain cases, Mortgage Loans secured in part by personal
property may be included in a Trust Fund even if the security interest in such
personal property was not perfected or the requisite UCC filings were allowed to
lapse.
FORECLOSURE
GENERAL. Foreclosure is a legal procedure that allows the lender to recover
its mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the borrower defaults in
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payment or performance of its obligations under the note or mortgage, the lender
has the right to institute foreclosure proceedings to sell the real property at
public auction to satisfy the indebtedness.
FORECLOSURE PROCEDURES VARY FROM STATE TO STATE. Two primary methods of
foreclosing a mortgage are judicial foreclosure, involving court proceedings,
and nonjudicial foreclosure pursuant to a power of sale granted in the mortgage
instrument. Other foreclosure procedures are available in some states, but they
are either infrequently used or available only in limited circumstances.
A foreclosure action is subject to most of the delays and expenses of other
lawsuits if defenses are raised or counterclaims are interposed, and sometimes
requires several years to complete.
JUDICIAL FORECLOSURE. A judicial foreclosure proceeding is conducted in a
court having jurisdiction over the mortgaged property. Generally, the action is
initiated by the service of legal pleadings upon all parties having a
subordinate interest of record in the real property and all parties in
possession of the property, under leases or otherwise, whose interests are
subordinate to the mortgage. Delays in completion of the foreclosure may
occasionally result from difficulties in locating defendants. When the lender's
right to foreclose is contested, the legal proceedings can be time-consuming.
Upon successful completion of a judicial foreclosure proceeding, the court
generally issues a judgment of foreclosure and appoints a 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 mortgage loans after commencement of foreclosure
proceedings but prior to a foreclosure sale.
NONJUDICIAL FORECLOSURE/POWER OF SALE. In states permitting nonjudicial
foreclosure proceedings, foreclosure of a deed of trust is generally
accomplished by a nonjudicial trustee's sale pursuant to a power of sale
typically granted in the deed of trust. A power of sale may also be contained in
any other type of mortgage instrument if applicable law so permits. A power of
sale under a deed of trust allows a nonjudicial public sale to be conducted
generally following a request from the beneficiary/lender to the trustee to sell
the property upon default by the borrower and after notice of sale is given in
accordance with the terms of the mortgage and applicable state law. In some
states, prior to such sale, the trustee under the deed of trust must record a
notice of default and notice of sale and send a copy to the borrower and to any
other party who has recorded a request for a copy of a notice of default and
notice of sale. In addition, in some states the trustee must provide notice to
any other party having an interest of record in the real property, including
junior lienholders. A notice of sale must be posted in a public place and, in
most states, published for a specified period of time in one or more newspapers.
The borrower or junior lienholder may then have the right, during a
reinstatement period required in some states, to cure the default by paying the
entire actual amount in arrears (without regard to the
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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 property may have occurred during the foreclosure proceedings. 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. (The Mortgage Loans, however, may be nonrecourse. See "Risk
Factors--Certain Factors Affecting Delinquency, Foreclosure and Loss of the
Mortgage Loans--Limited Recourse Nature of the Mortgage Loans.") 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.
The costs of operating and maintaining a commercial or multifamily residential
property may be significant and may be greater than the income derived from that
property. 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 the property may not equal the lender's investment in the property.
Moreover, because of the expenses associated with acquiring, owning and selling
a mortgaged property, a lender could realize an overall loss on a mortgage loan
even if the mortgaged property is sold at foreclosure, or resold after it is
acquired through foreclosure, for an amount equal to the full outstanding
principal amount of the loan plus accrued interest.
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
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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 may be
nonrecourse loans, as to which recourse in the case of default will be limited
to the Mortgaged Property and such other assets, if any, that were pledged to
secure the Mortgage Loan. However, even if a mortgage loan by its terms provides
for recourse to the borrower's other assets, a lender's ability to realize upon
those assets may be limited by state law. For example, in some states a lender
cannot obtain a deficiency judgment against the borrower following foreclosure
or sale under a deed of trust. A deficiency judgment is a personal judgment
against the former borrower equal to the difference between the net amount
realized upon the public sale of the real property and the amount due to the
lender. Other statutes may require the lender to exhaust the security afforded
under a mortgage before bringing a personal action against the borrower. In
certain other states, the lender has the option of bringing a personal action
against the borrower on the debt without first exhausting such security;
however, in some of those states, the lender, following judgment on such
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 proprietary leases
appurtenant thereto, allocable to cooperative dwelling units that may be vacant
or occupied by nonowner 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.
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
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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, as amended from time to time (11
U.S.C.) (the "Bankruptcy Code") and related state laws may interfere with or
affect the ability of a lender to realize upon collateral and/or to enforce a
deficiency judgment. For example, under the Bankruptcy Code, virtually all
actions (including foreclosure actions and deficiency judgment proceedings) are
automatically stayed upon the filing of the bankruptcy petition and, usually, no
interest or principal payments are made during the course of the bankruptcy
case. The delay and the consequences thereof caused by such automatic stay can
be significant. Also, under the Bankruptcy Code, the filing of a petition in
bankruptcy by or on behalf of a junior lienor may stay the senior lender from
taking action to foreclose out such junior lien.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards protective of the lender are met, the amount and terms of a mortgage
loan secured by a lien on property of the debtor may be modified under certain
circumstances. In many jurisdictions, the outstanding amount of the loan may be
reduced to the then-current value of the property (with a corresponding partial
reduction of the amount of lender's security interest) pursuant to a confirmed
plan or lien avoidance proceeding, thus leaving the lender a general unsecured
creditor for the difference between such value and the outstanding balance of
the loan. Other modifications may include the reduction in the amount of each
scheduled payment, by means of a reduction in the rate of interest and/or an
alteration of the repayment schedule (with or without affecting the unpaid
principal balance of the loan), and/or by an extension (or shortening) of the
term to maturity. Some courts with federal bankruptcy jurisdiction have approved
plans, based on the particular facts of the reorganization case, that effected
the cure 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 rehabilitative plan, to de-accelerate a secured loan and to reinstate the
loan even if the lender accelerated the mortgage loan and final judgment of
foreclosure has been entered in state court (provided no sale of the property
had yet occurred) prior to the filing of the debtor's petition. This may be done
even if the full amount due under the original loan is never repaid.
The Bankruptcy Code has been amended to provide 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." 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 property and the cash collateral is "adequately protected" as the
term is defined and interpreted under the Bankruptcy Code. It should be noted,
however, that the court may find that the lender has no security interest in
either pre-petition or post-petition revenues if the court finds that the loan
documents do not contain language covering accounts, room rents, or other forms
of personalty necessary for a security interest to attach to hotel revenues.
The Bankruptcy Code provides generally that rights and obligation 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 the trustee 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 trustee's
exercise of those
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remedies in the event that a lessee becomes the subject of a proceeding under
the Bankruptcy Code. For example, a mortgagee would be stayed from enforcing an
assignment of the lease by a borrower related to a mortgaged property if the
related borrower was in a bankruptcy proceeding. The legal proceedings necessary
to resolve the issues could be time-consuming and might result in significant
delays in the receipt of the assigned rents. Similarly, 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. Rents and other proceeds of a mortgage loan
may also escape an assignment if the assignment is not fully perfected under
state law prior to commencement of the bankruptcy proceeding.
In addition, the Bankruptcy Code generally provides that a trustee or
debtor-in-possession may, 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
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 immediately before the date
of filing the petition. As a consequence, the other party or parties to the
lease, such as the borrower, as lessor under a lease, would have only an
unsecured claim against the debtor for damages resulting from the breach, which
could adversely affect the security for the related mortgage loan. In addition,
pursuant to Section 502(b)(6) of the Bankruptcy Code, a lessor's damages for
lease rejection in respect of future rent installments are limited to the rent
reserved by the lease, without acceleration, for the greater of one year or 15
percent, not to exceed three years, of the remaining term of the lease.
If a trustee in bankruptcy on behalf of a lessor, or a lessor as
debtor-in-possession, rejects an unexpired lease of real property, the lessee
may treat the lease as terminated by the rejection or, in the alternative, the
lessee may remain in possession of the leasehold for the balance of the term and
for any renewal or extension of the term that is enforceable by the lessee under
applicable nonbankruptcy 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.
On the bankruptcy of a lessor or a lessee under a ground lease, the debtor
entity has the right to assume (continue) or reject (terminate) the ground
lease. Pursuant to Section 365(h) of the Bankruptcy Code, as it is presently in
effect, a ground lessee whose ground lease is rejected by a debtor ground lessor
has the right to remain in possession of its leased premises under the rent
reserved in the lease for the term (including renewals) of the ground lease, but
is not entitled to enforce the obligation of the ground lessor to provide any
services required under the ground lease. In the event a ground lessee/borrower
in bankruptcy rejects any/or all of its ground leases, the leasehold mortgagee
would have the right to succeed to the ground lessee/borrower's position under
the lease only if the ground lessor had specifically granted the mortgagee such
right. In the event of concurrent bankruptcy proceedings involving the ground
lessor and the ground lessee/borrower, the Trustee may be unable to enforce the
ground lessee/borrower's obligation to refuse to treat a ground lease rejected
by a bankrupt ground lessor as terminated. In such circumstances, a ground lease
could be terminated notwithstanding lender protection provisions contained
herein or in the mortgage. A lender could lose its security unless the borrower
holds a fee mortgage or the bankruptcy court, as a court of equity, allows the
lender to assume the ground lessee's obligations under the ground lease and
succeed to the position of a leasehold mortgagor. Although consistent with the
Bankruptcy Code, such position may not be adopted by a bankruptcy court.
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In a bankruptcy or similar proceeding of a borrower, action may be taken
seeking the recovery, as a preferential transfer or on other grounds, of any
payments made by the borrower, or made directly by the related lessee, under the
related mortgage loan to the trust fund. Payments on long-term debt may be
protected from recovery as preferences if they are payments in the ordinary
course of business made on debts incurred in the ordinary course of business.
Whether any particular payment would be protected depends upon the facts
specific to a particular transaction.
A trustee in bankruptcy, in some cases, may be entitled to collect its
costs and expenses in preserving or selling the mortgaged property ahead of
payment to the lender. In certain circumstances, a debtor in bankruptcy may have
the power to grant liens senior to the lien of a mortgage, and analogous state
statutes and general principles of equity may also provide a borrower with means
to halt a foreclosure proceeding or sale and to force a restructuring of a
mortgage loan on terms a lender would not otherwise accept. Moreover, the laws
of certain states also give priority to certain tax liens over the lien of a
mortgage or deed of trust. Under the Bankruptcy Code, if the court finds that
actions of the mortgagee have been unreasonable, the lien of the related
mortgage may be subordinated to the claims of unsecured creditors.
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. 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 notes in the same manner as a principal
prepayment.
In addition, the bankruptcy of the general or limited partner of a borrower
that is a partnership, or the bankruptcy of a member of a borrower that is a
limited liability company or the bankruptcy of a shareholder of a borrower that
is a corporation may provide the opportunity in the bankruptcy case of the
partner, member or shareholder to obtain an order from a court consolidating the
assets and liabilities of the partner, member or shareholder with those of the
mortgagor pursuant to the doctrines of substantive consolidation or piercing the
corporate veil. In such a case, the respective mortgaged property, for example,
would become property of the estate of the bankrupt partner, member or
shareholder. Not only would the mortgaged property be available to satisfy the
claims of creditors of the partner, member or shareholder, but an automatic stay
would apply to any attempt by the trustee to exercise remedies with respect to
the mortgaged property. However, such an occurrence should not affect the
trustee's status as a secured creditor with respect to the mortgagor or its
security interest in the mortgaged property.
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,
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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 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 "Act") amended, among other things, the provisions of CERCLA
with respect to lender liability and the secured creditor exemption. The 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 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 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 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.
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In a few states, transfers of some types of properties are conditioned upon
cleanup of contamination prior to transfer. In these cases, a lender that
becomes the owner of a property through foreclosure, deed in lieu of foreclosure
or otherwise, may be required to clean up the contamination before selling or
otherwise transferring the property.
Beyond statute-based environmental liability, there exist common law causes
of action (for example, actions based on nuisance or on toxic tort resulting in
death, personal injury or damage to property) related to hazardous environmental
conditions on a property. While it may be more difficult to hold a lender liable
under common law causes of action, unanticipated or uninsured liabilities of the
borrower may jeopardize the borrower's ability to meet its loan obligations or
may decrease the re-sale value of the collateral.
Federal, state and local environmental laws and regulatory requirements
change often. It is possible that compliance with a new requirement could impose
significant compliance costs on a borrower. Such costs may jeopardize the
borrower's ability to meet its loan obligations or 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 Trust Fund and occasion a loss to the Certificateholders.
To reduce the likelihood of such a loss, unless otherwise specified in the
related Prospectus Supplement, the Pooling Agreement will provide that neither
the Master Servicer nor the Special Servicer, acting on behalf of the Trustee,
may acquire title to a Mortgaged Property or take over its operation unless the
Special Servicer, based solely (as to environmental matters) on a report
prepared by a person who regularly conducts environmental audits, has made the
determination that it is appropriate to do so, as described under "Description
of the Pooling Agreements--Realization Upon Defaulted Mortgage Loans."
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 recoup its investment in a loan upon foreclosure.
ENVIRONMENTAL SITE ASSESSMENTS. In most cases, an environmental site
assessment of each Mortgaged Property will have been performed in connection
with the origination of the related Mortgage Loan or at some time prior to the
issuance of the related Certificates. Environmental site assessments, however,
vary considerably in their content, quality and cost. Even when adhering to good
professional practices, environmental consultants will sometimes not detect
significant environmental problems because to do an exhaustive environmental
assessment would be far too costly and time-consuming to be practical.
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. In recent years, court decisions and legislative actions
placed substantial restrictions on the right of lenders to enforce such clauses
in many states. However, 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 the
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regulations promulgated thereunder. Accordingly, a Master Servicer 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 Master Servicer's ability to demonstrate that a sale
threatens its legitimate security interest.
JUNIOR LIENS; RIGHTS OF HOLDERS OF SENIOR LIENS
If so provided in the related Prospectus Supplement, Mortgage Assets for a
series of Certificates may include Mortgage Loans secured by junior liens, and
the loans secured by the related Senior Liens may not be included in the
Mortgage Pool. The primary risk to holders of Mortgage Loans secured by junior
liens is the possibility that adequate funds will not be received in connection
with a foreclosure of the related Senior Liens to satisfy fully both the Senior
Liens and the related Mortgage Loan. In the event that a holder of a Senior Lien
forecloses on a Mortgaged Property, the proceeds of the foreclosure or similar
sale will be applied first to the payment of court costs and fees in connection
with the foreclosure, second to real estate taxes, third in satisfaction of all
principal, interest, prepayment or acceleration penalties, if any, and any other
sums due and owing to the holder of the Senior Liens. The claims of the holders
of the Senior Liens will be satisfied in full out of proceeds of the liquidation
of the related Mortgage Property, if such proceeds are sufficient, before the
Trust Fund as holder of the junior lien receives any payments in respect of the
Mortgage Loan. In the event that such proceeds from a foreclosure or similar
sale of the related Mortgaged Property are insufficient to satisfy all Senior
Liens and the Mortgage Loan in the aggregate, the Trust Fund, as the holder of
the junior lien, and, accordingly, holders of one or more classes of the
Certificates of the related series bear (i) the risk of delay in distributions
while a deficiency judgment against the borrower is obtained and (ii) the risk
of loss if the deficiency judgment is not realized upon. Moreover, deficiency
judgments may not be available in certain jurisdictions or the Mortgage Loan may
be nonrecourse.
SUBORDINATE FINANCING
The terms of certain of the Mortgage Loans may not restrict the ability of
the borrower to use the Mortgaged Property as security for one or more
additional loans, or such restrictions may be unenforceable. Where a borrower
encumbers a mortgaged property with one or more junior liens, the senior lender
is subjected to additional risk. First, the borrower may have difficulty
servicing and repaying multiple loans. Moreover, if the subordinate financing
permits recourse to the borrower (as is frequently the case) and the senior loan
does not, a borrower may have more incentive to repay sums due on the
subordinate loan. Second, acts of the senior lender that prejudice the junior
lender or impair the junior lender's security may create a superior equity in
favor of the junior lender. For example, if the borrower and the senior lender
agree to an increase in the principal amount of or the interest rate payable on
the senior loan, the senior lender may lose its priority to the extent any
existing junior lender is harmed or the borrower is additionally burdened.
Third, if the borrower defaults on the senior loan and/or any junior loan or
loans, the existence of junior loans and actions taken by junior lenders can
impair the security available to the senior lender and can interfere with or
delay the taking of action by the senior lender. Moreover, the bankruptcy of a
junior lender may operate to stay foreclosure or similar proceedings by the
senior lender.
DEFAULT INTEREST AND LIMITATIONS ON PREPAYMENTS
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.
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APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980 ("Title V") provides that state usury limitations shall 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.
No Mortgage Loan originated in any state in which application of Title V
has been expressly rejected or a provision limiting discount points or other
charges has been adopted, will (if originated after that rejection or adoption)
be eligible for inclusion in a Trust Fund unless (i) such Mortgage Loan provides
for such interest rate, discount points and charges as are permitted in such
state or (ii) such Mortgage Loan provides that the terms thereof are to be
construed in accordance with the laws of another state under which such interest
rate, discount points and charges would not be usurious and the borrower's
counsel has rendered an opinion that such choice of law provision would be given
effect.
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.
CERTAIN LAWS AND REGULATIONS
The Mortgaged Properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply (together
with an inability to remedy any such failure) could result in material
diminution in the value of a Mortgaged Property which could, together with the
possibility of limited alternative uses for a particular Mortgaged Property
(i.e., a nursing or convalescent home or hospital), result in a failure to
realize the full principal amount of the related Mortgage Loan.
The lender may be subject to additional risk depending upon the type and
use of the Mortgaged Property in question. For instance, Mortgaged Properties
which are hospitals, nursing homes or convalescent homes may present special
risks to lenders in large part due to significant governmental regulation of the
operation, maintenance, control and financing of health care institutions.
Mortgages on Mortgaged Properties which are owned by the borrower under a
condominium form of ownership are subject to the declaration, by-laws and other
rules and regulations of the condominium association. Mortgaged Properties which
are hotels or motels may present additional risk to the lender in that hotels
and motels are typically operated pursuant to franchise, management and
operating agreements which may be terminable by the operator; and the
transferability of the hotel's operating, liquor and other licenses to the
entity acquiring the hotel either through purchase or foreclosure is subject to
the vagaries of local law requirements. In addition, Mortgaged Properties which
are multifamily properties of cooperatively owned multifamily properties may be
subject to rent control laws, which could impact the future cash flows of those
properties.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers which are
structural in nature from existing places of public accommodation to the extent
"readily achievable." In addition, under the ADA,
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alterations to a place of public accommodation or a commercial facility are to
be made so that, to the maximum extent feasible, such altered portions are
readily accessible to and usable by disabled individuals. The "readily
achievable" standard takes into account, among other factors, the financial
resources of the affected site, owner, landlord or other applicable person. In
addition to imposing a possible financial burden on the borrower in its capacity
as owner or landlord, the ADA may also impose such requirements on a foreclosing
lender who succeeds to the interest of the borrower as owner or landlord.
Furthermore, since the "readily achievable" standard may vary depending on the
financial condition of the owner or landlord, a foreclosing lender who is
financially more capable than the borrower of complying with the requirements of
the ADA may be subject to more stringent requirements than those to which the
borrower is subject.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, 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), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such borrower's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
individuals who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to
individuals who enter military service (including reservists who are called to
active duty) after origination of the related mortgage loan, no information can
be provided as to the number of loans with individuals as borrowers that may be
affected by the Relief Act. Application of the Relief Act would adversely
affect, for an indeterminate period of time, the ability of a Master Servicer or
Special Servicer to collect full amounts of interest on certain of the Mortgage
Loans. Any shortfalls in interest collections resulting from the application of
the Relief Act would result in a reduction of the amounts distributable to the
holders of the related series of Certificates, and would not be covered by
advances or, unless otherwise specified in the related Prospectus Supplement,
any form of Credit Support provided in connection with such Certificates. In
addition, the Relief Act imposes limitations that would impair the ability of
the Master Servicer or Special Servicer 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.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property purchased or improved with assets
derived from criminal activity or otherwise tainted, or used in the commission
of certain offenses, can be seized and ordered forfeited to the United States of
America. The offenses which can trigger such a seizure and forfeiture include,
among others, violations of the Racketeer Influenced and Corrupt Organizations
Act, the Bank Secrecy Act, the anti-money laundering laws and regulations,
including the USA Patriot Act of 2001 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 (1) 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 (2) 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 FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of
Certificates. The discussion below does not purport to address all federal
income tax consequences that may be applicable to particular categories of
investors, some of which may be subject to special rules. The authorities on
which this discussion is
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based are subject to change or differing interpretations, and any such change or
interpretation could apply retroactively. This discussion reflects the
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), as well as regulations (the "REMIC Regulations") promulgated by the
U.S. Department of Treasury (the "Treasury"). Investors should consult their own
tax advisors in determining the federal, state, local and other tax consequences
to them of the purchase, ownership and disposition of Certificates.
For purposes of this discussion, (i) references to the Mortgage Loans
include references to the mortgage loans underlying MBS included in the Mortgage
Assets and (ii) where the applicable Prospectus Supplement provides for a fixed
retained yield with respect to the Mortgage Loans underlying a series of
Certificates, references to the Mortgage Loans will be deemed to refer to that
portion of the Mortgage Loans held by the Trust Fund which does not include the
Retained Interest. References to a "holder" or "Certificateholder" in this
discussion generally mean the beneficial owner of a Certificate.
FEDERAL INCOME TAX CONSEQUENCES FOR REMIC CERTIFICATES
GENERAL
With respect to a particular series of Certificates, an election may be
made to treat the Trust Fund or one or more segregated pools of assets therein
as one or more REMICs within the meaning of Code Section 860D. A Trust Fund or a
portion thereof as to which a REMIC election will be made will be referred to as
a "REMIC Pool." For purposes of this discussion, Certificates of a series as to
which one or more REMIC elections are made are referred to as "REMIC
Certificates" and will consist of one or more Classes of "Regular Certificates"
and one Class of "Residual Certificates" in the case of each REMIC Pool.
Qualification as a REMIC requires ongoing compliance with certain conditions.
With respect to each series of REMIC Certificates, Cadwalader, Wickersham & Taft
LLP or Latham & Watkins LLP, counsel to the Depositor, has advised the Depositor
that in the firm's opinion, assuming (i) the making of such an election, (ii)
compliance with the Pooling Agreement and (iii) compliance with any changes in
the law, including any amendments to the Code or applicable Treasury regulations
thereunder, each REMIC Pool will qualify as a REMIC. In such case, the Regular
Certificates will be considered to be "regular interests" in the REMIC Pool and
generally will be treated for federal income tax purposes as if they were newly
originated debt instruments, and the Residual Certificates will be considered to
be "residual interests" in the REMIC Pool. The Prospectus Supplement for each
series of Certificates will indicate whether one or more REMIC elections with
respect to the related Trust Fund will be made, in which event references to
"REMIC" or "REMIC Pool" herein shall be deemed to refer to each such REMIC Pool.
If so specified in the applicable Prospectus Supplement, the portion of a Trust
Fund as to which a REMIC election is not made may be treated as a grantor trust
for federal income tax purposes. See "--Federal Income Tax Consequences for
Certificates as to Which No REMIC Election Is Made."
STATUS OF REMIC CERTIFICATES
REMIC Certificates held by a domestic building and loan association will
constitute "a regular or residual interest in a REMIC" within the meaning of
Code Section 7701(a)(19)(C)(xi), but only in the same proportion that the assets
of the REMIC Pool would be treated as "loans . . . secured by an interest in
real property which is . . . residential real property" (such as single family
or multifamily properties, but not commercial properties) within the meaning of
Code Section 7701(a)(19)(C)(v) or as other assets described in Code Section
7701(a)(19)(C), and otherwise will not qualify for such treatment. REMIC
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 on the
Regular Certificates and income with respect to Residual 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 REMIC Pool would
be so treated. If at all times 95% or more of the assets of the REMIC Pool
qualify for each of the foregoing respective
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treatments, the REMIC Certificates will qualify for the corresponding status in
their entirety. For purposes of Code Section 856(c)(5)(B), payments of principal
and interest on the Mortgage Loans that are reinvested pending distribution to
holders of REMIC Certificates qualify for such treatment. Where two REMIC Pools
are a part of a tiered structure they will be treated as one REMIC for purposes
of the tests described above respecting asset ownership of more or less than
95%. In addition, if the assets of the REMIC include Buy-Down Mortgage Loans, it
is possible that the percentage of such assets constituting "loans . . . secured
by an interest in real property which is . . . residential real property" for
purposes of Code Section 7701(a)(19)(C)(v) may be required to be reduced by the
amount of the related Buy-Down Funds. Mortgage Loans that have been defeased
with U.S. Treasury obligations or other government securities will not qualify
for the foregoing treatments. Except as provided in the related prospectus
supplement, Regular Certificates will be "qualified mortgages" for another REMIC
for purposes of Code Section 860G(a)(3) and "permitted assets" for a financial
asset securitization investment trust for purposes of Section 860L(c). REMIC
Certificates held by a regulated investment company will not constitute
"Government Securities" within the meaning of Code Section 851(b)(3)(A)(i).
REMIC Certificates held by certain financial institutions will constitute an
"evidence of indebtedness" within the meaning of Code Section 582(c)(1).
QUALIFICATION AS A REMIC
In order for the REMIC Pool to qualify as a REMIC, there must be ongoing
compliance on the part of the REMIC Pool with the requirements set forth in the
Code. The REMIC Pool must fulfill an asset test, which requires that no more
than a de minimis portion of the assets of the REMIC Pool, as of the close of
the third calendar month beginning after the "Startup Day" (which for purposes
of this discussion is the date of issuance of the REMIC Certificates) and at all
times thereafter, may consist of assets other than "qualified mortgages" and
"permitted investments." The REMIC Regulations provide a safe harbor pursuant to
which the de minimis requirement is met if at all times the aggregate adjusted
basis of the nonqualified assets is less than 1% of the aggregate adjusted basis
of all the REMIC Pool's assets. An entity that fails to meet the safe harbor may
nevertheless demonstrate that it holds no more than a de minimis amount of
nonqualified assets. A REMIC also must provide "reasonable arrangements" to
prevent its residual interest from being held by "disqualified organizations"
and must furnish applicable tax information to transferors or agents that
violate this requirement. The Pooling Agreement for each Series will contain a
provision designed to meet this requirement. See "Taxation of Residual
Certificates--Tax-Related Restrictions on Transfer of Residual
Certificates--Disqualified Organizations."
A qualified mortgage is any obligation that is principally secured by an
interest in real property and that is either transferred to the REMIC Pool on
the Startup Day or is purchased by the REMIC Pool within a three-month period
thereafter pursuant to a fixed price contract in effect on the Startup Day.
Qualified mortgages include whole mortgage loans, such as the Mortgage Loans,
certificates of beneficial interest in a grantor trust that holds mortgage
loans, including certain of the MBS, regular interests in another REMIC, such as
MBS in a trust as to which a REMIC election has been made, loans secured by
timeshare interests and loans secured by shares held by a tenant stockholder in
a cooperative housing corporation, provided, in general, (i) the fair market
value of the real property security (including buildings and structural
components thereof) is at least 80% of the principal balance of the related
Mortgage Loan or mortgage loan underlying the Mortgage Certificate either at
origination or as of the Startup Day (an original loan-to-value ratio of not
more than 125% with respect to the real property security) or (ii) substantially
all the proceeds of the Mortgage Loan or the underlying mortgage loan were used
to acquire, improve or protect an interest in real property that, at the
origination date, was the only security for the Mortgage Loan or underlying
mortgage loan. If the Mortgage Loan has been substantially modified other than
in connection with a default or reasonably foreseeable default, it must meet the
loan-to-value test in (i) of the preceding sentence as of the date of the last
such modification or at closing. A qualified mortgage includes a qualified
replacement mortgage, which is any property that would have been treated as a
qualified mortgage if it were transferred to the REMIC Pool on the Startup Day
and that is received either (i) in exchange for any qualified mortgage within a
three-month period thereafter or (ii) in exchange for a "defective obligation"
within a two-year period thereafter. A "defective obligation" includes (i) a
mortgage in default or as to which default is
73
reasonably foreseeable, (ii) a mortgage as to which a customary representation
or warranty made at the time of transfer to the REMIC Pool has been breached,
(iii) a mortgage that was fraudulently procured by the mortgagor, and (iv) a
mortgage that was not in fact principally secured by real property (but only if
such mortgage is disposed of within 90 days of discovery). A Mortgage Loan that
is "defective" as described in clause (iv) that is not sold or, if within two
years of the Startup Day, exchanged, within 90 days of discovery, 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 Pool.
A qualified reserve asset is any intangible property held for investment that is
part of any reasonably required reserve maintained by the REMIC Pool to provide
for payments of expenses of the REMIC Pool or amounts due on the regular or
residual interests in the event of defaults (including delinquencies) on the
qualified mortgages, lower than expected reinvestment returns, prepayment
interest shortfalls and certain other contingencies. The reserve fund will be
disqualified if more than 30% of the gross income from the assets in such fund
for the year is derived from the sale or other disposition of property held for
less than three months, unless required to prevent a default on the regular
interests caused by a default on one or more qualified mortgages. A reserve fund
must be reduced "promptly and appropriately" as payments on the Mortgage Loans
are received. Foreclosure property is real property acquired by the REMIC Pool
in connection with the default or imminent default of a qualified mortgage and
generally not held beyond the close of the third calendar year following the
acquisition of the property by the REMIC Pool, with an extension that may be
granted by the Internal Revenue Service (the "Service").
In addition to the foregoing requirements, the various interests in a REMIC
Pool also must meet certain requirements. All of the interests in a REMIC Pool
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 Pool 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 qualified mortgages. Such a specified portion may
consist of a fixed number of basis points, a fixed percentage of the total
interest, or a fixed or qualified variable or inverse variable rate on some or
all of the qualified mortgages minus a different 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. A residual interest is an interest
in a REMIC Pool other than a regular interest that is issued on the Startup Day
and that is designated as a residual interest. An interest in a REMIC Pool 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 Pool, and are dependent on the absence of
defaults or delinquencies on qualified mortgages or permitted investments, lower
than reasonably expected returns on permitted investments, unanticipated
expenses incurred by the REMIC Pool or prepayment interest shortfalls.
Accordingly, the Regular Certificates of a series will constitute one or more
classes of regular interests, and the Residual Certificates with respect to that
series will constitute a single class of residual interests on which
distributions are made pro rata.
If an entity, such as the REMIC Pool, fails to comply with one or more of
the ongoing requirements of the Code for REMIC status during any taxable year,
the Code provides that the entity will not be treated as a REMIC for such year
and thereafter. In this event, an entity with multiple classes of ownership
interests may be treated as a separate association taxable as a corporation
under Treasury regulations, and the Regular Certificates may be treated as
equity interests therein. 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, and
disqualification of the REMIC Pool would occur absent regulatory relief.
Investors should be aware,
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however, that the Conference Committee Report to the Tax Reform Act of 1986 (the
"1986 Act") indicates that the relief may be accompanied by sanctions, such as
the imposition of a corporate tax on all or a portion of the REMIC Pool's income
for the period of time in which the requirements for REMIC status are not
satisfied.
TAXATION OF REGULAR CERTIFICATES
GENERAL
In general, interest, original issue discount and market discount on a
Regular Certificate will be treated as ordinary income to a holder of the
Regular Certificate (the "Regular Certificateholder") as they accrue, and
principal payments on a Regular Certificate will be treated as a return of
capital to the extent of the Regular Certificateholder's basis in the Regular
Certificate allocable thereto. Regular Certificateholders must use the accrual
method of accounting with regard to Regular Certificates, regardless of the
method of accounting otherwise used by such Regular Certificateholders.
ORIGINAL ISSUE DISCOUNT
Accrual Certificates and principal-only Certificates will be, and other
Classes of Regular Certificates may be, issued with "original issue discount"
within the meaning of Code Section 1273(a). Holders of any Class of Regular
Certificates having 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 that takes into account the
compounding of interest, in advance of receipt of the cash attributable to such
income. The following discussion is based in part on Treasury regulations (the
"OID Regulations") under Code Sections 1271 through 1273 and 1275 and in part on
the provisions of the 1986 Act. Regular Certificateholders should be aware,
however, that the OID Regulations do not adequately address certain issues
relevant to prepayable securities, such as the Regular Certificates. To the
extent such issues are not addressed in such regulations, the Depositor intends
to apply the methodology described in the Conference Committee Report to the
1986 Act. No assurance can be provided that the Service 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 Service to apply or depart from the OID Regulations where 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 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 herein and the appropriate method for reporting
interest and original issue discount with respect to the Regular Certificates.
Each Regular Certificate (except to the extent described below with respect
to a Regular Certificate on which principal is distributed by random lot
("Random Lot Certificates")) will be treated as a single installment obligation
for purposes of determining the original issue discount includible in a Regular
Certificateholder's income. The total amount of original issue discount on a
Regular Certificate is the excess of the "stated redemption price at maturity"
of the Regular Certificate over its "issue price." The issue price of a Class of
Regular Certificates offered pursuant to this Prospectus generally is the first
price at which a substantial amount of Regular Certificates of that Class is
sold to the public (excluding bond houses, brokers and underwriters). Although
unclear under the OID Regulations, the Depositor intends to treat the issue
price of a Class as to which there is no substantial sale as of the issue date
or that is retained by the Depositor as the fair market value of that Class as
of the issue date. The issue price of a Regular Certificate also includes the
amount paid by an initial Regular Certificateholder for accrued interest that
relates to a period prior to the issue date of the Regular Certificate, unless
the Regular Certificateholder elects on its federal income tax return to exclude
such amount from the issue price and to recover it on the first Distribution
Date. The stated redemption price at maturity of a Regular Certificate always
includes the original principal amount of the Regular Certificate, but generally
will not include distributions of stated interest if such interest distributions
constitute "qualified stated interest." Under the OID Regulations, qualified
stated interest generally means interest payable at a single fixed rate or a
qualified variable rate (as described below), provided that such interest
payments are unconditionally payable at intervals of one year or less during the
entire
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term of the Regular Certificate. Because there is no penalty or default remedy
in the case of nonpayment of interest with respect to a Regular Certificate, it
is possible that no interest on any Class of Regular Certificates will be
treated as qualified stated interest. However, except as provided in the
following three sentences or in the applicable Prospectus Supplement, because
the underlying Mortgage Loans provide for remedies in the event of default, the
Depositor intends to treat interest with respect to the Regular Certificates as
qualified stated interest. Distributions of interest on an Accrual Certificate,
or on other Regular Certificates with respect to which deferred interest will
accrue, will not constitute qualified stated interest, in which case the stated
redemption price at maturity of such Regular Certificates includes all
distributions of interest as well as principal thereon. Likewise, the Depositor
intends to treat an "interest only" class, or a class on which interest is
substantially disproportionate to its principal amount (a so-called
"super-premium" class) as having no qualified stated interest. Where the
interval between the issue date and the first Distribution Date on a Regular
Certificate is shorter than the interval between subsequent Distribution Dates,
the interest attributable to the additional days will be included in the stated
redemption price at maturity.
Under a de minimis rule, original issue discount on a Regular Certificate
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 Certificate multiplied
by the weighted average maturity of the Regular Certificate. For this purpose,
the weighted average maturity of the Regular Certificate 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 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
Certificate and the denominator of which is the stated redemption price at
maturity of the Regular Certificate. 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 of the Mortgage Loans (the
"Prepayment Assumption") and the anticipated reinvestment rate, if any, relating
to the Regular Certificates. The Prepayment Assumption with respect to a Series
of Regular Certificates will be set forth in the related Prospectus Supplement.
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 Certificate is held as a capital asset. However, under the OID
Regulations, Regular Certificateholders may elect to accrue all de minimis
original issue discount as well as market discount and market premium under the
constant yield method. See "Election to Treat All Interest Under the Constant
Yield Method."
A Regular Certificateholder 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 Certificate accrued during an accrual period for
each day on which it holds the Regular Certificate, including the date of
purchase but excluding the date of disposition. The Depositor will treat the
monthly period ending on the day before each Distribution Date as the accrual
period. With respect to each Regular Certificate, a calculation will be made of
the original issue discount that accrues during each successive full accrual
period (or shorter period from the date of original issue) that ends on the day
before the related Distribution Date on the Regular Certificate. The Conference
Committee Report to the 1986 Act states that the rate of accrual of original
issue discount is intended to be based on the Prepayment Assumption. Other than
as discussed below with respect to a Random Lot Certificate, the original issue
discount accruing in a full accrual period would 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 Certificate as of the end of that accrual period that are
included in the Regular Certificate's stated redemption price at maturity and
(b) the distributions made on the Regular Certificate during the accrual period
that are included in the Regular Certificate's stated redemption price at
maturity, over (ii) the adjusted issue price of the Regular Certificate 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 Certificate at the issue date, (ii) events
(including actual prepayments) that have occurred prior to the end of the
accrual period and (iii) the Prepayment Assumption. For these purposes, the
adjusted issue price of a Regular Certificate at the beginning of any accrual
period equals the issue price of the Regular Certificate, increased by the
aggregate amount of original issue discount with respect to the Regular
Certificate that accrued in all prior accrual periods and reduced by the amount
of distributions included
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in the Regular Certificate's stated redemption price at maturity that were made
on the Regular Certificate in 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. With respect to an initial
accrual period shorter than a full accrual period, the daily portions of
original issue discount must be determined according to an appropriate
allocation under any reasonable method.
Under the method described above, the daily portions of original issue
discount required to be included in income by a Regular Certificateholder
generally will increase to take into account prepayments on the Regular
Certificates 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. An
increase in prepayments on the Mortgage Loans with respect to a Series of
Regular Certificates can result in both a change in the priority of principal
payments with respect to certain Classes of Regular Certificates and either an
increase or decrease in the daily portions of original issue discount with
respect to such Regular Certificates.
In the case of a Random Lot Certificate, the Depositor intends to determine
the yield to maturity of such Certificate based upon the anticipated payment
characteristics of the Class as a whole under the Prepayment Assumption. In
general, the original issue discount accruing on each Random Lot Certificate in
a full accrual period would be its allocable share of the original issue
discount with respect to the entire Class, as determined in accordance with the
preceding paragraph. However, in the case of a distribution in retirement of the
entire unpaid principal balance of any Random Lot Certificate (or portion of
such unpaid principal balance), (a) the remaining unaccrued original issue
discount allocable to such Certificate (or to such portion) will accrue at the
time of such distribution, and (b) the accrual of original issue discount
allocable to each remaining Certificate of such Class (or the remaining unpaid
principal balance of a partially redeemed Random Lot Certificate after a
distribution of principal has been received) will be adjusted by reducing the
present value of the remaining payments on such Class and the adjusted issue
price of such Class to the extent attributable to the portion of the unpaid
principal balance thereof that was distributed. The Depositor believes that the
foregoing treatment is consistent with the "pro rata prepayment" rules of the
OID Regulations, but with the rate of accrual of original issue discount
determined based on the Prepayment Assumption for the Class as a whole.
Investors are advised to consult their tax advisors as to this treatment.
ACQUISITION PREMIUM
A purchaser of a Regular Certificate at a price greater than its adjusted
issue price but less than its stated redemption price at maturity will be
required to include in gross income the daily portions of the original issue
discount on the Regular Certificate 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 subsequent purchaser may elect to treat all such acquisition premium under the
constant yield method, as described below under the heading "Election to Treat
All Interest Under the Constant Yield Method."
VARIABLE RATE REGULAR CERTIFICATES
Regular Certificates may provide for interest based on a variable rate.
Under the OID Regulations, interest is treated as payable at a variable rate if,
generally, (i) the issue price does not exceed the original principal balance by
more than a specified amount and (ii) the interest compounds or is payable at
least annually at current values of (a) one or more "qualified floating rates,"
(b) a single fixed rate and one or more qualified floating rates, (c) a single
"objective rate," or (d) a single fixed rate and a single objective rate that is
a "qualified inverse floating rate." A floating rate is a qualified floating
rate if variations in the rate can reasonably be expected to measure
contemporaneous variations in the cost of newly borrowed funds, where such rate
is subject to a fixed multiple that is greater than 0.65, but not more than
1.35. Such rate may also be increased or decreased by a fixed spread or subject
to a fixed cap or floor, or a cap or floor that is not reasonably expected as of
the issue date to affect the yield of the instrument significantly. An objective
rate (other than a qualified floating rate) is a rate that is
77
determined using a single fixed formula and that is based on objective financial
or economic information, provided that such information is not (i) within the
control of the issuer or a related party or (ii) unique to the circumstances of
the issuer or a related party. A qualified inverse floating rate is a rate equal
to a fixed rate minus a qualified floating rate that inversely reflects
contemporaneous variations in the cost of newly borrowed funds; an inverse
floating rate that is not a qualified floating rate may nevertheless be an
objective rate. A Class of Regular Certificates may be issued under this
Prospectus that does not have a variable rate under the OID Regulations, for
example, a Class that bears different rates at different times during the period
it is outstanding such that it is considered significantly "front-loaded" or
"back-loaded" within the meaning of the OID Regulations. It is possible that
such a Class may be considered to bear "contingent interest" within the meaning
of the OID Regulations. The OID Regulations, as they relate to the treatment of
contingent interest, are by their terms not applicable to Regular Certificates.
However, if final regulations dealing with contingent interest with respect to
Regular Certificates apply the same principles as the OID Regulations, such
regulations may lead to different timing of income inclusion than would be the
case under the OID Regulations. Furthermore, application of such principles
could lead to the characterization of gain on the sale of contingent interest
Regular Certificates as ordinary income. Investors should consult their tax
advisors regarding the appropriate treatment of any Regular Certificate that
does not pay interest at a fixed rate or variable rate as described in this
paragraph.
Under the REMIC Regulations, a Regular Certificate (i) bearing a rate that
qualifies as a variable rate under the OID Regulations that is tied to current
values of a variable rate (or the highest, lowest or average of two or more
variable rates), including a rate based on the average cost of funds of one or
more financial institutions, or a positive or negative multiple of such a rate
(plus or minus a specified number of basis points), or that represents a
weighted average of rates on some or all of the Mortgage Loans, including such a
rate that is subject to one or more caps or floors, or (ii) bearing one or more
such variable rates for one or more periods or one or more fixed rates for one
or more periods, and a different variable rate or fixed rate for other periods
qualifies as a regular interest in a REMIC. Accordingly, unless otherwise
indicated in the applicable Prospectus Supplement, the Depositor intends to
treat Regular Certificates that qualify as regular interests under this rule in
the same manner as obligations bearing a variable rate for original issue
discount reporting purposes.
The amount of original issue discount with respect to a Regular Certificate
bearing a variable rate of interest will accrue in the manner described above
under "Original Issue Discount" with the yield to maturity and future payments
on such Regular Certificate generally to be determined by assuming that interest
will be payable for the life of the Regular Certificate based on the initial
rate (or, if different, the value of the applicable variable rate as of the
pricing date) for the relevant Class. Unless otherwise specified in the
applicable Prospectus Supplement, the Depositor intends to treat such variable
interest as qualified stated interest, other than variable interest on an
interest-only or super-premium Class, which will be treated as non-qualified
stated interest includible in the stated redemption price at maturity. Ordinary
income reportable for any period will be adjusted based on subsequent changes in
the applicable interest rate index.
Although unclear under the OID Regulations, unless required otherwise by
applicable final regulations, the Depositor intends to treat Regular
Certificates bearing an interest rate that is a weighted average of the net
interest rates on Mortgage Loans or Mortgage Certificates having fixed or
adjustable rates, as having qualified stated interest, except to the extent that
initial "teaser" rates cause sufficiently "back-loaded" interest to create more
than de minimis original issue discount. The yield on such Regular Certificates
for purposes of accruing original issue discount will be a hypothetical fixed
rate based on the fixed rates, in the case of fixed rate Mortgage Loans, and
initial "teaser rates" followed by fully indexed rates, in the case of
adjustable rate Mortgage Loans. In the case of adjustable rate Mortgage Loans,
the applicable index used to compute interest on the Mortgage Loans in effect on
the pricing date (or possibly the issue date) will be deemed to be in effect
beginning with the period in which the first weighted average adjustment date
occurring after the issue date occurs. Adjustments will be made in each accrual
period either increasing or decreasing the amount of ordinary income reportable
to reflect the actual Pass-Through Rate on the Regular Certificates.
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DEFERRED INTEREST
Under the OID Regulations, all interest on a Regular Certificate as to
which there may be Deferred Interest is includible in the stated redemption
price at maturity thereof. Accordingly, any Deferred Interest that accrues with
respect to a Class of Regular Certificates may constitute income to the holders
of such Regular Certificates prior to the time distributions of cash with
respect to such Deferred Interest are made.
MARKET DISCOUNT
A purchaser of a Regular Certificate also may be subject to the market
discount rules of Code Section 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 Certificate (i) is exceeded by the then-current principal
amount of the Regular Certificate or (ii) in the case of a Regular Certificate
having original issue discount, is exceeded by the adjusted issue price of such
Regular Certificate 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 Certificate as distributions includible in the stated redemption
price at maturity thereof 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 either (i) on the basis of a
constant interest rate or (ii) in the ratio of stated interest allocable to the
relevant period to the sum of the interest for such period plus the remaining
interest as of the end of such period, or in the case of a Regular Certificate
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 as of 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 Certificate 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 a Regular Certificate over the
interest distributable thereon. The deferred portion of such interest expense in
any taxable year generally will not exceed the accrued market discount on the
Regular Certificate 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 Certificate is disposed of.
As an alternative to the inclusion of market discount in income on the foregoing
basis, the Regular Certificateholder may elect to include market discount in
income currently as it accrues on all market discount instruments acquired by
such Regular Certificateholder in that taxable year or thereafter, in which case
the interest deferral rule will not apply. See "Election to Treat All Interest
Under the Constant Yield Method" below regarding an alternative manner in which
such election may be deemed to be made.
Market discount with respect to a Regular Certificate 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 Certificate multiplied by the
weighted average maturity of the Regular Certificate (determined as described
above in the third paragraph under "Original Issue Discount") remaining after
the date of purchase. It appears that de minimis market discount would be
reported in a manner similar to de minimis original issue discount. See
"Original Issue Discount" above. Treasury regulations implementing the market
discount rules have not yet been issued, and therefore investors should consult
their own tax advisors regarding the application of these 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 Certificate purchased at a cost greater than its remaining stated
redemption price at maturity generally is considered to be purchased at a
premium. If the Regular Certificateholder holds
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such Regular Certificate as a "capital asset" within the meaning of Code Section
1221, the Regular Certificateholder may elect under Code Section 171 to amortize
such premium under the constant yield method. Treasury Regulations issued under
Code Section 171 do not, by their terms, apply to Regular Certificates, which
are prepayable based on prepayments on the underlying Mortgage Loans. However,
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 Certificates,
although it is unclear whether the alternatives to the constant yield method
described above under "Market Discount" are available. Amortizable bond premium
will be treated as an offset to interest income on a Regular Certificate rather
than as a separate deduction item. See "Election to Treat All Interest Under the
Constant Yield Method" below regarding an alternative manner in which the Code
Section 171 election may be deemed to be made.
ELECTION TO TREAT ALL INTEREST UNDER THE CONSTANT YIELD METHOD
A holder of a debt instrument such as a Regular Certificate 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 debt instruments acquired by the
holder in the same taxable year 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 Service. Investors
should consult their own tax advisors regarding the advisability of making such
an election.
SALE OR EXCHANGE OF REGULAR CERTIFICATES
If a Regular Certificateholder sells or exchanges a Regular Certificate,
the Regular Certificateholder will recognize gain or loss equal to the
difference, if any, between the amount received and its adjusted basis in the
Regular Certificate. The adjusted basis of a Regular Certificate generally will
equal the cost of the Regular Certificate 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 Certificate and reduced by amounts
included in the stated redemption price at maturity of the Regular Certificate
that were previously received by the seller, by any amortized premium and by
previously recognized losses.
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 Certificate realized by an investor who holds the Regular Certificate as
a capital asset will be capital gain or loss and will be long-term or short-term
depending on whether the Regular Certificate has been held for the long-term
capital gain holding period (currently more than one year). Such gain will be
treated as ordinary income (i) if a Regular Certificate 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 Certificateholder's net
investment in the conversion transaction at 120% of the appropriate applicable
Federal rate under Code Section 1274(d) in effect at the time the taxpayer
entered into the transaction minus any amount previously treated as ordinary
income with respect to any prior distribution of property that was held as a
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 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 holder if its yield on
such Regular Certificate
80
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 holder with
respect to the Regular Certificate. In addition, gain or loss recognized from
the sale of a Regular Certificate by certain banks or thrift institutions will
be treated as ordinary income or loss pursuant to Code Section 582(c). 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.
Holders that recognize a loss on a sale or exchange of a Regular
Certificate for federal income tax purposes in excess of certain threshold
amounts should consult their tax advisors as to the need to file IRS Form 8886
(disclosing certain potential tax shelters) on their federal income tax returns.
TREATMENT OF LOSSES
Holders of Regular Certificates will be required to report income with
respect to Regular Certificates on the accrual method of accounting, without
giving effect to delays or reductions in distributions attributable to defaults
or delinquencies on the Mortgage Loans allocable to a particular class of
Regular Certificates, except to the extent it can be established that such
losses are uncollectible. Accordingly, the holder of a Regular Certificate 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 may generally cease to accrue
interest income if it reasonably appears that the interest will be
uncollectible, the Internal Revenue Service 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. To the extent the
rules of Code Section 166 regarding bad debts are applicable, it appears that
holders of Regular Certificates that are corporations or that otherwise hold the
Regular Certificates in connection with a trade or business should in general be
allowed to deduct as an ordinary loss any such loss sustained during the taxable
year on account of any such Regular Certificates becoming wholly or partially
worthless, and that, in general, holders of Regular Certificates that are not
corporations and do not hold the Regular Certificates 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 or subclass of such Regular Certificates becoming wholly worthless.
Although the matter is not free from doubt, non-corporate holders of Regular
Certificates should be allowed a bad debt deduction at such time as the
principal balance of any class or subclass of such Regular Certificates is
reduced to reflect losses resulting from any liquidated Mortgage Loans. The
Service, however, could take the position that non-corporate holders will be
allowed a bad debt deduction to reflect such losses only after all Mortgage
Loans remaining in the Trust Fund have been liquidated or such class of Regular
Certificates has been otherwise retired. The Service could also assert that
losses on the Regular Certificates 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 which would be deductible only
against future positive original issue discount or otherwise upon termination of
the Class. Holders of Regular Certificates are urged to consult their own tax
advisors regarding the appropriate timing, amount and character of any loss
sustained with respect to such Regular Certificates. While losses attributable
to interest previously reported as income should be deductible as ordinary
losses by both corporate and non-corporate holders, the Internal Revenue Service
may take the position that losses attributable to accrued original issue
discount may only be deducted as short-term capital losses by non-corporate
holders not engaged in a trade or business. 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 Regular Certificates.
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TAXATION OF RESIDUAL CERTIFICATES
TAXATION OF REMIC INCOME
Generally, the "daily portions" of REMIC taxable income or net loss will be
includible as ordinary income or loss in determining the federal taxable income
of holders of Residual Certificates ("Residual Certificateholders"), and will
not be taxed separately to the REMIC Pool. The daily portions of REMIC taxable
income or net loss of a Residual Certificateholder are determined by allocating
the REMIC Pool's taxable income or net loss for each calendar quarter ratably to
each day in such quarter and by allocating such daily portion among the Residual
Certificateholders in proportion to their respective holdings of Residual
Certificates in the REMIC Pool on such day. REMIC taxable income is generally
determined in the same manner as the taxable income of an individual using the
accrual method of accounting, except that (i) the limitations on deductibility
of investment interest expense and expenses for the production of income do not
apply, (ii) all bad loans will be deductible as business bad debts and (iii) the
limitation on the deductibility of interest and expenses related to tax-exempt
income will apply. The REMIC Pool's gross income includes interest, original
issue discount income and market discount income, if any, on the Mortgage Loans,
reduced by amortization of any premium on the Mortgage Loans, plus income from
amortization of issue premium, if any, on the Regular Certificates, plus income
on reinvestment of cash flows and reserve assets, plus any cancellation of
indebtedness income upon allocation of realized losses to the Regular
Certificates. The REMIC Pool's deductions include interest and original issue
discount expense on the Regular Certificates, servicing fees on the Mortgage
Loans, other administrative expenses of the REMIC Pool and realized losses on
the Mortgage Loans. The requirement that Residual Certificateholders report
their pro rata share of taxable income or net loss of the REMIC Pool will
continue until there are no Certificates of any class of the related series
outstanding.
The taxable income recognized by a Residual Certificateholder in any
taxable year will be affected by, among other factors, the relationship between
the timing of recognition of interest and original issue discount or market
discount income or amortization of premium with respect to the Mortgage Loans,
on the one hand, and the timing of deductions for interest (including original
issue discount) on the Regular Certificates or income from amortization of issue
premium on the Regular Certificates, on the other hand. In the event that an
interest in the Mortgage Loans is acquired by the REMIC Pool at a discount, and
one or more of such Mortgage Loans is prepaid, the Residual Certificateholder
may recognize taxable income without being entitled to receive a corresponding
amount of cash because (i) the prepayment may be used in whole or in part to
make distributions in reduction of principal on the Regular Certificates and
(ii) the discount on the Mortgage Loans which is includible in income may exceed
the deduction allowed upon such distributions on those Regular Certificates on
account of any unaccrued original issue discount relating to those Regular
Certificates. When there is more than one class of Regular Certificates that
distribute principal sequentially, this mismatching of income and deductions is
particularly likely to occur in the early years following issuance of the
Regular Certificates when distributions in reduction of principal are being made
in respect of earlier classes of Regular Certificates to the extent that such
classes are not issued with substantial discount. If taxable income attributable
to such a mismatching is realized, in general, losses would be allowed in later
years as distributions on the later classes of Regular Certificates are made.
Taxable income may also be greater in earlier years than in later years as a
result of the fact that interest expense deductions, expressed as a percentage
of the outstanding principal amount of such a series of Regular Certificates,
may increase over time as distributions in reduction of principal are made on
the lower yielding classes of Regular Certificates, whereas to the extent that
the REMIC Pool includes fixed rate Mortgage Loans, interest income with respect
to any given Mortgage Loan will remain constant over time as a percentage of the
outstanding principal amount of that loan. Consequently, Residual
Certificateholders must have sufficient other sources of cash to pay any
federal, state or local income taxes due as a result of such mismatching or
unrelated deductions against which to offset such income, subject to the
discussion of "excess inclusions" below under "Limitations on Offset or
Exemption of REMIC Income." The timing of such mismatching of income and
deductions described in this paragraph, if present with respect to a series of
Certificates, may have a significant adverse effect upon the Residual
Certificateholder's after-tax rate of return.
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BASIS AND LOSSES
The amount of any net loss of the REMIC Pool that may be taken into account
by the Residual Certificateholder is limited to the adjusted basis of the
Residual Certificate as of the close of the quarter (or time of disposition of
the Residual Certificate if earlier), determined without taking into account the
net loss for the quarter. The initial adjusted basis of a purchaser of a
Residual Certificate is the amount paid for such Residual Certificate. Such
adjusted basis will be increased by the amount of taxable income of the REMIC
Pool reportable by the Residual Certificateholder and will be decreased (but not
below zero), first, by a cash distribution from the REMIC Pool and, second, by
the amount of loss of the REMIC Pool reportable by the Residual
Certificateholder. Any loss that is disallowed on account of this limitation may
be carried over indefinitely with respect to the Residual Certificateholder as
to whom such loss was disallowed and may be used by such Residual
Certificateholder only to offset any income generated by the same REMIC Pool.
A Residual Certificateholder will not be permitted to amortize directly the
cost of its Residual Certificate as an offset to its share of the taxable income
of the related REMIC Pool. However, that taxable income will not include cash
received by the REMIC Pool that represents a recovery of the REMIC Pool's basis
in its assets. Such recovery of basis by the REMIC Pool will have the effect of
amortization of the issue price of the Residual Certificates over their life.
However, in view of the possible acceleration of the income of Residual
Certificateholders described above under "Taxation of REMIC Income," the period
of time over which such issue price is effectively amortized may be longer than
the economic life of the Residual Certificates.
A Residual Certificate may have a negative value if the net present value
of anticipated tax liabilities exceeds the present value of anticipated cash
flows. The REMIC Regulations appear to treat the issue price of such a residual
interest as zero rather than such negative amount for purposes of determining
the REMIC Pool's basis in its assets. The preamble to the REMIC Regulations
states that the Service may provide future guidance on the proper tax treatment
of payments made by a transferor of such a residual interest to induce the
transferee to acquire the interest, and Residual Certificateholders should
consult their own tax advisors in this regard.
Further, to the extent that the initial adjusted basis of a Residual
Certificateholder (other than an original holder) in the Residual Certificate is
greater that the corresponding portion of the REMIC Pool's basis in the Mortgage
Loans, the Residual Certificateholder will not recover a portion of such basis
until termination of the REMIC Pool unless future Treasury regulations provide
for periodic adjustments to the REMIC income otherwise reportable by such
holder. The REMIC Regulations currently in effect do not so provide. See
"Treatment of Certain Items of REMIC Income and Expense--Market Discount" below
regarding the basis of Mortgage Loans to the REMIC Pool and "Sale or Exchange of
a Residual Certificate" below regarding possible treatment of a loss upon
termination of the REMIC Pool as a capital loss.
TREATMENT OF CERTAIN ITEMS OF REMIC INCOME AND EXPENSE
Although the Depositor intends to compute REMIC income and expense in
accordance with the Code and applicable regulations, the authorities regarding
the determination of specific items of income and expense are subject to
differing interpretations. The Depositor makes no representation as to the
specific method that it will use for reporting income with respect to the
Mortgage Loans and expenses with respect to the Regular Certificates, and
different methods could result in different timing of reporting of taxable
income or net loss to Residual Certificateholders or differences in capital gain
versus ordinary income.
Original Issue Discount and Premium. Generally, the REMIC Pool's deductions
for original issue discount and income from amortization of issue premium will
be determined in the same manner as original issue discount income on Regular
Certificates as described above under "Taxation of Regular
Certificates--Original Issue Discount" and "--Variable Rate Regular
Certificates," without regard to the de minimis rule described therein, and
"--Premium."
DEFERRED INTEREST. Any Deferred Interest that accrues with respect to any
adjustable rate Mortgage Loans held by the REMIC Pool will constitute income to
the REMIC Pool and will be treated in a manner
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similar to the Deferred Interest that accrues with respect to Regular
Certificates as described above under "Taxation of Regular
Certificates--Deferred Interest."
MARKET DISCOUNT. The REMIC Pool will have market discount income in respect
of Mortgage Loans if, in general, the basis of the REMIC Pool allocable to such
Mortgage Loans is exceeded by their unpaid principal balances. The REMIC Pool's
basis in such Mortgage Loans is generally the fair market value of the Mortgage
Loans immediately after the transfer thereof to the REMIC Pool. The REMIC
Regulations provide that such basis is equal in the aggregate to the issue
prices of all regular and residual interests in the REMIC Pool (or the fair
market value thereof at the Closing Date, in the case of a retained Class). In
respect of Mortgage Loans that have market discount to which Code Section 1276
applies, the accrued portion of such market discount would be recognized
currently as an item of ordinary income in a manner similar to original issue
discount. Market discount income generally should accrue in the manner described
above under "Taxation of Regular Certificates--Market Discount."
PREMIUM. Generally, if the basis of the REMIC Pool in the Mortgage Loans
exceeds the unpaid principal balances thereof, the REMIC Pool will be considered
to have acquired such Mortgage Loans at a premium equal to the amount of such
excess. As stated above, the REMIC Pool's basis in Mortgage Loans is the fair
market value of the Mortgage Loans, based on the aggregate of the issue prices
(or the fair market value of retained Classes) of the regular and residual
interests in the REMIC Pool immediately after the transfer thereof to the REMIC
Pool. In a manner analogous to the discussion above under "Taxation of Regular
Certificates--Premium," a REMIC Pool that holds a Mortgage Loan as a capital
asset under Code Section 1221 may elect under Code Section 171 to amortize
premium on whole mortgage loans or mortgage loans underlying MBS that were
originated after September 27, 1985 or MBS that are REMIC regular interests
under the constant yield method. Amortizable bond premium will be treated as an
offset to interest income on the Mortgage Loans, rather than as a separate
deduction item. To the extent that the mortgagors with respect to the Mortgage
Loans are individuals, Code Section 171 will not be available for premium on
Mortgage Loans (including underlying mortgage loans) originated on or prior to
September 27, 1985. Premium with respect to such Mortgage Loans may be
deductible in accordance with a reasonable method regularly employed by the
holder thereof. The allocation of such premium pro rata among principal payments
should be considered a reasonable method; however, the Service may argue that
such premium should be allocated in a different manner, such as allocating such
premium entirely to the final payment of principal.
LIMITATIONS ON OFFSET OR EXEMPTION OF REMIC INCOME
A portion or all of the REMIC taxable income includible in determining the
federal income tax liability of a Residual Certificateholder will be subject to
special treatment. That portion, referred to as the "excess inclusion," is equal
to the excess of REMIC taxable income for the calendar quarter allocable to a
Residual Certificate over the daily accruals for such quarterly period of (i)
120% of the long-term applicable Federal rate that would have applied to the
Residual Certificate (if it were a debt instrument) on the Startup Day under
Code Section 1274(d), multiplied by (ii) the adjusted issue price of such
Residual Certificate at the beginning of such quarterly period. For this
purpose, the adjusted issue price of a Residual Certificate at the beginning of
a quarter is the issue price of the Residual Certificate, plus the amount of
such daily accruals of REMIC income described in this paragraph for all prior
quarters, decreased by any distributions made with respect to such Residual
Certificate prior to the beginning of such quarterly period. Accordingly, the
portion of the REMIC Pool's taxable income that will be treated as excess
inclusions will be a larger portion of such income as the adjusted issue price
of the Residual Certificates diminishes.
The portion of a Residual Certificateholder's REMIC taxable income
consisting of the excess inclusions generally may not be offset by other
deductions, including net operating loss carryforwards, on such Residual
Certificateholder's return. However, net operating loss carryovers are
determined without regard to excess inclusion income. Further, if the Residual
Certificateholder is an organization subject to the tax on unrelated business
income imposed by Code Section 511, the Residual Certificateholder's excess
inclusions will be treated as unrelated business taxable income of such Residual
Certificateholder for purposes of Code Section 511. In addition, REMIC taxable
income is subject to 30% withholding tax with respect to certain persons who are
not U.S. Persons (as defined
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below under "Tax-Related Restrictions on Transfer of Residual
Certificates--Foreign Investors"), and the portion thereof attributable to
excess inclusions is not eligible for any reduction in the rate of withholding
tax (by treaty or otherwise). See "Taxation of Certain Foreign
Investors--Residual Certificates" below. Finally, if a real estate investment
trust or a regulated investment company owns a Residual Certificate, a portion
(allocated under Treasury regulations yet to be issued) of dividends paid by the
real estate investment trust or a regulated investment company could not be
offset by net operating losses of its shareholders, would constitute unrelated
business taxable income for tax-exempt shareholders, and would be ineligible for
reduction of withholding to certain persons who are not U.S. Persons.
The Code provides three rules for determining the effect of excess
inclusions on the alternative minimum taxable income of a Residual
Certificateholder. First, alternative minimum taxable income for a Residual
Certificateholder is determined without regard to the special rule, discussed
above, that taxable income cannot be less than excess inclusions. Second, a
Residual Certificateholder's alternative minimum taxable income for a taxable
year cannot be less than the excess inclusions for the year. Third, the amount
of any alternative minimum tax net operating loss deduction must be computed
without regard to any excess inclusions.
TAX-RELATED RESTRICTIONS ON TRANSFER OF RESIDUAL CERTIFICATES
DISQUALIFIED ORGANIZATIONS. If any legal or beneficial interest in a
Residual Certificate is transferred to a Disqualified Organization (as defined
below), a tax would be imposed in an amount equal to the product of (i) the
present value of the total anticipated excess inclusions with respect to such
Residual Certificate for periods after the transfer and (ii) the highest
marginal federal income tax rate applicable to corporations. The REMIC
Regulations provide that the anticipated excess inclusions are based on actual
prepayment experience to the date of the transfer and projected payments based
on the Prepayment Assumption. The present value rate equals the applicable
Federal rate under Code Section 1274(d) as of the date of the transfer for a
term ending with the last calendar quarter in which excess inclusions are
expected to accrue. Such a tax generally would be imposed on the transferor of
the Residual Certificate, except that where such transfer is through an agent
(including a broker, nominee or other middleman) for a Disqualified
Organization, the tax would instead be imposed on such agent. However, a
transferor of a Residual Certificate would in no event be liable for such tax
with respect to a transfer if the transferee furnishes to the transferor an
affidavit that the transferee is not a Disqualified Organization and, as of the
time of the transfer, the transferor does not have actual knowledge that such
affidavit is false. The tax also may be waived by the Treasury Department if the
Disqualified Organization promptly disposes of the residual interest and the
transferor pays income tax at the highest corporate rate on the excess
inclusions for the period the Residual Certificate is actually held by the
Disqualified Organization.
In addition, if a "Pass-Through Entity" (as defined below) has excess
inclusion income with respect to a Residual Certificate during a taxable year
and a Disqualified Organization is the record holder of an equity interest in
such entity, then a tax is imposed on such entity equal to the product of (i)
the amount of excess inclusions on the Residual Certificate that are allocable
to the interest in the Pass-Through Entity during the period such interest is
held by such Disqualified Organization, and (ii) the highest marginal federal
corporate income tax rate. Such tax would be deductible from the ordinary gross
income of the Pass-Through Entity for the taxable year. The Pass-Through Entity
would not be liable for such tax if it has received an affidavit from such
record holder that it is not a Disqualified Organization or stating such
holder's taxpayer identification number and, during the period such person is
the record holder of the Residual Certificate, the Pass-Through Entity does not
have actual knowledge that such affidavit is false.
If an "electing large partnership" holds a Residual Certificate, all
interests in the electing large partnership are treated as held by Disqualified
Organizations for purposes of the tax imposed upon a Pass-Through Entity by
section 860E(c) of the Code. An exception to this tax, otherwise available to a
Pass-Through Entity that is furnished certain affidavits by record holders of
interests in the entity and that does not know such affidavits are false, is not
available to an electing large partnership.
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For these purposes, (i) "Disqualified Organization" means the United
States, any state or political subdivision thereof, any foreign government, any
international organization, any agency or instrumentality of any of the
foregoing (provided, that such term does not include an instrumentality if all
of its activities are subject to tax and a majority of its board of directors is
not selected by any such governmental entity), any cooperative organization
furnishing electric energy or providing telephone service to persons in rural
areas as described in Code Section 1381(a)(2)(C), and any organization (other
than a farmers' cooperative described in Code Section 521) that is exempt from
taxation under the Code unless such organization is subject to the tax on
unrelated business income imposed by Code Section 511, (ii) "Pass-Through
Entity" means any regulated investment company, real estate investment trust,
common trust fund, partnership, trust or estate and certain corporations
operating on a cooperative basis (except as may be provided in Treasury
regulations, any person holding an interest in a Pass-Through Entity as a
nominee for another will, with respect to such interest, be treated as a
Pass-Through Entity) and (iii) an "electing large partnership" means any
partnership having more than 100 members during the preceding tax year (other
than certain service partnerships and commodity pools), which elect to apply
simplified reporting provisions under the Code.
The Pooling Agreement with respect to a series of Certificates will provide
that no legal or beneficial interest in a Residual Certificate may be
transferred unless (i) the proposed transferee provides to the transferor and
the Trustee an affidavit providing its taxpayer identification number and
stating that such transferee is the beneficial owner of the Residual
Certificate, is not a Disqualified Organization and is not purchasing such
Residual Certificates on behalf of a Disqualified Organization (i.e., as a
broker, nominee or middleman thereof), and (ii) the transferor provides a
statement in writing to the Depositor and the Trustee that it has no actual
knowledge that such affidavit is false. Moreover, the Pooling Agreement will
provide that any attempted or purported transfer in violation of these transfer
restrictions will be null and void and will vest no rights in any purported
transferee. Each Residual Certificate with respect to a series will bear a
legend referring to such restrictions on transfer, and each Residual
Certificateholder will be deemed to have agreed, as a condition of ownership
thereof, to any amendments to the related Pooling Agreement required under the
Code or applicable Treasury regulations to effectuate the foregoing
restrictions. Information necessary to compute an applicable excise tax must be
furnished to the Service and to the requesting party within 60 days of the
request, and the Depositor or the Trustee may charge a fee for computing and
providing such information.
NONECONOMIC RESIDUAL INTERESTS. The REMIC Regulations would disregard
certain transfers of Residual Certificates, in which case the transferor would
continue to be treated as the owner of the Residual Certificates and thus would
continue to be subject to tax on its allocable portion of the net income of the
REMIC Pool. Under the REMIC Regulations, a transfer of a "noneconomic residual
interest" (as defined below) to a Residual Certificateholder (other than a
Residual Certificateholder who is not a U.S. Person, as defined below under
"Foreign Investors") is disregarded for all federal income tax purposes if a
significant purpose of the transferor is to impede the assessment or collection
of tax. A residual interest in a REMIC (including a residual interest with a
positive value at issuance) is a "noneconomic residual interest" unless, at the
time of the transfer, (i) the present value of the expected future distributions
on the residual interest at least equals the product of the present value of the
anticipated excess inclusions and the highest corporate income tax rate in
effect for the year in which the transfer occurs, and (ii) the transferor
reasonably expects that the transferee will receive distributions from the REMIC
at or after the time at which taxes accrue on the anticipated excess inclusions
in an amount sufficient to satisfy the accrued taxes. The anticipated excess
inclusions and the present value rate are determined in the same manner as set
forth above under "Disqualified Organizations." The REMIC Regulations explain
that a significant purpose to impede the assessment or collection of tax exists
if the transferor, at the time of the transfer, either knew or should have known
that the transferee would be unwilling or unable to pay taxes due on its share
of the taxable income of the REMIC. A safe harbor is provided if: (i) the
transferor conducted, at the time of the transfer, a reasonable investigation of
the financial condition of the transferee and found that the transferee
historically had paid its debts as they came due and found no significant
evidence to indicate that the transferee would not continue to pay its debts as
they came due in the future, (ii) the transferee represents to the transferor
that it understands that, as the holder of the noneconomic residual interest,
the transferee may incur tax
86
liabilities in excess of cash flows generated by the interest and that the
transferee intends to pay taxes associated with holding the residual interest as
they become due and (iii) transferee represents that it will not cause income
from the Residual Certificate to be attributable to a foreign permanent
establishment or fixed base, within the meaning of an applicable income tax
treaty, of the transferee or any other U.S. Person. The transferor must have no
actual knowledge or reason to know that those statements are false. The Pooling
Agreement with respect to each series of Certificates will require the
transferee of a Residual Certificate to certify to the matters in clauses
(i)-(iii) above as part of the affidavit described above under the heading
"Disqualified Organizations." The transferor must have no actual knowledge or
reason to know that such statements are false.
In addition to the three conditions set forth above for the transferor of a
noneconomic residual interest to be presumed not to have knowledge that the
transferee would be unwilling or unable to pay taxes due on its share of the
taxable income of the REMIC, recently issued Treasury regulations require a
fourth condition for the transferor to be presumed to lack such knowledge. The
condition must be satisfied in one of the two alternative ways for the
transferor to have a "safe harbor" against ignoring the transfer: Either
(a) the present value of the anticipated tax liabilities associated with
holding the noneconomic residual interest must not exceed the sum of:
(i) the present value of any consideration given to the transferee
to acquire the interest;
(ii) the present value of the expected future distributions on the
interest;
(iii) the present value of the anticipated tax savings associated with
holding the interest as the REMIC generates losses.
For purposes of the computations under this "minimum transfer price"
alternative, the transferee is assumed to pay tax at the highest rate of tax
specified in Section 11(b)(1) of the Code (currently 35%) or, in certain
circumstances the alternative minimum tax rate. Further, present values
generally are computed using a discount rate equal to the short-term Federal
rate set forth in Section 1274(d) of the Code for the month of such transfer and
the compounding period used by the transferee; or
(b) (i) the transferee must be a domestic "C" corporation (other than a
corporation exempt from taxation of a regulated investment
company or real estate investment trust) that meets certain
gross and net assets tests (generally, $100 million of gross
assets and $10 million of net assets for the current year and
the two preceding fiscal years);
(ii) the transferee must agree in writing that it will transfer the
Residual Certificate only to a subsequent transferee that is an
eligible corporation and meets the requirements for a safe
harbor transfer; and
(iii) the facts and circumstances known to the transferor on or before
the date of the transfer must not reasonably indicate that the
taxes associated with ownership of the Residual Certificate will
not be paid by the transferee.
FOREIGN INVESTORS. The REMIC Regulations provide that the transfer of a
Residual Certificate that has "tax avoidance potential" to a "foreign person"
will be disregarded for all federal tax purposes. This rule appears intended to
apply to a transferee who is not a "U.S. Person" (as defined below), unless such
transferee's income is effectively connected with the conduct of a trade or
business within the United States. A Residual Certificate is deemed to have tax
avoidance potential unless, at the time of the transfer, (i) the future value of
expected distributions equals at least 30% of the anticipated excess inclusions
after the transfer, and (ii) the transferor reasonably expects that the
transferee will receive sufficient distributions from the REMIC Pool at or after
the time at which the excess inclusions accrue and prior to the end of the next
succeeding taxable year for the accumulated withholding tax liability to be
paid. If the non-U.S. Person transfers the Residual Certificate back to a U.S.
Person, the transfer will be disregarded and the foreign transferor will
continue to be treated as the owner unless arrangements are made so that the
transfer does not have the effect of allowing the transferor to avoid tax on
accrued excess inclusions.
87
The Prospectus Supplement relating to a series of Certificates may provide
that a Residual Certificate may not be purchased by or transferred to any person
that is not a U.S. Person or may describe the circumstances and restrictions
pursuant to which such a transfer may be made. The term "U.S. Person" means a
citizen or resident of the United States, a corporation, partnership (except to
the extent provided in applicable Treasury regulations) or other entity created
or organized in or under the laws of the United States, any state thereof or the
District of Columbia, an estate that is subject to United States federal income
tax regardless of the source of its 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 United States persons have the authority to control
all substantial decisions of such trust (or, to the extent provided in
applicable Treasury regulations, certain trusts in existence on August 20, 1996
which are eligible to elect to be treated as U.S. Persons if such election has
been made).
SALE OR EXCHANGE OF A RESIDUAL CERTIFICATE
Upon the sale or exchange of a Residual Certificate, the Residual
Certificateholder will recognize gain or loss equal to the excess, if any, of
the amount realized over the adjusted basis (as described above under "Taxation
of Residual Certificates--Basis and Losses") of such Residual Certificateholder
in such Residual Certificate at the time of the sale or exchange. In addition to
reporting the taxable income of the REMIC Pool, a Residual Certificateholder
will have taxable income to the extent that any cash distribution to it from the
REMIC Pool exceeds such adjusted basis on that Distribution Date. Such income
will be treated as gain from the sale or exchange of the Residual Certificate.
It is possible that the termination of the REMIC Pool may be treated as a sale
or exchange of a Residual Certificateholder's Residual Certificate, in which
case, if the Residual Certificateholder has an adjusted basis in such Residual
Certificateholder's Residual Certificate remaining when its interest in the
REMIC Pool terminates, and if such Residual Certificateholder holds such
Residual Certificate as a capital asset under Code Section 1221, then such
Residual Certificateholder will recognize a capital loss at that time in the
amount of such remaining adjusted basis.
Any gain on the sale of a Residual Certificate will be treated as ordinary
income (i) if a Residual Certificate 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 Residual Certificateholder's net investment in
the conversion transaction at 120% of the appropriate applicable Federal rate in
effect at the time the taxpayer entered into the transaction minus any amount
previously treated as ordinary income with respect to any prior disposition of
property that was held as a part of such transaction or (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. In addition, gain or loss recognized from the sale of a
Residual Certificate by certain banks or thrift institutions will be treated as
ordinary income or loss pursuant to Code Section 582(c).
The Conference Committee Report to the 1986 Act provides that, except as
provided in Treasury regulations yet to be issued, the wash sale rules of Code
Section 1091 will apply to dispositions of Residual Certificates where the
seller of the Residual Certificate, during the period beginning six months
before the sale or disposition of the Residual Certificate and ending six months
after such sale or disposition, acquires (or enters into any other transaction
that results in the application of Section 1091) any residual interest in any
REMIC or any interest in a "taxable mortgage pool" (such as a non-REMIC owner
trust) that is economically comparable to a Residual Certificate.
MARK TO MARKET REGULATIONS
The Service has issued regulations under Code Section 475 relating to the
requirement that a securities dealer mark to market securities held for sale to
customers. These regulations provide that, for purposes of this mark-to-market
requirement, a Residual Certificate is not treated as a security and thus may
not be marked to market.
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TAXES THAT MAY BE IMPOSED ON THE REMIC POOL
PROHIBITED TRANSACTIONS
Income from certain transactions by the REMIC Pool, called prohibited
transactions, will not be part of the calculation of income or loss includible
in the federal income tax returns of Residual Certificateholders, but rather
will be taxed directly to the REMIC Pool at a 100% rate. Prohibited transactions
generally include (i) the disposition of a qualified mortgage other than for (a)
substitution within two years of the Startup Day for a defective (including a
defaulted) obligation (or repurchase in lieu of substitution of a defective
(including a defaulted) obligation at any time) or for any qualified mortgage
within three months of the Startup Day, (b) foreclosure, default or imminent
default of a qualified mortgage, (c) bankruptcy or insolvency of the REMIC Pool
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 Pool 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 Pool property to prevent a default on Regular
Certificates as a result of a default on qualified mortgages or to facilitate a
clean-up call (generally, an optional termination to save administrative costs
when no more than a small percentage of the Certificates is outstanding). The
REMIC Regulations indicate that the modification of a Mortgage Loan generally
will not be treated as a disposition if it is occasioned by a default or
reasonably foreseeable default, an assumption of the Mortgage Loan, the waiver
of a due-on-sale or due-on-encumbrance clause or the conversion of an interest
rate by a mortgagor pursuant to the terms of a convertible adjustable rate
Mortgage Loan.
CONTRIBUTIONS TO THE REMIC POOL AFTER THE STARTUP DAY
In general, the REMIC Pool will be subject to a tax at a 100% rate on the
value of any property contributed to the REMIC Pool after the Startup Day.
Exceptions are provided for cash contributions to the REMIC Pool (i) during the
three months following the Startup Day, (ii) made to a qualified reserve fund by
a Residual Certificateholder, (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.
NET INCOME FROM FORECLOSURE PROPERTY
The REMIC Pool will be subject to federal income tax at the highest
corporate rate on "net income from foreclosure property," determined by
reference to the rules applicable to real estate investment trusts. Generally,
property acquired by deed in lieu of foreclosure would be treated as
"foreclosure property" for a period ending with the third calendar year
following the year of acquisition of such 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.
It is not anticipated that the REMIC Pool will receive income or
contributions subject to tax under the preceding three paragraphs, except as
described in the applicable Prospectus Supplement with respect to net income
from foreclosure property on a commercial or multifamily residential property
that secured a Mortgage Loan.
LIQUIDATION OF THE REMIC POOL
If a REMIC Pool adopts a plan of complete liquidation, within the meaning
of Code Section 860F(a)(4)(A)(i), which may be accomplished by designating in
the REMIC Pool's final tax return a date on which such adoption is deemed to
occur, and sells all of its assets (other than cash) within a 90-day period
beginning on the date of the adoption of the plan of liquidation, the REMIC Pool
will not be subject to the prohibited transaction rules on the sale of its
assets, provided that the REMIC Pool credits or distributes in liquidation all
of the sale proceeds plus its cash (other than amounts retained to meet claims)
to holders of Regular Certificates and Residual Certificateholders within the
90-day period.
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ADMINISTRATIVE MATTERS
The REMIC Pool will be required to maintain its books on a calendar year
basis and to file federal income tax returns for federal income tax purposes in
a manner similar to a partnership. The form for such income tax return is Form
1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return.
The Trustee will be required to sign the REMIC Pool's returns. Treasury
regulations provide that, except where there is a single Residual
Certificateholder for an entire taxable year, the REMIC Pool will be subject to
the procedural and administrative rules of the Code applicable to partnerships,
including the determination by the Service of any adjustments to, among other
things, items of REMIC income, gain, loss, deduction or credit in a unified
administrative proceeding. The Residual Certificateholder owning the largest
percentage interest in the Residual Certificates will be obligated to act as
"tax matters person," as defined in applicable Treasury regulations, with
respect to the REMIC Pool. Each Residual Certificateholder will be deemed, by
acceptance of such Residual Certificates, to have agreed (i) to the appointment
of the tax matters person as provided in the preceding sentence and (ii) to the
irrevocable designation of the Master Servicer as agent for performing the
functions of the tax matters person.
LIMITATIONS ON DEDUCTION OF CERTAIN EXPENSES
An investor who is an individual, estate or trust will be subject to
limitation with respect to certain itemized deductions described in Code Section
67, to the extent that such itemized deductions, in the aggregate, do not exceed
2% of the investor's adjusted gross income. In addition, Code Section 68
provides that itemized deductions otherwise allowable for a taxable year of an
individual taxpayer will be reduced by the lesser of (i) 3% of the excess, if
any, of adjusted gross income over a threshold amount or (ii) 80% of the amount
of itemized deductions otherwise allowable for such year. These limitations will
be phased out over the period 2006-2010. In the case of a REMIC Pool, such
deductions may include deductions under Code Section 212 for the servicing fee
and all administrative and other expenses relating to the REMIC Pool, or any
similar expenses allocated to the REMIC Pool with respect to a regular interest
it holds in another REMIC. Such investors who hold REMIC Certificates either
directly or indirectly through certain pass-through entities may have their pro
rata share of such expenses allocated to them as additional gross income, but
may be subject to such limitation on deductions. In addition, such expenses are
not deductible at all for purposes of computing the alternative minimum tax, and
may cause such investors to be subject to significant additional tax liability.
Temporary Treasury regulations provide that the additional gross income and
corresponding amount of expenses generally are to be allocated entirely to the
holders of Residual Certificates in the case of a REMIC Pool that would not
qualify as a fixed investment trust in the absence of a REMIC election. However,
such additional gross income and limitation on deductions will apply to the
allocable portion of such expenses to holders of Regular Certificates, as well
as holders of Residual Certificates, where such Regular Certificates are issued
in a manner that is similar to pass-through certificates in a fixed investment
trust. In general, such allocable portion will be determined based on the ratio
that a REMIC Certificateholder's income, determined on a daily basis, bears to
the income of all holders of Regular Certificates and Residual Certificates with
respect to a REMIC Pool. As a result, individuals, estates or trusts holding
REMIC Certificates (either directly or indirectly through a grantor trust,
partnership, S corporation, REMIC, or certain other pass-through entities
described in the foregoing temporary Treasury regulations) may have taxable
income in excess of the interest income at the pass-through rate on Regular
Certificates that are issued in a single Class or otherwise consistently with
fixed investment trust status or in excess of cash distributions for the related
period on Residual Certificates. Unless otherwise indicated in the applicable
Prospectus Supplement, all such expenses will be allocable to the Residual
Certificates.
TAXATION OF CERTAIN FOREIGN INVESTORS
REGULAR CERTIFICATES
Interest, including original issue discount, distributable to Regular
Certificateholders who are non-resident aliens, foreign corporations, or other
Non-U.S. Persons (as defined below), will be considered "portfolio interest"
and, therefore, generally will not be subject to 30% United States withholding
tax,
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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) and (ii) provides the Trustee, or the
person who 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 Certificate is a Non-U.S.
Person. 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 Certificate 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. Prepayment Premiums
distributable to Regular Certificateholders who are Non-U.S. Persons may be
subject to 30% United States withholding tax. Investors who are Non-U.S. Persons
should consult their own tax advisors regarding the specific tax consequences to
them of owning a Regular Certificate. The term "Non-U.S. Person" means any
person who is not a U.S. Person.
The IRS issued final regulations which would provide alternative methods of
satisfying the beneficial ownership certification requirement described above.
For example, these regulations will require, in the case of Regular Certificates
held by a foreign partnership, that (x) the certification described above be
provided by the partners rather than by the foreign partnership and (y) the
partnership provide certain information, including a United States taxpayer
identification number. A look-through rule would apply in the case of tiered
partnerships. Non-U.S. Persons should consult their own tax advisors concerning
the application of the certification requirements in these regulations.
RESIDUAL CERTIFICATES
The Conference Committee Report to the 1986 Act indicates that amounts paid
to Residual Certificateholders who are Non-U.S. Persons are treated as interest
for purposes of the 30% (or lower treaty rate) United States withholding tax.
Treasury regulations provide that amounts distributed to Residual
Certificateholders may qualify as "portfolio interest," subject to the
conditions described in "Regular Certificates" above, but only to the extent
that (i) the Mortgage Loans (including mortgage loans underlying MBS) were
issued after July 18, 1984 and (ii) the Trust Fund or segregated pool of assets
therein (as to which a separate REMIC election will be made), to which the
Residual Certificate relates, consists of obligations issued in "registered
form" within the meaning of Code Section 163(f)(1). Generally, whole mortgage
loans will not be, but MBS and regular interests in another REMIC Pool will be,
considered obligations issued in registered form. Furthermore, a Residual
Certificateholder will not be entitled to any exemption from the 30% withholding
tax (or lower treaty rate) to the extent of that portion of REMIC taxable income
that constitutes an "excess inclusion." See "Taxation of Residual
Certificates--Limitations on Offset or Exemption of REMIC Income." If the
amounts paid to Residual Certificateholders who are Non-U.S. Persons are
effectively connected with the conduct of a trade or business within the United
States by such Non-U.S. Persons, 30% (or lower treaty rate) withholding will not
apply. Instead, the amounts paid to such Non-U.S. Persons will be subject to
United States federal income tax at regular rates. If 30% (or lower treaty rate)
withholding is applicable, such amounts generally will be taken into account for
purposes of withholding only when paid or otherwise distributed (or when the
Residual Certificate is disposed of) under rules similar to withholding upon
disposition of debt instruments that have original issue discount. See
"Tax-Related Restrictions on Transfer of Residual Certificates--Foreign
Investors" above concerning the disregard of certain transfers having "tax
avoidance potential." Investors who are Non-U.S. Persons should consult their
own tax advisors regarding the specific tax consequences to them of owning
Residual Certificates.
BACKUP WITHHOLDING
Distributions made on the Regular Certificates, and proceeds from the sale
of the Regular Certificates to or through certain brokers, may be subject to a
"backup" withholding tax under Code Section 3406 of 28% (which rate will
increase to 31% after 2010) on "reportable payments" (including interest
distributions, original issue discount, and, under certain circumstances,
principal distributions) unless the Regular Certificateholder complies with
certain reporting and/or certification procedures, including the provision of
its taxpayer identification number to the Trustee, its agent or the broker who
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effected the sale of the Regular Certificate, or such Certificateholder is
otherwise an exempt recipient under applicable provisions of the Code. Any
amounts to be withheld from distribution on the Regular Certificates would be
refunded by the Service or allowed as a credit against the Regular
Certificateholder's federal income tax liability. Investors are urged to contact
their own tax advisors regarding the application to them of backup withholding
and information reporting.
REPORTING REQUIREMENTS
Reports of accrued interest, original issue discount and information
necessary to compute the accrual of any market discount on the Regular
Certificates will be made annually to the Service and to individuals, estates,
non-exempt and non-charitable trusts, and partnerships who are either holders of
record of Regular Certificates or beneficial owners who own Regular Certificates
through a broker or middleman as nominee. All brokers, nominees and all other
non-exempt holders of record of Regular Certificates (including corporations,
non-calendar year taxpayers, securities or commodities dealers, real estate
investment trusts, investment companies, common trust funds, thrift institutions
and charitable trusts) may request such information for any calendar quarter by
telephone or in writing by contacting the person designated in Service
Publication 938 with respect to a particular series of Regular Certificates.
Holders through nominees must request such information from the nominee.
The Service's Form 1066 has an accompanying Schedule Q, Quarterly Notice to
Residual Interest Holders of REMIC Taxable Income or Net Loss Allocation.
Treasury regulations require that Schedule Q be furnished by the REMIC Pool to
each Residual Certificateholder by the end of the month following the close of
each calendar quarter (41 days after the end of a quarter under proposed
Treasury regulations) in which the REMIC Pool is in existence.
Treasury regulations require that, in addition to the foregoing
requirements, information must be furnished quarterly to Residual
Certificateholders, furnished annually, if applicable, to holders of Regular
Certificates, and filed annually with the Service concerning Code Section 67
expenses (see "Limitations on Deduction of Certain Expenses" above) allocable to
such holders. Furthermore, under such regulations, information must be furnished
quarterly to Residual Certificateholders, furnished annually to holders of
Regular Certificates, and filed annually with the Service concerning the
percentage of the REMIC Pool's assets meeting the qualified asset tests
described above under "Status of REMIC Certificates."
FEDERAL INCOME TAX CONSEQUENCES FOR CERTIFICATES
AS TO WHICH NO REMIC ELECTION IS MADE
STANDARD CERTIFICATES
GENERAL
In the event that no election is made to treat a Trust Fund (or a
segregated pool of assets therein) with respect to a series of Certificates that
are not designated as "Stripped Certificates," as described below, as a REMIC
(Certificates of such a series hereinafter referred to as "Standard
Certificates"), in the opinion of Cadwalader, Wickersham & Taft LLP or Latham &
Watkins LLP, counsel to the Depositor, the Trust Fund will be classified as a
grantor trust under subpart E, Part 1 of subchapter J of the Code and not as an
association taxable as a corporation or a "taxable mortgage pool" within the
meaning of Code Section 7701(i). Where there is no fixed retained yield with
respect to the Mortgage Loans underlying the Standard Certificates, the holder
of each such Standard Certificate (a "Standard Certificateholder") in such
series will be treated as the owner of a pro rata undivided interest in the
ordinary income and corpus portions of the Trust Fund represented by its
Standard Certificate and will be considered the beneficial owner of a pro rata
undivided interest in each of the Mortgage Loans, subject to the discussion
below under "Recharacterization of Servicing Fees." Accordingly, the holder of a
Standard Certificate of a particular series will be required to report on its
federal income tax return its pro rata share of the entire income from the
Mortgage Loans represented by its Standard Certificate, including interest at
the coupon rate on such Mortgage Loans, original issue discount (if any),
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prepayment fees, assumption fees, and late payment charges received by the
Master Servicer, in accordance with such Standard Certificateholder's method of
accounting. A Standard Certificateholder generally will be able to deduct its
share of the servicing fee and all administrative and other expenses of the
Trust Fund in accordance with its method of accounting, provided that such
amounts are reasonable compensation for services rendered to that Trust Fund.
However, investors who are individuals, estates or trusts who own Standard
Certificates, either directly or indirectly through certain pass-through
entities, will be subject to limitation with respect to certain itemized
deductions described in Code Section 67, including deductions under Code Section
212 for the servicing fee and all such administrative and other expenses of the
Trust Fund, to the extent that such deductions, in the aggregate, do not exceed
two percent of an investor's adjusted gross income. In addition, Code Section 68
provides that itemized deductions otherwise allowable for a taxable year of an
individual taxpayer will be reduced by the lesser of (i) 3% of the excess, if
any, of adjusted gross income over a threshold amount or (ii) 80% of the amount
of itemized deductions otherwise allowable for such year. These limitations will
be phased out over the period 2006-2010. As a result, such investors holding
Standard Certificates, directly or indirectly through a pass-through entity, may
have aggregate taxable income in excess of the aggregate amount of cash received
on such Standard Certificates with respect to interest at the pass-through rate
on such Standard Certificates. In addition, such expenses are not deductible at
all for purposes of computing the alternative minimum tax, and may cause such
investors to be subject to significant additional tax liability. Moreover, where
there is fixed retained yield with respect to the Mortgage Loans underlying a
series of Standard Certificates or where the servicing fee is in excess of
reasonable servicing compensation, the transaction will be subject to the
application of the "stripped bond" and "stripped coupon" rules of the Code, as
described below under "Stripped Certificates" and "Recharacterization of
Servicing Fees," respectively.
TAX STATUS
Standard Certificates will have the following status for federal income tax
purposes:
1. A Standard Certificate owned by a "domestic building and loan
association" within the meaning of Code Section 7701(a)(19) will be considered
to represent "loans . . . secured by an interest in real property which is . . .
residential real property" within the meaning of Code Section 7701(a)(19)(C)(v),
provided that the real property securing the Mortgage Loans represented by that
Standard Certificate is of the type described in such section of the Code.
2. A Standard Certificate owned by a real estate investment trust will be
considered to represent "real estate assets" within the meaning of Code Section
856(c)(5)(B) to the extent that the assets of the related Trust Fund consist of
qualified assets, and interest income on such assets will be considered
"interest on obligations secured by mortgages on real property" to such extent
within the meaning of Code Section 856(c)(3)(B).
3. A Standard Certificate owned by a REMIC will be considered to represent
an "obligation . . . which is principally secured by an interest in real
property" within the meaning of Code Section 860G(a)(3)(A) to the extent that
the assets of the related Trust Fund consist of "qualified mortgages" within the
meaning of Code Section 860G(a)(3).
PREMIUM AND DISCOUNT
Standard Certificateholders are advised to consult with their tax advisors
as to the federal income tax treatment of premium and discount arising either
upon initial acquisition of Standard Certificates or thereafter.
PREMIUM. The treatment of premium incurred upon the purchase of a Standard
Certificate will be determined generally as described above under "Certain
Federal Income Tax Consequences for REMIC Certificates--Taxation of Residual
Certificates--Treatment of Certain Items of REMIC Income and Expense--Premium."
ORIGINAL ISSUE DISCOUNT. The original issue discount rules will be
applicable to a Standard Certificateholder's interest in those Mortgage Loans as
to which the conditions for the application of those sections are met. Rules
regarding periodic inclusion of original issue discount income are
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applicable to mortgages of corporations originated after May 27, 1969, mortgages
of noncorporate mortgagors (other than individuals) originated after July 1,
1982, and mortgages of individuals originated after March 2, 1984. Under the OID
Regulations, such original issue discount could arise by the charging of points
by the originator of the mortgages in an amount greater than a statutory de
minimis exception, including a payment of points currently deductible by the
borrower under applicable Code provisions or, under certain circumstances, by
the presence of "teaser rates" on the Mortgage Loans.
Original issue discount must generally be reported as ordinary gross income
as it accrues under a constant interest method that takes into account the
compounding of interest, in advance of the cash attributable to such income.
Unless indicated otherwise in the applicable Prospectus Supplement, no
prepayment assumption will be assumed for purposes of such accrual. However,
Code Section 1272 provides for a reduction in the amount of original issue
discount includible in the income of a holder of an obligation that acquires the
obligation after its initial issuance at a price greater than the sum of the
original issue price and the previously accrued original issue discount, less
prior payments of principal. Accordingly, if such Mortgage Loans acquired by a
Standard Certificateholder are purchased at a price equal to the then unpaid
principal amount of such Mortgage Loans, no original issue discount attributable
to the difference between the issue price and the original principal amount of
such Mortgage Loans (i.e., points) will be includible by such holder.
MARKET DISCOUNT. Standard Certificateholders also will be subject to the
market discount rules to the extent that the conditions for application of those
sections are met. Market discount on the Mortgage Loans will be determined and
will be reported as ordinary income generally in the manner described above
under "Certain Federal Income Tax Consequences for REMIC Certificates--Taxation
of Regular Certificates--Market Discount," except that the ratable accrual
methods described therein will not apply and it is unclear whether a Prepayment
Assumption would apply. Rather, the holder will accrue market discount pro rata
over the life of the Mortgage Loans, unless the constant yield method is
elected. Unless indicated otherwise in the applicable Prospectus Supplement, no
prepayment assumption will be assumed for purposes of such accrual.
RECHARACTERIZATION OF SERVICING FEES
If the servicing fee paid to the Master Servicer were deemed to exceed
reasonable servicing compensation, the amount of such excess would represent
neither income nor a deduction to Certificateholders. In this regard, there are
no authoritative guidelines for federal income tax purposes as to either the
maximum amount of servicing compensation that may be considered reasonable in
the context of this or similar transactions or whether, in the case of the
Standard Certificate, the reasonableness of servicing compensation should be
determined on a weighted average or loan-by-loan basis. If a loan-by-loan basis
is appropriate, the likelihood that such amount would exceed reasonable
servicing compensation as to some of the Mortgage Loans would be increased.
Service guidance indicates that a servicing fee in excess of reasonable
compensation ("excess servicing") will cause the Mortgage Loans to be treated
under the "stripped bond" rules. Such guidance provides safe harbors for
servicing deemed to be reasonable and requires taxpayers to demonstrate that the
value of servicing fees in excess of such amounts is not greater than the value
of the services provided.
Accordingly, if the Service's approach is upheld, a servicer who receives a
servicing fee in excess of such amounts would be viewed as retaining an
ownership interest in a portion of the interest payments on the Mortgage Loans.
Under the rules of Code Section 1286, the separation of ownership of the right
to receive some or all of the interest payments on an obligation from the right
to receive some or all of the principal payments on the obligation would result
in treatment of such Mortgage Loans as "stripped coupons" and "stripped bonds."
Subject to the de minimis rule discussed below under "--Stripped Certificates,"
each stripped bond or stripped coupon could be considered for this purpose as a
non-interest bearing obligation issued on the date of issue of the Standard
Certificates, and the original issue discount rules of the Code would apply to
the holder thereof. While Standard Certificateholders would still be treated as
owners of beneficial interests in a grantor trust for federal income tax
purposes, the corpus of such trust could be viewed as excluding the portion of
the Mortgage Loans the ownership of which is attributed to the Master Servicer,
or as including such portion as a second class of equitable interest. Applicable
Treasury regulations treat such an
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arrangement as a fixed investment trust, since the multiple classes of trust
interests should be treated as merely facilitating direct investments in the
trust assets and the existence of multiple classes of ownership interests is
incidental to that purpose. In general, such a recharacterization should not
have any significant effect upon the timing or amount of income reported by a
Standard Certificateholder, except that the income reported by a cash method
holder may be slightly accelerated. See "Stripped Certificates" below for a
further description of the federal income tax treatment of stripped bonds and
stripped coupons.
SALE OR EXCHANGE OF STANDARD CERTIFICATES
Upon sale or exchange of a Standard Certificate, a Standard
Certificateholder will recognize gain or loss equal to the difference between
the amount realized on the sale and its aggregate adjusted basis in the Mortgage
Loans and the other assets represented by the Standard Certificate. In general,
the aggregate adjusted basis will equal the Standard Certificateholder's cost
for the Standard Certificate, increased by the amount of any income previously
reported with respect to the Standard Certificate and decreased by the amount of
any losses previously reported with respect to the Standard Certificate and the
amount of any distributions received thereon. Except as provided above with
respect to market discount on any Mortgage Loans, and except for certain
financial institutions subject to the provisions of Code Section 582(c), any
such gain or loss would be capital gain or loss if the Standard Certificate was
held as a capital asset. However, gain on the sale of a Standard Certificate
will be treated as ordinary income (i) if a Standard Certificate 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 Standard Certificateholder's
net investment in the conversion transaction at 120% of the appropriate
applicable Federal rate in effect at the time the taxpayer entered into the
transaction minus any amount previously treated as ordinary income with respect
to any prior disposition of property that was held as a part of such transaction
or (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. 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.
Holders that recognize a loss on a sale or exchange of a Standard
Certificate for federal income tax purposes in excess of certain threshold
amounts should consult their tax advisors as to the need to file IRS Form 8886
(disclosing certain potential tax shelters) on their federal income tax returns.
STRIPPED CERTIFICATES
GENERAL
Pursuant to Code Section 1286, the separation of ownership of the right to
receive some or all of the principal payments on an obligation from ownership of
the right to receive some or all of the interest payments results in the
creation of "stripped bonds" with respect to principal payments and "stripped
coupons" with respect to interest payments. For purposes of this discussion,
Certificates that are subject to those rules will be referred to as "Stripped
Certificates." Stripped Certificates include "Stripped Interest Certificates"
and "Stripped Principal Certificates" (as defined in this Prospectus) as to
which no REMIC election is made.
The Certificates will be subject to those rules if (i) the Depositor or any
of its affiliates retains (for its own account or for purposes of resale), in
the form of fixed retained yield or otherwise, an ownership interest in a
portion of the payments on the Mortgage Loans, (ii) the Master Servicer is
treated as having an ownership interest in the Mortgage Loans to the extent it
is paid (or retains) servicing compensation in an amount greater than reasonable
consideration for servicing the Mortgage Loans (see "Standard
Certificates--Recharacterization of Servicing Fees" above) and (iii)
Certificates are issued in two or more classes or subclasses representing the
right to non-pro-rata percentages of the interest and principal payments on the
Mortgage Loans.
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In general, a holder of a Stripped Certificate will be considered to own
"stripped bonds" with respect to its pro rata share of all or a portion of the
principal payments on each Mortgage Loan and/or "stripped coupons" with respect
to its pro rata share of all or a portion of the interest payments on each
Mortgage Loan, including the Stripped Certificate's allocable share of the
servicing fees paid to the Master Servicer, to the extent that such fees
represent reasonable compensation for services rendered. See discussion above
under "Standard Certificates--Recharacterization of Servicing Fees." Although
not free from doubt, for purposes of reporting to Stripped Certificateholders,
the servicing fees will be allocated to the Stripped Certificates in proportion
to the respective entitlements to distributions of each class (or subclass) of
Stripped Certificates for the related period or periods. The holder of a
Stripped Certificate generally will be entitled to a deduction each year in
respect of the servicing fees, as described above under "Standard
Certificates--General," subject to the limitation described therein.
Code Section 1286 treats a stripped bond or a stripped coupon as an
obligation issued at an original issue discount on the date that such stripped
interest is purchased. Although the treatment of Stripped Certificates for
federal income tax purposes is not clear in certain respects at this time,
particularly where such Stripped Certificates are issued with respect to a
Mortgage Pool containing variable-rate Mortgage Loans, the Depositor has been
advised by counsel that (i) the Trust Fund will be treated as a grantor trust
under subpart E, Part 1 of subchapter J of the Code and not as an association
taxable as a corporation or a "taxable mortgage pool" within the meaning of Code
Section 7701(i), and (ii) each Stripped Certificate should be treated as a
single installment obligation for purposes of calculating original issue
discount and gain or loss on disposition. This treatment is based on the
interrelationship of Code Section 1286, Code Sections 1272 through 1275, and the
OID Regulations. While under Code Section 1286 computations with respect to
Stripped Certificates arguably should be made in one of the ways described below
under "Taxation of Stripped Certificates--Possible Alternative
Characterizations," the OID Regulations state, in general, that two or more debt
instruments issued by a single issuer to a single investor in a single
transaction should be treated as a single debt instrument for original issue
discount purposes. The Pooling Agreement requires that the Trustee make and
report all computations described below using this aggregate approach, unless
substantial legal authority requires otherwise.
Furthermore, Treasury regulations issued December 28, 1992 provide for the
treatment of a Stripped Certificate as a single debt instrument issued on the
date it is purchased for purposes of calculating any original issue discount. In
addition, under these regulations, a Stripped Certificate that represents a
right to payments of both interest and principal may be viewed either as issued
with original issue discount or market discount (as described below), at a de
minimis original issue discount, or, presumably, at a premium. This treatment
suggests that the interest component of such a Stripped Certificate would be
treated as qualified stated interest under the OID Regulations. Further, these
final regulations provide that the purchaser of such a Stripped Certificate will
be required to account for any discount as market discount rather than original
issue discount if either (i) the initial discount with respect to the Stripped
Certificate was treated as zero under the de minimis rule, or (ii) no more than
100 basis points in excess of reasonable servicing is stripped off the related
Mortgage Loans. Any such market discount would be reportable as described under
"Certain Federal Income Tax Consequences for REMIC Certificates--Taxation of
Regular Certificates--Market Discount," without regard to the de minimis rule
therein, assuming that a prepayment assumption is employed in such computation.
STATUS OF STRIPPED CERTIFICATES
No specific legal authority exists as to whether the character of the
Stripped Certificates, for federal income tax purposes, will be the same as that
of the Mortgage Loans. Although the issue is not free from doubt, counsel has
advised the Depositor that Stripped Certificates owned by applicable holders
should be considered to represent "real estate assets" within the meaning of
Code Section 856(c)(5)(B), "obligation[s] principally secured by an interest in
real property" within the meaning of Code Section 860G(a)(3)(A), and "loans . .
.. secured by an interest in real property which is . . . residential real
property" within the meaning of Code Section 7701(a)(19)(C)(v), and interest
(including original issue discount) income attributable to Stripped Certificates
should be considered to represent "interest on obligations secured by mortgages
on real property" within the meaning of Code Section
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856(c)(3)(B), provided that in each case the Mortgage Loans and interest on such
Mortgage Loans qualify for such treatment.
TAXATION OF STRIPPED CERTIFICATES
ORIGINAL ISSUE DISCOUNT. Except as described above under "General," each
Stripped Certificate will be considered to have been issued at an original issue
discount for federal income tax purposes. Original issue discount with respect
to a Stripped Certificate must be included in ordinary income as it accrues, in
accordance with a constant interest method that takes into account the
compounding of interest, which may be prior to the receipt of the cash
attributable to such income. Based in part on the OID Regulations and the
amendments to the original issue discount sections of the Code made by the 1986
Act, the amount of original issue discount required to be included in the income
of a holder of a Stripped Certificate (referred to in this discussion as a
"Stripped Certificateholder") in any taxable year likely will be computed
generally as described above under "Federal Income Tax Consequences for REMIC
Certificates--Taxation of Regular Certificates--Original Issue Discount" and
"--Variable Rate Regular Certificates." However, with the apparent exception of
a Stripped Certificate qualifying as a market discount obligation, as described
above under "General," the issue price of a Stripped Certificate will be the
purchase price paid by each holder thereof, and the stated redemption price at
maturity will include the aggregate amount of the payments, other than qualified
stated interest to be made on the Stripped Certificate to such Stripped
Certificateholder, presumably under the Prepayment Assumption.
If the Mortgage Loans prepay at a rate either faster or slower than that
under the Prepayment Assumption, a Stripped Certificateholder's recognition of
original issue discount will be either accelerated or decelerated and the amount
of such original issue discount will be either increased or decreased depending
on the relative interests in principal and interest on each Mortgage Loan
represented by such Stripped Certificateholder's Stripped Certificate. While the
matter is not free from doubt, the holder of a Stripped Certificate should be
entitled in the year that it becomes certain (assuming no further prepayments)
that the holder will not recover a portion of its adjusted basis in such
Stripped Certificate to recognize an ordinary loss equal to such portion of
unrecoverable basis.
As an alternative to the method described above, the fact that some or all
of the interest payments with respect to the Stripped Certificates will not be
made if the Mortgage Loans are prepaid could lead to the interpretation that
such interest payments are "contingent" within the meaning of the OID
Regulations. The OID Regulations, as they relate to the treatment of contingent
interest, are by their terms not applicable to prepayable securities such as the
Stripped Certificates. However, if final regulations dealing with contingent
interest with respect to the Stripped Certificates apply the same principles as
the OID Regulations, such regulations may lead to different timing of income
inclusion that would be the case under the OID Regulations. Furthermore,
application of such principles could lead to the characterization of gain on the
sale of contingent interest Stripped Certificates as ordinary income. Investors
should consult their tax advisors regarding the appropriate tax treatment of
Stripped Certificates.
SALE OR EXCHANGE OF STRIPPED CERTIFICATES. Sale or exchange of a Stripped
Certificate prior to its maturity will result in gain or loss equal to the
difference, if any, between the amount received and the Stripped
Certificateholder's adjusted basis in such Stripped Certificate, as described
above under "Certain Federal Income Tax Consequences for REMIC
Certificates--Taxation of Regular Certificates--Sale or Exchange of Regular
Certificates." To the extent that a subsequent purchaser's purchase price is
exceeded by the remaining payments on the Stripped Certificates, such subsequent
purchaser will be required for federal income tax purposes to accrue and report
such excess as if it were original issue discount in the manner described above.
It is not clear for this purpose whether the assumed prepayment rate that is to
be used in the case of a Stripped Certificateholder other than an original
Stripped Certificateholder should be the Prepayment Assumption or a new rate
based on the circumstances at the date of subsequent purchase.
Holders that recognize a loss on a sale or exchange of a Stripped
Certificate for federal income tax purposes in excess of certain theshold
amounts should consult their tax advisors as to the need to file IRS Form 8886
(disclosing certain potential tax shelters) on their federal income tax returns.
97
PURCHASE OF MORE THAN ONE CLASS OF STRIPPED CERTIFICATES. Where an investor
purchases more than one class of Stripped Certificates, it is currently unclear
whether for federal income tax purposes such classes of Stripped Certificates
should be treated separately or aggregated for purposes of the rules described
above.
POSSIBLE ALTERNATIVE CHARACTERIZATIONS. The characterizations of the
Stripped Certificates discussed above are not the only possible interpretations
of the applicable Code provisions. For example, the Stripped Certificateholder
may be treated as the owner of (i) one installment obligation consisting of such
Stripped Certificate's pro rata share of the payments attributable to principal
on each Mortgage Loan and a second installment obligation consisting of such
Stripped Certificate's pro rata share of the payments attributable to interest
on each Mortgage Loan, (ii) as many stripped bonds or stripped coupons as there
are scheduled payments of principal and/or interest on each Mortgage Loan or
(iii) a separate installment obligation for each Mortgage Loan, representing the
Stripped Certificate's pro rata share of payments of principal and/or interest
to be made with respect thereto. Alternatively, the holder of one or more
classes of Stripped Certificates may be treated as the owner of a pro rata
fractional undivided interest in each Mortgage Loan to the extent that such
Stripped Certificate, or classes of Stripped Certificates in the aggregate,
represent the same pro rata portion of principal and interest on each such
Mortgage Loan, and a stripped bond or stripped coupon (as the case may be),
treated as an installment obligation or contingent payment obligation, as to the
remainder. Final regulations issued on December 28, 1992 regarding original
issue discount on stripped obligations make the foregoing interpretations less
likely to be applicable. The preamble to those regulations states that they are
premised on the assumption that an aggregation approach is appropriate for
determining whether original issue discount on a stripped bond or stripped
coupon is de minimis, and solicits comments on appropriate rules for aggregating
stripped bonds and stripped coupons under Code Section 1286.
Because of these possible varying characterizations of Stripped
Certificates and the resultant differing treatment of income recognition,
Stripped Certificateholders are urged to consult their own tax advisors
regarding the proper treatment of Stripped Certificates for federal income tax
purposes.
REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
The Trustee will furnish, within a reasonable time after the end of each
calendar year, to each Standard Certificateholder or Stripped Certificateholder
at any time during such year, such information (prepared on the basis described
above) as the Trustee deems to be necessary or desirable to enable such
Certificateholders to prepare their federal income tax returns. Such information
will include the amount of original issue discount accrued on Certificates held
by persons other than Certificateholders exempted from the reporting
requirements. The amounts required to be reported by the Trustee may not be
equal to the proper amount of original issue discount required to be reported as
taxable income by a Certificateholder, other than an original Certificateholder
that purchased at the issue price. In particular, in the case of Stripped
Certificates, unless provided otherwise in the applicable Prospectus Supplement,
such reporting will be based upon a representative initial offering price of
each class of Stripped Certificates. The Trustee will also file such original
issue discount information with the Service. If a Certificateholder fails to
supply an accurate taxpayer identification number or if the Secretary of the
Treasury determines that a Certificateholder has not reported all interest and
dividend income required to be shown on his federal income tax return, 28%
(which rate will increase to 30% after 2010) backup withholding may be required
in respect of any reportable payments, as described above under "Certain Federal
Income Tax Consequences for REMIC Certificates--Backup Withholding."
TAXATION OF CERTAIN FOREIGN INVESTORS
To the extent that a Certificate evidences ownership in Mortgage Loans that
are issued on or before July 18, 1984, interest or original issue discount paid
by the person required to withhold tax under Code Section 1441 or 1442 to
nonresident aliens, foreign corporations, or other Non-U.S. Persons generally
will be subject to 30% United States withholding tax, or such lower rate as may
be provided for interest by an applicable tax treaty. Accrued original issue
discount recognized by the Standard Certificateholder or Stripped
Certificateholder on original issue discount recognized by the Standard
98
Certificateholder or Stripped Certificateholders on the sale or exchange of such
a Certificate also will be subject to federal income tax at the same rate.
Treasury regulations provide that interest or original issue discount paid
by the Trustee or other withholding agent to a Non-U.S. Person evidencing
ownership interest in Mortgage Loans issued after July 18, 1984 will be
"portfolio interest" and will be treated in the manner, and such persons will be
subject to the same certification requirements, described above under "Certain
Federal Income Tax Consequences for REMIC Certificates--Taxation of Certain
Foreign Investors--Regular Certificates."
STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Consequences," potential investors should consider the state
and local tax consequences of the acquisition, ownership, and disposition of the
Offered Certificates. State tax law may differ substantially from the
corresponding federal law, and the discussion above does not purport to describe
any aspect of the tax laws of any state or other jurisdiction. Therefore,
prospective investors should consult their tax advisors with respect to the
various tax consequences of investments in the Offered Certificates.
CERTAIN ERISA CONSIDERATIONS
GENERAL
Sections 404 and 406 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), impose certain fiduciary requirements and prohibited
transaction restrictions on employee pension and welfare benefit plans subject
to ERISA ("ERISA Plans") and on certain other arrangements, including bank
collective investment funds and insurance company general and separate accounts
in which such ERISA Plans are invested. Section 4975 of the Code imposes
essentially the same prohibited transaction restrictions on tax-qualified
retirement plans described in Section 401(a) of the Code and on Individual
Retirement Accounts described in Section 408 of the Code (collectively, "Tax
Favored Plans").
Certain employee benefit plans, such as governmental plans (as defined in
ERISA Section 3(32)), and, if no election has been made under Section 410(d) of
the Code, church plans (as defined in Section 3(33) of ERISA) (collectively with
ERISA Plans and Tax-Favored plans, "Plans") are not subject to ERISA
requirements. Accordingly, assets of such plans may be invested in Offered
Certificates without regard to the ERISA considerations described below, subject
to the provisions of other applicable federal and state law ("Similar Law"). Any
such plan which is qualified and exempt from taxation under Sections 401(a) and
501(a) of the Code is subject to the prohibited transaction rules set forth in
Section 503 of the Code.
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, Section 406 of ERISA and Section 4975 of the
Code prohibit a broad range of transactions involving assets of a Plan and
persons ("parties in interest" within the meaning of ERISA and "disqualified
persons" within the meaning of the Code; collectively, "Parties in Interest")
who have certain specified relationships to the Plan, unless a statutory,
regulatory or administrative exemption is available with respect to any such
transaction. Pursuant to Section 4975 of the Code, certain Parties in Interest
to a prohibited transaction may be subject to a nondeductible 15% per annum
excise tax on the amount involved in such transaction, which excise tax
increases to 100% if the Party in Interest involved in the transaction does not
correct such transaction during the taxable period. In addition, such Party in
Interest may be subject to a penalty imposed pursuant to Section 502(i) of
ERISA. The United States Department of Labor ("DOL") and participants,
beneficiaries and fiduciaries of ERISA Plans may generally enforce violations of
ERISA, including the prohibited transaction provisions. If the prohibited
transaction amounts to a breach of fiduciary responsibility under ERISA, a 20%
civil penalty may be imposed on the fiduciary or other person participating in
the breach.
99
PLAN ASSET REGULATIONS
Certain transactions involving the Trust Fund, including a Plan's
investment in Offered Certificates, might be deemed to constitute prohibited
transactions under ERISA, the Code or Similar Law if the underlying Mortgage
Assets and other assets included in a related Trust Fund are deemed to be assets
of such Plan. Section 2510.3-101 of the DOL regulations (the "Plan Asset
Regulations") defines the term "Plan Assets" for purposes of applying the
general fiduciary responsibility provisions of ERISA and the prohibited
transaction provisions of ERISA and the Code. Under the Plan Asset Regulations,
generally, when a Plan acquires an equity interest in an entity, the Plan's
assets include both such equity interest and an undivided interest in each of
the underlying assets of the entity, unless certain exceptions not applicable
here apply, or unless the equity participation in the entity by "benefit plan
investors" (i.e., ERISA Plans and certain employee benefit plans not subject to
ERISA) is not "significant," both as defined therein. For this purpose, in
general, equity participation by benefit plan investors will be "significant" on
any date if 25% or more of the value of any class of equity interests in the
entity is held by benefit plan investors. Equity participation in a Trust Fund
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.
The prohibited transaction provisions of Section 406 of ERISA, Section 4975
of the Code may apply to a Trust Fund and cause the Depositor, the Master
Servicer, any Special Servicer, any Sub-Servicer, any Manager, the Trustee, the
obligor under any credit enhancement mechanism or certain affiliates thereof to
be considered or become Parties in Interest with respect to an investing Plan
(or of a Plan holding an interest in an investing entity). If so, the
acquisition or holding of Certificates by or on behalf of the investing Plan
could also give rise to a prohibited transaction under ERISA, the Code or
Similar Law, unless some statutory, regulatory or administrative exemption is
available. Certificates acquired by a Plan may be assets of that Plan. Under the
Plan Asset Regulations, the Trust Fund, including the Mortgage Asset Loans and
the other assets held in the Trust Fund, may also be deemed to be Plan Assets of
each Plan that acquires Certificates. Special caution should be exercised before
Plan Assets are used to acquire a Certificate in such circumstances, especially
if, with respect to such assets, the Depositor, the Master Servicer, any Special
Servicer, any Sub-Servicer, any Manager, the Trustee, the obligor under any
credit enhancement mechanism or an affiliate thereof either (i) has investment
discretion with respect to the investment of Plan Assets; or (ii) has authority
or responsibility to give (or regularly gives) investment advice with respect to
Plan Assets for a fee pursuant to an agreement or understanding that such advice
will serve as a primary basis for investment decisions with respect to such Plan
Assets.
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 such assets for a fee, is a fiduciary of the investing
Plan. If the Mortgage Assets and other assets included in a Trust Fund
constitute Plan Assets, then any party exercising management or discretionary
control regarding those assets, such as the Master Servicer, any Special
Servicer, any Sub-Servicer, the Trustee, the obligor under any credit
enhancement mechanism, or certain affiliates thereof may be deemed to be a Plan
"fiduciary" and thus subject to the fiduciary responsibility provisions and
prohibited transaction provisions of ERISA and the Code with respect to the
investing Plan. In addition, if the Mortgage Assets and other assets included in
a Trust Fund constitute Plan Assets, the purchase of Certificates by a Plan, as
well as the operation of the Trust Fund, may constitute or involve a prohibited
transaction under ERISA or the Code.
The Plan Asset Regulations provide that where a Plan acquires a "guaranteed
governmental mortgage pool certificate," the Plan's assets include such
certificate but do not solely by reason of the Plan's holdings of such
certificate include any of the mortgages underlying such certificate. The Plan
Asset Regulations include in the definition of a "guaranteed governmental
mortgage pool certificate" FHLMC Certificates, GNMA Certificates, FNMA
Certificates and FAMC Certificates. Accordingly, even if such MBS included in a
Trust Fund were deemed to be assets of Plan investors, the mortgages underlying
such MBS would not be treated as assets of such Plans. Private label mortgage
participations, mortgage pass-through certificates or other mortgage-backed
securities are not "guaranteed governmental mortgage pool certificates" within
the meaning of the Plan Asset
100
Regulations. Potential Plan investors should consult their counsel and review
the ERISA discussion in the related Prospectus Supplement before purchasing any
such Certificates.
PROHIBITED TRANSACTION EXEMPTIONS
The DOL granted an individual exemption, DOL Final Authorization Number
97-03E, as amended by Prohibited Transaction Exemption 97-34, Prohibited
Transaction Exemption 2000-58 and Prohibited Transaction Exemption 2002-41 (the
"Exemption"), to Deutsche Bank AG, New York Branch ("DBNY")and to a predecessor
to Deutsche Bank Securities, Inc. ("DBSI") which generally exempts from the
application of the prohibited transaction provisions of Section 406 of ERISA,
and the excise taxes imposed on such prohibited transactions pursuant to Section
4975(a) and (b) of the Code, certain transactions, among others, relating to the
servicing and operation of mortgage pools and the initial purchase, holding and
subsequent resale of mortgage pass-through certificates underwritten by an
Underwriter (as hereinafter defined), provided that certain conditions set forth
in the Exemption are satisfied. For purposes of this Section "ERISA
Considerations," the term "Underwriter" shall include (a) DBNY and DBSI, (b) any
person directly or indirectly, through one or more intermediaries, controlling,
controlled by or under common control with DBNY and DBSI and (c) any member of
the underwriting syndicate or selling group of which a person described in (a)
or (b) is a manager or co-manager with respect to a class of Certificates.
The Exemption sets forth five general conditions which must be satisfied
for the Exemption to apply. First, the acquisition of Certificates by a Plan or
with Plan Assets must be on terms that are at least as favorable to the Plan as
they would be in an arm's-length transaction with an unrelated party. Second,
the Certificates at the time of acquisition by a Plan or with Plan Assets must
be rated in one of the four highest generic rating categories by Standard &
Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc., Moody's
Investors Service, Inc. or Fitch, Inc. (collectively, the "Exemption Rating
Agencies"). Third, the Trustee cannot be an affiliate of any member of the
Restricted Group, other than an Underwriter; the "Restricted Group" consists of
any Underwriter, the Depositor, the Trustee, the Master Servicer, any
Sub-Servicer and any obligor with respect to assets included in the Trust Fund
constituting more than 5% of the aggregate unamortized principal balance of the
assets in the Trust Fund as of the date of initial issuance of the Certificates.
Fourth, the sum of all payments made to and retained by the Underwriter(s) must
represent not more than reasonable compensation for underwriting the
Certificates; the sum of all payments made to and retained by the Depositor
pursuant to the assignment of the assets to the related Trust Fund must
represent not more than the fair market value of such obligations; and the sum
of all payments made to and retained by the Master Servicer and any Sub-Servicer
must represent not more than reasonable compensation for such person's services
under the related Agreement and reimbursement of such person's reasonable
expenses in connection therewith. Fifth, the Exemption states that the investing
Plan or Plan Asset investor must be an accredited investor as defined in Rule
501(a)(1) of Regulation D of the Commission under the Securities Act of 1933, as
amended.
The Exemption also requires that the Trust Fund meet the following
requirements: (i) the Trust Fund must consist solely of assets of the type that
have been included in other investment pools; (ii) Certificates evidencing
interests in such other investment pools must have been rated in one of the four
highest categories of one of the Exemption Rating Agencies for at least one year
prior to the acquisition of Certificates by or on behalf of a Plan or with Plan
Assets; and (iii) Certificates evidencing interests in such other investment
pools must have been purchased by investors other than Plans for at least one
year prior to any acquisition of Certificates by or on behalf of a Plan or with
Plan Assets.
A fiduciary of a Plan or any person investing Plan Assets intending to
purchase a Certificate must make its own determination that the conditions set
forth above will be satisfied with respect to such Certificate.
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, and the excise taxes imposed by Sections 4975(a) and (b) of the Code
by reason of Sections 4975(c)(1)(A) through (D) of the Code, in connection with
the direct or indirect sale, exchange, transfer, holding or the direct or
indirect
101
acquisition or disposition in the secondary market of Certificates by a Plan or
with Plan Assets. 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 a Certificate on behalf of an "Excluded Plan" by any person who has
discretionary authority or renders investment advice with respect to the assets
of such Excluded Plan. For purposes of the Certificates, 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 excise taxes imposed by Sections 4975(a)
and (b) of the Code by reason of Section 4975(c)(1)(E) of the Code, in
connection with (1) the direct or indirect sale, exchange or transfer of
Certificates in the initial issuance of Certificates between the Depositor or an
Underwriter and a Plan when the person who has discretionary authority or
renders investment advice with respect to the investment of Plan Assets in the
Certificates is (a) a mortgagor with respect to 5% or less of the fair market
value of the Trust Fund Assets or (b) an affiliate of such a person, (2) the
direct or indirect acquisition or disposition in the secondary market of
Certificates by a Plan and (3) the holding of Certificates by a Plan or with
Plan Assets.
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 of ERISA, and the excise taxes imposed by Sections
4975(a) and (b) of the Code by reason of Section 4975(c) of the Code for
transactions in connection with the servicing, management and operation of the
Trust Fund. The Depositor expects that the specific conditions of the Exemption
required for this purpose will be satisfied with respect to the Certificates so
that the Exemption would provide an exemption from the restrictions imposed by
Sections 406(a) and (b) of ERISA (as well as the excise taxes imposed by
Sections 4975(a) and (b) of the Code by reason of Section 4975(c) of the Code)
for transactions in connection with the servicing, management and operation of
the Trust Fund, provided that the general conditions of the Exemption are
satisfied.
The Exemption also may provide an exemption from the restrictions imposed
by Sections 406(a) and 407(a) of ERISA, and the excise taxes imposed by Section
4975(a) and (b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of
the Code if such restrictions are deemed to otherwise apply merely because a
person is deemed to be a Party in Interest with respect to an investing Plan by
virtue of providing services to the Plan (or by virtue of having certain
specified relationships to such a person) solely as a result of the Plan's
ownership of Certificates.
Because the exemptive relief afforded by the Exemption (or any similar
exemption that might be available) will not apply to the purchase, sale or
holding of certain Certificates, such as Residual Certificates or any
Certificates ("ERISA Restricted Certificates") which are not rated in one of the
four highest generic rating categories by at least one of the Exemption Rating
Agencies, transfers of such Certificates to a Plan, to a trustee or other person
acting on behalf of any Plan, or to any other person investing Plan Assets to
effect such acquisition will not be registered by the Trustee unless the
transferee provides the Depositor, the Trustee and the Master Servicer with an
opinion of counsel satisfactory to the Depositor, the Trustee and the Master
Servicer, which opinion will not be at the expense of the Depositor, the Trustee
or the Master Servicer, that the purchase of such Certificates by or on behalf
of such Plan is permissible under applicable law, will not constitute or result
in any non-exempt prohibited transaction under ERISA or Section 4975 of the Code
or Similar Law and will not subject the Depositor, the Trustee or the Master
Servicer to any obligation in addition to those undertaken in the Agreement.
In lieu of such opinion of counsel with respect to ERISA Restricted
Certificates, the transferee may provide a certification substantially to the
effect that the purchase of ERISA Restricted Certificates by or on behalf of
such Plan is permissible under applicable law, will not constitute or result in
any non-exempt prohibited transaction under ERISA or Section 4975 of the Code,
will not subject the Depositor, the Trustee or the Master Servicer to any
obligation in addition to those undertaken in the Agreement and the following
conditions are satisfied: (i) the transferee is an insurance company and the
source of funds used to purchase such ERISA Restricted Certificates is an
"insurance company general account"
102
(as such term is defined in PTCE 95-60); (ii) the conditions set forth in
Sections I and III of PTCE 95-60 have been satisfied; and (iii) there is no Plan
with respect to which the amount of such general account's reserves and
liabilities for contracts held by or on behalf of such Plan and all other Plans
maintained by the same employer (or any "affiliate" thereof, as defined in PTCE
95-60) or by the same employee organization exceed 10% of the total of all
reserves and liabilities of such general account (as determined under PTCE
95-60) as of the date of the acquisition of such ERISA Restricted Certificates.
The purchaser or any transferee of any interest in an ERISA Restricted
Certificate or Residual Certificate that is not a definitive certificate, by the
act of purchasing such Certificate, shall be deemed to represent that it is not
a Plan or directly or indirectly purchasing such Certificate or interest therein
on behalf of, as named fiduciary of, as trustee of, or with assets of a Plan.
The ERISA Restricted Certificates and Residual Certificates will contain a
legend describing such restrictions on transfer and the Pooling and Servicing
Agreement will provide that any attempted or purported transfer in violation of
these transfer restrictions will be null and void.
There can be no assurance that any DOL exemption will apply with respect to
any particular Plan that acquires the Certificates or, even if all the
conditions specified therein were satisfied, that any such exemption would apply
to all transactions involving the Trust Fund. Prospective Plan investors should
consult with their legal counsel concerning the impact of ERISA, the Code and
Similar Law and the potential consequences to their specific circumstances prior
to making an investment in the Certificates. Neither the Depositor, the Trustee,
the Master Servicer nor any of their respective affiliates will make any
representation to the effect that the Certificates satisfy all legal
requirements with respect to the investment therein by Plans generally or any
particular Plan or to the effect that the Certificates are an appropriate
investment for Plans generally or any particular Plan.
Before purchasing a Certificate (other than an ERISA Restricted
Certificate, Residual Certificate or any Certificate which is not rated in one
of the four highest generic rating categories by at least one of the Exemption
Rating Agencies), a fiduciary of a Plan should itself confirm that (a) all the
specific and general conditions set forth in the Exemption or one of the Class
Exemptions would be satisfied and (b) the Certificate constitutes a
"certificate" for purposes of the Exemption. In addition, a Plan fiduciary
should consider its general fiduciary obligations under ERISA in determining
whether to purchase a Certificate on behalf of a Plan. Finally, a Plan fiduciary
should consider the fact that the DOL, in granting the Exemption, may not have
had under its consideration interests in pools of the exact nature of some of
the Certificates described herein.
TAX EXEMPT INVESTORS
A Plan that is exempt from federal income taxation pursuant to Section 501
of the Code (a "Tax Exempt Investor") nonetheless will be subject to federal
income taxation to the extent that its income is "unrelated business taxable
income" ("UBTI") within the meaning of Section 512 of the Code. All "excess
inclusions" of a REMIC allocated to a Residual Certificate held by a Tax-Exempt
Investor will be considered UBTI and thus will be subject to federal income tax.
See "Certain Federal Income Tax Consequences--Federal Income Tax Consequences
for REMIC Certificates--Taxation of Residual Certificates--Limitations on Offset
or Exemption of REMIC Income."
LEGAL INVESTMENT
If so specified in the related Prospectus Supplement, the Offered
Certificates will constitute "mortgage related securities" for purposes of
SMMEA. Generally, only classes of Offered Certificates that (i) are rated in one
of the two highest rating categories by one or more Rating Agencies and (ii) are
part of a series evidencing interests in a Trust Fund consisting of loans
secured by first liens on real property and originated by certain types of
Originators specified in SMMEA, will be "mortgage related securities" for
purposes of SMMEA. As "mortgage related securities," such classes will
constitute legal investments for persons, trusts, corporations, partnerships,
associations, business trusts and business entities (including depository
institutions, insurance companies and pension funds) created pursuant to or
existing under the laws of the United States or of any state (including the
District of
103
Columbia and Puerto Rico) whose authorized investments are subject to state
regulation, to the same extent that, under applicable law, obligations issued by
or guaranteed as to principal and interest by the United States or any agency or
instrumentality thereof constitute legal investments for such entities.
Pursuant to SMMEA, a number of states enacted legislation, on or before the
October 3, 1991 cutoff for such enactments, limiting to varying extents the
ability of certain entities (in particular, insurance companies) to invest in
"mortgage related securities" secured by liens on residential, or mixed
residential and commercial properties, in most cases by requiring the affected
investors to rely solely upon existing state law, and not SMMEA. Pursuant to
Section 347 of the Riegle Community Development and Regulatory Improvement Act
of 1994, which amended the definition of "mortgage related security" to include,
in relevant part, Offered Certificates satisfying the rating and qualified
Originator requirements for "mortgage related securities," but evidencing
interests in a Trust Fund consisting, in whole or in part, of first liens on one
or more parcels of real estate upon which are located one or more commercial
structures, states were authorized to enact legislation, on or before September
23, 2001, specifically referring to Section 347 and prohibiting or restricting
the purchase, holding or investment by state-regulated entities in such types of
Offered Certificates. Accordingly, the investors affected by any state
legislation overriding the preemptive effect of SMMEA will be authorized to
invest in Offered Certificates qualifying as "mortgage related securities" only
to the extent provided in such legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in "mortgage related
securities" without limitation as to the percentage of their assets represented
thereby, federal credit unions may invest in such securities, and national banks
may purchase such securities for their own account without regard to the
limitations generally applicable to investment securities set forth in 12 U.S.C.
Section 24 (Seventh), subject in each case to such regulations as the applicable
federal regulatory authority may prescribe. In this connection, the Office of
the Comptroller of the Currency (the "OCC") has amended 12 C.F.R. Part 1 to
authorize national banks to purchase and sell for their own account, without
limitation as to a percentage of the bank's capital and surplus (but subject to
compliance with certain general standards in 12 C.F.R. Section 1.5 concerning
"safety and soundness" and retention of credit information), certain "Type IV
securities," defined in 12 C.F.R. Section 1.2(m) to include certain "commercial
mortgage-related securities" and "residential mortgage-related securities." As
so defined, "commercial mortgage-related security" and "residential
mortgage-related security" mean, in relevant part, "mortgage related security"
within the meaning of SMMEA, provided that, in the case of a "commercial
mortgage-related security," it "represents ownership of a promissory note or
certificate of interest or participation that is directly secured by a first
lien on one or more parcels of real estate upon which one or more commercial
structures are located and that is fully secured by interests in a pool of loans
to numerous obligors." In the absence of any rule or administrative
interpretation by the OCC defining the term "numerous obligors," no
representation is made as to whether any class of Offered Certificates will
qualify as "commercial mortgage-related securities," and thus as "Type IV
securities," for investment by national banks. The National Credit Union
Administration (the "NCUA") has adopted rules, codified at 12 C.F.R. Part 703,
which permit federal credit unions to invest in "mortgage related securities"
under certain limited circumstances, other than stripped mortgage related
securities, residual interests in mortgage related securities, and commercial
mortgage related securities, unless the credit union has obtained written
approval from the NCUA to participate in the "investment pilot program"
described in 12 C.F.R. Section 703.140. The Office of Thrift Supervi- sion (the
"OTS") has issued Thrift Bulletin 13a (December 1, 1998), "Management of
Interest Rate Risk, Investment Securities, and Derivatives Activities," which
thrift institutions subject to the jurisdiction of the OTS should consider
before investing in any of the Offered Certificates.
All depository institutions considering an investment in the Offered
Certificates should review the "Supervisory Policy Statement on Investment
Securities and End-User Derivatives Activities" (the "1998 Policy Statement") of
the Federal Financial Institutions Examination Council, which has been adopted
by the Board of Governors of the Federal Reserve System, the OCC, the Federal
Deposit Insurance Corporation and the OTS, effective May 26, 1998, and by the
NCUA, effective October 1,
104
1998. The 1998 Policy Statement sets forth general guidelines which depository
institutions must follow in managing risks (including market, credit, liquidity,
operational (transaction), and legal risks) applicable to all securities
(including mortgage pass-through securities and mortgage-derivative products)
used for investment purposes.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any Offered
Certificates, as certain series or classes may be deemed unsuitable investments,
or may otherwise be restricted, under such rules, policies or guidelines (in
certain instances irrespective of SMMEA).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not
"interest-bearing" or "income-paying," and, with regard to any Offered
Certificates issued in book-entry form, provisions which may restrict or
prohibit investments in securities which are issued in book-entry form.
Except as to the status of certain classes of Offered Certificates as
"mortgage related securities," no representations are made as to the proper
characterization of the Offered Certificates for legal investment purposes,
financial institution regulatory purposes, or other purposes, or as to the
ability of particular investors to purchase Offered Certificates under
applicable legal investment restrictions. The uncertainties described above (and
any unfavorable future determinations concerning legal investment or financial
institution regulatory characteristics of the Offered Certificates) may
adversely affect the liquidity of the Offered Certificates.
Accordingly, all investors whose investment activities are subject to legal
investment laws and regulations, regulatory capital requirements or review by
regulatory authorities should consult with their own legal advisors in
determining whether and to what extent the Offered Certificates of any class
constitute legal investments or are subject to investment, capital or other
restrictions and, if applicable, whether SMMEA has been overridden in any
jurisdiction relevant to such investor.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates of any
series will be applied by the Depositor to the purchase of Trust Assets or will
be used by the Depositor to cover expenses related thereto. The Depositor
expects to sell the Certificates from time to time, but the timing and amount of
offerings of Certificates will depend on a number of factors, including the
volume of Mortgage Assets acquired by the Depositor, prevailing interest rates,
availability of funds and general market conditions.
METHOD OF DISTRIBUTION
The Certificates offered hereby and by the related Prospectus Supplements
will be offered in series through one or more of the methods described below.
The Prospectus Supplement prepared for each series will describe the method of
offering being utilized for that series and will state the net proceeds to the
Depositor from such sale.
The Depositor intends that Offered Certificates will be offered through the
following methods from time to time and that offerings may be made concurrently
through more than one of these methods or that an offering of the Offered
Certificates of a particular series may be made through a combination of two or
more of these methods. Such methods are as follows:
1. By negotiated firm commitment or best efforts underwriting and public
offering by one or more underwriters specified in the related Prospectus
Supplement;
2. By placements by the Depositor with institutional investors through
dealers; and
105
3. By direct placements by the Depositor with institutional investors.
In addition, if specified in the related Prospectus Supplement, the Offered
Certificates of a series may be offered in whole or in part to the seller of the
related Mortgage Assets that would comprise the Trust Fund for such
Certificates.
If underwriters are used in a sale of any Offered Certificates (other than
in connection with an underwriting on a best efforts basis), such Certificates
will be acquired by the underwriters for their own account and may be resold
from time to time in one or more transactions, including negotiated
transactions, at fixed public offering prices or at varying prices to be
determined at the time of sale or at the time of commitment therefor. The
managing underwriter or underwriters with respect to the offer and sale of
Offered Certificates of a particular series will be set forth on the cover of
the Prospectus Supplement relating to such series and the members of the
underwriting syndicate, if any, will be named in such Prospectus Supplement.
In connection with the sale of Offered Certificates, underwriters may
receive compensation from the Depositor or from purchasers of the Offered
Certificates in the form of discounts, concessions or commissions. Underwriters
and dealers participating in the distribution of the Offered Certificates may be
deemed to be underwriters in connection with such Certificates, and any
discounts or commissions received by them from the Depositor and any profit on
the resale of Offered Certificates by them may be deemed to be underwriting
discounts and commissions under the Securities Act of 1933, as amended.
It is anticipated that the underwriting agreement pertaining to the sale of
the Offered Certificates of any series will provide that the obligations of the
underwriters will be subject to certain conditions precedent, that the
underwriters will be obligated to purchase all such Certificates if any are
purchased (other than in connection with an underwriting on a best efforts
basis) and that, in limited circumstances, the Depositor will indemnify the
several underwriters and the underwriters will indemnify the Depositor against
certain civil liabilities, including liabilities under the Securities Act of
1933, as amended, or will contribute to payments required to be made in respect
thereof.
The Prospectus Supplement with respect to any series offered by placements
through dealers will contain information regarding the nature of such offering
and any agreements to be entered into between the Depositor and purchasers of
Offered Certificates of such series.
The Depositor anticipates 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 such
purchases, be deemed to be "underwriters" within the meaning of the Securities
Act of 1933, as amended, in connection with reoffers and sales by them of
Offered Certificates. Holders of Offered Certificates should consult with their
legal advisors in this regard prior to any such reoffer or sale.
All or part of any class of Offered Certificates may be acquired by the
Depositor or by an affiliate of the Depositor in a secondary market transaction
or from an affiliate. Such Offered Certificates may then be included in a trust
fund, the beneficial ownership of which will be evidenced by one or more classes
of mortgage-backed certificates, including subsequent series of certificates
offered pursuant to this Prospectus and a prospectus supplement.
As to any series of Certificates, only those classes rated in an investment
grade rating category by any Rating Agency will be offered hereby. Any unrated
class may be initially retained by the Depositor, and may be sold by the
Depositor at any time to one or institutional investors.
If and to the extent required by applicable law or regulation, this
Prospectus will be used by the Underwriter in connection with offers and sales
related to market-making transactions in the Offered Certificates with respect
to which the Underwriter acts as principal. The Underwriter may also act as
agent in such transactions. Sales may be made at negotiated prices determined at
the time of sales.
106
LEGAL MATTERS
Unless otherwise specified in the related Prospectus Supplement, certain
legal matters in connection with the Certificates of each series, including
certain federal income tax consequences, will be passed upon for the Depositor
by Cadwalader, Wickersham & Taft LLP or Latham & Watkins LLP.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each series of
Certificates, and no Trust Fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related series of
Certificates. Accordingly, no financial statements with respect to any Trust
Fund will be included in this Prospectus or in the related Prospectus
Supplement. The Depositor has determined that its financial statements will not
be material to the offering of any Offered Certificates.
RATING
It is a condition to the issuance of any class of Offered Certificates that
they shall have been rated not lower than investment grade, that is, in one of
the four highest rating categories, by at least one Rating Agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by the holders thereof of all collections on the underlying mortgage
assets to which such holders are entitled. These ratings address the structural,
legal and issuer-related aspects associated with such certificates, the nature
of the underlying mortgage assets and the credit quality of the guarantor, if
any. Ratings on mortgage pass-through certificates do not represent any
assessment of the likelihood of principal prepayments by borrowers or of the
degree by which such prepayments might differ from those originally anticipated.
As a result, Certificateholders might suffer a lower than anticipated yield,
and, in addition, holders of Stripped Interest Certificates might, in extreme
cases fail to recoup their initial investments. Furthermore, ratings on mortgage
pass-through certificates do not address the price of such certificates or the
suitability of such certificates to the investor.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning rating
organization. Each security rating should be evaluated independently of any
other security rating.
107
INDEX OF PRINCIPAL TERMS
1986 Act ................................................................. 75
1998 Policy Statement .................................................... 104
Accrual Certificates ..................................................... 4
Accrued Certificate Interest ............................................. 34
Act ...................................................................... 67
ADA ...................................................................... 70
ARM Loans ................................................................ 23
Available Distribution Amount ............................................ 33
Bankruptcy Code .......................................................... 64
Book-Entry Certificates .................................................. 33
Call Risk ................................................................ 10
Cash Flow Agreement ...................................................... 6
CERCLA ................................................................... 67
Certificate Account ...................................................... 26
Certificate Balance ...................................................... 4
Certificate Owner ........................................................ 39
Certificates ............................................................. i
Code ..................................................................... 7,72
Commercial Properties .................................................... 1,20
Commission ............................................................... iii
Companion Class .......................................................... 35
Condemnation Proceeds .................................................... 46
Controlled Amortization Class ............................................ 35
Controlled Amortization Classes .......................................... 3
Cooperatives ............................................................. 20
CPR ...................................................................... 29
Credit Support ........................................................... 5
Cut-off Date ............................................................. 5,35
DBNY ..................................................................... 101
DBSI ..................................................................... 101
Debt Service Coverage Ratio .............................................. 21
Definitive Certificates .................................................. 33
Depositor ................................................................ i
Determination Date ....................................................... 27,33
Deutsche Bank Group ...................................................... 32
Disqualified Organization ................................................ 86
Distribution Date ........................................................ 4
Distribution Date Statement .............................................. 36
DMARC Trustv ............................................................. 32
DOL ...................................................................... 99
DTC ...................................................................... iv,38
DTC Participants ......................................................... 39
Due Dates ................................................................ 22
Due Period ............................................................... 27
Equity Participation ..................................................... 23
ERISA .................................................................... 7,99
ERISA Plans .............................................................. 99
Excess Funds ............................................................. 31
Exchange Act ............................................................. iv
Exemption ................................................................ 101
Exemption Rating Agencies ................................................ 101
Extension Risk ........................................................... 10
FAMC ..................................................................... 25
FHLMC .................................................................... 25
Financial Intermediary ................................................... 39
FNMA ..................................................................... 25
Garn Act ................................................................. 68
GNMA ..................................................................... 25
Grantor Trust Certificates ............................................... 7
Insurance Proceeds ....................................................... 46
IRS ...................................................................... 48
Letter of Credit Bank .................................................... 58
Liquidation Proceeds ..................................................... 46
Loan-to-Value Ratio ...................................................... 22
Lock-out Date ............................................................ 23
Lock-out Period .......................................................... 23
Manager .................................................................. 1
Master Servicer .......................................................... 1
MBS ......................................................................i,2,20
MBS Administrator ........................................................ 1
MBS Agreement ............................................................ 25
MBS Issuer ............................................................... 25
MBS Servicer ............................................................. 25
MBS Trustee .............................................................. 25
Mortgage Asset Pool ...................................................... i
Mortgage Asset Seller .................................................... 20
Mortgage Assets .......................................................... i,20
Mortgage Loans ...........................................................i,1,20
Mortgage Notes ........................................................... 20
Mortgage Rate ............................................................ 2
Mortgaged Property ....................................................... 20
Mortgages ................................................................ 20
Multifamily Properties ................................................... 20
Multifamily Property ..................................................... 1
Net Leases ............................................................... 22
Net Operating Income ..................................................... 21
Non-U.S. Person .......................................................... 91
Nonrecoverable Advance ................................................... 36
Notional Amount .......................................................... 4
OCC ...................................................................... 104
Offered Certificates ..................................................... i
OID Regulations .......................................................... 75
Original Issue Discount .................................................. 78
Originator ............................................................... 20
parties in interest ...................................................... 99
Pass-Through Entity ...................................................... 85
Pass-Through Rate ........................................................ 4
Percentage Interest ...................................................... 33
108
Permitted Investments .................................................... 45
Plan Asset Regulations ................................................... 100
Pooling Agreement ........................................................ 3
Prepayment Assumption .................................................... 76
Prepayment Interest Shortfall ............................................ 27
Prepayment Premium ....................................................... 23
Prospectus Supplement .................................................... i
Purchase Price ........................................................... 42
Random Lot Certificates .................................................. 75
Rating Agency ............................................................ 7
Record Date .............................................................. 33
Regular Certificateholder ................................................ 75
Regular Certificates ..................................................... 7
Related Proceeds ......................................................... 36
Relief Act ............................................................... 71
REMIC .................................................................... ii
REMIC Administrator ...................................................... iii,1
REMIC Certificates ....................................................... 72
REMIC Pool ............................................................... 72
REMIC Regulations ........................................................ 72
REO Property ............................................................. 43
Residual Certificateholders .............................................. 82
Residual Certificates .................................................... 7
Restricted Group ......................................................... 101
Retail Property .......................................................... 2,20
Senior Certificates ...................................................... 3
Senior Liens ............................................................. 20
Service .................................................................. 74
SMMEA .................................................................... 7
SPA ...................................................................... 29
Special Servicer ......................................................... 1
Standard Certificateholder ............................................... 92
Standard Certificates .................................................... 92
Startup Day .............................................................. 73
Stripped Certificateholder ............................................... 97
Stripped Certificates .................................................... 93
Stripped Interest Certificates ........................................... 3
Stripped Principal Certificates .......................................... 3
Sub-Servicer ............................................................. 45
Sub-Servicing Agreement .................................................. 45
Subordinate Certificates ................................................. 3
Tax Exempt Investor ...................................................... 103
Tax Favored Plans ........................................................ 99
Title V .................................................................. 70
Treasury ................................................................. 72
Trust Assets ............................................................. iii
Trust Fund ............................................................... i
Trustee .................................................................. 1
U.S. Person .............................................................. 87
UBTI ..................................................................... 103
UCC ...................................................................... 60
Underwriter .............................................................. 101
Value .................................................................... 22
Voting Rights ............................................................ 38
Warranting Party ......................................................... 42
109
This diskette relates to the Prospectus Supplement in regard to the COMM
2003-LNB1, Commercial Mortgage Pass-Through Certificates. This diskette should
be reviewed only in conjunction with the entire Prospectus Supplement. This
diskette does not contain all relevant information relating to the underlying
Mortgage Loans. Such information is described elsewhere in the Prospectus
Supplement. Any information contained on this diskette will be more fully
described elsewhere in the Prospectus Supplement. The information on this
diskette should not be viewed as projections, forecasts, predictions or opinions
with respect to value. Prior to making any investment decision, a prospective
investor shall receive and should carefully review the Prospectus Supplement.
"ANNEX A COMM 2003-LNB1.XLS" is a Microsoft Excel*, Version 5.0 spreadsheet that
provides in electronic format certain loan-level information shown in Appendix
A, as well as certain Mortgage Loan and Mortgaged Property information shown in
Appendix A. This spreadsheet can be put on a user-specified hard drive or
network drive. Open this file as you would normally open any spreadsheet in
Microsoft Excel. After the file is opened, a disclaimer will be displayed. READ
THE DISCLAIMER CAREFULLY.
NOTHING IN THIS DISKETTE SHOULD BE CONSIDERED AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY THE CERTIFICATES.
- ----------------
* Microsoft is a registered trademark of Microsoft Corporation.
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NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS AND
PROSPECTUS SUPPLEMENT. YOU MUST NOT RELY ON ANY AUTHORIZED INFORMATION OR
REPRESENTATIONS. THIS PROSPECTUS AND PROSPECTUS SUPPLEMENT IS AN OFFER TO SELL
ONLY THE CERTIFICATES OFFERED HEREBY, BUT ONLY UNDER CIRCUMSTANCES AND IN
JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN THIS
PROSPECTUS AND PROSPECTUS SUPPLEMENT IS CURRENT ONLY AS OF ITS DATE.
---------------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Executive Summary .................................................... S-4
Summary of the Prospectus Supplement ................................. S-7
Risk Factors ......................................................... S-24
Description of the Mortgage Pool ..................................... S-51
Description of the Offered Certificates .............................. S-110
Yield and Maturity Considerations .................................... S-129
The Pooling and Servicing Agreement .................................. S-137
Use of Proceeds ...................................................... S-173
Certain Federal Income Tax Consequences .............................. S-173
ERISA Considerations ................................................. S-175
Legal Investment ..................................................... S-177
Method of Distribution ............................................... S-177
Legal Matters ........................................................ S-178
Ratings .............................................................. S-178
Index of Principal Terms ............................................. S-180
Until the date that is ninety days from the date of this prospectus
supplement, all dealers that buy, sell or trade the Offered Certificates,
whether or not participating in this offering, may be required to deliver a
prospectus supplement and the accompanying prospectus. This is in addition to
the dealers' obligation to deliver a prospectus supplement and the accompanying
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
================================================================================
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$580,872,000
(APPROXIMATE)
DEUTSCHE BANK SECURITIES
ABN AMRO INCORPORATED
BANC OF AMERICA SECURITIES LLC
JPMORGAN
MERRILL LYNCH & CO.
COMM 2003-LNB1
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES
-----------------------
PROSPECTUS SUPPLEMENT
-----------------------
JUNE __, 2003
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