GE CAPITAL COMMERCIAL MORTGAGE CORPORATION Commercial Mortgage Pass-Through
Certificates, Series 2001-1, April 2001
Filed Pursuant to Rule 424(b)(5)
Registration File No.: 33-45884
The information in this prospectus supplement is not complete and may be
changed. This 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 APRIL 11, 2001
PRELIMINARY PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 11, 2001)
$997,635,000 (APPROXIMATE)
GE CAPITAL COMMERCIAL MORTGAGE CORPORATION
DEPOSITOR
GENERAL ELECTRIC CAPITAL CORPORATION, MORGAN GUARANTY TRUST COMPANY OF NEW YORK
AND BEAR, STEARNS FUNDING, INC.
MORTGAGE LOAN SELLERS
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2001-1
-------------------------
GE Capital Commercial Mortgage Corporation is offering certain classes of
the Series 2001-1 Commercial Mortgage Pass-Through Certificates, which
represent the beneficial ownership interests in a trust. The trust's assets
will primarily be 153 mortgage loans secured by first liens on 167 commercial,
multifamily and manufactured housing community properties and are generally the
sole source of payments on the certificates. The Series 2001-1 certificates are
not obligations of GE Capital Commercial Mortgage Corporation, the mortgage
loan sellers or any of their respective affiliates, and neither the
certificates nor the underlying mortgage loans are insured or guaranteed by any
governmental agency or any other person or entity.
-------------------------
Certain characteristics of the offered certificates include:
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INITIAL CLASS CERTIFICATE INITIAL PASS- EXPECTED
BALANCE OR PASS- THROUGH RATE ASSUMED FINAL RATINGS RATED FINAL
NOTIONAL AMOUNT (1) THROUGH RATE DESCRIPTION DISTRIBUTION DATE (5) MOODY'S/FITCH DISTRIBUTION DATE
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Class A-1 ..... $176,850,000 % Fixed October 15, 2010 Aaa/AAA May 15, 2033
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Class A-2 ..... $709,301,000 % Fixed March 15, 2011 Aaa/AAA May 15, 2033
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Class B ....... $ 45,737,000 % Fixed April 15, 2011 Aa2/AA May 15, 2033
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Class C ....... $ 50,025,000 % Fixed(3) April 15, 2011 A2/A May 15, 2033
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Class D ....... $ 15,722,000 % Fixed(3) April 15, 2011 A3/A- May 15, 2033
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- ----------
(Footnotes to table on page S-6)
The Securities and Exchange Commission and state securities regulators
have not approved or disapproved of the offered certificates or determined if
this prospectus supplement or the accompanying prospectus are truthful or
complete. Any representation to the contrary is a criminal offense.
-------------------------
GE Capital Commercial Mortgage Corporation will not list the offered
certificates on any securities exchange or on any automated quotation system of
any securities association such as NASDAQ.
-------------------------
INVESTING IN THE OFFERED CERTIFICATES INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE S-33 IN THIS PROSPECTUS SUPPLEMENT AND PAGE 14 OF THE
PROSPECTUS.
The underwriters, JPMorgan, a division of Chase Securities Inc. ("Chase
Securities"), Bear, Stearns & Co. Inc., Deutsche Bank Securities Inc. and
Salomon Smith Barney Inc., will purchase the offered certificates from GE
Capital Commercial Mortgage Corporation and will offer them to the public at
negotiated prices, plus accrued interest, determined at the time of sale. Chase
Securities and Bear, Stearns & Co. Inc. are acting as co-lead managers and
Chase Securities is sole bookrunner for the offering. The underwriters also
expect to deliver the offered certificates to purchasers in book-entry form
only through the facilities of The Depository Trust Company against payment in
New York, New York on or about April 30, 2001. We expect to receive from this
offering approximately % of the initial principal amount of the offered
certificates, plus accrued interest from April 1, 2001, before deducting
expenses payable by us.
JPMORGAN BEAR, STEARNS & CO. INC.
Book Running Manager
DEUTSCHE BANC ALEX. BROWN SALOMON SMITH BARNEY INC.
APRIL , 2001
GE CAPITAL COMMERCIAL MORTGAGE CORPORATION
Commercial Mortgage Pass-Through Certificates, Series 2001-1
New Hampshire Alabama Kansas
1 Property 2 Properties 3 Properties
$10,250,000 $6,223,093 $5,650,000
0.90% of total 0.54% of total 0.66% of total
Massachusetts Mississippi Missouri
3 Properties 4 Properties 3 Properties
$20,798,985 $17,357,520 $7,535,000
1.82% of total 1.52% of total 0.49% of total
Connecticut Kentucky Illinois
4 Properties 2 Properties 3 Properties
$58,372,387 $7,764,646 $33,021,023
5.11% of total 0.68% of total 2.89% of total
New Jersey Texas Indiana
4 Properties 20 Properties 1 Property
$31,478,642 $87,107,177 $3,031,836
2.75% of total 7.62% of total 0.27% of total
Washington DC Oklahoma Michigan
1 Property 2 Properties 3 Properties
$17,312,124 $6,105,351 $16,944,722
1.51% of total 0.53% of total 1.48% of total
Delaware New Mexico Pennsylvania
2 Properties 3 Properties 4 Properties
$7,563,225 $15,666,660 $18,031,322
0.66% of total 1.37% of total 1.58% of total
Maryland Colorado Ohio
5 Properties 9 Properties 2 Properties
$24,750,161 $40,968,673 $5,843,082
2.16% of total 3.58% of total 0.51% of total
Virginia Arizona New York
8 Properties 1 Property 5 Properties
$55,938,886 $2,275,000 $85,541,641
4.89% of total 0.20% of total 7.48% of total
North Carolina Utah Vermont
3 Properties 1 Property 1 Property
$16,602,880 $2,360,000 $3,273,262
1.45% of total 0.21% of total 0.29% of total
South Carolina Nevada Puerto Rico
4 Properties 3 Properties 1 Property
$39,639,873 $19,894,166 $16,350,000
3.47% of total 1.74% of total 1.43% of total
Georgia California Tennessee
9 Properties 27 Properties 2 Properties
$71,164,946 $228,604,488 $21,379,152
6.22% of total 19.99% of total 1.87% of total
Florida Oregon Washington
16 Properties 2 Properties 1 Property
$105,481,085 $11,041,194 $16,298,492
9.23% of total 0.97% of total 1.43% of total
Idaho
2 Properties
$5,800,000
0.51% of total
------- (less than) 1.00% ------- 5.01 - 10.00%
of Initial Pool Balance of Initial Pool Balance
------- -------
------- 1.01 - 5.00% ------- (greater than) 10.00%
of Initial Pool Balance of Initial Pool Balance
------- -------
GEOGRAPHIC OVERVIEW OF MORTGAGE POOL
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 begins with several introductory sections
describing the Series 2001-1 certificates and the trust in abbreviated form:
Summary of Certificates, commencing on page S-6 of this prospectus
supplement, which sets forth important statistical information relating to the
certificates;
Summary of Terms, commencing on page S-7 of this prospectus supplement,
which gives a brief introduction of the key features of the Series 2001-1
certificates and a description of the mortgage loans; and
Risk Factors, commencing on page S-33 of this prospectus supplement, which
describe risks that apply to the Series 2001-1 certificates which are in
addition to those described in the prospectus with respect to the securities
issued by the trust generally.
This prospectus supplement and the accompanying prospectus include cross
references to sections in these materials where you can find further related
discussions. The Tables of Contents in this prospectus supplement and the
prospectus identify the pages where these sections are located.
Certain capitalized terms are defined and used in this prospectus
supplement and the prospectus to assist you in understanding the terms of the
offered certificates and this offering. The capitalized terms used in this
prospectus supplement are defined on the pages indicated under the caption
"Index of Principal Definitions" beginning on page S-132 in this prospectus
supplement. The capitalized terms used in the prospectus are defined on the
pages indicated under the caption "Index of Principal Definitions" beginning on
page 110 in the prospectus.
In this prospectus supplement, the terms "Depositor," "we," "us" and "our"
refer to GE Capital Commercial Mortgage Corporation.
S-3
TABLE OF CONTENTS
SUMMARY OF CERTIFICATES ........................... S-6
SUMMARY OF TERMS .................................. S-7
RISK FACTORS ...................................... S-33
Geographic Concentration Entails Risks ......... S-33
Risks Relating to Loan Concentrations .......... S-33
Cross-Collateralized Mortgage Loans Entail
Risks ....................................... S-35
Ability to Incur Other Borrowings Entails
Risk ........................................ S-35
Borrower May Be Unable to Repay
Remaining Principal Balance on Maturity
Date or Anticipated Prepayment Date ......... S-36
Commercial, Multifamily and
Manufactured Housing Community
Lending Is Dependent Upon Net
Operating Income ............................ S-37
Tenant Concentration Entails Risk .............. S-38
Certain Additional Risks Relating to
Tenants ..................................... S-39
Mortgaged Properties Leased to Multiple
Tenants Also Have Risks ..................... S-39
Tenant Bankruptcy Entails Risks ................ S-40
Mortgage Loans Are Nonrecourse and Are
Not Insured or Guaranteed ................... S-40
Office Properties Have Special Risks ........... S-40
Retail Properties Have Special Risks ........... S-41
Multifamily Properties Have Special Risks ...... S-41
Hotel Properties Have Special Risks ............ S-42
Risks Relating to Affiliation with a
Franchise or Hotel Management
Company ..................................... S-43
Industrial Properties Have Special Risks ....... S-43
Manufactured Housing Community
Properties Have Special Risks ............... S-44
Self-Storage Properties Have Special Risks S-44
Lack of Skillful Property Management
Entails Risks ............................... S-45
Some Mortgaged Properties May Not Be
Readily Convertible to Alternative Uses ..... S-45
Mortgage Loans Secured By Leasehold
Interests May Expose Investors to
Greater Risks of Default and Loss ........... S-45
Limitations of Appraisals ...................... S-45
Your Lack of Control Over the Trust Fund
Can Create Risks ............................ S-46
Potential Conflicts of Interest ................ S-46
Directing Certificateholder May Direct
Special Servicer Actions .................... S-47
Bankruptcy Proceedings Entail Certain
Risks ....................................... S-47
Risks Relating to Prepayments and
Repurchases ................................. S-48
Risks Relating to Enforceability of Yield
Maintenance Charges or Defeasance
Provisions .................................. S-49
Risks Relating to Borrower Default ............. S-49
Risks Relating to Certain Payments ............. S-50
Risks of Limited Liquidity and Market Value S-50
Different Timing of Mortgage Loan
Amortization Poses Certain Risks ............ S-50
Subordination of Subordinate Offered
Certificates ................................ S-50
Environmental Risks Relating to the
Mortgaged Properties ........................ S-50
Tax Considerations Relating to Foreclosure S-51
Risks Associated with One Action Rules ......... S-51
Certain Legal Aspects of Mortgaged Loans
for Mortgaged Properties Located in
Puerto Rico ................................. S-52
Puerto Rico/United States Relationship ......... S-52
Property Insurance ............................. S-52
Zoning Compliance and Use Restrictions ......... S-52
Risks Relating to Costs of Compliance with
Applicable Laws and Regulations ............. S-53
No Reunderwriting of the Mortgage Loans ........ S-53
Litigation ..................................... S-53
Book-Entry Registration ........................ S-53
Risks of Inspections Relating to Properties S-53
Other Risks .................................... S-54
DESCRIPTION OF THE MORTGAGE POOL .................. S-55
General ........................................ S-55
Affiliated Borrower Concentrations ............. S-56
Significant Mortgage Loans ..................... S-56
APD Loans ...................................... S-56
Certain Terms and Conditions of the
Mortgage Loans .............................. S-57
Prepayment Provisions ....................... S-58
Defeasance; Collateral Substitution ......... S-58
Substitution; 59 Maiden Lane Loan ........... S-59
Substitution; EII Portfolio II Loan ......... S-59
Substitution; Ingles Portfolio Loan ......... S-60
"Due-on-Sale" and
"Due-on-Encumbrance" Provisions .......... S-60
Additional Mortgage Loan Information ........... S-61
Underwritten Net Cash Flow ..................... S-69
Revenue ..................................... S-70
Expenses .................................... S-70
Replacement Reserves. ....................... S-70
Assessments of Property Condition .............. S-71
Property Inspections ........................ S-71
Appraisals. ................................. S-71
Environmental Reports ....................... S-71
Building Condition Reports .................. S-71
S-4
Earthquake Analyses ........................... S-71
The Mortgage Loan Sellers ........................ S-71
Underwriting Standards ........................... S-72
GECC's Underwriting Standards .................... S-72
General ....................................... S-72
Loan Analysis ................................. S-72
Loan Approval ................................. S-72
Debt Service Coverage Ratio and LTV
Ratio ...................................... S-72
Escrow Requirements ........................... S-73
Morgan Guaranty and Chase's
Underwriting Standards ........................ S-74
General ....................................... S-74
Loan Analysis ................................. S-74
Loan Approval ................................. S-74
Debt Service Coverage Ratio and LTV
Ratio ...................................... S-74
Escrow Requirements ........................... S-75
BSFI's Underwriting Standards ....................... S-75
General ....................................... S-75
Loan Analysis ................................. S-76
Loan Approval ................................. S-76
Debt Service Coverage Ratio and LTV
Ratio ...................................... S-76
Escrow Requirements ........................... S-76
Representations and Warranties;
Repurchases and Substitutions ................. S-77
Lock Box Accounts ................................ S-82
DESCRIPTION OF THE CERTIFICATES ..................... S-84
General .......................................... S-84
Paying Agent, Certificate Registrar and
Authenticating Agent .......................... S-85
Book-Entry Registration and Definitive
Certificates .................................. S-85
General ....................................... S-85
Definitive Certificates ....................... S-87
Distributions .................................... S-87
Method, Timing and Amount ..................... S-87
Priority ...................................... S-89
Pass-Through Rates ............................ S-92
Interest Distribution Amount .................. S-93
Principal Distribution Amount ................. S-94
Certain Calculations with Respect to
Individual Mortgage Loans .................. S-94
Excess Interest. .............................. S-95
Allocation of Yield Maintenance Charges .......... S-95
Assumed Final Distribution Date; Rated
Final Distribution Date ....................... S-96
Subordination; Allocation of Collateral
Support Deficit ............................... S-96
Advances ......................................... S-98
Appraisal Reductions ............................. S-100
Reports to Certificateholders; Certain
Available Information ......................... S-101
Voting Rights .................................... S-105
Termination; Retirement of Certificates .......... S-105
The Trustee ...................................... S-106
SERVICING OF THE MORTGAGE LOANS ..................... S-107
General .......................................... S-107
The Master Servicer .............................. S-109
The Special Servicer ............................. S-109
Replacement of the Special Servicer .............. S-110
Servicing and Other Compensation and
Payment of Expenses ........................... S-110
Maintenance of Insurance ......................... S-111
Modifications, Waiver and Amendments ............. S-112
Directing Certificateholder ...................... S-114
Limitation on Liability of Directing
Certificateholder ............................. S-115
Realization Upon Defaulted Mortgage
Loans ......................................... S-115
Inspections; Collection of Operating
Information ................................... S-117
Certain Matters Regarding the Master
Servicer, the Special Servicer and the
Depositor ..................................... S-117
Events of Default ................................ S-119
Rights Upon Event of Default ..................... S-120
Amendment ........................................ S-120
YIELD AND MATURITY CONSIDERATIONS ................... S-122
Yield Considerations ............................. S-122
General ....................................... S-122
Pass-Through Rate ............................. S-122
Rate and Timing of Principal Payments ......... S-122
Losses and Shortfalls ......................... S-123
Certain Relevant Factors ...................... S-123
Delay in Payment of Distributions ............. S-123
Unpaid Distributable Certificate Interest S-124
Weighted Average Life ............................ S-124
Yield Sensitivity of the Offered Certificates S-128
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES ..................................... S-128
METHOD OF DISTRIBUTION .............................. S-129
LEGAL MATTERS ....................................... S-130
RATINGS ............................................. S-131
LEGAL INVESTMENT .................................... S-131
ERISA CONSIDERATIONS ................................ S-131
INDEX OF PRINCIPAL DEFINITIONS ...................... S-134
S-5
SUMMARY OF CERTIFICATES
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INITIAL
CLASS INITIAL
CERTIFICATE PASS- ASSUMED PASS- WEIGHTED PRINCIPAL OR
BALANCE OR THROUGH FINAL THROUGH AVERAGE EXPECTED NOTIONAL
NOTIONAL APPROXIMATE RATE DISTRIBUTION RATE LIFE RATINGS PRINCIPAL
CLASS AMOUNT (1) CREDIT SUPPORT DESCRIPTION DATE (5) (APPROX.) (YRS.) (6) CUSIP NO. (MOODY'S/FITCH) WINDOW (6)
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OFFERED CERTIFICATES
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A-1 $ 176,850,000 22.500% Fixed 10/10 % 5.70 Aaa/AAA 5/01-10/10
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A-2 $ 709,301,000 22.500% Fixed 3/11 % 9.74 Aaa/AAA 10/10-3/11
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B $ 45,737,000 18.500% Fixed 4/11 % 9.89 Aa2/AA 3/11-4/11
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C $ 50,025,000 14.125% Fixed (3) 4/11 % 9.96 A2/A 4/11-4/11
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D $ 15,722,000 12.750% Fixed (3) 4/11 % 9.96 A3/A- 4/11-4/11
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NON-OFFERED CERTIFICATES
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Variable
X-1 $1,143,420,694 N/A Interest Only (2) N/A % N/A N/A N/A N/A
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Variable
X-2 $ 641,484,000 N/A Interest Only (2) N/A % N/A N/A N/A N/A
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E $ 31,444,00 10.000% Fixed (3) N/A % N/A N/A N/A N/A
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F $ 14,292,000 8.750% Variable (4) N/A % N/A N/A N/A N/A
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G $ 25,727,000 6.500% Fixed (3) N/A % N/A N/A N/A N/A
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H $ 18,581,000 4.875% Fixed (3) N/A % N/A N/A N/A N/A
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I $ 10,005,000 4.000% Fixed (3) N/A % N/A N/A N/A N/A
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J $ 10,005,000 3.125% Fixed (3) N/A % N/A N/A N/A N/A
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K $ 14,293,000 1.875% Fixed (3) N/A % N/A N/A N/A N/A
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L $ 4,287,000 1.500% Fixed (3) N/A % N/A N/A N/A N/A
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M $ 17,151,694 N/A Fixed (3) N/A % N/A N/A N/A N/A
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(1) Approximate, subject to a permitted variance of plus or minus 10%.
(2) The aggregate of the pass-through rates on the Class X-1 and Class X-2
certificates will be equal to the excess, if any, of (1) the weighted
average of the net interest rates on the mortgage loans determined
without regard to any reductions in the interest rate resulting from
modification of the mortgage loans (in each case converted, if necessary,
to a rate expressed on the basis of a 360-day year consisting of twelve
30-day months), over (2) the weighted average of the pass-through rates
of the other certificates (other than the residual certificates and the
Class S certificates) as described in this prospectus supplement.
(3) For any distribution date, if the weighted average of the net interest
rates on the mortgage loans determined without regard to any reductions
in the interest rate resulting from modification of the mortgage loans
(in each case converted, if necessary, to a rate expressed on the basis
of a 360-day year consisting of twelve 30-day months) as of the first day
of the related due period is less than the rate specified for the Class
C, Class D, Class E, Class G, Class H, Class I, Class J, Class K, Class L
and Class M certificates with respect to the distribution date, then the
pass-through rate for that class of certificates on that distribution
date will equal such weighted average net mortgage interest rate.
(4) It is anticipated that the pass-through rate applicable to the Class F
certificates on each distribution date will be equal to the weighted
average of the net interest rates on the mortgage loans determined
without regard to any reductions in the interest rate resulting from
modification of the mortgage loans (in each case converted, if necessary,
to a rate expressed on the basis of a 360-day year consisting of twelve
30-day months) minus % per annum.
(5) The assumed final distribution dates set forth in this prospectus
supplement have been determined on the basis of the assumptions described
in "Description of the Certificates--Assumed Final Distribution Date;
Rated Final Distribution Date" in this prospectus supplement. The rated
final distribution date for each class of certificates is May 15, 2033.
See "Description of the Certificates--Assumed Final Distribution Date;
Rated Final Distribution Date" in this prospectus supplement.
(6) The weighted average life and period during which distributions of
principal would be received set forth in the foregoing table with respect
to each class of certificates is based on the assumptions set forth under
"Yield and Maturity Considerations-- Weighted Average Life" in this
prospectus supplement and on the assumptions that there are no prepayments
(other than on each anticipated prepayment date, if any) or losses on the
mortgage loans and that there are no extensions of maturity dates of
mortgage loans.
The Class X-1, Class X-2, Class E, Class F, Class G, Class H, Class I,
Class J, Class K, Class L and Class M certificates are not offered by this
prospectus supplement. The Class S, Class R and Class LR certificates are not
offered by this prospectus supplement or represented in this table.
S-6
SUMMARY OF TERMS
This summary highlights selected information from this prospectus
supplement. It does not contain all of the information you need to consider in
making your investment decision. To understand all of the terms of the offering
of the offered certificates, read this entire document and the accompanying
prospectus carefully.
RELEVANT PARTIES AND DATES
Depositor................... GE Capital Commercial Mortgage Corporation, a
Delaware corporation. The principal executive
offices of the depositor are located at 292 Long
Ridge Road, Stamford, Connecticut 06927 and its
telephone number is (203) 357-4000. The depositor
is a wholly-owned subsidiary of General Electric
Capital Corporation. All outstanding common stock
of General Electric Capital Corporation is owned
by General Electric Capital Services, Inc., the
common stock of which is in turn wholly owned
directly or indirectly by The General Electric
Company. See "The Depositor" in the prospectus.
Master Servicer............. GE Capital Loan Services, Inc., a Delaware
corporation. The master servicer's principal
address is 363 North Sam Houston Parkway East,
Suite 140, Houston, Texas 77060, and its
telephone number is (281) 405-7000. See
"Servicing of the Mortgage Loans--The Master
Servicer" in this prospectus supplement. The
master servicer is an affiliate of the depositor.
Primary Servicer............ GE Capital Loan Services, Inc., as master
servicer, will be responsible for the primary
servicing of the mortgage loans sold to the
depositor by the mortgage loan sellers. Under the
pooling and servicing agreement, the primary
servicer is permitted to hire subservicers with
respect to its primary servicing duties, and GE
Capital Loan Services, Inc. has informed the
depositor that it intends to use one or more
subservicers on certain of the mortgage loans.
See "Servicing of the Mortgage Loans--The Primary
Servicers" in this prospectus supplement.
Special Servicer............ Midland Loan Services, Inc., a Delaware
corporation. The special servicer's address is
210 West 10th Street, 6th Floor, Kansas City,
Missouri 64105, and its telephone number is (816)
435-5000. Under the Pooling and Servicing
Agreement, the special servicer is permitted to
hire subservicers with respect to its special
servicing duties, and has informed the depositor
that it intends to use a subservicer. See
"Servicing of the Mortgage Loans--The Special
Servicer" in this prospectus supplement.
Trustee..................... LaSalle Bank National Association, a national
banking association. The trustee's address is 135
South LaSalle Street, Suite 1625, Chicago,
Illinois 60603, and its telephone number is (312)
904-7807. See "Description of the
Certificates--The Trustee" in this prospectus
supplement.
S-7
Fiscal Agent................ ABN AMRO Bank N.V., a Netherlands banking
corporation and indirect corporate parent of the
trustee.
Paying Agent................ The Chase Manhattan Bank. The Chase Manhattan
Bank will also act as the certificate registrar
and authenticating agent. The paying agent's
address is 450 West 33rd Street, 14th Floor, New
York, New York 10001, and its telephone number is
(212) 946-3200. See "Description of the
Certificates--Paying Agent, Certificate Registrar
and Authenticating Agent" in this prospectus
supplement.
Mortgage Loan Sellers....... General Electric Capital Corporation, a New
York corporation, which is contributing
approximately 58.70% of the mortgage loans by
aggregate principal balance as of the cut-off
date, Morgan Guaranty Trust Company of New York,
which is contributing approximately 30.47% of the
mortgage loans by aggregate principal balance as
of the cut-off date, and Bear, Stearns Funding,
Inc., a Delaware corporation, which is
contributing approximately 10.83% of the mortgage
loans by aggregate principal balance as of the
cut-off date. General Electric Capital
Corporation is an affiliate of the master and
primary servicer and the parent of the depositor.
Morgan Guaranty Trust Company of New York is an
affiliate of The Chase Manhattan Bank, the paying
agent and is also an affiliate of Chase
Securities, one of the underwriters. Morgan
Guaranty Trust Company of New York, The Chase
Manhattan Bank, and Chase Manhattan Bank USA,
National Association are the principal bank
subsidiaries of J.P. Morgan Chase & Co. On
December 31, 2000, J.P. Morgan & Co. Incorporated
merged with and into The Chase Manhattan
Corporation, which thereupon changed its name to
"J.P. Morgan Chase & Co." It is anticipated that
The Chase Manhattan Bank and Morgan Guaranty
Trust Company of New York will merge on July 14,
2001. Bear, Stearns Funding, Inc. is an affiliate
of Bear, Stearns & Co. Inc., one of the
underwriters. See "Description of the Mortgage
Pool--The Mortgage Loan Sellers" in this
prospectus supplement.
Cut-off Date................ April 11, 2001.
Closing Date................ On or about April 30, 2001.
Distribution Date........... The 15th day of each month or, if such 15th day
is not a business day, the business day
immediately following such 15th day, beginning in
May 2001.
Interest Accrual Period..... Interest will accrue on the offered
certificates during the calendar month prior to
the related distribution date and will be
calculated assuming that each month has 30 days
and each year has 360 days.
Due Period.................. The period commencing on the second day of the
month preceding the month in which the related
distribution date
S-8
occurs and ending on the first day of the month
in which the related distribution date occurs
or, with respect to 22 mortgage loans,
representing approximately 17.03% of the
aggregate principal balance of the pool of
mortgage loans as of the cut-off date, the
period commencing on the 11th day of the month
preceding the month in which the related
distribution date occurs and ending on the 10th
day of the month in which the related
distribution date occurs or, with respect to one
mortgage loan, representing approximately 2.53%
of the aggregate principal balance of the pool
of mortgage loans as of the cut-off date, the
period commencing on the 12th day of the month
preceding the month in which the related
distribution date occurs and ending on the 11th
day of the month in which the related
distribution date occurs.
Determination Date.......... The earlier of (i) the 11th day of the month in
which the related distribution date occurs, or if
such 11th day is not a business day, then the
immediately preceding business day, and (ii) the
4th business day prior to the related
distribution date.
OFFERED SECURITIES
General..................... We are offering the following five classes of
commercial mortgage pass-through certificates as
part of Series 2001-1:
o Class A-1
o Class A-2
o Class B
o Class C
o Class D
Series 2001-1 will consist of a total of 19
classes, the following fourteen of which are not
being offered through this prospectus supplement
and the accompanying prospectus: Class X-1,
Class X-2, Class E, Class F, Class G, Class H,
Class I, Class J, Class K, Class L, Class M,
Class S, Class R and Class LR.
The Series 2001-1 certificates will collectively
represent beneficial ownership interests in a
trust created by GE Capital Commercial Mortgage
Corporation. The trust's assets will primarily
be 153 mortgage loans secured by first liens on
167 commercial, multifamily and manufactured
housing community properties.
Certificate Principal Amounts
and Notional Amount........ Your certificates will have the approximate
aggregate initial principal amount or notional
amount set forth below, subject to a variance of
plus or minus 10%:
Class A-1 ....... $176,850,000 principal amount
Class A-2 ....... $709,301,000 principal amount
Class B ......... $45,737,000 principal amount
Class C ......... $50,025,000 principal amount
Class D ......... $15,722,000 principal amount
S-9
See "Description of the Certificates--General"
in this prospectus supplement.
Pass-Through Rates
A. Offered Certificates.... Your certificates will accrue interest at an
annual rate called a pass-through rate which is
set forth below for each class of certificates:
Class A-1 .......................... %
Class A-2 .......................... %
Class B ............................ %
Class C ............................ %(1)
Class D ............................ %(1)
----------
(1) For any distribution date, if the weighted
average of the net interest rates on the
mortgage loans determined without regard
to any reductions in the interest rate
resulting from modification of the
mortgage loans (in each case converted, if
necessary, to a rate expressed on the
basis of a 360-day year consisting of
twelve 30-day months and net of all
servicing and trustee fees) as of the
first day of the related due period is
less than the rate specified for the Class
C or Class D certificates with respect to
the distribution date, then the
pass-through rate for that class of
certificates on that distribution date
will equal such weighted average net
mortgage interest rate.
B. Interest Rate Calculation
Convention............... Interest on your certificates will be
calculated based on a 360-day year consisting of
twelve 30-day months (i.e., a 30/360 basis).
For purposes of calculating the limit on the
pass-through rates on the Class B, Class C and
Class D certificates and the pass-through rate
on the non-offered certificates, the mortgage
loan interest rates will not reflect any default
interest rate, any rate increase occurring after
an anticipated prepayment date, any loan term
modifications agreed to by the special servicer
or any modifications resulting from a borrower's
bankruptcy or insolvency. In addition, all of
the mortgage loans accrue interest based on a
360-day year and the actual number of days
elapsed, also known as an actual/360 basis;
except that one mortgage loan, representing
approximately 1.20% of the aggregate principal
balance of the pool of mortgage loans as of the
cut-off date, accrues interest on the basis of a
360-day year consisting of twelve 30-day months,
also known as a "30/360" basis. The interest
rate for each mortgage loan will be
recalculated, if necessary, so that the amount
of interest that would accrue at that rate in
that month, calculated on a 30/360 basis, will
equal the amount of interest that is required to
be paid on that mortgage loan in that month,
subject to certain adjustments as described in
"Description of the Certificates--
Distributions--Pass-Through Rates" in this
prospectus supplement. See "Description of the
Certificates--Distributions--
S-10
Pass-Through Rates" and "Description of the
Certificates-- Distributions--Interest
Distribution Amount" in this prospectus
supplement.
Distributions
A. Amount and Order of
Distributions............ On each distribution date, funds from the
mortgage loans available for distribution to the
certificates, net of specified trust expenses,
will be distributed in the following amounts and
order of priority:
First/Class A-1, Class A-2, Class X-1 and Class
X-2: To interest on Class A-1, Class A-2, Class
X-1 and Class X-2, pro rata, in accordance with
their interest entitlements.
Second/Class A-1 and Class A-2: To the extent of
funds allocated to principal, to principal on
Class A-1 and Class A-2, in that order, until
reduced to zero. If the principal amount of each
class of certificates other than Class A-1 and
Class A-2 has been reduced to zero, funds
available for principal will be distributed to
Class A-1 and Class A-2, pro rata, rather than
sequentially.
Third/Class A-1 and Class A-2: After the
principal amount of each class of certificates
other than Class A-1 and Class A-2 has been
reduced to zero, to reimburse Class A-1 and
Class A-2, pro rata, for any previously
unreimbursed losses on the mortgage loans
allocable to principal that were previously
borne by those classes, together with interest.
Fourth/Class B: To Class B as follows: (a) to
interest on Class B in the amount of its
interest entitlement; (b) to the extent of funds
allocated to principal remaining after
distributions in respect of principal to each
Class with a higher priority (in this case,
Class A-1 and Class A-2), to principal on Class
B until reduced to zero; and (c) to reimburse
Class B for any previously unreimbursed losses
on the mortgage loans allocable to principal
that were previously borne by that class,
together with interest.
Fifth/Class C: To Class C in a manner analogous
to the Class B allocations of priority Fourth
above.
Sixth/Class D: To Class D in a manner analogous
to the Class B allocations of priority Fourth
above.
Seventh/Non-offered Certificates (other than the
Class X-1 and Class X-2 Certificates): In the
amounts and order of priority described in
"Description of the
Certificates--Distributions--
Priority" in this prospectus supplement.
B. Interest and Principal
Entitlements............. A description of each class's interest
entitlement can be found in "Description of the
Certificates--Distributions--Interest
Distribution Amount" in this prospectus
supplement.
A description of the amount of principal
required to be
S-11
distributed to the classes entitled to principal
on a particular distribution date also can be
found in "Description of the
Certificates--Distributions--Principal
Distribution Amount" in this prospectus
supplement.
C. Yield Maintenance
Charges and Prepayment
Premiums................ Yield maintenance charges with respect to the
related mortgage loan will be allocated between
the Class A through Class F certificates and the
Class X-1 and Class X-2 certificates by using the
Base Interest Fraction, as defined herein.
Prepayment premiums with respect to the related
mortgage loan will be allocated to the Class X-1
and Class X-2 certificates.
For an explanation of the calculation of yield
maintenance charges, see "Description of the
Mortgage Pool--Certain Terms and Conditions of
the Mortgage Loans--Prepayment Provisions" in
this prospectus supplement.
See "Description of the Certificates--Allocation
of Yield Maintenance Charges" in this prospectus
supplement.
Subordination
A. General................. The chart below describes the manner in which
the payment rights of certain classes will be
senior or subordinate, as the case may be, to the
payment rights of other classes. The chart shows
the entitlement to receive principal and interest
(other than excess interest) on any distribution
date in descending order (beginning with the
Class A-1, Class A-2, Class X-1 and Class X-2
certificates). It also shows the manner in which
mortgage loan losses are allocated in ascending
order (beginning with the other Series 2001-1
certificates that are not being offered by this
prospectus supplement). However, no principal
payments or loan losses will be allocated to the
Class X-1 and Class X-2 certificates, although
loan losses will reduce the notional amount of
the Class X-1 and Class X-2 certificates and,
therefore, the amount of interest they accrue.
S-12
------------------------------
Class A-1, Class A-2,
Class X-1 and Class X-2*
------------------------------
----------------
Class B
----------------
----------------
Class C
----------------
----------------
Class D
----------------
----------------
Private
certificates**
----------------
* The Class X-1 and Class X-2 certificates
are interest-only certificates and are not
offered hereby.
** Other than the Class S, Class R and Class
LR certificates.
No other form of credit enhancement will be
available for the benefit of the holders of the
offered certificates.
Any allocation of a loss to a class of
certificates will reduce the principal amount of
that class.
See "Description of the Certificates" in this
prospectus supplement.
B. Shortfalls in
Available Funds......... The following types of shortfalls in available
funds will reduce distributions to the classes of
certificates with the lowest payment priorities:
shortfalls resulting from additional
compensation, other than the servicing fee, which
the master servicer or the special servicer is
entitled to receive; shortfalls resulting from
interest on advances made by the master servicer,
the special servicer, the trustee or the fiscal
agent (to the extent not covered by default
interest and late charges paid by the borrower as
described herein); shortfalls resulting from
extraordinary expenses of the trust; and
shortfalls resulting from a modification of a
mortgage loan's interest rate or principal
balance or from other unanticipated or
default-related expenses of the trust.
See "Description of the
Certificates--Distributions--Priority" in this
prospectus supplement.
S-13
Advances
A. P&I Advances............ The master servicer is required to advance
delinquent periodic mortgage loan payments if it
determines that the advance will be recoverable.
The master servicer will not be required to
advance balloon payments due at maturity in
excess of a regular periodic payment, interest in
excess of a mortgage loan's regular interest rate
or yield maintenance charges. There may be other
circumstances in which the master servicer will
not be required to advance one full month of
principal and/or interest. If the master servicer
fails to make a required advance, the trustee
will be required to make the advance. If the
trustee fails to make a required advance, the
fiscal agent will be required to make the
advance. None of the master servicer, the trustee
or the fiscal agent is required to advance
amounts deemed non-recoverable. See "Description
of the Certificates--Advances" in this prospectus
supplement. If an interest advance is made, the
master servicer will not advance its servicing
fee, but will advance the trustee's fee.
B. Property Protection
Advances................ The master servicer or, in certain limited
instances, the special servicer, may be required
to make advances to pay delinquent real estate
taxes, assessments and hazard insurance premiums
and similar expenses necessary to protect and
maintain the mortgaged property, to maintain the
lien on the mortgaged property or enforce the
related mortgage loan documents. If the master
servicer fails to make a required advance of this
type, the trustee is required to make this
advance. If the trustee fails to make a required
advance of this type, the fiscal agent will be
required to make this advance. None of the master
servicer, the special servicer, the trustee or
the fiscal agent is required to advance amounts
deemed non-recoverable. See "Description of the
Certificates--Advances" in this prospectus
supplement.
C. Interest on Advances..... The master servicer, the special servicer, the
trustee and the fiscal agent, as applicable, will
be entitled to interest on all advances,
compounded monthly, at the "Prime Rate" as
published in The Wall Street Journal as described
in this prospectus supplement; provided, however,
that with respect to advances for periodic
mortgage loan payments made prior to the
expiration of any grace period for such mortgage
loan, interest on such advances will only accrue
from and after the expiration of such grace
period. Interest accrued on outstanding advances
may result in reductions in amounts otherwise
payable on the certificates.
See "Description of the Certificates--Advances"
and "--Subordination; Allocation of Collateral
Support Deficit" in this prospectus supplement
and "Description of the Certificates--Advances
in Respect of Delinquencies" and "Description of
the Pooling Agreements--Certificate Account" in
the prospectus.
S-14
Reports to
Certificateholders.......... On each distribution date, the following reports,
among others, will be available to
Certificateholders and will contain the
information described under "Description of the
Offered Certificates--Reports to
Certificateholders; Certain Available
Information" in this prospectus supplement:
o Delinquent Loan Status Report,
o Historical Liquidation Report,
o Historical Loan Modification Report,
o REO Status Report,
o Servicer Watch List, and
o Comparative Financial Status Report.
It is expected that each report will be in the
form recommended by the Commercial Mortgage
Securities Association (to the extent any
changes thereto are reasonably acceptable to the
master servicer or special servicer, as
applicable). Upon reasonable prior notice,
Certificateholders may also review at the paying
agent's offices during normal business hours a
variety of information and documents that
pertain to the pooled mortgage loans and the
mortgaged properties securing those loans. We
expect that the available information and
documents will include borrower operating
statements, rent rolls and property inspection
reports to the extent received by the paying
agent from the servicer or special servicer.
See "Description of the Offered
Certificates--Reports to Certificateholders;
Certain Available Information" in this
prospectus supplement.
THE MORTGAGE LOANS
The Mortgage Pool........... The trust's primary assets will be 153 fixed
rate mortgage loans, each evidenced by one or
more promissory notes secured by first mortgages,
deeds of trust or similar security instruments on
the fee and/or leasehold estate of the related
borrower in 167 commercial, multifamily and
manufactured housing community properties.
The following tables set forth certain
anticipated characteristics of the mortgage
loans as of the later of the cut-off date or the
origination date. The sum in any column may not
equal the indicated total due to rounding.
Unless otherwise indicated, all figures
presented in this summary section are calculated
as described under "Description of the Mortgage
Pool--Additional Mortgage Loan Information" in
this prospectus supplement and all percentages
represent the indicated percentage of the
aggregate principal balance of the pool of
mortgage loans as of the later of the cut-off
date or the origination date. The principal
balance of each mortgage loan as of the later of
the cut-off date or the origination date assumes
the timely receipt of principal scheduled to be
paid in April 2001 on each mortgage loan and no
defaults, delinquencies or prepayments on any
mortgage loan as of the cut-off date.
S-15
The mortgage loans will have the following
approximate characteristics as of the later of
the origination date and the cut-off date:
Aggregate principal balance (1) ......... $1,143,420,694
Number of mortgage loans ................ 153
Number of mortgaged properties........... 167
Number of balloon mortgage
loans (2) ............................... 135
Number of mortgage loans with
anticipated prepayment dates............. 16
Number of fully amortizing
mortgage loans .......................... 2
Range of mortgage loan principal
balances ................................ $925,000 to $50,000,000
Average mortgage loan principal
balance ................................. $7,473,338
Range of mortgage rates ................. 7.00% to 8.85%
Weighted average mortgage rate........... 7.65%
Range of original terms to
maturity (3)(4) ......................... 60 to 240 months
Weighted average original term to
maturity (3)(4) ......................... 121 months
Range of remaining terms to
maturity (3)(4) ......................... 56 months to 237 months
Weighted average remaining term
to maturity (3)(4) ...................... 119 months
Range of original amortization
terms ................................... 238 months to 360 months
Weighted average original
amortization term ....................... 349 months
Range of remaining amortization
terms ................................... 236 months to 360 months
Weighted average remaining
amortization term ....................... 347 months
Range of loan-to-value ratios as of
the later of the origination date
and the cut-off date .................... 25.00% to 81.69%
Weighted average loan-to-value
ratio as of the later of the
origination date and the cut-off
date .................................... 70.03%
S-16
Range of loan-to-value ratios as of
the maturity date (3) ................... 0.00% to 74.28%
Weighted average loan-to-value
ratio as of the maturity
date (3) ................................ 60.76%
Range of occupancy rates (5) ............ 71.84% to 100.00%
Weighted average occupancy
rate (5) ................................ 96.62%
Range of debt service coverage
ratios .................................. 1.14x to 2.75x
Weighted average debt service
coverage ratio .......................... 1.41x
----------
(1) Subject to a permitted variance of plus or
minus 10%.
(2) Includes seven mortgage loans, representing
approximately 1.52% of the aggregate
principal balance of the mortgage loans as
of the cut-off date, that pay interest-only
for the first 25 scheduled payments of
their term.
(3) In the case of 16 mortgage loans, the
anticipated prepayment date.
(4) For the 11 mortgage loans with a first
payment date of either 6/1/01 or 6/10/01,
representing 5.57% of the aggregate
principal balance of the pool of mortgage
loans as of the cut-off date, the "Original
Term to Maturity" and the "Remaining Term
to Maturity" are calculated as the term
between the first payment date and the
maturity date.
(5) Excludes 11 hotel properties, representing
approximately 6.04% of the aggregate
principal balance of the pool of mortgage
loans as of the cut-off date, which have
occupancy rates that generally range from
56.35% to 84.88%; if the mortgage loans
secured by hotel properties are included,
the range of occupancy rates of all the
mortgaged properties is 56.35% to 100.00%
and the weighted average occupancy rate of
all the mortgaged properties is 95.17%.
SELLERS OF THE MORTGAGE LOANS
AGGREGATE
NUMBER OF PRINCIPAL
MORTGAGE BALANCE OF THE % OF INITIAL
LOANS/MORTGAGED MORTGAGE POOL
SELLER PROPERTIES LOANS BALANCE
------ ---------- ----- -------
General Electric Capital
Corporation ............ 98/109 $ 671,207,923 58.70%
Morgan Guaranty Trust
Company of New
York ................... 39/39 348,393,472 30.47
Bear, Stearns Funding,
Inc. ................... 16/19 123,819,299 10.83
------ -------------- ------
Total .................. 153/167 $1,143,420,694 100.00%
======= ============== ======
S-17
CURRENT USES OF THE MORTGAGED PROPERTIES
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
MORTGAGED MORTGAGE POOL
CURRENT USE PROPERTIES LOANS BALANCE
----------- ---------- ----- -------
Office .................. 46 $ 479,400,087 41.93%
Anchored Retail ......... 40 269,367,316 23.56
Multifamily ............. 22 158,451,443 13.86
Hotel ................... 11 69,061,668 6.04
Self Storage ............ 16 55,313,763 4.84
Manufactured Housing..... 12 39,188,531 3.43
Unanchored Retail ....... 11 37,137,103 3.25
Industrial .............. 8 30,511,821 2.67
Parking Garage .......... 1 4,988,962 0.44
-- -------------- ------
Total ................... 167 $1,143,420,694 100.00%
=== ============== ======
----------
(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 (generally
allocating the mortgage loan principal
amount to each of those properties by the
appraised values of the mortgaged
properties and/or each mortgaged
property's underwritten net cash flow if
not otherwise specified in the related
loan agreement).
S-18
PROPERTY TYPE
Industrial 2.67%
Anchored Retail 23.56%
Multifamily 13.86%
Parking Garage 0.44%
Manufactured Housing 3.43%
Office 41.93%
Self Storage 4.84%
Hotel 6.04%
Unanchored Retail 3.25%
The mortgaged properties are located in 35
states, Puerto Rico and the District of
Columbia. The following table lists the states
which have concentrations of mortgaged
properties above 5%:
GEOGRAPHIC DISTRIBUTION (1)
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
MORTGAGED MORTGAGE POOL
STATE PROPERTIES LOANS BALANCE
----- ---------- ----- -------
California .......... 27 $ 228,604,488 19.99%
Florida ............. 16 105,481,085 9.23
Texas ............... 20 87,107,177 7.62
New York ............ 5 85,541,641 7.48
Georgia ............. 9 71,164,946 6.22
Connecticut ......... 4 58,372,387 5.11
Other ............... 86 507,148,970 44.35
-- -------------- ------
Total ............... 167 $1,143,420,694 100.00%
=== ============== ======
----------
(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 (generally
allocating the mortgage loan principal
amount to each of those properties by the
appraised values of the mortgaged
properties and/or each mortgaged
property's underwritten net cash flow if
not otherwise specified in the related
loan agreement).
S-19
RANGE OF MORTGAGE RATES
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
MORTGAGE MORTGAGE POOL
RANGE OF MORTGAGE RATES LOANS LOANS BALANCE
----------------------- ----- ----- -------
7.000% to 7.299% ......... 9 $ 172,523,061 15.09%
7.300% to 7.499% ......... 23 182,628,384 15.97
7.500% to 7.699% ......... 50 347,609,106 30.40
7.700% to 7.999% ......... 38 222,046,712 19.42
8.000% to 8.299% ......... 24 156,276,494 13.67
8.300% to 8.599% ......... 6 35,120,550 3.07
8.600% to 8.850% ......... 3 27,216,387 2.38
Total .................... 153 $1,143,420,694 100.00%
=== ============== ======
RANGE OF PRINCIPAL BALANCES
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
RANGE OF CUT-OFF DATE MORTGAGE MORTGAGE POOL
BALANCES LOANS LOANS BALANCE
-------- ----- ----- -------
$925,000 to
$2,000,000........... 16 $ 25,108,204 2.20%
$2,000,001 to
$4,000,000........... 47 138,812,324 12.14
$4,000,001 to
$7,000,000 .......... 41 220,384,296 19.27
$7,000,001 to
$12,000,000 ......... 25 235,451,119 20.59
$12,000,001 to
$20,000,000 ......... 14 215,337,103 18.83
$20,000,001 to
$30,000,000 ......... 6 154,142,322 13.48
$30,000,001 to
$50,000,000 ......... 4 154,185,328 13.48
-- -------------- ------
Total ............... 153 $1,143,420,694 100.00%
=== ============== ======
RANGE OF DSCRS
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
MORTGAGE MORTGAGE POOL
RANGE OF DSCRS LOANS LOANS BALANCE
-------------- ----- ----- -------
1.143x to 1.209x ......... 7 $ 60,237,631 5.27%
1.210x to 1.239x ......... 22 133,258,473 11.65
1.240x to 1.259x ......... 22 151,475,944 13.25
1.260x to 1.299x ......... 27 185,297,877 16.21
1.300x to 1.359x ......... 36 254,024,707 22.22
1.360x to 1.489x ......... 27 159,380,208 13.94
1.490x to 2.750x ......... 12 199,745,855 17.47
-- -------------- ------
Total .................... 153 $1,143,420,694 100.00%
=== ============== ======
S-20
RANGE OF LTV RATIOS
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
MORTGAGE MORTGAGE POOL
RANGE OF LTV RATIOS LOANS LOANS BALANCE
------------------- ----- ----- -------
25.00% to 59.99% ......... 10 $ 117,811.779 10.30%
60.00% to 64.99% ......... 13 145,895,012 12.76
65.00% to 68.99% ......... 15 122,846,832 10.74
69.00% to 72.99% ......... 25 214,583,575 18.77
73.00% to 76.99% ......... 37 187,393,465 16.39
77.00% to 79.99% ......... 43 272,670,689 23.85
80.00% to 81.69% ......... 10 82,219,341 7.19
-- -------------- ------
Total .................... 153 $1,143,420,694 100.00%
=== ============== ======
RANGE OF REMAINING TERM TO MATURITY DATE
OR ANTICIPATED PREPAYMENT DATE(1)
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
RANGE OF REMAINING MORTGAGE MORTGAGE POOL
TERMS (MOS.) LOANS LOANS BALANCE
------------ ----- ----- -------
56 to 89 ........... 3 $ 22,755,713 1.99%
90 to 111 .......... 3 10,686,126 0.93
112 to 116 ......... 19 192,905,613 16.87
117 to 118 ......... 62 376,682,839 32.94
119 to 120 ......... 63 518,090,818 45.31
121 to 220 ......... 1 6,087,000 0.53
221 to 237 ......... 2 16,212,585 1.42
-- -------------- ------
Total .............. 153 $1,143,420,694 100.00%
=== ============== ======
----------
(1) For the 11 mortgage loans with a first
payment date of either 6/1/01 or 6/10/01,
representing 5.57% of the aggregate
principal balance of the pool of mortgage
loans as of the cut-off date, the
"Remaining Term to Maturity Date or
Anticipated Prepayment Date" is calculated
as the term between the first payment date
and the maturity date.
All of the mortgage loans bear interest at fixed
rates.
The mortgage loans require the borrowers to make
scheduled payments of principal and/or interest
on the following days of each month (in some
cases, subject to the indicated grace periods
described below): 130 of the mortgage loans,
representing approximately 80.43% of the
aggregate principal balance of the pool of
mortgage loans as of the cut-off date, provide
for scheduled payments of principal and/or
interest due on the 1st day of each month, 22
mortgage loans, representing approximately
17.03% of the aggregate principal balance of the
pool of the mortgage loans as of the cut-off
date, provide for scheduled payments of
principal and/or interest due on the 10th day of
each month and one mortgage loan, representing
approximately 2.53% of the aggregate principal
balance of the
S-21
pool of mortgage loans as of the cut-off date,
provides for scheduled payments of principal
and/or interest due on the 11th day of each
month. Except with respect to 18 mortgage loans,
representing approximately 15.18% of the
aggregate principal balance of the pool of
mortgage loans as of the cut-off date, all of
the mortgage loans whose due date is the 1st day
of each month provide for a grace period of five
days. Three of such mortgage loans, representing
2.57% of the aggregate principal balance of the
pool of mortgage loans as of the cut-off date
provide for a grace period of 10 days; two of
such mortgage loans, representing 6.38% of the
aggregate principal balance of the pool of
mortgage loans as of the cut-off date, provide
for no grace period; and thirteen of such
mortgage loans, representing 6.22% of the
aggregate principal balance of the pool of
mortgage loans as of the cut-off date, provide
for a grace period of seven days. See
"Description of the Mortgage Pool--Certain Terms
and Conditions of the Mortgage Loans" in this
prospectus supplement.
152 of the mortgage loans, representing
approximately 98.80% of the aggregate principal
balance of the pool of mortgage loans as of the
cut-off date accrue interest on an actual/360
basis and the remaining mortgage loan accrues
interest on a 30/360 basis.
See "Description of the Mortgage Pool--Certain
Terms and Conditions of the Mortgage Loans" in
this prospectus supplement.
AMORTIZATION TYPES
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
MORTGAGE MORTGAGE POOL
TYPE OF AMORTIZATION LOANS LOANS BALANCE
-------------------- ----- ----- -------
Balloon Loans (1) ......... 135 $ 976,333,196 85.39%
APD Loans ................. 16 150,874,914 13.20
Fully Amortizing Loans..... 2 16,212,585 1.42
--- -------------- ------
Total ..................... 153 $1,143,420,694 100.00%
=== ============== ======
----------
(1) Excludes the 16 mortgage loans with
anticipated prepayment dates.
16 mortgage loans, representing approximately
13.20% of the aggregate principal balance of the
pool of mortgage loans as of the cut-off date,
provide for an increase in the related interest
rate after a certain date, the anticipated
prepayment date. The interest accrued in excess
of the original rate, together with any interest
on that accrued interest, will be deferred and
will not be paid until the principal balance of
the related mortgage loan has been paid. Any
amount received in respect of that deferred
interest will be distributed to the holders of
the Class S certificates.
In addition, after the anticipated prepayment
date, cash flow in excess of that required for
debt service and certain budgeted expenses with
respect to the related mortgaged property will
be
S-22
applied towards the payment of principal
(without payment of a yield maintenance charge)
of the related mortgage loan until its principal
balance has been reduced to zero. A substantial
principal payment would be required to pay off
these mortgage loans on their anticipated
prepayment dates. The remaining amortization
term of these mortgage loans are the same as the
remaining term to maturity if the mortgage loans
are not prepaid on their anticipated prepayment
dates.
See "Description of the Mortgage
Pool--Additional Mortgage Loan Information" and
"Description of the Mortgage Pool-- Certain
Terms and Conditions of the Mortgage Loans" in
this prospectus supplement.
The following table contains general information
regarding the prepayment provisions of the
mortgage loans.
OVERVIEW OF PREPAYMENT PROTECTION
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
MORTGAGE MORTGAGE POOL
PREPAYMENT PROTECTION LOANS LOANS BALANCE
--------------------- ----- ----- -------
Lockout period followed
by defeasance ......... 151 $1,134,683,694 99.24%
Lockout period followed
by yield maintenance 1 6,087,000 0.53
Fixed Penalty ......... 1 2,650,000 0.23
--- -------------- ------
Total ................. 153 $1,143,420,694 100.00%
=== ============== ======
Defeasance permits the related borrower to
substitute direct non-callable U.S. Treasury
obligations or other government securities for
the related mortgaged property as collateral for
the mortgage loan.
One mortgage loan (identified as Loan No. 4 on
Annex A to this prospectus supplement),
representing approximately 0.53% of the
aggregate principal balance of the pool of
mortgage loans as of the cut-off date, permits
voluntary prepayment upon payment of a yield
maintenance charge following the 47th scheduled
payment of principal and interest.
One mortgage loan (identified as Loan No. 82,
representing approximately 0.23% of the
aggregate principal balance of the pool of
mortgage loans as of the cut-off date, permits
voluntary prepayment after the 59th scheduled
payment of principal and interest upon payment
of a prepayment premium that declines from 5% to
1% during the remaining life of the loan.
140 of the mortgage loans, representing
approximately 90.94% of the aggregate principal
balance of the pool of mortgage loans as of the
cut-off date, specify a period of time
immediately prior to the stated maturity date or
anticipated prepayment date, as applicable,
during which there are no restrictions on
voluntary prepayment. 138 of the mortgage loans,
representing approximately 89.52% of the
aggregate principal balance of the
S-23
pool of mortgage loans as of the cut-off date,
permit voluntary prepayment without the payment
of a yield maintenance charge for the final 2 to
7 scheduled payments (including the scheduled
payment on the stated maturity date or the
anticipated prepayment date, as applicable). Two
mortgage loans (identified as Loan No. 50 and
109 on Annex A to this prospectus supplement),
representing approximately 1.42% of the
aggregate principal balance of the pool of
mortgage loans as of the cut-off date, permit
voluntary prepayment without payment of a yield
maintenance charge for the final 37 scheduled
payments (including the scheduled payment on the
maturity date).
All of the mortgage loans that permit
prepayments require that the prepayment be made
on the due date or, if on a different date, that
any prepayment be accompanied by the interest
that would be due on the next due date.
See "Description of the Mortgage
Pool--Additional Mortgage Loan Information,"
"Description of the Mortgage Pool--Certain Terms
and Conditions of the Mortgage Loans" and
"--Defeasance; Collateral Substitution" in this
prospectus supplement.
S-24
SIGNIFICANT LOANS
TEN LARGEST MORTGAGE LOANS OR CROSS-COLLATERALIZED GROUPS
% OF STATED
NUMBER OF NUMBER OF CUT-OFF INITIAL REMAINING CUT-OFF LTV
MORTGAGE MORTGAGED DATE POOL MORTGAGE TERM DATE LTV RATIO AT
PROPERTY NAME LOANS PROPERTIES BALANCE BALANCE RATE (MOS.) (1) DSCR RATIO MATURITY (1)
- ------------- ----- ---------- ------- ------- ---- ---------- ---- ----- ------------
59 Maiden Lane ............ 1 1 $ 50,000,000 4.37% 7.00% 120 2.75 25.00% 21.80%
Long Wharf Maritime
Center I ................. 1 1 37,478,298 3.28 7.25 119 1.31 68.14 59.86
Synergy I and II Loans .... 2 2 35,289,165 3.09 8.06 115 1.23 70.73 63.53
818 West 7th Street ....... 1 1 33,781,053 2.95 7.35 119 1.61 62.56 55.09
EII Portfolio II .......... 1 7 32,925,976 2.88 8.25 116 2.11 56.48 47.05
Shoppes at Dadeland ....... 1 1 29,000,000 2.54 7.46 120 1.23 80.56 71.11
Pescadero Apartments ...... 1 1 28,984,673 2.53 7.53 119 1.39 64.41 56.98
Information Resources ..... 1 1 25,911,945 2.27 7.60 117 1.50 61.70 50.41
Civic Executive Center .... 1 1 25,135,353 2.20 7.23 119 1.25 69.82 61.30
510 Fifth Avenue .......... 1 1 23,000,000 2.01 7.15 120 1.33 78.50 68.73
- - ------------ ----- ---- --- ---- ----- -----
Total/Weighted Average .... 11 17 $321,506,464 28.12% 7.48% 118 1.65x 61.07% 53.27%
== == ============ ===== ==== === ==== ===== =====
- ----------
(1) Calculated with respect to the Anticipated Prepayment Date.
59 Maiden Lane Loan......... The 59 Maiden Lane Loan (identified as Loan No.
5 on Annex A to this prospectus supplement) is
secured by a first lien on a multi-tenanted
office building located within the financial
district submarket of downtown Manhattan, New
York. The building contains approximately
1,125,295 square feet of net rentable area. The
building was built in 1966 and renovated in 2000.
As of February 2001, the building was
approximately 86.6% occupied. A deposit of
$125,000 per month into a re-leasing reserve will
be required in years eight and nine. The 59
Maiden Lane Loan also required tax and insurance
escrows, each funded monthly. The related
mortgage loan permits the borrower to substitute
another mortgaged property subject to certain
requirements described in "Description of the
Mortgage Pool--Certain Terms and Conditions of
the Mortgage Loans--Defeasance; Collateral
Substitution--59 Maiden Lane Loan" in this
prospectus supplement. The sponsors of the
borrower are George and Michael Karfunkel, owners
of AmTrust Realty Corp. AmTrust Realty Corp. is a
privately held real estate company in Manhattan.
Long Wharf Maritime Center
I Loan...................... The Long Wharf Maritime Center I Loan (identified
as Loan No. 77 on Annex A to this prospectus
supplement) is secured by a first lien on a
multi-tenanted office building located within the
Long Wharf Maritime Center office complex in New
Haven, Connecticut. The building contains
approximately 415,685 square feet of net rentable
area and approximately 644,693 square feet of
parking. The building and the parking garage were
built in 1985. As of December 2000, the building
was approximately 99.3% occupied. The borrower
will be required to escrow $425,000 per year for
the initial five years of the loan, with the
right to withdraw up to $500,000 per year over
the life of the loan to cover any costs to relet
vacant space. After the initial five years, the
borrower will be required to escrow $45,835 per
month until
S-25
August 2008, up to a maximum of $3,000,000. The
Long Wharf Maritime Center I Loan also required
a $34,042 annual replacement reserve, and tax
and insurance escrows, each funded monthly. The
sponsor of the borrower is Fusco Corporation, a
Connecticut based owner and developer of real
estate.
Synergy Business Park --
Columbia I and Synergy
Business Park -- Columbia
II Loans.................... The Synergy Business Park -- Columbia I Loan
(identified as Loan No. 129 on Annex A to this
prospectus supplement) and Synergy Business Park
-- Columbia II Loan (identified as Loan No. 130
on Annex A to this prospectus supplement) are
secured by first liens on 3 and 5 multi-tenanted
office buildings respectively, comprising the
Synergy Business Park, formerly known as the
Koger Business Center. The office park is located
in the St. Andrews suburb, three miles from
downtown Columbia, South Carolina. The Synergy
Business Park contains 525,136 square feet of net
rentable area in the aggregate. The three
buildings securing the Synergy Business Park --
Columbia I Loan contain approximately 256,792
square feet of net rentable area, with the
buildings built between 1987 and 1989. As of
January 2001, the buildings were approximately
90.9% occupied and leased to 38 tenants. The five
buildings securing the Synergy Business Park --
Columbia II Loan contain approximately 268,344
square feet of net rentable area, with the
buildings built between 1982 and 1985. As of
January 2001, the buildings were approximately
93.1% occupied and leased to 71 tenants. The
Synergy Business Park -- Columbia I Loan required
an up-front $527,000 re-leasing reserve and an
up-front $270,000 capital improvements reserve.
The Synergy Business Park -- Columbia I Loan also
required a $276,480 annual rollover reserve, a
$49,680 annual replacement reserve, and tax and
insurance escrows, each funded monthly. The
Synergy Business Park -- Columbia II Loan
required an up-front $773,000 rollover reserve
and an up-front $677,500 capital improvements
reserve. The Synergy Business Park -- Columbia II
Loan also required a $293,760 annual rollover
reserve, a $59,460 annual replacement reserve,
and tax and insurance escrows, each funded
monthly. The managing member of the managing
member of the borrowers is Jordan E. Slone. Mr.
Slone is the Chairman and CEO of Harbor Group
International. Harbor Group International
controls over 1.9 million square feet of office
space, over 2.2 million square feet of retail
space and over 6,800 apartment units. The Synergy
Business Park -- Columbia I and Synergy Business
Park -- Columbia II Loans are
cross-collateralized and cross-defaulted with
each other. Under the terms of the Synergy
Business Park -- Columbia I and Synergy Business
Park -- Columbia II Loans, partial releases of
properties within each loan are not permitted.
However, the borrower is permitted to obtain the
release of all the properties securing each
respective loan, provided the outstanding
principal balance of such loan is defeased. See
"Risk Factors--Cross-Collateralized Mortgage
Loans Entail Risks" in this prospectus
supplement.
S-26
818 West Seventh
Street Loan.................. The 818 West Seventh Street Loan (identified as
Loan No. 9 on Annex A to this prospectus
supplement) is secured by a first lien on a
multi-tenanted office building located in
downtown Los Angeles, California. The building
contains approximately 377,405 square feet of net
rentable area and two subterranean parking
levels. The property, which is listed as a Los
Angeles historical monument, was built in 1926
and extensively renovated in 1985. As of January
2001, the building was 100.0% occupied with a
total of 27 tenants. The 818 West Seventh Street
Loan required an up-front $775,327 rollover
reserve together with letters of credit totaling
$1,045,237 to cover the rental obligations of 3
tenants. The 818 West Seventh Street Loan also
required a $492,180 annual rollover reserve and a
$75,000 annual replacement reserve, funded
monthly, and tax and insurance escrows, each
funded monthly. The sponsor of the borrower is
Goodwin Gaw, president of Pioneer Capital
Investments, Inc. Pioneer has a portfolio
consisting of approximately 2.5 million square
feet of office buildings in Los Angeles, San
Francisco, New York and Hawaii.
EII Portfolio II Loan....... The EII Portfolio II Loan (identified as Loan
No. 51 on Annex A to this prospectus supplement)
is secured by a first lien on five limited
service Hampton Inns hotels in State College,
Pennsylvania, Madison Heights, Michigan, Dublin,
Ohio, Charleston, South Carolina and Birmingham,
Alabama, one extended stay Homewood Suites Hotel
in Windsor Locks, Connecticut and one limited
service Comfort Inn in Rutland, Vermont. The
hotels have a total of 859 rooms. As of November
30, 2000, the year-to-date occupancy rate of the
hotels, in the aggregate, was approximately
68.5%, with a $80.91 underwritten ADR and $54.03
underwritten RevPar. The EII Portfolio II Loan
required a 4.0% reserve for furniture, fixtures
and equipment, on a spend or accrue basis, as
well as tax and insurance escrows. The sponsor of
the borrower is Equity Inns, Inc, a NYSE traded
self-administered REIT. Equity Inns, Inc.
commenced operations in March 1994. As of
December 31, 2000, the company held a portfolio
of 96 hotels comprising 12,284 rooms, located in
34 states and operating predominantly as
limited-service and extended-stay hotels. The
hotels in State College, Pennsylvania, Madison
Heights, Michigan, Dublin, Ohio, Charleston,
South Carolina, and Rutland, Vermont are operated
under the terms of management agreements with
Crossroads Hospitality, a wholly owned subsidiary
of Interstate Hotels Corporation. The hotels in
Birmingham, Alabama and Windsor Locks,
Connecticut are operated under the terms of
management agreements with Promus, a wholly owned
subsidiary of Hilton Hotels. The individual liens
that constitute the EII Portfolio II loan are
cross-defaulted and cross-collateralized with
each other. Under the terms of the EII Portfolio
II Loan, partial releases are permitted provided
that, among other conditions, the borrower
defeases 125% of the allocated loan amounts of
the properties to be released. See "Risk
Factors--Cross-Collateralized Mortgage
S-27
Loans Entail Risks" and "Description of the
Mortgage Pool--Certain Terms and Conditions of
the Mortgage Loans--Defeasance; Collateral
Substitution--EII Portfolio II Loan" in this
prospectus supplement.
Shoppes at Dadeland Loan.... The Shoppes at Dadeland Loan (identified as
Loan No. 117 on Annex A to this prospectus
supplement) is secured by a first lien on a two
building shopping center located directly across
the street from the Dadeland Mall, in Miami,
Florida. The property was built in 1999 and
contains approximately 105,181 square feet of net
rentable area. As of December, 2000, the
buildings were approximately 100.0% occupied and
anchored by Linens-n-Things and The Container
Store. Dadeland Mall is a 1,400,000 square feet
regional shopping center anchored by Burdines
department store, Home Gallery, Lord & Taylor,
Saks Fifth Avenue and JC Penney. The Shoppes at
Dadeland Loan required a $15,660 annual
replacement reserve, an $80,004 annual rollover
reserve and insurance escrows, all funded
monthly. The sponsors of the borrower are Stephen
Hayman, Alan Hayman and Neal Higgins Walters. The
Hayman company manages approximately 9,000
apartment units and approximately 3,000,000
square feet of commercial space.
Pescadero Apartments Loan... The Pescadero Apartments Loan (identified as
Loan No. 93 on Annex A to this prospectus
supplement) is secured by a first lien on a
fourteen building 170 unit class "A" apartment
complex, located in Redwood City, California,
approximately 26 miles from San Francisco. The
complex was built in 1999 and contains 70
one-bedroom units and 100 two-bedroom units.
Amenities include an indoor swimming pool and
health club. As of February, 2001 the mortgaged
property was approximately 91.2% occupied.
Average rents at the property are $2,643 for one
bedrooms and $2,989 for two-bedrooms. The
Pescadero Apartments Loan required a $29,750
annual replacement reserve, funded monthly. The
sponsors of the borrower are the Michael Podell
and Catherine Podell trusts, with the Michael
Podell trust having interests in 4 multifamily
properties in Northern California.
Information Resources,
Inc. Loan................... The Information Resources, Inc. Loan (identified
as Loan No. 67 on Annex A to this prospectus
supplement) is secured by a first lien on two
adjacent office buildings connected by a 6th
floor skybridge. The six-story 150 N. Clinton
Street building contains approximately 159,600
square feet of net rentable area and was built in
1908 and renovated in 1988. The seven-story 564
W. Randolph Street building contains
approximately 92,400 square feet of net rentable
area and was built in 1918 and renovated in 1990.
The buildings are located in West Loop District
of Chicago, Illinois. The buildings are 100%
occupied by Information Resources Inc. (IRI)
whose lease expires approximately two months
prior to the maturity of the mortgage loan. The
borrower was required to establish a re-leasing
reserve at origination in
S-28
the amount of $500,000 and requires additional
reserves of $20,834 per month through year 8 of
the loan. During the last two years prior to
maturity, the terms of the mortgage loan require
that all cash flow in excess of that required
for debt service and certain other expenses be
deposited in the leasing reserve. Additionally,
IRI is required to provide a $4.5 million letter
of credit as a security deposit for payment of
rent and performance by IRI of its other
obligations under the lease. The Information
Resources, Inc. Loan also required a $63,204
annual replacement reserve and tax and insurance
escrows, each funded monthly. The sponsor of the
borrower is W.P. Carey & Co., LLC.
Civic Executive
Center Loan................. The Civic Executive Center Loan (identified as
Loan No. 32 on Annex A to this prospectus
supplement) is secured by a first lien on a three
story, multi-tenant office building located in
Walnut Creek, California, 20 miles east of
downtown San Francisco. The property, which was
built in 1983, contains approximately 167,117
square feet of net rentable area. As of December
2000, the property was approximately 98.0%
occupied and leased by 16 tenants. The Civic
Executive Center Loan required an annual
replacement reserve, calculated as 150% of the
excess of $58,088 less actual expenditures in the
previous calendar year paid for by the borrower.
The Civic Executive Center Loan also required a
$108,324 annual re-leasing reserve, funded
monthly and capped at $541,632, together with tax
escrows funded monthly. The sponsor of the
borrower is Sanford Diller. Mr. Diller has
developed over 8,000 apartment units and
approximately 2,700,000 square feet of office and
retail space.
510 Fifth Avenue Loan....... The 510 Fifth Avenue Loan (identified as Loan
No. 3 on Annex A to this prospectus supplement)
is secured by a first lien on a five-story office
building located in New York, New York. The
building contains approximately 61,159 square
feet of net rentable area and was built in 1954.
The building was designated a New York City
landmark in 1997. As of March 2001, the property
was 100% occupied by three tenants. The borrower
will be required to make a deposit of $100,000
per annum into an escrow account to cover the
estimated costs to re-lease any vacant space. The
510 Fifth Avenue Loan required a $20,750 annual
replacement reserve and tax and insurance
escrows, each funded monthly. The sponsor of the
borrower is Tahl-Propp Equities, a real estate
development and acquisition company based in New
York.
ADDITIONAL ASPECTS OF CERTIFICATES
Denominations............... The offered certificates will be offered in
minimum denominations of $10,000 initial
principal amount. Investments in excess of the
minimum denominations may be made in multiples of
$1.
S-29
Registration, Clearance and
Settlement................. Each class of offered certificates will be
registered in the name of Cede & Co., as nominee
of The Depository Trust Company, or DTC.
You may hold your offered certificates through:
(1) DTC in the United States; or (2) Clearstream
Banking, societe anonyme or The Euroclear System
in Europe. Transfers within DTC, Clearstream
Banking, societe anonyme or The Euroclear System
will be made in accordance with the usual rules
and operating procedures of those systems.
We may elect to terminate the book-entry system
through DTC with respect to all or any portion
of any class of the offered certificates.
See "Description of the Certificates--Book-Entry
Registration and Definitive Certificates" in
this prospectus supplement and in the
prospectus.
Information Available to
Certificateholders......... On each distribution date, the paying agent will
prepare and make available to each
certificateholder of record, initially expected
to be Cede & Co., a statement as to the
distributions being made on that date.
Additionally, under certain circumstances,
certificateholders of record may be entitled to
certain other information regarding the trust.
See "Description of the Certificates--Reports to
Certificateholders; Certain Available
Information" in this prospectus supplement.
Deal Information/Analytics... Certain information concerning the mortgage
loans and the offered certificates will be
available to you through the following services:
o Bloomberg, L.P. and
o the paying agent's website at
www.chase.com/absmbs.
S-30
Optional Termination........ On any distribution date on which the aggregate
principal balance of the pool of mortgage loans
remaining in the trust is less than 1% of the
aggregate unpaid balance of the mortgage loans as
of the cut-off date, certain entities specified
in this prospectus supplement will have the
option to purchase all of the remaining mortgage
loans at the price specified in this prospectus
supplement (and all property acquired through
exercise of remedies in respect of any mortgage
loan). Exercise of this option will terminate the
trust and retire the then outstanding
certificates.
See "Description of the Certificates--
Termination; Retirement of Certificates" in this
prospectus supplement and "Description of the
Certificates--Termination" in the prospectus.
Tax Status.................. Elections will be made to treat designated
portions of the trust (exclusive of interest that
is deferred after the anticipated prepayment date
on the mortgage loans that have anticipated
prepayment dates and the related distribution
account for this deferred interest) as two
separate REMICs--a Lower-Tier REMIC and an
Upper-Tier REMIC--for federal income tax
purposes. The portion of the trust representing
the deferred interest described above will be
treated as a grantor trust for federal income tax
purposes. In the opinion of counsel, the portions
of the trust referred to above will qualify for
this treatment.
Pertinent federal income tax consequences of an
investment in the offered certificates include:
o Each class of offered certificates (and the
Class X-1, Class X-2, Class E, Class F, Class
G, Class H, Class I, Class J, Class K, Class L
and Class M certificates) will represent
"regular interests" in the Upper-Tier REMIC.
o The offered certificates will be treated as
newly originated debt instruments for federal
income tax purposes.
You will be required to report income on the
regular interests represented by your
certificates using the accrual method of
accounting.
o One or more classes of offered certificates
may be issued with original issue discount.
o The Class S certificates will represent
interests in a grantor trust with respect to
interest that is deferred after the
anticipated prepayment date on the mortgage
loans that have anticipated prepayment dates.
See "Certain Federal Income Tax Consequences" in
this prospectus supplement and in the
accompanying prospectus.
ERISA Considerations........ Subject to important considerations described
under "ERISA Considerations" in this prospectus
supplement and "Certain ERISA Considerations" in
the accompanying prospectus, the offered
certificates are eligible for purchase by persons
investing assets of employee benefit plans or
individual retirement accounts.
S-31
Legal Investment............ The offered certificates will not constitute
"mortgage related securities" within the meaning
of the Secondary Mortgage Market Enhancement Act
of 1984, as amended.
See "Legal Investment" in this prospectus
supplement and in the accompanying prospectus.
Ratings..................... The offered certificates will not be issued
unless each of the offered classes receives the
following ratings from Moody's Investors Service,
Inc. and Fitch:
MOODY'S FITCH
------- -----
Class A-1 .......... Aaa AAA
Class A-2 .......... Aaa AAA
Class B ............ Aa2 AA
Class C ............ A2 A
Class D ............ A3 A-
A rating agency may downgrade, qualify or
withdraw a security rating at any time. A rating
agency not requested to rate the offered
certificates may nonetheless issue a rating and,
if one does, it may be lower than those stated
above. The security ratings do not address the
frequency of prepayments (whether voluntary or
involuntary) of mortgage loans, the degree to
which prepayments might differ from those
originally anticipated, the likelihood of
collection of excess interest, default interest
or yield maintenance charges, or the tax
treatment of the certificates. See "Yield and
Maturity Considerations" in this prospectus
supplement, "Risk Factors" and "Ratings" in this
prospectus supplement and "Rating" and "Yield
and Maturity Considerations" in the prospectus.
See "Ratings" in this prospectus supplement and
"Rating" in the prospectus for a discussion of
the basis upon which ratings are given and the
conclusions that may not be drawn from a rating.
S-32
RISK FACTORS
You should carefully consider the following risks before making an
investment decision. In particular, distributions on your certificates will
depend on payments received on and other recoveries with respect to the
mortgage loans. Therefore, you should carefully consider the risk factors
relating to the mortgage loans and the mortgaged properties.
The risks and uncertainties described below (in addition to those risks
described in the prospectus under "Risk Factors") 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.
GEOGRAPHIC CONCENTRATION ENTAILS RISKS
Mortgaged properties located in California, Florida, Texas, New York and
Georgia represent approximately 19.99%, 9.23%, 7.62%, 7.48% and 6.22%,
respectively, by allocated loan amounts, of the aggregate principal balance of
the pool of mortgage loans as of the cut-off date. Concentrations of mortgaged
properties in geographic areas may increase the risk that adverse economic or
other developments or natural disasters affecting a particular region of the
country could increase the frequency and severity of losses on mortgage loans
secured by those properties. In recent periods, several regions of the United
States have experienced significant real estate downturns. Regional economic
declines or conditions in regional real estate markets could adversely affect
the income from, and market value of, the mortgaged properties. Other regional
factors--e.g., earthquakes, floods or hurricanes or changes in governmental
rules or fiscal policies--also may adversely affect the mortgaged properties.
For example, mortgaged properties located in California may be more susceptible
to certain hazards (such as earthquakes) than properties in other parts of the
country.
RISKS RELATING TO LOAN CONCENTRATIONS
The effect of mortgage pool loan losses will be more severe if the losses
relate to loans that account for a disproportionately large percentage of the
pool's aggregate principal balance. In this regard:
o The largest mortgage loan represents approximately 4.37% of the
aggregate principal balance of the pool of mortgage loans as of the
cut-off date. See "Description of the Mortgage Pool--
Significant Mortgage Loans" in this prospectus supplement.
o The 5 largest mortgage loans or group of cross-collateralized loans
represent, in the aggregate, approximately 16.02% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date.
o The 10 largest mortgage loans or group of cross-collateralized loans
represent, in the aggregate, approximately 26.97% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date.
Each of the other mortgage loans or group of cross-collateralized loans
not described above represents less than 1.93% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date.
A concentration of mortgaged property types or of mortgage loans with the
same borrower or related borrowers also can pose increased risks. In that
regard, the following table lists the property type concentrations in excess of
5% of the aggregate principal balance of the pool of mortgage loans as of the
cut-off date:
S-33
PROPERTY TYPE CONCENTRATIONS
CUT-OFF
NUMBER AGGREGATE % OF BALANCE
OF CUT-OFF INITIAL # OF PER # OF
PROPERTY MORTGAGED DATE POOL UNITS UNITS OR
TYPE PROPERTIES(1) BALANCE(1) BALANCE OR NRA NRA
- -------- ------------- ---------- ------- ------ ---
Office ...... 46 $479,400,087 41.93% 0 84.70
Retail (3) .. 51 306,504,419 26.81% 0 89.62
Multifamily.. 22 158,451,443 13.86% 0 53,603
Hotel ....... 11 69,061,668 6.04% 0 46,949
WEIGHTED AVERAGES
--------------------------------------------------------------------
LTV
STATED CUT-OFF RATIO
REMAINING DATE AT
PROPERTY MORTGAGE TERM LTV MATURITY
TYPE RATE (MOS)(2) OCCUPANCY DSCR RATIO (2)
- -------- ---- -------- --------- ---- ----- ---
Office ...... 7.54% 118 96% 1.49 65.51% 57.77%
Retail (3) .. 7.67% 122 98% 1.29 75.86% 64.20%
Multifamily.. 7.48% 113 97% 1.31 74.48% 66.19%
Hotel ....... 8.41% 116 72% 1.82 59.80% 50.04%
- ----------
(1) Based on the allocated loan amount for mortgage loans secured by more
than one mortgaged property.
(2) Calculated with respect to the anticipated prepayment date for the
mortgage loans with anticipated prepayment dates.
(3) 37 of such mortgage loans, representing approximately 23.55% of the
aggregate principal balance of the pool of mortgage loans as of the
cut-off date, are considered by the applicable mortgage loan seller to be
"anchored" or "shadow anchored" retail mortgaged properties.
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.
MORTGAGE LOANS WITH RELATED BORROWERS
18 groups of mortgage loans have borrowers related to each other, but none
of these groups of mortgage loans represent more than 3.89% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date.
Three mortgage loans, representing approximately 5.06% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, are
secured by more than one mortgaged property.
See "Description of the Mortgage Pool--Additional Mortgage Loan
Information" in this prospectus supplement.
Mortgaged properties owned by related borrowers are likely to:
o have common management, increasing the risk that financial or other
difficulties experienced by the property manager could have a greater
impact on the pool of mortgage loans; and
o have common general partners, which could increase the risk that a
financial failure or bankruptcy filing would have a greater impact on
the pool of mortgage loans.
Except as described below, the terms of the mortgage loans generally
require that the borrowers covenant to be single-purpose entities, although in
many cases the borrowers have previously owned property other than the related
mortgaged property or may not otherwise be 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 borrower's 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. In addition, the terms of 3 mortgage loans (identified as Loan
Nos. 70, 82 and 99 on Annex A to this prospectus supplement), representing
approximately 0.95% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date, do not require the related borrower to be a
single-purpose entity. See "Certain Legal Aspects of Mortgage Loans--Bankruptcy
Laws" in the prospectus.
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CROSS-COLLATERALIZED MORTGAGE LOANS ENTAIL RISKS
Six groups, consisting of 17 mortgage loans in the aggregate (identified
as Loan Nos. 6, 10, 17, 18, 31, 33, 40, 57, 79, 85, 94, 98, 111, 116, 129, 130
and 150, on Annex A to this prospectus supplement), representing approximately
10.93%, respectively, of the aggregate principal balance of the pool of
mortgage loans as of the cut-off date, are cross-collateralized or
cross-defaulted. In addition, three mortgage loans (identified as Loan Nos. 51,
68 and 113 on Annex A to this prospectus supplement), representing 5.06% of the
aggregate principal balance of the pool of mortgage loans as of the cut-off
date provides that the individual liens that constitute the loan are
cross-collateralized and cross-defaulted with each other. These arrangements
seek to reduce the risk that the inability of a mortgaged property securing
each such mortgage loan to generate net operating income sufficient to pay debt
service will result in defaults and ultimate losses. However, to the extent any
property is released through prepayment or defeasance, such
cross-collateralization may not provide sufficient credit enhancement, even if
the prepaid or defeased loan provided for a release price greater than the
allocated loan amount.
Cross-collateralization arrangements involving more than one borrower
could be challenged as a fraudulent conveyance by creditors of a borrower or by
the representative of the bankruptcy estate of a borrower if a borrower were to
become a debtor in a bankruptcy case. 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.
ABILITY TO INCUR OTHER BORROWINGS ENTAILS RISK
The mortgage loans generally prohibit the borrower from incurring any
additional debt secured by the mortgaged property without the consent of the
lender. As of the cut-off date, the mortgage loan sellers have informed us that
they are aware of the following indebtedness with respect to the mortgage
loans.
o With respect to 1 mortgage loan (identified as Loan No. 27 on Annex A
to this prospectus supplement), representing approximately 0.93% of the
aggregate principal balance of the pool of mortgage loans as of the
cut-off date, the related borrower has a contingent obligation to the
original owner of the property for the reimbursement of Community
Facility District payments if and when such payments are made to the
borrower, secured by the related mortgaged property. No such payments
have currently been made.
o With respect to 1 mortgage loan (identified as Loan No. 1 on Annex A to
this prospectus supplement), representing approximately 1.51% of the
aggregate principal balance of the pool of mortgage loans as of the
cut-off date, the terms of such loan permit further unsecured debt
payable to a general partner of the related borrower in an amount not to
exceed $1,000,000, and is subject to both the lender's approval and the
subordinate debt lender's entering into a subordination and standstill
agreement.
o The terms of certain loans permit or require the borrowers to post
letters of credit and/or surety bonds for the benefit of the mortgage
loan, which may constitute a contingent reimbursement obligation of the
related borrower or an affiliate. The issuing bank or surety will not
typically agree to subordination and standstill protection benefiting
the mortgagee.
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Substantially all of the mortgage loans permit the related borrower to
incur limited indebtedness in the ordinary course of business that is not
secured by the related mortgaged property. Moreover, in general, any borrower
that does not meet single-purpose entity criteria may not be restricted from
incurring unsecured debt.
Additionally, although the mortgage loans generally restrict the pledging
of general partnership and managing member equity interests in a borrower
subject to certain exceptions, the terms of the mortgages generally permit,
subject to certain limitations, the transfer or pledge of less than a certain
specified portion of the limited partnership or non-managing membership equity
interests in a borrower. Moreover, in general, the parent entity of any
borrower that does not meet single purpose entity criteria may not be
restricted in any way from incurring mezzanine or other debt not secured by the
related mortgaged property.
In particular, with respect to 7 mortgage loans (identified as Loan Nos.
6, 10, 31, 79, 85, 111 and 116 on Annex A to this prospectus supplement),
representing approximately 3.28% of the aggregate principal balance of the pool
of mortgage loans as of the cut-off date, the partners of the related borrower
have pledged their interest in such borrowers to secure $4,227,870 of mezzanine
debt. Such mezzanine debt is also secured by the interests in an affiliated
owner of another property not included in the mortgage pool. The terms of such
loans do not permit additional mezzanine debt. Additionally, with respect to
four mortgage loans (identified as Loan Nos. 17, 18, 57 and 98 on Annex A to
this prospectus supplement), representing approximately 1.94% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, the
sole shareholder of the related borrowers has an unsecured obligation to the
non-recourse carveout indemnitor in the aggregate amount of approximately
$7,344,720.
Additionally, 3 mortgage loans (identified as Loan Nos. 20, 32 and 87 on
Annex A to this prospectus supplement), representing approximately 3.10% of the
aggregate principal balance of the pool of mortgage loans as of the cut-off
date, permit future mezzanine debt, subject to lender review and respective
caps of $2,000,000, $1,000,000 and $250,000.
When a mortgage loan borrower (or its constituent members) also has one or
more other outstanding loans (even if they are subordinated loans), the trust
is subjected to additional risk. The borrower may have difficulty servicing and
repaying multiple loans. The existence of another loan will generally also make
it more difficult for the borrower to obtain refinancing of 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 such as a
foreclosure or an involuntary petition for bankruptcy against the borrower
could impair the security available to the trust, including the mortgaged
property, or stay the trust's ability to foreclose during the course of the
bankruptcy case. The bankruptcy of another lender also may operate to stay
foreclosure by the trust. The trust may also be subject to the costs and
administrative burdens of involvement in foreclosure or bankruptcy proceedings
or related litigation.
See "Description of the Mortgage Pool--General" in this prospectus
supplement and "Certain Legal Aspects of Mortgage Loans--Subordinate Financing"
in the prospectus.
BORROWER MAY BE UNABLE TO REPAY REMAINING PRINCIPAL BALANCE ON MATURITY DATE OR
ANTICIPATED PREPAYMENT DATE
151 of the mortgage loans (including seven mortgage loans, representing
1.52% of the aggregate principal balance of the pool of mortgage loans as of
the cut-off date, which pay interest only for the first 25 scheduled payments
of their terms), representing approximately 98.59% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date, are expected to
have substantial remaining principal balances as of their respective
anticipated prepayment dates or stated maturity dates. 135 of these mortgage
loans, representing approximately 85.39% of the aggregate principal balance of
the pool of mortgage loans as of the cut-off date, require balloon payments at
their stated maturity, and the remaining 16 mortgage loans, representing
approximately 13.20% of the aggregate principal balance of the pool of
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mortgage loans as of the cut-off date, will have a substantial balance
outstanding at their anticipated prepayment dates. 125 of the mortgage loans,
representing approximately 78.25% of the aggregate principal balance of the
pool of mortgage loans as of the cut-off date, mature in the year 2011.
Mortgage loans with substantial remaining principal balances at their stated
maturity (i.e., "balloon loans") involve greater risk than fully amortizing
loans. This is because the borrower may be unable to repay the loan at that
time.
A borrower's ability to repay a loan on its stated maturity date or
anticipated prepayment 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 the prevailing interest rates;
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 reductions in government assistance/rent subsidy programs;
o the tax laws; and
o the prevailing general and regional economic conditions.
The availability of funds in the credit markets fluctuates over time.
We cannot assure you that each borrower will have the ability to repay the
remaining principal balances on the pertinent date.
See "Description of the Mortgage Pool--Certain Terms and Conditions of the
Mortgage Loans" in this prospectus supplement and "Risk Factors--Borrowers May
Be Unable to Make Balloon Payments" in the prospectus.
COMMERCIAL, MULTIFAMILY AND MANUFACTURED HOUSING COMMUNITY LENDING IS DEPENDENT
UPON NET OPERATING INCOME
The mortgage loans are secured by various income-producing commercial,
multifamily and/or manufactured housing community properties. Commercial,
multifamily and manufactured housing community lending are generally thought to
expose a lender to greater risk than residential one-to-four family lending
because they typically involve larger loans to a single borrower or groups of
related borrowers.
The repayment of a commercial, multifamily or manufactured housing
community loan is typically dependent upon the ability of the applicable
property to produce cash flow through the collection of rents. Even the
liquidation value of a commercial property is determined, in substantial part,
by the capitalization of the property's cash flow. However, net operating
income can be volatile and may be insufficient to cover debt service on the
loan at any given time.
The net operating incomes and property values of the mortgaged properties
may be adversely affected by a large number of factors. Some of these factors
relate to the properties themselves, such as:
o the adequacy of the property's management and maintenance;
o the age, design and construction quality of the properties;
o management's ability to convert an unsuccessful property to an
alternate use;
o perceptions regarding the safety, convenience and attractiveness of the
properties;
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o the proximity and attractiveness of competing properties;
o new construction of competing properties in the same market;
o the adequacy of the property's management and maintenance;
o increases in operating expenses;
o dependence on tenant(s) in a particular business or industry;
o an increase in the capital expenditures needed to maintain the
properties or make improvements;
o a decline in the financial condition of a major tenant;
o rent control laws;
o an increase in vacancy rates; and
o a decline in rental rates as leases are renewed or entered into with
new tenants.
Other 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 retail space,
office space or multifamily housing;
o demographic factors;
o consumer confidence;
o consumer tastes and preferences; and
o retroactive changes in building codes.
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 in the case of rental properties, the rate at which new rentals occur;
and
o the property's "operating leverage" which is generally the percentage
of total property expenses in relation to revenue, the ratio of fixed
operating expenses to those that vary with revenues, and the level of
capital expenditures required to maintain the property and to retain or
replace tenants.
1 of the Mortgage Loans (identified as Loan No. 125 on Annex A to this
prospectus supplement), representing approximately 0.19% of the Initial Pool
Balance, is secured by a mortgaged property that is eligible for and has
received low income housing tax credits pursuant to Section 42 of the Internal
Revenue Code in respect of various units within the mortgaged property.
In addition 1 of the Mortgage Loans (identified as Loan No. 93 on Annex A
to this prospectus supplement), representing approximately 2.53% of the Initial
Pool Balance, is secured by a mortgaged property that is subject to certain
affordable housing covenants administered by the City of Redwood, California,
in respect of various units within the mortgaged property.
A decline in the real estate market or in the financial condition of a
major tenant will tend to have a more immediate effect on the net operating
income of properties with short-term revenue sources, such as short-term or
month-to-month leases, and may lead to higher rates of delinquency or defaults.
TENANT CONCENTRATION ENTAILS RISK
A deterioration in the financial condition of a tenant can be particularly
significant if a mortgaged property is leased to a single tenant or if any
tenant represents a significant portion of the rental income.
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Mortgaged properties leased to a single tenant or a tenant that represents a
significant portion of the rental income also are more susceptible to
interruptions of cash flow if such tenant fails to renew its lease. This is so
because the financial effect of the absence of rental income may be severe;
more time may be required to re-lease the space; and substantial capital costs
may be incurred to make the space appropriate for replacement tenants. In this
respect, 15 mortgage loans, representing approximately 6.94% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, are
secured by mortgaged properties leased to a single tenant. Most of the leases
for each of these single tenants extend beyond the stated maturity date of the
mortgage loans. Additionally, the underwriting of certain of these mortgage
loans leased to single tenants may have taken into account the creditworthiness
of the tenants under the related leases and consequently may have 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. In this regard, see "--Retail
Properties Have Special Risks" and "--Office Properties Have Special Risks"
below.
CERTAIN ADDITIONAL RISKS RELATING TO TENANTS
The income from, and market value of, the mortgaged properties leased to
various tenants would be adversely affected if:
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, office and industrial
properties will be affected by the expiration of leases and the ability of the
respective borrowers to renew the leases or re-let the space on comparable
terms. In this regard, the three largest tenants and their respective lease
expiration dates for office, retail and industrial properties are set forth on
Annex A to this prospectus supplement. Certain of the mortgaged properties may
be leased in whole or in part by government-sponsored tenants who have the
right to cancel their leases at any time or for lack of appropriations.
Additionally, mortgage loans may have concentrations of leases expiring at
varying rates in varying percentages.
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 re-letting the property.
Additionally, in certain jurisdictions, if tenant leases are subordinated
to the liens created by the mortgage but do not contain attornment provisions
(provisions requiring the tenant to recognize a successor owner following
foreclosure as landlord under the lease), the leases may terminate at tenant's
option upon the transfer of the property to a foreclosing lender or purchaser
at foreclosure. Accordingly, if a mortgaged property is located in such a
jurisdiction and is leased to one or more desirable tenants under leases that
are subordinate to the mortgage and do not contain attornment provisions, such
mortgaged property could experience a further decline in value if such tenants'
leases were terminated.
Additionally, with respect to certain of the mortgage loans, the related
borrower has given to certain tenants a right of first refusal in the event a
sale is contemplated or purchase option to purchase all or a portion of the
mortgaged property. Such provisions, if not waived, may impede the mortgagee's
ability to sell the related mortgaged property at foreclosure.
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
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service payments. Multi-tenanted mortgaged properties also may experience
higher continuing vacancy rates and greater volatility in rental income and
expenses.
TENANT BANKRUPTCY ENTAILS RISKS
The bankruptcy or insolvency of a major tenant, or a number of smaller
tenants, in retail, office and industrial properties may adversely affect the
income produced by a mortgaged property. Under the federal bankruptcy code a
tenant has the option of assuming or rejecting any unexpired lease. If the
tenant rejects the lease, the landlord's claim for breach of the lease would be
a general unsecured claim against the tenant (absent collateral securing the
claim). The claim would be limited to the unpaid rent reserved under the lease
for the periods prior to the bankruptcy petition (or earlier surrender of the
leased premises) which are unrelated to the rejection, plus the greater of one
year's rent or 15% of the remaining reserved rent (but not more than three
years' rent).
MORTGAGE LOANS ARE NONRECOURSE AND ARE NOT INSURED OR GUARANTEED
The mortgage loans are not insured or guaranteed by any person or entity,
governmental or otherwise.
Each mortgage loan is a nonrecourse loan, except with respect to
liabilities resulting from certain matters such as fraud or misappropriation of
funds. If a default occurs, recourse generally may be had only against the
specific properties and other assets that have been pledged to secure the loan.
Payment prior to maturity is consequently dependent primarily on the
sufficiency of the net operating income of the mortgaged property. Payment at
maturity is primarily dependent upon the market value of the mortgaged property
or the borrower's ability to refinance the property.
OFFICE PROPERTIES HAVE SPECIAL RISKS
Office properties secure 46 of the mortgage loans representing
approximately 41.93% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date.
A large number of factors may adversely affect the value of office
properties, including:
o the quality of an office building's tenants;
o the physical attributes of the building in relation to competing
buildings (e.g., age, condition, design, access to transportation and
ability to offer certain amenities, such as sophisticated building
systems);
o the failure of federal, state and local government-sponsored tenants to
sustain relevant appropriations, resulting in such tenants terminating
their leases;
o a decline in the business of tenants, resulting in tenants ceasing
operations, not renewing their leases or filing for bankruptcy;
o the desirability of the area as a business location; and
o the strength and nature of the local economy, including labor costs and
quality, tax environment and quality of life for employees.
Moreover, the cost of refitting office space for a new tenant is often
higher than the cost of refitting other types of property for new tenants. See
"--Risks Relating to Loan Concentrations" above.
Technology, communications and internet start-up companies have recently
experienced a variety of factors that tend to make their businesses relatively
volatile. Many of those companies have little or no operating history, their
owners and management are often inexperienced and such companies may be heavily
dependent on obtaining venture capital financing. In addition, technology and
internet start-up companies often require significant build-out related to
special technology which may adversely affect the ability of the landlord to
relet the properties. The relative instability or failure of these tenants may
have an adverse impact on certain of the properties.
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RETAIL PROPERTIES HAVE SPECIAL RISKS
Retail properties secure 51 of the mortgage loans representing
approximately 26.81% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date.
The quality and success of a retail property's tenants significantly
affect the property's value. For example, if the sales revenues of retail
tenants were to decline, rents tied to a percentage of gross sales revenues may
decline and those tenants may be unable to pay their rent or other occupancy
costs.
The presence or absence of an "anchor tenant" in 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 and is important in attracting customers to a
retail property, whether or not it is located on the related mortgaged
property. 40 of the mortgage loans, representing approximately 23.56% of the
aggregate principal balance of the pool of mortgage loans as of the cut-off
date, are secured by retail properties that are considered by the applicable
mortgage loan seller to be "anchored" or "shadow anchored" and 11 of the
mortgage loans, representing approximately 3.25% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date, are secured by
retail properties that are considered by the applicable mortgage loan seller to
be "unanchored".
If anchor stores in a mortgaged property were to close, the related
borrower may be unable to replace those anchors in a timely manner or without
suffering adverse economic consequences. Certain of the tenants or anchor
stores at the retail properties may have co-tenancy clauses and/or operating
covenants in their leases or operating agreements which permit those tenants or
anchor stores to cease operating under certain conditions including without
limitation certain other stores not being open for business at the mortgaged
property or a subject store not meeting the minimum sales requirement under its
lease. We cannot assure you that such space will be occupied or that the
related mortgaged property will not suffer adverse economic consequences.
Retail properties also face competition from sources outside a given real
estate market. For example, all of the following compete with more traditional
retail properties for consumer dollars: factory outlet centers; discount
shopping centers and clubs; catalogue retailers; home shopping networks;
Internet web sites; and telemarketing. Continued growth of these alternative
retail outlets (which often have lower operating costs) could adversely affect
the rents collectible at the retail properties included in the pool of mortgage
loans, as well as the income from, and market value of, the mortgaged
properties.
Moreover, additional competing retail properties may be built in the areas
where the retail properties are located.
In addition, various factors may affect the economic performance of retail
properties, including:
o local competitive conditions;
o adverse changes in consumer spending;
o quality of management;
o need to make major improvements to satisfy tenants; and
o a decline in the business of tenants, resulting in tenants ceasing
operations, not renewing their leases, going dark or filing for
bankruptcy.
MULTIFAMILY PROPERTIES HAVE SPECIAL RISKS
Multifamily properties secure 22 of the mortgage loans representing
approximately 13.86% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date. 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 such as its age,
appearance and construction quality;
o local employer relocations and military base closings;
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o the location of the property, for example, a change in the neighborhood
over time;
o capability of management in renting units;
o the ability of management to provide adequate maintenance and
insurance;
o the types of services or amenities that the property provides;
o the property's reputation;
o the level of mortgage interest rates, which may encourage tenants to
purchase rather than lease housing;
o in the case of student housing facilities, the reliance on the
financial well-being of the colleges or universities to which they
relate, as well as physical layouts which may not be readily convertible
to traditional multifamily use;
o the presence of competing properties;
o the tenant mix, such as the tenant population being predominantly
students or being heavily dependent on workers from a particular
business or personnel from a local military base;
o local competitive conditions;
o quality of management;
o dependence upon governmental programs that provide rent subsidies to
tenants pursuant to tenant voucher programs, which vouchers may be used
at other properties and influence tenant mobility;
o adverse local or national economic conditions, which may limit the
amount of rent that may be charged and may result in a reduction of
timely rent payments or a reduction in occupancy levels; and
o state and local regulations, which may affect the building owner's
ability to increase rent to market rent for an equivalent apartment.
HOTEL PROPERTIES HAVE SPECIAL RISKS
Hotel properties secure five of the mortgage loans representing
approximately 6.04% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date.
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);
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 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.
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.
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The liquor licenses for most of the mortgaged properties are 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 RELATING TO AFFILIATION WITH A FRANCHISE OR HOTEL MANAGEMENT COMPANY
Four of the mortgage loans secured by hotel properties, representing
approximately 5.28% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date, are affiliated with a franchise or hotel
management company through a franchise or management agreement. 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 management 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. Replacement franchises may require significantly
higher fees.
The transferability of franchise license agreements is restricted. In the
event of a foreclosure, the lender or its agent would not have the right to use
the franchise license without the franchisor's consent. Conversely, in the case
of certain mortgage loans, the lender may be unable to remove a franchisor or a
hotel management company that it desires to replace following a foreclosure.
INDUSTRIAL PROPERTIES HAVE SPECIAL RISKS
Industrial properties secure 8 of the mortgage loans representing
approximately 2.67% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date. Significant factors determining the value of
industrial properties are:
o the quality of tenants;
o building design and adaptability; and
o the location of the property.
Concerns about the quality of tenants, particularly major tenants, are
similar in both office properties and industrial properties, although
industrial properties are more frequently dependent on a single or few tenants.
Industrial properties may be adversely affected by reduced demand for
industrial space occasioned by a decline in a particular industry segment (for
example, a decline in defense spending), and a particular industrial or
warehouse property that suited the needs of its original tenant may be
difficult to relet to another tenant or may become functionally obsolete
relative to newer properties. In addition, lease terms with respect to
industrial properties are generally for shorter periods of time and may result
in a substantial percentage of leases expiring in the same year at any
particular industrial property.
Aspects of building site design and adaptability affect the value of an
industrial property. Site characteristics which are generally desirable to a
warehouse/industrial property include high clear ceiling heights, wide column
spacing, a large number of bays (loading docks) and large bay depths,
divisibility, large minimum truck turning radii and overall functionality and
accessibility.
Location is also important because an industrial property requires the
availability of labor sources, proximity to supply sources and customers and
accessibility to rail lines, major roadways and other distribution channels.
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MANUFACTURED HOUSING COMMUNITY PROPERTIES HAVE SPECIAL RISKS
12 of the mortgage loans, representing approximately 3.43% of the
aggregate principal balance of the pool of mortgage loans as of the cut-off
date, are secured by 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 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.
SELF-STORAGE PROPERTIES HAVE SPECIAL RISKS
Self-storage properties secure 16 of the mortgage loans, representing
approximately 4.84% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date. Self-storage properties are considered vulnerable
to competition, because both acquisition costs and break-even occupancy are
relative low. The conversion of self-storage facilities to alternative uses
would generally require substantial capital expenditures, Thus, if the
operation of any of the self-storage mortgaged properties becomes unprofitable
due to:
o decreased demand;
o competition;
o lack of proximity to apartment complexes or commercial users;
o apartment tenants moving to single-family homes;
o decline in services rendered, including security;
o dependence on business activity ancillary to renting units;
o age of improvements; or
o other factors so that the borrower becomes unable to meet its
obligations on the related mortgage loan, the liquidation value of that
self-storage mortgage property may be substantially less, relative to
the amount owing on the mortgage loan, than if the self-storage
mortgaged property were readily adaptable to other uses.
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Tenant privacy, anonymity and efficient access may heighten environmental
risks. No environmental assessment of a mortgaged property included an
inspection of the contents of the self-storage units included in the
self-storage mortgaged properties and there is no assurance that all of the
units included in the self-storage mortgaged properties are free from hazardous
substances or other pollutants or contaminants or will remain so in the future.
LACK OF SKILLFUL PROPERTY MANAGEMENT ENTAILS RISKS
The successful operation of a real estate project depends upon the
property manager's performance and viability. The property manager is
responsible for:
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.
Properties deriving revenues primarily from short-term sources, such as
short-term or month-to-month leases, are generally more management intensive
than properties leased to creditworthy tenants under long-term leases.
We make no representation or warranty as to the skills of any present or
future managers. In many cases, the property manager is an affiliate of the
borrower and may not manage properties for non-affiliates. Additionally, we
cannot assure you that the property managers will be in a financial condition
to fulfill their management responsibilities throughout the terms of their
respective management agreements.
SOME MORTGAGED PROPERTIES MAY NOT BE READILY CONVERTIBLE TO ALTERNATIVE USES
Some of the mortgaged properties 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. The liquidation value of a mortgaged property
consequently may be substantially less than would be the case if the property
were readily adaptable to other uses.
Zoning or other restrictions also may prevent alternative uses. See
"--Zoning Compliance and Use Restrictions" below.
MORTGAGE LOANS SECURED BY LEASEHOLD INTERESTS MAY EXPOSE INVESTORS TO GREATER
RISKS OF DEFAULT AND LOSS
Nine of the mortgage loans, representing approximately 7.51% of the
aggregate principal balance of the pool of mortgage loans as of the cut-off
date, are secured by liens on the related borrower's leasehold interest in all
or a portion of the related real property, but not by the corresponding fee
ownership interest in the property that is subject to the ground lease. One of
these mortgage loans, representing 2.88% of the aggregate principal balance of
the pool of mortgage loans as of the cut-off date, consists of seven
properties, six of which (representing 89.83% of the mortgage loan's allocated
balance) are secured by a fee simple estate and one of which (representing
10.17% of the mortgage loan's allocated balance) is secured by a leasehold
estate in the commercial property. Because of the possible termination of the
related ground lease, lending on a leasehold interest in a real property may be
riskier than lending on a fee ownership interest in that property. See "Certain
Legal Aspects of the Mortgage Loans--Foreclosure--Leasehold Risks" in the
prospectus.
LIMITATIONS OF APPRAISALS
Appraisals were obtained with respect to each of the mortgaged properties
at or about the time of the origination of the applicable mortgage loan. In
general, appraisals represent the analysis and opinion of qualified appraisers
and are not guarantees of present or future value. One appraiser may reach a
different
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conclusion than the conclusion that would be reached if a different appraiser
were appraising that property. Moreover, appraisals seek to establish the
amount a typically motivated buyer would pay a typically motivated seller and,
in certain cases, may have taken into consideration the purchase price paid by
the borrower. That amount could be significantly higher than the amount
obtained from the sale of a mortgaged property under a distress or liquidation
sale. We cannot assure you that the information set forth in this prospectus
supplement regarding appraised values or loan-to-value ratios accurately
reflects past, present or future market values of the mortgaged properties.
YOUR LACK OF CONTROL OVER THE TRUST FUND CAN CREATE RISKS
You and other certificateholders generally do not have a right to vote and
do not have the right to make decisions with respect to the administration of
the trust. See "Servicing of the Mortgage Loans--General" in this prospectus
supplement. Those decisions are generally made, subject to the express terms of
the pooling and servicing agreement, by the master servicer, the trustee or the
special servicer, as applicable. Any decision made by one of those parties in
respect of the trust, even if that decision is determined to be in your best
interests by that party, may be contrary to the decision that you or other
certificateholders would have made and may negatively affect your interests.
POTENTIAL CONFLICTS OF INTEREST
Affiliates of the depositor and the master and primary servicer may
purchase a portion of the Series 2001-1 offered and non-offered certificates.
This could cause a conflict between the master servicer's duties to the trust
under the pooling and servicing agreement or subservicing agreement, as
applicable, and its interest as a holder of a certificate. In addition, the
holder of certain of the non-offered certificates has the right to remove the
special servicer and appoint a successor, which may be an affiliate of such
holder. However, the pooling and servicing agreement provides that the mortgage
loans are required to be administered in accordance with the servicing
standards without regard to ownership of any certificate by a servicer or any
of their affiliates. See "Servicing of the Mortgage Loans--General" in this
prospectus supplement.
In addition, any of those parties may, especially if it or an affiliate
holds Series 2001-1 non-offered certificates, or has financial interests in or
other financial dealings with a borrower under any of the mortgage loans, have
interests when dealing with the mortgage loans that are in conflict with those
of holders of the offered certificates. For instance, a special servicer that
holds Series 2001-1 non-offered certificates could seek to reduce the potential
for losses allocable to those certificates from a troubled mortgage loan by
deferring acceleration in hope of maximizing future proceeds. However, that
action could result in less proceeds to the trust than would be realized if
earlier action had been taken. In general, a servicer is not required to act in
a manner more favorable to the offered certificates or any particular class of
offered certificates than to Series 2001-1 non-offered certificates.
In addition, the master and primary servicer services and will, in the
future, service, in the ordinary course of its business, existing and new loans
for third parties, including portfolios of loans similar to the loans that will
be included in the trust. The real properties securing these other loans may be
in the same markets as, and compete with, certain of the real properties
securing the loans that will be included in the trust. Consequently, personnel
of the master servicer and the special servicer may perform services, on behalf
of the trust, with respect to the mortgage loans at the same time as they are
performing services, on behalf of other persons, with respect to other mortgage
loans secured by properties that compete with the real properties securing the
mortgage loans. This may pose inherent conflicts for the master servicer or the
special servicer.
In addition, certain of the mortgage loans included in the trust may have
been refinancings of debt previously held by a mortgage loan seller or an
affiliate of a mortgage loan seller and the mortgage loan sellers or their
affiliates may have or have had equity investments in the borrowers or
properties under certain of the mortgage loans included in the trust. Each of
the mortgage loan sellers and their affiliates have made and/or may make loans
to, or equity investments in, affiliates of the borrowers under the mortgage
loans. With respect to seven mortgage loans identified as Loan Nos. 22, 23, 30,
46, 83, 101 and
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107 on Annex A to this prospectus supplement, representing approximately 1.52%
of the aggregate principal balance of the pool of mortgage loans as of the
cut-off date, an affiliate of General Electric Capital Corporation, one of the
mortgage loan sellers, of the depositor and of the master servicer owns 85% of
each borrower's managing member.
The managers of the mortgaged properties and the borrowers may experience
conflicts of interest in the management and/or ownership of the mortgaged
properties because:
o a substantial number of the mortgaged properties are managed by
property managers affiliated with the respective borrowers;
o these property managers also may manage and/or franchise additional
properties, including properties that may compete with the mortgaged
properties; and
o affiliates of the managers and/or the borrowers, or the managers and/or
the borrowers themselves, also may own other properties, including
competing properties.
DIRECTING CERTIFICATEHOLDER MAY DIRECT SPECIAL SERVICER ACTIONS
In connection with the servicing of the specially serviced mortgage loans,
the special servicer may, at the direction of the directing certificateholder,
take actions with respect to the specially serviced mortgage loans that could
adversely affect the holders of some or all of the classes of offered
certificates. The directing certificateholder will be controlled by the
controlling class certificateholders, which may have interests in conflict with
those of the certificateholders of the classes of offered certificates. As a
result, it is possible that the directing certificateholder may direct the
special servicer to take actions which conflict with the interests of certain
classes of the offered certificates. However, the special servicer is not
permitted to take actions which are prohibited by law or violate the servicing
standards. See "Servicing of the Mortgage Loans--General" in this prospectus
supplement.
BANKRUPTCY PROCEEDINGS ENTAIL CERTAIN RISKS
Under federal bankruptcy law, the filing of a petition in bankruptcy by or
against a borrower will stay the sale of the mortgaged property owned by that
borrower, as well as the commencement or continuation of a foreclosure action.
In addition, even if a court determines that the value of the mortgaged
property is less than the principal balance of the mortgage loan it secures,
the court may prevent a lender from foreclosing on the mortgaged property
(subject to certain protections available to the lender). As part of a
restructuring plan, a court also may reduce the amount of secured indebtedness
to the then-current value of the mortgaged property, which would make the
lender a general unsecured creditor for the difference between the then-current
value and the amount of its outstanding mortgage indebtedness. A bankruptcy
court also may: (1) grant a debtor a reasonable time to cure a payment default
on a mortgage loan; (2) reduce periodic payments due under a mortgage loan; (3)
change the rate of interest due on a mortgage loan; or (4) otherwise alter the
mortgage loan's repayment schedule.
Moreover, the filing of a petition in bankruptcy by, or on behalf of, a
junior lienholder may stay the senior lienholder from taking action to
foreclose on the junior lien. Additionally, the borrower's trustee or the
borrower, as debtor-in-possession, has certain special powers to avoid,
subordinate or disallow debts. In certain circumstances, the claims of the
trustee may be subordinated to financing obtained by a debtor-in-possession
subsequent to its bankruptcy.
Additionally, pursuant to subordination agreements for certain of the
mortgage loans, the subordinate lenders may have agreed that they will not take
any direct actions with respect to the related subordinated debt, including any
actions relating to the bankruptcy of the borrower, and that the holder of the
mortgage loan will have all rights to direct all such actions. There can be no
assurance that in the event of the borrower's bankruptcy, a court will enforce
such restrictions against a subordinated lender.
In its recent decision in In re 203 North LaSalle Street Partnership, 246
B.R. 325 (Bankr. N.D. Ill. March 10, 2000), the United States Bankruptcy Court
for the Northern District of Illinois refused to enforce a provision of a
subordination agreement that allowed a first mortgagee to vote a second
mortgagee's claim
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with respect to a Chapter 11 reorganization plan on the grounds that
prebankruptcy contracts cannot override rights expressly provided by the
Bankruptcy Code. This holding, which one court has already followed,
potentially limits the ability of a senior lender to accept or reject a
reorganization plan or to control the enforcement of remedies against a common
borrower over a subordinated lender's objections.
Under federal bankruptcy law, the lender will be stayed from enforcing a
borrower's assignment of rents and leases. Federal bankruptcy law also may
interfere with the master servicer's or special servicer's ability to enforce
lockbox requirements. The legal proceedings necessary to resolve these issues
can be time consuming and costly and may significantly delay or diminish the
receipt of rents. Rents also may escape an assignment to the extent they are
used by the borrower to maintain the mortgaged property or for other court
authorized expenses.
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.
RISKS RELATING TO PREPAYMENTS AND REPURCHASES
The yield to maturity on your certificates will depend, in significant
part, upon the rate and timing of principal payments on the mortgage loans. For
this purpose, principal payments include both voluntary prepayments, if
permitted, and involuntary prepayments, such as prepayments resulting from
casualty or condemnation, defaults and liquidations or repurchases upon
breaches of representations and warranties.
The yield on the Class C and Class D Certificates could also be adversely
affected if mortgage loans with higher interest rates pay faster than the
mortgage loans with lower interest rates, since those classes bear interest at
a rate limited by the weighted average net mortgage rate of the mortgage loans.
The pass-through rates on those classes of certificates may be limited by the
weighted average of the net interest rates on the mortgage loans even if
principal prepayments do not occur.
The investment performance of your certificates may vary materially and
adversely from your expectations if the actual rate of prepayment on the
mortgage loans is higher or lower than you anticipate.
Any changes in the weighted average lives of your certificates may
adversely affect your yield. Prepayments resulting in a shortening of weighted
average lives of your certificates may be made at a time of low interest rates
when you may be unable to reinvest the resulting payment of principal on your
certificates at a rate comparable to the effective yield anticipated by you in
making your investment in the certificates, while delays and extensions
resulting in a lengthening of those weighted average lives may occur at a time
of high interest rates when you may have been able to reinvest principal
payments that would otherwise have been received by you at higher rates.
Although all of the mortgage loans have prepayment protection in the form
of lockout periods with defeasance provisions or with yield maintenance
provisions, we cannot assure you that the related borrowers will refrain from
prepaying their mortgage loans due to the existence of yield maintenance
charges or prepayment provisions or that involuntary prepayments will not
occur. In particular, two mortgage loans, each of which is a fully amortizing
loan with a 20 year term, representing 1.42% of the aggregate principal balance
of the pool of mortgage loans as of the cut-off date, have an open prepayment
period beginning three years prior to their respective maturity date.
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 lock-out period;
o the level of prevailing interest rates;
o the availability of mortgage credit;
o the applicable yield maintenance charges;
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o the master servicer's or special servicer's ability to enforce those
charges or premiums;
o the failure to meet certain requirements for the release of escrows;
o the occurrence of casualties or natural disasters; and
o economic, demographic, tax, legal or other factors.
The mortgage loans do not require a yield maintenance charge for
prepayments in connection with a casualty or condemnation unless, in the case
of most of the mortgage loans, an event of default has occurred and is
continuing. Certain shortfalls in interest as a result of involuntary
prepayments may reduce the available distribution amount. In addition, if a
mortgage loan seller repurchases any mortgage loan from the trust due to
breaches of representations or warranties, the repurchase price paid will be
passed through to the holders of the certificates with the same effect as if
the mortgage loan had been prepaid in part or in full, and no yield maintenance
charge would be payable. A repurchase may adversely affect the yield to
maturity on your certificates.
RISKS RELATING TO ENFORCEABILITY OF YIELD MAINTENANCE CHARGES OR DEFEASANCE
PROVISIONS
Provisions requiring yield maintenance charges, penalty charges or lockout
periods may not be enforceable in some states and under federal bankruptcy law.
Provisions requiring yield maintenance charges also may be interpreted as
constituting the collection of interest for usury purposes. Accordingly, we
cannot assure you that the obligation to pay any yield maintenance charge or
penalty charge will be enforceable. Also, we cannot assure you that foreclosure
proceeds will be sufficient to pay an enforceable yield maintenance charge.
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. In certain jurisdictions, those
collateral substitution provisions might be deemed unenforceable under
applicable law or public policy, or usurious.
RISKS RELATING 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;
o their yield to maturity;
o the rate of principal payments; and
o their weighted average life.
If losses on the mortgage loans exceed the aggregate principal amount of
the classes of certificates subordinated to a particular class, that class will
suffer a loss equal to the full amount of the excess (up to the outstanding
principal amount of that class).
If you calculate your anticipated yield based on assumed rates of defaults
and losses that are lower than the default rate and losses actually
experienced, and those losses are allocated to your certificates, your actual
yield to maturity will be lower than the assumed yield. Under certain extreme
scenarios, that yield could be negative. In general, the earlier a loss borne
by you on 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 lead to your certificates
having a higher percentage ownership interest in the trust and 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.
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Additionally, delinquencies and defaults on the mortgage loans may
significantly delay the receipt of distributions by you on your certificates,
unless advances are made to cover delinquent payments or the subordination of
another class of certificates fully offsets the effects of any delinquency or
default.
Additionally, the courts of any state may refuse the foreclosure of a
mortgage or deed of trust when an acceleration of the indebtedness would be
inequitable or unjust or the circumstances would render the action
unconscionable. See "Certain Legal Aspects of the Mortgage Loans--Foreclosure"
in the prospectus.
RISKS RELATING TO CERTAIN PAYMENTS
To the extent described in this prospectus supplement, the master
servicer, the special servicer, the trustee or the fiscal agent, as applicable,
will be entitled to receive interest on unreimbursed advances, compounded
monthly, at the "Prime Rate" as published in The Wall Street Journal as
described in this prospectus supplement. This interest will generally accrue
from the date on which the related advance is made or the related expense is
incurred through the date of reimbursement. In addition, under certain
circumstances, including delinquencies in the payment of principal and/or
interest, a mortgage loan will be specially serviced and the special servicer
is entitled to compensation for special servicing activities. The right to
receive interest on advances or special servicing compensation is senior to the
rights of certificateholders to receive distributions on the offered
certificates. The payment of interest on advances and the payment of
compensation to the special servicer may lead to shortfalls in amounts
otherwise distributable on your certificates.
RISKS OF LIMITED LIQUIDITY AND MARKET VALUE
Your certificates will not be listed on any national securities exchange
or traded on any automated quotation systems of any registered securities
association, and there is currently no secondary market for your certificates.
While the underwriters currently intend to make a secondary market in the
offered certificates, they are not obligated to do so. Additionally, one or
more purchasers may purchase substantial portions of one or more classes of
offered certificates. Accordingly, you may not have an active or liquid
secondary market for your certificates. Lack of liquidity could result in a
substantial decrease in the market value of your certificates. The market value
of your certificates also may be affected by many other factors, including the
then-prevailing interest rates.
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 mortgage loans, the pool will be subject to more
concentration risks with respect to the diversity of mortgaged properties,
types of mortgaged properties and number of borrowers, as described 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 a 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.
SUBORDINATION OF SUBORDINATE OFFERED CERTIFICATES
As described in this prospectus supplement, unless your certificates are
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.
See "Description of the Certificates--Distributions--Priority" and
"Description of the Certificates-- Subordination; Allocation of Collateral
Support Deficit" in this prospectus supplement.
ENVIRONMENTAL RISKS RELATING TO THE MORTGAGED PROPERTIES
The trust could become liable for a material adverse environmental
condition at an underlying real property. Any such potential liability could
reduce or delay payments on the offered certificates.
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Other than one mortgage loan, representing approximately 0.12% of the
aggregate principal balance of the pool of mortgage loans as of the cut-off
date, for which a lender's secured creditor insurance policy was obtained from
a third party insurer, all of the mortgaged properties were subject to
environmental site assessments at or about the time of origination of the
mortgage loans, including Phase I site assessments or updates of previously
performed Phase I site assessments. In some cases, Phase II site assessments
have also been performed. Although those assessments involved site visits and
other types of review, we cannot assure you that all environmental conditions
and risks were identified.
Except as described below, none of the environmental assessments revealed
any material adverse environmental condition or circumstance at any mortgaged
property except for those:
o which will be remediated or abated in all material respects by the
closing date;
o for which an escrow for the remediation was established;
o for which an environmental insurance policy was obtained from a third
party insurer;
o for which the consultant recommended an operations and maintenance plan
or periodic monitoring of nearby properties, which recommendations are
consistent with industry practice;
o for which the principal of the borrower or another financially
responsible party is required to take, or is liable for the failure to
take, such actions, if any, with respect to such matters as have been
required by the applicable governmental authority or recommended by the
environmental assessments; or
o for which such conditions or circumstances were investigated further
and the environmental consultant recommended no further action or
remediation.
In certain cases, the identified condition related to the presence of
asbestos-containing materials, lead-based paint, silver and/or radon. Where
these substances were present, the environmental consultant generally
recommended, and the related loan documents required, the establishment of an
operation and maintenance plan to address the issue or, in the case of
asbestos-containing materials and lead-based paint, an abatement or removal
program. Other identified conditions, for example, include leaks from storage
tanks and on-site spills. Corrective action, as required by the regulatory
agencies, has been or is currently being undertaken and/or the related
borrowers have made deposits into environmental reserve accounts. However, we
cannot assure you that any environmental indemnity, insurance or reserve
amounts will be sufficient to remediate the environmental conditions or that
all environmental conditions have been identified or that operation and
maintenance plans will be put in place and/or followed. Additionally, we cannot
assure you that actions of tenants at mortgaged properties will not adversely
affect the environmental condition of the mortgaged properties.
See "Servicing of the Mortgage Loans--Realization Upon Defaulted Mortgage
Loans" in this prospectus supplement and "Risk Factors--Environmental Risks"
and "Certain Legal Aspects of Mortgage Loans-- Environmental Risks" in the
prospectus.
TAX CONSIDERATIONS RELATING TO FORECLOSURE
If the trust acquires a mortgaged property pursuant to a foreclosure or
deed in lieu of foreclosure, the special servicer must (in all circumstances
required by the Code) retain an independent contractor to operate the property.
Any net income from the operation of the property (other than qualifying "rents
from real property"), any rental income based on the net profits of a tenant or
sub-tenant or any income from a non-customary service, will subject the
Lower-Tier REMIC to federal tax (and possibly state or local tax) on that
income at the highest marginal corporate tax rate (currently 35%). In that
event, the net proceeds available for distribution to certificateholders will
be reduced. The special servicer may permit the Lower-Tier REMIC to earn "net
income from foreclosure property" that is subject to tax if it determines that
the net after-tax benefit to certificateholders is greater than under another
method of operating or net leasing the mortgaged property.
RISKS ASSOCIATED WITH ONE ACTION RULES
Several states (including California) have laws that prohibit more than
one "judicial action" to enforce a mortgage obligation, and some courts have
construed the term "judicial action" broadly. Accordingly, the
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special servicer is required to obtain advice of counsel prior to enforcing any
of the trust fund's rights under any of the mortgage loans that include
mortgaged properties where the rule could be applicable. See "Certain Legal
Aspects of Mortgage Loans--Foreclosure" in the prospectus.
CERTAIN LEGAL ASPECTS OF MORTGAGED LOANS FOR MORTGAGED PROPERTIES LOCATED IN
PUERTO RICO
Commercial mortgage loans in Puerto Rico are generally evidenced by the
execution of a promissory note in favor of the mortgagee and a "mortgage note"
payable to the bearer thereof is then pledged to the mortgagee as security for
the promissory note. The mortgage note in turn is secured by a deed of mortgage
on certain real property of the mortgagor. Priority between mortgage
instruments depends on their terms and generally on the order of filing with
the appropriate Registry of Property of Puerto Rico. Foreclosure of a mortgage
in Puerto Rico is generally accomplished by judicial action. The action is
initiated by the service of legal pleadings upon all parties having an interest
in the real property. The costs of foreclosure would reduce the proceeds from a
foreclosure sale available to satisfy the Mortgage Loan. At the completion of
the judicial foreclosure proceedings, if the mortgagee prevails, the court
generally issues a judgment of foreclosure and appoints a marshal or other
court officer to conduct the sale of the property. The purchaser at such sale
acquires the estate or interest in real property covered by the mortgage. The
courts of Puerto Rico will enforce clauses providing for acceleration in the
event of a material payment default after giving effect to any appropriate
notices.
PUERTO RICO/UNITED STATES RELATIONSHIP
The Commonwealth of Puerto Rico is an unincorporated territory of the
United States. The provisions of the United States Constitution and laws of the
United States apply to the Commonwealth of Puerto Rico as determined by the
United States Congress and the continuation or modification of current federal
law and policy applicable to the Commonwealth of Puerto Rico remains within the
discretion of the United States Congress.
PROPERTY INSURANCE
All of the mortgage loans require the related borrower to maintain, or
cause to be maintained, property insurance. However, the mortgaged properties
may suffer casualty losses due to risks which were not covered by insurance or
for which insurance coverage is inadequate. In addition, approximately 19.99%,
9.23%, 7.62% and 1.43% of the mortgaged properties, by aggregate principal
balance of the pool of mortgage loans as of the cut-off date, are located in
California, Florida, Texas and Puerto Rico, respectively, areas that have
historically been at greater risk regarding acts of nature (such as
earthquakes, floods and hurricanes) than other states. We cannot assure you
that borrowers will be able to maintain adequate insurance. 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.
As a result of any of the foregoing, the amount available to make
distributions on your certificates could be reduced.
ZONING COMPLIANCE AND USE RESTRICTIONS
Certain of the mortgaged properties may not comply with current zoning
laws, including density, use, parking and set back requirements, due to changes
in zoning requirements after such mortgaged properties were constructed. These
properties, as well as those for which variances or special permits were
issued, are considered to be a "legal non-conforming use" and/or the
improvements are considered to be "legal non-conforming structures". This means
that the borrower is not required to alter its structure to comply with the
existing or new law; however, the borrower may not be able to rebuild the
premises "as is" in the event of a substantial casualty loss. This may
adversely affect the cash flow of the property following the loss. If a
substantial casualty were to occur, we cannot assure you that insurance
proceeds would be available to pay the mortgage loan in full. In addition, if
the property were repaired or restored in conformity with the current law, the
value of the property or the revenue-producing potential of the property may
not be equal to that before the casualty.
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In addition, certain of the mortgaged properties which are non-conforming
may be in violation of applicable zoning laws although the mortgage loan
sellers are not aware of any such violations that are material. The failure of
a mortgaged property to comply with zoning laws or to be a "legal
non-conforming use" or "legal non-conforming structure" may adversely affect
market value of the mortgaged property or the borrower's ability to continue to
use it in the manner it is currently being used, or subject the borrower to
other penalties prescribed by applicable zoning laws.
Certain of the mortgaged properties may be subject to certain use
restrictions imposed pursuant to reciprocal easement agreements or operating
agreements. Such use restrictions could include, for example, limitations on
the character of the improvements or the properties, limitations affecting
noise and parking requirements, and limitations on the borrowers' right to
operate certain types of facilities within a prescribed radius, among other
things. These limitations could adversely affect the ability of the related
borrower to lease the mortgaged property on favorable terms, thus adversely
affecting the borrower's ability to fulfill its obligations under the related
mortgage loan.
RISKS RELATING TO COSTS OF COMPLIANCE WITH APPLICABLE LAWS AND REGULATIONS
A borrower may be required to incur costs to comply with various existing
and future federal, state or local laws and regulations applicable to the
related mortgaged property, for example, zoning laws and the Americans with
Disabilities Act of 1990, as amended, which requires all public accommodations
to meet certain federal requirements related to access and use by disabled
persons. See "Certain Legal Aspects of Mortgage Loans--Americans with
Disabilities Act" in the prospectus. The expenditure of these costs or the
imposition of injunctive relief, penalties or fines in connection with the
borrower's noncompliance could negatively impact the borrower's cash flow and,
consequently, its ability to pay its mortgage loan.
NO REUNDERWRITING OF THE MORTGAGE LOANS
We have not reunderwritten the mortgage loans. Instead, we have relied on
the representations and warranties made by the mortgage loan sellers, and the
applicable mortgage loan seller's obligation to repurchase, substitute or cure
a mortgage loan in the event that a representation or warranty was not true
when made. These representations and warranties do not cover all of the matters
that we would review in underwriting a mortgage loan and you should not view
them as a substitute for reunderwriting the mortgage loans. If we had
reunderwritten the mortgage loans, it is possible that the reunderwriting
process may have revealed problems with a mortgage loan not covered by a
representation or warranty. In addition, we can give no assurance that the
applicable mortgage loan seller will be able to repurchase a mortgage loan if a
representation or warranty has been breached. See "Description of the Mortgage
Pool-- Representations and Warranties; Repurchases and Substitutions" in this
prospectus supplement.
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 borrowers, managers and affiliates.
We cannot assure you that litigation will not have a material adverse effect on
your investment.
BOOK-ENTRY REGISTRATION
Your certificates will be initially represented by one or more
certificates registered in the name of Cede & Co., as the nominee for DTC, and
will not be registered in your name. As a result, you will not be recognized as
a certificateholder, or holder of record of your certificates. See "Risk
Factors--Book-Entry System for Certain Classes May Decrease Liquidity and Delay
Payment" in the prospectus for a discussion of important considerations
relating to not being a certificateholder of record.
RISKS OF INSPECTIONS RELATING TO PROPERTIES
Licensed engineers or consultants inspected the mortgaged properties at or
about the time of the origination of the mortgage loans to assess items such as
structural integrity of the buildings and other
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improvements on the mortgaged properties, including exterior walls, roofing,
interior construction, mechanical and electrical systems and general condition
of the site, buildings and other improvements. However, we cannot assure you
that all conditions requiring repair or replacement were identified. No
additional property inspections were conducted in connection with the issuance
of the offered certificates.
OTHER RISKS
See "Risk Factors" in the prospectus for a description of certain other
risks and special considerations that may be applicable to your certificates.
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DESCRIPTION OF THE MORTGAGE POOL
GENERAL
All percentages of the mortgage loans and mortgaged properties, or of any
specified group of mortgage loans and mortgaged properties, referred to in this
prospectus supplement without further description are approximate percentages
by Initial Pool Balance. The trust will consist primarily of 153 mortgage loans
secured by 167 commercial, multifamily and manufactured housing community
mortgaged properties with an aggregate principal balance of approximately
$1,143,420,694 (the "Initial Pool Balance") as of the later of the cut-off date
or the origination date. The "Cut-off Date Balance" of any mortgage loan will
be the unpaid principal balance of that mortgage loan as of the later of the
cut-off date or the origination date, after application of all payments due on
or before that date, whether or not received. Each mortgage loan is evidenced
by a promissory note (a "Mortgage Note") and secured by a mortgage, deed of
trust or other similar security instrument (a "Mortgage") that creates a first
mortgage lien:
(1) on a fee simple estate in one or more commercial, multifamily or
manufactured housing community properties;
(2) with respect to one mortgage loan (identified as Loan No. 51 on
Annex A to this prospectus supplement), representing approximately 2.88% of
the Initial Pool Balance and comprised of seven different properties, one
of such properties constitutes a leasehold estate in the commercial
property; or
(3) with respect to eight mortgage loans (identified as Loan No. 1,
17, 18, 38, 45, 57, 98 and 100 on Annex A to this prospectus supplement),
representing approximately 4.63% of the Initial Pool Balance, a leasehold
estate in all or a portion of a commercial property (each of clauses (1)
through (3), a "Mortgaged Property").
The term of any ground lease securing any mortgage loan that is not also
secured by the related fee interest extends at least 10 years beyond the stated
maturity of that mortgage loan (including extensions at the borrower's option).
Mortgage loans secured by ground leases present certain bankruptcy and
foreclosure risks not present with mortgage loans secured by fee simple
estates. See "Certain Legal Aspects of Mortgage Loans--Foreclosure--Leasehold
Risks" and "Certain Legal Aspects of Mortgage Loans-- Bankruptcy Laws" in the
prospectus.
On or about April 30, 2001 (the "Closing Date"), GE Capital Commercial
Mortgage Corporation (the "Depositor") will acquire the mortgage loans from
General Electric Capital Corporation ("GECC"), Morgan Guaranty Trust Company of
New York ("Morgan Guaranty") and Bear, Stearns Funding, Inc. ("BSFI" and,
collectively with GECC and Morgan Guaranty, the "Mortgage Loan Sellers")
pursuant to three mortgage loan purchase agreements, each dated as of the
cut-off date (the "Purchase Agreements"), between the Depositor and the
applicable Mortgage Loan Seller. The Depositor will then assign its interests
in the mortgage loans, without recourse, to LaSalle Bank National Association,
as trustee (the "Trustee") for the benefit of the holders of the certificates
(the "Certificateholders"). See "--The Mortgage Loan Sellers" below and
"Description of the Pooling Agreements--Assignment of Mortgage Loans;
Repurchases" in the prospectus. For purposes of the prospectus, each of the
Mortgage Loan Sellers constitutes a Mortgage Asset Seller.
The mortgage loans were originated in the period between March 2000 and
April 2001.
The mortgage loans are not insured or guaranteed by the Mortgage Loan
Sellers or any other person or entity. You should consider all of the mortgage
loans to be nonrecourse loans as to which recourse in the case of default will
be limited to the specific property and other assets, if any, pledged to secure
a mortgage loan.
As of the cut-off date, the applicable Mortgage Loan Sellers have informed
us that they are aware of the following indebtedness with respect to the
mortgage loans:
o With respect to 1 mortgage loan (identified as Loan No. 27 on Annex A to
this prospectus supplement), representing approximately 0.93% of the
Initial Pool Balance, the related borrower
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has a contingent obligation for the reimbursement of Community Facility
District payments, if and when such payments are made to the borrower,
secured by the related mortgaged property. No such payments have
currently been made.
o With respect to 1 mortgage loan (identified as Loan No. 1 on Annex A to
this prospectus supplement), representing approximately 1.51% of the
Initial Pool Balance, the terms of such loan permit further unsecured
debt payable to a general partner of the related borrower in an amount
not to exceed $1,000,000, subject to both the lender's approval and the
subordinate debt lender's entering into a subordination and standstill
agreement.
o The terms of certain of the mortgage loans permit or require the
borrowers to post letters of credit and/or surety bonds for the benefit
of the mortgage loan, which may constitute a contingent reimbursement
obligation of the related borrower or an affiliate. The issuing bank or
surety will not typically agree to subordination and standstill
protection benefiting the mortgagee.
In addition, substantially all of the mortgage loans permit the related
borrower to incur limited indebtedness in the ordinary course of business that
is not secured by the related mortgaged property. Moreover, in general, any
borrower that does not meet single-purpose entity criteria may not be
restricted from incurring unsecured debt.
In addition, although the mortgage loans generally restrict the transfer
or pledging of general partnership and managing member equity interests in a
borrower, subject to certain exceptions, the terms of the mortgage generally
permit, subject to certain limitations, the pledging of a less than a
controlling portion of the limited partnership or non-managing membership
equity interests in a borrower. Moreover, in general, the parent entity of any
borrower that does not meet single purpose entity criteria may not be
restricted in any way from incurring mezzanine or other debt not secured by the
related Mortgaged Property.
In particular, with respect to 7 mortgage loans (identified as Loan No. 6,
10, 31, 79, 85, 111 and 116 on Annex A to this prospectus supplement),
representing approximately 3.28% of the Initial Pool Balance, the partners of
the related borrower have pledged their interest in such borrowers to secure
$4,227,870 of mezzanine debt. Such debt is also secured by the interests in an
affiliated owner of another property. The terms of such loans do not permit
additional mezzanine debt. Additionally, with respect to four mortgage loans
(identified as Loan Nos. 17, 18, 57 and 98 on Annex A to this prospectus
supplement), representing approximately 1.94% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date, the sole
shareholder of the related borrowers has an unsecured obligation to the
non-recourse carveout indemnitor in the aggregate amount of approximately
$7,344,720.
Three mortgage loans (identified as Loan No. 20, 32 and 87 on Annex A to
this prospectus supplement), representing approximately 3.10% of the Initial
Pool Balance, permit future mezzanine debt, subject to lender review and
respective caps of $2,000,000, $1,000,000 and $250,000.
Certain risks relating to additional debt are described in "Risk
Factors--Ability to Incur Other Borrowings Entails Risk" in this prospectus
supplement and "Certain Legal Aspects of Mortgage Loans-- Subordinate Financing"
in the prospectus.
AFFILIATED BORROWER CONCENTRATIONS
No concentration of non-cross-collateralized mortgage loans has affiliated
borrowers with an aggregate outstanding principal balance as of the cut-off
date which exceeds 5% of the Initial Pool Balance.
SIGNIFICANT MORTGAGE LOANS
No mortgage loan or group of cross-collateralized mortgage loans has an
outstanding principal balance as of the cut-off date which exceeds 5% of the
Initial Pool Balance.
APD LOANS
16 mortgage loans (identified as Loan No. 6, 10, 11, 31, 47, 51, 54, 79,
80, 85, 93, 97, 111, 116, 128 and 136 on Annex A to this prospectus supplement)
(the "APD Loans"), representing approximately 13.20% of
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the Initial Pool Balance, provide that if, after a certain date (each, an
"Anticipated Prepayment Date"), the borrower has not prepaid the respective APD
Loan in full, any principal outstanding on that date will accrue interest at an
increased interest rate (the "Revised Rate") rather than the stated Mortgage
Rate (the "Initial Rate"). The Anticipated Prepayment Date for each APD Loan is
approximately 120 months after the origination date for the APD Loans. The
Revised Rate for (a) three APD Loans (identified as Loan No. 51, 93 and 136 on
Annex A to this prospectus supplement) is equal to the Initial Rate, plus 2%
per annum, (b) eight APD Loans (identified as Loan No. 6, 10, 31, 47, 79, 85,
111 and 116 on Annex A to this prospectus supplement) is equal to the greater
of (i) the Initial Rate plus 2% or (ii) then current treasury rate most closely
corresponding to the remaining loan term plus 2%; and (c) 5 APD Loans
(identified as Loan No. 11, 54, 80, 97 and 128 on Annex A to this prospectus
supplement) is equal to the greater of the Initial Rate plus 2% or a treasury
index plus a specified amount (ranging from 3.9% to 4.2%). After the
Anticipated Prepayment Date, the APD Loans further require that all cash flow
available from the related Mortgaged Property after payment of the constant
periodic payment required under the terms of the related loan documents and all
escrows and property expenses required under the related loan documents be used
to accelerate amortization of principal on the respective APD Loan. While
interest at the Initial Rate continues to accrue and be payable on a current
basis on the APD Loans after their Anticipated Prepayment Dates, the payment of
interest at the excess of the Revised Rate over the Initial Rate for the APD
Loans will be deferred and will be required to be paid, with interest, only
after the outstanding principal balance of the respective APD Loan has been
paid in full. Additionally, with respect to Loan No. 11, 51, 80, 93, 97 and
128, the terms of the APD Loans provide that the springing lockbox accounts
established on or about origination into which the related property manager
and/or tenants are required to directly deposit rents or other revenues from
the related Mortgaged Property become hard lock boxes after the Anticipated
Prepayment Date or other trigger events. With respect to Loan No. 6, 10, 31,
47, 79, 85, 111, 116 and 136 the terms of such loans provide that a lockbox be
established six months prior to the Anticipated Prepayment Date which becomes a
hard lockbox after the Anticipated Prepayment Date. Loan No. 54 has terms that
provide for a hard lockbox from origination. See "--Lock Box Accounts" below.
The foregoing features, to the extent applicable, are designed to increase the
likelihood that the APD Loans will be prepaid by the respective borrower on or
about their Anticipated Prepayment Dates.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
130 of the mortgage loans, representing approximately 80.43% of the
Initial Pool Balance, have due dates that occur on the 1st day of each month,
and 22 mortgage loans, representing approximately 17.03% of the Initial Pool
Balance, have due dates that occur on the tenth day of each month and one
mortgage loan, representing approximately 2.53% of the Initial Pool Balance,
has a due date that occurs on the 11th day of each month. All of the mortgage
loans whose due dates are the 1st day of each month provide for grace periods
of not more than ten days.
All of the mortgage loans bear interest at fixed rates. 152 of the
mortgage loans, representing approximately 98.80% of the Initial Pool Balance,
accrue interest on the basis of the actual number of days in a month, assuming
a 360-day year ("Actual/360 Basis"), and the remaining mortgage loan, accrues
interest on the basis of a 360-day year consisting of twelve 30-day months
("30/360 Basis"). 135 mortgage loans, representing approximately 85.39% of the
Initial Pool Balance, provide for monthly payments of principal based on
amortization schedules significantly longer than the remaining terms of the
related mortgage loans. Seven of these mortgage loans, representing
approximately 1.52% of the Initial Pool Balance, initially provide for monthly
payments of interest-only for the first 25 scheduled payments of the term of
the mortgage loan and payments which would amortize a portion of the principal
balance of the mortgage loan during the remaining term of the mortgage loan.
Thus, those mortgage loans will have balloon payments due at their stated
maturity dates. In addition, the 16 APD Loans, representing approximately
13.20% of the Initial Pool Balance, provide for monthly payments of principal
that will result in a substantial principal payment at their Anticipated
Prepayment Dates if the related borrower prepays the mortgage loan on that
date.
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Prepayment Provisions. Each mortgage loan prohibits any prepayments (or
defeasance) for a specified period of time after its date of origination (a
"Lock-out Period"). In addition, each mortgage loan restricts voluntary
prepayments in one of the following ways:
(1) 152 of the mortgage loans, representing approximately 99.47% of
the Initial Pool Balance, permit only defeasance after the expiration of
the Lock-out Period. In the case of certain loans that are secured by
multiple properties or are cross-collateralized with other loans, partial
defeasance is permitted.
(2) One of the mortgage loans, representing approximately 0.53% of the
Initial Pool Balance, requires that any principal prepayment made during a
specified period of time after the Lockout Period (a "Yield Maintenance
Period"), be accompanied by a Yield Maintenance Charge (as defined below)
and one mortgage loan, representing approximately 0.23% of the Initial Pool
Balance, requires that any payments made during a specified period be
accompanied by a prepayment penalty equal to a declining percentage of the
outstanding principal balance of the mortgage loan.
"Yield Maintenance Charge" will be the greater of (i) 1% of the principal
amount being prepaid or (ii) the excess, if any, of (a) the sum of the present
values of all remaining scheduled payments of principal and interest, including
the balloon payment, discounted at a rate, which, when compounded monthly,
equals the U.S. Securities Rate over (b) the principal amount being prepaid.
"U.S. Securities Rate" means as of the date five business days prior to the
scheduled date of prepayment, the rate published in the "Treasury Bonds, Notes
and Bills" section of The Wall Street Journal, or if not published therein the
rate published by the Federal Reserve System in its "Statistical Release
H.15(519), Selected Interest Rates", for the most recently issued U.S. Treasury
Security with a term closest to, but not exceeding, that remaining on the
related mortgage note on the date of the prepayment.
Yield Maintenance Charges and prepayment premiums are distributable as
described in this prospectus supplement under "Description of the
Certificates--Allocation of Yield Maintenance Charges."
140 of the mortgage loans, representing approximately 90.94% of the
Initial Pool Balance, specify a period of time immediately prior to the stated
maturity date or Anticipated Prepayment Date, as applicable, during which there
are no restrictions on voluntary prepayment. 138 of the mortgage loans,
representing approximately 89.52% of the Initial Pool Balance, permit voluntary
prepayment without the payment of a yield maintenance charge for the final 2 to
7 scheduled payments (including the scheduled payment on the stated maturity
date or Anticipated Prepayment Date, as applicable). Two mortgage loans
(identified as Loan No. 50 and 109 on Annex A to this prospectus supplement),
representing approximately 1.42% of the Initial Pool Balance, permits voluntary
prepayment without payment of a yield maintenance charge for the last 37
scheduled payments (including the scheduled payment on the maturity date).
Certain state laws limit the amounts that a lender may collect from a
borrower as an additional charge in connection with the prepayment of a
mortgage loan. Provided no event of default exists, none of the mortgage loans
require the payment of yield maintenance charges in connection with a
prepayment of the related mortgage loan as a result of a total casualty or
condemnation. Certain of the mortgage loans may require the payment of yield
maintenance charges in connection with an acceleration of the related mortgage
loan. There can be no assurances that the related borrowers will pay the Yield
Maintenance Charges. See "Risk Factors--Risks Relating to Enforceability of
Yield Maintenance Charges or Defeasance Provisions" in this prospectus
supplement and "Certain Legal Aspects of Mortgage Loans--Default Interest and
Limitations on Prepayments" in the prospectus.
Defeasance; Collateral Substitution. Except with respect to two mortgage
loans (identified as Loan No. 4 and 82 on Annex A to this prospectus
supplement), representing approximately 0.76% of the Initial Pool Balance, the
terms of all of the mortgage loans permit the applicable borrower on any due
date after a specified period (the "Defeasance Lock-out Period") to obtain a
release of a Mortgaged Property from the lien of the related Mortgage (a
"Defeasance Option"). The Defeasance Lock-out Period is at least two years from
the Closing Date. The release is subject to certain conditions, including,
among other conditions, that the borrower:
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(a) pays or delivers to the Master Servicer on any due date (the
"Release Date") (1) all interest accrued and unpaid on the principal
balance of the Mortgage Note to and including the Release Date, (2) all
other sums due under the mortgage loan and all other loan documents
executed in connection with the related mortgage loan, (3) direct
non-callable obligations of the United States of America or other
government securities providing payments (x) on or prior to all successive
scheduled payment dates from the Release Date to the related maturity date
including the balloon payment (or the anticipated prepayment date),
assuming, in the case of each APD Loan, that the loan prepays on the
related Anticipated Prepayment Date and (y) in amounts at least equal to
the scheduled payments due on those dates under the mortgage loan or the
related defeased amount of the mortgage loan in the case of a partial
defeasance (including any balloon payment), and (4) any costs and expenses
incurred in connection with the purchase of the U.S. government
obligations; and
(b) delivers a security agreement granting the trust fund a first
priority lien on the U.S. government obligations purchased as substitute
collateral and an opinion of counsel relating to the enforceability of such
security interest.
The related borrower or, if the borrower is not required to do so under
the mortgage loan documents, the Master Servicer, will be responsible for
purchasing the U.S. government obligations on behalf of the borrower at the
borrower's expense. Simultaneously with these actions, the related Mortgaged
Property will be released from the lien of the mortgage loan and the pledged
U.S. government obligations (together with any Mortgaged Property not released,
in the case of a partial defeasance) will be substituted as the collateral
securing the mortgage loan.
In general, a successor borrower established or designated by the related
borrower (or, if the borrower is not required to do so under the mortgage loan
documents, the Master Servicer will establish or designate such successor) will
assume all of the defeased obligations of a borrower exercising a Defeasance
Option under a mortgage loan and the borrower will be relieved of all of the
defeased obligations under the mortgage loan.
Although the collateral substitution provisions related to defeasance are
not intended to be, and do not have the same effect on the Certificateholders
as, a prepayment of the related mortgage loan, a court could interpret these
provisions as being equivalent to an unenforceable yield maintenance charge or
prepayment premium. We make no representation as to the enforceability of the
defeasance provisions of any mortgage loan.
Substitution; 59 Maiden Lane Loan. Provided no event of default exists,
the borrower under the 59 Maiden Lane loan (the "59 Maiden Lane Borrower") has
the right to replace the Mortgaged Property that secures the 59 Maiden Lane
loan (the "59 Maiden Lane Property" with another substitute office property
owned by the related borrower (a "59 Maiden Lane Substitute Property"). Such
right of substitution is subject to, among other things, the following
conditions: (a) the appraised value of the 59 Maiden Lane Substitute Property
is equal to greater than twice the value of the 59 Maiden Lane Property; (b)
after giving effect to the substitution, the debt service coverage ratio for
the 59 Maiden Lane loan is equal to or greater than 4.0 to 1.0; (c) the net
operating income for the 59 Maiden Lane Substitute Property for the three year
period immediately preceding the substitution does not show a downward trend;
(d) the loan-to-value ratio for the 59 Maiden Lane Substitute Property as of
the date of substitution is equal to or less than 12%; and (e) the Rating
Agencies must provide written confirmation that such substitution will not
result in the downgrade, withdrawal or qualification of the ratings then in
effect for the Certificates.
Substitution; EII Portfolio II Loan. Provided no potential default or
event of default exists, the borrower under the EII Portfolio II loan (the "EII
Portfolio II Borrower") has the right to replace up to two of the properties
that secure the EII Portfolio II loan (each, an "EII Portfolio II Substituted
Property" and, collectively, the "EII Portfolio II Substituted Properties")
with substitute hotel properties of like kind and quality (each, an "EII
Portfolio II Substitute Property" and, collectively, the "EII Portfolio II
Substitute Properties") acquired by the EII Portfolio II Borrower. Such right
of substitution is subject to, among other things, the following conditions:
(a) the EII Portfolio II Borrower shall not replace, in the aggregate, more
than two of the properties that secure the EII Portfolio II loan; (b) the
portion of the EII Portfolio II loan allocated to the EII Portfolio II
Substituted Properties in the aggregate shall not comprise more than 25% of
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the entire EII Portfolio II loan; (c) the fair market value of the EII
Portfolio II Substitute Property is not less than 105% of the greater of (i)
the fair market value of the EII Portfolio II Substituted Property as of the
date of origination of the EII Portfolio II loan and (ii) the fair market value
of the EII Portfolio II Substituted Property as of the date immediately
preceding the substitution; (d) after giving effect to the substitution, the
debt service coverage ratio for the EII Portfolio II loan for all of the
properties (excluding the EII Portfolio II Substituted Property and including
the EII Portfolio II Substitute Property) is not less than the debt service
coverage ratio for the EII Portfolio II loan for all of the properties that
secure the EII Portfolio II loan as of the date of origination of the EII
Portfolio II loan and as of the date immediately preceding the substitution;
(e) the net operating income and debt service coverage ratio (for the 12 month
period immediately preceding the substitution) for the EII Portfolio II
Substitute Property is greater than 105% of the net operating income and debt
service coverage ratio (for the 12 month period immediately preceding the
substitution) for the EII Portfolio II Substituted Property; and (f) the Rating
Agencies must provide written confirmation that such substitution will not
result in the downgrade, withdrawal or qualification of the ratings then in
effect for the Certificates.
Substitution; Ingles Portfolio Loan. Provided no event of default exists,
the borrower under the Ingles Portfolio loan (the "Ingles Portfolio Borrower")
has the right to replace any of the properties that secure the Ingles Portfolio
loan (each, an "Ingles Portfolio Substitute Property" and, collectively, the
"Ingles Portfolio Substituted Properties") with substitute retail properties of
like kind and quality (each, an "Ingles Portfolio Substitute Property" and,
collectively, the "Ingles Portfolio Substitute Properties") acquired by the
Ingles Portfolio Borrower. Such right to substitution is subject to, among
other things, the following conditions: (a) the fair market value of the Ingles
Portfolio Substitute Property is not less than 105% of the greater of (i) the
fair market value of the Ingles Portfolio Substituted Property as of the date
of origination of the Ingles Portfolio loan and (ii) the fair market value of
the Ingles Portfolio Substituted Property as of the date immediately preceding
the substitution; (b) after giving effect to the substitution, the debt service
coverage ratio for the Ingles Portfolio loan for all of the properties
(excluding the Ingles Portfolio Substituted Property and including the Ingles
Portfolio Substitute Property) is not less than the debt service coverage ratio
for the Ingles Portfolio loan for all of the properties that secure the Ingles
Portfolio loan as of the date of origination of the Ingles Portfolio loan and
as of the date immediately preceding the substitution; (c) after giving effect
to the substitution, the loan-to-value ratio for the Ingles Portfolio loan for
all of the properties (excluding the Ingles Portfolio Substituted Property and
including the Ingles Portfolio Substitute Property) is not less than the
loan-to-value ratio for all of the properties as of the date of origination of
the Ingles Portfolio loan and as of the date immediately preceding the
substitution; and (d) the Rating Agencies must provide written confirmation
that such substitution will not result in the downgrade, withdrawal or
qualification of the ratings then in effect for the Certificates.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions. The mortgage loans
contain "due-on-sale" and "due-on-encumbrance" provisions that in each case,
with limited exceptions, permit the holder of the Mortgage to accelerate the
maturity of the related mortgage loan if the borrower sells or otherwise
transfers or encumbers the related Mortgaged Property without the consent of
the holder of the Mortgage; provided, however, under the terms of certain of
the mortgage loans, this consent must be granted if certain conditions are met.
Certain of the Mortgaged Properties have been, or may become, subject to
additional financing. See "--General" above. The Master Servicer with respect
to mortgage loans that are not Specially Serviced Mortgage Loans and the
Special Servicer with respect to Specially Serviced Mortgage Loans will be
required to exercise (or waive its right to exercise, provided that a
confirmation that such waiver would not result in the downgrade, withdrawal or
qualification of the then-current ratings on any class of outstanding
Certificates has been obtained from Moody's and Fitch (with respect to certain
mortgage loans) and, if the particular mortgage loan is either (i) a Specially
Serviced Mortgage Loan or (ii) a mortgage loan that is not a Specially Serviced
Mortgage Loan and that has a Cut-off Date Principal Balance of $2,500,000 or
greater, written notice has been provided to the Directing Certificateholder
and the Directing Certificateholder has failed to object within ten days
following receipt of such notice) any right it may have with respect to a
mortgage loan containing a "due-on-sale" clause (1) to accelerate the payments
on those mortgage loans, or (2) to withhold its consent to any sale or
transfer, consistent with the Servicing Standards. With respect to a mortgage
loan with a "due-on-encumbrance" clause, the Master Servicer with respect to
mortgage loans that are not Specially Serviced Mortgage Loans and the Special
Servicer with respect to Specially
S-60
Serviced Mortgage Loans will be required to exercise (or waive its right to
exercise, provided that a confirmation that such waiver would not result in the
downgrade, withdrawal or qualification of the then-current ratings on any class
of outstanding Certificates has been obtained from Moody's and Fitch (with
respect to certain loans) and, if the particular mortgage loan is either (i) a
Specially Serviced Mortgage Loan or (ii) a mortgage loan that is not a
Specially Serviced Mortgage Loan and that has a Cut-off Date Principal Balance
of $2,500,000 or greater, written notice has been provided to the Directing
Certificateholder and the Directing Certificateholder has failed to object
within ten days following receipt of such notice) any right it may have with
respect to a mortgage loan containing a due-on-encumbrance clause (1) to
accelerate the payments thereon, or (2) to withhold its consent to the creation
of any additional lien or other encumbrance, consistent with the Servicing
Standards.
Notwithstanding the foregoing, the existence of any additional
indebtedness may increase the difficulty of refinancing the related mortgage
loan at maturity or the anticipated prepayment date and the possibility that
reduced cash flow could result in deferred maintenance. Also, if the holder of
the additional debt has filed for bankruptcy or been placed in involuntary
receivership, foreclosure of the related mortgage loan could be delayed. See
"Certain Legal Aspects of Mortgage Loans--Due-on-Sale and Due-on-Encumbrance"
and "--Subordinate Financing" in the prospectus.
ADDITIONAL MORTGAGE LOAN INFORMATION
The following tables set forth certain anticipated characteristics of the
mortgage loans as of the later of the cut-off date or the origination date. The
sum in any column may not equal the indicated total due to rounding. The
descriptions in this prospectus supplement of the mortgage loans and the
Mortgaged Properties are based upon the pool of mortgage loans as it is
expected to be constituted as of the close of business on the Closing Date,
assuming that (1) all scheduled principal and/or interest payments due on or
before the cut-off date will be made, and (2) there will be no principal
prepayments on or before the cut-off date.
For the 11 mortgage loans with a first payment date of either 6/1/01 or
6/10/01, representing 5.57% of the aggregate principal balance of the pool of
mortgage loans as of the cut-off date, the "Stated Remaining Term" is
calculated as the term between the first payment date and the maturity date.
Prior to the issuance of the Certificates, one or more mortgage loans
(including mortgage loans specifically described in this prospectus supplement)
may be removed from the pool of mortgage loans as a result of prepayments,
delinquencies, incomplete documentation or for any other reason, if the
Depositor or a Mortgage Loan Seller deems the removal necessary, appropriate or
desirable. A limited number of other mortgage loans may be included in the pool
of mortgage loans prior to the issuance of the Certificates, unless including
those mortgage loans would materially alter the characteristics of the pool of
mortgage loans as described in this prospectus supplement. The Depositor
believes that the information set forth in this prospectus supplement will be
representative of the characteristics of the pool of mortgage loans as it will
be constituted at the time the Certificates are issued, although the range of
mortgage rates and maturities as well as other characteristics of the mortgage
loans described in this prospectus supplement may vary.
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates on or shortly after the Closing Date and
will be filed, together with the Pooling and Servicing Agreement, with the
Securities and Exchange Commission within 15 days after the initial issuance of
the Offered Certificates. If mortgage loans are removed from or added to the
pool of mortgage loans as set forth in the preceding paragraph, the removal or
addition will be noted in the Form 8-K.
For a detailed presentation of certain characteristics of the mortgage
loans and the Mortgaged Properties on an individual basis, see Annex A.
S-61
TYPE OF MORTGAGED PROPERTIES
CUT-OFF
NUMBER OF AGGREGATE % OF NUMBER OF DATE
MORTGAGED CUT-OFF DATE INITIAL POOL UNITS OR BALANCE PER
PROPERTY TYPE PROPERTIES BALANCE (1) BALANCE (1) NRA (2) UNITS/NRA (2)
- ------------- ---------- -------------- ------------ --------- -------------
Office ..................... 46 $ 479,400,087 41.93% 5,660,049 $ 84.70
Anchored Retail ............ 40 269,367,316 23.56 2,976,346 90.50
Multifamily ................ 22 158,451,443 13.86 2,956 53,603.33
Hotel ...................... 11 69,061,668 6.04 1,471 46,948.79
Self-Storage ............... 16 55,313,763 4.84 969,451 57.06
Manufactured Housing ....... 12 39,188,531 3.43 2,600 15,072.51
Unanchored Retail .......... 11 37,137,103 3.25 443,737 83.69
Industrial ................. 8 30,511,821 2.67 628,480 48.55
Parking Garage ............. 1 4,988,962 0.44 417,560 11.95
-- -------------- ------
Total/Weighted Average ..... 167 $1,143,420,694 100.00%
=== ============== ======
WEIGHTED AVERAGES
--------------------------------------------------------------------------
STATED
REMAINING CUT-OFF LTV
MORTGAGE TERM DATE RATIO AT
PROPERTY TYPE RATE (MOS.) (3) OCCUPANCY (4) DSCR LTV RATIO MATURITY
- ------------- ---------- ------------ --------------- ---------- ----------- -----------
Office ..................... 7.54% 118 96% 1.49x 65.51% 57.77%
Anchored Retail ............ 7.64% 125 98% 1.28x 76.09% 63.89%
Multifamily ................ 7.48% 113 97% 1.31x 74.48% 66.19%
Hotel ...................... 8.41% 116 72% 1.82x 59.80% 50.04%
Self-Storage ............... 8.04% 122 91% 1.30x 71.41% 58.73%
Manufactured Housing ....... 7.60% 118 93% 1.27x 73.32% 66.08%
Unanchored Retail .......... 7.90% 106 97% 1.32x 74.14% 66.43%
Industrial ................. 7.58% 118 99% 1.25x 74.97% 65.17%
Parking Garage ............. 7.77% 117 100% 1.31x 75.02% 66.84%
Total/Weighted Average ..... 7.65% 119 97% 1.41x 70.03% 60.76%
- -------
(1) Because this table is presented at the Mortgaged Property level, balances
and weighted averages are based on allocated loan amounts (generally
allocated by the appraised value and/or underwritten net cash flow for
the Mortgaged Property if not otherwise specified in the related loan
agreement) for mortgage loans secured by more than one Mortgaged
Property. As a result, the weighted averages presented in this table may
deviate slightly from weighted averages presented at the mortgage loan
level in other tables in this prospectus supplement.
(2) "NRA" means net rentable area and is applicable with respect to retail,
office, industrial and self-storage properties.
(3) Calculated with respect to the respective Anticipated Prepayment Date for
the APD Loans.
(4) Total/Weighted Average Occupancy excludes 11 hotel properties,
representing approximately 6.04% of the Initial Pool Balance, which have
occupancy rates that generally range from 56.35% to 84.88%; if the
mortgage loans secured by hotel properties are included, the weighted
average occupancy rates of the Mortgaged Properties is 95.17%.
S-62
RANGE OF MORTGAGE RATES AS OF THE CUT-OFF DATE
WEIGHTED AVERAGES
----------------------------------------------------------
NUMBER OF AGGREGATE % OF STATED LTV
LOANS/ CUT-OFF INITIAL REMAINING CUT-OFF RATIO AT
MORTGAGED DATE POOL MORTGAGE TERM DATE LTV MATURITY
RANGE OF MORTGAGE RATES PROPERTIES BALANCE BALANCE RATE (MOS.) (1) DSCR (2) RATIO (2) (1)(2)
- ----------------------- ---------- --------------- ----------- ---------- ------------ ---------- ----------- -----------
7.000% to 7.299% ............... 9/ 9 $ 172,523,061 15.09% 7.15% 119 1.72x 59.11% 51.84%
7.300% to 7.499% ............... 23/ 23 182,628,384 15.97 7.38% 115 1.38x 72.76% 63.99%
7.500% to 7.699% ............... 50/ 50 347,609,106 30.40 7.55% 118 1.32x 72.73% 63.74%
7.700% to 7.999% ............... 38/ 43 222,046,712 19.42 7.80% 125 1.28x 73.98% 61.67%
8.000% to 8.299% ............... 24/ 33 156,276,493 13.67 8.14% 115 1.48x 67.47% 59.06%
8.300% to 8.599% ............... 6/ 6 35,120,550 3.07 8.36% 116 1.31x 73.47% 64.28%
8.600% to 8.850% ............... 3/ 3 27,216,387 2.38 8.78% 114 1.48x 64.40% 55.49%
------- -------------- ------
Total/Weighted Average ......... 153/167 $1,143,420,694 100.00% 7.65% 119 1.41x 70.03% 60.76%
======= ============== ======
- ----------
(1) Calculated with respect to the respective Anticipated Prepayment Date for
the APD Loans.
S-63
MORTGAGED PROPERTIES BY STATE AND/OR LOCATION (1)
WEIGHTED AVERAGES
----------------------------------------------------------
% OF STATED LTV
NUMBER OF AGGREGATE INITIAL REMAINING CUT-OFF RATIO AT
MORTGAGED CUT-OFF DATE POOL MORTGAGE TERM DATE LTV MATURITY
STATE/LOCATION PROPERTIES BALANCE BALANCE RATE (MOS.) (2) DSCR (3) RATIO (3) (2)(3)
- -------------- ------------ ----------------- ----------- ---------- ------------ ---------- ----------- -----------
California .................. 27 $ 228,604,488 19.99% 7.59% 115 1.38x 67.79% 59.74%
Florida ..................... 16 105,481,085 9.23 7.72% 118 1.28x 75.64% 66.24%
Texas ....................... 20 87,107,177 7.62 7.73% 117 1.30x 74.63% 65.43%
New York .................... 5 85,541,641 7.48 7.08% 120 2.16x 46.41% 40.61%
Georgia ..................... 9 71,164,946 6.22 7.98% 140 1.33x 71.95% 51.72%
Connecticut ................. 4 58,372,387 5.11 7.59% 118 1.47x 66.36% 57.64%
Virginia .................... 8 55,938,886 4.89 7.53% 118 1.33x 77.06% 67.84%
Colorado .................... 9 40,968,673 3.58 7.69% 118 1.30x 73.59% 64.93%
South Carolina .............. 4 39,639,873 3.47 8.06% 115 1.30x 69.81% 62.39%
Illinois .................... 3 33,021,023 2.89 7.60% 117 1.46x 64.62% 53.94%
New Jersey .................. 4 31,478,642 2.75 7.65% 119 1.36x 73.01% 62.37%
Maryland .................... 5 24,750,161 2.16 7.92% 116 1.24x 74.02% 66.15%
Tennessee ................... 2 21,379,152 1.87 7.60% 118 1.22x 74.36% 65.93%
Massachusetts ............... 3 20,798,985 1.82 7.95% 118 1.30x 71.00% 63.48%
Nevada ...................... 3 19,894,166 1.74 7.99% 117 1.23x 75.07% 67.20%
Pennsylvania ................ 4 18,031,322 1.58 7.84% 117 1.55x 69.99% 59.95%
Mississippi ................. 4 17,357,520 1.52 7.54% 118 1.28x 73.60% 63.10%
Washington, DC .............. 1 17,312,124 1.51 7.63% 117 1.28x 75.93% 67.42%
Michigan .................... 3 16,944,722 1.48 7.61% 117 1.54x 72.40% 62.96%
North Carolina .............. 3 16,602,880 1.45 7.72% 118 1.34x 75.04% 66.71%
Puerto Rico ................. 1 16,350,000 1.43 7.75% 120 1.25x 76.40% 67.92%
Washington .................. 1 16,298,492 1.43 7.50% 116 1.28x 79.12% 70.08%
New Mexico .................. 3 15,666,660 1.37 7.42% 120 1.31x 80.03% 70.17%
Oregon ...................... 2 11,041,194 0.97 7.87% 119 1.34x 68.90% 61.49%
New Hampshire ............... 1 10,250,000 0.90 7.15% 120 1.47x 71.68% 62.76%
Kentucky .................... 2 7,764,646 0.68 7.45% 118 1.29x 72.94% 59.38%
Delaware .................... 2 7,563,225 0.66 7.59% 119 1.32x 79.37% 70.32%
Missouri .................... 3 7,535,000 0.66 7.53% 119 1.23x 76.98% 70.52%
Alabama ..................... 2 6,223,093 0.54 7.91% 117 1.72x 67.28% 57.96%
Oklahoma .................... 2 6,105,351 0.53 7.72% 117 1.28x 76.58% 69.85%
Ohio ........................ 2 5,843,082 0.51 8.09% 116 1.87x 61.58% 52.60%
Idaho ....................... 2 5,800,000 0.51 7.49% 120 1.28x 74.56% 65.87%
Kansas ...................... 3 5,650,000 0.49 7.53% 119 1.24x 70.71% 64.77%
Vermont ..................... 1 3,273,262 0.29 8.25% 116 2.11x 56.48% 47.05%
Indiana ..................... 1 3,031,836 0.27 7.66% 116 1.21x 79.79% 70.94%
Utah ........................ 1 2,360,000 0.21 7.47% 120 1.43x 74.92% 66.15%
Arizona ..................... 1 2,275,000 0.20 7.68% 120 1.25x 75.83% 67.29%
-- -------------- ------
Total/Weighted Average ...... 167 $1,143,420,694 100.00% 7.65% 119 1.41x 70.03% 60.76%
=== ============== ======
- ----------
(1) Because this table is presented at the Mortgaged Property level, balances
and weighted averages are based on allocated loan amounts (generally
allocated by the appraised value and/or underwritten net cash flow for
the Mortgaged Property if not otherwise specified in the related loan
agreement) for mortgage loans secured by more than one Mortgaged
Property. As a result, the weighted averages presented in this table may
deviate slightly from weighted averages presented at the mortgage loan
level in other tables in this prospectus supplement.
(2) Calculated with respect to the respective Anticipated Prepayment Date for
the APD Loans.
S-64
RANGE OF REMAINING TERMS TO MATURITY DATE OR ANTICIPATED PREPAYMENT DATE IN
MONTHS (1)(2)
WEIGHTED AVERAGES
----------------------------------------------------------
% OF STATED LTV
NUMBER OF AGGREGATE INITIAL REMAINING CUT-OFF RATIO AT
RANGE OF REMAINING LOANS/ CUT-OFF DATE POOL MORTGAGE TERM DATE LTV MATURITY
TERMS (MOS.) (1) PROPERTIES BALANCE BALANCE RATE (MOS.) (1) DSCR (3) RATIO (3) (1)(3)
- ----------------------------- ------------ ----------------- ----------- ---------- ------------ ---------- ----------- -----------
56 to 89 .................. 3/ 3 $ 22,755,713 1.99% 7.62% 57 1.27x 69.38% 66.31%
90 to 111 .................. 3/ 3 10,686,126 0.93 8.44% 110 1.33x 61.73% 56.02%
112 to 116 .................. 19/ 28 192,905,613 16.87 8.13% 115 1.44x 70.10% 61.73%
117 to 118 .................. 62/ 67 376,682,839 32.94 7.66% 117 1.30x 74.23% 64.92%
119 to 120 .................. 63/ 63 518,090,818 45.31 7.43% 119 1.49x 67.28% 59.17%
121 to 220 .................. 1/ 1 6,087,000 0.53 7.75% 177 1.40x 71.61% 56.71%
221 to 237 .................. 2/ 2 16,212,585 1.42 7.93% 237 1.24x 65.07% 0.38%
------- -------------- ------
Total/Weighted Average ...... 153/167 $1,143,420,694 100.00% 7.65% 119 1.41x 70.03% 60.76%
======= ============== ======
- ----------
(1) Calculated with respect to the respective Anticipated Prepayment Date for
the APD Loans.
(2) For the 11 mortgage loans with a first payment date of either 6/1/01 or
6/10/01, representing 5.57% of the aggregate principal balance of the
pool of mortgage loans as of the cut-off date, the "Remaining Term to
Maturity Date or Anticipated Prepayment Date" is calculated as the term
between the First Payment Date and the Maturity Date.
YEARS OF MATURITY (1)
WEIGHTED AVERAGES
----------------------------------------------------------
% OF STATED LTV
NUMBER OF AGGREGATE INITIAL REMAINING CUT-OFF RATIO AT
LOANS/ CUT-OFF DATE POOL MORTGAGE TERM DATE LTV MATURITY
YEARS OF MATURITY PROPERTIES BALANCE BALANCE RATE (MOS.) (1) DSCR (2) RATIO (2) (1)(2)
- ----------------- ------------ ----------------- ----------- ---------- ------------ ---------- ----------- -----------
2005 ....................... 1/ 1 6,883,056 0.60 8.05% 56 1.27x 77.34% 74.28%
2006 ....................... 2/ 2 15,872,657 1.39 7.43% 58 1.27x 65.93% 62.86%
2010 ....................... 22/ 31 203,591,739 17.81 8.15% 115 1.43x 69.67% 61.43%
2011 ....................... 125/130 894,773,657 78.25 7.53% 119 1.41x 70.21% 61.59%
2016 ....................... 1/ 1 6,087,000 0.53 7.75% 177 1.40x 71.61% 56.71%
2020 ....................... 1/ 1 2,483,722 0.22 8.14% 236 1.40x 54.59% 2.45%
2021 ....................... 1/ 1 13,728,863 1.20 7.89% 237 1.21x 66.97% 0.00%
------- ----------- ------
Total/Weighted Average ..... 153/167 $1,143,420,694 100.00% 7.65% 119 1.41x 70.03% 60.76%
======= ============== ======
- ----------
(1) Calculated with respect to the respective Anticipated Prepayment Date for
the APD Loans.
S-65
TEN LARGEST MORTGAGE LOANS AND CROSS-COLLATERALIZED GROUPS
WEIGHTED AVERAGES
----------------------------------------------------------
% OF STATED
NUMBER OF CUT-OFF INITIAL REMAINING CUT-OFF LTV
MORTGAGED DATE POOL MORTGAGE TERM DATE LTV RATIO AT
PROPERTY NAME PROPERTIES BALANCE BALANCE RATE (MOS.) (1) DSCR RATIO MATURITY (1)
- ------------- ------------ -------------- --------- --------- ------------ ---------- ---------- -------------
C>
59 Maiden Lane ................... 1 $ 50,000,000 4.37% 7.00% 120 2.75x 25.00% 21.80%
Long Wharf Maritime
Center I ........................ 1 37,478,298 3.28 7.25% 119 1.31x 68.14% 59.86%
Synergy Business Park --
Columbia I and II Loans ......... 2 35,289,165 3.09 8.06% 115 1.23x 70.73% 63.53%
818 West Seventh Street .......... 1 33,781,053 2.95 7.35% 119 1.61x 62.56% 55.09%
EII Portfolio II ................. 7 32,925,976 2.88 8.25% 116 2.11x 56.48% 47.05%
Shoppes at Dadeland .............. 1 29,000,000 2.54 7.46% 120 1.23x 80.56% 71.11%
Pescadero Apartments ............. 1 28,984,673 2.53 7.53% 119 1.39x 64.41% 56.98%
Information Resources ............ 1 25,911,945 2.27 7.60% 117 1.50x 61.70% 50.41%
Civic Executive Center ........... 1 25,135,353 2.20 7.23% 119 1.25x 69.82% 61.30%
510 Fifth Avenue ................. 1 23,000,000 2.01 7.15% 120 1.33x 78.50% 68.73%
- ------------ -----
Total/Weighted Average ........... 17 $321,506,464 28.12% 7.48% 118 1.65x 61.07% 53.27%
== ============ =====
- ----------
(1) Calculated with respect to the respective Anticipated Prepayment Date for
the APD Loans.
The following table sets forth a range of Debt Service Coverage Ratios for
the mortgage loans as of the cut-off date. The "Debt Service Coverage Ratio" or
"DSCR" for any mortgage loan is the ratio of (1) Underwritten Net Cash Flow
produced by the related Mortgaged Property or Mortgaged Properties to (2) the
aggregate amount of the scheduled payments of principal and/or interest (the
"Periodic Payments") due for the 12-month period immediately following the
cut-off date, except with respect to 7 mortgage loans, representing
approximately 1.52% of the Initial Pool Balance, where Periodic Payments are
interest-only for the first 25 scheduled payments, after which date the
mortgage loans amortize based upon a 30-year amortization schedule.
See "--Certain Terms and Conditions of the Mortgage Loans" above.
RANGE OF DEBT SERVICE COVERAGE RATIOS AS OF THE CUT-OFF DATE
WEIGHTED AVERAGES
-----------------------------------------------------------
% OF STATED
NUMBER OF AGGREGATE INITIAL REMAINING CUT-OFF LTV
RANGE OF DEBT SERVICE LOANS/ CUT-OFF DATE POOL MORTGAGE TERM DATE LTV RATIO AT
COVERAGE RATIOS PROPERTIES BALANCE BALANCE RATE (MOS.) (1) DSCR RATIO MATURITY (1)
- ----------------------------- ------------ ----------------- ----------- ---------- ------------ ---------- ---------- -------------
1.143 to 1.209 .............. 7/ 7 $ 60,237,631 5.27% 7.88% 117 1.20x 74.15% 66.24%
1.210 to 1.239 .............. 22/ 22 133,258,473 11.65 7.72% 130 1.22x 76.37% 61.70%
1.240 to 1.259 .............. 22/ 22 151,475,944 13.25 7.59% 118 1.25x 74.80% 66.04%
1.260 to 1.299 .............. 27/ 32 185,297,877 16.21 7.63% 110 1.28x 75.92% 67.23%
1.300 to 1.359 .............. 36/ 39 254,024,707 22.22 7.61% 118 1.32x 72.12% 63.48%
1.360 to 1.489 .............. 27/ 27 159,380,208 13.94 7.59% 122 1.40x 71.51% 62.05%
1.490 to 2.750 .............. 12/ 18 199,745,855 17.47 7.68% 118 1.96x 51.64% 43.99%
------- -------------- ------
Total/Weighted Average ...... 153/167 $1,143,420,694 100.00% 7.65% 119 1.41x 70.03% 60.76%
======= ============== ======
- ----------
(1) Calculated with respect to the respective Anticipated Prepayment Date for
the APD Loans.
S-66
The following two tables set forth the range of LTV Ratios of the mortgage
loans as of the cut-off date and the stated maturity dates or Anticipated
Prepayment Date of the mortgage loans. An "LTV Ratio" for any mortgage loan, as
of any date of determination, is a fraction, expressed as a percentage, the
numerator of which is the scheduled principal balance of the mortgage loan as
of that date (assuming no defaults or prepayments on the mortgage loan prior to
that date), and the denominator of which is the appraised value of the related
Mortgaged Property or Mortgaged Properties as determined by an appraisal of the
property obtained in connection with the origination of the mortgage loan. The
LTV Ratio as of the mortgage loan maturity date or Anticipated Prepayment Date,
as the case may be, described below was calculated based on the principal
balance of the related mortgage loan on the maturity date or Anticipated
Prepayment Date, as the case may be, assuming all principal payments required
to be made on or prior to the mortgage loan's maturity date or Anticipated
Prepayment Date, as the case may be (not including the balloon payment), are
made. In addition, because it is based on the value of a Mortgaged Property
determined as of loan origination, the information set forth in the table below
is not necessarily a reliable measure of the related borrower's current equity
in each Mortgaged Property. In a declining real estate market, the appraised
value of a Mortgaged Property could have decreased from the appraised value
determined at origination and the current actual loan-to-value ratio of a
mortgage loan may be higher than its LTV Ratio at origination even after taking
into account amortization since origination.
RANGE OF LTV RATIOS AS OF THE CUT-OFF DATE
WEIGHTED AVERAGES
-----------------------------------------------------------
% OF STATED
NUMBER OF AGGREGATE INITIAL REMAINING CUT-OFF
RANGE OF LTV RATIOS AS OF LOANS/ CUT-OFF DATE POOL MORTGAGE TERM DATE LTV LTV RATIO AT
THE CUT-OFF DATE PROPERTIES BALANCE BALANCE RATE (MOS.) (1) DSCR RATIO MATURITY (1)
- ----------------------------- ------------ ----------------- ----------- ---------- ------------ ---------- ---------- -------------
25.00% to 59.99% ............ 10/ 16 $ 117,811,779 10.30% 7.58% 121 2.23x 43.27% 36.10%
60.00% to 64.99% ............ 13/ 13 145,895,012 12.76 7.65% 113 1.45x 63.25% 55.48%
65.00% to 68.99% ............ 15/ 15 122,846,832 10.74 7.71% 131 1.34x 67.33% 51.86%
69.00% to 72.99% ............ 25/ 33 214,583,575 18.77 7.71% 118 1.28x 71.10% 62.38%
73.00% to 76.99% ............ 37/ 37 187,393,465 16.39 7.78% 118 1.29x 75.24% 66.33%
77.00% to 79.99% ............ 43/ 43 272,670,689 23.85 7.54% 116 1.28x 78.82% 69.97%
80.00% to 81.69% ............ 10/ 10 82,219,341 7.19 7.52% 119 1.26x 80.61% 71.30%
------- -------------- ------
Total/Weighted Average ...... 153/167 $1,143,420,694 100.00% 7.65% 119 1.41x 70.03% 60.76%
======= ============== ======
- ----------
(1) Calculated with respect to the respective Anticipated Prepayment Date for
the APD Loans.
RANGE OF LTV RATIOS AS OF MORTGAGE LOAN MATURITY DATES
WEIGHTED AVERAGES
----------------------------------------------------------
% OF STATED
NUMBER OF AGGREGATE INITIAL REMAINING CUT-OFF
RANGE OF LTV RATIOS AS OF LOANS/ CUT-OFF DATE POOL MORTGAGE TERM DATE LTV LTV RATIO AT
MORTGAGE LOAN MATURITY DATES PROPERTIES BALANCE BALANCE RATE (MOS.) (1) DSCR RATIO MATURITY (1)
- ---------------------------- ------------ ----------------- ----------- ---------- ------------ -------- ---------- -------------
0.00% to 44.99% ............. 4/ 4 $ 67,912,585 5.94% 7.24% 148 2.36x 35.27% 17.23%
45.00% to 57.49% ............. 21/ 27 217,386,146 19.01 7.82% 119 1.58x 62.00% 52.71%
57.50% to 62.49% ............. 25/ 30 204,781,320 17.91 7.53% 115 1.31x 68.88% 60.14%
62.50% to 66.99% ............. 35/ 38 207,405,266 18.14 7.83% 116 1.30x 72.54% 64.68%
67.00% to 69.99% ............. 32/ 32 223,995,486 19.59 7.58% 118 1.27x 77.33% 68.43%
70.00% to 72.99% ............. 34/ 34 210,841,835 18.44 7.59% 118 1.27x 79.96% 71.00%
73.00% to 74.28% ............. 2/ 2 11,098,056 0.97 7.85% 80 1.25x 78.34% 73.90%
------- -------------- ------
Total/Weighted Average ....... 153/167 $1,143,420,694 100.00% 7.65% 119 1.41x 70.03% 60.76%
======= ============== ======
- ----------
(1) Calculated with respect to the respective Anticipated Prepayment Date for
the APD Loans.
S-67
RANGE OF CUT-OFF DATE BALANCES
WEIGHTED AVERAGES
-----------------------------------------------------------
% OF STATED
NUMBER OF AGGREGATE INITIAL REMAINING CUT-OFF
RANGE OF LOANS/ CUT-OFF DATE POOL MORTGAGE TERM DATE LTV LTV RATIO AT
CUT-OFF DATE BALANCES PROPERTIES BALANCE BALANCE RATE (MOS.) (1) DSCR RATIO MATURITY (1)
- --------------------- ------------ ---------------- ----------- ---------- ------------ ---------- ---------- -------------
$ 925,000 to $ 2,000,000..... 16/ 16 $ 25,108,204 2.20% 7.76% 118 1.33x 71.93% 63.80%
2,000,001 to 4,000,000 ... 47/ 47 138,812,324 12.14 7.75% 120 1.30x 72.84% 63.14%
4,000,001 to 7,000,000 ... 41/ 41 220,384,296 19.27 7.72% 116 1.31x 74.90% 66.31%
7,000,001 to 12,000,000 ... 25/ 30 235,451,119 20.59 7.59% 115 1.33x 72.99% 64.25%
12,000,001 to 20,000,000 ... 14/ 17 215,337,103 18.83 7.89% 124 1.28x 72.26% 60.00%
20,000,001 to 30,000,000 ... 6/ 6 154,142,322 13.48 7.42% 119 1.34x 72.19% 62.95%
30,000,001 to 50,000,000 ... 4/ 10 154,185,328 13.48 7.40% 119 2.01x 50.44% 43.74%
------- -------------- ------
Total/Weighted Average ....... 153/167 $1,143,420,694 100.00% 7.65% 119 1.41x 70.03% 60.76%
======= ============== ======
- ----------
(1) Calculated with respect to the respective Anticipated Prepayment Date for
the APD Loans.
RANGE OF CURRENT OCCUPANCY RATES (1)(2)(3)
WEIGHTED AVERAGES
-----------------------------------------------------------
% OF STATED
NUMBER OF AGGREGATE INITIAL REMAINING CUT-OFF
RANGE OF CURRENT MORTGAGED CUT-OFF DATE POOL MORTGAGE TERM DATE LTV LTV RATIO AT
OCCUPANCY RATES PROPERTIES BALANCE BALANCE RATE (MOS.) (4) DSCR RATIO MATURITY (4)
- ------------------------------ ------------ ----------------- --------- ---------- ------------ ---------- ---------- -------------
71.84% to 78.99% ........... 5 $ 13,626,330 1.19% 8.22% 136 1.32x 63.74% 48.20%
79.00% to 84.99% ........... 4 10,203,245 .89 7.71% 115 1.30x 67.54% 60.26%
85.00% to 89.99% ........... 11 98,279,338 8.60 7.30% 119 2.06x 47.61% 41.73%
90.00% to 94.99% ........... 22 158,687,610 13.88 7.78% 128 1.30x 70.60% 57.31%
95.00% to 97.99% ........... 20 135,600,774 11.86 7.59% 116 1.29x 75.10% 66.11%
98.00% to 99.99% ........... 20 174,492,172 15.26 7.52% 114 1.30x 72.60% 64.47%
100.00% to 100.00% ........... 74 483,469,557 42.28% 7.61% 118 1.33x 73.74% 64.82%
-- -------------- -----
Total/Weighted Average ....... 156 $1,074,359,026 93.96% 7.60% 119 1.38x 70.69% 61.45%
=== ============== =====
- ----------
(1) Current occupancy rates have been calculated in this table based upon
rent rolls made available to the applicable Mortgage Loan Sellers by the
related borrowers as of the dates set forth on Annex A to this prospectus
supplement.
(2) Because this table is presented at the Mortgaged Property level, balances
and weighted averages are based on allocated loan amounts (generally
allocated by the appraised value and/or underwritten net cash flow for
the Mortgaged Property if not otherwise specified in the related loan
agreement) for mortgage loans secured by more than one Mortgaged
Property. As a result, the weighted averages presented in this table may
deviate slightly from weighted averages presented at the mortgage loan
level in other tables in this prospectus supplement.
(3) Excludes 11 hotel properties, representing approximately 6.04% of the
Initial Pool Balance, which have occupancy rates that generally range
from 56.35% to 84.88%; if the mortgage loans secured by hotel properties
are included, the weighted average occupancy rate of the Mortgaged
Properties is 95.17%.
(4) Calculated with respect to the respective Anticipated Prepayment Date for
the APD Loans.
S-68
RANGE OF YEARS BUILT/RENOVATED (1)(2)
WEIGHTED AVERAGES
-----------------------------------------------------------
% OF STATED
NUMBER OF AGGREGATE INITIAL REMAINING CUT-OFF
RANGE OF YEARS MORTGAGED CUT-OFF DATE POOL MORTGAGE TERM DATE LTV LTV RATIO AT
BUILT/RENOVATED (1) PROPERTIES BALANCE BALANCE RATE (MOS.) (2) DSCR RATIO MATURITY (3)
- ------------------- ------------ ----------------- ----------- ---------- ------------ ---------- ---------- -------------
1925 to 1965 ............... 2 $ 24,750,000 2.16% 7.18% 120 1.32x 77.53% 68.07%
1966 to 1970 ............... 7 34,465,151 3.01% 7.55% 98 1.28x 71.22% 65.19%
1971 to 1980 ............... 8 35,393,142 3.10% 7.70% 118 1.32x 75.79% 67.74%
1981 to 1985 ............... 18 163,819,876 14.33% 7.45% 118 1.36x 69.93% 61.53%
1986 to 1990 ............... 19 113,938,917 9.96% 7.74% 117 1.38x 69.51% 60.82%
1991 to 1995 ............... 15 93,338,141 8.16% 7.71% 114 1.35x 73.47% 64.65%
1996 to 2001 ............... 98 677,715,466 59.27% 7.69% 121 1.44x 69.03% 59.17%
-- -------------- ------
Total/Weighted Average ..... 167 $1,143,420,694 100.00% 7.65% 119 1.41x 70.03% 60.76%
=== ============== ======
- ----------
(1) Range of Years Built/Renovated references the later of the year built or
the year of the most recent renovations with respect to each Mortgaged
Property.
(2) Because this table is presented at the Mortgaged Property level, balances
and weighted averages are based on allocated loan amounts (generally
allocated by the appraised value and/or underwritten net cash flow for
the Mortgaged Property if not otherwise specified in the related loan
agreement) for mortgage loans secured by more than one Mortgaged
Property. As a result, the weighted averages presented in this table may
deviate slightly from weighted averages presented at the mortgage loan
level in other tables in this prospectus supplement.
(3) Calculated with respect to the respective Anticipated Prepayment Date for
the APD Loans.
PREPAYMENT PROTECTION AS OF THE CUT-OFF DATE
REMAINING
REMAINING LOCKOUT
REMAINING LOCKOUT PLUS FIXED STATED
NUMBER OF AGGREGATE % OF INITIAL LOCKOUT PLUS PENALTY REMAINING
MORTGAGE CUT-OFF DATE POOL TERM YM PERIOD PERIOD TERM
PREPAYMENT PROVISION LOANS BALANCE BALANCE (PAYMENTS) (PAYMENTS) (PAYMENTS) (PAYMENTS)
- -------------------- ----------- ----------------- -------------- ------------ ------------ ------------ -----------
Lockout with Defeasance ......... 151 $1,134,683,694 99.24% 114 114 114 118
Lockout Period Followed by
Yield Maintenance .............. 1 6,087,000 0.53 44 176 44 177
Lockout followed by Fixed
Penalty ........................ 1 2,650,000 0.23% 59 59 116 120
--- -------------- ------ --- --- --- ---
Total/Weighted Average .......... 153 $1,143,420,694 100.00% 114 115 114 119
=== ============== ====== === === === ===
- ----------
(1) Calculated with respect to the Anticipated Prepayment Date for the APD
Loans.
The foregoing characteristics, along with certain additional
characteristics of the mortgage loans presented on a loan-by-loan basis, are
set forth in Annex A to this prospectus supplement. Certain additional
information regarding the mortgage loans is set forth in this prospectus
supplement below under "--Underwriting Standards" and "--Representations and
Warranties; Repurchases and Substitutions" and in the prospectus under
"Description of the Trust Funds--Mortgage Loans" and "Certain Legal Aspects of
Mortgage Loans".
UNDERWRITTEN NET CASH FLOW
The "Underwritten Net Cash Flow" for a Mortgaged Property is generally the
estimated stabilized annual revenue derived from the use and operation of the
Mortgaged Property (consisting primarily of rental income and reimbursement of
expenses where applicable) after an allowance for vacancies and credit losses,
less estimated stabilized annual expenses, including operating expenses (such
as utilities, administrative expenses, repairs and maintenance, tenant
improvement costs, leasing commissions, management fees and advertising), fixed
expenses (such as insurance, real estate taxes and, if applicable, ground lease
payments) reserves for capital expenditures, including tenant improvement
costs, leasing commissions and replacement reserves. In calculating
Underwritten Net Cash Flow, certain non-operating items such as depreciation,
amortization, partnership distributions, interest expense, financing fees and
capital expenditures other than applicable reserves, are not included as
expenses.
S-69
Underwritten Net Cash Flow reflects the calculations and adjustments used
by the Mortgage Loan Sellers for their underwriting process and any updates
thereof and may or may not reflect the amounts calculated and adjusted by
Moody's and Fitch for their own analysis. In addition, Underwritten Net Cash
Flow and the DSCRs derived therefrom are not a substitute for cash flow as
determined in accordance with generally accepted accounting principles as a
measure of the results of the property's operation or a substitute for cash
flows from operating activities determined in accordance with generally
accepted accounting principles as a measure of liquidity.
Revenue. In determining potential gross revenue for each Mortgaged
Property, the Mortgage Loan Sellers generally relied on the most recent rent
roll supplied by the borrower as of the date of such determination and, where
the actual vacancy shown on the rent roll and other unaudited financial
information and the market vacancy was less than 5.0%, assumed at least 5.0%
vacancy in determining revenue from rents, except that in the case of certain
Mortgaged Properties which are not secured by multifamily properties, space
occupied by the anchor or single tenants or other large creditworthy tenants
may have been disregarded in performing the vacancy adjustment due to the
length of the related leases or creditworthiness of the tenants, in accordance
with the respective Mortgage Loan Seller's underwriting standards. Where the
actual or market vacancy was not less than 5.0%, the Mortgage Loan Sellers
determined revenue from rents by generally relying on the most recent rent roll
supplied by the borrower as of the date of such determination and the greater
of (a) actual vacancy at the related Mortgaged Property, (b) vacancy at
comparable properties in the same market as the related Mortgaged Property, and
(c) 5.0%. In determining rental revenue for multifamily, manufactured housing
community and self-storage properties, the Mortgage Loan Sellers generally
either reviewed rental revenue shown on the rolling 12-month operating
statements or annualized the rental revenue and reimbursement of expenses shown
on rent rolls or operating statements with respect to the prior one to twelve
month periods. For the other rental properties, the Mortgage Loan Sellers
generally annualized rental revenue shown on the most recent rent roll (as
applicable), after applying the vacancy factor. In the case of hotel
properties, gross receipts were generally determined based upon the average
occupancy not to exceed 80.0% and daily rates achieved during the prior two to
three year annual reporting period. In general, any non-recurring items and
non-property related revenue were eliminated from the calculation. Rents under
some leases were adjusted downward to reflect market rent for similar
properties if actual rent was significantly higher than market rent. For newly
constructed properties with little or no historical operating information,
revenue was based on information in appraisals, rent rolls and other borrower
supplied information.
Expenses. In determining expenses for each Mortgaged Property, the related
Mortgage Loan Seller generally relied on rolling 12-month operating statements
and/or full-year or year-to-date financial statements supplied by the borrower.
Notwithstanding the foregoing, (a) if tax or insurance expense information more
current than that reflected in the financial statements was available, the
newer information was used, (b) property management fees were generally assumed
to be 3.0% to 5.0% of effective gross revenue (except with respect to single
tenant properties, where a minimum of 3.0% of gross receipts was generally
assumed, and with respect to self-storage properties, where a minimum of 5% of
gross receipts was generally assumed), (c) assumptions were made with respect
to reserves for leasing commissions, tenant improvement expenses and capital
expenditures and (d) expenses were assumed to include annual replacement
reserves. In some cases historical expenses were increased for underwriting
purposes.
Replacement Reserves. Replacement reserves, if any, are reserves escrowed
for ongoing items such as repairs and replacements, including, in the case of
hotel properties, reserves for furniture, fixtures and equipment. In certain
cases, however, the subject reserve will be subject to a maximum amount, and
once that maximum amount is reached the subject reserve will not be funded
except, in some cases, to the extent it is drawn upon.
No assurances are given with respect to the accuracy of information
provided by borrowers or the adequacy of procedures used by the related
Mortgage Loan Seller in determining the operating information presented.
S-70
ASSESSMENTS OF PROPERTY CONDITION
Property Inspections. All of the Mortgaged Properties were inspected at or
about the time of the origination or acquisition of the related mortgage loan
to assess their general condition. No inspection revealed any patent structural
deficiency or any deferred maintenance considered material and adverse to the
interest of the holders of the offered certificates or for which adequate
reserves have not been established.
Appraisals. All of the Mortgaged Properties were appraised at or about the
time of the origination of the related mortgage loans. All of these appraisals
stated that they were performed in compliance with the Code of Professional
Ethics and Standards of Professional Conduct of the Appraisal Institute and the
Uniform Standards of Professional Appraisal Practice as adopted by the
Appraisal Standards Board of the Appraisal Foundation and accepted and
incorporated into the Financial Institutions Reform, Recovery and Enforcement
Act of 1989, as amended ("FIRREA").
The purpose of each appraisal was to provide an opinion as to the market
value of the related Mortgaged Property and are not guarantees of, and may not
be indicative of, present or future value. We cannot assure you that another
appraiser would have arrived at the same opinion of market value. Appraised
value is the appraiser's estimated amount a typically motivated buyer would pay
a typically motivated seller and may be significantly higher than the amount
obtained from the sale of a Mortgaged Property in a distressed or liquidation
sale.
Environmental Reports. A "Phase I" environmental site assessment was
performed with respect to each Mortgaged Property, except with respect to one
mortgage loan representing approximately 0.12% of the Initial Pool Balance, for
which a lender's secured creditor insurance policy was obtained from a third
party, and, in some cases, a "Phase II" environmental site assessment or other
additional testing was performed. See "--Representations and Warranties;
Repurchases and Substitutions" below.
Building Condition Reports. At or about the time of the origination of all
mortgage loans, a licensed engineer or consultant inspected each related
Mortgaged Property to assess the condition of the structure, exterior walls,
roofing, interior structure, mechanical and electrical systems and site
improvements. The resulting reports indicated deferred maintenance items on
certain Mortgaged Properties and recommended certain capital improvements for
which escrows were generally established at origination and the reports were
used in determining underwritten net cash flow and capital reserves, if any.
Generally, with respect to the majority of the Mortgaged Properties, the
related borrowers were required to deposit with the lender an amount equal to
at least 125% of the licensed engineer's estimated cost of the recommended
repairs, corrections or replacements to assure their completion. In addition,
the building condition reports provided a projection of necessary replacements
and repair of structural and mechanical systems over the life of the related
mortgage loans.
Earthquake Analyses. An architectural and engineering consultant performed
an analysis on 29 Mortgaged Properties, securing mortgage loans representing
approximately 23.73% of the Initial Pool Balance, located primarily in the
State of California in order to evaluate the structural and seismic condition
of the property and to assess, based primarily on statistical information, the
probable maximum loss for the property in an earthquake scenario. 7 of the 29
Mortgaged Properties described above (identified as Loan No. 7, 9, 32, 55, 71,
93 and 151 on Annex A to this prospectus supplement), representing
approximately 10.26% of the Initial Pool Balance, are covered by earthquake
insurance in an amount at least equal to the lesser of the replacement cost of
the improvements on such Mortgaged Property and the outstanding principal
balance of the related mortgage loan. Seismic reports were generally not done
for manufactured housing community properties.
THE MORTGAGE LOAN SELLERS
The Mortgage Loan Sellers are GECC, Morgan Guaranty and BSFI. GECC is an
affiliate of GE Capital Loan Services, Inc., the Master Servicer and the
Primary Servicer and is the parent corporation of the Depositor. See "The
Depositor" in the prospectus. Morgan Guaranty is an affiliate of The Chase
Manhattan Bank, the paying agent, and is also an affiliate of Chase Securities,
one of the Underwriters. BSFI is an affiliate of Bear, Stearns & Co. Inc., one
of the Underwriters. GECC directly originated (generally, in accordance with
the
S-71
underwriting criteria described below) all of the mortgage loans acquired by
the Depositor from GECC. Morgan Guaranty or The Chase Manhattan Bank directly
originated (generally, in accordance with the underwriting criteria described
below) all of the mortgage loans acquired by the Depositor from Morgan Guaranty
except with respect to one mortgage loan, representing approximately 0.42% of
the Initial Pool Balance, which Morgan Guaranty acquired from Wachovia Bank
N.A. BSFI directly originated (generally, in accordance with the underwriting
criteria described below) all of the mortgage loans acquired by the Depositor
from BSFI.
The information set forth in this prospectus supplement concerning the
Mortgage Loan Sellers and their underwriting standards have been provided by
the Mortgage Loan Sellers, and neither the Depositor nor the Underwriters make
any representation or warranty as to the accuracy or completeness of that
information.
UNDERWRITING STANDARDS
GECC'S UNDERWRITING STANDARDS
General. Through its GE Capital Real Estate business, GECC has been
lending and investing in the commercial real estate industry for over 25 years
and has a portfolio of approximately $21 billion of assets. GE Capital Real
Estate originates commercial mortgage loans through approximately 12 offices
located throughout the United States. The risk-management (loan underwriting
and closing) functions are centralized and separate from loan origination.
Loan Analysis. All GECC credit underwriting is performed by GECC
risk-management employees. GECC performs both a credit analysis and a
collateral analysis with respect to each loan. The credit analysis of the
borrower includes 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. The
collateral analysis includes an analysis of the historical property operating
statements, rent rolls and a projection of future performance and a review of
tenant leases. Historical cash flow verification is performed in most cases by
staff of a "big five" accounting firm and reviewed by GECC underwriting staff.
All anchor leases are reviewed by legal counsel and by GECC underwriting staff.
GECC also performs a qualitative analysis which generally incorporates
independent credit checks, periodical searches, industry research and published
debt and equity information with respect to certain tenants located within the
collateral. A member of the loan underwriting team also conducts a site
inspection to confirm the occupancy rate of the Mortgaged Property, analyze the
market, confirm proactive management and assess the utility of the Mortgaged
Property within the market. GECC requires third party appraisals, as well as
environmental reports, building condition reports and seismic reports, if
applicable. Each report is reviewed for acceptability by a GECC staff member
for compliance with program standards and the staff member approves or rejects
the report. The results of these reviews are incorporated into the underwriting
report.
Loan Approval. Prior to commitment, all mortgage loans must be approved by
GE Capital Real Estate'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. GECC's underwriting standards
generally require the following minimum debt service coverage ratios for each
of the indicated property types:
S-72
PROPERTY TYPE DSCR GUIDELINE LTV RATIO GUIDELINE
- ------------- -------------- -------------------
Multifamily .................. 1.20x 80%
Anchored Retail .............. 1.20x 80%
Unanchored Retail ............ 1.25x 80%
Office ....................... 1.20x 80%
Industrial/Warehouse ......... 1.20x 80%
Hotel ........................ 1.40x 70%
Manufactured Housing ......... 1.20x 80%
Self-Storage ................. 1.25x 75%
The debt service coverage ratio guidelines listed above are calculated
based on Underwritten Net Cash Flow. In addition, GECC'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
GECC may vary from these guidelines. See "Description of the Mortgage Pool" in
this prospectus supplement and Annex A to this prospectus supplement.
Escrow Requirements. Except with respect to certain low leverage loans or
where tenants are required in their leases to pay for the covered expenses,
GECC generally requires most borrowers to fund various escrows for taxes and
insurance, capital expenses and/or replacement reserves. In some cases, the
borrower is permitted to post a letter of credit in lieu of funding a given
reserve or escrow. Generally, the required escrows for mortgage loans
originated by GECC are as follows:
o Taxes--Typically an initial deposit and monthly escrow deposits equal to
1/12th of the annual property taxes (based on the most recent property
assessment and the current millage rate) are required to provide GECC
with sufficient funds to satisfy all taxes and assessments at least one
month prior to their respective due dates.
o Insurance--If the property is insured under an individual policy (i.e.,
the property is not covered by a blanket policy), typically an initial
deposit and monthly escrow deposits equal to 1/12th of the annual
property insurance premium are required to provide GECC with sufficient
funds to pay all insurance premiums at least one month prior to their
respective due dates. If the property is covered by a blanket policy of
insurance, GECC generally reserves the right in the mortgage to require a
separate insurance policy and insurance escrows in certain circumstances.
o Replacement Reserves--Replacement reserves are calculated in accordance
with the expected useful life of the components of the property during
the term of the mortgage loan.
Notwithstanding the actual level of escrowed reserves, the following
minimum replacement reserve levels were generally assumed by GECC in
determining Underwritten Net Cash Flow:
Multifamily .................. $250 per unit
Retail ....................... $0.15 per square foot
Office ....................... $0.20 per square foot
Industrial/Warehouse ......... $0.10-0.15 per square foot
Hotel ........................ 4-5% of gross revenue
Manufactured Housing ......... $50-100 per pad
o Completion Repair/Environmental Remediation--Typically, a completion
repair or remediation reserve is required if so indicated by the building
condition report. An initial deposit, upon funding of the mortgage loan
generally in an amount equal to at least 125% of the estimated costs of
repairs or replacements to be completed within the first year of the
mortgage loan pursuant to the building condition report is generally
required.
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, reserves for loans secured by
S-73
commercial properties may be required to be funded either at closing of
the mortgage loan and/or during the mortgage loan term to cover certain
anticipated leasing commissions or tenant improvement costs which might
be associated with releasing the space occupied by the tenants.
MORGAN GUARANTY AND CHASE'S UNDERWRITING STANDARDS
General. Each of 39 mortgage loans, representing approximately 30.47% of
the Initial Pool Balance, originated by Chase was sold to Morgan Guaranty prior
to the sale of such mortgage loans to the Depositor. Morgan Guaranty Trust
Company of New York, The Chase Manhattan Bank, and Chase Manhattan Bank USA,
National Association are the principal bank subsidiaries of J.P. Morgan Chase &
Co. On December 31, 2000, J.P. Morgan & Co. Incorporated merged with and into
The Chase Manhattan Corporation, which thereupon changed its name to "J.P.
Morgan Chase & Co." It is anticipated that The Chase Manhattan Bank and Morgan
Guaranty Trust Company of New York will merge on July 14, 2001. Each of Morgan
Guaranty and Chase's commercial mortgage banking groups have, among other
things, the authority to originate fixed-rate, first lien mortgage loans for
securitization. Each of their commercial mortgage banking operations are
vertically integrated entities, staffed by real estate professionals, many of
whom, in the case of Chase, have completed the credit training programs of
Chase or one of its predecessor banks. The loan underwriting groups are an
integral component of their commercial mortgage banking groups which also
include distinct groups responsible for loan origination, closing and servicing
mortgage loans.
Loan Analysis. All of the mortgage loans originated by Morgan Guaranty and
Chase were underwritten by Morgan Guaranty and Chase employees respectively. In
some cases, Chase may have employed a third party contractor to assist in
preparation of due diligence materials. Upon receipt of a loan package, Morgan
Guaranty and Chase's respective loan underwriters commence an extensive review
of the borrower's financial condition and creditworthiness and the real estate
which will secure the loan. Each of Morgan Guaranty and Chase performs both a
credit analysis and collateral analysis with respect to a loan applicant. The
credit analysis of the borrower includes a review of historical financial
statements, including operating statements and rent rolls (generally
unaudited), historical tax returns, third party credit reports and, if
applicable, the loan payment history of the borrower. They also perform a
qualitative analysis which incorporates independent credit checks, industry
research and published debt and equity information with respect to certain
principals of the borrower as well as the borrower itself. Generally, borrowers
are required to be single-purpose entities. The collateral analysis includes an
analysis of the historical property operating statements, rent rolls, leases,
service contracts, projection of future performance and, in the case of loans
originated by Chase, utility bills. A member of the loan underwriting team or a
third party inspector also conducts a site inspection to (1) confirm the
occupancy rate of the mortgaged property, (2) analyze the market, and (3)
assess the utility of the mortgaged property within the market. Each of Morgan
Guaranty and Chase requires third party appraisals, environmental reports,
building condition reports and seismic reports, where appropriate. Each
environmental, building condition and seismic report is reviewed for
acceptability by a staff member of Chase's Technical Services Unit with respect
to loans originated by Chase, and by an underwriter with respect to loans
originated by Morgan Guaranty, in each case for compliance with program
standards and that staff member approves or rejects the report. Appraisals are
reviewed by a member of the respective in-house appraisal staff and that staff
member approves or rejects the appraisal. The results of these reviews are
incorporated into the underwriting report.
Loan Approval. Prior to commitment, all mortgage loans originated by Chase
must be approved by Chase's credit committee and all mortgage loans originated
by Morgan Guaranty must be approved by a senior credit officer (for loans under
10 million) or by Morgan Guaranty's credit committee, in each case in
accordance with their respective credit policies. A mortgage loan may be
approved as recommended, the terms may be modified or a loan transaction may be
declined.
Debt Service Coverage Ratio and LTV Ratio. Each of Morgan Guaranty and
Chase's underwriting standards generally require the following minimum debt
service coverage ratios for each of the indicated property types:
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PROPERTY TYPE DSCR GUIDELINE LTV RATIO GUIDELINE
- ------------- -------------- -------------------
Anchored Retail ........... 1.20x 80%
Multifamily ............... 1.20x 80%
Unanchored Retail ......... 1.30x 75%
Office .................... 1.20x 80%
Industrial ................ 1.20x 80%
Self-Storage .............. 1.30x 70%
The debt service coverage ratio guidelines listed above are calculated
based on Underwritten Net Cash Flow at the time of origination. In addition,
their underwriting guidelines generally require a maximum amortization period
of 30 years. However, notwithstanding the foregoing, in certain circumstances
the actual debt service coverage ratios, loan-to-value ratios and amortization
periods for the mortgage loans originated by Morgan Guaranty or Chase may vary
from these guidelines. See "Description of the Mortgage Pool" in this
prospectus supplement and Annex A to this prospectus supplement.
Escrow Requirements. Each of Morgan Guaranty and Chase requires
substantially all borrowers to fund various escrows for taxes and insurance,
capital expenses and replacement reserves. Generally, the required escrows for
mortgage loans are as follows:
o Taxes--Typically an initial deposit and monthly escrow deposits equal to
1/12th of the annual property taxes (based on the most recent property
assessment and the current millage rate) are required.
o Insurance--If the property is insured under an individual policy (i.e.,
the property is not covered by a blanket policy), typically an initial
deposit and monthly escrow deposits equal to 1/12th of the annual
property insurance premium are required. If the property is covered by a
blanket policy of insurance, insurance escrows are not required. However,
the lender reserves the right in the mortgage to require a separate
insurance policy and insurance escrows in certain circumstances.
o Replacement Reserves--Replacement reserves are calculated in accordance
with the expected useful life of the components of the property during
the term of the mortgage loan, as estimated in the engineering report.
Notwithstanding the actual level of escrowed reserves, the following
minimum annual replacement reserve levels were generally assumed by Morgan
Guaranty or Chase in determining Underwritten Net Cash Flow:
Retail ......................................... $0.15 per square foot
Multifamily .................................... $250 per unit
Office ......................................... $0.20 per square foot
Industrial (Chase) ............................. $0.10 per square foot
Industrial (Morgan Guaranty) ................... $0.20 per square foot
Self-Storage ................................... $0.20 per square foot
o Completion Repair/Environmental Remediation--Typically, a completion
repair reserve is required and, if necessary, an environmental
remediation reserve may be established. An initial deposit, upon funding
of the mortgage loan, in an amount generally equal to at least 125% of
the estimated costs of repairs or replacements to be completed within the
first year of the mortgage loan pursuant to the building condition report
is generally required.
o Re-tenanting/Debt Service Coverage--In some cases, tenants may have
lease expirations within or shortly after the mortgage loan term. To
mitigate this risk, special reserves may be established to be funded
either at closing of the mortgage loan and/or during the mortgage loan
term to cover certain anticipated leasing commissions or tenant
improvement costs which might be associated with releasing the space
occupied by those tenants.
BSFI'S UNDERWRITING STANDARDS
General. All of the mortgage loans sold to the Depositor by BSFI were
originated by BSFI, in each case, generally in accordance with the underwriting
criteria described herein. BSFI originates loans secured by
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retail, office, industrial, multifamily, self-storage and hotel properties as
well as manufactured housing communities located in the United States. BSFI and
its affiliates originate and underwrite loans through four offices located
throughout the United States. BSFI's loan origination and underwriting
professionals, who are all full-time BSFI employees, are compensated based on
loan performance.
Loan Analysis. The BSFI credit underwriting team for each mortgage loan
was comprised of Bear Stearns real estate professionals. The underwriting team
for each loan is required to conduct an extensive review of the related
mortgaged property, including an analysis of the appraisal, engineering report,
environmental report, historical property operating statements, rent rolls,
current and historical real estate taxes, and a review of tenant leases. The
credit of the borrower and certain key principals of the borrower are examined
for financial strength and character prior to approval of the loan. This
analysis includes a review of historical financial statements (which are
generally unaudited), historical income tax returns of the borrower and its
principals, third-party credit reports, judgment, lien, bankruptcy and pending
litigation searches. Borrowers generally are required to be special purpose
entities. The credit of key tenants is also examined as part of the
underwriting process. A member of the BSFI underwriting 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.
Loan Approval. Prior to commitment, all mortgage loans must be approved by
a loan committee comprised of senior real estate professionals from BSFI and
its affiliates. The loan committee may either approve a mortgage loan as
recommended, request additional due diligence, modify the terms, or reject a
mortgage loan.
Debt Service Coverage Ratio and LTV Ratio. BSFI's underwriting standards
generally require the following minimum debt service coverage ratios and loan
to value ratios for each of the indicated property types:
PROPERTY TYPE DSCR GUIDELINE LTV RATIO GUIDELINE
- ------------- -------------- -------------------
Anchored Retail ......................... 1.20x 80%
Unanchored Retail ....................... 1.30x 75%
Multifamily ............................. 1.20x 80%
Industrial .............................. 1.25x 75%
Office .................................. 1.25x 75%
Hotel ................................... 1.40x 70%
Manufactured Housing Community .......... 1.25x 80%
Self-Storage ............................ 1.30x 75%
The debt service coverage ratio guidelines listed above are calculated
based on anticipated Underwritten Net Cash Flow at the time of origination.
Therefore, the debt service coverage ratio for each mortgage loan as reported
elsewhere in this Prospectus Supplement may differ from the amount calculated
at the time of origination.
Escrow Requirements. BSFI generally requires a borrower to fund various
escrows for taxes and insurance, replacement reserves and capital expenses.
Generally, the required escrows for mortgage loans originated by BSFI are as
follows:
o Taxes and Insurance--Typically, a pro rated initial deposit and monthly
deposits equal to 1/12 of the annual property taxes (based on the most
recent property assessment and the current millage rate) and annual
property insurance premium.
o Replacement Reserves--Monthly deposits generally based on the greater of
the amount recommended pursuant to a building condition report prepared
for BSFI or the following minimum amounts:
Retail ................................. $0.15 per square foot
Multifamily ............................ $250 per unit
Industrial ............................. $0.10-$0.15 per square foot
Office ................................. $0.20 per square foot
Hotel .................................. 5% of gross revenue
Manufactured Housing Community ......... $50 per pad
Self-Storage ........................... $0.15 per square foot
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o Deferred Maintenance/Environmental Remediation--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
engineer and the estimated costs of environmental remediation expenses as
recommended by an independent environmental assessment.
o Re-tenanting--In some cases major leases expire 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 anticipated leasing commissions or tenant improvement costs which
may be associated with re-leasing the space occupied by these tenants.
REPRESENTATIONS AND WARRANTIES; REPURCHASES AND SUBSTITUTIONS
In each Purchase Agreement, the applicable Mortgage Loan Seller will
represent and warrant with respect to each mortgage loan (subject to certain
exceptions specified in the related Purchase Agreement) sold by the Mortgage
Loan Seller, as of the Closing Date, or as of another date specifically
provided in the representation and warranty, among other things, that:
(a) certain specified information set forth in the schedule of
mortgage loans attached to the applicable Purchase Agreement is true and
correct in all material respects as of the cut-off date and the items of
information on the schedule of mortgage loans include all applicable data
fields required to be in the schedule of mortgage loans attached to the
Pooling and Servicing Agreement;
(b) as of the date of its origination, the mortgage loan complied in
all material respects with, or was exempt from, all requirements of
federal, state or local law relating to the origination, funding and
servicing of the mortgage loan;
(c) immediately prior to the sale, transfer and assignment to the
Depositor, the applicable Mortgage Loan Seller had good and indefeasible
title to, and was the sole owner of, each mortgage loan, and is
transferring the mortgage loan free and clear of any and all liens,
pledges, charges or security interests or any other ownership interests of
any nature encumbering the mortgage loan (other than the rights to
servicing and related compensation set forth in the schedule of mortgage
loans attached to the applicable Purchase Agreement) and the applicable
Mortgage Loan Seller has validly and effectively conveyed to the Depositor
all legal and beneficial interest in and to such mortgage loan free and
clear of any pledge, lien or security interest;
(d) the proceeds of the mortgage loan have been fully disbursed and
there is no requirement for future advances thereunder;
(e) each of the related Mortgage Note, related Mortgage, related
assignment of leases, if any, and other agreements executed in connection
with the mortgage loan are the legal, valid and binding obligations of the
related mortgagor (subject to any nonrecourse provisions therein and any
state anti-deficiency legislation), enforceable in accordance with their
terms, except with respect to provisions relating to default interest,
yield maintenance charges or prepayment premiums and except as the
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the enforcement of creditors' rights
generally, or by general principles of equity (regardless of whether the
enforcement is considered in a proceeding in equity or at law);
(f) as of the date of its origination, there was no valid offset,
defense, counterclaim or right to rescission with respect to any of the
related Mortgage Note, Mortgage(s) or other agreements executed in
connection therewith, and, as of the cut-off date, to the applicable
Mortgage Loan Seller's knowledge there is no valid offset, defense,
counterclaim or right to rescission with respect to the Mortgage Note,
Mortgage(s) or other agreements;
(g) the assignment of the related Mortgage and assignment of leases in
favor of the Trustee has been duly authorized, executed and delivered in
recordable form by the applicable Mortgage Loan Seller and constitutes the
legal, valid and enforceable assignment of the Mortgage and the assignment
of leases to the Trustee (subject to customary limitations). Each related
Mortgage and assignment of leases is freely assignable upon notice to the
mortgagor;
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(h) the related Mortgage is a legal, valid and enforceable first lien
on the related Mortgaged Property subject only to the following title
exceptions (each exception, a "Title Exception") (A) the liens for current
real property taxes, ground rents, water charges, sewer rents and
assessments not yet due and payable, (B) covenants, conditions and
restrictions, rights of way, easements and other matters of public record,
none of which, individually or in the aggregate, materially interferes with
the current use of the Mortgaged Property or the security intended to be
provided by the Mortgage or with the mortgagor's ability to pay its
obligations when they become due or materially and adversely affects the
value of the Mortgaged Property and (C) the exceptions (general and
specific) set forth in the mortgage policy of title insurance issued with
respect to the mortgage loan, none of which, individually or in the
aggregate, materially interferes with the current use or operation of the
Mortgaged Property or the security intended to be provided by the Mortgage
or with the mortgagor's ability to pay its obligations when they become due
or materially and adversely affects the value of the Mortgaged Property and
none of which is a mortgage lien that is pari passu or senior to the
mortgage loan and the Mortgaged Property is free and clear of any
mechanics' and materialmen's liens which are prior to or equal with the
lien of the related Mortgage, except those which are insured against by a
lender's title insurance policy as described above;
(i) all taxes and governmental assessments that prior to the closing
date became due and owing in respect of the related Mortgaged Property have
been paid or, if in dispute, an escrow of funds in an amount sufficient to
cover the payments has been established and such taxes and assessments
shall not be considered delinquent or unpaid until the date on which
interest or penalties may first be payable thereon;
(j) to the applicable Mortgage Loan Seller's knowledge, after
conducting due diligence consistent with the practice of institutional
lenders generally for properties of the same type as the related Mortgaged
Property as of origination, and to the applicable Mortgage Loan Seller's
actual knowledge as of the closing date, each related Mortgaged Property
was free and clear of any material damage (other than deferred maintenance
for which escrows were established at origination in an amount equal to at
least 125% of the amount estimated to effect the necessary repairs, or such
other amount as a prudent commercial lender would deem appropriate under
the circumstances) that would affect materially and adversely the value of
the Mortgaged Property as security for the mortgage loan and there was no
proceeding pending or, to the applicable Mortgage Loan Seller's knowledge
threatened, for the total or partial condemnation of the Mortgaged
Property;
(k) 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, which insurance covered those risks as were
customarily acceptable to prudent commercial and multifamily mortgage
lending institutions lending on the security of property comparable to the
related Mortgaged Property in the jurisdiction in which the Mortgaged
Property is located; each Mortgaged Property was covered by a fire and
extended perils insurance policy, in an amount (subject to a customary
deductible) at least equal to the replacement cost of improvements located
on the Mortgaged Property, with no deduction for depreciation, or an amount
at least equal to the initial principal balance of the mortgage loan and in
any event, the amount necessary to avoid the operation of any co-insurance
provisions; each Mortgaged Property was covered by business interruption or
rental loss insurance, in an amount at least equal to 12 months of
operations of the related Mortgaged Property; such insurance was in full
force and effect with respect to each related Mortgaged Property at
origination; and, as of the cut-off date, to the best knowledge of the
applicable Mortgage Loan Seller, all insurance coverage required under each
Mortgage was in full force and effect with respect to each related
Mortgaged Property; and no notice of termination or cancellation with
respect to any such insurance policy has been received by the applicable
Mortgage Loan Seller; and except for certain amounts not greater than
amounts which would be considered prudent by an institutional commercial
mortgage lender with respect to a similar mortgage loan and which are set
forth in the related Mortgage, any insurance proceeds in respect of a
casualty loss will be applied either to (1) the repair or restoration of
the related Mortgaged Property with mortgagee or a third party custodian
acceptable to mortgagee having the right to hold and disburse the proceeds
as the repair or restoration progresses other than with respect to amounts
that
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are customarily acceptable to commercial and multifamily mortgage lending
institutions, or (2) the reduction of the outstanding principal balance of
the Mortgage Loan. The insurer with respect to each policy is qualified to
write insurance in the relevant jurisdiction to the extent required. The
insurance policies contain a standard mortgagee clause naming the
originator, its successors and assigns as loss payees in the case of
property insurance policies and additional insureds in the case of
liability insurance policies and provide that they are not terminable and
may not be reduced below replacement cost without 30 days prior written
notice to the mortgagee (or, with respect to non-payment, 10 days prior
written notice to the mortgagee) or such lesser period as prescribed by
applicable law. Each Mortgage requires that the mortgagor maintain
insurance as described above or permits the mortgagee to require insurance
as described above, and permits the mortgagee to purchase such insurance at
the mortgagor's expense if the mortgagor fails to do so;
(l) the 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
scheduled payment without giving effect to any applicable grace period;
(m) one or more Phase I environmental site assessments covering
environmental hazards typically assessed for similar properties, including,
use, type and tenants of the Mortgaged Property (or updates thereof) (each
"Phase I") meeting ASTM requirements were performed by an environmental
consulting firm experienced in environmental matters and properly licensed,
if applicable, and independent of the applicable Mortgage Loan Seller and
that Mortgage Loan Seller's affiliates with respect to each related
Mortgaged Property within the 12 months prior to the Closing Date. The
applicable Mortgage Loan Seller, having made no independent inquiry other
than to review the report(s) prepared in connection with the assessment(s)
referenced herein, has no knowledge and has received no notice of any
material and adverse environmental condition or circumstance affecting the
Mortgaged Property that was not disclosed in those report(s). A copy of
such Phase I will be delivered as directed by the depositor within the time
required by the Pooling and Servicing Agreement. With respect to any
material and adverse environmental matters disclosed in the Phase I any of
(i) the same have been remediated in all material respects prior to the
Closing Date, (ii) sufficient funds estimated to effect such remediation
have been escrowed with the applicable Mortgage Loan Seller for purposes of
effecting such remediation, (iii) the related mortgagor or one of its
affiliates is currently taking or required to take such actions, if any,
with respect to such matters as have been recommended by the Phase I or
required by the applicable governmental authority, (iv) another responsible
party identified in a notice or other action from the applicable
governmental authority is currently taking or required to take such
actions, if any, with respect to such regulatory authority's order or
directive, (v) an operations and maintenance plan has been or will be
implemented, or (vi) environmental insurance has been obtained with respect
to such matters, subject to customary limitations. All such Phase I's that
were in the possession of the originator and that relate to a Mortgaged
Property which is insured by an environmental insurance policy have been
delivered to or disclosed to the environmental insurance carrier issuing
such policy prior to the issuance of such policy. Each mortgage loan
requires the related mortgagor to comply with all applicable federal, state
and local environmental laws and regulations;
(n) the Mortgage Loan Seller has received an ALTA lender's title
insurance policy or a comparable form of lender's title insurance policy
(or a commitment "marked up" at the closing of the related Mortgage Loan)
as adopted in the applicable jurisdiction (the "Title Insurance Policy"),
which was issued by a title insurance company qualified to do business in
the jurisdiction where the applicable Mortgaged Property is located to the
extent required, insuring that the related Mortgage is a valid first lien
in the original principal amount of the related Mortgage Loan on the
Mortgagor's fee simple interest (or, if applicable, leasehold interest) in
the portion of the Mortgaged Property comprised of real estate, subject
only to Title Exceptions. Such Title Insurance Policy was issued in
connection with the origination of the related Mortgage Loan. No claims
have been made under such Title Insurance Policy. Such Title Insurance
Policy is in full force and effect, provides that the originator, its
successors or assigns is the sole named insured, and all premiums thereon
have been paid. The Mortgage Loan Seller has not done, by act or omission,
and the Mortgage Loan Seller has no knowledge of anything that would impair
the coverage under such Title Insurance Policy; such policy contains no
exclusions for or affirmatively insures (other than in jurisdictions in
which affirmative insurance is unavailable) (a) access to public roads, (b)
that there are no encroachments of any part of the building thereon over
easements and (c) that the land shown on the survey is the same as the
property described in the Mortgage;
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(o) except with respect to the APD Loans, which provide that the rate
at which interest accrues on each APD Loan increases after its respective
Anticipated Prepayment Date, the Mortgage Rate (exclusive of any default
interest, late charges or prepayment premiums) of the mortgage loan is a
fixed rate;
(p) other than payments due but not yet 30 days or more delinquent, to
the Mortgage Loan Seller's knowledge, (A) there is no material default,
breach, violation or event of acceleration existing under the related
Mortgage Note or each related Mortgage, (B) since the date of origination
of such mortgage loan, there has been no declaration by the Mortgage Loan
Seller of an event of acceleration under the related Mortgage or mortgage
note; and (C) the applicable Mortgage Loan Seller has not received notice
of any event which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute a material
default, breach, violation or event of acceleration under any of the
documents; the Mortgage Loan Seller has not waived any other material
default, breach, violation or event of acceleration under any of those
documents; and under the terms of each mortgage loan, each related Mortgage
Note, each related Mortgage and the other loan documents in the related
mortgage file, no person or party other than the holder of such Mortgage
Note may declare an event of default or accelerate the related indebtedness
under that mortgage loan, Mortgage Note or Mortgage;
(q) each mortgage loan is directly secured by a Mortgage on a
commercial, multifamily residential or manufactured housing community
property, and either (1) substantially all of the proceeds of the mortgage
loan were used to acquire, improve or protect the portion of the
commercial, multifamily residential or manufactured housing community
property that consists of an interest in real property (within the meaning
of Treasury Regulations Sections 1.856-3(c) and 1.856-3(d)) and the
interest in real property was the only security for the mortgage loan as of
the Testing Date (as defined below), or (2) the fair market value of the
interest in real property which secures the mortgage loan was at least
equal to 80% of the principal amount of the mortgage loan (a) as of the
Testing Date, or (b) as of the closing date. For purposes of the previous
sentence, (1) the fair market value of the referenced interest in real
property shall first be reduced by (a) the amount of any lien on the
interest in real property that is senior to the mortgage loan, and (b) a
proportionate amount of any lien on the interest in real property that is
on a parity with the mortgage loan, and (2) the "Testing Date" shall be the
date on which the referenced mortgage loan was originated unless (a) the
mortgage loan was modified after the date of its origination in a manner
that would cause "significant modification" of the mortgage loan within the
meaning of Treasury Regulations Section 1.1001-3(b), and (b) such
"significant modification" did not occur at a time when the mortgage loan
was in default or when default with respect to the mortgage loan was
reasonably foreseeable. However, if the referenced Mortgage Loan has been
subjected to a "significant modification" after the date of its origination
and at a time when such Mortgage Loan was not in default or when default
with respect to such Mortgage Loan was not reasonably foreseeable, the
Testing Date shall be the date upon which the latest such "significant
modification" occurred.
(r) each mortgage loan is a whole loan, contains no equity
participation by the lender or shared appreciation feature and does not
provide for any contingent or additional interest in the form of
participation in the cash flow of the related Mortgaged Property or provide
for negative amortization (other than the APD Loans) and the applicable
Mortgage Loan Seller holds no preferred equity interest in any mortgagor.
Except as set forth herein, the Mortgage Loan Seller has not received
notice of any mezzanine debt secured by a lien on the equity of the related
mortgagor with respect to any Mortgage Loan;
(s) subject to certain exceptions, which are customarily acceptable to
prudent commercial and multifamily mortgage lending institutions lending on
the security of property comparable to the related Mortgaged Property and
permitted subordinate indebtedness discussed herein, each Mortgage or loan
agreement contains provisions for the acceleration of the payment of the
unpaid principal balance of the mortgage loan if, without complying with
the requirements of the Mortgage or loan agreement, the related Mortgaged
Property, or any controlling interest in the related mortgagor, is directly
transferred or sold or encumbered, other than permitted subordinate and
mezzanine debt (see "Risk Factors--Ability to Incur Other Borrowings
Entails Risk" in this prospectus supplement);
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(t) each Mortgaged Property was inspected by or on behalf of the
related originator within the 12 months prior to the Closing Date;
(u) since origination, no material 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 of the mortgage
loan or materially interferes with the security intended to be provided by
the Mortgage. The terms of the related Mortgage do not provide for release
of any material portion of the Mortgaged Property from the lien of the
Mortgage except (a) in consideration of payment therefor equal to not less
than the allocated loan amount of such Mortgaged Property, (b) payment in
full of such mortgage loan, (c) Mortgage Loans which permit defeasance by
means of substituting for the Mortgaged Property (or, in the case of a
mortgage loan secured by multiple Mortgaged Properties, one or more of the
Mortgaged Properties) U.S. government securities sufficient to pay the
mortgage loans in accordance with their terms or (d) Mortgage Loans which
permit substitution as disclosed herein;
(v) to the Mortgage Loan Seller's knowledge, as of the date of
origination of the mortgage loan, based on due diligence customary in the
industry, and, to the Mortgage Loan Seller's actual knowledge, as of the
closing date, there are no violations of any applicable zoning ordinances,
building codes and land laws applicable to the Mortgaged Property or the
use and occupancy thereof which would have a material adverse effect on the
value, operation or net operating income of the Mortgaged Property. Any
non-conformity with zoning laws constitutes a legal non-conforming use or
structure which, in the event of casualty or destruction, may be restored
or repaired to the full extent of the use or structure at the time of such
casualty, or for which law and ordinance insurance coverage has been
obtained in amounts customarily required by prudent commercial lenders, or
such non-conformity does not materially and adversely affect the use,
operation or value of the Mortgaged Property;
(w) all escrow deposits and payments required pursuant to the mortgage
loan are in the possession, or under the control, of the applicable
Mortgage Loan Seller or its agent and there are no deficiencies in
connection therewith and all such escrows, deposits and payments will be
conveyed by the applicable Mortgage Loan Seller to the Depositor and
identified as such with appropriate detail on the Closing Date.
If a Mortgage Loan Seller has been notified of a material breach of any of
the foregoing representations and warranties and if the respective Mortgage
Loan Seller cannot cure the breach within a period of 90 days following the
earlier of its receipt of that notice or its discovery of the breach, then the
respective Mortgage Loan Seller will be obligated pursuant to the respective
Purchase Agreement (the relevant rights under which will be assigned, together
with its interests in the mortgage loans, to the Trustee) to (a) repurchase the
affected mortgage loan as well as, if such affected mortgage loan is
cross-collateralized with one or more other mortgage loans in the pool of
mortgage loans, the other mortgage loans in such cross-collateralized group of
mortgage loans, within the 90-day period at a price (the "Purchase Price")
equal to the sum of (1) the outstanding principal balance of the mortgage loan
or mortgage loans as of the date of purchase, (2) all accrued and unpaid
interest on the mortgage loan or mortgage loans at the related mortgage rates,
in effect from time to time, to but not including the due date in the Due
Period of purchase, (3) all related unreimbursed Servicing Advances plus
accrued and unpaid interest on related Advances at the Reimbursement Rate, and
unpaid Special Servicing Fees allocable to the mortgage loan or mortgage loans
and (4) all reasonable out-of-pocket expenses reasonably incurred or to be
incurred by the Special Servicer, the Depositor and the Trustee in respect of
the breach giving rise to the repurchase obligation, including any expenses
arising out of the enforcement of the repurchase obligation or (b) substitute,
within two years of the start-up date of the REMIC trust, a Qualified
Substitute Mortgage Loan and pay any shortfall amount equal to the excess of
the Purchase 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 90-day period to cure the
breach if it is diligently proceeding with that cure, and has delivered to
Moody's, Fitch and the Trustee an officer's certificate that describes the
reasons that a cure was not effected within the first 90-day cure period and
the actions it proposes to take to effect the cure and which states that it
anticipates the cure will be effected within the additional 90-day period.
Notwithstanding the foregoing, the actions specified in (a) or (b) of the
preceding sentence must be taken within 90 days following the earlier of the
Mortgage Loan Seller's receipt of notice or discovery of a breach, with no
extension, if such breach would cause the mortgage loan not to be a "qualified
mortgage" within the meaning of Section 860G(a)(3) of the Code.
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A "Qualified Substitute Mortgage Loan" is a mortgage loan which must, on
the date of substitution: (a) have an outstanding principal balance, after
application of all scheduled payments of principal and/or interest due during
or prior to the month of substitution, not in excess of the outstanding
principal balance of the deleted mortgage loan as of the due date in the
calendar month during which the substitution occurs; (b) have a Mortgage Rate
not less than the Mortgage Rate of the deleted mortgage loan; (c) have the same
due date as the deleted mortgage loan; (d) accrue interest on the same basis as
the deleted mortgage loan (for example, on the basis of a 360-day year and the
actual number of days elapsed); (e) have a remaining term to stated maturity
not greater than, and not more than two years less than, the remaining term to
stated maturity of the deleted mortgage loan; (f) have an original
loan-to-value ratio not higher than that of the deleted mortgage loan and a
current loan-to-value ratio not higher than the then-current loan-to-value
ratio of the deleted mortgage loan; (g) materially comply as of the date of
substitution with all of the representations and warranties set forth in the
applicable Purchase Agreement; (h) have an environmental report with respect to
the related Mortgaged Property that indicates no material adverse environmental
conditions with respect to the related Mortgaged Property and which will be
delivered as a part of the related mortgage file; (i) have an original debt
service coverage ratio not less than the original debt service coverage ratio
of the deleted mortgage loan; (j) be determined by an opinion of counsel to be
a "qualified replacement mortgage" within the meaning of Section 860G(a)(4) of
the Code; (k) not have a maturity date after the date two years prior to the
Rated Final Distribution Date; (l) not be substituted for a deleted mortgage
loan unless the Trustee has received prior confirmation in writing by each of
Moody's and Fitch that the substitution will not result in the withdrawal,
downgrade, or qualification of the then current rating assigned by either of
Moody's or Fitch to any class of Certificates then rated by Moody's or Fitch,
respectively, (the cost, if any, of obtaining the confirmation to be paid by
the applicable Mortgage Loan Seller); (m) has been approved by the Directing
Certificateholder in its reasonable discretion; provided, that the Directing
Certificateholder will cease to have the right to approve the substitution of a
Qualified Substitute Mortgage Loan for a deleted mortgage loan after the
aggregate of the outstanding principal balance of all Qualified Substitute
Mortgage Loans which were previously substituted for deleted mortgage loans
exceeds 10% of the aggregate outstanding principal balance of all the mortgage
loans as of the cut-off date; and (n) not be substituted for a deleted mortgage
loan if it would result in the termination of the REMIC status of either REMIC
or the imposition of tax on either REMIC other than a tax on income expressly
permitted or contemplated to be received by the terms of the Pooling and
Servicing Agreement. In the event that one or more mortgage loans are
substituted for one or more deleted mortgage loans simultaneously, then the
amounts described in clause (a) are required to be determined on the basis of
aggregate principal balances and the rates described in clause (b) above and
the remaining term to stated maturity referred to in clause (e) above are
required to be determined on a weighted average basis. When a Qualified
Substitute Mortgage Loan is substituted for a deleted mortgage loan, the
applicable Mortgage Loan Seller will be required to certify that the mortgage
loan meets all of the requirements of the above definition and send the
certification to the Trustee.
The foregoing repurchase or substitution obligation will constitute the
sole remedy available to the Certificateholders and the Trustee for any breach
of any Mortgage Loan Seller's representations and warranties regarding the
mortgage loans. The respective Mortgage Loan Seller will be the sole warranting
party in respect of the mortgage loans sold by that Mortgage Loan Seller to the
Depositor, and none of the Depositor, the Master Servicer, the Special
Servicer, the Trustee, the Fiscal Agent, the Underwriters or any of their
affiliates (other than the respective Mortgage Loan Seller) will be obligated
to repurchase any affected mortgage loan in connection with a breach of the
Mortgage Loan Seller's representations and warranties if the Mortgage Loan
Seller defaults on its obligation to do so. However, the Depositor will not
include any mortgage loan in the pool of mortgage loans if anything has come to
the Depositor's attention prior to the Closing Date that causes it to believe
that the representations and warranties made by a Mortgage Loan Seller
regarding the mortgage loan will not be correct in all material respects when
made. See "Description of the Pooling Agreements--Representations and
Warranties; Repurchases" in the prospectus.
LOCK BOX ACCOUNTS
With respect to 26 mortgage loans (the "Lock Box Loans"), representing
approximately 25.72% of the Initial Pool Balance, one or more accounts
(collectively, the "Lock Box Accounts") have been or may be
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established into which the related property manager and/or tenants directly
deposits rents or other revenues from the Mortgaged Property. Pursuant to the
terms of the Lock Box Loans, upon the occurrence of certain trigger events, the
borrower will not have access to the funds on deposit therein (except with
respect to 4 mortgage loans, representing approximately 3.06% of the Initial
Pool Balance, with respect to which a hard lockbox is currently in place and
the borrower does not currently have access to the funds on deposit therein).
The Lock Box Accounts will not be assets of either REMIC.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to a pooling and servicing
agreement, among the Depositor, the Master Servicer, the Special Servicer, the
Trustee and the Fiscal Agent (the "Pooling and Servicing Agreement") and will
represent in the aggregate the entire beneficial ownership interest in the
trust fund consisting of: (1) the mortgage loans and all payments under and
proceeds of the mortgage loans received after the cut-off date (exclusive of
payments of principal and/or interest due on or before the cut-off date); (2)
any REO Property; (3) those funds or assets as from time to time are deposited
in the Certificate Account, the Distribution Accounts, the Interest Reserve
Account, the Excess Interest Distribution Account, and the REO Account, if
established; (4) the rights of the mortgagee under all insurance policies with
respect to the mortgage loans; and (5) certain rights of the Depositor under
the Purchase Agreements relating to mortgage loan document delivery
requirements and the representations and warranties of each Mortgage Loan
Seller regarding the mortgage loans.
The Depositor's Commercial Mortgage Pass-Through Certificates, Series
2001-1 (the "Certificates") will consist of the following 19 classes: the Class
A-1 and Class A-2 Certificates (collectively, the "Class A Certificates") and
the Class X-1 and Class X-2 Certificates (the "Class X Certificates"), Class B,
Class C, Class D, Class E, Class F, Class G, Class H, Class I, Class J, Class
K, Class L, Class M, Class S, Class R and Class LR Certificates. The Class A
Certificates and the Class X Certificates are referred to collectively as the
"Senior Certificates" in this prospectus supplement. The Class B, Class C,
Class D, Class E, Class F, Class G, Class H, Class I, Class J, Class K, Class L
and Class M Certificates are referred to collectively as the "Subordinate
Certificates" in this prospectus supplement. The Class B, Class C and Class D
Certificates are referred to collectively as the "Subordinate Offered
Certificates" in this prospectus supplement. The Class R and Class LR
Certificates are referred to collectively as the "Residual Certificates" in
this prospectus supplement.
Only the Class A, Class B, Class C and Class D Certificates are offered
hereby (collectively, the "Offered Certificates"). The Class X, Class E, Class
F, Class G, Class H, Class I, Class J, Class K, Class L, Class M, Class S,
Class R and Class LR Certificates (collectively, the "Non-Offered
Certificates") have not been registered under the Securities Act of 1933 and
are not offered hereby.
The "Certificate Balance" of any class of Certificates (other than the
Class X, Class S and Residual Certificates) outstanding at any time represents
the maximum amount which its holders are entitled to receive as distributions
allocable to principal from the cash flow on the mortgage loans and the other
assets in the trust fund. On each distribution date, the Certificate Balance of
each class of Certificates will be reduced by any distributions of principal
actually made on, and any Collateral Support Deficit actually allocated to,
that class of Certificates on that distribution date. The initial Certificate
Balance of each class of Offered Certificates is expected to be the balance set
forth on the cover of this prospectus supplement. The Class X, Class S and
Residual Certificates will not have Certificate Balances or entitle their
holders to distributions of principal.
The Class X Certificates will, however, represent the right to receive
distributions of interest accrued as described in this prospectus supplement on
a notional amount (the "Notional Amount"). The Notional Amount of the Class X
Certificates will be based on all or part of the aggregate of the Certificate
Balances of the other Certificates (other than the Class S, Class R and Class
LR Certificates) as of the prior distribution date (after giving effect to the
distribution of principal on that distribution date) or, prior to the first
distribution date, the cut-off date. The Notional Amount of the Class X
Certificates is used solely for purposes of describing the amounts of interest
payable on the Class X Certificates and does not represent an interest in
principal payments on the mortgage loans. The Class E, Class F, Class G, Class
H, Class I, Class J, Class K, Class L and Class M Certificates will have an
aggregate initial Certificate Balance of approximately $145,785,694.
The Offered Certificates will be maintained and transferred in book-entry
form and issued in denominations of $10,000 initial Certificate Balance, and
integral multiples of $1 in excess of that amount. The "Percentage Interest"
evidenced by any Certificate (other than the Class S and Residual Certificates)
is equal to its initial denomination as of the Closing Date, divided by the
initial Certificate Balance or Notional Amount of the class to which it
belongs.
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The Offered Certificates will initially be represented by one or more
global Certificates registered in the name of the nominee of The Depository
Trust Company ("DTC"). The Depositor has been informed by DTC that DTC's
nominee will be Cede & Co. No person acquiring an interest in the Offered
Certificates (this person, a "Certificate Owner") will be entitled to receive
an Offered Certificate in fully registered, certificated form, a definitive
certificate, representing its interest in that class, except as set forth under
"--Book-Entry Registration and Definitive Certificates" below. Unless and until
definitive certificates are issued, all references to actions by holders of the
Offered Certificates will refer to actions taken by DTC upon instructions
received from Certificate Owners through its participating organizations
(together with Clearstream Banking, societe anonyme ("Clearstream, Luxembourg")
and the Euroclear System ("Euroclear") participating organizations (the
"Participants"), and all references in this prospectus supplement to payments,
notices, reports and statements to holders of the Offered Certificates will
refer to payments, notices, reports and statements to DTC or Cede & Co., as the
registered holder of the Offered Certificates, for distribution to Certificate
Owners through its Participants in accordance with DTC procedures. See
"Description of the Certificates--Book-Entry Registration and Definitive
Certificates" in the prospectus.
Until definitive certificates are issued, interests in any class of
Offered Certificates will be transferred on the book-entry records of DTC and
its Participants.
PAYING AGENT, CERTIFICATE REGISTRAR AND AUTHENTICATING AGENT
The Chase Manhattan Bank, 450 West 33rd Street, Capital Markets Fiduciary
Services (CMBS), 14th Floor, New York, New York 10001 will serve as paying
agent (in that capacity, the "Paying Agent"). In addition, The Chase Manhattan
Bank will initially serve as registrar (in that capacity, the "Certificate
Registrar") for the purposes of recording and otherwise providing for the
registration of the Offered Certificates and of transfers and exchanges of the
definitive certificates, if issued, and as authenticating agent of the
Certificates (in that capacity, the "Authenticating Agent").
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
General. Certificate Owners may hold their Certificates through DTC (in
the United States) or Clearstream, Luxembourg or Euroclear (in Europe) if they
are Participants of that system, or indirectly through organizations that are
Participants in those systems. Clearstream, Luxembourg and Euroclear will hold
omnibus positions on behalf of the Clearstream, Luxembourg Participants and the
Euroclear Participants, respectively, through customers' securities accounts in
Clearstream, Luxembourg's and Euroclear's names on the books of their
respective depositories (collectively, the "Depositories") which in turn will
hold those positions in customers' securities accounts in the Depositories'
names on the books of DTC. DTC is a limited purpose trust company organized
under the New York Banking Law, a "banking organization" within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the Securities Exchange
Act of 1934, as amended. DTC was created to hold securities for its
Participants and to facilitate the clearance and settlement of securities
transactions between Participants through electronic computerized book-entries,
thereby eliminating the need for physical movement of certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations ("Direct Participants"). Indirect access to the DTC
system also is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between Clearstream, Luxembourg 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, Luxembourg
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by its Depository; however, these cross-market transactions
will require delivery of instructions to
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the relevant European international clearing system by the counterparty in that
system in accordance with its rules and procedures. If the transaction complies
with all relevant requirements, Euroclear or Clearstream, Luxembourg, 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,
Luxembourg or Euroclear as a result of a transaction with a DTC Participant
will be made during the subsequent securities settlement processing, dated the
business day following the DTC settlement date, and those credits or any
transactions in those securities settled during those processing will be
reported to the relevant Clearstream, Luxembourg Participant or Euroclear
Participant on that business day. Cash received in Clearstream, Luxembourg or
Euroclear as a result of sales of securities by or through a Clearstream,
Luxembourg 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, Luxembourg or Euroclear cash account only as of the
business day following settlement in DTC.
Certificate Owners that are not Direct or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of, or other interests in,
the Offered Certificates may do so only through Direct and Indirect
Participants. In addition, Certificate Owners will receive all distributions of
principal of and interest on the Offered Certificates from the Paying Agent
through DTC and its Direct and Indirect Participants. Accordingly, Certificate
Owners may experience delays in their receipt of payments, since those payments
will be forwarded by the Paying Agent to Cede & Co., as nominee of DTC. DTC
will forward those payments to its Participants, which thereafter will forward
them to Indirect Participants or beneficial owners of Offered Certificates.
Except as otherwise provided under "--Reports to Certificateholders; Certain
Available Information" below, Certificate Owners will not be recognized by the
Paying Agent, the Certificate Registrar, the Trustee, the Fiscal Agent, the
Special Servicer or the Master Servicer as holders of record of Certificates
and Certificate Owners will be permitted to receive information furnished to
Certificateholders and to exercise the rights of Certificateholders only
indirectly through DTC and its Direct and Indirect Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
the Offered Certificates among Participants and to receive and transmit
distributions of principal of, and interest on, the Offered Certificates.
Direct and Indirect Participants with which Certificate Owners have accounts
with respect to the Offered Certificates similarly are required to make
book-entry transfers and receive and transmit the distributions on behalf of
their respective Certificate Owners. Accordingly, although Certificate Owners
will not possess physical certificates evidencing their interests in the
Offered Certificates, the Rules provide a mechanism by which Certificate
Owners, through their Direct and Indirect Participants, will receive
distributions and will be able to transfer their interests in the Offered
Certificates.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of
Certificateholders to pledge the Certificates to persons or entities that do
not participate in the DTC system, or to otherwise act with respect to the
Certificates, may be limited due to the lack of a physical certificate for the
Certificates.
DTC has advised the Depositor that it will take any action permitted to be
taken by a holder of an Offered Certificate under the Pooling and Servicing
Agreement only at the direction of one or more Participants to whose accounts
with DTC the Offered Certificates are credited. DTC may take conflicting
actions with respect to other undivided interests to the extent that those
actions are taken on behalf of Participants whose holdings include the
undivided interests.
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, Luxembourg have implemented the
foregoing procedures in order to facilitate transfers of interests in global
Certificates among Participants of DTC, Euroclear and Clearstream, Luxembourg,
they are under no obligation to perform or to continue to comply with the
foregoing procedures, and the foregoing procedures may be discontinued at any
time.
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None of the Depositor, the Master Servicer, the Paying Agent, the
Certificate Registrar, the Underwriters, the Special Servicer, the Trustee or
the Fiscal Agent will have any liability for any actions taken by DTC,
Euroclear or Clearstream, Luxembourg, their respective Direct or Indirect
Participants or their nominees, including, without limitation, actions for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Offered Certificates held by Cede & Co., as nominee
for DTC, or for maintaining, supervising or reviewing any records relating to
that beneficial ownership interest. The information in this prospectus
supplement concerning DTC, Clearstream, Luxembourg and Euroclear and their
book-entry systems has been obtained from sources believed to be reliable, but
the Depositor takes no responsibility for the accuracy or completeness of the
information.
Definitive Certificates. Definitive certificates will be issued to
Certificate Owners or their nominees, respectively, rather than to DTC or its
nominee, only under the limited conditions set forth in the prospectus under
"Description of the Certificates--Book-Entry Registration and Definitive
Certificates."
Upon the occurrence of an event described in the prospectus in the second
to last paragraph under "Description of the Certificates--Book-Entry
Registration and Definitive Certificates", the Paying Agent is required to
notify, through DTC, Direct Participants who have ownership of Offered
Certificates as indicated on the records of DTC of the availability of
definitive certificates. Upon surrender by DTC of the global certificates
representing the Offered Certificates and upon receipt of instructions from DTC
for re-registration, the Certificate Registrar and the Authenticating Agent
will reissue the Offered Certificates as definitive certificates issued in the
respective Certificate Balances owned by individual Certificate Owners, and
thereafter the Paying Agent, the Certificate Registrar, the Trustee, the Fiscal
Agent, the Special Servicer and the Master Servicer will recognize the holders
of those definitive certificates as Certificateholders under the Pooling and
Servicing Agreement.
For additional information regarding DTC and Certificates maintained on
the book-entry records of DTC, see "Description of the Certificates--Book-Entry
Registration and Definitive Certificates" in the prospectus.
DISTRIBUTIONS
Method, Timing and Amount. Distributions on the Certificates are required
to be made by the Paying Agent, to the extent of available funds, on the 15th
day of each month or, if the 15th day is not a business day, then on the next
succeeding business day, commencing in May 2001 (each, a "Distribution Date").
All distributions (other than the final distribution on any Certificate) are
required to be made to the Certificateholders in whose names the Certificates
are registered at the close of business on each Record Date. With respect to
any Distribution Date, the "Record Date" will be the last business day of the
month preceding the month in which that Distribution Date occurs. These
distributions are required to be made by wire transfer in immediately available
funds to the account specified by the Certificateholder at a bank or other
entity having appropriate facilities therefor, if the Certificateholder has
provided the Paying Agent with written wiring instructions no less than five
business days prior to the related Record Date (which wiring instructions may
be in the form of a standing order applicable to all subsequent distributions)
and is the registered owner of Certificates with an aggregate initial
Certificate Balance or Notional Amount, as the case may be, of at least
$5,000,000, or otherwise by check mailed to the Certificateholder. The final
distribution on any Certificate is required to be made in like manner, but only
upon presentation and surrender of the Certificate at the location that will be
specified in a notice of the pendency of the final distribution. All
distributions made with respect to a class of Certificates will be allocated
pro rata among the outstanding Certificates of that class based on their
respective Percentage Interests.
The Master Servicer is required to establish and maintain, or cause to be
established and maintained, one or more accounts (collectively, the
"Certificate Account") as described in the Pooling and Servicing Agreement. The
Master Servicer is required to deposit in the Certificate Account on a daily
basis (and in no event later than the business day following receipt in
available funds) all payments and collections due after the cut-off date and
other amounts received or advanced with respect to the mortgage loans
(including, without limitation, all proceeds received under any hazard, title
or other insurance policy that provides coverage with respect to a Mortgaged
Property or the related mortgage loan or in connection with the full or partial
condemnation of a Mortgaged Property (the "Insurance and Condemnation
Proceeds") and other amounts received and retained in connection with the
liquidation of defaulted mortgage loans or property
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acquired by foreclosure or otherwise (the "Liquidation Proceeds")), and will be
permitted to make withdrawals therefrom as set forth in the Pooling and
Servicing Agreement.
The Paying Agent is required to establish and maintain an account (the
"Lower-Tier Distribution Account", and a second account (the "Upper-Tier
Distribution Account" and, together with the Lower-Tier Distribution Account,
the "Distribution Accounts") in the name of the Paying Agent and for the
benefit of the Certificateholders. On each Distribution Date, the Paying Agent
is required to apply amounts on deposit in the Upper-Tier Distribution Account
(which will include all funds that were remitted by the Master Servicer from
the Certificate Account plus, among other things, any P&I Advances less
amounts, if any, distributable to the Class LR Certificates as set forth in the
Pooling and Servicing Agreement) generally to make distributions of interest
and principal from the Available Distribution Amount to the Certificateholders
as described in this prospectus supplement. Each of the Certificate Account and
the Distribution Accounts will conform to certain eligibility requirements set
forth in the Pooling and Servicing Agreement.
The Paying Agent is required to establish and maintain an "Interest
Reserve Account" in the name of the Paying Agent for the benefit of the holders
of the Certificates. On each Servicer Remittance Date occurring in February and
on any Servicer Remittance Date occurring in any January which occurs in a year
that is not a leap year, the Paying Agent will be required to deposit into the
Interest Reserve Account during the related interest period, in respect of the
mortgage loans that accrue interest on an Actual/360 Basis (collectively, the
"Withheld Loans"), an amount equal to one day's interest at the Mortgage Rate
for each Withheld Loan on its Stated Principal Balance as of the Distribution
Date in the month preceding the month in which the related Servicer Remittance
Date occurs, to the extent a Periodic Payment or P&I Advance is made in respect
of the mortgage loans (all amounts so deposited in any consecutive January (if
applicable) and February, "Withheld Amounts"). On each Servicer Remittance Date
occurring in March, the Paying Agent will be required to withdraw from the
Interest Reserve Account an amount equal to the Withheld Amounts from the
preceding January (if applicable) and February, if any, and deposit that amount
into the Lower-Tier Distribution Account.
The Master Servicer is authorized but not required to direct the
investment of funds held in the Certificate Account in U.S. government
securities and other obligations that are acceptable to each of Moody's and
Fitch ("Permitted Investments"), and the Master Servicer will be entitled to
retain any interest or other income earned on the funds. The Master Servicer
will be required to bear any losses resulting from the investment of the funds,
other than losses which result from the insolvency of any financial institution
which was an eligible institution under the terms of the Pooling and Servicing
Agreement.
The Paying Agent is required to establish and maintain an "Excess Interest
Distribution Account" in the name of the Paying Agent for the benefit of the
Class S Certificateholders. Prior to the applicable Distribution Date, the
Master Servicer is required to remit to the Paying Agent for deposit into the
Excess Interest Distribution Account an amount equal to the Excess Interest
received during the related Due Period.
The aggregate amount available for distribution to Certificateholders on
each Distribution Date (the "Available Distribution Amount") will, in general,
equal the sum of the following amounts (without duplication):
(x) the total amount of all cash received on the mortgage loans and
any REO Properties that is on deposit in the Certificate Account and the
Lower-Tier Distribution Account as of the business day preceding the
related Servicer Remittance Date, exclusive of (without duplication):
(1) all Periodic Payments and balloon payments collected but due
on a due date subsequent to the related Due Period;
(2) all principal prepayments, Liquidation Proceeds, Insurance
and Condemnation Proceeds and other unscheduled recoveries received
subsequent to the related Due Period;
(3) all amounts in the Certificate Account and Lower-Tier
Distribution Account that are due or reimbursable to any person other
than the Certificateholders;
(4) with respect to each Withheld Loan and any Distribution Date
occurring in each February and in any January occurring in a year that
is not a leap year, the related Withheld Amount to the extent those
funds are collected or advanced and are required to be deposited in
the Interest Reserve Account;
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(5) Excess Interest;
(6) all Yield Maintenance Charges and fixed penalties; and
(7) all amounts deposited in the Certificate Account and
Lower-Tier Distribution Account in error;
(y) all P&I Advances made by the Master Servicer, the Trustee or the
Fiscal Agent, as applicable, with respect to the Distribution Date (net of
certain amounts that are due or reimbursable to persons other than the
Certificateholders). See "Description of the Pooling
Agreements--Certificate Account" in the prospectus; and
(z) for the Distribution Date occurring in each March, the related
Withheld Amounts required to be deposited in the Lower-Tier Distribution
Account pursuant to the Pooling and Servicing Agreement.
The "Due Period" for each Distribution Date will be the period commencing
on the second day of the month preceding the month in which that Distribution
Date occurs and ending on the first day of the month in which that Distribution
Date occurs (or, with respect to 22 mortgage loans, representing approximately
17.03% of the Initial Pool Balance, the period commencing on the 11th day of
the month preceding the month in which that Distribution Date occurs and ending
on the 10th day of the month in which that Distribution Date occurs or, with
respect to one mortgage loan, representing approximately 2.53% of the Initial
Pool Balance, the period commencing on the 12th day of the month preceding the
month in which the Distribution Date occurs and ending on the 11th day of the
month in which such Distribution Date occurs). Notwithstanding the foregoing,
in the event that the last day of a Due Period (or applicable grace period) is
not a business day, any payments received with respect to the mortgage loans
relating to the related Due Period on the business day immediately following
that day will be deemed to have been received during that Due Period and not
during any other Due Period.
Priority. On each Distribution Date, for so long as the Certificate
Balances of the Certificates have not been reduced to zero, the Paying Agent is
required to apply amounts on deposit in the Upper-Tier Distribution Account, to
the extent of the Available Distribution Amount, in the following order of
priority:
first, to the Class A-1, Class A-2, Class X-1 and Class X-2 Certificates,
pro rata (based upon their respective entitlements to interest for that
Distribution Date), in respect of interest, up to an amount equal to the
aggregate Interest Distribution Amount for those classes;
second, (1) to the Class A-1 Certificates, in reduction of its Certificate
Balance, an amount equal to the Principal Distribution Amount until the
Certificate Balance of that class is reduced to zero and (2) following
reduction of the Certificate Balance of the Class A-1 Certificates to zero, to
the Class A-2 Certificates, in reduction of its Certificate Balance, an amount
equal to the Principal Distribution Amount (or the portion of it remaining
after distributions on the Class A-1 Certificates on that Distribution Date)
until the Certificate Balance of that class is reduced to zero;
third, to the Class A-1 and Class A-2 Certificates, pro rata (based upon
the aggregate unreimbursed Collateral Support Deficit allocated to that class),
until all amounts of Collateral Support Deficit previously allocated to those
classes, but not previously reimbursed, have been reimbursed in full;
fourth, to the Class B Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for that class;
fifth, following reduction of the Certificate Balances of the Class A
Certificates to zero, to the Class B Certificates, in reduction of its
Certificate Balance, an amount equal to the Principal Distribution Amount (or
the portion of it remaining after distributions on the Class A Certificates on
that Distribution Date), until the Certificate Balance of that class is reduced
to zero;
sixth, to the Class B Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class B Certificates, but not
previously reimbursed, have been reimbursed in full;
seventh, to the Class C Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for that class;
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eighth, following reduction of the Certificate Balances of the Class A and
Class B Certificates to zero, to the Class C Certificates, in reduction of its
Certificate Balance, an amount equal to the Principal Distribution Amount (or
the portion of it remaining after distributions on the Class A and Class B
Certificates on that Distribution Date), until the Certificate Balance of that
class is reduced to zero;
ninth, to the Class C Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class C Certificates, but not
previously reimbursed, have been reimbursed in full;
tenth, to the Class D Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for that class;
eleventh, following reduction of the Certificate Balances of the Class A,
Class B and Class C Certificates to zero, to the Class D Certificates, in
reduction of its Certificate Balance, an amount equal to the Principal
Distribution Amount (or the portion of it remaining after distributions on the
Class A, Class B and Class C Certificates on that Distribution Date), until the
Certificate Balance of that class is reduced to zero;
twelfth, to the Class D Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class D Certificates, but not
previously reimbursed, have been reimbursed in full;
thirteenth, to the Class E Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for that class;
fourteenth, following reduction of the Certificate Balances of the Class
A, Class B, Class C and Class D Certificates to zero, to the Class E
Certificates, in reduction of its Certificate Balance, an amount equal to the
Principal Distribution Amount (or the portion of it remaining after
distributions on the Class A, Class B, Class C and Class D Certificates on that
Distribution Date), until the Certificate Balance of that class is reduced to
zero;
fifteenth, to the Class E Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class E Certificates, but not
previously reimbursed, have been reimbursed in full;
sixteenth, to the Class F Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for that class;
seventeenth, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D and Class E Certificates to zero, to the Class F
Certificates, in reduction of its Certificate Balance, an amount equal to the
Principal Distribution Amount (or the portion of it remaining after
distributions on the Class A, Class B, Class C, Class D and Class E
Certificates on that Distribution Date), until the Certificate Balance of that
class is reduced to zero;
eighteenth, to the Class F Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class F Certificates, but not
previously reimbursed, have been reimbursed in full;
nineteenth, to the Class G Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for that class;
twentieth, following reduction of the Certificate Balances of the Class A,
Class B, Class C, Class D, Class E and Class F Certificates to zero, to the
Class G Certificates, in reduction of its Certificate Balance, an amount equal
to the Principal Distribution Amount (or the portion of it remaining after
distributions on the Class A, Class B, Class C, Class D, Class E and Class F
Certificates on that Distribution Date), until the Certificate Balance of that
class is reduced to zero;
twenty-first, to the Class G Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class G Certificates, but not
previously reimbursed, have been reimbursed in full;
twenty-second, to the Class H Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount for that class;
twenty-third, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D, Class E, Class F and Class G Certificates to
zero, to the Class H Certificates, in reduction of its Certificate Balance, an
amount equal to the Principal Distribution Amount (or the portion of it
remaining after distributions on the Class A, Class B, Class C, Class D, Class
E, Class F and Class G Certificates on that Distribution Date), until the
Certificate Balance of that class is reduced to zero;
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twenty-fourth, to the Class H Certificates, until all amounts of
Collateral Support Deficit previously allocated to the Class H Certificates,
but not previously reimbursed, have been reimbursed in full;
twenty-fifth, to the Class I Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount for that class;
twenty-sixth, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D, Class E, Class F, Class G and Class H
Certificates to zero, to the Class I Certificates, in reduction of its
Certificate Balance, an amount equal to the Principal Distribution Amount (or
the portion of it remaining after distributions on the Class A, Class B, Class
C, Class D, Class E, Class F, Class G and Class H Certificates on that
Distribution Date), until the Certificate Balance of that class is reduced to
zero;
twenty-seventh, to the Class I Certificates, until all amounts of
Collateral Support Deficit previously allocated to the Class I Certificates,
but not previously reimbursed, have been reimbursed in full;
twenty-eighth, to the Class J Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount for that class;
twenty-ninth, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D, Class E, Class F, Class G, Class H and Class I
Certificates to zero, to the Class J Certificates, in reduction of its
Certificate Balance, an amount equal to the Principal Distribution Amount (or
the portion of it remaining after distributions on the Class A, Class B, Class
C, Class D, Class E, Class F, Class G, Class H and Class I Certificates on that
Distribution Date), until the Certificate Balance of that class is reduced to
zero;
thirtieth, to the Class J Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class J Certificates, but not
previously reimbursed, have been reimbursed in full;
thirty-first, to the Class K Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount for that class;
thirty-second, following reduction of the Certificate Balances of the
Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class I
and Class J Certificates to zero, to the Class K Certificates, in reduction of
its Certificate Balance, an amount equal to the Principal Distribution Amount
(or the portion of it remaining after distributions on the Class A, Class B,
Class C, Class D, Class E, Class F, Class G, Class H, Class I and Class J
Certificates on that Distribution Date), until the Certificate Balance of that
class is reduced to zero;
thirty-third, to the Class K Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class K Certificates, but not
previously reimbursed, have been reimbursed in full;
thirty-fourth, to the Class L Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount for that class;
thirty-fifth, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class I,
Class J and Class K Certificates to zero, to the Class L Certificates, in
reduction of its Certificate Balance, an amount equal to the Principal
Distribution Amount (or the portion of it remaining after distributions on the
Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class
I, Class J and Class K Certificates on that Distribution Date), until the
Certificate Balance of that class is reduced to zero;
thirty-sixth, to the Class L Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class L Certificates, but not
previously reimbursed, have been reimbursed in full;
thirty-seventh, to the Class M Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount for that class;
thirty-eighth, following reduction of the Certificate Balances of the
Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class
I, Class J, Class K and Class L Certificates to zero, to the Class M
Certificates, in reduction of its Certificate Balance, an amount equal to the
Principal Distribution Amount (or the portion of it remaining after
distributions on the Class A, Class B, Class C, Class D, Class E, Class F,
Class G, Class H, Class I, Class J, Class K and Class L Certificates on that
Distribution Date), until the Certificate Balance of that class is reduced to
zero;
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thirty-ninth, to the Class M Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class M Certificates, but not
previously reimbursed, have been reimbursed in full; and
fortieth, to the Class R and Class LR Certificates, the amount, if any, of
the Available Distribution Amount remaining in the Upper-Tier Distribution
Account and the Lower-Tier Distribution Account, respectively, with respect to
that Distribution Date.
Reimbursement of previously allocated Collateral Support Deficit will not
constitute distributions of principal for any purpose and will not result in an
additional reduction in the Certificate Balance of the class of Certificates in
respect of which a reimbursement is made.
Notwithstanding the distribution priority second set forth above, on and
after the Distribution Date on which the Certificate Balances of the
Subordinate Certificates have all been reduced to zero (that date, the
"Cross-Over Date"), the Principal Distribution Amount will be distributed, pro
rata (based upon their respective Certificate Balances), among the classes of
Class A Certificates without regard to the priorities set forth above.
Pass-Through Rates. The interest rate (the "Pass-through Rate") applicable
to each class of Certificates (other than the Class S and Residual
Certificates) for any Distribution Date will equal the rates set forth below.
The Pass-through Rate on the Class A-1 Certificates is a per annum rate
equal to %.
The Pass-through Rate on the Class A-2 Certificates is a per annum rate
equal to %.
The Pass-through Rate on the Class B Certificates is a per annum rate
equal to %.
The Pass-through Rate on the Class C Certificates is a per annum rate
equal to %, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate on the Class D Certificates is a per annum rate
equal to %, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate on the Class E Certificates is a per annum rate
equal to %, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate on the Class F Certificates is a per annum rate
equal to the WAC Rate less % per annum.
The Pass-through Rate on the Class G Certificates is a per annum rate
equal to %, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate on the Class H Certificates is a per annum rate
equal to %, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate on the Class I Certificates is a per annum rate
equal to %, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate on the Class J Certificates is a per annum rate
equal to %, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate on the Class K Certificates is a per annum rate
equal to %, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate on the Class L Certificates is a per annum rate
equal to %, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate on the Class M Certificates is a per annum rate
equal to %, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate for the Class X Certificates for any Distribution
Date will equal the excess, if any, of (a) the WAC Rate for the related
Distribution Date, over (b) the weighted average of the Pass-through Rates on
all of the other Certificates (other than the Class S and Residual
Certificates) weighted on the basis of their respective Certificate Balances
immediately prior to that Distribution Date.
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The Class S Certificates will not have a Pass-through Rate or be entitled
to distributions in respect of interest other than Excess Interest.
The Pass-through Rate on each class of Offered Certificates for the first
Distribution Date is expected to be as set forth on page S-6 of this prospectus
supplement.
The "WAC Rate" with respect to any Distribution Date is equal to the
weighted average of the applicable Net Mortgage Rates for the mortgage loans
weighted on the basis of their respective Stated Principal Balances as of the
preceding Distribution Date (after giving effect to the distribution of
principal on the related Distribution Date) or, in the case of the first
Distribution Date, the cut-off date.
The "Net Mortgage Rate" for each mortgage loan is equal to the related
Mortgage Rate in effect from time to time less the related Administrative Cost
Rate; provided, however, that for purposes of calculating Pass-through Rates,
the Net Mortgage Rate for any mortgage loan will be determined without regard
to any modification, waiver or amendment of the terms of the mortgage loan,
whether agreed to by the Master Servicer or resulting from a bankruptcy,
insolvency or similar proceeding involving the related borrower.
"Administrative Cost Rate" as of any date of determination will be equal
to the sum of the Servicing Fee Rate and the Trustee Fee Rate.
The "Mortgage Rate" with respect to any mortgage loan is the per annum
rate at which interest accrues on the mortgage loan as stated in the related
Mortgage Note in each case without giving effect to any default rate or an
increased interest rate. 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 with
respect to each Withheld Loan, 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, and (2) prior to the due
date in March, will be the per annum rate stated in the related Mortgage Note.
"Excess Interest" with respect to the APD Loans is the interest accrued at
an increased interest rate in respect of each APD Loan in excess of the
interest accrued at the initial interest rate, plus any related interest, to
the extent permitted by applicable law.
A "Prepayment Interest Shortfall" with respect to any Mortgage Loan that
was subject to a principal prepayment in full or in part and which did not
include a full month's interest, or as to which insurance or condemnation
proceeds were received by the Master Servicer, the amount of interest that
would have accrued at the Net Mortgage Rate for such Mortgage Loan on the
amount of such principal prepayment, insurance proceeds or condemnation
proceeds during the period commencing on the date as of which such amounts were
applied to the unpaid balance of such Mortgage Loan and ending on the day
preceding the next Due Date.
Interest Distribution Amount. Interest will accrue for each class of
Certificates (other than the Class S and Residual Certificates) during the
related Interest Accrual Period. The "Interest Distribution Amount" of any
class of Certificates (other than the Class S and Residual Certificates) for
any Distribution Date is an amount equal to all Distributable Certificate
Interest in respect of that class for that Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates.
The "Distributable Certificate Interest" in respect of each class of
Certificates (other than Class S and the Residual Certificates) for each
Distribution Date is equal to one month's interest at the Pass-through Rate
applicable to that class of Certificates for that Distribution Date accrued for
the related Interest Accrual Period on the related Certificate Balance or
Notional Amount, as the case may be, outstanding immediately prior to that
Distribution Date.
Shortfalls in the Available Distribution Amount resulting from Uncovered
Prepayment Interest Shortfalls will generally be allocated to all classes of
Certificates (other than the Class X, Class S and Residual Certificates). In
each case, such allocations will be made pro rata to such classes on the basis
of their Interest Distribution Amount and will reduce such classes' respective
interest entitlements.
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An "Uncovered Prepayment Interest Shortfall" is any Prepayment Interest
Shortfall in excess of the first 0.025% of the Servicing Fee attributable to
such Mortgage Loan (other than any prepayment in respect of a Specially
Serviced Mortgage Loan, a prepayment due to insurance or condemnation proceeds,
a prepayment subsequent to a default or a prepayment accepted with the consent
of the Directing Certificateholder) due to the Master Servicer for the Due
Period in which a prepayment was accepted by the Master Servicer which
contravenes the terms of such mortgage loan to the following Determination
Date.
Principal Distribution Amount. The "Principal Distribution Amount" for any
Distribution Date is an amount equal to the sum of (a) the Principal Shortfall
for that Distribution Date, (b) the Scheduled Principal Distribution Amount for
that Distribution Date and (c) the Unscheduled Principal Distribution Amount
for that Distribution Date.
The "Scheduled Principal Distribution Amount" for each Distribution Date
will equal the aggregate of the principal portions of (a) all Periodic Payments
(excluding balloon payments and Excess Interest) due during or, if and to the
extent not previously received or advanced and distributed to
Certificateholders on a preceding Distribution Date, prior to the related Due
Period and all Assumed Scheduled Payments for the related Due Period, in each
case to the extent paid by the related borrower as of the business day
preceding the related Servicer Remittance Date or advanced by the Master
Servicer, the Trustee or the Fiscal Agent, as applicable, and (b) all balloon
payments to the extent received during the related Due Period or any applicable
grace period, and to the extent not included in clause (a) above. The Scheduled
Principal Distribution Amount from time to time will include all late payments
of principal made by a borrower, including late payments in respect of a
delinquent balloon payment, regardless of the timing of those late payments,
except to the extent those late payments are otherwise reimbursable to the
Master Servicer, the Special Servicer, the Trustee or the Fiscal Agent, as the
case may be, for prior Advances.
The "Unscheduled Principal Distribution Amount" for each Distribution Date
will equal the aggregate of (a) all voluntary prepayments of principal received
on the mortgage loans during the related Due Period; and (b) any other
collections (exclusive of payments by borrowers) received on the mortgage loans
and any REO Properties during the related Due Period, whether in the form of
Liquidation Proceeds, Insurance and Condemnation Proceeds, net income, rents,
and profits from REO Property or otherwise, that were identified and applied by
the Master Servicer as recoveries of previously unadvanced principal of the
related mortgage loan.
The "Assumed Scheduled Payment" for any Due Period and with respect to any
mortgage loan that is delinquent in respect of its balloon payment (including
any REO Loan as to which the balloon payment would have been past due), is an
amount equal to the sum of (a) the principal portion of the Periodic Payment
that would have been due on that mortgage loan on the related due date based on
the constant payment required by the related Mortgage Note or the original
amortization schedule of the mortgage loan (as calculated with interest at the
related Mortgage Rate), if applicable, assuming the related balloon payment has
not become due, after giving effect to any modification, and (b) interest on
the Stated Principal Balance of that mortgage loan at its Mortgage Rate (net of
the applicable rate at which the Servicing Fee is calculated).
For purposes of the foregoing definition of Principal Distribution Amount,
the term "Principal Shortfall" for any Distribution Date means the amount, if
any, by which (1) the Principal Distribution Amount for the prior Distribution
Date, exceeds (2) the aggregate amount distributed in respect of principal on
the Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class H,
Class I, Class J, Class K, Class L and Class M Certificates on the preceding
Distribution Date. There will be no Principal Shortfall on the first
Distribution Date.
Certain Calculations with Respect to Individual Mortgage Loans. The Stated
Principal Balance of each mortgage loan outstanding at any time represents the
principal balance of the mortgage loan ultimately due and payable to the
Certificateholders. The "Stated Principal Balance" of each mortgage loan will
initially equal its Cut-off Date Balance and, on each Distribution Date, will
be reduced by the portion of the Principal Distribution Amount for that date
that is attributable to that mortgage loan, including the principal portion of
any P&I Advances. The Stated Principal Balance of a mortgage loan may also be
reduced in connection with any forced reduction of its actual unpaid principal
balance imposed by a court presiding over a
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bankruptcy proceeding in which the related borrower is the debtor or by
modification of the mortgage loans. See "Certain Legal Aspects of Mortgage
Loans--Bankruptcy Laws" in the prospectus. If any mortgage loan is paid in full
or the mortgage loan (or any Mortgaged Property acquired in respect of the
mortgage loan) is otherwise liquidated, then, as of the first Distribution Date
that follows the end of the Due Period in which that payment in full or
liquidation occurred and notwithstanding that a loss may have occurred in
connection with any liquidation, the Stated Principal Balance of the mortgage
loan will be zero.
For purposes of calculating distributions on, and allocations of
Collateral Support Deficit to, the Certificates, as well as for purposes of
calculating the Servicing Fee and Trustee Fee payable each month, each REO
Property will be treated as if there exists with respect thereto an outstanding
mortgage loan (an "REO Loan"), and all references to mortgage loan, mortgage
loans and pool of mortgage loans in this prospectus supplement and in the
prospectus, when used in that context, will be deemed to also be references to
or to also include, as the case may be, any REO Loans. Each REO Loan will
generally be deemed to have the same characteristics as its actual predecessor
mortgage loan, including the same fixed Mortgage Rate (and, accordingly, the
same Net Mortgage Rate) and the same unpaid principal balance and Stated
Principal Balance. Amounts due on the predecessor mortgage loan, including any
portion of it payable or reimbursable to the Master Servicer, will continue to
be "due" in respect of the REO Loan; and amounts received in respect of the
related REO Property, net of payments to be made, or reimbursement to the
Master Servicer or the Special Servicer for payments previously advanced, in
connection with the operation and management of that property, generally will
be applied by the Master Servicer as if received on the predecessor mortgage
loan.
Excess Interest. On each Distribution Date, the Paying Agent is required
to distribute from the Excess Interest Distribution Account any Excess Interest
received with respect to mortgage loans during the related Due Period to the
Class S Certificates.
ALLOCATION OF YIELD MAINTENANCE CHARGES AND PENALTY CHARGES
On any Distribution Date, Yield Maintenance Charges collected during the
related Due Period will be required to be distributed by the Paying Agent to
the holders of the Class A through Class F Certificates in the following
manner: The holders of the Class A through Class F Certificates will receive
the product of (a) a fraction whose numerator is the amount of principal
distributed to such Class on such Distribution Date and whose denominator is
the total amount of principal distributed to all of the Certificates on such
Distribution Date, (b) the Base Interest Fraction for the related principal
prepayment and such Class of Certificates and (c) the Yield Maintenance Charges
collected on such principal prepayment during the related Due Period. Any Yield
Maintenance Charges collected during the related Due Period remaining after
such distributions shall be distributed to the holders of the Class X
Certificates. No Yield Maintenance Charges will be distributed to holders of
any other Class of Certificates. All Penalty Charges will be distributed to the
holders of the Class X Certificates.
The "Base Interest Fraction" for any principal prepayment on any mortgage
loan and for any of the Class A through Class F Certificates, will be a
fraction (not greater than 1) (a) whose numerator is the greater of zero and
the amount, if any, by which (i) the Pass-Through Rate on such Class of
Certificates exceeds (ii) the yield rate (as provided by the master servicer)
used in calculating the Yield Maintenance Charge with respect to such principal
prepayment and (b) whose denominator is the amount, if any, by which the (i)
Mortgage Rate on such mortgage loan exceeds (ii) the yield rate (as provided by
the Master Servicer) used in calculating the Yield Maintenance Charge with
respect to such principal prepayment; provided, however, that if such yield
rate is greater than or equal to the Mortgage Rate on such mortgage loan then
the Base Interest Fraction will be zero.
For a description of Yield Maintenance Charges, see "Description of the
Mortgage Pool--Certain Terms and Conditions of the Mortgage Loans--Prepayment
Provisions" in this prospectus supplement. See also "Risk Factors--Risks
Relating to Enforceability of Yield Maintenance Charges" in this prospectus
supplement and "Certain Legal Aspects of Mortgage Loans--Default Interest and
Limitations on Prepayments" in the prospectus regarding the enforceability of
yield maintenance charges.
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ASSUMED FINAL DISTRIBUTION DATE; RATED FINAL DISTRIBUTION DATE
The "Assumed Final Distribution Date" with respect to any class of Offered
Certificates is the Distribution Date on which the aggregate Certificate
Balance or Notional Amount, as the case may be, of that class of Certificates
would be reduced to zero based on the assumptions set forth below. The Assumed
Final Distribution Date will in each case be as follows:
ASSUMED FINAL
CLASS DESIGNATIONS DISTRIBUTION DATE
- ------------------ ------------------
Class A-1 ................................ October 15, 2010
Class A-2 ................................ March 15, 2011
Class B .................................. April 15, 2011
Class C .................................. April 15, 2011
Class D .................................. April 15, 2011
THE ASSUMED FINAL DISTRIBUTION DATES SET FORTH ABOVE WERE CALCULATED
WITHOUT REGARD TO ANY DELAYS IN THE COLLECTION OF BALLOON PAYMENTS AND WITHOUT
REGARD TO A REASONABLE LIQUIDATION TIME WITH RESPECT TO ANY MORTGAGE LOANS THAT
MAY BECOME DELINQUENT. ACCORDINGLY, IN THE EVENT OF DEFAULTS ON THE MORTGAGE
LOANS, THE ACTUAL FINAL DISTRIBUTION DATE FOR ONE OR MORE CLASSES OF THE
OFFERED CERTIFICATES MAY BE LATER, AND COULD BE SUBSTANTIALLY LATER, THAN THE
RELATED ASSUMED FINAL DISTRIBUTION DATE(S).
In addition, the Assumed Final Distribution Dates set forth above were
calculated on the basis of a 0% CPR and assuming the APD Loans are prepaid in
full on their respective Anticipated Prepayment Dates. Since the rate of
payment (including prepayments) of the mortgage loans may exceed the scheduled
rate of payments, and could exceed the scheduled rate by a substantial amount,
the actual final Distribution Date for one or more classes of the Offered
Certificates may be earlier, and could be substantially earlier, than the
related Assumed Final Distribution Date(s). The rate of payments (including
prepayments) on the mortgage loans will depend on the characteristics of the
mortgage loans, as well as on the prevailing level of interest rates and other
economic factors, and we cannot assure you as to actual payment experience.
Finally, the Assumed Final Distribution Dates were calculated assuming that
there would not be an early termination of the trust fund.
The "Rated Final Distribution Date" for each class of Offered Certificates
will be the Distribution Date in May 2033, the first Distribution Date after
the 24th month following the end of the stated amortization term for the
mortgage loan that, as of the cut-off date, will have the longest remaining
amortization term.
SUBORDINATION; ALLOCATION OF COLLATERAL SUPPORT DEFICIT
The rights of holders of the Subordinate Certificates to receive
distributions of amounts collected or advanced on the mortgage loans will be
subordinated, to the extent described in this prospectus supplement, to the
rights of holders of the Senior Certificates. Moreover, to the extent described
in this prospectus supplement:
o the rights of the holders of the Class M Certificates will be
subordinated to the rights of the holders of the Class L Certificates,
o the rights of the holders of the Class L and Class M Certificates will
be subordinated to the rights of the holders of the Class K
Certificates,
o the rights of the holders of the Class K, Class L and Class M
Certificates will be subordinated to the rights of the holders of the
Class J Certificates,
o the rights of the holders of the Class J, Class K, Class L and Class M
Certificates will be subordinated to the rights of the holders of the
Class I Certificates,
o the rights of the holders of the Class I, Class J, Class K, Class L and
Class M Certificates will be subordinated to the rights of the holders
of the Class H Certificates,
S-96
o the rights of the holders of the Class H, Class I, Class J, Class K,
Class L and Class M Certificates will be subordinated to the rights of
the holders of the Class G Certificates,
o the rights of the holders of the Class G, Class H, Class I, Class J,
Class K, Class L and Class M Certificates will be subordinated to the
rights of the holders of the Class F Certificates,
o the rights of the holders of the Class F, Class G, Class H, Class I,
Class J, Class K, Class L and Class M Certificates will be subordinated
to the rights of the holders of the Class E Certificates,
o the rights of the holders of the Class E, Class F, Class G, Class H,
Class I, Class J, Class K, Class L and Class M Certificates will be
subordinated to the rights of the holders of the Class D Certificates,
o the rights of the holders of the Class D, Class E, Class F, Class G,
Class H, Class I, Class J, Class K, Class L and Class M Certificates
will be subordinated to the rights of the holders of the Class C
Certificates,
o the rights of the holders of the Class C, Class D, Class E, Class F,
Class G, Class H, Class I, Class J, Class K, Class L and Class M
Certificates will be subordinated to the rights of the holders of the
Class B Certificates, and
o the rights of the holders of the Class B, Class C, Class D, Class E,
Class F, Class G, Class H, Class I, Class J, Class K, Class L and Class
M Certificates will be subordinated to the rights of the holders of the
Senior Certificates.
This subordination is intended to enhance the likelihood of timely receipt
by the holders of the Senior Certificates of the full amount of all interest
payable in respect of the Senior Certificates on each Distribution Date, and
the ultimate receipt by the holders of the Class A Certificates of principal in
an amount equal to, in each case, the entire Certificate Balance of the Class A
Certificates. Similarly, but to decreasing degrees, this subordination is also
intended to enhance the likelihood of timely receipt by the holders of the
Class B Certificates, the holders of the Class C Certificates and the holders
of the Class D Certificates of the full amount of interest payable in respect
of those classes of Certificates on each Distribution Date, and the ultimate
receipt by the holders of the Class B Certificates, the holders of the Class C
Certificates and the holders of the Class D Certificates of principal equal to,
in each case, the entire Certificate Balance of each of those classes of
Certificates.
The protection afforded to the holders of the Class D Certificates by
means of the subordination of the Non-Offered Certificates that are Subordinate
Certificates (the "Non-Offered Subordinate Certificates"), to the holders of
the Class C Certificates by means of the subordination of the Class D
Certificates and the Non-Offered Subordinate Certificates, to the holders of
the Class B Certificates by means of the subordination of the Class C and Class
D Certificates and the Non-Offered Subordinate Certificates and to the holders
of the Senior Certificates by means of the subordination of the Subordinate
Certificates, will be accomplished by the application of the Available
Distribution Amount on each Distribution Date in accordance with the order of
priority described under "--Distributions" above and by the allocation of
Collateral Support Deficits in the manner described below. No other form of
credit support will be available for the benefit of the holders of the Offered
Certificates.
Allocation to the Class A Certificates (unless the Cross-Over Date has
occurred, first to the Class A-1 Certificates until the Certificate Balance
thereof has been reduced to zero and then to the Class A-2 Certificates until
the Certificate Balance thereof has been reduced to zero), for so long as they
are outstanding, of the entire Principal Distribution Amount for each
Distribution Date will have the effect of reducing the aggregate Certificate
Balance of the Class A 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.
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Following retirement of the Class A Certificates, the successive
allocation on each Distribution Date of the remaining Principal Distribution
Amount to the Class B Certificates, the Class C Certificates and the Class D
Certificates, in that order, in each case for so long as they are outstanding,
will provide a similar benefit to each of those classes of Certificates as to
the relative amount of subordination afforded by the outstanding classes of
Certificates (other than the Class X, Class S and the Residual Certificates)
with later alphabetical Class designations.
On each Distribution Date, immediately following the distributions to be
made to the Certificateholders on that date, the Paying Agent is required to
calculate the amount, if any, by which (1) the aggregate Stated Principal
Balance of the mortgage loans expected to be outstanding immediately following
that Distribution Date is less than (2) the aggregate Certificate Balance of
the Certificates after giving effect to distributions of principal on that
Distribution Date (any deficit, "Collateral Support Deficit"). The Paying Agent
will be required to allocate any Collateral Support Deficit among the
respective classes of Certificates as follows: to the Class M, Class L, Class
K, Class J, Class I, Class H, Class G, Class F, Class E, Class D, Class C and
Class B Certificates in that order, and in each case in respect of and until
the remaining Certificate Balance of that class has been reduced to zero.
Following the reduction of the Certificate Balances of all classes of
Subordinate Certificates to zero, the Paying Agent will be required to allocate
the Collateral Support Deficit between the classes of Class A Certificates, pro
rata (based upon their respective Certificate Balances), until the remaining
Certificate Balances of the Class A Certificates have been reduced to zero. Any
Collateral Support Deficit allocated to a class of Certificates will be
allocated among respective Certificates of the class in proportion to the
Percentage Interests evidenced by those Certificates.
In general, Collateral Support Deficits could result from the occurrence
of: (1) losses and other shortfalls on or in respect of the mortgage loans,
including as a result of defaults and delinquencies on the mortgage loans,
Nonrecoverable Advances made in respect of the mortgage loans, the payment to
the Special Servicer of any compensation as described in "Servicing of the
Mortgage Loans--Servicing and Other Compensation and Payment of Expenses" in
this prospectus supplement, and the payment of interest on Advances and certain
servicing expenses; and (2) certain unanticipated, non-mortgage loan specific
expenses of the trust fund, including certain reimbursements to the Trustee as
described under "Description of the Pooling Agreements--Certain Matters
Regarding the Trustee" in the prospectus, certain reimbursements to the Master
Servicer and the Depositor as described under "Description of the Pooling
Agreements--Certain Matters Regarding the Master Servicer and the Depositor" in
the prospectus, and certain federal, state and local taxes, and certain
tax-related expenses, payable out of the trust fund as described under "Certain
Federal Income Tax Consequences--Federal Income Tax Consequences for REMIC
Certificates--Taxes That May Be Imposed on the REMIC Pool" in the prospectus.
Accordingly, the allocation of Collateral Support Deficits as described above
will constitute an allocation of losses and other shortfalls experienced by the
trust fund.
A class of Offered Certificates will be considered outstanding until its
Certificate Balance or Notional Amount, as the case may be, is reduced to zero.
However, reimbursement of any previously allocated Collateral Support Deficit
is required thereafter to be made to that class in accordance with the payment
priorities set forth in "--Distributions--Priority" above.
ADVANCES
On the business day immediately preceding each Distribution Date (the
"Servicer Remittance Date"), the Master Servicer will be obligated, subject to
the recoverability determination described below, to make advances (each, a
"P&I Advance") out of its own funds or, subject to the replacement of those
funds as provided in the Pooling and Servicing Agreement, certain funds held in
the Certificate Account that are not required to be part of the Available
Distribution Amount for that Distribution Date, in an amount equal to (but
subject to reduction as described in the following paragraph) the aggregate of:
(1) all Periodic Payments (net of any applicable Servicing Fees), other than
balloon payments, which were due on the mortgage loans during the related Due
Period and delinquent (or not advanced by any sub-servicer) as of the business
day preceding the related Servicer Remittance Date; and (2) in the case of each
mortgage loan delinquent in respect of its balloon payment as of the end of the
related Due Period (including any applicable grace period and including any REO
Loan as to which the balloon payment would have been past
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due), an amount equal to its Assumed Scheduled Payment. The Master Servicer's
obligations to make P&I Advances in respect of any mortgage loan or REO
Property will continue through liquidation of the mortgage loan or disposition
of the REO Property, as the case may be. To the extent that the Master Servicer
fails to make a P&I Advance that it is required to make under the Pooling and
Servicing Agreement, the Trustee will make the required P&I Advance in
accordance with the terms of the Pooling and Servicing Agreement. To the extent
that the Trustee fails to make a P&I Advance that it is required to make under
the Pooling and Servicing Agreement, the Fiscal Agent will make the required
P&I Advance in accordance with the terms of the Pooling and Servicing
Agreement.
The amount required to be advanced in respect of delinquent Periodic
Payments or Assumed Scheduled Payments on a mortgage loan with respect to any
Distribution Date that has been subject to an Appraisal Reduction Event will
equal the amount that would be required to be advanced by the Master Servicer
without giving effect to the Appraisal Reduction less any Appraisal Reduction
Amount with respect to the mortgage loan for that Distribution Date. None of
the Master Servicer, the Trustee or the Fiscal Agent will be required to make a
P&I Advance for default interest, yield maintenance charges or Excess Interest.
In addition to P&I Advances, the Master Servicer or, on an emergency
basis, the Special Servicer, will be obligated (subject to the limitations
described in this prospectus supplement) to make advances ("Servicing Advances"
and, collectively with P&I Advances, "Advances") in connection with the
servicing and administration of any mortgage loan in respect of which a
default, delinquency or other unanticipated event has occurred or is reasonably
foreseeable or in connection with the servicing and administration of any
Mortgaged Property or REO Property, to pay delinquent real estate taxes,
assessments and hazard insurance premiums and to cover other similar costs and
expenses necessary to preserve the priority of or enforce the related mortgage
loan documents or to protect, lease, manage and maintain the related Mortgaged
Property. To the extent that the Master Servicer fails to make a Servicing
Advance that it is required to make under the Pooling and Servicing Agreement
and the Trustee has notice of this failure, the Trustee will make the required
Servicing Advance in accordance with the terms of the Pooling and Servicing
Agreement. To the extent that the Trustee fails to make a Servicing Advance
that it is required to make under the Pooling and Servicing Agreement, the
Fiscal Agent will make the required Servicing Advance in accordance with the
terms of the Pooling and Servicing Agreement.
The Master Servicer, the Special Servicer, the Trustee or the Fiscal
Agent, as applicable, will be entitled to recover (after payment of any
outstanding Special Servicing Fees due) any Advance made out of its own funds
from any amounts collected in respect of the mortgage loan as to which that
Advance was made, whether in the form of late payments, Insurance and
Condemnation Proceeds, Liquidation Proceeds or otherwise from the mortgage loan
("Related Proceeds"). Notwithstanding the foregoing, none of the Master
Servicer, the Special Servicer, the Trustee nor the Fiscal Agent will be
obligated to make any Advance that it determines in its reasonable judgment
would, if made, not be recoverable (including interest on the Advance) out of
Related Proceeds (a "Nonrecoverable Advance"), and the Master Servicer, the
Special Servicer, the Trustee or the Fiscal Agent will be entitled to recover
any Advance that it so determines to be a Nonrecoverable Advance out of general
funds on deposit in the Certificate Account. The Trustee and the Fiscal Agent
will be entitled to rely conclusively on any non-recoverability determination
of the Master Servicer. Nonrecoverable Advances will represent a portion of the
losses to be borne by the Certificateholders. See "Description of the
Certificates--Advances in Respect of Delinquencies" and "Description of the
Pooling Agreements--Certificate Account" in the prospectus.
In connection with its recovery of any Advance, each of the Master
Servicer, the Special Servicer, the Trustee and the Fiscal Agent will be
entitled to be paid, out of any amounts then on deposit in the Certificate
Account, interest at the Prime Rate (the "Reimbursement Rate") accrued on the
amount of the Advance from the date made to but not including the date of
reimbursement, compounded monthly; provided, however, that with respect to any
P&I Advance paid prior to the expiration of the related grace period, interest
will accrue only from and after the expiration of such grace period. The "Prime
Rate" will be the prime rate, for any day, set forth in The Wall Street
Journal, New York edition.
Each Statement to Certificateholders furnished or made available by the
Paying Agent to the Certificateholders will contain information relating to the
amounts of Advances made with respect to the related Distribution Date. See
"Description of the Certificates--Reports to Certificateholders; Certain
Available Information" in this prospectus supplement and "Description of the
Certificates--Reports to Certificateholders" in the prospectus.
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APPRAISAL REDUCTIONS
After an Appraisal Reduction Event has occurred, an Appraisal Reduction is
required to be calculated. An "Appraisal Reduction Event" will occur on the
earliest of:
(1) the third anniversary of the date on which an extension of the
maturity date of a mortgage loan becomes effective as a result of a
modification of the related mortgage loan by the Special Servicer, which
extension does not change the amount of Periodic Payments on the mortgage
loan;
(2)120 days after an uncured delinquency (without regard to the
application of any grace period) occurs in respect of a mortgage loan;
(3) the date on which a reduction in the amount of Periodic Payments
on a mortgage loan, or a change in any other material economic term of the
mortgage loan (other than an extension of its maturity), becomes effective
as a result of a modification of the related mortgage loan by the Special
Servicer;
(4) a certain period after the Special Servicer receives notice that a
receiver or similar official has been appointed with respect to the related
Mortgaged Property;
(5) a certain period after the Special Servicer receives notice that a
borrower has declared bankruptcy;
(6) 60 days after the date on which an involuntary petition of
bankruptcy is filed with respect to the borrower;
(7) 30 days after an uncured delinquency occurs in respect of a
balloon payment for a mortgage loan if the borrower has not delivered to
the Master Servicer on the related maturity date a written refinancing
commitment reasonably satisfactory in form and substance to the Master
Servicer which provides that such refinancing will occur within 60 days;
and
(8) immediately after a mortgage loan becomes an REO Loan.
No Appraisal Reduction Event may occur at any time when the aggregate
Certificate Balance of all classes of Certificates (other than the Class A
Certificates) has been reduced to zero.
Within 90 days after the Appraisal Reduction Event, the Special Servicer
will be required to use reasonable efforts to order and receive an appraisal or
valuation; provided, however, that with respect to an Appraisal Reduction Event
described in clause (2) above, the Special Servicer will be required to use
reasonable efforts to order and receive an appraisal or valuation within the
120-day period set forth in such clause (2). On the first Determination Date
occurring on or after the delivery of the MAI appraisal, the Special Servicer
will be required to calculate and report to the Master Servicer and the Master
Servicer will be required to report to the Paying Agent, the Appraisal
Reduction to take into account the appraisal. In the event that the Special
Servicer has not received the MAI appraisal or conducted the valuation within
the timeframe described above (or, in the case of an appraisal in connection
with an Appraisal Reduction Event described in clause (2), within the 120-day
period set forth in clause (2)), the amount of the Appraisal Reduction will be
deemed to be an amount equal to 25% of the current Stated Principal Balance of
the related mortgage loan until the MAI appraisal is received. The
"Determination Date" for each Distribution Date is the earlier of (i) 11th day
of the month in which the Distribution Date occurs or, if such 11th day is not
a business day, then the next immediately preceding business day and (ii) the
4th business day prior to the related Distribution Date.
The "Appraisal Reduction" for any Distribution Date and for any mortgage
loan as to which any Appraisal Reduction Event has occurred will be an amount
calculated by the Special Servicer as of the first Determination Date following
the date the Special Servicer receives or performs such appraisal equal to the
excess of (a) the outstanding Stated Principal Balance of that mortgage loan
over (b) the excess of (i) the sum of (A) 90% of the appraised value of the
related Mortgaged Property as determined (1) by one or more independent
Appraisal Institute ("MAI") appraisals with respect to any mortgage loan with
an outstanding principal balance equal to or in excess of the lesser of (x)
$2,000,000 or (y) 2% of the aggregate Stated Principal Balance of the mortgage
loans (the costs of which will be paid by the Master Servicer as a
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Servicing Advance), or (2) by an internal valuation performed by the Special
Servicer (unless the Directing Certificateholder objects, in which case by an
Appraisal) with respect to any mortgage loan with an outstanding principal
balance less than the lesser of (x) $2,000,000 or (y) 2% of the aggregate
Stated Principal Balance of the mortgage loans, and (B) all escrows, letters of
credit and reserves in respect of such mortgage loan as of the date of
calculation over (ii) the sum as of the due date occurring in the month of that
Distribution Date of (A) to the extent not previously advanced by the Master
Servicer, the Trustee or the Fiscal Agent, all unpaid interest on that mortgage
loan at a per annum rate equal to the Mortgage Rate, (B) all unreimbursed
Advances and interest on those Advances at the Reimbursement Rate in respect of
that mortgage loan, (C) all unpaid Servicing Fees (to the extent not
duplicative of clause (A)) and Special Servicing Fees and (D) all currently due
and unpaid real estate taxes and assessments, insurance premiums and ground
rents and all other amounts due and unpaid under the mortgage loan (which tax,
premiums, ground rents and other amounts have not been the subject of an
Advance by the Master Servicer, the Special Servicer, the Trustee or the Fiscal
Agent, as applicable).
As a result of calculating one or more Appraisal Reductions, the amount of
any required P&I Advance will be reduced by an amount equal to the Appraisal
Reduction Amount, which will have the effect of reducing the amount of interest
available to the most subordinate class of Certificates then outstanding (i.e.,
first to the Class M Certificates, then to the Class L Certificates, then to
the Class K Certificates, then to the Class J Certificates, then to the Class I
Certificates, then to the Class H Certificates, then to the Class G
Certificates, then to the Class F Certificates, then to the Class E
Certificates, then to the Class D Certificates, then to the Class C
Certificates and then to the Class B Certificates). See "--Advances" above. The
"Appraisal Reduction Amount" for any Distribution Date will equal the product
of (1) the applicable per annum Pass-through Rate (i.e., for any month, one
twelfth of the Pass-through Rate) on the class of Certificates to which the
Appraisal Reduction is allocated, and (2) the sum of all Appraisal Reductions
with respect to the related Distribution Date. See "Servicing of the Mortgage
Loans--General" in this prospectus supplement.
With respect to each mortgage loan as to which an Appraisal Reduction has
occurred (unless the mortgage loan has remained current for three consecutive
Periodic Payments, and with respect to which no other Appraisal Reduction Event
has occurred with respect thereto during the preceding twelve months), the
Special Servicer is required, (1) within 30 days of each anniversary of the
related Appraisal Reduction Event, (2) at such time as the Special Servicer has
knowledge of a material change in the condition of the related Mortgaged
Property or (3) in the event the Special Servicer becomes aware of a material
defect in the Appraisal or valuation, to use reasonable efforts to order an
appraisal (which may be an update of a prior appraisal), the cost of which will
be paid by the Master Servicer as a Servicing Advance, or to conduct an
internal valuation, as applicable. Based upon the appraisal or valuation, the
Special Servicer is required to redetermine and report to the Paying Agent the
amount of the Appraisal Reduction with respect to the mortgage loan.
Notwithstanding the foregoing, the Special Servicer will not be required to
obtain an appraisal or valuation with respect to a mortgage loan which is the
subject of an Appraisal Reduction Event to the extent the Special Servicer has
obtained an appraisal or valuation with respect to the related Mortgaged
Property within the 12-month period prior to the occurrence of the Appraisal
Reduction Event. Instead, the Special Servicer may use the prior appraisal or
valuation in calculating any Appraisal Reduction with respect to the mortgage
loan, provided that the Special Servicer is not aware of any material change to
the Mortgaged Property that has occurred that would affect the validity of the
appraisal or valuation.
Any mortgage loan previously subject to an Appraisal Reduction which
becomes current and remains current for three consecutive Periodic Payments,
and with respect to which no other Appraisal Reduction Event has occurred and
is continuing, will no longer be subject to an Appraisal Reduction.
REPORTS TO CERTIFICATEHOLDERS; CERTAIN AVAILABLE INFORMATION
On each Distribution Date, the Paying Agent will be required to furnish or
make available to each holder of a Certificate, the Trustee, the Master
Servicer, the Underwriters, the Special Servicer, Morgan Guaranty, GECC, BSFI
and a financial market publisher (which is anticipated to initially be
Bloomberg, L.P.), if any, a statement (a "Statement to Certificateholders")
based upon information provided by the Master Servicer in accordance with
Commercial Mortgage Securities Association guidelines setting forth, among
other things:
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(1) the amount of the distribution on the Distribution Date to the
holders of the class of Certificates in reduction of the Certificate
Balance of the Certificates;
(2) the amount of the distribution on the Distribution Date to the
holders of the class of Certificates allocable to Distributable Certificate
Interest;
(3) the aggregate amount of Advances made in respect of the
Distribution Date;
(4) the aggregate amount of compensation paid to the Trustee and
servicing compensation paid to the Master Servicer and the Special Servicer
during the Due Period for the Distribution Date;
(5) the aggregate Stated Principal Balance of the mortgage loans and
any REO Loans outstanding immediately before and immediately after the
Distribution Date;
(6) the number, aggregate principal balance, weighted average
remaining term to maturity and weighted average mortgage rate of the
mortgage loans as of the end of the related Due Period for the Distribution
Date;
(7) the number and aggregate principal balance of mortgage loans (A)
delinquent 30-59 days, (B) delinquent 60-89 days, (C) delinquent 90 days or
more and (D) current but specially serviced or in foreclosure but not an
REO Property;
(8) the value of any REO Property included in the trust fund as of the
end of the related Due Period for the Distribution Date, on a loan-by-loan
basis, based on the most recent appraisal or valuation;
(9) the Available Distribution Amount for the Distribution Date;
(10) the amount of the distribution on the Distribution Date to the
holders of any Class of Certificates allocable to Yield Maintenance
Charges;
(11) the Pass-through Rate for the class of Certificates for the
Distribution Date and the next succeeding Distribution Date;
(12) the Scheduled Principal Distribution Amount and the Unscheduled
Principal Distribution Amount for the Distribution Date;
(13) the Certificate Balance or Notional Amount, as the case may be,
of each class of Certificates immediately before and immediately after the
Distribution Date, separately identifying any reduction in these amounts as
a result of the allocation of any Collateral Support Deficit on the
Distribution Date;
(14) the fraction, expressed as a decimal carried to eight places, the
numerator of which is the then related Certificate Balance, and the
denominator of which is the related initial aggregate Certificate Balance,
for each class of Certificates (other than the Class S and Residual
Certificates) immediately following the Distribution Date;
(15) the amount of any Appraisal Reductions effected in connection
with the Distribution Date on a loan-by-loan basis, the total Appraisal
Reduction effected in connection with the Distribution Date and the total
Appraisal Reduction Amounts as of that Distribution Date;
(16) the number and related principal balances of any mortgage loans
extended or modified during the related Due Period on a loan-by-loan basis;
(17) the amount of any remaining unpaid interest shortfalls for the
class as of the Distribution Date;
(18) a loan-by-loan listing of each mortgage loan which was the
subject of a principal prepayment during the related Due Period and the
amount and the type of principal prepayment occurring;
(19) a loan-by-loan listing of any mortgage loan which was defeased
during the related Due Period;
(20) all deposits into, withdrawals from, and the balance of the
Interest Reserve Account on the related Servicer Remittance Dates;
(21) the amount of the distribution on the Distribution Date to the
holders of each class of Certificates in reimbursement of Collateral
Support Deficit;
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(22) the aggregate unpaid principal balance of the pool of mortgage
loans outstanding as of the close of business on the related Determination
Date;
(23) with respect to any mortgage loan as to which a liquidation
occurred during the related due period (other than a payment in full), (A)
the loan number thereof, (B) the aggregate of all Liquidation Proceeds
which are included in the available distribution amount and other amounts
received in connection with the liquidation (separately identifying the
portion thereof allocable to distributions on the Certificates), and (C)
the amount of any realized loss in connection with the liquidation;
(24) with respect to any REO Property included in the trust as to
which the Special Servicer determined, in accordance with accepted
servicing standards, that all payments or recoveries with respect to the
Mortgaged Property have been ultimately recovered during the related Due
Period, (A) the loan number of the related mortgage loan, (B) the aggregate
of all Liquidation Proceeds and other amounts received in connection with
that determination (separately identifying the portion thereof allocable to
distributions on the Certificates), and (C) the amount of any realized loss
in respect of the related REO Loan in connection with that determination;
(25) the aggregate amount of interest on P&I Advances paid to the
Master Servicer, the Trustee and the Fiscal Agent during the related Due
Period;
(26) the aggregate amount of interest on Servicing Advances paid to
the Master Servicer, the Special Servicer, the Trustee and the Fiscal Agent
during the related Due Period;
(27) the original and then current credit support levels for each
class of Certificates;
(28) the original and then current ratings for each class of
Certificates; and
(29) the amount of the distribution on the Distribution Date to the
holders of the Class S and Residual Certificates.
The Paying Agent will make available the Statements to Certificateholders
through its corporate trust home page on the internet, which is located at
"www.chase.com/absmbs". In addition, the Paying Agent may make certain other
information and reports related to the mortgage loans available, to the extent
the Paying Agent receives such information, through its home page. Such reports
may include: (a) the Loan Setup File, (b) the Loan Periodic Update File; (c)
the Property File, (d) the Bond Level File, (e) the Financial File, and (f) the
Collateral Summary File.
In addition, to the extent not provided for above, the following reports
will be available to Certificateholders on the Distribution Date:
(a) Delinquent Loan Status Report,
(b) Historical Liquidation Report,
(c) Historical Loan Modification Report,
(d) REO Status Report,
(e) Servicer Watch List,
(f) Comparative Financial Status Report, and
(g) NOI Adjustment Worksheet.
Each report referred to above is expected to be in the form recommended by
the Commercial Mortgage Securities Association.
In the case of information furnished pursuant to clauses (1), (2), (17)
and (21) above, the amounts will be expressed as a dollar amount in the
aggregate for all Certificates of each applicable class and per definitive
certificate.
In addition, within a reasonable period of time after the end of each
calendar year, the Paying Agent is required to furnish to each person or entity
who at any time during the calendar year was a holder of a
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Certificate and, upon request, to the Trustee, a statement containing the
information set forth in clauses (1), (2) and (10) above as to the applicable
class, aggregated for the related calendar year or applicable partial year
during which that person was a Certificateholder, together with any other
information as the Paying Agent deems necessary or desirable, or that a
Certificateholder or Certificate Owner reasonably requests, to enable
Certificateholders to prepare their tax returns for that calendar year. This
obligation of the Paying Agent will be deemed to have been satisfied to the
extent that substantially comparable information will be provided by the Paying
Agent pursuant to any requirements of the Code as from time to time are in
force.
The Paying Agent will be required to provide a financial market publisher,
which is anticipated to initially be Bloomberg, L.P., quarterly with certain
current information with respect to the Mortgaged Properties, including current
and original net operating income, debt service coverage ratios based upon
borrowers' annual operating statements and occupancy rates, to the extent it
has received the information from the borrowers pursuant to the related loan
documents.
The Pooling and Servicing Agreement requires that the Paying Agent (or the
Trustee with respect to clause (6) only) make available at its offices
primarily responsible for administration of the trust fund, during normal
business hours upon prior written request, for review by any holder of an
Offered Certificate, the Mortgage Loan Sellers, the Depositor, the Special
Servicer, the Master Servicer, Moody's, Fitch or any other person to whom the
Paying Agent (or the Trustee, if applicable) believes the disclosure is
appropriate, originals or copies of, among other things, the following items to
the extent the Paying Agent or Trustee, as applicable, has received such items:
(1) the Pooling and Servicing Agreement and any amendments to that
agreement;
(2) all Statements to Certificateholders made available to holders of
the relevant class of Offered Certificates since the Closing Date;
(3) all officer's certificates delivered to the Paying Agent since the
Closing Date as described under "Description of the Pooling Agreements--
Evidence as to Compliance" in the prospectus;
(4) all accountants' reports delivered to the Paying Agent since the
Closing Date as described under "Description of the Pooling
Agreements--Evidence as to Compliance" in the prospectus;
(5) the most recent property inspection report prepared by or on
behalf of the Master Servicer or the Special Servicer and delivered to the
Paying Agent in respect of each Mortgaged Property;
(6) copies of the mortgage loan documents;
(7) any and all modifications, waivers and amendments of the terms of
a mortgage loan entered into by the Master Servicer or the Special Servicer
and delivered to the Paying Agent; and
(8) any and all statements and reports delivered to, or collected by,
the Master Servicer or the Special Servicer, from the borrowers, including
the most recent annual property operating statements, rent rolls and
borrower financial statements, but only to the extent the statements and
reports have been delivered to the Paying Agent.
Copies of any and all of the foregoing items will be available to
Certificateholders from the Paying Agent (or the Trustee with respect to clause
(6) only) upon request; however, the Paying Agent (or the Trustee, as
applicable) will be permitted to require payment of a sum sufficient to cover
the reasonable costs and expenses of providing the copies. Pursuant to the
Pooling and Servicing Agreement, the Master Servicer will be responsible for
enforcing all provisions of the mortgage loan documents relating to the
submission of financial and property information.
The Pooling and Servicing Agreement will require the Master Servicer and
the Paying Agent, subject to certain restrictions set forth in the Pooling and
Servicing Agreement, to provide certain of the reports or, in the case of the
Master Servicer, access to the reports available to Certificateholders set
forth above, as well as certain other information received by the Master
Servicer or the Paying Agent, as the case may be, to any Certificateholder, the
Underwriters, the Mortgage Loan Sellers, any Certificate Owner or any
prospective investor so identified by a Certificate Owner or an Underwriter,
that requests reports or information; provided that the Paying Agent and the
Master Servicer will be permitted to require payment of a sum
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sufficient to cover the reasonable costs and expenses of providing copies of
these reports or information. Except as otherwise set forth in this paragraph,
until the time definitive certificates are issued, notices and statements
required to be mailed to holders of Certificates will be available to
Certificate Owners of Offered Certificates only to the extent they are
forwarded by or otherwise available through DTC and its Participants.
Conveyance of notices and other communications by DTC to Participants, and by
Participants to Certificate Owners, will be governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time. Except as otherwise set forth in this paragraph, the Master
Servicer, the Special Servicer, the Trustee, the Depositor, the Paying Agent
and the Certificate Registrar are required to recognize as Certificateholders
only those persons in whose names the Certificates are registered on the books
and records of the Certificate Registrar. The initial registered holder of the
Offered Certificates will be Cede & Co., as nominee for DTC.
VOTING RIGHTS
At all times during the term of the Pooling and Servicing Agreement, the
voting rights for the Certificates (the "Voting Rights") will be allocated
among the respective classes of Certificateholders as follows: (1) 4% in the
case of the Class X Certificates, and (2) in the case of any other class of
Certificates (other than the Class S and Residual Certificates), a percentage
equal to the product of 96% and a fraction, the numerator of which is equal to
the aggregate Certificate Balance of the class, in each case, determined as of
the prior Distribution Date, and the denominator of which is equal to the
aggregate Certificate Balance of all classes of Certificates, each determined
as of the prior Distribution Date. None of the Class S, the Class R nor the
Class LR Certificates will be entitled to any Voting Rights. For purposes of
determining Voting Rights, the Certificate Balance of each class will not be
reduced by the amount allocated to that class of any Appraisal Reductions
related to mortgage loans as to which Liquidation Proceeds or other final
payment has not yet been received. Voting Rights allocated to a class of
Certificateholders will be allocated among the Certificateholders in proportion
to the Percentage Interests evidenced by their respective Certificates. Solely
for purposes of giving any consent, approval or waiver pursuant to the Pooling
and Servicing Agreement, neither the Master Servicer, the Special Servicer nor
the Depositor will be entitled to exercise any Voting Rights with respect to
any Certificates registered in its name, if the consent, approval or waiver
would in any way increase its compensation or limit its obligations in that
capacity under the Pooling and Servicing Agreement; provided, however, that the
restrictions will not apply to the exercise of the Special Servicer's rights,
if any, as a member of the Controlling Class. Appraisal Reduction Amounts will
not be applied to reduce Voting Rights.
TERMINATION; RETIREMENT OF CERTIFICATES
The obligations created by the Pooling and Servicing Agreement will
terminate upon payment (or provision for payment) to all Certificateholders of
all amounts held by or on behalf of the Paying Agent and required to be paid
following the earlier of (1) the final payment (or related advance) or other
liquidation of the last mortgage loan or REO Property subject thereto or (2)
the purchase of all of the assets of the trust fund by the holders of the
Controlling Class, the Special Servicer, the Master Servicer or the holders of
the Class LR Certificates. Written notice of termination of the Pooling and
Servicing Agreement will be given to each Certificateholder, and the final
distribution will be made only upon surrender and cancellation of the
Certificates at the office of the Certificate Registrar or other location
specified in the notice of termination.
The holders of the Controlling Class, the Special Servicer, the Master
Servicer and the holders of the Class LR Certificates (in that order) will have
the right to purchase all of the assets of the trust fund. This purchase of all
the mortgage loans and other assets in the trust fund is required to be made at
a price equal to the sum of (1) the aggregate Purchase Price of all the
mortgage loans (exclusive of REO Loans) then included in the trust fund and (2)
the aggregate fair market value of all REO Properties then included in the
trust fund (which fair market value for any REO Property may be less than the
Purchase Price for the corresponding REO Loan), as determined by an appraiser
selected by the Master Servicer, and approved by more than 50% of the Voting
Rights of the classes of Certificates then outstanding, other than the
Controlling Class, unless the Controlling Class is the only class of
Certificates outstanding, plus the reasonable out-of-pocket expenses of the
Master Servicer related to such purchase, unless the Master
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Servicer is the purchaser. This purchase will effect early retirement of the
then outstanding Offered Certificates, but the rights of the holders of the
Controlling Class, the Special Servicer, the Master Servicer or the holders of
the Class LR Certificates to effect the termination is subject to the
requirement that the then aggregate Stated Principal Balance of the pool of
mortgage loans be less than 1% of the Initial Pool Balance.
On the final Distribution Date, the aggregate amount paid by the holders
of the Controlling Class, the Special Servicer, the Master Servicer or the
holders of the Class LR Certificates, as the case may be, for the mortgage
loans and other assets in the trust fund (if the trust fund is to be terminated
as a result of the purchase described in the preceding paragraph), together
with all other amounts on deposit in the Certificate Account and not otherwise
payable to a person other than the Certificateholders (see "Description of the
Pooling Agreements--Certificate Account" in the prospectus), will be applied
generally as described under "--Distributions--Priority" above.
Any optional termination by the holders of the Controlling Class, the
Special Servicer, the Master Servicer, the Depositor or the holders of the
Class LR Certificates would result in prepayment in full of the Certificates
and would have an adverse effect on the yield of the Class X Certificates
because a termination would have an effect similar to a principal prepayment in
full of the mortgage loans and, as a result, investors in the Class X
Certificates and any other Certificates purchased at a premium might not fully
recoup their initial investment. See "Yield and Maturity Considerations" in
this prospectus supplement.
THE TRUSTEE
LaSalle Bank National Association, will serve as Trustee under the Pooling
and Servicing Agreement pursuant to which the Certificates are being issued (in
such capacity, the "Trustee"). The corporate trust office of the Trustee
responsible for administration of the Trust is located at 135 South LaSalle
Street, Suite 1625, Chicago, Illinois 60603, Attn: Asset-Backed Securities
Trust Services Group -- GECCMC 2001-1. As of December 31, 2000, the Trustee had
assets in excess of $49 billion. As compensation for the performance of its
routine duties, the Trustee will be paid a fee (the "Trustee Fee"). The Trustee
Fee will include the fee payable to the Paying Agent. The Trustee Fee will be
payable monthly from amounts received in respect of the mortgage loans and will
accrue at a rate (the "Trustee Fee Rate"), calculated on the basis of a 360-day
year consisting of twelve 30-day months equal to 0.00125% per annum, and will
be computed on the basis of the Stated Principal Balance of the related
mortgage loan as of the preceding Distribution Date. In addition, the Trustee
will be entitled to recover from the trust fund all reasonable unanticipated
expenses and disbursements incurred or made by the Trustee in accordance with
any of the provisions of the Pooling and Servicing Agreement, but not including
routine expenses incurred in the ordinary course of performing its duties as
Trustee under the Pooling and Servicing Agreement, and not including any
expense, disbursement or advance as may arise from its willful misfeasance,
negligence or bad faith. See "Description of the Pooling Agreements--The
Trustee," "--Duties of the Trustee," "--Certain Matters Regarding the Trustee"
and "--Resignation and Removal of the Trustee" in the prospectus.
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SERVICING OF THE MORTGAGE LOANS
GENERAL
The servicing of the mortgage loans and any REO Properties will be
governed by the Pooling and Servicing Agreement. The following summaries
describe certain provisions of the Pooling and Servicing Agreement relating to
the servicing and administration of the mortgage loans and any REO Properties.
The summaries do not purport to be complete and are subject, and qualified in
their entirety by reference, to the provisions of the Pooling and Servicing
Agreement. Reference is made to the prospectus for additional information
regarding the terms of the Pooling and Servicing Agreement relating to the
servicing and administration of the mortgage loans and any REO Properties,
provided that the information in this prospectus supplement supersedes any
contrary information set forth in the prospectus. See "Description of the
Pooling Agreements" in the prospectus.
Each of the Master Servicer (directly or through one or more
sub-servicers) and the Special Servicer will be required to service and
administer the mortgage loans for which it is responsible. The Master Servicer
may delegate and/or assign some or all of its servicing obligations and duties
with respect to some or all of the mortgage loans to one or more affiliates so
long as such delegation and/or assignment, in and of itself, does not cause the
qualification, withdrawal or downgrading of the then-current ratings assigned
to any class of Certificates as confirmed in writing by each of Moody's and
Fitch. The Master Servicer and the Primary Servicer will be permitted to
appoint sub-servicers with respect to its servicing obligations and duties and
it intends to use one or more subservicers with respect to certain of the
mortgage loans sold to the Depositor provided that, after the Closing Date any
such sub-servicing agreement, in and of itself, does not cause the
qualification, withdrawal or downgrading of the then-current ratings assigned
to any class of Certificates as confirmed in writing by each of Moody's and
Fitch. The Special Servicer will appoint KeyCorp Real Estate Capital Markets,
Inc. d/b/a Key Commercial Mortgage as special sub-servicer. In addition, after
the Closing Date, the Special Servicer may enter into one or more sub-servicing
agreements with one or more special sub-servicers so long as such sub-servicing
agreement, in and of itself, does not cause the qualification, withdrawal or
downgrading of the then-current ratings assigned to any class of Certificates
as confirmed in writing by each of Moody's and Fitch and such sub-servicer is
acceptable to the Directing Certificateholder.
The Master Servicer and the Special Servicer will be required to
diligently service and administer the mortgage loans for which each is
responsible in the best interests of and for the benefit of the
Certificateholders (as determined by the Master Servicer or the Special
Servicer in the exercise of its good faith and reasonable judgment) in
accordance with applicable law, the terms of the Pooling and Servicing
Agreement and the mortgage loans and, to the extent consistent with the
foregoing, in accordance with the higher of the following standards of care:
(1) the same manner in which, and with the same care, skill, prudence and
diligence with which the Master Servicer or the Special Servicer, as the case
may be, services and administers similar mortgage loans for other third-party
portfolios, giving due consideration to the customary and usual standards of
practice of prudent institutional commercial and multifamily mortgage lenders
servicing their own mortgage loans and (2) the same care, skill, prudence and
diligence with which the Master Servicer or the Special Servicer, as the case
may be, services and administers commercial and multifamily mortgage loans
owned by the Master Servicer or the Special Servicer, as the case may be, with
a view to the maximization of timely recovery of principal and interest on a
net present value basis on the mortgage loans or Specially Serviced Mortgage
Loans, as applicable, and the best interests of the Trust and the
Certificateholders, as determined by the Master Servicer or the Special
Servicer, as the case may be, in its reasonable judgment, but without regard
to: (A) any relationship that the Master Servicer or the Special Servicer, as
the case may be, or any affiliate of either, may have with the related
borrower, any Mortgage Loan Seller or any other party to the Pooling and
Servicing Agreement; (B) the ownership of any Certificate by the Master
Servicer or the Special Servicer, as the case may be, or any affiliate of
either; (C) the Master Servicer's or Special Servicer's, as applicable,
obligation to make Advances; (D) the Master Servicer's or the Special
Servicer's, as the case may be, right to receive compensation for its services
under the Pooling and Servicing Agreement or with respect to any particular
transaction; (E) the ownership, servicing or management for others of any other
mortgage loans or mortgaged properties by the Master Servicer or Special
Servicer; (F) any obligation of the Master Servicer or any of its affiliates
(in their capacity as a
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Mortgage Loan Seller) to cure a breach of a representation or warranty or
repurchase the mortgage loan; and (G) any debt that the Master Servicer or
Special Servicer has extended to any borrower (the foregoing, collectively
referred to as the "Servicing Standards").
Except as otherwise described under "--Inspections; Collection of
Operating Information" below, the Master Servicer initially will be responsible
for the servicing and administration of the entire pool of mortgage loans. With
respect to any mortgage loan (1) as to which a payment default has occurred at
its original maturity date, or, if the original maturity date has been
extended, at its extended maturity date or, in the case of a balloon payment,
such payment is more than 60 days delinquent and the borrower has not delivered
to the Master Servicer on the related maturity date a written refinancing
commitment reasonably satisfactory in form and substance to the Master Servicer
which provides that such refinancing will occur within 60 days, provided that
if such refinancing does not occur, at such time the related mortgage loan will
become a Specially Serviced Mortgage Loan, (2) as to which any Periodic Payment
(other than a balloon payment) is more than 60 days delinquent, (3) as to which
the borrower has entered into or consented to bankruptcy, appointment of a
receiver or conservator or a similar insolvency proceeding, or the borrower has
become the subject of a decree or order for that proceeding and such decree or
order has remained in force undischarged or unstayed for a period of 60 days,
or the related borrower has admitted in writing its inability to pay its debts
generally as they become due, (4) as to which the Master Servicer or Special
Servicer has received notice of the foreclosure or proposed foreclosure of any
other lien on the Mortgaged Property, (5) as to which, in the judgment of the
Master Servicer or Special Servicer, a payment default is imminent and is not
likely to be cured by the borrower within 60 days, or (6) as to which a default
of which the Master Servicer or Special Servicer has notice (other than a
failure by the related borrower to pay principal or interest) and which
materially and adversely affects the interests of the Certificateholders has
occurred and remains unremediated for the applicable grace period specified in
the mortgage loan (or if no grace period is specified, 60 days), the Master
Servicer will be required to transfer its servicing responsibilities to the
Special Servicer, but will be required to continue to receive payments on the
mortgage loan (including amounts collected by the Special Servicer), to make
certain calculations with respect to the mortgage loan and to make remittances
and prepare certain reports to the Certificateholders with respect to the
mortgage loan. If the related Mortgaged Property is acquired in respect of any
mortgage loan (upon acquisition, an "REO Property") whether through
foreclosure, deed-in-lieu of foreclosure or otherwise, the Special Servicer
will continue to be responsible for its operation and management. The mortgage
loans serviced by the Special Servicer and any mortgage loans that have become
REO Properties are referred to in this prospectus supplement as the "Specially
Serviced Mortgage Loans". The Master Servicer will have no responsibility for
the performance by the Special Servicer of its duties under the Pooling and
Servicing Agreement.
If any Specially Serviced Mortgage Loan, in accordance with its original
terms or as modified in accordance with the Pooling and Servicing Agreement,
becomes a performing mortgage loan for at least three Periodic Payments
(provided no additional event of default is foreseeable in the reasonable
judgment of the Special Servicer), the Special Servicer will be required to
return servicing of that mortgage loan (a "Corrected Mortgage Loan") to the
Master Servicer.
The Special Servicer will be required to prepare a report (an "Asset
Status Report") for each mortgage loan which becomes a Specially Serviced
Mortgage Loan not later than 30 days after the servicing of the mortgage loan
is transferred to the Special Servicer. Each Asset Status Report will be
delivered to the Directing Certificateholder (as defined below), the Mortgage
Loan Sellers, Moody's and Fitch. If the Directing Certificateholder does not
disapprove an Asset Status Report within 10 business days, the Special Servicer
will be required to implement the recommended action as outlined in the Asset
Status Report. The Directing Certificateholder may object to any 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 Standards that the objection is not in the best interests of all the
Certificateholders. If the Directing Certificateholder disapproves the Asset
Status Report and the Special Servicer has not made the affirmative
determination described above, the Special Servicer will be required to revise
the Asset Status Report as soon as practicable thereafter, but in no event
later than 30 days after the disapproval. The Special Servicer will be
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required to revise the Asset Status Report until the Directing
Certificateholder fails to disapprove the revised Asset Status Report as
described above or until the Special Servicer makes a determination that the
objection is not in the best interests of all the Certificateholders; provided,
however, in the event that the Directing Certificateholder and the Special
Servicer have not agreed upon an Asset Status Report with respect to a
Specially Serviced Mortgage Loan within 60 days of the Directing
Certificateholder's receipt of the initial Asset Status Report with respect to
such Specially Serviced Mortgage Loan, the Special Servicer will implement the
actions described in the most recent Asset Status Report submitted to the
Directing Certificateholder by the Special Servicer.
The 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, any other provision of the Pooling
and Servicing Agreement, including the provisions thereof relating to
foreclosure, sale of defaulted mortgage loans and modifications and the
Servicing Standards, or the REMIC Provisions.
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 Certificate
Registrar from time to time; provided, however, that (1) absent that selection,
or (2) until a Directing Certificateholder is so selected or (3) upon receipt
of a notice from a majority of the Controlling Class Certificateholders, by
Certificate Balance, that a Directing Certificateholder is no longer
designated, the Controlling Class Certificateholder that owns the largest
aggregate Certificate Balance of the Controlling Class 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 Certificate Registrar from time to time by the holder (or Certificate
Owner).
The "Controlling Class" will be as of any time of determination the most
subordinate class of Certificates then outstanding that has a Certificate
Balance at least equal to 25% of the initial Certificate Balance of that Class.
For purposes of determining identity of the Controlling Class, the Certificate
Balance of each Class will not be reduced by the amount allocated to that class
of any Appraisal Reductions. The Controlling Class as of the Closing Date will
be the Class M Certificates.
THE MASTER SERVICER
GE Capital Loan Services, Inc. will act as servicer (in that capacity, the
"Master Servicer") and in that capacity will be responsible for servicing the
mortgage loans. The principal offices of the Master Servicer are located at 363
North Sam Houston Parkway East, Suite 200, Houston, Texas 77060. As of March
31, 2001, the Master Servicer had a total commercial and multifamily mortgage
loan servicing portfolio of approximately $31.7 billion. The Master Servicer
will act as primary servicer with respect to the mortgage loans sold to the
Depositor and it intends to use one or more subservicers with respect to
certain of the mortgage loans serviced by it (in such capacity, the "Primary
Servicer"). The Master Servicer and its affiliates own and are in the business
of acquiring assets similar in type to the assets of the Trust Fund.
Accordingly, its assets may compete with the Mortgaged Properties for tenants,
purchasers, financing and other parties and services relevant to the business
of acquiring similar assets.
THE SPECIAL SERVICER
Midland Loan Services, Inc. (the "Special Servicer"), will initially be
appointed as special servicer of the mortgage loans. Midland is a real estate
financial services company which provides loan servicing and asset management
for large pools of commercial and multifamily real estate assets. Midland is a
wholly-owned subsidiary of PNC Bank, National Association. Midland's address is
210 West 10th Street, Kansas City, Missouri 64105. Midland is approved as a
master servicer, special servicer and primary servicer for investment-grade
rated commercial and multifamily mortgage-backed securities by S&P, Moody's and
Fitch. Midland has received the highest ranking as a master, primary and
special servicer from both S&P and Fitch. S&P ranks Midland as "Strong" and
Fitch ranks Midland as "1" for each category. As of February 28, 2001, Midland
was servicing approximately 15,000 commercial and multifamily loans with an
aggregate principal balance of approximately $57.7 billion. The collateral for
these loans is located in all 50 states, the
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District of Columbia, Puerto Rico and Canada. Approximately 11,000 of the
loans, with a total principal balance of approximately $44.7 billion, pertain
to commercial and multifamily mortgage-backed securities. The portfolio
includes multifamily, office, retail, hospitality and other types of
income-producing properties. Midland also services newly-originated loans and
loans acquired in the secondary market for financial institutions, private
investors and issuers of commercial and multifamily mortgage-backed securities.
The Special Servicer will appoint KeyCorp Real Estate Capital Markets, Inc.
d/b/a Key Commercial Mortgage as special sub-servicer with respect to the
mortgage loans.
The information set forth in the preceding paragraph concerning Midland
has been provided by the Special Servicer, and neither the Depositor nor the
Underwriters make any representation or warranty as to the accuracy or
completeness of that information.
REPLACEMENT OF THE SPECIAL SERVICER
The Special Servicer may be removed, and a successor Special Servicer
appointed, at any time by the Directing Certificateholder. In each of the
foregoing cases, any appointment of a successor Special Servicer will be
subject to written confirmation from Moody's and Fitch that the replacement of
the Special Servicer, in and of itself, will not cause a qualification,
withdrawal or downgrading of the then-current ratings assigned to any class of
Certificates.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The fee of the Master Servicer (the "Servicing Fee") will be payable
monthly from amounts received in respect of the mortgage loans, and will accrue
at a rate (the "Servicing Fee Rate"), calculated on a basis of a 360-day year
consisting of twelve 30-day months equal to a per annum rate ranging from 0.05%
to 0.12%. As of the cut-off date the weighted average Servicing Fee Rate will
be 0.05449% per annum. In addition to the Servicing Fee, the Master Servicer
will be entitled to retain, as additional servicing compensation, (1) certain
assumption, assumption application, extension, modification, consent, waiver
and earnout fees, and charges for beneficiary statements or demand fees with
respect to mortgage loans which are not Specially Serviced Mortgage Loans as
set forth in the Pooling and Servicing Agreement, and (2) late payment charges
and default interest paid by the borrowers (other than on Specially Serviced
Mortgage Loans), but only to the extent the amounts are not needed to pay
interest on Advances that has accrued during the 12 months immediately
preceding the end of the related Due Period with respect to the related
Mortgage Loan to the extent provided in the Pooling and Servicing Agreement.
The Master Servicer also is authorized but not required to invest or direct the
investment of funds held in the Certificate Account in Permitted Investments,
and the Master Servicer will be entitled to retain any interest or other income
earned on those funds and will bear any losses resulting from the investment of
these funds, except as set forth in the Pooling and Servicing Agreement. The
Master Servicer also is entitled to retain any interest earned on any servicing
escrow account to the extent the interest is not required to be paid to the
related borrowers.
The principal compensation to be paid to the Special Servicer in respect
of its special servicing activities will be the Special Servicing Fee, the
Workout Fee and the Liquidation Fee.
The "Special Servicing Fee" will accrue with respect to each Specially
Serviced Mortgage Loan at a rate equal to 0.25% per annum (the "Special
Servicing Fee Rate") calculated on the basis of the Stated Principal Balance of
the related Specially Serviced Mortgage Loans and on the basis of a 360-day
year consisting of twelve 30-day months, and will be payable monthly from the
trust fund.
The "Workout Fee" will generally be payable with respect to each Corrected
Mortgage Loan and will be calculated by application of a "Workout Fee Rate" of
1% to each collection of interest and principal (including scheduled payments,
prepayments, balloon payments, and payments at maturity) received on the
respective mortgage loan for so long as it remains a Corrected Mortgage Loan.
The Workout Fee with respect to any Corrected Mortgage Loan will cease to be
payable if the Corrected Mortgage Loan again becomes a Specially Serviced
Mortgage Loan but will become payable again if and when the mortgage loan again
becomes a Corrected Mortgage Loan.
If the Special Servicer is terminated or resigns, it will retain the right
to receive any and all Workout Fees payable in respect to mortgage loans that
were worked-out during the period that it acted as special
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servicer and as to which no other event has occurred which would cause such
mortgage loan to become a Specially Serviced Mortgage Loan as of the time of
its termination or resignation. The successor special servicer will not be
entitled to any portion of those Workout Fees.
A "Liquidation Fee" will be payable with respect to each Specially
Serviced Mortgage Loan as to which the Special Servicer obtains a full or
discounted payoff from the related borrower and, except as otherwise described
below, with respect to any Specially Serviced Mortgage Loan or REO Property as
to which the Special Servicer receives any Liquidation Proceeds attributable to
principal. The Liquidation Fee for each Specially Serviced Mortgage Loan will
be payable from, and will be calculated by application of a "Liquidation Fee
Rate" of 1% to the amount of the related payment or proceeds. 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
repurchase of any mortgage loan by a Mortgage Loan Seller for a breach of
representation or warranty or for defective or deficient mortgage loan
documentation, the purchase of any Specially Serviced Mortgage Loan by the
majority holder of the Controlling Class, the Special Servicer or the Master
Servicer, or the purchase of all of the mortgage loans and REO Properties in
connection with an optional termination of the trust fund. If, however,
Liquidation Proceeds are received with respect to any Corrected Mortgage Loan
and the Special Servicer is properly entitled to a Workout Fee, the Workout Fee
will be payable based on and out of the portion of the Liquidation Proceeds
that constitutes principal and/or interest. No Liquidation Fee will be payable
if the mortgage loan becomes a corrected mortgage loan. Liquidation Proceeds do
not include condemnation awards or insurance proceeds.
The Special Servicer will also be entitled to additional servicing
compensation in the form of all assumption, assumption application, extension,
modification, consent, waiver and earnout fees, and charges for beneficiary
statements or demands fees with respect to Specially Serviced Mortgage Loans.
The Special Servicer will also be entitled to late payment charges and default
interest paid by the borrowers on Specially Serviced Mortgage Loans, but only
to the extent those amounts are not needed to pay interest on Advances that has
accrued during the 12 months immediately preceding the end of the related Due
Period with respect to the related Mortgage Loan to the extent provided in the
Pooling and Servicing Agreement. The Special Servicer will not be entitled to
retain any portion of Excess Interest paid on the APD Loans.
Although the Master Servicer and the Special Servicer are each required to
service and administer the pool of mortgage loans in accordance with the
Servicing Standards above and, accordingly, without regard to its right to
receive compensation under the Pooling and Servicing Agreement, additional
servicing compensation in the nature of assumption and modification fees may
under certain circumstances provide the Master Servicer or the Special
Servicer, as the case may be, with an economic disincentive to comply with this
standard.
As and to the extent described in this prospectus supplement under
"Description of the Certificates--Advances," the Master Servicer and the
Special Servicer, as applicable, will be entitled to receive interest on
Advances, which will be paid contemporaneously with the reimbursement of the
related Advance.
Each of the Master Servicer and the Special Servicer generally will be
required to pay all expenses incurred by it in connection with its servicing
activities under the Pooling and Servicing Agreement and will not be entitled
to reimbursement for any expense of this type except as expressly provided in
the Pooling and Servicing Agreement. The Master Servicer will be responsible
for all fees of any sub-servicers. See "Description of the
Certificates--Distributions--Method, Timing and Amount" in this prospectus
supplement and "Description of the Pooling Agreements--Certificate Account" and
"--Servicing Compensation and Payment of Expenses" in the prospectus.
MAINTENANCE OF INSURANCE
To the extent permitted by the related mortgage loan and required by the
Servicing Standards, the Master Servicer will be required to use its reasonable
best efforts to (1) cause each borrower to maintain, and if the borrower does
not maintain, will be required to (2) itself maintain to the extent available
at commercially reasonable rates (as determined by the Master Servicer in
accordance with the Servicing Standards), a fire and hazard insurance policy
with extended coverage covering the related Mortgaged
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Property. The coverage of that kind of policy will be in an amount that is not
less than the lesser of the full replacement cost of the improvements securing
that mortgage loan or the outstanding principal balance owing on that mortgage
loan, but in any event, in an amount sufficient to avoid the application of any
co-insurance clause unless otherwise noted in the related mortgage loan
documents. After the Master Servicer determines that a Mortgaged Property is
located in an area identified as a federally designated special flood hazard
area (and flood insurance has been made available), the Master Servicer will be
required to use its reasonable best efforts to (1) cause each borrower to
maintain (to the extent required by the related mortgage loan), and if the
borrower does not so maintain, will be required to (2) itself maintain to the
extent available at commercially reasonable rates (as determined by the Master
Servicer in accordance with the Servicing Standards) a flood insurance policy
in an amount representing coverage not less than the lesser of (1) the
outstanding principal balance of the related mortgage loan and (2) the maximum
amount of insurance which is available under the National Flood Insurance Act
of 1968, as amended, but only to the extent that the related mortgage loan
permits the lender to require the coverage and maintaining coverage is
consistent with the Servicing Standards.
The Special Servicer will be required to maintain (or cause to be
maintained), fire and hazard insurance on each REO Property, to the extent
obtainable at commercially reasonable rates, in an amount which is at least
equal to the lesser of (1) the full replacement cost of the improvements on REO
Property, or (2) the outstanding principal balance owing on the related
mortgage loan and in any event, the amount necessary to avoid the operation of
any co-insurance provisions. In addition, while the REO Property is located in
an area identified as a federally designated special flood hazard area, the
Special Servicer will be required to cause to be maintained, to the extent
available at commercially reasonable rates (as determined by the Special
Servicer in accordance with the Servicing Standards), a flood insurance policy
meeting the requirements of the current guidelines of the Federal Insurance
Administration in an amount representing coverage not less than the maximum
amount of insurance which is available under the National Flood Insurance Act
of 1968, as amended.
The Pooling and Servicing Agreement provides that the Master Servicer and
the Special Servicer may satisfy their respective obligations to cause each
borrower to maintain a hazard insurance policy by maintaining a blanket or
master single interest policy insuring against hazard losses on the mortgage
loans and REO Properties. Any losses incurred with respect to mortgage loans or
REO Properties due to uninsured risks (including earthquakes, mudflows and
floods) or insufficient hazard insurance proceeds may adversely affect payments
to Certificateholders. Any cost incurred by the Master Servicer or Special
Servicer in maintaining that kind of insurance policy if the borrower defaults
on its obligation to do so will be advanced by the Master Servicer or the
Special Servicer as a Servicing Advance and will be charged to the related
borrower. Generally, no borrower is required by the mortgage loan documents to
maintain earthquake insurance on any Mortgaged Property and the Special
Servicer will not be required to maintain earthquake insurance on any REO
Properties. Any cost of maintaining that kind of required insurance or other
earthquake insurance obtained by the Special Servicer will be paid out of a
segregated custodial account created and maintained by the Special Servicer on
behalf of the Trustee in trust for the Certificateholders (the "REO Account")
or advanced by the Master Servicer or the Special Servicer as a Servicing
Advance.
The costs of the insurance may be recovered by the Master Servicer or
Special Servicer, as applicable, from reimbursements received from the borrower
or, if the borrower does not pay those amounts, as a Servicing Advance as set
forth in the Pooling and Servicing Agreement.
No pool insurance policy, special hazard insurance policy, bankruptcy
bond, repurchase bond or certificate guarantee insurance will be maintained
with respect to the mortgage loans, nor will any mortgage loan be subject to
FHA insurance.
MODIFICATIONS, WAIVER AND AMENDMENTS
The Master Servicer, (except as provided in the Pooling and Servicing
Agreement), may agree to extend the maturity date of a mortgage loan that is
neither a Specially Serviced Mortgage Loan nor a mortgage loan in default or as
to which default is reasonably foreseeable; except that any extension entered
into by the Master Servicer will not extend the maturity date beyond the
earlier of (1) two years prior to the Rated Final
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Distribution Date and (2) in the case of a mortgage loan secured by a leasehold
estate and not the related fee interest, the date ten years prior to the
expiration of the leasehold estate; provided that, if the extension would
extend the maturity date of a mortgage loan for more than twelve months from
and after the original maturity date of the mortgage loan, the Master Servicer
must obtain the opinion of counsel described in the third succeeding sentence.
Notwithstanding the foregoing, the Master Servicer will not extend any Mortgage
Loan without first sending notice to the Directing Certificateholder, who will
have ten days after it receives such notice to object to such extension. If the
Directing Certificateholder objects to such extension, the Master Servicer,
subject to the Servicing Standards, will not extend such maturity date and will
not be liable for any loss caused by the failure to extend such maturity.
Except as otherwise set forth in this paragraph, neither the Master Servicer
nor the Special Servicer may waive, modify or amend (or consent to waive,
modify or amend) any provision of a mortgage loan which is not in default or as
to which default is not reasonably foreseeable except for (1) the waiver of any
due-on-sale clause or due-on-encumbrance clause to the extent permitted in the
Pooling and Servicing Agreement, and (2) any waiver, modification or amendment
that would not be a "significant modification" of the mortgage loan within the
meaning of Treasury Regulations Section 1.860G-2(b) and as to which the Master
Servicer or the Special Servicer, as applicable, has provided the Trustee with
an opinion of counsel that the waiver, modification or amendment will not
constitute a "significant modification."
If, but only if, the Special Servicer determines that a modification,
waiver or amendment (including the forgiveness or deferral of interest or
principal or the substitution or release of collateral or the pledge of
additional collateral) of the terms of a Specially Serviced Mortgage Loan with
respect to which a payment default or other material default has occurred or a
payment default or other material default is, in the Special Servicer's
judgment, reasonably foreseeable, is estimated to produce a greater recovery on
a net present value basis (the relevant discounting to be performed at the
related Mortgage Rate) than liquidation of the Specially Serviced Mortgage
Loan, then the Special Servicer will agree to such modification, waiver or
amendment of the Specially Serviced Mortgage Loan, subject to the restrictions
and limitations described below. The Special Servicer will use reasonable
efforts to the extent possible to fully amortize a modified mortgage loan prior
to the Rated Final Distribution Date.
The Special Servicer may not agree to a modification, waiver or amendment
of any term of any Specially Serviced Mortgage Loan if that modification,
waiver or amendment would:
(1) extend the maturity date of the Specially Serviced Mortgage Loan
to a date occurring later than the earlier of (A) two years prior to the
Rated Final Distribution Date and (B) if the Specially Serviced Mortgage
Loan is secured by a leasehold estate and not the related fee interest, the
date ten years prior to the expiration of the leasehold; or
(2) reduce the related Net Mortgage Rate to less than the lesser of
(A) the original Net Mortgage Rate and (B) the highest Pass-through Rate on
any class of Certificates (other than the Class X Certificates); or
(3) provide for the deferral of interest unless (A) interest accrues
on the mortgage loan, generally, at the related Mortgage Rate and (B) the
aggregate amount of deferred interest does not exceed 10% of the unpaid
principal balance of the Specially Serviced Mortgage Loan.
In the event of a modification which creates a deferral of interest, the
Pooling and Servicing Agreement will provide that the amount of deferred
interest will be allocated to reduce the Distributable Certificate Interest of
the class or classes (other than the Class X Certificates) with the latest
alphabetical designation then outstanding, and to the extent so allocated, will
be added to the Certificate Balance of the class or classes.
The Special Servicer or the Master Servicer, as the case may be, will be
required to notify each other, the Mortgage Loan Sellers, Moody's, Fitch, and
the Trustee of any modification, waiver or amendment of any term of any
mortgage loan and will be required to deliver to the Trustee for deposit in the
related mortgage file, an original counterpart of the agreement related to the
modification, waiver or amendment, promptly following the execution. Copies of
each agreement whereby the modification, waiver or amendment of any
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term of any mortgage loan is effected are required to be available for review
during normal business hours at the offices of the Trustee. See "Description of
the Certificates--Reports to Certificateholders; Certain Available Information"
in this prospectus supplement.
DIRECTING CERTIFICATEHOLDER
The Directing Certificateholder will be entitled to advise the Special
Servicer with respect to the following actions of the Special Servicer with
respect to any Specially Serviced Mortgage Loan and the Master Servicer with
respect to any Mortgage Loan having a Cut-off Date Principal Balance of
$2,500,000 or more, or any Mortgage Loan for which an extension of maturity is
requested, and except as otherwise described below, neither the Master Servicer
nor the Special Servicer will be permitted to take any of the following actions
with respect to such respective Mortgage Loans as to which the Directing
Certificateholder has objected in writing within 10 business days of having
been notified thereof (provided that if such written notice has not been
received by the Special Servicer within the 10 business day period, the
Directing Certificateholder will be deemed to have waived its right to object):
(i) any foreclosure upon or comparable conversion (which may include
acquisitions of an REO Property) of the ownership of properties securing
such of the Specially Serviced Mortgage Loans as come into and continue in
default;
(ii) any modification of a monetary term of a Specially Serviced
Mortgage Loan;
(iii) any proposed sale of a defaulted mortgage loan or REO Property
(other than in connection with the termination of the trust as described
under "Description of Certificates--Termination; Retirement of
Certificates" in this prospectus supplement) for less than the applicable
Purchase Price;
(iv) any determination to bring an REO Property into compliance with
applicable environmental laws or to otherwise address hazardous material
located at an REO Property;
(v) any acceptance of substitute or additional collateral for a
Specially Serviced Mortgage Loan (other than in accordance with its terms);
(vi) any waiver of a "due-on-sale" or "due-on-encumbrance" clause;
(vii) any acceptance of an assumption agreement releasing a borrower
from liability under a Specially Serviced Mortgage Loan other than in
accordance with its terms; and
(viii) any proposed lease relating to an REO Loan which represents 15%
or more of the gross rental income from the related Mortgaged Property;
provided that, in the event that the Special Servicer or Master Servicer, as
applicable, determines that immediate action is necessary to protect the
interests of the Certificateholders (as a collective whole), the Special
Servicer or Master Servicer, as applicable, may take any such action without
waiting for the Directing Certificateholder's response.
In addition, the Directing Certificateholder may direct the Special
Servicer to take, or to refrain from taking, other actions with respect to a
Specially Serviced Mortgage Loan as the Directing Certificateholder may deem
advisable; provided that no such direction and no objection contemplated by the
preceding paragraph may require, permit or cause the Special Servicer to
violate any provision of the Pooling and Servicing Agreement (including the
provisions thereof related to foreclosure, sale of defaulted mortgage loans and
modifications) or the Servicing Standards.
Any costs and expenses incurred by the Special Servicer or Master Servicer
in obtaining such consent will be borne by the Directing Certificateholder. In
the event the Special Servicer determines that a refusal to consent by the
Directing Certificateholder or any advice from the Directing Certificateholder
would cause the Special Servicer or Master Servicer, as applicable, to violate
the terms of the Pooling and Servicing Agreement (including the provisions
thereof related to foreclosure, sale of defaulted mortgage loans and
modifications) or the Servicing Standards, the Special Servicer or Master
Servicer, as applicable, will be required to disregard such refusal to consent
or advice and notify the Directing Certificateholder, the Trustee, Moody's and
Fitch.
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LIMITATION ON LIABILITY OF DIRECTING CERTIFICATEHOLDER
The Directing Certificateholder will not be liable to the trust fund or
the Certificateholders for any action taken, or for refraining from the taking
of any action, in good faith pursuant to the Pooling and Servicing Agreement,
or for errors in judgment; provided, however, that the Directing
Certificateholder will not be protected against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
in the performance of duties or by reason of reckless disregard of obligations
or duties. Each Certificateholder acknowledges and agrees, by its acceptance of
its Certificates, that the Directing Certificateholder may have special
relationships and interests that conflict with those of holders of one or more
classes of certificates, that the Directing Certificateholder may act solely in
the interests of the holders of the Controlling Class, that the Directing
Certificateholder does not have any duties to the holders of any class of
certificates other than the Controlling Class, that the Directing
Certificateholder may take actions that favor the interests of the holders of
the Controlling Class over the interests of the holders of one or more other
classes of certificates, that the Directing Certificateholder, absent willful
misfeasance, bad faith or negligence, will not be deemed to have been negligent
or reckless, or to have acted in bad faith or engaged in willful misconduct, by
reason of its having acted solely in the interests of the Controlling Class,
and that the Directing Certificateholder will have no liability whatsoever for
having so acted and that no Certificateholder may take any action whatsoever
against the Directing Certificateholder or any director, officer, employee,
agent or principal of the Directing Certificateholder for having so acted.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
The Special Servicer will exercise reasonable efforts, consistent with the
Servicing Standards, to foreclose upon or otherwise comparably convert the
ownership of property securing such mortgage loans, as come into and continue
in default as to which no satisfactory arrangements can be made for collection
of delinquent payments pursuant to the Pooling and Servicing Agreement, and
which are not released from the trust pursuant to any provision of the Pooling
and Servicing Agreement. The Special Servicer is not permitted, however, to
acquire title 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 the 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 paid for by the Master Servicer as a Servicing Advance) and
either:
(1) the 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
(2) the Special Servicer, based solely (as to environmental matters
and related costs) on the information set forth in the report, determines
that taking those 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 (1)(b) above, is reasonably
likely to produce a greater recovery, taking into account the time value of
money, than not taking those actions. See "Certain Legal Aspects of
Mortgage Loans--Environmental Risks" in the prospectus.
In the event that any mortgage loan becomes at least sixty days delinquent
in respect of its monthly payments or more than thirty days delinquent in
respect of its balloon payment, if any (in each case, determined without giving
effect to any grace period permitted by the related mortgage or mortgage note
and without regard to any acceleration of payments under the related mortgage
or mortgage note) (each such mortgage loan, a "Defaulted Mortgage Loan") and
the Special Servicer has reasonably determined that such Defaulted Mortgage
Loan will become subject to foreclosure proceedings, the Special Servicer will
promptly notify in writing the Trustee, the Master Servicer and the majority
holder of the Controlling Class. The majority holder of the Controlling Class
may at its option purchase such Defaulted Mortgage Loan from the trust, at a
price equal to the Purchase Price if that price exceeds the estimated net
present value of
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proceeds to be realized from (i) selling the Defaulted Mortgage Loan (in
accordance with procedures set forth in the Pooling and Servicing Agreement) or
(ii) foreclosure. The Special Servicer is required to offer to sell any
Defaulted Mortgage Loan not otherwise purchased by the majority holder of the
Controlling Class if and when the Special Servicer determines, consistent with
the Servicing Standards, that such a sale would produce a greater recovery to
Certificateholders on a net present value basis than would foreclosure or
comparable conversion of the related Mortgaged Property. In the absence of the
sale, the Special Servicer will be required to proceed against the related
Mortgaged Property, subject to the discussion above.
If title to any Mortgaged Property is acquired by the trust fund, the
Special Servicer, on behalf of the trust fund, will be required to sell the
Mortgaged Property prior to the close of the third calendar year beginning
after the year of acquisition, unless (1) the Internal Revenue Service (the
"IRS") grants an extension of time to sell the property or (2) the Trustee
receives an opinion of independent counsel to the effect that the holding of
the property by the trust fund longer than the above-referenced three year
period will not result in the imposition of a tax on either the Upper-Tier
REMIC or the Lower-Tier REMIC or cause the trust fund (or either the Upper-Tier
REMIC or the Lower-Tier REMIC) to fail to qualify as a REMIC under the Code at
any time that any Certificate is outstanding. The Special Servicer will be
required to ensure that any Mortgaged Property acquired by the trust fund is
administered so that it constitutes "foreclosure property" within the meaning
of Code Section 860G(a)(8) at all times, that the sale of the property does not
result in the receipt by the trust fund of any income from nonpermitted assets
as described in Code Section 860F(a)(2)(B). If the trust fund acquires title to
any Mortgaged Property, the Special Servicer, on behalf of the trust fund, will
retain, at the expense of the trust fund, an independent contractor to manage
and operate the property in all circumstances required by the Code. The
independent contractor generally will be permitted to perform construction
(including renovation) on a foreclosed property only if the construction was at
least 10% completed at the time default on the related mortgage loan became
imminent. The retention of an independent contractor, however, will not relieve
the Special Servicer of its obligation to manage the Mortgaged Property as
required under the Pooling and Servicing Agreement.
Generally, neither the Upper-Tier REMIC nor the Lower-Tier REMIC will be
taxable on income received with respect to a Mortgaged Property acquired by the
trust fund to the extent that it constitutes "rents from real property," within
the meaning of Code Section 856(c)(3)(A) and Treasury regulations under the
Code. Rents from real property include fixed rents and rents based on the
receipts or sales of a tenant but do not include the portion of any rental
based on the net income or profit of any tenant or sub-tenant. No determination
has been made whether rent on any of the Mortgaged Properties meets this
requirement. Rents from real property include charges for services customarily
furnished or rendered in connection with the rental of real property, whether
or not the charges are separately stated. Services furnished to the tenants of
a particular building will be considered as customary if, in the geographic
market in which the building is located, tenants in buildings which are of
similar class are customarily provided with the service. No determination has
been made whether the services furnished to the tenants of the Mortgaged
Properties are "customary" within the meaning of applicable regulations. It is
therefore possible that a portion of the income with respect to a Mortgaged
Property owned by the trust fund attributable to any non-qualifying services,
would not constitute rents from real property, or that all income would not
qualify if no separate charge was stated for the non-customary services or they
were not performed by an independent contractor. Rents from real property also
do not include income from the operation of a trade or business on the
Mortgaged Property, such as a hotel. Any of the foregoing types of income may
instead constitute "net income from foreclosure property," which would be
taxable to the Lower-Tier REMIC at the highest marginal federal corporate rate
(currently 35%) and may also be subject to state or local taxes. The Pooling
and Servicing Agreement provides that the Special Servicer will be permitted to
cause the Lower-Tier REMIC to earn "net income from foreclosure property" that
is subject to tax if it determines that the net after-tax benefit to
Certificateholders is greater than another method of operating or net leasing
the Mortgaged Property. Because these sources of income, if they exist, are
already in place with respect to the Mortgaged Properties, it is generally
viewed as beneficial to Certificateholders to permit the trust fund to continue
to earn them if it acquires a Mortgaged Property, even at the cost of this tax.
These taxes would be chargeable against the related income for purposes of
determining the proceeds available for distribution to holders of Certificates.
See "Certain Federal Income Tax Consequences--Federal Income Tax Consequences
for REMIC Certificates--Taxes That May Be Imposed on the REMIC Pool" in the
prospectus.
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To the extent that Liquidation Proceeds collected with respect to any
mortgage loan are less than the sum of: (1) the outstanding principal balance
of the mortgage loan, (2) interest accrued on the mortgage loan and (3) the
aggregate amount of outstanding reimbursable expenses (including any
unreimbursed Servicing Advances and unpaid and accrued interest on those
Servicing Advances) incurred with respect to the mortgage loan, then the trust
fund will realize a loss in the amount of the shortfall. The Fiscal Agent, the
Trustee, the Master Servicer and/or the Special Servicer will be entitled to
reimbursement out of the Liquidation Proceeds recovered on any mortgage loan,
prior to the distribution of those Liquidation Proceeds to Certificateholders,
of any and all amounts that represent unpaid servicing compensation in respect
of the related mortgage loan, certain unreimbursed expenses incurred with
respect to the mortgage loan and any unreimbursed Advances made with respect to
the mortgage loan. In addition, amounts otherwise distributable on the
Certificates will be further reduced by interest payable to the Master
Servicer, the Special Servicer, the Fiscal Agent or Trustee on these Advances.
If any Mortgaged Property suffers damage and the proceeds, if any, of the
related hazard insurance policy are insufficient to restore fully the damaged
property, the Master Servicer will not be required to advance the funds to
effect the restoration unless (1) the Special Servicer determines that the
restoration will increase the proceeds to Certificateholders on liquidation of
the mortgage loan after reimbursement of the Special Servicer or the Master
Servicer, as the case may be, for its expenses and (2) the Master Servicer
determines that the expenses will be recoverable by it from related Insurance
and Condemnation Proceeds and Liquidation Proceeds.
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
The Master Servicer will be required to perform or cause to be performed
(at its own expense), physical inspections of each Mortgaged Property securing
a Mortgage Note with a Stated Principal Balance of (A) $2,000,000 or more at
least once every 12 months and (B) less than $2,000,000 at least once every 24
months, in each case commencing in calendar year 2002; provided, however, that
if any scheduled payment becomes more than 60 days delinquent on the related
mortgage loan, the Special Servicer is required to inspect 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 which inspection will be paid as a
Servicing Advance). The Special Servicer or the Master Servicer, as applicable,
will be required to prepare a written report of the inspection describing,
among other things, the condition of and any damage to the Mortgaged Property
and specifying the existence of any material vacancies in the Mortgaged
Property of any sale, transfer or abandonment of the Mortgaged Property of
which it has knowledge, of any material adverse change in the condition of the
Mortgaged Property, or of any visible material waste committed on the Mortgaged
Property.
With respect to each mortgage loan that requires the borrower to deliver
those statements, the Special Servicer or the Master Servicer, as applicable,
is also required to collect and review the annual operating statements of the
related Mortgaged Property. Most of the Mortgages obligate the related borrower
to deliver annual property operating statements. However, we cannot assure you
that any operating statements required to be delivered will in fact be
delivered, nor is the Special Servicer or the Master Servicer likely to have
any practical means of compelling the delivery in the case of an otherwise
performing mortgage loan.
Copies of the inspection reports and operating statements referred to
above are to be available for review by Certificateholders during normal
business hours at the offices of the Paying Agent. See "Description of the
Certificates--Reports to Certificateholders; Certain Available Information" in
this prospectus supplement.
CERTAIN MATTERS REGARDING THE MASTER SERVICER, THE SPECIAL SERVICER AND THE
DEPOSITOR
The Pooling and Servicing Agreement permits the Master Servicer and the
Special Servicer to resign from their respective obligations only upon (a) in
the case of the Master Servicer only, the appointment of, and the acceptance of
the appointment by, a successor and receipt by the Trustee of written
confirmation
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from each of Moody's and Fitch that the resignation and appointment will, in
and of itself, not cause a downgrade, withdrawal or qualification of the
then-current rating assigned by Moody's or Fitch to any class of certificates;
provided that with respect to the resignation of the Master Servicer, Chase
will have been offered the opportunity to accept the appointment and Chase and
the Master Servicer have been unable to agree upon terms or Chase has declined
or otherwise been unable to accept that appointment, or (b) a determination
that their respective obligations are no longer permissible with respect to the
Master Servicer or the Special Servicer, as the case may be, under applicable
law. No resignation will become effective until the Trustee or other successor
has assumed the obligations and duties of the resigning Master Servicer or
Special Servicer, as the case may be, under the Pooling and Servicing
Agreement.
The Pooling and Servicing Agreement will provide that none of the Master
Servicer, the Special Servicer, the Depositor or any director, officer,
employee or agent of any of them will be under any liability to the trust fund
or the Certificateholders for any action taken, or not taken, in good faith
pursuant to the Pooling and Servicing Agreement or for errors in judgment;
provided, however, that none of the Master Servicer, the Special Servicer, the
Depositor or similar person will be protected against any liability that would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
in the performance of obligations or duties under the Pooling and Servicing
Agreement or by reason of negligent disregard of the obligations and duties.
The Pooling and Servicing Agreement will also provide that the Master Servicer,
the Special Servicer, the Depositor and any general partner of the foregoing
and any director, officer, employee or agent of any of them will be entitled to
indemnification by the trust fund against any loss, liability or expense
incurred in connection with the performance of its duties and the exercise of
rights under, or any legal action or claim that relates to the Pooling and
Servicing Agreement or the Certificates; provided, however, that the
indemnification will not extend to any loss, liability or expense incurred by
reason of willful misfeasance, bad faith or negligence in the performance of
obligations or duties under the Pooling and Servicing Agreement, by reason of
negligent disregard of the obligations or duties, or in the case of the
Depositor and any of its directors, officers, members, managers, employees and
agents, any violation by any of them of any state or federal securities law.
In addition, the Pooling and Servicing Agreement will provide that none of
the Master Servicer, the Special Servicer or the Depositor will be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its respective responsibilities under the Pooling and Servicing
Agreement or that in its opinion may involve it in any expense or liability not
reimbursed by the trust fund. However, each of the Master Servicer, the Special
Servicer and the Depositor will be permitted, in the exercise of its
discretion, to undertake any action that it may deem necessary or desirable
with respect to the enforcement and/or protection of the rights and duties of
the parties to the Pooling and Servicing Agreement and the interests of the
Certificateholders under the Pooling and Servicing Agreement. In that event,
the legal expenses and costs of the action, and any liability resulting
therefrom, will be expenses, costs and liabilities of the Certificateholders,
and the Master Servicer, the Special Servicer or the Depositor, as the case may
be, will be entitled to charge the Certificate Account for the expenses.
Pursuant to the Pooling and Servicing Agreement, the Master Servicer and
Special Servicer will each be required to maintain a fidelity bond and errors
and omissions policy or their equivalent that provides coverage against losses
that may be sustained as a result of an officer's or employee's
misappropriation of funds or errors and omissions, subject to certain
limitations as to amount of coverage, deductible amounts, conditions,
exclusions and exceptions permitted by the Pooling and Servicing Agreement.
Notwithstanding the foregoing, the Master Servicer will be allowed to
self-insure with respect to an errors and omission policy and a fidelity bond
so long as certain conditions set forth in the Pooling and Servicing Agreement
are met.
Any person into which the Master Servicer, the Special Servicer or the
Depositor may be merged or consolidated, or any person resulting from any
merger or consolidation to which the Master Servicer, the Special Servicer or
the Depositor is a party, or any person succeeding to the business of the
Master Servicer, the Special Servicer or the Depositor, will be the successor
of the Master Servicer, the Special Servicer or the Depositor, as the case may
be, under the Pooling and Servicing Agreement. The Master Servicer and the
Special Servicer may have other normal business relationships with the
Depositor or the Depositor's affiliates.
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EVENTS OF DEFAULT
"Events of Default" under the Pooling and Servicing Agreement with respect
to the Master Servicer or the Special Servicer, as the case may be, will
include, without limitation:
(a) (A) any failure by the Master Servicer to make a required deposit
to the Certificate Account on the day such deposit was first required to be
made, which failure is not remedied within one business day, or (B) any
failure by the Master Servicer to deposit into, or remit to the Paying
Agent for deposit into, the Distribution Account any amount required to be
so deposited or remitted, which failure is not remedied by 10:00 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, or to remit to the
Master Servicer for deposit in the Certificate Account any such remittance
required to be made by the Special Servicer on the day such remittance is
required to be made under the Pooling and Servicing Agreement;
(c) any failure by the Master Servicer or the Special Servicer duly to
observe or perform in any material respect any of its other covenants or
obligations under the Pooling and Servicing Agreement, which failure
continues unremedied for 30 days (10 days in the case of a failure to make
a Servicing Advance or 15 days in the case of a failure to pay the premium
for any insurance policy required to be maintained under the Pooling and
Servicing Agreement) after written notice of the failure has been given to
the Master Servicer or the Special Servicer, as the case may be, by any
other party to the Pooling and Servicing Agreement, or to the Master
Servicer or the Special Servicer, as the case may be, with a copy to each
other party to the related Pooling and Servicing Agreement, by
Certificateholders of any class, evidencing, as to that class, percentage
interests aggregating not less than 25%; provided, however, if that failure
is capable of being cured and the Master Servicer or Special Servicer, as
applicable, is diligently pursuing that cure, that 15- or 30-day period
will be extended an additional 30 days;
(d) any breach on the part of the Master Servicer or the Special
Servicer of any representation or warranty in the Pooling and Servicing
Agreement 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 Master Servicer or the Special
Servicer, as the case may be, by the Depositor or the Trustee, or to the
Master Servicer, the Special Servicer, the Depositor and the Trustee by the
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 Master Servicer or Special
Servicer, as applicable, is diligently pursuing that cure, that 30-day
period will be extended an additional 30 days;
(e) certain events of insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings in respect of or relating to
the Master Servicer or the Special Servicer, and certain actions by or on
behalf of the Master Servicer or the Special Servicer indicating its
insolvency or inability to pay its obligations;
(f) the Trustee has received written notice from Fitch that the
continuation of the Master Servicer or the Special Servicer in that
capacity would result, or has resulted, in a downgrade or withdrawal of any
rating then assigned by Fitch to any class of Certificates; provided that
the publication of a ratings watch with negative implications due to the
continuation of the Special Servicer with respect to the Certificates will
be deemed notice for purposes of this section (f);
(g) 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 cause of such rating action, and, in the case of watch
status, such watch is not withdrawn by Moody's within sixty (60) days; and
(h) the Master Servicer is no longer rated CMS3 or higher by Fitch or
the equivalent.
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RIGHTS UPON EVENT OF DEFAULT
If an Event of Default occurs with respect to the Master Servicer or the
Special Servicer under the Pooling and Servicing Agreement, then, so long as
the Event of Default remains unremedied, the Depositor or the Trustee will be
authorized, and at the direction of Certificateholders entitled to not less
than 51% of the Voting Rights, the Trustee will be required, to terminate all
of the rights and obligations of the defaulting party as Master Servicer or
Special Servicer, as applicable, under the Pooling and Servicing Agreement. If
the Master Servicer is terminated due to certain Events of Default, subject to
the rights of Chase, as described below, the Trustee will solicit bids for such
servicing rights and deliver the proceeds net of expenses incurred by the
Trustee of any resulting sale to the Master Servicer. If the Master Servicer is
terminated, Chase will be offered the opportunity to accept the appointment. If
Chase and the Master Servicer have been unable to agree upon terms or Chase has
declined or otherwise been unable to accept that appointment, then subject to
the bid process described above, the Trustee will succeed to all of the
responsibilities, duties and liabilities of the Master Servicer as described
below. The Trustee, or the Master Servicer with respect to a termination of the
Special Servicer, will then succeed to all of the responsibilities, duties and
liabilities of the defaulting party as Master Servicer or Special Servicer, as
applicable, under the Pooling and Servicing Agreement and will be entitled to
similar compensation arrangements. If the Trustee is unwilling or unable so to
act, it may (or, at the written request of Certificateholders entitled to not
less than 51% of the Voting Rights, it will be required to) appoint, or
petition a court of competent jurisdiction to appoint, a loan servicing
institution or other entity that would not result in the downgrading,
qualification or withdrawal of the ratings assigned to any class of
Certificates by either of Moody's or Fitch to act as successor to the Master
Servicer or Special Servicer, as the case may be, under the Pooling and
Servicing Agreement.
No Certificateholder will have any right under the Pooling and Servicing
Agreement to institute any proceeding with respect to the Certificates or the
Pooling and Servicing Agreement unless the holder previously has given to the
Trustee written notice of default and the continuance of the default and unless
the holders of Certificates of any class evidencing not less than 25% of the
aggregate Percentage Interests constituting the class have made written request
upon the Trustee to institute a proceeding in its own name (as Trustee) and
have offered to the Trustee reasonable indemnity, and the Trustee for 60 days
after receipt of the request and indemnity has neglected or refused to
institute the proceeding. However, the Trustee will be under no obligation to
exercise any of the trusts or powers vested in it by the Pooling and Servicing
Agreement or to institute, conduct or defend any related litigation at the
request, order or direction of any of the Certificateholders, unless the
Certificateholders have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred as a result.
AMENDMENT
The Pooling and Servicing Agreement may be amended by the parties thereto,
without the consent of any of the holders of Certificates:
(a) to cure any ambiguity;
(b) to correct or supplement any of its provisions which may be
inconsistent with any other provisions or to correct any error;
(c) to change the timing and/or nature of deposits in the Certificate
Account, the Distribution Accounts or the REO Account, provided that (A)
the Servicer Remittance Date shall in no event be later than the related
Distribution Date, (B) the change would not adversely affect in any
material respect the interests of any Certificateholder, as evidenced by an
opinion of counsel (at the expense of the party requesting the amendment)
and (C) the change would not result in the downgrading, qualification or
withdrawal of the then-current ratings assigned to any class of
Certificates by either of Moody's or Fitch, as evidenced by a letter from
each of Moody's and Fitch;
(d) to modify, eliminate or add to any of its provisions (A) to the
extent as will be necessary to maintain the qualification of either the
Upper-Tier REMIC or Lower-Tier REMIC as a REMIC, to maintain the grantor
trust portion of the trust fund as a grantor trust or to avoid or minimize
the risk of imposition of any tax on the trust fund, provided that the
Trustee has received an opinion of counsel (at
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the expense of the party requesting the amendment) to the effect that (1)
the action is necessary or desirable to maintain qualification or to avoid
or minimize the risk and (2) the action will not adversely affect in any
material respect the interests of any holder of the Certificates or (B) to
restrict the transfer of the Residual Certificates, provided that the
Depositor has determined that the amendment will not give rise to any tax
with respect to the transfer of the Residual Certificates to a
non-permitted transferee. See "Certain Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC
Certificates--Taxation of Residual Certificates--Tax-Related Restrictions
on Transfer of Residual Certificates" in the prospectus;
(e) to make any other provisions with respect to matters or questions
arising under the Pooling and Servicing Agreement or any other change,
provided that the required action will not adversely affect in any material
respect the interests of any Certificateholder (unless the affected
Certificateholder consents in writing to such amendment), as evidenced by
an opinion of counsel and written confirmation that the change would not
result in the downgrading, qualification or withdrawal of the ratings
assigned to any class of Certificates by either of Moody's or Fitch; or
(f) to amend or supplement any provision of the Pooling and Servicing
Agreement to the extent necessary to maintain the ratings assigned to each
class of Certificates by each of Moody's and Fitch, as evidenced by written
confirmation that the change would not result in the downgrading,
qualification or withdrawal of the then-current ratings assigned to any
class of Certificates by either of Moody's or Fitch.
The Pooling and Servicing 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% of the aggregate
Percentage Interests constituting the class for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Pooling and Servicing Agreement or of modifying in any manner the rights of
the holders of the Certificates, except that the amendment may not (1) reduce
in any manner the amount of, or delay the timing of, payments received on the
mortgage loans which are required to be distributed on a Certificate of any
class without the consent of the holder of that Certificate, (2) reduce the
aforesaid percentage of Certificates of any class the holders of which are
required to consent to the amendment without the consent of the holders of all
Certificates of that class then outstanding, (3) adversely affect the Voting
Rights of any class of Certificates or (4) amend the Servicing Standards
without the consent of the holders of all Certificates of the classes then
outstanding.
Notwithstanding the foregoing, the Trustee will not be required to consent
to any amendment to the Pooling and Servicing Agreement without having first
received an opinion of counsel (at the trust fund's expense) to the effect that
the amendment is permitted under the Pooling and Servicing Agreement and that
the amendment or the exercise of any power granted to the Master Servicer, the
Special Servicer, the Depositor, the Trustee or any other specified person in
accordance with the amendment, will not result in the imposition of a tax on
any portion of the trust fund or cause either the Upper-Tier REMIC or
Lower-Tier REMIC to fail to qualify as a REMIC or cause the grantor trust
portion of the trust fund to fail to qualify as a grantor trust.
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YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General. The yield on any Offered Certificate will depend on: (1) the
Pass-through Rate for the Certificate; (2) the price paid for the Certificate
and, if the price was other than par, the rate and timing of payments of
principal on the Certificate; (3) the aggregate amount of distributions on the
Certificate; and (4) the aggregate amount of Collateral Support Deficit amounts
allocated to a class of Offered Certificates.
Pass-Through Rate. The Pass-through Rate applicable to each class of
Offered Certificates for any Distribution Date will equal the rate set forth on
the cover of this prospectus supplement. See "Description of the Certificates"
in this prospectus supplement.
Rate and Timing of Principal Payments. The yield to holders of Offered
Certificates that are purchased at a discount or premium will be affected by
the rate and timing of principal payments on the mortgage loans (including
principal prepayments on the mortgage loans resulting from both voluntary
prepayments by the mortgagors and involuntary liquidations). The rate and
timing of principal payments on the mortgage loans will in turn be affected by
their amortization schedules, Lockout Periods, Yield Maintenance Charges, the
dates on which balloon payments are due, any extensions of maturity dates by
the Master Servicer or the Special Servicer and the rate and timing of
principal prepayments and other unscheduled collections on the mortgage loans
(including for this purpose, collections made in connection with liquidations
of mortgage loans due to defaults, casualties or condemnations affecting the
Mortgaged Properties, or purchases of mortgage loans out of the trust fund). In
addition, although the borrowers under the APD Loans may have certain
incentives to prepay the APD Loans on their Anticipated Prepayment Dates, we
cannot assure you that the borrowers will be able to prepay the APD Loans on
their Anticipated Prepayment Dates. The failure of a borrower to prepay an APD
Loan on its Anticipated Prepayment Date will not be an event of default under
the terms of the APD Loans, and pursuant to the terms of the Pooling and
Servicing Agreement, neither the Master Servicer nor the Special Servicer will
be permitted to take any enforcement action with respect to a borrower's
failure to pay Excess Interest, other than requests for collection, until the
scheduled maturity of the respective APD Loan; provided, that the Master
Servicer or the Special Servicer, as the case may be, may take action to
enforce the trust fund's right to apply excess cash flow to principal in
accordance with the terms of the APD Loan documents. See "Risk
Factors--Borrower May Be Unable to Repay Remaining Principal Balance on
Maturity Date or Anticipated Prepayment Date" in this prospectus supplement.
Prepayments and, assuming the respective stated maturity dates for the
mortgage loans have not occurred, liquidations and purchases of the mortgage
loans, will result in distributions on the Offered Certificates of amounts that
would otherwise be distributed over the remaining terms of the mortgage loans.
Defaults on the mortgage loans, particularly at or near their stated maturity
dates, may result in significant delays in payments of principal on the
mortgage loans (and, accordingly, on the Offered Certificates) while work-outs
are negotiated or foreclosures are completed. See "Servicing of the Mortgage
Loans--Modifications, Waiver and Amendments" and "--Realization Upon Defaulted
Mortgage Loans" in this prospectus supplement and "Certain Legal Aspects of
Mortgage Loans--Foreclosure" in the prospectus. Because the rate of principal
payments on the mortgage loans will depend on future events and a variety of
factors (as described below), we cannot assure you as to the rate of payments
or the rate of principal prepayments in particular. We are not aware of any
relevant publicly available or authoritative statistics with respect to the
historical prepayment experience of a large group of mortgage loans comparable
to the mortgage loans.
The extent to which the yield to maturity of any class of Offered
Certificates may vary from the anticipated yield will depend upon the degree to
which the Certificates are purchased at a discount or premium and when, and to
what degree, payments of principal on the mortgage loans are in turn
distributed on the Certificates. 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 will result in an
actual yield to the investor that is lower than the anticipated yield and, in
the case of any Offered Certificate purchased at a premium, particularly the
Class X Certificates, the risk that a faster than anticipated rate of principal
payments on the mortgage loans will result in an actual yield to the investor
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that is lower than the anticipated yield. In general, the earlier a payment of
principal is distributed on an Offered Certificate purchased at a discount or
premium, the greater will be the effect on an investor's yield to maturity. As
a result, the effect on an investor's yield of principal payments distributed
on an investor's Offered Certificates occurring at a rate higher (or lower)
than the rate anticipated by the investor during any particular period would
not be fully offset by a subsequent like reduction (or increase) in the rate of
principal payments.
Principal payments (whether resulting from differences in amortization
terms, prepayments following expirations of the respective prepayment Lock-out
Periods or otherwise) on the mortgage loans will affect the Pass-through Rate
of the Class A, Class B, Class C and Class D Certificates, to the extent the
weighted average Net Mortgage Rate would be reduced below the fixed
Pass-through Rate on those classes, for one or more future periods and
therefore will also affect the yield on those classes.
The yield on the Class C and Class D Certificates could be adversely
affected if mortgage loans with higher interest rates pay faster than the
mortgage loans with lower interest rates, since those classes bear interest at
a rate limited by the weighted average Net Mortgage Rate of the mortgage loans.
The pass-through rates on those classes of certificates may be limited by the
weighted average of the net interest rates on the mortgage loans even if
principal prepayments do not occur.
Losses and Shortfalls. The yield to holders of the Offered Certificates
will also depend on the extent to which the holders are required to bear the
effects of any losses or shortfalls on the mortgage loans. Losses and other
shortfalls on the mortgage loans will generally be borne by the holders of the
Class M, Class L, Class K, Class J, Class I, Class H, Class G, Class F, Class
E, Class D, Class C and Class B Certificates, in that order, and in each case
to the extent of amounts otherwise distributable in respect of the class of
Certificates. In the event of the reduction of the Certificate Balances of all
those classes of Certificates to zero, the resulting losses and shortfalls will
then be borne, pro rata, by the Class A-1 and Class A-2 Certificates (and Class
X Certificates with respect to shortfalls of interest).
Certain Relevant Factors. The rate and timing of principal payments and
defaults and the severity of losses on the mortgage loans may be affected by a
number of factors, including, without limitation, prevailing interest rates,
the terms of the mortgage loans (for example, due-on-sale clauses or 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 rental properties in those
areas, the quality of management of the Mortgaged Properties, the servicing of
the mortgage loans, possible changes in tax laws and other opportunities for
investment. See "Risk Factors" and "Description of the Mortgage Pool" in this
prospectus supplement and "Risk Factors" and "Yield and Maturity
Considerations--Yield and Prepayment Considerations" in the prospectus.
The rate of prepayment on the pool of mortgage loans is likely to be
affected by prevailing market interest rates for mortgage loans of a comparable
type, term and risk level as the mortgage loans. When the prevailing market
interest rate is below a mortgage coupon, a borrower may have an increased
incentive to refinance its mortgage loan. However, under all of the mortgage
loans, voluntary prepayments are subject to Lock-out Periods and Yield
Maintenance Periods. See "Description of the Mortgage Pool--Certain Terms and
Conditions of the Mortgage Loans--Prepayment Provisions" in this prospectus
supplement.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell
Mortgaged Properties in order to realize their equity in the Mortgaged
Property, to meet cash flow needs or to make other investments. In addition,
some borrowers may be motivated by federal and state tax laws (which are
subject to change) to sell Mortgaged Properties prior to the exhaustion of tax
depreciation benefits.
The Depositor makes no representation as to the particular factors that
will affect the rate and timing of prepayments and defaults on the mortgage
loans, as to the relative importance of those factors, as to the percentage of
the principal balance of the mortgage loans that will be prepaid or as to which
a default will have occurred as of any date or as to the overall rate of
prepayment or default on the mortgage loans.
Delay in Payment of Distributions. Because each monthly distribution is
made on each Distribution Date, which is at least 15 days after 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 the
prices did not account for the delay).
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Unpaid Distributable Certificate Interest. As described under "Description
of the Certificates-- Distributions--Priority" in this prospectus supplement,
if the portion of the Available Distribution Amount distributable in respect of
interest on any class of Offered Certificates on any Distribution Date is less
than the Distributable Certificate Interest then payable for that class, the
shortfall will be distributable to holders of that class of Certificates on
subsequent Distribution Dates, to the extent of available funds. The shortfall
will not bear interest, however, so it will negatively affect the yield to
maturity of the class of Certificates for so long as it is outstanding.
WEIGHTED AVERAGE LIFE
The weighted average life of an Offered Certificate refers to the average
amount of time that will elapse from the date of its issuance until each dollar
allocable to principal of the Certificate is distributed to the investor. The
weighted average life of an Offered Certificate will be influenced by, among
other things, the rate at which principal on the mortgage loans is paid or
otherwise collected, which may be in the form of scheduled amortization,
voluntary prepayments, Insurance and Condemnation Proceeds and Liquidation
Proceeds.
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this prospectus supplement is the "Constant Prepayment
Rate" or "CPR" model. The CPR model represents an assumed constant annual rate
of prepayment each month, expressed as a per annum percentage of the
then-scheduled principal balance of the pool of mortgage loans. As used in each
of the following tables, the column headed "0% CPR" assumes that none of the
mortgage loans is prepaid before maturity or the Anticipated Prepayment Date,
as the case may be. The columns headed "3% CPR", "6% CPR", "9% CPR" and "12%
CPR" assume that prepayments on the mortgage loans are made at those levels of
CPR following the expiration of any Lock-out Period. We cannot assure you,
however, that prepayments of the mortgage loans will conform to any level of
CPR, and no representation is made that the mortgage loans will prepay at the
levels of CPR shown or at any other prepayment rate.
The following tables indicate the percentage of the initial Certificate
Balance of each class of the Offered Certificates that would be outstanding
after each of the dates shown at various CPRs and the corresponding weighted
average life of each class of Certificates. The tables have been prepared on
the basis of the following assumptions, among others:
(a) scheduled periodic payments of principal and/or interest on the
mortgage loans, and with respect to seven mortgage loans, representing
approximately 1.52% of the Initial Pool Balance, scheduled periodic
payments of interest-only over the first 25 scheduled payments of their
term and then principal and interest in accordance with the amortization
schedule) will be received on a timely basis and will be distributed on
each Distribution Date, beginning in May 2001;
(b) the Mortgage Rate in effect for each mortgage loan as of the
cut-off date will remain in effect to maturity or the Anticipated
Prepayment Date, as the case may be, and will be adjusted, if necessary, as
required pursuant to the definition of Mortgage Rate;
(c) the periodic principal and/or interest payment due for each
mortgage loan on the first due date following the cut-off date will
continue to be due on each due date until maturity or the Anticipated
Prepayment Date, as the case may be;
(d) any principal prepayments on the mortgage loans will be received
on their respective due dates after the expiration of any applicable
Lock-out Period, defeasance period and/or Yield Maintenance Period at the
respective levels of CPR set forth in the tables;
(e) No Mortgage Loan Seller will be required to repurchase any
mortgage loan, and none of the Master Servicer, the Special Servicer, the
holders of the Controlling Class or the holders of the Class LR
Certificates will exercise its option to purchase all the mortgage loans
and thereby cause an early termination of the trust fund;
(f) the Closing Date is April 30, 2001;
(g) the APD Loans prepay on their Anticipated Prepayment Dates; and
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(h) the Pass-through Rates and initial Certificate Balances of the
respective classes of Certificates are as described in this Prospectus
Supplement.
To the extent that the mortgage loans have characteristics that differ
from those assumed in preparing the tables set forth below, a class of Offered
Certificates may mature earlier or later than indicated by the tables. It is
highly unlikely that the mortgage loans will prepay at any constant rate until
maturity or that all the mortgage loans will prepay at the same rate. In
addition, variations in the actual prepayment experience and the balance of the
mortgage loans that prepay may increase or decrease the percentages of initial
Certificate Balances (and weighted average lives) shown in the following
tables. These variations may occur even if the average prepayment experience of
the mortgage loans were to equal any of the specified CPR percentages.
Investors are urged to conduct their own analyses of the rates at which the
mortgage loans may be expected to prepay. Based on the foregoing assumptions,
the following tables indicate the resulting weighted average lives of each
class of Offered Certificates and set forth the percentage of the initial
Certificate Balance of the class of the Offered Certificate that would be
outstanding after each of the dates shown at the indicated CPRs.
PERCENT OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS A-1 CERTIFICATES AT THE RESPECTIVE CPRS
SET FORTH BELOW:
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ---- ------ ------ ------ ------ -------
Initial Percent ............................. 100 100 100 100 100
April 15, 2002 .............................. 94 94 94 94 94
April 15, 2003 .............................. 88 88 88 88 88
April 15, 2004 .............................. 82 82 82 82 82
April 15, 2005 .............................. 74 74 74 74 74
April 15, 2006 .............................. 54 54 54 54 54
April 15, 2007 .............................. 46 46 46 46 46
April 15, 2008 .............................. 37 37 37 37 37
April 15, 2009 .............................. 27 27 27 27 27
April 15, 2010 .............................. 16 16 15 15 15
April 15, 2011 .............................. 0 0 0 0 0
Weighted Average Life (Years)(1) ............ 5.70 5.70 5.69 5.69 5.68
Estimated Month of First Principal .......... 5/15/2001 5/15/2001 5/15/2001 5/15/2001 5/15/2001
Estimated Month of Maturity ................. 10/15/2010 10/15/2010 10/15/2010 10/15/2010 10/15/2010
- ----------
(1) The weighted average life of the Class A-1 Certificates is determined by
(a) multiplying the amount of each principal distribution on it by the
number of years from the date of issuance of the Class A-1 Certificates
to the related Distribution Date, (b) summing the results and (c)
dividing the sum by the aggregate amount of the reductions in the
principal balance of the Class A-1 Certificates.
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PERCENT OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS A-2 CERTIFICATES AT THE RESPECTIVE CPRS
SET FORTH BELOW:
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ---- ------ ------ ------ ------ -------
Initial Percent ............................. 100 100 100 100 100
April 15, 2002 .............................. 100 100 100 100 100
April 15, 2003 .............................. 100 100 100 100 100
April 15, 2004 .............................. 100 100 100 100 100
April 15, 2005 .............................. 100 100 100 100 100
April 15, 2006 .............................. 100 100 100 100 100
April 15, 2007 .............................. 100 100 100 100 100
April 15, 2008 .............................. 100 100 100 100 100
April 15, 2009 .............................. 100 100 100 100 100
April 15, 2010 .............................. 100 100 100 100 100
April 15, 2011 .............................. 0 0 0 0 0
Weighted Average Life (Years)(1) ............ 9.74 9.74 9.74 9.74 9.74
Estimated Month of First Principal .......... 10/15/2010 10/15/2010 10/15/2010 10/15/2010 10/15/2010
Estimated Month of Maturity ................. 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011
- ----------
(1) The weighted average life of the Class A-2 Certificates is determined by
(a) multiplying the amount of each principal distribution on it by the
number of years from the date of issuance of the Class A-2 Certificates
to the related Distribution Date, (b) summing the results and (c)
dividing the sum by the aggregate amount of the reductions in the
principal balance of the Class A-2 Certificates.
PERCENT OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS B CERTIFICATES AT THE RESPECTIVE CPRS
SET FORTH BELOW:
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ---- ------ ------ ------ ------ -------
Initial Percent ........................ 100 100 100 100 100
April 15, 2002 ......................... 100 100 100 100 100
April 15, 2003 ......................... 100 100 100 100 100
April 15, 2004 ......................... 100 100 100 100 100
April 15, 2005 ......................... 100 100 100 100 100
April 15, 2006 ......................... 100 100 100 100 100
April 15, 2007 ......................... 100 100 100 100 100
April 15, 2008 ......................... 100 100 100 100 100
April 15, 2009 ......................... 100 100 100 100 100
April 15, 2010 ......................... 100 100 100 100 100
April 15, 2011 ......................... 0 0 0 0 0
Weighted Average Life (Years)(1) ....... 9.89 9.89 9.89 9.88 9.88
Estimated Month of First Principal ..... 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011
Estimated Month of Maturity ............ 4/15/2011 4/15/2011 4/15/2011 4/15/2011 4/15/2011
- ----------
(1) The weighted average life of the Class B Certificates is determined by
(a) multiplying the amount of each principal distribution on it by the
number of years from the date of issuance of the Class B Certificates to
the related Distribution Date, (b) summing the results and (c) dividing
the sum by the aggregate amount of the reductions in the principal
balance of the Class B Certificates.
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PERCENT OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS C CERTIFICATES AT THE RESPECTIVE CPRS
SET FORTH BELOW:
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ---- ------ ------ ------ ------ -------
Initial Percent ........................ 100 100 100 100 100
April 15, 2002 ......................... 100 100 100 100 100
April 15, 2003 ......................... 100 100 100 100 100
April 15, 2004 ......................... 100 100 100 100 100
April 15, 2005 ......................... 100 100 100 100 100
April 15, 2006 ......................... 100 100 100 100 100
April 15, 2007 ......................... 100 100 100 100 100
April 15, 2008 ......................... 100 100 100 100 100
April 15, 2009 ......................... 100 100 100 100 100
April 15, 2010 ......................... 100 100 100 100 100
April 15, 2011 ......................... 0 0 0 0 0
Weighted Average Life (Years)(1) ....... 9.96 9.96 9.96 9.96 9.96
Estimated Month of First Principal ..... 4/15/2011 4/15/2011 4/15/2011 4/15/2011 4/15/2011
Estimated Month of Maturity ............ 4/15/2011 4/15/2011 4/15/2011 4/15/2011 4/15/2011
- ----------
(1) The weighted average life of the Class C Certificates is determined by
(a) multiplying the amount of each principal distribution on it by the
number of years from the date of issuance of the Class C Certificates to
the related Distribution Date, (b) summing the results and (c) dividing
the sum by the aggregate amount of the reductions in the principal
balance of the Class C Certificates.
PERCENT OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS D CERTIFICATES AT THE RESPECTIVE CPRS
SET FORTH BELOW:
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ---- ------ ------ ------ ------ -------
Initial Percent ........................ 100 100 100 100 100
April 15, 2002 ......................... 100 100 100 100 100
April 15, 2003 ......................... 100 100 100 100 100
April 15, 2004 ......................... 100 100 100 100 100
April 15, 2005 ......................... 100 100 100 100 100
April 15, 2006 ......................... 100 100 100 100 100
April 15, 2007 ......................... 100 100 100 100 100
April 15, 2008 ......................... 100 100 100 100 100
April 15, 2009 ......................... 100 100 100 100 100
April 15, 2010 ......................... 100 100 100 100 100
April 15, 2011 ......................... 0 0 0 0 0
Weighted Average Life (Years)(1) ....... 9.96 9.96 9.96 9.96 9.96
Estimated Month of First Principal ..... 4/15/2011 4/15/2011 4/15/2011 4/15/2011 4/15/2011
Estimated Month of Maturity ............ 4/15/2011 4/15/2011 4/15/2011 4/15/2011 4/15/2011
- ----------
(1) The weighted average life of the Class D Certificates is determined by
(a) multiplying the amount of each principal distribution on it by the
number of years from the date of issuance of the Class D Certificates to
the related Distribution Date, (b) summing the results and (c) dividing
the sum by the aggregate amount of the reductions in the principal
balance of the Class D Certificates.
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YIELD SENSITIVITY OF THE OFFERED CERTIFICATES
The tables beginning on page (the "Yield Tables") indicate the
sensitivity of the pre-tax corporate bond equivalent yields to maturity of the
Class A-1, Class A-2, Class B, Class C and Class D Certificates at various
prices and constant prepayment rates. The allocations and calculations do not
take account of any Yield Maintenance Charges. The Yield Tables have been
prepared based on the assumption that distributions are made in accordance with
"Description of the Certificates" in this prospectus supplement, the
assumptions described in clauses (a) through (h) on pages [S-125] and [S-126]
and, where applicable, the specified assumed purchase prices (which prices do
not include accrued interest). Assumed purchase prices are expressed in 32nds
(i.e., 100/04 means 100 4/32%) as a percentage of the initial Certificate
Balance of each class of Offered Certificates.
The yields set forth in the Yield 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 the assumed stream of cash flows to equal the
assumed purchase prices, plus accrued interest from and including April 1, 2001
to, but excluding April , 2001, and by converting the monthly rates to
semi-annual corporate bond equivalent rates. This 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 distributions on the Offered
Certificates and consequently does not purport to reflect the return on any
investment in the classes of Offered Certificates when the reinvestment rates
are considered. For purposes of the Yield Tables, "modified duration" has been
calculated using the modified Macaulay Duration as specified in the "PSA
Standard Formulas". The Macaulay Duration is calculated as the present value
weighted average time to receive future payments of principal and/or interest,
and the PSA Standard Formula modified duration is calculated by dividing the
Macaulay Duration by the appropriate semi-annual compounding factor. The
duration of a security may be calculated according to various methodologies;
accordingly, no representation is made by the Depositor or any other person
that the "modified duration" approach used in this prospectus supplement is
appropriate. Duration, like yield, will be affected by the prepayment rate of
the mortgage loans and extensions in respect of balloon payments that actually
occur during the life of the Class A-1, Class A-2, Class B, Class C and Class D
Certificates and by the actual performance of the mortgage loans, all of which
may differ, and may differ significantly, from the assumptions used in
preparing the Yield Tables.
The characteristics of the mortgage loans differ in certain respects from
those assumed in preparing the Yield Tables, and the Yield Tables are presented
for illustrative purposes only. In particular, none of the mortgage loans
permit voluntary partial prepayments. Thus neither the pool of mortgage loans
nor any mortgage loan will prepay at any constant rate, and it is unlikely that
the mortgage loans will prepay in a manner consistent with the designated
Scenario for the Yield Tables. In addition, it is unlikely that the mortgage
loans will prepay at any of the specified percentages of CPR until maturity or
that all the mortgage loans will so prepay at the same rate, 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, 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.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Upon the issuance of the Certificates, Cadwalader, Wickersham & Taft,
special counsel to the Depositor, will deliver its opinion that, assuming (1)
the making of appropriate elections, (2) compliance with the provisions of the
Pooling and Servicing Agreement and (3) compliance with applicable changes in
the Internal Revenue Code of 1986, as amended (the "Code"), including the REMIC
Provisions, for federal income tax purposes, the trust fund, exclusive of the
Excess Interest and the Excess Interest Distribution Account, will qualify as
two separate real estate mortgage investment conduits (the "Upper-Tier REMIC"
and the "Lower-Tier REMIC", respectively, and each a "REMIC") within the
meaning of Sections 860A through 860G (the "REMIC Provisions") of the Code, and
(1) the Class A-1, Class A-2, Class X-1, Class X-2, Class B, Class C, Class D,
Class E, Class F, Class G, Class H, Class I, Class J, Class K, Class L and
Class M Certificates will evidence the "regular interests" in the Upper-Tier
REMIC and (2) the Class R and Class LR Certificates
S-128
will be the sole classes of "residual interests" in the Upper-Tier REMIC and
Lower-Tier REMIC, respectively, within the meaning of the REMIC Provisions in
effect on the date of this prospectus supplement. The Offered Certificates are
"Regular Certificates" as defined in the prospectus. In addition, in the
opinion of Cadwalader, Wickersham & Taft, the portion of the trust fund
consisting of the Excess Interest and the Excess Interest Distribution Account
will be treated as a grantor trust for federal income tax purposes under
subpart E, Part I of subchapter J of the Code.
Because they represent regular interests, each class of Offered
Certificates generally will be treated as newly originated debt instruments for
federal income tax purposes. Holders of the classes of Offered Certificates
will be required to include in income all interest on the regular interests
represented by their Certificates in accordance with the accrual method of
accounting, regardless of a Certificateholder's usual method of accounting. It
is anticipated that the [Class A-1, Class A-2, Class B, Class C and Class D
Certificates] will be issued at a premium for federal income tax purposes. The
prepayment assumption that will be used in determining the rate of accrual of
original issue discount ("OID") or whether the OID is de minimis and that may
be used to amortize premium, if any, for federal income tax purposes will be
based on the assumption that subsequent to the date of any determination the
mortgage loans will prepay at a rate equal to a CPR of 0%; provided, that it is
assumed that the APD Loans prepay on their Anticipated Prepayment Dates (the
"Prepayment Assumption"). No representation is made that the mortgage loans
will prepay at that rate or at any other rate. See "Certain Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC Certificates--Taxation
of Regular Certificates" in the prospectus.
Yield Maintenance Charges actually collected will be distributed to the
Offered Certificates as described under "Description of the Certificates--
Allocation of Yield Maintenance Charges" in this prospectus supplement. It is
not entirely clear under the Code when the amount of Yield Maintenance Charges
so allocated should be taxed to the holder of an Offered Certificate, but it is
not expected, for federal income tax reporting purposes, that Yield Maintenance
Charges will be treated as giving rise to any income to the holder of an Offered
Certificate prior to the Master Servicer's actual receipt of a Yield Maintenance
Charge. Yield Maintenance Charges, if any, may be treated as ordinary income,
although authority exists for treating such amounts as capital gain if they are
treated as paid upon retirement or partial retirement of a Certificate.
Certificateholders should consult their own tax advisers concerning the
treatment of Yield Maintenance Charges.
The Offered Certificates will be treated as "real estate assets" within
the meaning of Section 856(c)(4)(A) of the Code, and interest (including OID,
if any) on the Offered Certificates will be interest described in Section
856(c)(3)(B) of the Code to the extent of the percentage of the trust fund
assets meeting such requirements. Moreover, the Offered Certificates will be
"qualified mortgages" for another REMIC within the meaning of Section
860G(a)(3) of the Code and "permitted assets" for a "financial asset
securitization investment trust" within the meaning of Section 860L(c) of the
Code. The Offered Certificates will be treated as "loans. . . secured by an
interest in real property which is. . . residential real property" for a
domestic building and loan association under Section 7701(a)(19)(C) of the
Code, to the extent the loans are secured by multifamily properties and
manufactured housing community properties. As of the Cut-off Date, 22 and 12
mortgage loans representing approximately 13.86% and 3.43% of the Initial Pool
Balance are secured by multifamily properties and manufactured housing
community properties, respectively. The Offered Certificates will qualify for
treatment under Sections 856(c)(4)(A), 856(c)(3)(B) and 7701(a)(19)(C) in their
entirety if at least 95% of the assets or income of the trust fund meet such
requirements. A mortgage loan that has been defeased with U.S. government
securities does not qualify under the foregoing sections. See "Certain Federal
Income Tax Consequences--Federal Income Tax Consequences for REMIC Certificates
- --Status of REMIC Certificates" in the prospectus.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see "Certain Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC Certificates--Taxation
of Regular Certificates" in the prospectus.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the underwriting
agreement, dated as of the date of this prospectus supplement (the
"Underwriting Agreement"), among JPMorgan, a division of Chase
S-129
Securities Inc., Bear, Stearns & Co. Inc., Deutsche Bank Securities Inc. and
Salomon Smith Barney Inc. (collectively, the "Underwriters") and the Depositor,
the Depositor has agreed to sell to the Underwriters, and the Underwriters have
severally but not jointly agreed to purchase from the Depositor the respective
Certificate Balances, or Notional Amounts, as applicable, of each class of
Offered Certificates set forth below subject in each case to a variance of 10%.
BEAR, DEUTSCHE BANK SALOMON SMITH
CLASS JPMORGAN STEARNS & CO. INC. SECURITIES INC. BARNEY INC.
- ------------------- -------- ------------------ --------------- -----------
Class A-1 ......... $ $ $ $
Class A-2 ......... $ $ $ $
Class B ........... $ $ $ $
Class C ........... $ $ $ $
Class D ........... $ $ $ $
In the Underwriting Agreement, the Underwriters have severally but not
jointly agreed, subject to the terms and conditions set forth in the
Underwriting Agreement, to purchase all of the Offered Certificates if any
Offered Certificates are purchased. In the event of a default by any
Underwriter, the Underwriting Agreement provides that, in certain
circumstances, purchase commitments of the non-defaulting Underwriter may be
increased or the Underwriting Agreement may be terminated. Further, the
Depositor has agreed to indemnify the Underwriters and the Mortgage Loan
Sellers, and the Underwriters have agreed to indemnify the Depositor, against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
The Depositor has been advised by the Underwriters that they propose to
offer the Offered Certificates to the public from time to time in one or more
negotiated transactions, or otherwise, at varying prices to be determined at
the time of sale. Proceeds to the Depositor from the sale of Offered
Certificates before deducting expenses payable by the Depositor estimated to be
approximately $ , will be % of the initial aggregate Certificate
Balance of the Offered Certificates, plus accrued interest on the Offered
Certificates from April 1, 2001. The Underwriters may effect the transactions
by selling the Offered Certificates to or through dealers, and the dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Underwriters. In connection with the purchase and sale of
the Offered Certificates offered hereby, the Underwriters may be deemed to have
received compensation from the Depositor in the form of underwriting discounts.
Chase Securities is an affiliate of The Chase Manhattan Bank, the paying
agent, and of Morgan Guaranty, one of the Mortgage Loan Sellers. Bear, Stearns
& Co. Inc. is an affiliate of BSFI, one of the Mortgage Loan Sellers.
We cannot assure you that a secondary market for the Offered Certificates
will develop or, if it does develop, that it will continue. The Underwriters
expect to make, but are not obligated to make, a secondary market in the
Offered Certificates. The primary source of ongoing information available to
investors concerning the Offered Certificates will be the monthly statements
discussed in the prospectus under "Description of the Certificates--Reports to
Certificateholders," which will include information as to the outstanding
principal balance of the Offered Certificates and the status of the applicable
form of credit enhancement. Except as described in this prospectus supplement
under "Description of the Certificates--Reports to Certificateholders; Certain
Available Information," we cannot assure you that any additional information
regarding the Offered Certificates will be available through any other source.
In addition, we are not aware of any source through which price information
about the Offered Certificates will be generally available on an ongoing basis.
The limited nature of that information regarding the Offered Certificates may
adversely affect the liquidity of the Offered Certificates, even if a secondary
market for the Offered Certificates becomes available.
LEGAL MATTERS
The validity of the Certificates will be passed upon for the Depositor by
Cadwalader, Wickersham & Taft, New York, New York, and for the Underwriters by
Thacher Proffitt and Wood, New York, New York. In addition, certain federal
income tax matters will be passed upon for the Depositor by Cadwalader,
Wickersham & Taft.
S-130
RATINGS
It is a condition to issuance that the Offered Certificates be rated not
lower than the following ratings by Moody's Investors Service, Inc. ("Moody's")
and Fitch:
CLASS MOODY'S FITCH
----- ------- -----
A-1 ................. Aaa AAA
A-2 ................. Aaa AAA
B ................... Aa2 AA
C ................... A2 A
D ................... A3 A-
A securities rating on mortgage pass-through certificates addresses the
likelihood of the timely receipt by their holders of interest and the ultimate
repayment of principal to which they are entitled by the Rated Final
Distribution Date. The rating takes into consideration the credit quality of
the pool of mortgage loans, structural and legal aspects associated with the
certificates, and the extent to which the payment stream from the pool of
mortgage loans is adequate to make payments required under the certificates.
The ratings on the Offered Certificates do not, however, constitute a statement
regarding the likelihood, timing or frequency of prepayments (whether voluntary
or involuntary) on the mortgage loans or the degree to which the payments might
differ from those originally contemplated. In addition, a rating does not
address the likelihood or frequency of voluntary or mandatory prepayments of
mortgage loans, payment of Excess Interest, yield maintenance charges or net
default interest.
We cannot assure you as to whether any rating agency not requested to rate
the Offered Certificates will nonetheless issue a rating to any class of
Offered Certificates and, if so, what the rating would be. A rating assigned to
any class of Offered Certificates by a rating agency that has not been
requested by the Depositor to do so may be lower than the rating assigned
thereto by Moody's or Fitch.
The ratings on the Offered Certificates should be evaluated independently
from similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the assigning rating agency.
LEGAL INVESTMENT
The Certificates will not constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended.
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 the Offered Certificates under applicable legal
investment 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.
ERISA CONSIDERATIONS
A fiduciary of any retirement plan or other employee benefit plan or
arrangement, including individual retirement accounts and annuities, Keogh
plans and collective investment funds and separate accounts in which those
plans, annuities, accounts or arrangements are invested, including insurance
company general accounts, that is subject to the fiduciary responsibility rules
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
or Section 4975 of the Code (an "ERISA Plan") or which is a governmental plan,
as defined in Section 3(32) of ERISA, subject to any federal, state or local
law ("Similar Law") which is, to a material extent, similar to the foregoing
provisions of ERISA or the Code (collectively, with an ERISA Plan, a "Plan")
should review with its legal advisors whether the purchase or holding of
Offered Certificates could give rise to a transaction that is prohibited or is
not otherwise permitted either under ERISA, the Code
S-131
or Similar Law or whether there exists any statutory or administrative
exemption applicable thereto. Moreover, each Plan fiduciary should determine
whether an investment in the Offered Certificates is appropriate for the Plan,
taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
The U.S. Department of Labor has issued individual prohibited transaction
exemptions to [Chase Securities Inc., PTE 90-33, 55 Fed. Reg. 23,151 (June 6,
1990) (the "Chase Exemption")] and to Bear, Stearns Co., Inc., PTE 90-30, 55
Ped. Reg. 21, 461 (May 24, 1990 (the "Bear, Stearns Exemption" and together
with the Chase Exemption, the "Exemption"), each as subsequently amended. The
Exemption generally exempts from the application of the prohibited transaction
provisions of Sections 406 and 407 of ERISA, and the excise taxes imposed on
the prohibited transactions pursuant to Sections 4975(a) and (b) of the Code,
certain transactions, among others, relating to the servicing and operation of
the pools of mortgage loans, such as the pool of mortgage loans, and the
purchase, sale and holding of mortgage pass-through certificates, such as the
Offered Certificates, underwritten by the respective Underwriter, provided that
certain conditions set forth in the Exemption are satisfied.
The Exemption sets forth five general conditions which must be satisfied
for a transaction involving the purchase, sale and holding of the Offered
Certificates to be eligible for exemptive relief. First, the acquisition of the
Offered Certificates by a Plan must be on terms that are at least as favorable
to the Plan as they would be in an arm's-length transaction with an unrelated
party. Second, the Offered Certificates at the time of acquisition by the Plan
must be rated in one of the four highest generic rating categories by Standard
& Poor's Ratings Services ("S&P"), Moody's or Fitch. Third, the Trustee cannot
be an affiliate of any other member of the "Restricted Group" which consists of
any Underwriter, the Depositor, the Trustee, the Master Servicer, the Special
Servicer, any sub-servicer, any entity that provides insurance or other credit
support to the trust fund and any mortgagor with respect to mortgage loans
constituting more than 5% of the aggregate unamortized principal balance of the
mortgage loans as of the date of initial issuance of the Offered Certificates,
and any affiliate of any of the foregoing entities. Fourth, the sum of all
payments made to and retained by the Underwriters must represent not more than
reasonable compensation for underwriting the Offered Certificates, the sum of
all payments made to and retained by the Depositor pursuant to the assignment
of the mortgage loans to the trust fund must represent not more than the fair
market value of obligations and the sum of all payments made to and retained by
the Master Servicer, the Special Servicer and any sub-servicer must represent
not more than reasonable compensation for that person's services under the
Pooling and Servicing Agreement and reimbursement of the person's reasonable
expenses in connection therewith. Fifth, the investing Plan must be an
accredited investor as defined in Rule 501(a)(1) of Regulation D of the
Securities and Exchange Commission under the Securities Act of 1933, as
amended.
It is a condition of the Offered Certificates that they be rated not lower
than the ratings set forth on the cover page hereof. As of the Closing Date,
the third general condition set forth above will be satisfied with respect to
the Offered Certificates. A fiduciary of a Plan contemplating purchasing an
Offered Certificate in the secondary market must make its own determination
that, at the time of purchase, that the Offered Certificates continue to
satisfy the second and third general conditions set forth above. A fiduciary of
a Plan contemplating purchasing an Offered Certificate, whether in the initial
issuance of the Offered Certificates or in the secondary market, must make its
own determination that the first, fourth and fifth general conditions set forth
above will be satisfied with respect to the related Offered Certificate.
The Exemption also requires that the trust fund meet the following
requirements: (1) the trust fund must consist solely of assets of the type that
have been included in other investment pools; (2) certificates in those other
investment pools must have been rated in one of the four highest categories of
S&P, Moody's or Fitch for at least one year prior to the Plan's acquisition of
Offered Certificates; and (3) certificates in those other investment pools must
have been purchased by investors other than Plans for at least one year prior
to any Plan's acquisition of Offered Certificates.
If the general conditions of the Exemption are satisfied, the Exemption
may provide an exemption from the restrictions imposed by Sections 406(a) and
407(a) of ERISA (as well as the excise taxes imposed by Sections 4975(a) and
(b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of the Code) in
S-132
connection with (1) the direct or indirect sale, exchange or transfer of
Offered Certificates in the initial issuance of Certificates between the
Depositor or the Underwriters and a Plan when the Depositor, any of the
Underwriters, the Trustee, the Fiscal Agent, the Master Servicer, the Special
Servicer, a sub-servicer or a borrower is a Party in Interest with respect to
the investing Plan, (2) the direct or indirect acquisition or disposition in
the secondary market of the Offered Certificates by a Plan and (3) the holding
of Offered Certificates by a Plan. However, no exemption is provided from the
restrictions of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the
acquisition or holding of an Offered Certificate on behalf of an "Excluded
Plan" or any person who has discretionary authority or renders investment
advice with respect to the assets of the Excluded Plan. For purposes of this
prospectus supplement, an "Excluded Plan" is a Plan sponsored by any member of
the Restricted Group.
If certain specific conditions of the Exemption are also satisfied, the
Exemption may provide an exemption from the restrictions imposed by Sections
406(b)(1) and (b)(2) of ERISA and the taxes imposed by Section 4975(c)(1)(E) of
the Code in connection with (1) the direct or indirect sale, exchange or
transfer of Offered Certificates in the initial issuance of Certificates
between the Depositor or the Underwriters and a Plan when the person who has
discretionary authority or renders investment advice with respect to the
investment of Plan assets in those Certificates is (a) a borrower with respect
to 5% or less of the fair market value of the mortgage loans or (b) an
affiliate of that person, (2) the direct or indirect acquisition or disposition
in the secondary market of Offered Certificates by a Plan and (3) the holding
of Offered Certificates by a Plan.
Further, if certain specific conditions of the Exemption are satisfied,
the Exemption may provide an exemption from the restrictions imposed by
Sections 406(a), 406(b) and 407(a) of ERISA, and the taxes imposed by Sections
4975(a) and (b) of the Code by reason of Section 4975(c) of the Code for
transactions in connection with the servicing, management and operation of the
pool of mortgage loans.
Before purchasing an Offered Certificate, a fiduciary of a Plan should
itself confirm that (1) the Offered Certificates constitute "certificates" for
purposes of the Exemption and (2) the specific and general conditions and the
other requirements set forth in the Exemption would be satisfied. In addition
to making its own determination as to the availability of the exemptive relief
provided in the Exemption, the Plan fiduciary should consider the availability
of any other prohibited transaction exemptions, including with respect to
governmental plans, any exemptive relief afforded under Similar Law. See
"Certain ERISA Considerations" in the prospectus. A purchaser of an Offered
Certificate should be aware, however, that even if the conditions specified in
one or more exemptions are satisfied, the scope of relief provided by an
exemption may not cover all acts which might be construed as prohibited
transactions.
The sale of Offered Certificates to a Plan is in no respect a
representation by the Depositor or any of the Underwriters that this investment
meets 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.
S-133
INDEX OF PRINCIPAL DEFINITIONS
PAGE
----
30/360 Basis ..................................... S-57
59 Maiden Lane Borrower .......................... S-59
59 Maiden Lane Property .......................... S-59
59 Maiden Lane Substitute Property ............... S-59
Actual/360 Basis ................................. S-57
Administrative Cost Rate ......................... S-93
Advances ......................................... S-99
Anticipated Prepayment Date ...................... S-57
APD Loans ........................................ S-56
Appraisal Reduction .............................. S-100
Appraisal Reduction Amount ....................... S-101
Appraisal Reduction Event ........................ S-100
Asset Status Report .............................. S-108
Assumed Final Distribution Date .................. S-96
Assumed Scheduled Payment ........................ S-94
Authenticating Agent ............................. S-85
Available Distribution Amount .................... S-88
balloon loans .................................... S-37
Base Interest Fraction ........................... S-95
Bear, Stearns Exemption .......................... S-132
BSFI ............................................. S-55
Certificate Account .............................. S-87
Certificate Balance .............................. S-84
Certificate Owner ................................ S-85
Certificate Registrar ............................ S-85
Certificateholders ............................... S-55
Certificates ..................................... S-84
Chase Exemption .................................. S-132
Class A Certificates ............................. S-84
Class X Certificates ............................. S-84
Clearstream, Luxembourg .......................... S-85
Closing Date ..................................... S-55
Code ............................................. S-128
Collateral Support Deficit ....................... S-98
Constant Prepayment Rate ......................... S-124
Controlling Class ................................ S-109
Controlling Class Certificateholder .............. S-109
Corrected Mortgage Loan .......................... S-108
CPR .............................................. S-124
Cross-Over Date .................................. S-92
Cut-off Date Balance ............................. S-55
Debt Service Coverage Ratio ...................... S-66
Defaulted Mortgage Loan .......................... S-115
Defeasance Lock-out Period ....................... S-58
Defeasance Option ................................ S-58
Depositor ........................................ S-55
Depositories ..................................... S-85
Direct Participants .............................. S-85
Directing Certificateholder ...................... S-109
Distributable Certificate Interest ............... S-93
Distribution Accounts ............................ S-88
Distribution Date ................................ S-87
DSCR ............................................. S-66
DTC .............................................. S-85
Due Period ....................................... S-89
EII Portfolio II Borrower ........................ S-59
EII Portfolio II Substitute Properties ........... S-59
EII Portfolio II Substitute Property ............. S-59
EII Portfolio II Substituted Properties .......... S-59
EII Portfolio II Substituted Property ............ S-59
ERISA ............................................ S-131
ERISA Plan ....................................... S-131
Euroclear ........................................ S-85
Events of Default ................................ S-119
Excess Interest .................................. S-93
Excess Interest Distribution Account ............. S-88
Excluded Plan .................................... S-133
Exemption ........................................ S-132
FIRREA ........................................... S-71
Form 8-K ......................................... S-61
GECC ............................................. S-55
Indirect Participants ............................ S-85
Ingles Portfolio Borrower ........................ S-60
Ingles Portfolio Substitute Properties ........... S-60
Ingles Portfolio Substitute Property ............. S-60
Ingles Portfolio Substituted Properties .......... S-60
Initial Pool Balance ............................. S-55
Initial Rate ..................................... S-57
Insurance and Condemnation Proceeds .............. S-87
Interest Distribution Amount ..................... S-93
Interest Reserve Account ......................... S-88
IRS .............................................. S-116
Liquidation Fee .................................. S-111
Liquidation Fee Rate ............................. S-111
Liquidation Proceeds ............................. S-88
Lock Box Accounts ................................ S-82
Lock Box Loans ................................... S-82
Lock-out Period .................................. S-58
Lower-Tier Distribution Account .................. S-88
Lower-Tier REMIC ................................. S-128
MAI .............................................. S-100
Master Servicer .................................. S-109
Moody's .......................................... S-131
Morgan Guaranty .................................. S-55
Mortgage ......................................... S-55
Mortgage Loan Sellers ............................ S-55
Mortgage Note .................................... S-55
Mortgage Rate .................................... S-93
Mortgaged Property ............................... S-55
net income from foreclosure property ............. S-116
Net Mortgage Rate ................................ S-93
Non-Offered Certificates ......................... S-84
S-134
PAGE
----
Non-Offered Subordinate Certificates ............ S-97
Nonrecoverable Advance .......................... S-99
Notional Amount ................................. S-84
Offered Certificates ............................ S-84
OID ............................................. S-129
P&I Advance ..................................... S-98
Participants .................................... S-85
Pass-through Rate ............................... S-92
Paying Agent .................................... S-85
Percentage Interest ............................. S-84
Periodic Payments ............................... S-66
Permitted Investments ........................... S-88
Phase I ......................................... S-79
Plan ............................................ S-131
Pooling and Servicing Agreement ................. S-84
Prepayment Assumption ........................... S-129
Prepayment Interest Shortfall ................... S-93
Primary Servicer ................................ S-109
Prime Rate ...................................... S-99
Principal Distribution Amount ................... S-94
Principal Shortfall ............................. S-94
Purchase Agreements ............................. S-55
Purchase Price .................................. S-81
Qualified Substitute Mortgage Loan .............. S-82
Rated Final Distribution Date ................... S-96
Record Date ..................................... S-87
Reimbursement Rate .............................. S-99
Related Proceeds ................................ S-99
Release Date .................................... S-59
REMIC ........................................... S-128
REMIC Provisions ................................ S-128
rents from real property ........................ S-51, S-116
REO Account ..................................... S-112
REO Loan ........................................ S-95
REO Property .................................... S-108
Residual Certificates ........................... S-84
Restricted Group ................................ S-132
Revised Rate .................................... S-57
Rules ........................................... S-86
S&P ............................................. S-132
Scheduled Principal Distribution Amount ......... S-94
Senior Certificates ............................. S-84
Servicer Remittance Date ........................ S-98
Servicing Advances .............................. S-99
Servicing Fee ................................... S-110
Servicing Fee Rate .............................. S-110
Servicing Standards ............................. S-108
Similar Law ..................................... S-131
Special Servicer ................................ S-109
Special Servicing Fee ........................... S-110
Special Servicing Fee Rate ...................... S-110
Specially Serviced Mortgage Loans ............... S-108
Stated Principal Balance ........................ S-94
Statement to Certificateholders ................. S-101
Subordinate Certificates ........................ S-84
Subordinate Offered Certificates ................ S-84
Terms and Conditions ............................ S-86
Testing Date .................................... S-80
Title Exception ................................. S-78
Title Insurance Policy .......................... S-79
Trustee ......................................... S-55, S-106
Trustee Fee ..................................... S-106
Trustee Fee Rate ................................ S-106
U.S. Securities Rate ............................ S-58
Uncovered Prepayment Interest Shortfall ......... S-94
Underwriters .................................... S-130
Underwriting Agreement .......................... S-129
Underwritten Net Cash Flow ...................... S-69
Unscheduled Principal Distribution Amount S-94
Upper-Tier Distribution Account ................. S-88
Upper-Tier REMIC ................................ S-128
Voting Rights ................................... S-105
WAC Rate ........................................ S-93
Withheld Amounts ................................ S-88
Withheld Loans .................................. S-88
Workout Fee ..................................... S-110
Workout Fee Rate ................................ S-110
Yield Maintenance Charge ........................ S-58
Yield Maintenance Period ........................ S-58
Yield Tables .................................... S-128
S-135
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GE CAPITAL COMMERCIAL MORTGAGE CORPORATION, SERIES 2001-1
ANNEX A - CERTAIN CHARACTERISTICS OF THE MORTGAGED LOANS AND MORTGAGED
- ----------------------------------------------------------------------
PROPERTIES
- ----------
% OF MORTGAGE CUT-OFF
INITIAL POOL # OF LOAN ORIGINAL DATE
ID PROPERTY NAME BALANCE PROPERTIES SELLER (1) BALANCE BALANCE
- -------------------------------------------------------------------------------------------------------------------------------
1 1400 Eye Street Office Building 1.51% 1 GECC 17,350,000 17,312,124
2 360 Place Office Park 0.48% 1 BSCMI 5,500,000 5,488,966
3 510 Fifth Avenue 2.01% 1 MGT 23,000,000 23,000,000
4 524 Lamar 0.53% 1 BSCMI 6,100,000 6,087,000
5 59 Maiden Lane 4.37% 1 MGT 50,000,000 50,000,000
- -------------------------------------------------------------------------------------------------------------------------------
6 59 West 0.25% 1 GECC 2,880,000 2,875,119
7 611 Wilshire Building 0.63% 1 GECC 7,200,000 7,196,067
8 67 Forest Street 0.48% 1 BSCMI 5,525,000 5,525,000
9 818 West Seventh Street 2.95% 1 GECC 33,800,000 33,781,053
10 98 Palms 0.89% 1 GECC 10,233,000 10,215,658
- -------------------------------------------------------------------------------------------------------------------------------
11 'A' Commerce Center 0.27% 1 MGT 3,150,000 3,132,510
12 Aliso Viejo Specialty Shops 0.31% 1 GECC 3,500,000 3,494,788
13 Alpine Manor Apartments 0.17% 1 GECC 2,000,000 2,000,000
14 Annapolis Business Center 0.46% 1 GECC 5,240,000 5,237,349
15 Ansley Oaks Apartments 0.13% 1 GECC 1,522,000 1,521,133
- -------------------------------------------------------------------------------------------------------------------------------
16 Aramingo Village 0.44% 1 MGT 5,050,000 5,032,622
17 Arapahoe Medical Plaza I 0.50% 1 GECC 5,700,000 5,690,684
18 Arapahoe Medical Plaza II 0.17% 1 GECC 1,900,000 1,896,895
19 Audubon II 0.27% 1 BSCMI 3,150,000 3,143,486
20 Avion Corporate Center 0.50% 1 GECC 5,720,000 5,710,796
- -------------------------------------------------------------------------------------------------------------------------------
21 Battlefield Lakes Tech Center I and II 0.32% 1 GECC 3,700,000 3,700,000
22 Bonner Springs Estates 0.26% 1 GECC 2,970,000 2,970,000
23 Briarwood 0.18% 1 GECC 2,030,000 2,030,000
24 Brighton Commons 0.49% 1 MGT 5,600,000 5,587,945
25 Butts Station 0.19% 1 GECC 2,140,000 2,140,000
- -------------------------------------------------------------------------------------------------------------------------------
26 BWI Buidings 1&2 0.30% 1 MGT 3,425,000 3,417,219
27 Canyon Creek Plaza 0.93% 1 GECC 10,600,000 10,600,000
28 Canyon Point Office 0.19% 1 GECC 2,200,000 2,195,622
29 Carlsbad Corporate Plaza 1.05% 1 GECC 12,000,000 11,979,599
30 Carriage Park 0.08% 1 GECC 930,000 930,000
- -------------------------------------------------------------------------------------------------------------------------------
31 Chicot Crossing Office Depot 0.14% 1 GECC 1,600,000 1,597,288
32 Civic Executive Center 2.20% 1 GECC 25,150,000 25,135,353
33 Clover Square 0.75% 1 BSCMI 8,550,000 8,545,667
34 College Park Apartments 1.93% 1 GECC 22,160,000 22,110,350
35 College Park Center (In-Line Retail Space) 0.38% 1 GECC 4,320,000 4,320,000
- -------------------------------------------------------------------------------------------------------------------------------
36 Commerce Park North 0.19% 1 GECC 2,208,000 2,192,665
37 Corn Hill Apartments 0.35% 1 MGT 3,975,000 3,975,000
38 Courtyard by Marriott - Manchester 0.59% 1 GECC 6,800,000 6,779,498
39 Cromwell Business Park 0.40% 1 MGT 4,600,000 4,589,694
40 Crown Valley Self Storage 0.59% 1 GECC 6,800,000 6,779,036
- -------------------------------------------------------------------------------------------------------------------------------
41 CVS - Five Points 0.25% 1 GECC 2,875,000 2,869,290
42 CVS - Mullica Hill 0.13% 1 GECC 1,500,000 1,497,021
43 CVS - Wareham 0.19% 1 GECC 2,200,000 2,200,000
44 Cypress Gardens Mobile Home Park 0.21% 1 GECC 2,350,000 2,346,159
45 Dal-Park Garage 0.44% 1 GECC 4,988,962 4,988,962
- -------------------------------------------------------------------------------------------------------------------------------
46 Dellwood Estates 0.08% 1 GECC 925,000 925,000
47 Denver Gas and Electric Building 0.93% 1 MGT 10,600,000 10,600,000
48 Driscoll Place Shopping Center 0.15% 1 GECC 1,720,000 1,720,000
49 Durango Springs Plaza 0.21% 1 GECC 2,385,000 2,380,292
50 Eastern Self Storage 0.22% 1 MGT 2,500,000 2,483,722
- -------------------------------------------------------------------------------------------------------------------------------
51 EII Portfolio II 2.88% 7 GECC 33,053,100 32,925,976
51a Hampton Inn-State College 0.41% GECC 4,715,300 4,697,165
51b Hampton Inn-Madison Heights 0.45% GECC 5,178,400 5,158,484
51c Hampton Inn-Dublin 0.35% GECC 4,037,500 4,021,972
51d Hampton Inn Airport-Charleston 0.26% GECC 2,962,100 2,950,708
- -------------------------------------------------------------------------------------------------------------------------------
51e Hampton Inn Mountain Brook-Birmingham 0.29% GECC 3,360,900 3,347,974
51f Comfort Inn-Rutland 0.29% GECC 3,285,900 3,273,262
51g Homewood Suites-Windsor Locks 0.83% GECC 9,513,000 9,476,412
52 Fair Lakes - Uptons 1.01% 1 GECC 11,600,000 11,593,622
53 Fairway Estates Apartments 0.65% 1 GECC 7,500,000 7,483,855
- -------------------------------------------------------------------------------------------------------------------------------
54 First USA Building 1.18% 1 MGT 13,570,000 13,519,190
55 Garfield Center 0.34% 1 GECC 3,884,000 3,872,406
56 Hamden Surgery and Medical Center 0.41% 1 BSCMI 4,650,000 4,638,178
57 Harvard Park East 0.57% 1 GECC 6,473,000 6,462,420
58 Hawthorn Suites 1.57% 1 GECC 18,000,000 17,920,990
- -------------------------------------------------------------------------------------------------------------------------------
59 High House Crossing 0.83% 1 GECC 9,500,000 9,494,675
60 Highland MHP 0.36% 1 GECC 4,133,000 4,123,740
61 Highland Place 0.16% 1 GECC 1,825,000 1,821,111
62 Highland South 0.85% 1 GECC 9,720,000 9,694,599
63 Howard Johnson Plaza Resort 0.24% 1 BSCMI 2,700,000 2,692,288
- -------------------------------------------------------------------------------------------------------------------------------
64 Hunterwood Apartments 0.46% 1 GECC 5,300,000 5,297,124
65 Huntwick Village Shopping Center 0.32% 1 GECC 3,675,000 3,668,993
66 Hurst Retail Center 0.19% 1 GECC 2,200,000 2,193,403
67 Information Resources 2.27% 1 MGT 26,000,000 25,911,945
68 Ingles Portfolio 1.15% 4 BSCMI 13,200,000 13,168,886
- -------------------------------------------------------------------------------------------------------------------------------
68a Black Mountain Shopping Center 0.29% BSCMI 3,325,000 3,317,162
68b Marion Shopping Center 0.33% BSCMI 3,800,000 3,791,043
68c Adams Square Shopping Center 0.19% BSCMI 2,200,000 2,194,814
68d Hull Shopping Center 0.34% BSCMI 3,875,000 3,865,866
69 Iron Horse Shopping Center 1.11% 1 MGT 12,700,000 12,674,054
- -------------------------------------------------------------------------------------------------------------------------------
70 Jackson Bluff Apartments 0.12% 1 MGT 1,320,000 1,317,043
71 Jantzen Park 0.77% 1 BSCMI 8,850,000 8,845,882
72 Juncos Plaza 1.43% 1 MGT 16,350,000 16,350,000
73 Kmart Plaza Albuquerque 0.57% 1 GECC 6,535,000 6,535,000
74 Knight Port Apartments 0.27% 1 GECC 3,101,000 3,094,365
- -------------------------------------------------------------------------------------------------------------------------------
75 L & C Tower and Garage 1.39% 1 MGT 15,975,000 15,948,372
76 Laurel Canyon Office Plaza 0.34% 1 MGT 3,850,000 3,847,985
77 Long Wharf Maritime Center I 3.28% 1 MGT 37,500,000 37,478,298
78 Lowe's Boulevard 0.35% 1 GECC 4,000,000 3,994,693
79 Magnolia Place 0.72% 1 GECC 8,200,000 8,186,103
- -------------------------------------------------------------------------------------------------------------------------------
80 Mill at White Clay 0.28% 1 MGT 3,250,000 3,243,225
81 Netherwood Commons 0.69% 1 GECC 7,920,000 7,920,000
82 North Peachtree Perimeter Park Office Building 0.23% 1 MGT 2,650,000 2,650,000
83 North Star Village 0.40% 1 GECC 4,580,000 4,580,000
84 Oceanside Business-Park 0.30% 1 MGT 3,400,000 3,392,260
- -------------------------------------------------------------------------------------------------------------------------------
85 Office Depot/Goody's 0.41% 1 GECC 4,640,000 4,632,136
86 Oltorf Market Shopping Center 0.20% 1 MGT 2,343,750 2,340,206
87 One Ocean Plaza 0.41% 1 GECC 4,650,000 4,642,400
88 Ontario Mills Country Suites 0.76% 1 GECC 8,750,000 8,742,917
89 Osco Drug 0.20% 1 GECC 2,275,000 2,275,000
- -------------------------------------------------------------------------------------------------------------------------------
90 Park Pacific Apartments 0.98% 1 GECC 11,250,000 11,230,257
91 Partin-Settlement Plaza 0.45% 1 GECC 5,120,000 5,111,295
92 Pepperwood Townhomes 0.47% 1 GECC 5,400,000 5,388,492
93 Pescadero Apartments 2.53% 1 GECC 29,000,000 28,984,673
94 Plano Self Storage 0.81% 1 GECC 9,300,000 9,271,328
- -------------------------------------------------------------------------------------------------------------------------------
95 Platt Avenue Shopping Center 0.16% 1 GECC 1,800,000 1,796,561
96 Plaza 355 0.43% 1 MGT 4,915,000 4,902,790
97 Plaza Square Apartments 0.27% 1 MGT 3,040,000 3,031,836
98 Porter Medical Plaza 0.71% 1 GECC 8,160,000 8,146,663
99 Preston Valley View 0.60% 1 MGT 6,900,000 6,883,056
- -------------------------------------------------------------------------------------------------------------------------------
100 Quarry Self Storage 0.15% 1 GECC 1,700,000 1,700,000
101 Quivira Hills Estates 0.15% 1 GECC 1,750,000 1,750,000
102 Rancho Monte Vista MHP 0.65% 1 GECC 7,500,000 7,480,932
103 Red Bank Self Storage 0.12% 1 GECC 1,400,000 1,400,000
104 Redlands Ranch Mobile Home Park 0.27% 1 GECC 3,100,000 3,098,279
- -------------------------------------------------------------------------------------------------------------------------------
105 Reservoir Corporate Center 1.14% 1 BSCMI 13,100,000 13,073,984
106 Robious Hall Shopping Center 0.33% 1 GECC 3,825,000 3,822,958
107 Rockwood Village 0.37% 1 GECC 4,215,000 4,215,000
108 Rolling Hills Executive Center 0.51% 1 GECC 5,807,000 5,807,000
109 Roswell Corners Shopping Center (6) 1.20% 1 MGT 13,752,928 13,728,863
- -------------------------------------------------------------------------------------------------------------------------------
110 Sam's Trail Plaza 0.34% 1 GECC 3,950,000 3,937,335
111 Saufley Station 0.40% 1 GECC 4,528,000 4,520,326
112 Sawtelle Self Storage 0.66% 1 GECC 7,600,000 7,574,872
113 Security Portfolio V 1.03% 6 GECC 11,835,000 11,795,871
113a 9555 Forest Lane 0.22% GECC 2,467,115 2,458,958
- -------------------------------------------------------------------------------------------------------------------------------
113b 3335 West Northwest Highway 0.19% GECC 2,145,317 2,138,224
113c 4620 Pan American Freeway 0.11% GECC 1,215,680 1,211,660
113d 121 Old Broadmoor Road 0.19% GECC 2,181,073 2,173,861
113e 3061 Wood Avenue 0.14% GECC 1,608,988 1,603,668
113f 8100 South Main 0.19% GECC 2,216,828 2,209,498
- -------------------------------------------------------------------------------------------------------------------------------
114 Self Storage Plus (5) 0.58% 1 GECC 6,603,110 6,603,110
115 Shaw's Plaza 0.90% 1 BSCMI 10,250,000 10,250,000
116 Shoppes at Austin Square 0.47% 1 GECC 5,440,000 5,430,781
117 Shoppes at Dadeland 2.54% 1 GECC 29,000,000 29,000,000
118 Sierra Mini Storage 0.12% 1 GECC 1,350,000 1,345,802
- -------------------------------------------------------------------------------------------------------------------------------
119 Space Saver Self Storage 0.20% 1 GECC 2,325,000 2,320,045
120 Spectrum Office Building 0.56% 1 MGT 6,450,000 6,438,859
121 Springtree Center 0.27% 1 MGT 3,130,000 3,122,509
122 Stansbury Park Plaza 0.21% 1 MGT 2,360,000 2,360,000
123 Staples - Stillwater 0.17% 1 GECC 1,900,000 1,890,351
- -------------------------------------------------------------------------------------------------------------------------------
124 Stone Oak Physicians Plaza 0.64% 1 GECC 7,300,000 7,287,628
125 Stoneridge Apartments 0.19% 1 GECC 2,200,000 2,195,311
126 Storage USA - Manassas 0.35% 1 GECC 4,050,000 4,039,977
127 Summit Creek II Apartments 0.47% 1 MGT 5,360,000 5,347,380
128 Sunland Manor Apartments 0.24% 1 MGT 2,750,000 2,744,139
- -------------------------------------------------------------------------------------------------------------------------------
129 Synergy Business Park - Columbia I 1.56% 1 GECC 17,925,000 17,868,878
130 Synergy Business Park - Columbia II 1.52% 1 GECC 17,475,000 17,420,287
131 Telcordia Technologies 0.54% 1 BSCMI 6,200,000 6,200,000
132 The Chattahoochee Building 0.28% 1 MGT 3,200,000 3,198,419
133 The Exchange at Austin 1.03% 1 GECC 11,782,000 11,754,803
- -------------------------------------------------------------------------------------------------------------------------------
134 The Highlands Mobile Home Park 0.41% 1 GECC 4,750,000 4,739,421
135 The Pavillion 0.53% 1 BSCMI 6,050,000 6,046,641
136 The Shops at Windsor Green 1.33% 1 BSCMI 15,250,000 15,235,954
137 Third and Williams Walgreens 0.34% 1 MGT 3,900,000 3,898,087
138 Tomball Professional Atrium Building 0.29% 1 GECC 3,300,000 3,298,238
- -------------------------------------------------------------------------------------------------------------------------------
139 Tree Trail Apartments 1.30% 1 GECC 14,852,000 14,817,030
140 University Science Center 0.42% 1 MGT 4,875,000 4,858,566
141 Valley Parkway Health Center 0.88% 1 MGT 10,115,000 10,115,000
142 Vicksburg Crossing 0.25% 1 GECC 2,850,000 2,834,707
143 View Pointe Building 0.33% 1 MGT 3,800,000 3,800,000
- -------------------------------------------------------------------------------------------------------------------------------
144 Villa Mesa Apartments 0.41% 1 MGT 4,665,000 4,654,189
145 Village Square Shopping Center 0.19% 1 GECC 2,200,000 2,198,860
146 Village Walk Apartments 0.22% 1 MGT 2,520,000 2,520,000
147 Walgreens - Dallas 0.27% 1 GECC 3,040,000 3,040,000
148 Walgreens - Las Vegas 0.42% 1 GECC 4,842,000 4,839,819
- -------------------------------------------------------------------------------------------------------------------------------
149 Walgreens - Lubbock 0.23% 1 GECC 2,582,000 2,580,904
150 Warrington Plaza 0.48% 1 BSCMI 5,435,000 5,432,246
151 Water Tower II 0.83% 1 BSCMI 9,450,000 9,445,121
152 West Campus Square Shopping Center 1.43% 1 MGT 16,344,000 16,298,492
153 Williamsburg Downs 0.54% 1 GECC 6,200,000 6,196,799
- -------------------------------------------------------------------------------------------------------------------------------
GENERAL DETAILED INTEREST ORIGINAL
PROPERTY PROPERTY INTEREST ADMINISTRATIVE ACCRUAL TERM TO MATURITY
ID TYPE TYPE RATE FEE RATE BASIS OR APD (MOS.)
- ------------------------------------------------------------------------------------------------------------------------------
1 Office Office 7.6300% 0.05125% ACT/360 120
2 Office Office 8.0500% 0.05125% ACT/360 120
3 Office Office/Retail 7.1500% 0.05125% ACT/360 120
4 Office Office/Retail 7.7500% 0.05125% ACT/360 180
5 Office Office 7.0000% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
6 Retail Unanchored 7.5200% 0.05125% ACT/360 120
7 Office Office 7.4300% 0.05125% ACT/360 120
8 Office Office 7.7500% 0.09125% ACT/360 120
9 Office Office 7.3500% 0.05125% ACT/360 120
10 Retail Anchored 7.5200% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
11 Industrial Office/Warehouse 7.3500% 0.05125% ACT/360 120
12 Retail Unanchored 8.3500% 0.05125% ACT/360 120
13 Multifamily Conventional 7.7500% 0.05125% ACT/360 120
14 Industrial Office/Warehouse 7.6600% 0.05125% ACT/360 120
15 Multifamily Conventional 7.3000% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
16 Retail Unanchored 7.5000% 0.08125% ACT/360 120
17 Office Office 7.7500% 0.05125% ACT/360 120
18 Office Office 7.7500% 0.05125% ACT/360 120
19 Office Office 7.9000% 0.05125% ACT/360 120
20 Office Office 7.8500% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
21 Industrial Office/Warehouse 7.5000% 0.05125% ACT/360 120
22 Manufactured Housing Manufactured Housing 7.5300% 0.05125% ACT/360 120
23 Manufactured Housing Manufactured Housing 7.5300% 0.05125% ACT/360 120
24 Office Office/Retail 7.7000% 0.08125% ACT/360 120
25 Industrial Office/Warehouse 7.5000% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
26 Industrial Office/Manufacturing 7.4300% 0.08125% ACT/360 120
27 Retail Anchored (2) 7.5000% 0.05125% ACT/360 120
28 Office Office 8.0900% 0.05125% ACT/360 120
29 Office Office 7.5000% 0.05125% ACT/360 120
30 Manufactured Housing Manufactured Housing 7.5300% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
31 Retail Anchored 7.5200% 0.05125% ACT/360 120
32 Office Office 7.2300% 0.05125% ACT/360 120
33 Retail Anchored 7.6550% 0.05125% ACT/360 120
34 Multifamily Student 7.5000% 0.05125% ACT/360 120
35 Retail Anchored (2) 7.3900% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
36 Office Office 8.1400% 0.05125% ACT/360 120
37 Multifamily Conventional 7.1500% 0.05125% ACT/360 120
38 Hotel Limited-Service 8.3200% 0.05125% ACT/360 120
39 Industrial Office/Warehouse 7.5000% 0.08125% ACT/360 120
40 Self Storage Self Storage 8.3600% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
41 Retail Anchored 8.1000% 0.05125% ACT/360 120
42 Retail Anchored 8.1000% 0.05125% ACT/360 120
43 Retail Anchored 7.6000% 0.05125% ACT/360 120
44 Manufactured Housing Manufactured Housing 7.7500% 0.05125% ACT/360 120
45 Parking Garage Parking Garage 7.7700% 0.05125% ACT/360 117
- ------------------------------------------------------------------------------------------------------------------------------
46 Manufactured Housing Manufactured Housing 7.5300% 0.05125% ACT/360 120
47 Office Office 7.5000% 0.05125% ACT/360 120
48 Retail Unanchored 7.7200% 0.05125% ACT/360 120
49 Retail Unanchored 8.1300% 0.05125% ACT/360 120
50 Self Storage Self Storage 8.1400% 0.12125% ACT/360 240
- ------------------------------------------------------------------------------------------------------------------------------
51 Hotel Various 8.2500% 0.05125% ACT/360 120
51a Hotel Limited-Service
51b Hotel Limited-Service
51c Hotel Limited-Service
51d Hotel Limited-Service
- ------------------------------------------------------------------------------------------------------------------------------
51e Hotel Limited-Service
51f Hotel Limited-Service
51g Hotel Extended Stay
52 Retail Anchored 7.4100% 0.05125% ACT/360 120
53 Multifamily Conventional 7.7000% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
54 Office Office 7.8800% 0.10125% ACT/360 120
55 Office Office 8.2700% 0.05125% ACT/360 120
56 Office Office 7.9000% 0.05125% ACT/360 120
57 Office Office 7.7500% 0.05125% ACT/360 120
58 Hotel Extended Stay 8.8500% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
59 Retail Anchored 7.3500% 0.05125% ACT/360 120
60 Manufactured Housing Manufactured Housing 7.5000% 0.05125% ACT/360 120
61 Office Office 7.7500% 0.05125% ACT/360 120
62 Multifamily Conventional 7.7800% 0.05125% ACT/360 120
63 Hotel Limited Service 8.6500% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
64 Multifamily Conventional 7.4500% 0.05125% ACT/360 120
65 Retail Unanchored 7.7500% 0.05125% ACT/360 120
66 Retail Anchored (2) 8.2500% 0.05125% ACT/360 120
67 Office Office 7.6000% 0.08125% ACT/360 120
68 Retail Anchored 8.2250% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
68a Retail Anchored
68b Retail Anchored
68c Retail Anchored
68d Retail Anchored
69 Retail Anchored 7.9600% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
70 Multifamily Student 7.5000% 0.05125% ACT/360 120
71 Office Office 7.9000% 0.05125% ACT/360 120
72 Retail Anchored 7.7500% 0.05125% ACT/360 120
73 Retail Anchored 7.3600% 0.05125% ACT/360 120
74 Multifamily Conventional 7.7300% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
75 Office Office 7.6250% 0.05125% ACT/360 120
76 Office Suburban 7.5600% 0.05125% ACT/360 120
77 Office Suburban 7.2500% 0.05125% ACT/360 120
78 Retail Anchored 7.3300% 0.05125% ACT/360 120
79 Retail Anchored 7.5200% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
80 Multifamily Conventional 7.8600% 0.05125% ACT/360 120
81 Office Office 7.4100% 0.05125% ACT/360 120
82 Office Office 7.3200% 0.05125% ACT/360 120
83 Manufactured Housing Manufactured Housing 7.5300% 0.05125% ACT/360 120
84 Industrial Office/Warehouse 7.4200% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
85 Retail Anchored 7.5200% 0.05125% ACT/360 120
86 Retail Unanchored 8.2500% 0.08125% ACT/360 120
87 Office Office 7.7500% 0.05125% ACT/360 60
88 Hotel Limited-Service 8.1000% 0.05125% ACT/360 120
89 Retail Anchored 7.6800% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
90 Multifamily Conventional 7.3000% 0.05125% ACT/360 60
91 Retail Anchored 7.5000% 0.05125% ACT/360 120
92 Multifamily Conventional 7.7500% 0.05125% ACT/360 120
93 Multifamily Conventional 7.5300% 0.05125% ACT/360 120
94 Self Storage Self Storage 8.3600% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
95 Retail Unanchored 8.2900% 0.05125% ACT/360 120
96 Industrial Warehouse 8.0000% 0.08125% ACT/360 120
97 Multifamily Conventional 7.6600% 0.05125% ACT/360 120
98 Office Office 7.7500% 0.05125% ACT/360 120
99 Retail Unanchored 8.0500% 0.05125% ACT/360 60
- ------------------------------------------------------------------------------------------------------------------------------
100 Self Storage Self Storage 7.7500% 0.05125% ACT/360 120
101 Manufactured Housing Manufactured Housing 7.5300% 0.05125% ACT/360 120
102 Manufactured Housing Manufactured Housing 7.9000% 0.05125% ACT/360 120
103 Self Storage Self Storage 7.5800% 0.05125% ACT/360 120
104 Manufactured Housing Manufactured Housing 7.3800% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
105 Office Office 8.1000% 0.09125% ACT/360 120
106 Retail Unanchored 7.5000% 0.05125% ACT/360 120
107 Manufactured Housing Manufactured Housing 7.5300% 0.05125% ACT/360 120
108 Office Office 7.5000% 0.05125% ACT/360 120
109 Retail Anchored 7.8900% 0.05125% 30/360 238
- ------------------------------------------------------------------------------------------------------------------------------
110 Retail Anchored (2) 8.5100% 0.05125% ACT/360 120
111 Retail Anchored 7.5200% 0.05125% ACT/360 120
112 Self Storage Self Storage 7.7500% 0.05125% ACT/360 120
113 Self Storage Self Storage 7.7500% 0.05125% ACT/360 120
113a Self Storage Self Storage
- ------------------------------------------------------------------------------------------------------------------------------
113b Self Storage Self Storage
113c Self Storage Self Storage
113d Self Storage Self Storage
113e Self Storage Self Storage
113f Self Storage Self Storage
- ------------------------------------------------------------------------------------------------------------------------------
114 Self Storage Self Storage 8.6300% 0.05125% ACT/360 111
115 Retail Anchored 7.1500% 0.05125% ACT/360 120
116 Retail Anchored 7.5200% 0.05125% ACT/360 120
117 Retail Anchored 7.4600% 0.05125% ACT/360 120
118 Self Storage Self Storage 8.1300% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
119 Self Storage Self Storage 7.7500% 0.05125% ACT/360 120
120 Office Suburban 7.4000% 0.08125% ACT/360 120
121 Retail Unanchored 8.1600% 0.12125% ACT/360 120
122 Office Office/Retail 7.4700% 0.05125% ACT/360 120
123 Retail Anchored 8.1500% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
124 Office Office 7.5200% 0.05125% ACT/360 120
125 Multifamily Conventional 7.7500% 0.05125% ACT/360 120
126 Self Storage Self Storage 7.5700% 0.05125% ACT/360 120
127 Multifamily Conventional 7.2500% 0.08125% ACT/360 120
128 Multifamily Conventional 7.7500% 0.11125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
129 Office Office 8.0600% 0.05125% ACT/360 120
130 Office Office 8.0600% 0.05125% ACT/360 120
131 Office Office 7.8000% 0.09125% ACT/360 120
132 Office Suburban 7.7300% 0.05125% ACT/360 120
133 Multifamily Student 7.3500% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
134 Manufactured Housing Manufactured Housing 7.5300% 0.05125% ACT/360 120
135 Multifamily Conventional 7.3800% 0.05125% ACT/360 120
136 Retail Anchored 7.5500% 0.05125% ACT/360 120
137 Retail Anchored 7.7500% 0.05125% ACT/360 120
138 Office Office 7.5000% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
139 Multifamily Conventional 7.2500% 0.05125% ACT/360 120
140 Office Office 8.3100% 0.05125% ACT/360 120
141 Office Office 7.5000% 0.05125% ACT/360 120
142 Retail Anchored 7.6300% 0.05125% ACT/360 120
143 Office Office 7.3500% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
144 Multifamily Conventional 7.3300% 0.08125% ACT/360 120
145 Retail Anchored (2) 7.5900% 0.05125% ACT/360 120
146 Multifamily Conventional 7.1500% 0.05125% ACT/360 120
147 Retail Anchored 8.1500% 0.05125% ACT/360 120
148 Retail Anchored 7.9900% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
149 Retail Anchored 8.1500% 0.05125% ACT/360 120
150 Retail Anchored 7.6550% 0.05125% ACT/360 120
151 Office Office 7.6000% 0.09125% ACT/360 120
152 Retail Anchored 7.5000% 0.08125% ACT/360 120
153 Retail Anchored 7.6000% 0.05125% ACT/360 120
- ------------------------------------------------------------------------------------------------------------------------------
STATED REMAINING ORIGINAL REMAINING FIRST MATURITY ANNUAL MONTHLY REMAINING
TERM TO MATURITY AMORTIZATION AMORTIZATION PAYMENT DATE DEBT DEBT INTEREST-ONLY
ID OR APD (MOS.) TERM (MOS.) TERM (MOS.) DATE OR APD SERVICE SERVICE (3) PERIOD (MOS.)
- ----------------------------------------------------------------------------------------------------------------------------------
1 117 360 357 02/01/01 01/01/11 1,474,343 122,862 -
2 117 360 357 02/01/01 01/01/11 486,587 40,549 -
3 120 360 360 05/01/01 04/01/11 1,864,123 155,344 -
4 177 360 357 02/01/01 01/01/16 524,414 43,701 -
5 120 360 360 05/01/01 04/01/11 3,991,815 332,651 -
- ----------------------------------------------------------------------------------------------------------------------------------
6 118 360 358 03/01/01 02/01/11 242,122 20,177 -
7 119 360 359 04/01/01 03/01/11 599,985 49,999 -
8 120 360 360 05/01/01 04/01/11 474,981 39,582 -
9 119 360 359 04/01/01 03/01/11 2,794,471 232,873 -
10 118 360 358 03/01/01 02/01/11 860,290 71,691 -
- ---------------------------------------------------------------------------------------------------------------------------------
11 117 240 237 02/01/01 01/01/11 301,057 25,088 -
12 118 360 358 03/01/01 02/01/11 318,489 26,541 -
13 120 360 360 05/01/01 04/01/11 171,939 14,328 -
14 119 360 359 04/01/01 03/01/11 446,576 37,215 -
15 119 360 359 04/01/01 03/01/11 125,213 10,434 -
- ---------------------------------------------------------------------------------------------------------------------------------
16 117 300 297 02/10/01 01/10/11 447,829 37,319 -
17 118 360 358 03/01/01 02/01/11 490,026 40,835 -
18 118 360 358 03/01/01 02/01/11 163,342 13,612 -
19 117 360 357 02/01/01 01/01/11 274,732 22,894 -
20 118 360 358 03/01/01 02/01/11 496,497 41,375 -
- ---------------------------------------------------------------------------------------------------------------------------------
21 120 360 360 05/01/01 04/01/11 310,451 25,871 -
22 119 360 360 04/01/01 03/01/11 249,933 20,828 24
23 119 360 360 04/01/01 03/01/11 170,829 14,236 24
24 117 360 357 02/10/01 01/10/11 479,109 39,926 -
25 120 360 360 05/01/01 04/01/11 179,558 14,963 -
- ---------------------------------------------------------------------------------------------------------------------------------
26 117 360 357 02/10/01 01/10/11 285,410 23,784 -
27 120 360 360 05/01/01 04/01/11 889,401 74,117 -
28 117 360 357 02/01/01 01/01/11 195,373 16,281 -
29 118 360 358 03/01/01 02/01/11 1,006,869 83,906 -
30 119 360 360 04/01/01 03/01/11 78,262 6,522 24
- ---------------------------------------------------------------------------------------------------------------------------------
31 118 360 358 03/01/01 02/01/11 134,512 11,209 -
32 119 360 359 04/01/01 03/01/11 2,054,716 171,226 -
33 119 360 359 04/01/01 03/01/11 728,315 60,693 -
34 117 360 357 02/01/01 01/01/11 1,859,351 154,946 -
35 120 360 360 05/01/01 04/01/11 358,576 29,881 -
- ---------------------------------------------------------------------------------------------------------------------------------
36 108 360 348 05/01/00 04/01/10 197,010 16,418 -
37 120 360 360 06/10/01 05/10/11 322,169 26,847 -
38 117 300 297 02/01/01 01/01/11 647,197 53,933 -
39 117 360 357 02/10/01 01/10/11 385,966 32,164 -
40 116 324 320 01/01/01 12/01/10 635,504 52,959 -
- ---------------------------------------------------------------------------------------------------------------------------------
41 117 360 357 02/01/01 01/01/11 255,558 21,296 -
42 117 360 357 02/01/01 01/01/11 133,335 11,111 -
43 120 360 360 05/01/01 04/01/11 186,404 15,534 -
44 118 360 358 03/01/01 02/01/11 202,028 16,836 -
45 117 357 357 05/01/01 01/01/11 430,640 35,887 -
- ---------------------------------------------------------------------------------------------------------------------------------
46 119 360 360 04/01/01 03/01/11 77,841 6,487 24
47 120 360 360 06/10/01 05/10/11 889,401 74,117 -
48 120 360 360 05/01/01 04/01/11 147,440 12,287 -
49 117 360 357 02/01/01 01/01/11 212,603 17,717 -
50 236 240 236 01/01/01 12/01/20 253,552 21,129 -
- ---------------------------------------------------------------------------------------------------------------------------------
51 116 300 296 01/01/01 12/01/10 3,127,287 260,607 -
51a
51b
51c
51d
- ---------------------------------------------------------------------------------------------------------------------------------
51e
51f
51g
52 119 360 359 04/01/01 03/01/11 964,742 80,395 -
53 117 360 357 02/01/01 01/01/11 641,664 53,472 -
- ---------------------------------------------------------------------------------------------------------------------------------
54 114 360 354 11/01/00 10/01/10 1,181,268 98,439 -
55 115 360 355 12/01/00 11/01/10 350,806 29,234 -
56 116 360 356 01/01/01 12/01/10 405,557 33,796 -
57 118 360 358 03/01/01 02/01/11 556,480 46,373 -
58 115 300 295 12/01/00 11/01/10 1,790,529 149,211 -
- ---------------------------------------------------------------------------------------------------------------------------------
59 119 360 359 04/01/01 03/01/11 785,428 65,452 -
60 117 360 357 02/01/01 01/01/11 346,782 28,899 -
61 117 360 357 02/01/01 01/01/11 156,894 13,075 -
62 116 360 356 01/01/01 12/01/10 838,043 69,837 -
63 117 300 297 02/01/01 01/01/11 264,177 22,015 -
- ---------------------------------------------------------------------------------------------------------------------------------
64 119 360 359 04/01/01 03/01/11 442,525 36,877 -
65 118 360 358 03/01/01 02/01/11 315,938 26,328 -
66 115 360 355 12/01/00 11/01/10 198,334 16,528 -
67 117 300 297 02/10/01 01/10/11 2,325,985 193,832 -
68 116 360 356 01/01/01 12/01/10 1,187,223 98,935 -
- ----------------------------------------------------------------------------------------------------------------------------------
68a
68b
68c
68d
69 117 360 357 02/01/01 01/01/11 1,114,011 92,834 -
- ---------------------------------------------------------------------------------------------------------------------------------
70 117 360 357 02/01/01 01/01/11 110,756 9,230 -
71 119 360 359 04/01/01 03/01/11 771,867 64,322 -
72 120 360 360 06/10/01 05/10/11 1,405,601 117,133 -
73 120 360 360 06/01/01 05/01/11 540,826 45,069 -
74 117 360 357 02/01/01 01/01/11 266,077 22,173 -
- ---------------------------------------------------------------------------------------------------------------------------------
75 118 360 358 03/10/01 02/10/11 1,356,841 113,070 -
76 119 360 359 04/01/01 03/01/11 324,937 27,078 -
77 119 360 359 04/10/01 03/10/11 3,069,793 255,816 -
78 119 264 263 04/01/01 03/01/11 366,660 30,555 -
79 118 360 358 03/01/01 02/01/11 689,375 57,448 -
- ---------------------------------------------------------------------------------------------------------------------------------
80 117 360 357 02/01/01 01/01/11 282,371 23,531 -
81 120 360 360 05/01/01 04/01/11 658,686 54,891 -
82 120 360 360 06/01/01 05/01/11 218,444 18,204 -
83 119 360 360 04/01/01 03/01/11 385,418 32,118 24
84 117 360 357 02/01/01 01/01/11 283,048 23,587 -
- ---------------------------------------------------------------------------------------------------------------------------------
85 118 360 358 03/01/01 02/01/11 390,085 32,507 -
86 118 360 358 03/10/01 02/10/11 211,294 17,608 -
87 58 360 358 03/01/01 02/01/06 399,758 33,313 -
88 119 300 299 04/01/01 03/01/11 817,375 68,115 -
89 120 360 360 05/01/01 04/01/11 194,262 16,188 -
- ---------------------------------------------------------------------------------------------------------------------------------
90 58 360 358 03/01/01 02/01/06 925,521 77,127 -
91 118 360 358 03/01/01 02/01/11 429,597 35,800 -
92 117 360 357 02/01/01 01/01/11 464,235 38,686 -
93 119 360 359 04/11/01 03/11/11 2,440,419 203,368 -
94 116 324 320 01/01/01 12/01/10 869,145 72,429 -
- ---------------------------------------------------------------------------------------------------------------------------------
95 117 360 357 02/01/01 01/01/11 162,881 13,573 -
96 116 360 356 01/10/01 12/10/10 432,774 36,065 -
97 116 360 356 01/01/01 12/01/10 259,082 21,590 -
98 118 360 358 03/01/01 02/01/11 701,511 58,459 -
99 56 360 356 01/01/01 12/01/05 610,446 50,870 -
- ---------------------------------------------------------------------------------------------------------------------------------
100 120 300 300 06/01/01 05/01/11 154,087 12,841 -
101 119 360 360 04/01/01 03/01/11 147,267 12,272 24
102 116 360 356 01/01/01 12/01/10 654,125 54,510 -
103 120 360 360 05/01/01 04/01/11 118,390 9,866 -
104 119 360 359 04/01/01 03/01/11 257,058 21,421 -
- ---------------------------------------------------------------------------------------------------------------------------------
105 117 360 357 02/01/01 01/01/11 1,164,455 97,038 -
106 119 360 359 04/01/01 03/01/11 320,939 26,745 -
107 119 360 360 04/01/01 03/01/11 354,702 29,559 24
108 120 360 360 05/01/01 04/01/11 487,241 40,603 -
109 237 238 237 04/01/01 01/01/21 1,373,888 114,491 -
- ---------------------------------------------------------------------------------------------------------------------------------
110 114 360 354 11/01/00 10/01/10 364,801 30,400 -
111 118 360 358 03/01/01 02/01/11 380,670 31,722 -
112 117 300 297 02/01/01 01/01/11 688,860 57,405 -
113 117 300 297 02/01/01 01/01/11 1,072,718 89,393 -
113a
- ---------------------------------------------------------------------------------------------------------------------------------
113b
113c
113d
113e
113f
- ---------------------------------------------------------------------------------------------------------------------------------
114 111 351 351 05/01/01 07/01/10 619,945 51,662 -
115 120 360 360 05/01/01 04/01/11 830,750 69,229 -
116 118 360 358 03/01/01 02/01/11 457,342 38,112 -
117 120 360 360 05/01/01 04/01/11 2,423,385 201,949 -
118 117 300 297 02/01/01 01/01/11 126,433 10,536 -
- ---------------------------------------------------------------------------------------------------------------------------------
119 117 360 357 02/01/01 01/01/11 199,879 16,657 -
120 118 360 358 03/10/01 02/10/11 535,902 44,659 -
121 116 360 356 01/01/01 12/01/10 279,803 23,317 -
122 120 360 360 06/10/01 05/10/11 197,436 16,453 -
123 111 360 351 08/01/00 07/01/10 169,689 14,141 -
- ---------------------------------------------------------------------------------------------------------------------------------
124 118 360 358 03/01/01 02/01/11 613,712 51,143 -
125 117 360 357 02/01/01 01/01/11 189,133 15,761 -
126 118 300 298 03/01/01 02/01/11 361,365 30,114 -
127 117 360 357 02/10/01 01/10/11 438,776 36,565 -
128 117 360 357 02/01/01 01/01/11 236,416 19,701 -
- ---------------------------------------------------------------------------------------------------------------------------------
129 115 360 355 12/01/00 11/01/10 1,587,334 132,278 -
130 115 360 355 12/01/00 11/01/10 1,547,484 128,957 -
131 120 360 360 05/01/01 04/01/11 535,584 44,632 -
132 119 360 359 04/10/01 03/10/11 274,572 22,881 -
133 117 360 357 02/01/01 01/01/11 974,096 81,175 -
- ---------------------------------------------------------------------------------------------------------------------------------
134 117 360 357 02/01/01 01/01/11 399,724 33,310 -
135 119 360 359 04/01/01 03/01/11 501,678 41,806 -
136 119 300 299 04/01/01 03/01/11 1,358,311 113,193 -
137 119 360 359 04/10/01 03/10/11 335,281 27,940 -
138 119 360 359 04/01/01 03/01/11 276,889 23,074 -
- ---------------------------------------------------------------------------------------------------------------------------------
139 117 360 357 02/01/01 01/01/11 1,215,802 101,317 -
140 114 360 354 11/01/00 10/01/10 441,961 36,830 -
141 120 360 360 06/10/01 05/10/11 848,707 70,726 -
142 117 240 237 02/01/01 01/01/11 278,238 23,186 -
143 120 360 360 06/10/01 05/10/11 314,171 26,181 -
- ---------------------------------------------------------------------------------------------------------------------------------
144 117 360 357 02/10/01 01/10/11 384,924 32,077 -
145 119 360 359 04/01/01 03/01/11 186,222 15,519 -
146 120 360 360 06/10/01 05/10/11 204,243 17,020 -
147 120 360 360 06/01/01 05/01/11 271,502 22,625 -
148 119 360 359 04/01/01 03/01/11 425,942 35,495 -
- ---------------------------------------------------------------------------------------------------------------------------------
149 119 360 359 04/01/01 03/01/11 230,598 19,216 -
150 119 360 359 04/01/01 03/01/11 462,970 38,581 -
151 119 360 359 04/01/01 03/01/11 800,689 66,724 -
152 116 360 356 01/10/01 12/10/10 1,371,355 114,280 -
153 119 360 359 04/01/01 03/01/11 525,320 43,777 -
- ---------------------------------------------------------------------------------------------------------------------------------
CROSSED
APD WITH GRACE PAYMENT APPRAISED
ID LOCKBOX (YES/NO) OTHER LOANS DSCR PERIOD DATE VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
1 No No No 1.28 5 1 22,800,000
2 No No No 1.34 5 1 8,500,000
3 Soft at Closing, Springing Hard No No 1.33 0 1 29,300,000
4 Soft at Closing, Springing Hard No No 1.40 5 1 8,500,000
5 Soft at Closing, Springing Hard No No 2.75 0 1 200,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
6 Springing Hard Yes Yes (d) 1.27 5 1 3,600,000
7 No No No 1.80 5 1 12,500,000
8 No No No 1.33 5 1 8,200,000
9 No No No 1.61 5 1 54,000,000
10 Springing Hard Yes Yes (d) 1.23 5 1 12,650,000
- -----------------------------------------------------------------------------------------------------------------------------------
11 Soft at Closing, Springing Hard Yes No 1.35 7 1 4,700,000
12 No No No 1.27 5 1 4,850,000
13 No No No 1.23 5 1 2,500,000
14 No No No 1.23 5 1 6,550,000
15 No No No 1.35 5 1 1,903,000
- -----------------------------------------------------------------------------------------------------------------------------------
16 No No No 1.39 0 10 6,900,000
17 No No Yes (f) 1.25 5 1 7,500,000
18 No No Yes (f) 1.25 5 1 2,500,000
19 Hard No No 1.37 5 1 4,500,000
20 No No No 1.24 5 1 7,150,000
- -----------------------------------------------------------------------------------------------------------------------------------
21 No No No 1.30 5 1 5,300,000
22 No No No 1.23 5 1 3,750,000
23 No No No 1.23 5 1 2,600,000
24 No No No 1.35 0 10 7,550,000
25 No No No 1.27 5 1 2,800,000
- -----------------------------------------------------------------------------------------------------------------------------------
26 No No No 1.22 0 10 4,500,000
27 No No No 1.31 5 1 15,400,000
28 No No No 1.20 5 1 2,800,000
29 No No No 1.23 5 1 17,000,000
30 No No No 1.28 5 1 1,700,000
- -----------------------------------------------------------------------------------------------------------------------------------
31 Springing Hard Yes Yes (d) 1.30 5 1 2,150,000
32 No No No 1.25 5 1 36,000,000
33 No No Yes (a) 1.45 5 1 11,400,000
34 No No No 1.37 5 1 27,700,000
35 No No No 1.37 5 1 5,400,000
- -----------------------------------------------------------------------------------------------------------------------------------
36 No No No 1.35 5 1 4,400,000
37 No No No 1.26 5 10 5,150,000
38 No No No 1.50 5 1 10,500,000
39 No No No 1.24 0 10 6,200,000
40 No No Yes (b) 1.22 5 1 8,500,000
- -----------------------------------------------------------------------------------------------------------------------------------
41 No No No 1.22 5 1 3,700,000
42 No No No 1.21 5 1 1,950,000
43 No No No 1.27 5 1 2,800,000
44 No No No 1.23 5 1 3,000,000
45 No No No 1.31 5 1 6,650,000
- -----------------------------------------------------------------------------------------------------------------------------------
46 No No No 1.23 5 1 1,400,000
47 Springing Hard Yes No 1.37 5 10 15,800,000
48 No No No 1.37 5 1 2,175,000
49 No No No 1.43 5 1 3,690,000
50 No No No 1.40 7 1 4,550,000
- -----------------------------------------------------------------------------------------------------------------------------------
51 Soft at Closing, Springing Hard Yes No (4) 2.11 5 1 58,300,000
51a 7,400,000
51b 10,100,000
51c 7,100,000
51d 5,200,000
- -----------------------------------------------------------------------------------------------------------------------------------
51e 5,900,000
51f 5,900,000
51g 16,700,000
52 No No No 1.31 7 1 15,000,000
53 No No No 1.25 5 1 9,375,000
- -----------------------------------------------------------------------------------------------------------------------------------
54 Hard Yes No 1.32 10 1 21,100,000
55 No No No 1.36 5 1 5,700,000
56 No No No 1.39 5 1 6,200,000
57 No No Yes (f) 1.31 5 1 8,800,000
58 No No No 1.51 5 1 27,500,000
- -----------------------------------------------------------------------------------------------------------------------------------
59 No No No 1.33 5 1 12,300,000
60 No No No 1.31 5 1 6,720,000
61 No No No 1.35 5 1 2,500,000
62 No No No 1.27 5 1 12,000,000
63 No No No 1.74 5 1 4,400,000
- -----------------------------------------------------------------------------------------------------------------------------------
64 No No No 1.37 5 1 6,900,000
65 No No No 1.36 5 1 5,000,000
66 No No No 1.34 5 1 2,850,000
67 No No No 1.50 0 10 42,000,000
68 Springing Hard No No (4) 1.35 10 1 18,250,000
- -----------------------------------------------------------------------------------------------------------------------------------
68a 4,200,000
68b 5,450,000
68c 3,200,000
68d 5,400,000
69 No No No 1.20 7 1 16,525,000
- -----------------------------------------------------------------------------------------------------------------------------------
70 No No No 1.39 7 1 1,650,000
71 No No No 1.31 5 1 12,410,000
72 Yes No No 1.25 5 10 21,400,000
73 No No No 1.32 5 1 8,000,000
74 No No No 1.23 5 1 4,200,000
- -----------------------------------------------------------------------------------------------------------------------------------
75 No No No 1.20 0 10 22,000,000
76 No No No 1.25 7 1 5,900,000
77 No No No 1.31 0 10 55,000,000
78 No No No 1.25 5 1 5,340,000
79 Springing Hard Yes Yes (e) 1.26 5 1 10,600,000
- -----------------------------------------------------------------------------------------------------------------------------------
80 Soft at Closing, Springing Hard Yes No 1.25 7 1 4,130,000
81 No No No 1.30 5 1 9,900,000
82 No No No 1.55 7 1 4,370,000
83 No No No 1.23 5 1 5,820,000
84 No No No 1.26 7 1 4,700,000
- -----------------------------------------------------------------------------------------------------------------------------------
85 Springing Hard Yes Yes (e) 1.25 5 1 6,000,000
86 No No No 1.34 0 10 3,150,000
87 No No No 1.26 5 1 6,700,000
88 No No No 1.61 5 1 15,300,000
89 No No No 1.25 5 1 3,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
90 No No No 1.27 5 1 17,400,000
91 No No No 1.27 5 1 6,300,000
92 No No No 1.24 5 1 6,750,000
93 Soft at Closing, Springing Hard Yes No 1.39 - 11 45,000,000
94 No No Yes (b) 1.22 5 1 12,700,000
- -----------------------------------------------------------------------------------------------------------------------------------
95 No No No 1.26 5 1 2,475,000
96 No No No 1.20 0 10 6,100,000
97 Soft at Closing, Springing Hard Yes No 1.21 7 1 3,800,000
98 No No Yes (f) 1.28 5 1 10,200,000
99 Soft at Closing, Springing Hard No No 1.27 7 1 8,900,000
- -----------------------------------------------------------------------------------------------------------------------------------
100 No No No 1.70 5 1 3,200,000
101 No No No 1.24 5 1 2,700,000
102 No No No 1.21 5 1 9,790,000
103 No No No 1.34 5 1 1,875,000
104 No No No 1.47 5 1 4,500,000
- -----------------------------------------------------------------------------------------------------------------------------------
105 No No No 1.29 5 1 18,350,000
106 No No No 1.32 5 1 5,300,000
107 No No No 1.23 5 1 5,270,000
108 No No No 1.24 5 1 8,300,000
109 Hard No No 1.21 7 1 20,500,000
- -----------------------------------------------------------------------------------------------------------------------------------
110 No No No 1.30 5 1 4,955,000
111 Springing Hard Yes Yes (e) 1.24 5 1 5,660,000
112 No No No 1.30 5 1 10,000,000
113 No No No (4) 1.27 5 1 16,550,000
113a 3,450,000
- -----------------------------------------------------------------------------------------------------------------------------------
113b 3,000,000
113c 1,700,000
113d 3,050,000
113e 2,250,000
113f 3,100,000
- -----------------------------------------------------------------------------------------------------------------------------------
114 No No No 1.30 5 1 10,380,000
115 No No No 1.47 5 1 14,300,000
116 Springing Hard Yes Yes (d) 1.27 5 1 6,800,000
117 No No No 1.23 5 1 36,000,000
118 No No No 1.36 5 1 1,970,000
- -----------------------------------------------------------------------------------------------------------------------------------
119 No No No 1.39 5 1 3,100,000
120 No No No 1.32 0 10 8,100,000
121 No No No 1.30 7 1 4,175,000
122 No No No 1.43 5 10 3,150,000
123 No No No 1.39 5 1 2,740,000
- -----------------------------------------------------------------------------------------------------------------------------------
124 No No No 1.27 5 1 9,300,000
125 No No No 1.44 5 1 3,700,000
126 No No No 1.38 5 1 5,400,000
127 No No No 1.26 0 10 6,750,000
128 Soft at Closing, Springing Hard Yes No 1.24 10 1 3,700,000
- -----------------------------------------------------------------------------------------------------------------------------------
129 No No Yes (c) 1.25 5 1 24,900,000
130 No No Yes (c) 1.21 5 1 25,000,000
131 Springing Hard No No 1.43 5 1 8,300,000
132 No No No 1.21 0 10 4,000,000
133 No No No 1.28 5 1 15,100,000
- -----------------------------------------------------------------------------------------------------------------------------------
134 No No No 1.33 5 1 6,700,000
135 No No No 1.39 5 1 9,000,000
136 Springing Hard Yes No 1.30 5 1 21,500,000
137 No No No 1.14 0 10 5,020,000
138 No No No 1.24 5 1 4,400,000
- -----------------------------------------------------------------------------------------------------------------------------------
139 No No No 1.25 5 1 18,800,000
140 No No No 1.34 5 1 6,550,000
141 No No No 1.29 5 10 12,800,000
142 No No No 1.26 5 1 4,200,000
143 No No No 1.31 5 10 5,300,000
- -----------------------------------------------------------------------------------------------------------------------------------
144 Hard No No 1.31 0 10 6,000,000
145 No No No 1.24 5 1 3,000,000
146 No No No 1.26 5 10 3,150,000
147 No No No 1.28 5 1 3,875,000
148 No No No 1.21 5 1 6,370,000
- -----------------------------------------------------------------------------------------------------------------------------------
149 No No No 1.30 5 1 3,565,000
150 No No Yes (a) 1.38 5 1 7,250,000
151 No No No 1.55 5 1 16,000,000
152 No No No 1.28 0 10 20,600,000
153 No No No 1.27 5 1 7,750,000
- -----------------------------------------------------------------------------------------------------------------------------------
CUT-OFF LTV
DATE LTV RATIO AT
ID RATIO MATURITY ADDRESS
- ----------------------------------------------------------------------------------------------------------------------
1 75.93% 67.42% 1400 Eye Street
2 64.58% 57.91% 1201 North Watson Road
3 78.50% 68.73% 510 Fifth Avenue
4 71.61% 56.71% 524 North Lamar Boulevard
5 25.00% 21.80% 59 Maiden Lane
- ----------------------------------------------------------------------------------------------------------------------
6 79.86% 70.67% 726 Academy Drive
7 57.57% 50.80% 611 Wilshire Boulevard
8 67.38% 59.89% 67 Forest Street
9 62.56% 55.09% 818 West Seventh Street
10 80.76% 71.46% U.S. Highway 98 and Gulf Shore Drive
- ----------------------------------------------------------------------------------------------------------------------
11 66.65% 46.17% 3100-3330 Commerce Center Place
12 72.06% 65.02% 22912 Pacific Park Drive
13 80.00% 71.11% 3905 Alpine Street
14 79.96% 70.97% 441-445 Defense Highway
15 79.93% 70.31% 545 Donna Drive
- ----------------------------------------------------------------------------------------------------------------------
16 72.94% 59.42% 2300 East Castor Avenue
17 75.88% 67.52% 7720 South Broadway
18 75.88% 67.52% 7750 South Broadway
19 69.86% 62.43% 1892 Preston White Drive
20 79.87% 71.24% 2200 West Commercial Boulevard
- ----------------------------------------------------------------------------------------------------------------------
21 69.81% 61.67% 525 and 533 Byron Street
22 79.20% 72.55% 40 Lilac Lane
23 78.08% 71.52% 4950 West Farm Road 156
24 74.01% 65.83% 1288, 1292, 1296 Rickert Drive
25 76.43% 67.52% 600 Greentree Road
- ----------------------------------------------------------------------------------------------------------------------
26 75.94% 67.09% 2605 & 2609 Cabover Drive
27 68.83% 60.81% 5601-5667 Silver Creek Valley Road
28 78.42% 70.39% 110 North Rubey Drive
29 70.47% 62.33% 6183 & 6185 Paseo Del Norte
30 54.71% 50.11% 6500 Kansas Avenue
- ----------------------------------------------------------------------------------------------------------------------
31 74.29% 65.74% 3527 Denny Avenue
32 69.82% 61.30% 201 North Civic Drive
33 74.96% 66.53% 3100 Quakerbridge Road
34 79.82% 70.65% 1600 Patrick Henry Drive
35 80.00% 70.48% 2-6 College Park Lane
- ----------------------------------------------------------------------------------------------------------------------
36 49.83% 45.02% 15425 North Freeway
37 77.18% 67.59% 290 South Fitzhugh Street and 653 & 689 Clarissa Street
38 64.57% 53.84% 225 Slater Street
39 74.03% 65.52% 820 Cromwell Park Drive & 890 Airport Park Road
40 79.75% 69.16% 27680 Center Drive
- ----------------------------------------------------------------------------------------------------------------------
41 77.55% 69.62% 4216 Woodbourne Road
42 76.77% 68.93% 211 North Main Street
43 78.57% 69.59% 2992 Cranberry Highway
44 78.21% 69.59% 1951 Lake Daisy Road
45 75.02% 66.84% 1600 Commerce Street
- ----------------------------------------------------------------------------------------------------------------------
46 66.07% 60.52% 10 Southwest 11th Road
47 67.09% 59.28% 910 15th Street
48 79.08% 70.24% 1845-1847 West Alabama Street
49 64.51% 57.96% 3585 South Durango Drive
50 54.59% 2.45% 4411 45th Street
- ----------------------------------------------------------------------------------------------------------------------
51 56.48% 47.05% Various
51a 1101 East College Avenue
51b 32420 Stephenson Highway
51c 3920 Tuller Road
51d 4701 Saul White Boulevard
- ----------------------------------------------------------------------------------------------------------------------
51e 2731 Highway 280
51f 19 Allen Street
51g 65 Ella Grasso Turnpike
52 77.29% 68.17% 12995 Fair Lakes Shopping Center
53 79.83% 71.00% 807 The Heights Drive
- ----------------------------------------------------------------------------------------------------------------------
54 64.07% 57.34% 600 International Parkway
55 67.94% 61.30% 320-330 South Garfield Avenue
56 74.81% 66.90% 2080 Whitney Avenue
57 73.44% 65.35% 950 East Harvard Avenue
58 65.17% 55.21% 1500 Parkwood Circle
- ----------------------------------------------------------------------------------------------------------------------
59 77.19% 67.98% 2741 NC Highway 55
60 61.37% 54.31% 7717 Church Avenue
61 72.84% 64.87% 6151 Wilson Mills Road
62 80.79% 72.04% 221 Upper Riverdale Road
63 61.19% 51.48% 9 North Pompano Beach Boulevard
- ----------------------------------------------------------------------------------------------------------------------
64 76.77% 67.78% 5830 South Lake Houston Parkway
65 73.38% 65.30% 5050 FM 1960 West
66 76.96% 69.41% 804 Northeast Loop 820
67 61.70% 50.41% 150 North Clinton Street & 564 West Randolph Street
68 72.16% 65.01% Various
- ----------------------------------------------------------------------------------------------------------------------
68a 550 Highway 9
68b 309 West Henderson Street
68c 1070 East Franklin Street
68d 9151 Highway 29 South
69 76.70% 68.64% 345-693 East Prater Way
- ----------------------------------------------------------------------------------------------------------------------
70 79.82% 70.65% 1327 Jackson Bluff Road
71 71.28% 63.64% 518 & 541 Northeast 20th Avenue and 2035 Northeast Glisan Street
72 76.40% 67.92% State Road 31 Kilometer 24 Cieba Norte Ward
73 81.69% 71.92% 2100 Carlisle Boulevard Northeast
74 73.68% 65.57% 201 Willow Chase Drive
- ----------------------------------------------------------------------------------------------------------------------
75 72.49% 64.31% 401 Church Street
76 65.22% 57.74% 4705 North Laurel Canyon Boulevard
77 68.14% 59.86% 555 and 585 Long Wharf Drive
78 74.81% 55.77% 1500 Lowe's Boulevard
79 77.23% 68.34% 1484 Old Aberdeen Road
- ----------------------------------------------------------------------------------------------------------------------
80 78.53% 70.11% 49 Annabelle Street
81 80.00% 70.51% 5001-5041 Indian School Road Northeast
82 60.64% 53.33% 10-24 Perimeter Park Drive
83 78.69% 72.09% 8701 Northeast 107th Place
84 72.18% 63.75% 3025, 3033, 3041, 3044, 3052, 3060 Industry Street
- ----------------------------------------------------------------------------------------------------------------------
85 77.20% 68.31% 1850 South US Highway 27
86 74.29% 66.89% 2121 Oltorf Street East
87 69.29% 66.28% 1 South Ocean Boulevard
88 57.14% 47.28% 4370 Mills Circle
89 75.83% 67.29% 6712 West Bell Road
- ----------------------------------------------------------------------------------------------------------------------
90 64.54% 61.44% 10250-10322 La Hacienda Avenue
91 81.13% 71.76% 2501 East Irlo Bronson Memorial Highway
92 79.83% 71.09% 3790 Pepperwood Court
93 64.41% 56.98% 950 Redwood Shores Parkway
94 73.00% 63.30% 30359 Esperanza
- ----------------------------------------------------------------------------------------------------------------------
95 72.59% 65.46% 6401-6415 Platt Avenue
96 80.37% 72.04% 15551-15563 Frederick Road
97 79.79% 70.94% 3206 Plaza Drive
98 79.87% 71.07% 2535 South Downing Street
99 77.34% 74.28% 13330 Preston Road
- ----------------------------------------------------------------------------------------------------------------------
100 53.13% 43.48% 6260 Quarry Road
101 64.81% 59.37% 7257 Forest Drive
102 76.41% 68.33% 15050 Monte Vista Avenue
103 74.67% 66.09% 1206 Red Bank Road
104 68.85% 60.68% 1721 East Colton Avenue
- ----------------------------------------------------------------------------------------------------------------------
105 71.25% 63.97% 144 Turnpike Road
106 72.13% 63.77% 10064 Robious Road
107 79.98% 73.27% 4130 South 104th East Avenue
108 69.96% 61.81% 3305-3355 South University Drive
109 66.97% 0.00% 1105, 1115, 1125, 1145, 1155, 1165, and 1195 Woodstock Road
- ----------------------------------------------------------------------------------------------------------------------
110 79.46% 72.13% 9404-9484 South Orange Blossom Trail
111 79.86% 70.67% 5985-5995 Mobile Highway
112 75.75% 62.16% 2240 Sawtelle Boulevard
113 71.27% 58.49% Various
113a 9555 Forest Lane
- ----------------------------------------------------------------------------------------------------------------------
113b 3335 West Northwest Highway
113c 4620 Pan American Freeway
113d 121 Old Broadmoor Road
113e 3061 Wood Avenue
113f 8100 South Main
- ----------------------------------------------------------------------------------------------------------------------
114 63.61% 57.90% 8001-8011 Snouffer School Road
115 71.68% 62.76% 5-9 Plaistow Road
116 79.86% 70.67% 2710 Wilma Rudolph Boulevard
117 80.56% 71.11% 7220 North Kendall Drive
118 68.31% 56.67% 555 South Lovers Lane
- ----------------------------------------------------------------------------------------------------------------------
119 74.84% 66.64% 26419 Barton Road
120 79.49% 70.13% 32000 Northwestern Highway
121 74.79% 67.28% 8027 West Oakland Park Boulevard
122 74.92% 66.15% 220 Millpond Road
123 68.99% 62.24% 616 North Perkins Road
- ----------------------------------------------------------------------------------------------------------------------
124 78.36% 69.34% 19016 Stone Oak Parkway & 544 Oak Centre Drive
125 59.33% 52.83% 3864 Sunnyview Road Northeast
126 74.81% 61.01% 8621 Sunnygate Drive
127 79.22% 69.68% 2421-2781 Hidden Woods Drive
128 74.17% 66.04% 10825 Nettleton Street
- ----------------------------------------------------------------------------------------------------------------------
129 71.76% 64.45% 201 Executive Center Drive, 250 Berryhill Road & 110 Centerview Drive
130 69.68% 62.58% 101, 111, 100, 121, 220 Executive Center Drive
131 74.70% 66.48% 45 Knightsbridge Road
132 79.96% 71.09% 1642 Powers Ferry Road
133 77.85% 68.64% 1500 Crossing Place
- ----------------------------------------------------------------------------------------------------------------------
134 70.74% 62.65% 3127 Greenfield Road
135 67.18% 59.22% 88 Cutter Mill Road
136 70.86% 57.71% 3477 US Route 1
137 77.65% 69.07% 5300 Third Street
138 74.96% 66.27% 425 Holderrieth Boulevard
- ----------------------------------------------------------------------------------------------------------------------
139 78.81% 69.32% 1355 Indian Trail Road
140 74.18% 67.03% 12001 Science Center
141 79.02% 69.82% 488 East Valley Parkway
142 67.49% 47.22% Highway 61 at Iowa Avenue
143 71.70% 63.11% 1501 Federal Way
- ----------------------------------------------------------------------------------------------------------------------
144 77.57% 68.37% 720 West Victoria Street and 719 West Wilson Street
145 73.30% 64.94% 535-645 South Boulder Road
146 80.00% 70.05% 66 Reynolds Road
147 78.45% 70.42% 3211 South Lancaster Road
148 75.98% 67.98% 3808 East Tropicana Avneue
- ----------------------------------------------------------------------------------------------------------------------
149 72.40% 65.01% 1619 50th Street
150 74.93% 66.49% 620 Easton Road
151 59.03% 52.32% 307 Orchard City Drive
152 79.12% 70.08% 35020 Enchanted Parkway South
153 79.96% 70.86% 5350 Central Florida Parkway
- ----------------------------------------------------------------------------------------------------------------------
NET UNITS
YEAR YEAR RENTABLE OF
ID CITY STATE ZIP CODE BUILT RENOVATED AREA SF/UNITS MEASURE
- ------------------------------------------------------------------------------------------------------------------
1 Washington DC 20005 1982 1995 167,233 Sq. Ft.
2 Arlington TX 76006 1972 1999 102,678 Sq. Ft.
3 New York NY 10036 1954 61,159 Sq. Ft.
4 Austin TX 78703 2000 36,209 Sq. Ft.
5 New York NY 10038 1966 2000 1,125,295 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
6 Bessemer AL 35022 2000 38,900 Sq. Ft.
7 Los Angeles CA 90017 1953 2000 146,229 Sq. Ft.
8 Marlborough MA 01752 1984 1996 61,973 Sq. Ft.
9 Los Angeles CA 90017 1926 1985 377,405 Sq. Ft.
10 Destin FL 32541 1999 84,682 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
11 Louisville KY 40211 1960 1998 169,527 Sq. Ft.
12 Aliso Viejo CA 92656 1999 15,189 Sq. Ft.
13 Boise ID 83705 1971 1998 84 Units
14 Annapolis MD 21401 2000 63,660 Sq. Ft.
15 O'Fallon IL 62269 1982 70 Units
- ------------------------------------------------------------------------------------------------------------------
16 Philadelphia PA 19134 1983 77,360 Sq. Ft.
17 Littleton CO 80122 1983 59,607 Sq. Ft.
18 Littleton CO 80122 1983 23,555 Sq. Ft.
19 Reston VA 20191 1986 23,669 Sq. Ft.
20 Ft. Lauderdale FL 33309 1985 67,115 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
21 Chesapeake VA 23320 1999 67,400 Sq. Ft.
22 Bonner Springs KS 66012 1970 211 Units
23 Brookline Station MO 65619 1980 1986 166 Units
24 Naperville IL 60540 1988 1989 45,369 Sq. Ft.
25 Chesapeake VA 23320 1998 44,000 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
26 Hanover MD 21076 1985 67,000 Sq. Ft.
27 San Jose CA 95138 2000 61,049 Sq. Ft.
28 Golden CO 80403 2000 18,628 Sq. Ft.
29 Carlsbad CA 92009 2000 75,453 Sq. Ft.
30 Kansas City KS 66111 1967 143 Units
- ------------------------------------------------------------------------------------------------------------------
31 Pascagoula MS 39581 2000 20,100 Sq. Ft.
32 Walnut Creek CA 94596 1983 167,117 Sq. Ft.
33 Hamilton NJ 08619 1979 176,231 Sq. Ft.
34 Blacksburg VA 24060 1989 1998 288 Units
35 Georgetown DE 19947 2000 42,400 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
36 Houston TX 77090 1982 66,239 Sq. Ft.
37 Rochester NY 14608 1989 92 Units
38 Manchester CT 6040 1999 90 Units
39 Glen Burnie MD 21061 1987 1998 68,441 Sq. Ft.
40 Mission Viejo CA 92692 1996 83,319 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
41 Bristol PA 19055 2000 10,125 Sq. Ft.
42 Mullica Hill NJ 8062 2000 10,125 Sq. Ft.
43 East Wareham MA 2538 1999 10,125 Sq. Ft.
44 Winter Haven FL 33880 1974 269 Units
45 Dallas TX 75201 1969 417,560 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
46 Warrensburg MO 64093 1973 136 Units
47 Denver CO 80202 1910 1996 145,018 Sq. Ft.
48 Houston TX 77098 1980 2000 14,500 Sq. Ft.
49 Las Vegas NV 89147 1998 17,887 Sq. Ft.
50 West Palm Beach FL 33407 1999 70,310 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
51 Various Various Various Various Various 859 Units
51a State College PA 16801 1987 1999 120 Units
51b Madison Heights MI 48071 1987 1998 124 Units
51c Dublin OH 43017 1988 1999 123 Units
51d Charleston SC 29418 1985 125 Units
- ------------------------------------------------------------------------------------------------------------------
51e Birmingham AL 35223 1987 131 Units
51f Rutland VT 05701 1985 1995 104 Units
51g Windsor Locks CT 06096 1990 1999 132 Units
52 Fairfax VA 22033 1994 2000 68,366 Sq. Ft.
53 Fort Worth TX 76112 1979 2000 352 Units
- ------------------------------------------------------------------------------------------------------------------
54 Lake Mary FL 32746 1997 125,155 Sq. Ft.
55 Alhambra CA 91801 1988 51,866 Sq. Ft.
56 Hamden CT 06518 1972 1999 42,088 Sq. Ft.
57 Denver CO 80210 1979 80,542 Sq. Ft.
58 Atlanta GA 30339 1984 2001 280 Units
- ------------------------------------------------------------------------------------------------------------------
59 Cary NC 27502 1998 89,997 Sq. Ft.
60 Highland CA 92346 1984 215 Units
61 Highland Heights OH 44143 1971 1997 31,699 Sq. Ft.
62 Jonesboro GA 30236 1972 2000 218 Units
63 Pompano Beach FL 33062 1972 2000 104 Units
- ------------------------------------------------------------------------------------------------------------------
64 Houston TX 77049 1972 1999 256 Units
65 Houston TX 77069 1979 1995 62,205 Sq. Ft.
66 Hurst TX 76053 1994 2000 15,608 Sq. Ft.
67 Chicago IL 60661 1908 1990 252,000 Sq. Ft.
68 Various Various Various Various Various 312,019 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
68a Black Mountain NC 28711 1981 1996 76,390 Sq. Ft.
68b Marion NC 28752 1977 1993 89,359 Sq. Ft.
68c Hartwell GA 30643 1980 1994 81,270 Sq. Ft.
68d Hull GA 30646 1990 2000 65,000 Sq. Ft.
69 Sparks NV 89431 1980 1985 185,890 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
70 Tallahassee FL 32304 1995 24 Units
71 Portland OR 97232 1920 1993 115,436 Sq. Ft.
72 Juncos PR 00777 1998 2001 213,327 Sq. Ft.
73 Albuquerque NM 87110 1969 1984 106,494 Sq. Ft.
74 McDonough GA 30253 1999 76 Units
- ------------------------------------------------------------------------------------------------------------------
75 Nashville TN 37219 1925 1998 269,326 Sq. Ft.
76 Studio City CA 91607 1987 36,988 Sq. Ft.
77 New Haven CT 06511 1985 415,685 Sq. Ft.
78 Killeen TX 76542 2000 58,300 Sq. Ft.
79 Columbus MS 39701 1999 103,607 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
80 Newark DE 19711 2000 40 Units
81 Albuquerque NM 87110 1997 86,426 Sq. Ft.
82 Atlanta GA 30341 1969 70,394 Sq. Ft.
83 Kansas City MO 64157 1975 219 Units
84 Oceanside CA 92054 1986 72,852 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
85 Somerset KY 42501 2000 56,840 Sq. Ft.
86 Austin TX 78741 1986 33,644 Sq. Ft.
87 Boca Raton FL 33432 1981 1998 46,465 Sq. Ft.
88 Ontario CA 91764 1998 138 Units
89 Glendale AZ 85308 2000 15,000 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
90 Fountain Valley CA 92708 1970 172 Units
91 Kissimmee FL 34744 2000 54,300 Sq. Ft.
92 Portsmouth VA 23703 1984 1986 141 Units
93 Redwood City CA 94065 1999 170 Units
94 Rancho Santa Margarita CA 92688 1989 1996 97,259 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
95 West Hills CA 91307 1988 12,581 Sq. Ft.
96 Rockville MD 20850 1978 75,600 Sq. Ft.
97 New Albany IN 47150 1985 1996 104 Units
98 Denver CO 80210 1991 76,046 Sq. Ft.
99 Dallas TX 75240 1964 1995 61,670 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
100 Spring Valley CA 91977 1992 70,346 Sq. Ft.
101 Kansas City KS 66106 1963 142 Units
102 Chino Hills CA 91709 1970 226 Units
103 Goose Creek SC 29445 1991 43,909 Sq. Ft.
104 Redlands CA 92374 1988 122 Units
- ------------------------------------------------------------------------------------------------------------------
105 Southborough MA 01772 1999 99,745 Sq. Ft.
106 Midlothian VA 23225 1981 1996 63,041 Sq. Ft.
107 Tulsa OK 74146 1970 264 Units
108 Davie FL 33328 2000 35,904 Sq. Ft.
109 Roswell GA 30076 2000 136,752 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
110 Orlando FL 32837 1987 72,190 Sq. Ft.
111 Pensacola FL 32526 1998 53,872 Sq. Ft.
112 Los Angeles CA 90064 1998 50,054 Sq. Ft.
113 Various Various Various Various Various 288,969 Sq. Ft.
113a Dallas TX 75243 1997 53,780 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
113b Dallas TX 75220 1997 56,150 Sq. Ft.
113c Albuquerque NM 87109 1996 40,930 Sq. Ft.
113d Colorado Springs CO 80906 1999 43,835 Sq. Ft.
113e Colorado Springs CO 80907 1998 37,630 Sq. Ft.
113f Houston TX 77025 1997 56,644 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
114 Gaithersburg MD 20879 1997 87,195 Sq. Ft.
115 Plaistow NH 03865 1965 1995 155,033 Sq. Ft.
116 Clarksville TN 37040 1991 2000 97,005 Sq. Ft.
117 Miami FL 33156 1999 105,181 Sq. Ft.
118 Visalia CA 93292 1998 41,500 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
119 Redlands CA 92373 1987 63,295 Sq. Ft.
120 Farmington Hills MI 48334 1985 54,537 Sq. Ft.
121 Sunrise FL 33351 1978 1995 46,760 Sq. Ft.
122 Stansbury Park UT 84074 2000 22,400 Sq. Ft.
123 Stillwater OK 74074 1998 24,049 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
124 San Antonio TX 78258 1999 65,652 Sq. Ft.
125 Salem OR 97305 1984 1999 140 Units
126 Manassas VA 20110 1998 73,295 Sq. Ft.
127 Canton MI 48188 2000 42 Units
128 Los Angeles CA 91352 1985 85 Units
- ------------------------------------------------------------------------------------------------------------------
129 Columbia SC 29210 1987 1989 256,792 Sq. Ft.
130 Columbia SC 29210 1982 1998 268,344 Sq. Ft.
131 Piscataway NJ 08854 1979 1999 73,868 Sq. Ft.
132 Marietta GA 30067 1983 35,754 Sq. Ft.
133 Austin TX 78741 2000 156 Units
- ------------------------------------------------------------------------------------------------------------------
134 Pearl MS 39208 1990 2000 487 Units
135 Great Neck NY 11021 1988 2000 29 Units
136 West Windsor NJ 08550 1992 157,463 Sq. Ft.
137 San Francisco CA 94124 2000 13,390 Sq. Ft.
138 Tomball TX 77375 1982 53,792 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
139 Norcross GA 30093 1986 2000 302 Units
140 Orlando FL 32826 1999 55,908 Sq. Ft.
141 Escondico CA 92025 1989 70,058 Sq. Ft.
142 Vicksburg MS 39180 1998 45,308 Sq. Ft.
143 Boise ID 83705 1962 1999 44,287 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
144 Costa Mesa CA 92627 1964 1998 59 Units
145 Louisville CO 80027 1979 25,335 Sq. Ft.
146 Village of Webster NY 14580 1988 56 Units
147 Dallas TX 75216 1998 13,905 Sq. Ft.
148 Las Vegas NV 89121 2000 15,120 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
149 Lubbock TX 79412 1999 13,905 Sq. Ft.
150 Warrington PA 18976 1977 83,142 Sq. Ft.
151 Campbell CA 95008 1935 1988 52,941 Sq. Ft.
152 Federal Way WA 98003 1990 1999 163,798 Sq. Ft.
153 Orlando FL 32821 1985 1992 106,313 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------
ACTUAL,
LOAN PER NET PREPAYMENT ANNUALIZED, OR
RENTABLE AREA PROVISIONS TTM 2000/ UNDERWRITTEN UNDERWRITTEN
ID SF/UNITS (# OF PAYMENTS) 1999 NOI 2001 NOI NOI REVENUE
- ------------------------------------------------------------------------------------------------------------------------------------
1 103.52 L(27),D(90),O(3) 2,008,268 2,136,461 2,192,797 4,138,135
2 53.46 L(47),D(72),O(1) 538,523 811,092 772,737 1,240,776
3 376.07 L(24),D(92),O(4) 2,672,093 3,775,805
4 168.11 L(47),YMor1%(132),O(1) 774,388 773,551
5 44.43 L(24),D(92),O(4) 13,473,333 25,130,068
- ------------------------------------------------------------------------------------------------------------------------------------
6 73.91 L(26),D(91),O(3) 322,653 341,756
7 49.21 L(25),D(91),O(4) 1,390,980 1,548,865 1,350,345 2,376,606
8 89.15 L(47),D(72),O(1) 511,098 575,289 706,806 1,076,866
9 89.51 L(25),D(91),O(4) 4,685,993 5,230,628 5,105,665 6,783,962
10 120.64 L(26),D(91),O(3) 1,103,091 1,165,510
- ------------------------------------------------------------------------------------------------------------------------------------
11 18.48 L(27),D(89),O(4) 481,423 484,854 531,574
12 230.09 L(26),D(91),O(3) 426,757 435,455
13 23,809.52 L(24),D(92),O(4) 95,892 245,619 232,850 460,864
14 82.27 L(25),D(91),O(4) 604,473 697,267
15 21,730.47 L(25),D(91),O(4) 231,418 250,360 192,236 342,478
- ------------------------------------------------------------------------------------------------------------------------------------
16 65.05 L(27),D(89),O(4) 539,089 614,878 653,972 690,205
17 95.47 L(26),D(91),O(3) 798,682 809,190 736,997 1,126,573
18 80.53 L(26),D(91),O(3) 299,746 311,370 257,037 428,445
19 132.81 L(47),D(72),O(1) 295,136 399,109 554,683
20 85.09 L(26),D(91),O(3) 607,185 635,770 696,195 738,204
- ------------------------------------------------------------------------------------------------------------------------------------
21 54.90 L(24),D(92),O(4) 254,956 451,366 469,451
22 14,075.83 L(25),D(91),O(4) 287,474 328,905 317,499 519,849
23 12,228.92 L(25),D(91),O(4) 223,303 221,663 217,731 350,584
24 123.17 L(27),D(89),O(4) 699,771 714,760 689,899 733,738
25 48.64 L(24),D(92),O(4) 236,403 293,117 261,251 279,042
- ------------------------------------------------------------------------------------------------------------------------------------
26 51.00 L(27),D(89),O(4) 327,042 382,944 405,759 484,175
27 173.63 L(24),D(92),O(4) 664,607 1,230,136 1,398,437
28 117.87 L(27),D(90),O(3) 257,046 351,608
29 158.77 L(26),D(91),O(3) 503,168 1,369,911 1,642,600
30 6,503.50 L(25),D(91),O(4) 101,606 135,432 108,632 253,320
- ------------------------------------------------------------------------------------------------------------------------------------
31 79.47 L(26),D(91),O(3) 178,446 186,176
32 150.41 L(25),D(91),O(4) 705,695 2,026,463 2,878,681 4,196,053
33 48.49 L(35),D(83),O(2) 1,038,418 1,075,304 1,127,567 1,138,493
34 76,772.05 L(27),D(89),O(4) 2,481,130 2,791,587 2,671,223 3,887,582
35 101.89 L(24),D(92),O(4) 522,413 527,809
- ------------------------------------------------------------------------------------------------------------------------------------
36 33.10 L(36),D(80),O(4) 358,298 392,491 340,759 740,699
37 43,206.52 L(23),D(93),O(4) 446,029 437,563 430,189 806,670
38 75,327.76 L(27),D(90),O(3) 953,703 1,404,775 1,111,413 2,553,738
39 67.06 L(27),D(89),O(4) 554,333 552,311 681,687
40 81.36 L(28),D(89),O(3) 700,063 869,887 784,956 1,101,301
- ------------------------------------------------------------------------------------------------------------------------------------
41 283.39 L(27),D(90),O(3) 314,493 319,156
42 147.85 L(27),D(90),O(3) 156,959 163,477 166,040
43 217.28 L(24),D(92),O(4) 237,573 243,000
44 8,721.78 L(26),D(91),O(3) 279,188 255,992 264,719
45 11.95 L(24),D(90),O(3) 569,299 581,420 583,078 812,367
- ------------------------------------------------------------------------------------------------------------------------------------
46 6,801.47 L(25),D(91),O(4) 106,502 113,991 103,737 238,533
47 73.09 L(23),D(93),O(4) 1,301,775 1,374,950 1,382,860 2,024,324
48 118.62 L(24),D(92),O(4) 164,628 221,015 229,727
49 133.07 L(27),D(90),O(3) 334,591 322,199 326,043
50 35.33 L(28),D(175),O(37) 275,921 396,123 367,204 690,430
- ------------------------------------------------------------------------------------------------------------------------------------
51 38,330.59 L(28),D(89),O(3) 8,127,951 7,581,049 7,312,703 16,940,510
51a 39,143.04 1,220,635 1,242,542 1,191,653 2,400,695
51b 41,600.67 1,194,201 1,234,735 1,184,982 2,515,348
51c 32,698.96 886,561 946,057 902,447 2,198,087
51d 23,605.66 956,404 594,501 558,881 1,657,182
- ------------------------------------------------------------------------------------------------------------------------------------
51e 25,557.05 1,000,583 634,573 683,087 2,021,454
51f 31,473.68 751,888 729,927 675,480 1,847,915
51g 71,791.00 2,117,679 2,198,714 2,116,173 4,299,829
52 169.58 L(25),D(91),O(4) 1,337,525 1,391,448
53 21,260.95 L(27),D(90),O(3) 799,314 921,028 875,421 1,665,446
- ------------------------------------------------------------------------------------------------------------------------------------
54 108.02 L(30),D(86),O(4) 1,735,053 2,427,381
55 74.66 L(29),D(88),O(3) 365,594 415,378 556,659 832,301
56 110.20 L(47),D(72),O(1) 601,925 594,284
57 80.24 L(26),D(91),O(3) 858,938 824,334 858,945 1,472,360
58 64,003.54 L(29),D(88),O(3) 2,987,014 2,886,313 3,026,347 6,183,202
- ------------------------------------------------------------------------------------------------------------------------------------
59 105.50 L(25),D(91),O(4) 842,542 968,268 1,098,171 1,173,590
60 19,180.19 L(27),D(90),O(3) 465,180 448,734 461,867 895,958
61 57.45 L(27),D(90),O(3) 264,271 273,566 246,604 406,128
62 44,470.64 L(28),D(89),O(3) 1,170,728 1,130,989 1,697,587
63 25,887.38 L(47),D(72),O(1) 446,502 465,510 559,067 2,149,177
- ------------------------------------------------------------------------------------------------------------------------------------
64 20,691.89 L(25),D(91),O(4) 664,569 669,000 669,909 1,577,715
65 58.98 L(26),D(91),O(3) 360,990 466,822 488,710 537,852
66 140.53 L(29),D(88),O(3) 280,092 294,715
67 102.83 L(27),D(86),O(7) 3,998,139 3,935,303
68 42.21 L(28),D(91),O(1) 1,751,878 1,735,589
- ------------------------------------------------------------------------------------------------------------------------------------
68a 43.42 594,308 605,015 435,650 430,828
68b 42.42 657,211 617,043 504,336 477,110
68c 27.01 579,827 605,711 312,218 305,152
68d 59.47 650,000 650,000 499,674 522,499
69 68.18 L(27),D(89),O(4) 1,559,517 1,697,348 1,451,398 1,552,361
- ------------------------------------------------------------------------------------------------------------------------------------
70 54,876.77 L(27),D(89),O(4) 158,836 167,041 160,889 278,118
71 76.63 L(47),D(72),O(1) 1,279,262 1,175,869 1,457,579
72 76.64 L(23),D(93),O(4) 1,909,670 2,049,232
73 61.36 L(23),D(92),O(5) 701,904 714,632 729,216
74 40,715.32 L(27),D(90),O(3) 180,809 342,594 556,141
- ------------------------------------------------------------------------------------------------------------------------------------
75 59.22 L(26),D(91),O(3) 2,445,134 2,276,984 2,117,056 3,185,750
76 104.03 L(25),D(91),O(4) 338,128 540,372 478,572 788,446
77 90.16 L(25),D(91),O(4) 6,346,997 6,274,576 4,607,318 5,628,799
78 68.52 L(25),D(91),O(4) 510,451 490,847 529,744
79 79.01 L(26),D(91),O(3) 530,238 912,199 963,774
- ------------------------------------------------------------------------------------------------------------------------------------
80 81,080.63 L(27),D(89),O(4) 415,477 362,044 491,739
81 91.64 L(24),D(92),O(4) 827,033 1,061,815 1,017,873 1,209,299
82 37.65 L(59),5%(24),4%(24),1%(9),O(4) 436,019 481,775 426,574 814,710
83 20,913.24 L(25),D(91),O(4) 375,094 457,477 484,690 680,740
84 46.56 L(27),D(89),O(4) 325,388 381,659 398,685 524,484
- ------------------------------------------------------------------------------------------------------------------------------------
85 81.49 L(26),D(91),O(3) 6,563 506,318 528,385
86 69.56 L(26),D(90),O(4) 290,625 313,107 311,659 330,373
87 99.91 L(26),D(31),O(3) 510,083 569,431 567,620 599,759
88 63,354.47 L(25),D(91),O(4) 1,708,838 1,873,988 1,476,295 2,955,712
89 151.67 L(24),D(92),O(4) 244,855 250,700
- ------------------------------------------------------------------------------------------------------------------------------------
90 65,292.19 L(26),D(31),O(3) 1,113,970 1,258,915 1,218,546 1,840,584
91 94.13 L(26),D(91),O(3) 561,799 555,905
92 38,216.25 L(27),D(90),O(3) 540,274 610,837 613,491 955,573
93 170,498.07 L(25),D(91),O(4) 3,189,880 3,431,070 4,494,627
94 95.33 L(28),D(89),O(3) 998,346 1,101,469 1,081,715 1,563,857
- ------------------------------------------------------------------------------------------------------------------------------------
95 142.80 L(27),D(90),O(3) 246,489 248,646 222,853 215,420
96 64.85 L(28),D(88),O(4) 597,291 618,669 567,577 667,288
97 29,152.26 L(28),D(88),O(4) 376,599 380,548 345,762 573,050
98 107.13 L(26),D(91),O(3) 713,879 577,842 994,963 1,538,420
99 111.61 L(28),D(30),O(2) 878,681 937,843 859,495 871,449
- ------------------------------------------------------------------------------------------------------------------------------------
100 24.17 L(23),D(93),O(4) 316,032 330,658 275,430 438,909
101 12,323.94 L(25),D(91),O(4) 181,266 191,603 190,085 350,292
102 33,101.47 L(28),D(89),O(3) 686,369 812,296 804,097 1,141,747
103 31.88 L(24),D(92),O(4) 164,684 172,031 165,777 267,499
104 25,395.73 L(25),D(91),O(4) 364,678 396,941 381,323 565,701
- ------------------------------------------------------------------------------------------------------------------------------------
105 131.07 L(47),D(72),O(1) 1,622,371 2,182,422
106 60.64 L(25),D(91),O(4) 309,831 483,842 468,044 503,524
107 15,965.91 L(25),D(91),O(4) 442,295 465,042 455,834 737,660
108 161.74 L(24),D(92),O(4) 72,833 647,142 718,451
109 100.39 L(25),D(176),O(37) 1,806,867 1,859,476
- ------------------------------------------------------------------------------------------------------------------------------------
110 54.54 L(30),D(87),O(3) 467,310 566,730 515,278 539,508
111 83.91 L(26),D(91),O(3) 490,070 481,189 493,009
112 151.33 L(27),D(90),O(3) 603,037 889,623 902,775 1,221,194
113 40.82 L(27),D(87),O(6) 1,122,575 1,367,433 1,401,631 2,315,599
113a 45.72 265,141 289,025 310,790 501,444
- ------------------------------------------------------------------------------------------------------------------------------------
113b 38.08 170,999 229,207 225,340 409,383
113c 29.60 122,223 146,766 147,417 265,766
113d 49.59 154,001 260,069 244,850 357,782
113e 42.62 131,812 172,523 194,203 305,100
113f 39.01 278,399 269,843 279,031 476,124
- ------------------------------------------------------------------------------------------------------------------------------------
114 75.73 L(24),D(84),O(3) 596,811 773,440 818,852 1,118,325
115 66.11 L(47),D(72),O(1) 1,213,304 1,094,564 1,304,645 1,515,239
116 55.98 L(26),D(91),O(3) 407,899 614,176 647,410
117 275.72 L(24),D(92),O(4) 2,852,812 3,105,489 3,240,815
118 32.43 L(27),D(90),O(3) 92,324 150,005 179,428 259,322
- ------------------------------------------------------------------------------------------------------------------------------------
119 36.65 L(27),D(90),O(3) 278,554 308,705 285,696 424,170
120 118.06 L(26),D(87),O(7) 694,815 800,824 787,650 1,053,971
121 66.78 L(28),D(88),O(4) 407,336 440,954 406,487 483,435
122 105.36 L(23),D(93),O(4) 307,844 308,279
123 78.60 L(33),D(84),O(3) 238,942 246,502
- ------------------------------------------------------------------------------------------------------------------------------------
124 111.00 L(26),D(90),O(4) 901,794 1,319,971
125 15,680.80 L(27),D(90),O(3) 203,213 326,036 314,871 644,802
126 55.12 L(26),D(91),O(3) 444,963 509,729 784,385
127 127,318.56 L(27),D(86),O(7) 564,582 748,209
128 32,283.99 L(27),D(89),O(4) 359,469 402,167 315,939 518,294
- ------------------------------------------------------------------------------------------------------------------------------------
129 69.59 L(29),D(88),O(3) 2,294,845 2,346,530 2,303,966 3,593,365
130 64.92 L(29),D(88),O(3) 2,163,626 2,246,777 2,247,442 3,520,838
131 83.93 L(24),D(92),O(4) 924,678 833,627 1,225,263
132 89.46 L(25),D(91),O(4) 301,083 384,531 388,158 518,766
133 75,351.30 L(27),D(89),O(4) 344,226 1,305,345 2,202,309
- ------------------------------------------------------------------------------------------------------------------------------------
134 9,731.87 L(27),D(90),O(3) 539,897 567,843 557,981 783,360
135 208,504.87 L(25),D(94),O(1) 708,765 1,121,760
136 96.76 L(47),D(72),O(1) 1,907,539 2,066,042 1,909,673 2,051,795
137 291.12 L(25),D(91),O(4) 385,187 397,100
138 61.31 L(25),D(90),O(5) 387,757 460,626 425,015 800,079
- ------------------------------------------------------------------------------------------------------------------------------------
139 49,063.01 L(27),D(90),O(3) 1,379,445 1,593,025 1,620,027 2,489,224
140 86.90 L(30),D(86),O(4) 547,555 663,961 679,793
141 144.38 L(23),D(93),O(4) 1,103,455 1,221,030 1,227,954 1,269,834
142 62.57 L(27),D(90),O(3) 365,126 383,358 377,386 412,619
143 85.80 L(23),D(93),O(4) -145,373 -34,191 463,126 629,832
- ------------------------------------------------------------------------------------------------------------------------------------
144 78,884.55 L(27),D(89),O(4) 471,517 517,909 710,836
145 86.79 L(25),D(91),O(4) 251,567 307,306 265,984 288,500
146 45,000.00 L(23),D(93),O(4) 285,152 267,894 271,424 445,309
147 218.63 L(23),D(93),O(4) 348,573 355,000
148 320.09 L(25),D(91),O(4) 518,138 530,000
- ------------------------------------------------------------------------------------------------------------------------------------
149 185.61 L(25),D(91),O(4) 302,042 309,000
150 65.34 L(35),D(83),O(2) 726,888 688,946 688,496 702,526
151 178.41 L(36),D(83),O(1) 731,974 1,169,740 1,326,310 1,726,636
152 99.50 L(28),D(88),O(4) 1,673,154 1,892,175 1,901,736 1,903,776
153 58.29 L(25),D(91),O(4) 1,104,358 806,822 767,079 871,683
- ------------------------------------------------------------------------------------------------------------------------------------
Underwritten Underwritten Underwritten Underwritten
ID EGI Expenses Net Cash Flow Reserves Largest Tenant
- ------------------------------------------------------------------------------------------------------------------------------------
1 4,393,309 2,200,512 1,880,558 45,153 Points of Light Foundation
2 1,344,770 572,033 652,910 15,401 Luxton Capital, Inc.
3 3,909,083 1,236,990 2,476,360 20,751 Tahari
4 1,177,327 402,939 733,008 5,431 Mecca Gym & Spa, Ltd.
5 27,387,551 13,914,218 10,977,191 257,674 NYC Dept of Citywide Admin
- ------------------------------------------------------------------------------------------------------------------------------------
6 395,893 73,240 306,578 5,835 Goody's
7 2,560,606 1,210,261 1,081,398 29,246 GTE Global Networks
8 1,204,261 497,455 634,050 9,296 The Butcher Company
9 8,571,137 3,465,472 4,497,188 75,481 Level 3 Communications, Inc.
10 1,364,860 261,769 1,057,397 12,702 Winn Dixie
- ------------------------------------------------------------------------------------------------------------------------------------
11 688,829 203,975 405,177 33,905 Mannesmann DRC
12 537,551 110,794 404,616 2,278 C.R. Xtreme
13 508,299 275,449 211,234 21,616
14 718,452 113,979 549,236 9,549 GE Marquette Medical Systems Inc
15 356,478 164,242 169,416 22,820
- ------------------------------------------------------------------------------------------------------------------------------------
16 855,783 201,811 621,302 16,479 Wilson's Meats
17 1,346,107 609,110 611,740 22,504 Women's Health Care Ass.
18 505,745 248,708 203,831 8,077 Littleton OB/GYN Associates
19 591,370 192,261 375,128 4,734 Apple Computer, Inc.
20 1,076,819 380,624 616,855 18,238 Zimmerman & Partners Adv.
- ------------------------------------------------------------------------------------------------------------------------------------
21 581,384 130,018 404,932 10,110 Quality Control Service, LLC
22 591,849 274,350 306,949 10,550
23 359,707 141,976 210,648 7,083
24 988,131 298,232 646,370 8,162 Old Kent Bank
25 343,477 82,226 227,980 6,600 Mareva, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
26 497,193 91,434 348,896 13,400 Prime Med Pharmacy
27 1,725,440 495,304 1,169,044 8,512 Cosentino's
28 394,569 137,523 234,732 3,726 Fluor Signature Services
29 1,737,555 367,644 1,239,331 15,091 NetSynergy Center
30 301,320 192,688 100,481 8,151
- ------------------------------------------------------------------------------------------------------------------------------------
31 241,343 62,897 175,431 3,015 Office Depot Inc.
32 4,376,243 1,497,562 2,558,547 58,088 Brown and Caldwell
33 1,728,837 601,270 1,053,945 13,685 Ames
34 4,001,582 1,330,359 2,543,639 127,584
35 593,024 70,611 491,303 6,000 Happy Harrys
- ------------------------------------------------------------------------------------------------------------------------------------
36 823,453 482,694 266,133 14,567 Celltech Information Systems
37 828,837 398,648 406,729 23,460
38 2,796,238 1,684,825 971,601 139,812
39 702,935 150,624 479,764 12,319 Kuehne & Nagel Inc
40 1,104,130 319,174 772,635 12,321
- ------------------------------------------------------------------------------------------------------------------------------------
41 381,411 66,918 312,974 1,519 CVS
42 193,492 30,015 161,958 1,519 Harrison Township CVS, Inc.
43 271,350 33,777 236,054 1,519 CVS
44 433,065 177,073 247,922 8,070
45 817,867 234,789 563,534 8,000
- ------------------------------------------------------------------------------------------------------------------------------------
46 246,260 142,523 95,529 8,208
47 2,025,109 642,249 1,219,829 37,016 Qwest Communications
48 280,436 59,421 201,740 2,175 Calico Corners
49 389,102 66,903 304,989 2,683 Karate for Kids
50 720,430 353,226 353,741 13,463
- ------------------------------------------------------------------------------------------------------------------------------------
51 17,711,413 10,398,710 6,604,247 708,456
51a 2,494,396 1,302,743 1,091,877 99,776
51b 2,646,329 1,461,347 1,079,129 105,853
51c 2,336,645 1,434,198 808,981 93,466
51d 1,704,262 1,145,381 490,711 68,170
- ------------------------------------------------------------------------------------------------------------------------------------
51e 2,080,084 1,396,997 599,884 83,203
51f 1,975,371 1,299,891 596,465 79,015
51g 4,474,326 2,358,153 1,937,200 178,973
52 1,659,660 322,135 1,263,469 10,255 DSW Designer Shoe Warehouse
53 1,790,446 915,025 799,741 75,680
- ------------------------------------------------------------------------------------------------------------------------------------
54 2,427,381 692,328 1,553,578 25,031 First USA, Inc.
55 862,943 306,284 478,113 19,030 The Regents of the University of CA - UCLA
56 921,019 319,094 563,290 6,313 Saint Raphael Healthcare System Hamden Surgery Center, LLC
57 1,565,876 706,931 730,461 23,357 PorterCare Health Club
58 6,448,497 3,422,150 2,703,922 322,425
- ------------------------------------------------------------------------------------------------------------------------------------
59 1,457,560 359,389 1,044,074 13,500 Harris Teeter
60 1,071,158 609,291 453,577 8,290
61 460,840 214,236 211,690 6,340 Tower City Title
62 1,785,794 654,805 1,063,627 67,362
63 2,222,238 1,663,171 459,066 100,001
- ------------------------------------------------------------------------------------------------------------------------------------
64 1,618,019 948,110 605,909 64,000
65 688,692 199,982 429,855 9,331 Spec's Liquor Warehouse
66 352,392 72,300 265,397 2,341 David's Bridal
67 6,466,329 2,468,190 3,479,019 63,000 Information Resources Inc.
68 2,122,923 371,045 1,600,911 46,804
- ------------------------------------------------------------------------------------------------------------------------------------
68a 530,529 94,879 403,683 11,459 Ingles
68b 604,188 99,852 460,773 13,404 Ingles
68c 418,183 105,965 265,983 12,191 Ingles
68d 570,023 70,349 470,472 9,750 Ingles
69 1,922,549 471,151 1,338,377 27,884 Target
- ------------------------------------------------------------------------------------------------------------------------------------
70 287,118 126,229 153,689 7,200
71 1,805,450 629,581 1,013,884 17,314 Adidas
72 2,631,232 721,562 1,760,362 31,995 Kmart
73 729,216 14,584 714,632 0 Kmart Corporation
74 565,261 222,667 327,394 15,200
- ------------------------------------------------------------------------------------------------------------------------------------
75 4,212,830 2,095,774 1,628,381 97,439 State of Tennessee
76 842,446 363,874 407,655 7,398 20th Century Fox
77 8,952,450 4,345,132 4,030,078 83,804 SNET
78 650,657 159,810 457,214 9,633 Goody's
79 1,104,374 192,175 866,860 15,537 Goody's
- ------------------------------------------------------------------------------------------------------------------------------------
80 491,739 129,695 352,044 10,000
81 1,333,999 316,126 857,289 17,285 Mission Research
82 814,710 388,136 339,397 16,191 Property Data Systems, LLC
83 710,178 225,488 475,190 9,500
84 550,044 151,359 357,159 19,670 Summit Steel
- ------------------------------------------------------------------------------------------------------------------------------------
85 603,610 97,292 489,167 8,625 Goody's
86 460,716 149,057 282,725 5,047 Clicks Billiards
87 844,759 277,139 505,486 14,869 Jaice, LC Mourjan & Salmon
88 3,141,563 1,665,268 1,319,217 157,078
89 292,255 47,400 242,629 2,226 Osco Drug of Texas, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
90 1,863,584 645,038 1,175,546 43,000
91 713,405 151,606 547,411 8,145 Kash n' Karry Food Stores, Inc.
92 996,153 382,662 577,677 35,814
93 4,528,022 1,096,952 3,397,070 34,000
94 1,566,626 484,911 1,063,851 17,864
- ------------------------------------------------------------------------------------------------------------------------------------
95 268,354 45,501 205,067 5,885 Hollywood Video
96 694,682 127,105 519,609 11,340 H & C Motors, Inc.
97 581,588 235,826 314,672 31,090
98 1,737,248 742,285 896,414 15,209 Ambulatory Surgery
99 1,228,884 369,389 775,354 9,251 Videoland
- ------------------------------------------------------------------------------------------------------------------------------------
100 485,789 210,359 261,361 14,069
101 391,792 201,707 182,363 7,722
102 1,376,442 572,345 792,797 11,300
103 289,377 123,600 159,180 6,597
104 817,701 436,378 376,886 4,437
- ------------------------------------------------------------------------------------------------------------------------------------
105 2,329,002 706,631 1,498,266 14,962 Formation Systems, Inc.
106 639,371 171,327 424,283 9,756 Stone Mountain Carpet
107 756,660 300,826 435,242 20,592
108 850,651 203,509 606,251 6,566 Buca's Restaurant
109 2,302,681 495,814 1,665,472 20,513 TJ Maxx
- ------------------------------------------------------------------------------------------------------------------------------------
110 746,554 231,276 474,229 13,467 Rhodes, Inc.
111 559,283 78,094 473,108 8,081 Winn Dixie
112 1,267,205 364,430 895,267 7,508
113 2,387,197 985,566 1,358,359 43,272
113a 521,896 211,106 302,723 8,067
- ------------------------------------------------------------------------------------------------------------------------------------
113b 423,857 198,517 216,917 8,423
113c 273,622 126,205 141,277 6,140
113d 365,358 120,508 238,350 6,500
113e 313,917 119,714 188,558 5,645
113f 488,547 209,516 270,534 8,497
- ------------------------------------------------------------------------------------------------------------------------------------
114 1,161,114 342,262 805,971 12,881
115 1,833,202 528,557 1,220,292 15,781 Shaw's Supermarkets
116 793,621 179,445 580,813 14,551 Hobby Lobby
117 3,947,623 842,134 2,983,500 15,665 Linens & Things
118 287,880 108,452 172,528 6,900
- ------------------------------------------------------------------------------------------------------------------------------------
119 444,300 158,604 277,071 8,625
120 1,165,031 377,381 706,728 10,907 Kleiman, Carey & Greenbaum
121 597,716 191,229 364,912 7,014 Party Supermarket
122 385,166 77,322 282,973 4,480 U of U Health Network
123 311,585 72,643 235,328 3,614 Staples the Office Superstore and Staples, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
124 1,404,531 502,737 782,249 13,130 IMED
125 676,402 361,531 271,612 43,259
126 820,785 311,056 498,735 10,994
127 754,509 189,927 554,082 10,500
128 534,298 218,359 294,029 21,910
- ------------------------------------------------------------------------------------------------------------------------------------
129 3,603,347 1,299,381 1,991,341 51,625 SC Dept. of Labor
130 3,648,125 1,400,683 1,868,902 59,419 SC Public Serv. Comm
131 1,345,678 512,051 764,229 11,080 Telcordia
132 518,766 130,608 331,577 7,151 Signal & Comm. Systems of GA
133 2,251,609 946,264 1,250,745 54,600
- ------------------------------------------------------------------------------------------------------------------------------------
134 806,660 248,679 533,334 24,647
135 1,121,760 412,995 697,128 11,637
136 2,836,099 926,426 1,771,533 23,158 Pathmark
137 397,100 11,913 383,178 2,009 Walgreen Co.
138 850,001 424,986 344,644 12,484 George J. Murrillo, M.D.
- ------------------------------------------------------------------------------------------------------------------------------------
139 2,639,224 1,019,197 1,519,577 100,450
140 839,130 175,169 594,209 11,160 Talk.com Holding Corp.
141 1,550,557 322,603 1,092,139 18,916 Penn Elm Medical
142 499,096 121,710 351,384 6,796 OfficeMax
143 656,664 193,538 410,530 8,766 RMC Internet
- ------------------------------------------------------------------------------------------------------------------------------------
144 733,911 216,002 502,392 15,517
145 412,500 146,516 231,390 3,800 Bart's Restaurant
146 455,809 184,385 257,368 14,056
147 395,415 46,842 346,487 2,086 Walgreen Co.
148 571,913 53,775 516,324 1,814 Walgreen Co.
- ------------------------------------------------------------------------------------------------------------------------------------
149 347,934 45,892 299,956 2,086 Walgreen Co.
150 934,017 245,521 639,424 12,471 Shop'n Bag
151 1,785,400 459,090 1,241,355 7,941 Black & White
152 2,348,307 446,571 1,761,033 24,570 G.I. Joe's
153 1,135,084 368,005 665,381 28,188 Publix Supermarket
- ------------------------------------------------------------------------------------------------------------------------------------
Lease Lease
ID SF Expiration 2nd Largest Tenant SF Expiration
- ----------------------------------------------------------------------------------------------------------
1 37,551 04/30/08 CSR, Inc. 27,454 09/01/04
2 36,977 01/14/04 Custom Information Services 9,033 02/14/04
3 22,775 11/30/11 Ricoh Corp 20,127 03/31/07
4 12,709 07/31/05 Short Girls, Inc. 5,974 05/30/05
5 253,922 11/30/20 Bluestone Capital Partners 105,465 8/31/10
- ----------------------------------------------------------------------------------------------------------
6 27,900 10/31/15 Shoe Dept 6,000 11/30/05
7 14,705 09/30/07 Vitcom Corporation 14,705 05/31/07
8 26,542 06/30/05 HTI Voice Solutions 17,840 04/30/03
9 75,031 01/31/08 Pihana Pacific, Inc. 66,160 06/30/15
10 51,282 03/08/20 Kirkland's Stores 4,900 05/31/10
- ----------------------------------------------------------------------------------------------------------
11 76,905 06/30/02 Louisville Chemical 13,600 10/31/03
12 2,136 09/14/05 Hanger 29 1,708 09/30/04
13
14 40,560 07/31/10 The Scarborough Group Inc 18,900 02/28/08
15
- ----------------------------------------------------------------------------------------------------------
16 12,000 03/31/03 Fashion Bug Plus 8,000 01/31/08
17 5,106 07/31/02 Berg, M.D. 3,662 05/31/01
18 4,225 10/31/01 Gidday, M.D. 3,950 04/30/01
19 23,669 07/01/07
20 26,254 01/31/14 Webstream, Inc. 7,718 12/31/04
- ----------------------------------------------------------------------------------------------------------
21 37,200 12/31/05 Element-System USA, LP 19,075 12/31/03
22
23
24 14,292 12/31/09 A.G. Edwards & Sons, Inc. 6,269 05/31/05
25 10,000 09/30/04 Physician Sales & Service, Inc. 7,810 10/31/02
- ----------------------------------------------------------------------------------------------------------
26 12,000 03/31/05 US Cable, Inc. 12,000 09/30/02
27 29,335 05/10/20 Blockbuster Video 3,861 06/30/05
28 13,369 07/31/07 clickdata.com, Inc. 5,259 07/31/05
29 22,110 08/31/06 OneWorld Software Solutions, Inc. 20,034 07/31/06
30
- ----------------------------------------------------------------------------------------------------------
31 20,100 12/31/15
32 56,168 05/31/10 Bank of the West 21,171 02/28/05
33 85,000 10/19/78 Risoldi's 25,000 08/18/05
34
35 12,000 03/31/21 Dollar Tree 6,000 08/31/05
- ----------------------------------------------------------------------------------------------------------
36 18,005 10/31/04 Odyssey Management Inc. 10,779 04/30/02
37
38
39 27,000 08/31/03 Iphotonics LLC 9,980 05/31/02
40
- ----------------------------------------------------------------------------------------------------------
41 10,125 01/31/23
42 10,125 01/31/22
43 10,125 01/31/20
44
45
- ----------------------------------------------------------------------------------------------------------
46
47 22,969 6/30/08 MCI Worldcom 19,284 12/31/01
48 5,000 12/31/04 Antiques & Interiors by Jacque 4,750 11/30/03
49 3,600 09/30/03 Blockbuster 3,000 05/17/04
50
- ----------------------------------------------------------------------------------------------------------
51
51a
51b
51c
51d
- ----------------------------------------------------------------------------------------------------------
51e
51f
51g
52 26,856 01/31/11 Thomasville Furniture 21,825 03/27/11
53
- ----------------------------------------------------------------------------------------------------------
54 125,155 09/30/09
55 6,897 04/30/08 C.J. Calvin Yang, M.D. 4,133 10/31/02
56 15,712 04/04/10 Medical Oncology & Hematology, P.C. 6,925 05/31/07
57 5,704 06/30/11 Associates of Otolaryngology 5,250 12/31/03
58
- ----------------------------------------------------------------------------------------------------------
59 43,658 12/31/17 Ace Hardware 15,748 01/31/09
60
61 10,068 07/31/02 Dr. Fratantonio 2,970 12/01/04
62
63
- ----------------------------------------------------------------------------------------------------------
64
65 12,235 05/31/10 Mongolian Steak 6,462 04/30/02
66 10,200 04/29/10 Car Toys 5,408 06/14/10
67 252,000 10/31/10
68
- ----------------------------------------------------------------------------------------------------------
68a 64,000 09/25/26 Eckerd's 8,640 03/31/06
68b 44,800 09/25/26 B.C. Moore & Sons Inc. 17,026 10/30/05
68c 42,000 09/25/26 Gallant-Belk Co. 21,120 01/31/03
68d 65,000 09/25/26
69 105,705 05/01/05 Party Universe 10,288 01/01/02
- ----------------------------------------------------------------------------------------------------------
70
71 70,421 12/31/06 Kraus Productivity Organization, Ltd. 14,664 03/31/05
72 96,077 2/28/26 Supermercado Amigo 30,046 11/30/18
73 104,100 10/31/26 Burger King 2,394 05/31/25
74
- ----------------------------------------------------------------------------------------------------------
75 165,074 12/31/04 Bank of Nashville 32,679 08/31/09
76 26,682 5/31/02 Steel Systems 5,009 6/30/02
77 241,068 10/01/08 Curagen 35,938 12/31/02
78 35,000 05/31/12 Fashion Bug 8,100 05/31/05
79 35,070 07/31/14 Office Depot 30,809 06/10/14
- ----------------------------------------------------------------------------------------------------------
80
81 27,492 07/31/04 Art Center 12,170 01/31/03
82 6,632 01/31/03 Imaging Technologies 4,498 6/30/01
83
84 15,976 05/31/03 New Age 8,000 05/31/02
- ----------------------------------------------------------------------------------------------------------
85 32,500 10/31/15 Office Depot 24,340 09/30/15
86 7,408 12/31/04 Doc Holiday 7,020 06/30/03
87 4,046 02/28/06 NRT Incorporated 3,883 07/31/01
88
89 15,000 12/27/20
- ----------------------------------------------------------------------------------------------------------
90
91 49,500 07/01/20 Bargain Kingdom 1,800 09/01/05
92
93
94
- ----------------------------------------------------------------------------------------------------------
95 5,214 12/31/08 Twin Panda Restaurant 2,176 07/31/03
96 25,200 12/31/01 A-1 Imports, Inc. 7,200 10/31/06
97
98 15,102 06/30/11 Hand Surgery Associates, PC 9,532 06/30/03
99 10,020 09/30/05 Boat America Corp 9,750 02/28/02
- ----------------------------------------------------------------------------------------------------------
100
101
102
103
104
- ----------------------------------------------------------------------------------------------------------
105 23,795 12/31/04 Beals and Thomas, Inc. 20,572 08/31/06
106 14,000 12/31/09 Total Beverage 13,968 12/01/14
107
108 7,600 07/23/10 Bennigan's 6,304 12/31/14
109 30,000 4/30/10 Staples 24,049 2/28/15
- ----------------------------------------------------------------------------------------------------------
110 45,200 12/31/10 Mattress Barn, Inc. 5,100 04/30/02
111 51,282 03/31/19 Amsouth 2,590 08/31/18
112
113
113a
- ----------------------------------------------------------------------------------------------------------
113b
113c
113d
113e
113f
- ----------------------------------------------------------------------------------------------------------
114
115 49,826 02/28/18 Petco 11,300 12/01/09
116 58,965 06/30/20 Office Depot 29,896 12/31/08
117 44,648 01/31/15 Container Store 25,522 11/13/09
118
- ----------------------------------------------------------------------------------------------------------
119
120 11,175 5/31/02 Phoenix Land Development 5,118 1/31/05
121 11,400 02/28/03 Mattress Giant Super Store 4,000 08/31/06
122 12,000 8/31/09 James McConnell 1,700 12/31/10
123 24,049 12/31/13
- ----------------------------------------------------------------------------------------------------------
124 8,081 02/01/05 Radiology & Associates 8,081 05/01/07
125
126
127
128
- ----------------------------------------------------------------------------------------------------------
129 71,580 03/31/05 Physicians Health Pl 34,005 02/28/02
130 31,707 08/31/03 State Board Tech. Ed 28,697 06/30/02
131 73,868 12/31/04
132 18,189 12/01/08 Prudential Atlanta Realty 5,757 07/01/02
133
- ----------------------------------------------------------------------------------------------------------
134
135
136 51,502 01/31/13 Marshalls 30,800 01/31/04
137 13,390 12/31/19
138 4,373 11/30/01 Kirkpatrick, M.D. & Debakey 3,718 11/30/01
- ----------------------------------------------------------------------------------------------------------
139
140 17,425 06/30/07 Access One Communications 10,247 12/31/04
141 11,757 02/28/11 Valley Radiology 7,599 11/30/04
142 23,500 11/30/13 Catosouth, LLC 4,700 01/31/04
143 12,800 04/30/05 Advantest America, Inc. 11,696 04/01/06
- ----------------------------------------------------------------------------------------------------------
144
145 3,605 11/30/04 Bungalow Wine & Spirits 2,580 03/31/04
146
147 13,905 10/31/18
148 15,120 12/31/20
- ----------------------------------------------------------------------------------------------------------
149 13,905 08/31/19
150 34,950 03/04/02 Tutor Time 9,500 03/27/12
151 12,686 09/30/06 Speciality Ultra Vision, Inc. 8,972 06/30/02
152 57,158 2/28/21 Circuit City 37,273 1/31/15
153 39,795 08/28/05 Eckerd Drug Store 10,356 08/28/05
- ----------------------------------------------------------------------------------------------------------
RENT ROLL/ UPFRONT
LEASE OCCUPANCY CENSUS ACTUAL REPLACEMENT
ID 3RD LARGEST TENANT SF EXPIRATION RATE AT UW DATE RESERVES
- ----------------------------------------------------------------------------------------------------------------------------------
1 Malchow Adams & Hussey 14,306 11/30/05 98.96% 09/01/00 0
2 TX Dept. of Criminal Justice 4,596 02/28/02 93.04% 11/01/00 1,283
3 Chase Manhattan 18,257 12/01/10 100.00% 03/26/01 0
4 Gracy Title Co. 5,703 05/30/05 100.00% 10/26/00 453
5 The Home Insurance Company 73,909 12/31/02 86.62% 02/28/01 250,000
- ----------------------------------------------------------------------------------------------------------------------------------
6 Hibbett's Sporting 5,000 01/31/06 100.00% 11/15/00 0
7 United Mizrahi Bank 12,497 12/31/01 85.05% 12/31/00 0
8 IBM 8,890 09/30/07 100.00% 10/20/00 775
9 Southern California Associaton of Governements 50,513 12/31/09 100.00% 01/08/01 0
10 98 Palms Wine & Spirits 4,200 03/31/05 95.04% 11/15/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
11 Ole Mexican 11,054 11/30/02 90.40% 11/29/00 0
12 Shoheil Shahosseini, DVM 1,680 02/28/05 100.00% 01/01/01 0
13 96.43% 01/24/01 0
14 Bell Atlantic - MD Inc 4,200 06/30/05 100.00% 11/07/00 0
15 94.29% 10/31/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
16 The Farmers Market 7,316 01/31/10 88.42% 12/01/00 0
17 Colorado Allergy & Asthma 3,541 01/31/06 99.19% 12/11/00 0
18 Bowman, M.D. 3,605 07/31/03 100.00% 12/11/00 0
19 100.00% 01/01/01 394
20 Signature Consultants, Inc. 5,372 12/31/03 100.00% 12/01/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
21 Ceo Tronics, Inc. 11,000 04/30/06 100.00% 01/22/01 0
22 92.42% 11/21/00 0
23 89.76% 11/21/00 0
24 Pancake Cafe 5,006 09/30/02 100.00% 01/03/01 35,000
25 Wilson, UTC, Inc. 6,000 11/30/01 100.00% 01/22/01 0
- ----------------------------------------------------------------------------------------------------------------------------------
26 East Coast Fire Protection, Inc. 9,000 12/31/01 100.00% 11/08/00 85,000
27 Megabyte Pizza 3,441 12/15/10 98.63% 08/17/00 0
28 100.00% 09/01/00 0
29 Eye Laser Care Center, LLC 7,129 03/31/06 100.00% 10/17/00 0
30 76.92% 11/21/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
31 100.00% 11/15/00 0
32 Laidlaw Transit 14,890 03/31/05 97.99% 12/15/00 0
33 Tutor Time 13,000 02/28/13 98.58% 01/01/01 1,140
34 100.00% 09/30/00 0
35 CATO Corporation 3,600 09/18/05 100.00% 01/09/01 0
- ----------------------------------------------------------------------------------------------------------------------------------
36 Computational Systems 6,745 12/31/01 83.03% 01/07/01 0
37 100.00% 02/08/01 0
38 84.88% 10/31/00 0
39 FAA Flight Standards 6,674 09/30/05 100.00% 11/06/00 0
40 99.88% 10/27/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
41 100.00% 12/22/99 0
42 100.00% 10/30/00 0
43 100.00% 12/11/00 0
44 83.64% 11/01/00 0
45 100.00% 10/25/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
46 83.82% 11/21/00 0
47 ICG 17,419 11/30/08 99.22% 11/28/00 0
48 Williams Collection 4,750 05/31/02 100.00% 01/25/01 0
49 Jitters Gourmet Coffee 2,287 10/24/09 86.02% 05/17/00 0
50 75.39% 11/16/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
51 68.49% 11/30/00 0
51a 67.81% 11/30/00
51b 75.24% 11/30/00
51c 67.33% 11/30/00
51d 56.35% 11/30/00
- ----------------------------------------------------------------------------------------------------------------------------------
51e 60.46% 11/30/00
51f 75.01% 11/30/00
51g 78.20% 11/30/00
52 World Market 19,685 09/19/10 100.00% 12/18/00 0
53 90.06% 11/03/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
54 100.00% 02/28/01 0
55 Simmunet, Inc 2,754 01/31/03 90.26% 01/25/01 0
56 Saint Raphael Healthcare System, Inc. 5,206 01/31/08 100.00% 03/01/01 526
57 Alpine Women's Healthcare 4,757 07/31/05 93.85% 02/06/01 0
58 66.92% 06/30/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
59 Blockbuster Video 3,238 12/31/05 98.42% 12/12/00 0
60 99.53% 10/30/00 0
61 Dr. Fox & Dr. Then 2,450 10/01/08 100.00% 11/02/00 0
62 95.87% 09/25/00 0
63 82.50% 12/31/99 10,000
- ----------------------------------------------------------------------------------------------------------------------------------
64 92.97% 01/03/01 0
65 Sports Express 5,475 12/31/06 100.00% 11/21/00 0
66 100.00% 07/11/00 0
67 100.00% 11/13/00 100,000
68 11/01/00 1,203
- ----------------------------------------------------------------------------------------------------------------------------------
68a 95.00% 11/01/00
68b Eckerd's 10,080 01/31/03 93.20% 11/01/00
68c CVS 8,450 07/31/05 100.00% 11/01/00
68d 100.00% 11/01/00
69 Wherehouse 10,000 12/01/04 100.00% 12/04/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
70 95.83% 11/28/00 0
71 Applied Geotechnology 13,532 12/31/02 100.00% 09/01/00 1,443
72 Pep Boys 19,675 12/31/18 93.92% 01/05/01 0
73 100.00% 12/07/00 0
74 100.00% 10/01/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
75 Bluestar Communications 4,711 04/30/02 88.44% 01/04/01 7,176
76 Technicolor Digital 3,660 11/7/02 100.00% 02/16/01 0
77 Chubb 25,919 10/31/05 99.34% 12/19/00 0
78 Dollar Tree 8,000 06/12/05 100.00% 12/19/00 0
79 Old Navy 26,353 08/31/05 89.02% 11/15/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
80 100.00% 12/11/00 0
81 American Express Travel 10,138 03/31/03 100.00% 12/01/00 0
82 MacConnell Research Services, Inc. 4,310 2/28/04 97.11% 02/06/01 58,354
83 96.35% 11/21/00 0
84 Creedmore Sports 4,436 7/15/02 98.02% 12/07/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
85 100.00% 12/06/00 0
86 Canela Bakery 3,125 9/20/05 98.44% 12/01/00 0
87 Power Systems Mfg, LLC 3,265 01/31/05 97.83% 12/01/00 0
88 77.48% 09/30/00 0
89 100.00% 11/10/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
90 99.42% 01/12/01 0
91 Regis Corp 1,200 09/01/05 100.00% 11/10/00 0
92 96.45% 11/28/00 0
93 91.18% 02/09/01 0
94 96.61% 09/26/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
95 Frozen Yogurt 1,205 07/31/01 100.00% 05/22/00 0
96 Herson's 7,200 12/31/01 100.00% 08/31/00 40,000
97 100.00% 11/14/00 0
98 S.E. Family Practice Assoc. PC 7,407 11/30/09 98.33% 02/06/01 0
99 Half Price Books 9,600 2/28/03 100.00% 10/31/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
100 98.73% 12/08/00 0
101 88.73% 11/21/00 0
102 99.56% 10/31/00 0
103 76.98% 12/04/00 0
104 100.00% 11/30/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
105 BindView Development 13,665 12/31/04 100.00% 11/01/00 1,247
106 Eckerd 8,450 05/31/06 100.00% 01/12/01 0
107 98.48% 11/21/00 0
108 Ross Realty 5,565 10/31/05 92.04% 11/01/00 0
109 Fashion Bug 8,000 5/31/10 91.65% 11/01/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
110 Maris G. Ramsey, DO, PA 4,250 11/30/04 97.65% 06/19/00 0
111 100.00% 11/15/00 0
112 97.35% 09/01/00 0
113 88.88% Various 0
113a 94.86% 11/02/00
- ----------------------------------------------------------------------------------------------------------------------------------
113b 92.16% 11/02/00
113c 89.94% 11/13/00
113d 96.35% 11/08/00
113e 91.50% 11/08/00
113f 71.84% 11/10/00
- ----------------------------------------------------------------------------------------------------------------------------------
114 76.40% 12/31/00 0
115 New Hampshire State Liquor Store 7,518 02/28/05 95.16% 02/01/01 1,938
116 Electronic Express 8,144 01/31/10 100.00% 12/08/00 0
117 Old Navy 18,502 12/31/09 100.00% 12/08/00 0
118 89.77% 09/25/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
119 90.41% 11/06/00 0
120 Sakwa Properties 4,940 5/31/02 97.23% 01/08/01 70,000
121 Rubin's Restaurant & Deli 3,930 10/31/02 100.00% 10/02/00 0
122 Dr. Alan Jeppsen 1,550 12/31/05 94.64% 01/17/01 0
123 100.00% 03/24/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
124 S. Texas Oncology 7,288 04/01/05 100.00% 01/01/01 0
125 94.29% 08/01/00 0
126 96.36% 11/29/00 0
127 100.00% 10/31/00 0
128 98.82% 12/14/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
129 Bellsouth 23,996 12/31/03 90.85% 01/09/01 270,000
130 SC Juvenile Justice 27,392 04/30/07 93.06% 01/09/01 677,500
131 100.00% 10/17/00 923
132 Global IT Assoc. 3,416 12/01/04 89.41% 11/07/00 40,000
133 100.00% 12/04/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
134 79.47% 01/01/01 0
135 100.00% 12/20/00 2,417
136 Staples 23,708 02/28/05 100.00% 01/01/01 1,968
137 100.00% 12/08/00 0
138 Clinic for Cardiovascular Care 3,279 10/31/03 95.49% 11/01/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
139 97.35% 11/13/00 151,000
140 Mercedes Homes 4,828 12/31/04 96.56% 09/20/00 498
141 Patrick Omeara 5,698 06/30/04 100.00% 02/01/01 0
142 Dollar Tree 4,640 10/31/03 100.00% 09/29/00 0
143 Insurance Network 7,434 03/31/04 98.97% 03/07/01 14,188
- ----------------------------------------------------------------------------------------------------------------------------------
144 100.00% 12/12/00 30,000
145 The Mason Jar Restaurant and Alehouse Inc. 2,150 11/01/04 100.00% 12/01/00 0
146 98.21% 10/01/00 0
147 100.00% 08/27/00 0
148 100.00% 01/01/01 0
- ----------------------------------------------------------------------------------------------------------------------------------
149 100.00% 08/28/00 0
150 Eckerd Drug 8,640 04/02/02 91.04% 01/01/01 1,039
151 Nx Networks, Inc. 8,536 05/31/07 100.00% 04/04/01 662
152 Office Depot 22,750 12/31/05 99.43% 11/01/00 25,000
153 Buddy's Freddy's 10,000 06/14/04 100.00% 12/21/00 0
- ----------------------------------------------------------------------------------------------------------------------------------
ONGOING UPFRONT
ACTUAL REPLACEMENT TI/LC MONTHLY MONTHLY TAX MONTHLY INSURANCE ENGINEERING
ID RESERVES TAKEN AT CLOSING TI/LC CONSTANT/ESCROW CONSTANT/ESCROW RESERVE
- ------------------------------------------------------------------------------------------------------------------------------
1 1,882 0 11,827 30,029 2,465 156,875
2 1,283 8,333 8,333 9,339 825 28,750
3 1,729 0 8,333 50,605 1,462 428,125
4 453 20,000 2,750 16,273 836 0
5 0 0 0 451,636 0 0
- ------------------------------------------------------------------------------------------------------------------------------
6 490 0 855 (Unless LOC) 756 359 3,125
7 2,420 141,185 21,325 10,475 5,351 0
8 775 4,167 4,167 12,078 487 0
9 6,250 775,327 41,015 29,367 12,572 0
10 1,060 0 2,660 (Unless LOC) 2,793 1,003 0
- ------------------------------------------------------------------------------------------------------------------------------
11 0 0 0 507 1,066 0
12 200 0 1,690 (Unless LOC) 1,916 258 0
13 1,805 0 0 3,212 669 8,479
14 796 0 3,808 3,290 172 0
15 1,896 0 0 3,358 468 73,454
- ------------------------------------------------------------------------------------------------------------------------------
16 696 0 1,394 4,556 0 2,656
17 1,875 0 8,565 0 0 0
18 675 0 3,765 0 0 16,781
19 394 150,000 1,604 3,611 227 0
20 1,520 0 4,380 11,209 1,286 101,581
- ------------------------------------------------------------------------------------------------------------------------------
21 845 0 3,027 3,575 263 0
22 880 0 0 3,971 0 1,875
23 590 0 0 722 0 0
24 627 0 1,725 7,868 520 3,250
25 550 35,000 2,225 2,013 218 0
- ------------------------------------------------------------------------------------------------------------------------------
26 1,117 0 0 2,069 0 0
27 710 247,438 3,080 18,329 1,383 0
28 310 0 1,550 1,396 292 0
29 0 170,283 0 8,026 943 0
30 680 0 0 2,126 0 625
- ------------------------------------------------------------------------------------------------------------------------------
31 255 0 0 0 371 3,125
32 0 0 9,027 25,123 0 15,750
33 1,140 0 0 27,618 3,250 102,460
34 10,638 0 0 14,766 6,404 78,750
35 500 0 2,485 733 501 0
- ------------------------------------------------------------------------------------------------------------------------------
36 1,210 0 4,940 7,998 917 17,438
37 1,938 0 0 3,425 0
38 11,230 0 0 8,750 416 0
39 741 0 5,209 3,608 0 6,673
40 1,030 0 0 6,693 812 0
- ------------------------------------------------------------------------------------------------------------------------------
41 0 0 0 0 0 0
42 0 0 0 0 0 0
43 0 0 0 0 0 0
44 675 0 0 2,981 708 41,906
45 670 0 965 10,383 933 43,375
- ------------------------------------------------------------------------------------------------------------------------------
46 685 0 0 415 0 39,375
47 625 120,000 20,000 5,313 1,829
48 185 0 1,425 2,615 348 8,469
49 225 0 1,355 1,454 375 2,938
50 1,122 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
51 4% of revenues 0 0 62,382 105,530 (LOC) 167,656
51a
51b
51c
51d
- ------------------------------------------------------------------------------------------------------------------------------
51e
51f
51g
52 855 722,837 5,335 9,132 0 0
53 6,310 0 0 9,585 4,021 21,875
- ------------------------------------------------------------------------------------------------------------------------------
54 0 0 0 19,622 1,416 0
55 1,586 0 5,360 4,661 1,865 33,250
56 526 1,754 1,754 6,892 637 0
57 1,950 0 8,765 0 0 50,938
58 26,950 0 0 23,843 0 3,250,000
- ------------------------------------------------------------------------------------------------------------------------------
59 825 0 2,710 9,167 0 5,500
60 691 0 0 4,385 0 37,100
61 530 0 2,715 2,624 425 52,705
62 4,290 0 0 6,667 1,853 39,125
63 10,000 0 0 10,446 2,877 36,750
- ------------------------------------------------------------------------------------------------------------------------------
64 5,335 0 0 12,024 2,807 4,688
65 780 0 3,370 7,103 1,074 0
66 195 91,936 0 2,518 475 0
67 5,267 500,000 20,834 0 0 0
68 1,203 3,626 3,626 10,790 0 32,112
- ------------------------------------------------------------------------------------------------------------------------------
68a
68b
68c
68d
69 2,324 0 7,095 8,987 758 11,219
- ------------------------------------------------------------------------------------------------------------------------------
70 575 0 0 1,698 783 0
71 1,443 12,083 12,083 13,794 2,241 18,438
72 854 0 5,000 4,535 10,179
73 0 0 0 0 0 0
74 1,270 0 0 4,490 1,813 0
- ------------------------------------------------------------------------------------------------------------------------------
75 8,103 970,954 22,190 18,073 0 77,688
76 617 0 4,000 5,277 546 0
77 2,837 0 35,417 105,000 0 7,500
78 825 0 2,855 (LOC) 6,802 924 0
79 1,295 0 2,485 (Unless LOC) 1,997 863 14,438
- ------------------------------------------------------------------------------------------------------------------------------
80 833 0 0 1,121 542 0
81 1,440 0 12,995 3,755 0 3,125
82 1,354 0 0 3,272 0 58,354
83 795 0 0 2,347 0 14,016
84 1,639 10,000 3,500 3,220 738 97,248
- ------------------------------------------------------------------------------------------------------------------------------
85 720 0 715 (Unless LOC) 0 474 0
86 421 0 1,983 5,299 581 0
87 1,231 0 3,605 8,514 1,550 91,688
88 2% of revenues 0 0 6,235 650 0
89 185 0 0 2,474 150 0
- ------------------------------------------------------------------------------------------------------------------------------
90 3,585 0 0 15,710 1,204 0
91 0 0 0 0 0 0
92 2,985 0 0 6,003 1,851 178,125
93 2,479 0 0 11,735 0 0
94 1,461 0 0 11,900 1,031 0
- ------------------------------------------------------------------------------------------------------------------------------
95 490 0 1,070 1,316 125 0
96 945 10,000 2,102 4,873 0 19,235
97 2,591 0 0 6,681 0 0
98 1,270 0 6,945 16,427 0 1,125
99 771 0 0 13,651 166 0
- ------------------------------------------------------------------------------------------------------------------------------
100 1,175 0 0 0 0 6,250
101 645 0 0 2,558 0 46,000
102 945 0 0 5,510 0 0
103 0 0 0 922 414 4,563
104 370 0 0 3,628 0 3,438
- ------------------------------------------------------------------------------------------------------------------------------
105 1,247 6,250 6,250 11,498 2,065 0
106 813 0 3,398 2,437 776 15,313
107 1,504 0 0 2,004 0 67,188
108 550 175,000 0 4,550 917 0
109 1,710 0 2,000 4,076 0 0
- ------------------------------------------------------------------------------------------------------------------------------
110 1,125 0 2,300 6,109 2,076 147,475
111 675 0 0 0 0 0
112 625 0 0 7,875 842 0
113 3,606 0 0 21,185 0 11,170
113a
- ------------------------------------------------------------------------------------------------------------------------------
113b
113c
113d
113e
113f
- ------------------------------------------------------------------------------------------------------------------------------
114 1,075 0 0 5,573 653 0
115 1,938 25,000 1,667 19,110 1,808 0
116 1,215 0 1,570 (Unless LOC) 4,612 808 0
117 1,305 0 6,667 0 4,378 0
118 575 0 0 915 283 3,000
- ------------------------------------------------------------------------------------------------------------------------------
119 720 0 0 2,967 670 0
120 909 0 0 10,911 429 0
121 358 0 2,880 5,547 1,752 1,875
122 75 0 0 1,968 179 0
123 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
124 1,094 0 9,168 13,125 551 50,175
125 3,605 0 0 4,833 1,568 33,750
126 920 0 0 0 0 0
127 875 0 0 7,365.00 0 0
128 1,826 0 0 3,144 538 0
- ------------------------------------------------------------------------------------------------------------------------------
129 4,155 527,000 23,040 22,750 1,345 30,000
130 4,955 773,000 24,480 22,211 1,345 22,500
131 923 0 0 9,798 0 0
132 775 25,000 5,208 2,857 488 20,000
133 4,550 0 0 23,250 3,500 19,938
- ------------------------------------------------------------------------------------------------------------------------------
134 2,055 0 0 1,250 1,679 875
135 2,417 0 0 16,719 412 3,746
136 1,968 0 0 41,581 0 3,438
137 0 0 0 0 0 0
138 1,040 0 5,955 7,022 437 77,994
- ------------------------------------------------------------------------------------------------------------------------------
139 8,429 0 0 14,823 2,704 0
140 498 0 3,458 5,312 549 3,125
141 1,575 0 0 7,279 0 0
142 570 0 0 5,215 579 3,375
143 699 0 1,667 5,555 190 14,188
- ------------------------------------------------------------------------------------------------------------------------------
144 1,293 0 0 4,770 979 38,656
145 317 0 2,871 3,655 609 102,888
146 1,175 0 0 5,597 0 0
147 0 0 0 0 0 0
148 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
149 0 0 0 0 0 0
150 1,039 275,000 0 6,700 2,000 23,055
151 662 5,360 5,360 6,146 1,609 4,375
152 2,047 0 0 17,666 0 0
153 2,350 0 5,000 12,063 1,180 2,625
- ------------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL
REPORT ENGINEERING APPRAISAL
ID DATE REPORT DATE REPORT DATE SPONSOR
- ------------------------------------------------------------------------------------------------------------------------------------
1 10/23/00 10/06/00 10/12/00 Andrew Czekaj
2 11/07/00 11/06/00 10/30/00 Dominican Equity Corp., T.M. Mian, Marty Mian
3 12/15/00 12/15/00 07/10/00 Rodney M. Propp, Joseph Tahl
4 11/08/00 11/06/00 10/31/00 Evan Williams, David Williams
5 01/29/01 01/29/01 01/01/01 George Karfunkel, Michael Karfunkel
- ------------------------------------------------------------------------------------------------------------------------------------
6 12/06/00 11/30/00 11/27/00 Thomas E. Newton, William A. Oldacre, Jr., Mark McDonald
7 07/17/00 07/19/00 07/20/00 Goodwin Gaw
8 12/11/00 12/12/00 11/22/00 John Power, Roger Altrueter
9 07/14/00 07/19/00 07/18/00 Goodwin Gaw
10 12/07/00 11/30/00 12/01/00 Bean Realty, Thomas E. Newton, William A. Oldacre, Jr.
- ------------------------------------------------------------------------------------------------------------------------------------
11 12/06/00 12/06/00 11/20/00 Paul Breckinridge Jones, John Hoagland, John Rulketter
12 09/11/00 09/11/00 09/20/00 Thomas R. Rossi
13 12/26/00 12/27/00 12/19/00 WPL Investments, LLC, Howard Liebreich, Wendy Liebreich, Leslie Liebreich
14 12/05/00 12/06/00 12/26/00 Edward St. John
15 11/07/00 01/12/01 11/03/00 First Pegasus Properties, L.L.C., James R. Federer, Richard L. Federer
- ------------------------------------------------------------------------------------------------------------------------------------
16 11/16/00 11/06/00 11/01/00 Robert Y. Shasha
17 11/08/00 11/01/00 10/25/00 South Central Nursing Homes Properties, Inc.
18 11/08/00 11/01/00 10/25/00 South Central Nursing Homes Properties, Inc.
19 12/27/00 12/20/00 11/09/00 Audubon GM LLC, Marvin Lang
20 11/21/00 11/28/00 11/27/00 Steven Fischer, Mark Zand
- ------------------------------------------------------------------------------------------------------------------------------------
21 01/12/01 01/03/01 01/09/01 Howard R. Sykes, Jr., C. Burton Cutright, Eric G. Olson
22 01/03/01 12/04/00 11/28/00 Joe Wolf
23 01/03/01 12/04/00 12/01/00 Joe Wolf
24 12/06/00 11/22/00 11/09/00 Tom Stilp, Joseph Messer
25 01/12/01 01/03/01 01/09/01 C. Burton Curtright, Eric G. Olson
- ------------------------------------------------------------------------------------------------------------------------------------
26 12/14/00 12/14/00 12/04/00 Edward St. John
27 11/22/00 10/20/00 09/18/00 Edgar Abelite, Kenneth R. Connors
28 09/18/00 09/18/00 09/14/00 Marcus Phillips, Meer 97, LLC, Y2K Resources, Inc., Donald Jackson
29 10/19/00 10/19/00 11/02/00 Donald Morton
30 01/03/01 12/04/00 11/27/00 Joe Wolf
- ------------------------------------------------------------------------------------------------------------------------------------
31 12/07/00 11/30/00 11/25/00 Thomas E. Newton, William A. Oldacre, Jr., Mark McDonald
32 02/09/01 01/26/01 12/07/00 Sunset Ridge Development, DNS Trust, Wagner Family Trust
33 02/05/01 07/26/00 01/31/01 Brian McElwee, Richard Ireland
34 11/02/00 12/01/00 10/19/00 Reckson Associates Realty
35 01/09/01 01/08/01 01/04/01 Michael Zimmerman, Alan Levin
- ------------------------------------------------------------------------------------------------------------------------------------
36 03/02/00 03/02/00 2/28/00 Paul D. Agarwal
37 01/23/01 01/23/01 01/05/01 Anthony DiMarzo
38 10/18/00 10/18/00 10/16/00 Bradford Honigfeld
39 11/20/00 11/20/00 12/04/00 Edward St. John
40 09/27/00 09/27/00 09/27/00 Danilo A. Sanchez, Monette A. Sanchez, Roy Arcenas, Virginia Arcenas
- ------------------------------------------------------------------------------------------------------------------------------------
41 10/13/00 10/16/00 10/18/00 David J. Lisa, John J. McKenna III
42 10/16/00 10/16/00 09/26/00 David J. Lisa
43 01/02/01 12/27/00 12/19/00 Gregory Bostivales, Harry Bostivales
44 11/29/00 11/21/00 11/22/00 George Branton, Adam McGavin, Jr.
45 10/20/00 09/27/00 09/26/00 John C. Tatum, Jr.
- ------------------------------------------------------------------------------------------------------------------------------------
46 01/03/01 12/04/00 11/30/00 Joe Wolf
47 11/29/00 11/29/00 11/03/00 Seymour S. Fortner, Willam R. Smith
48 12/15/00 12/20/00 01/30/01 John Hooten
49 08/03/00 08/09/00 08/30/00 Jocelyne Abrar, Abrar Family, LLC
50 10/13/00 10/17/00 09/29/00 Elbridge Johnson, Ernest Saunders
- ------------------------------------------------------------------------------------------------------------------------------------
51 Various Various Various Equity Inns, Inc.
51a 08/23/00 10/30/00 08/15/00
51b 09/22/00 10/30/00 08/22/00
51c 08/22/00 10/30/00 08/14/00
51d 08/23/00 10/30/00 08/07/00
- ------------------------------------------------------------------------------------------------------------------------------------
51e 08/23/00 10/30/00 08/08/00
51f 08/24/00 10/19/00 08/02/00
51g 08/23/00 10/30/00 08/01/00
52 01/09/01 01/08/01 04/01/01 Milton V. Peterson, The Peterson Family Trust
53 12/12/00 12/14/00 07/17/00 Philip Cascavilla, Robert B. Acree
- ------------------------------------------------------------------------------------------------------------------------------------
54 08/01/00 08/07/00 08/14/00 Lexington Acquiport Company, LLC
55 09/15/00 09/15/00 09/07/00 David A. Norwitt, Sandra Norwitt
56 10/18/00 10/17/00 02/01/01 Mikar LP, Iris Drazen, Kathie Welch
57 11/08/00 11/01/00 10/25/00 South Central Nursing Homes, Inc.
58 08/18/00 08/18/00 03/01/01 Schaedle Worthington Hyde Hotel, LLC, Schaedle Worthington Hyde Properties,
LLP, The Atlantic Hotel Group, LLC
- ------------------------------------------------------------------------------------------------------------------------------------
59 01/05/01 12/22/00 12/28/00 Robert V. Hughes, Thomas Phillip Hughes
60 12/01/00 03/08/01 12/04/00 Michael Flesh, Robert Flesh
61 09/12/00 09/21/00 09/05/00 James P. Breen
62 10/27/00 10/25/00 10/20/00 Daniel J. Miles, GMD Investments, LLC
63 09/12/00 07/14/00 07/07/00 Schecter Gateway Ltd, Aaron Schecter, Jerry Miller
- ------------------------------------------------------------------------------------------------------------------------------------
64 12/20/00 01/18/01 12/20/00 Anwar Kajani, Lidtas Management Group
65 12/06/00 10/24/00 11/08/00 Michael Lan S. Tran
66 07/10/00 07/07/00 09/15/00 James E. Strode, M. Adam Richey
67 12/07/00 12/07/00 12/01/00 W.P. Carey & Co. LLC
68 Various Ingles Markets, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
68a 09/25/00 09/24/00 09/09/00
68b 09/22/00 09/21/00 09/09/00
68c 09/25/00 09/22/00 09/13/00
68d 09/25/00 09/21/00 09/13/00
69 09/29/00 11/02/00 11/01/00 Mark J. Weinstein, Brian Fagan
- ------------------------------------------------------------------------------------------------------------------------------------
70 None 11/15/00 11/08/00 W. Eugene Wilcox, Sharon Wilcox
71 11/27/00 01/22/01 11/28/00 George Allen, Jimmy Aviram
72 01/18/01 01/25/01 02/01/01 The Sembler Company
73 02/22/01 12/19/00 12/07/00 Robert Rosen, Florence Rosen, David Rosen
74 10/26/00 10/24/00 10/17/00 J.P. Knight, Sr., J.P. Knight, Jr., Gary S. Knight, Christopher S. Knight
- ------------------------------------------------------------------------------------------------------------------------------------
75 01/10/01 01/11/01 12/27/00 Peridot, LLC, Peridot Investors LP, Barry Malkin, Norm Geller, Michael
Elrad, Craig Caffarelli
76 12/14/00 12/14/00 12/01/00 Paul Bershin
77 01/12/01 01/15/01 01/15/01 Edmund J. Fusco, Sr.
78 09/01/00 09/01/00 10/25/00 Horne Properties, Inc., Douglas A. Horne
79 12/06/00 11/29/00 11/25/00 Thomas E. Newton, William A. Oldacre, Jr., Mark McDonald
- ------------------------------------------------------------------------------------------------------------------------------------
80 12/04/00 11/29/00 11/14/00 Brock Vinton, Jeffrey Lang, David Grayson, John Brown
81 12/13/00 12/11/00 12/07/00 Jonathan F. P. Rose, Maidad Rabina
82 12/21/00 12/21/00 01/16/01 Steve Rothstein, Robert S. Wilensky, William S. Harvin, Howard E. Bowen
83 01/03/01 12/04/00 11/30/00 Joe Wolf
84 12/15/00 12/15/00 11/08/00 Stephen Zotovich, Bruce Ibbetson, Michael Meyer
- ------------------------------------------------------------------------------------------------------------------------------------
85 12/05/00 11/30/00 11/21/00 Thomas E. Newton, William A. Oldacre, Jr., Mark McDonald
86 11/16/00 11/16/00 11/05/00 Hong T. Nguyen
87 01/03/01 12/08/00 12/15/00 Pierre Martin, Jean Francis Roy
88 11/07/00 11/07/00 11/01/00 Kentwood, LLC, Ayres Family LP
89 12/07/00 12/13/00 11/10/00 Martin Shore, Marc Makebakken
- ------------------------------------------------------------------------------------------------------------------------------------
90 01/24/01 01/29/01 01/17/01 The Alexander Partnership, MVA-GP Limited Partnership, Urban Fund
Limited-1973, SP Investments II, LLC
91 11/09/00 10/30/00 11/10/00 Glenn W. Miller
92 12/14/00 12/14/00 12/05/00 Jordan E. Slone, Herbert K. Bangel, Jeffrey Kramer
93 06/08/00 09/29/00 09/22/00 Michael H. Podell Trust, Catherine H. Podell Trust
94 09/27/00 09/27/00 09/26/00 Danilo A. Sanchez, Monette A. Sanchez, Roy Arcenas, Virginia Arcenas
- ------------------------------------------------------------------------------------------------------------------------------------
95 09/27/00 09/28/00 06/05/00 Enayat Taban
96 11/08/00 11/06/00 10/25/00 Richard S. Cohen
97 09/27/00 09/27/00 09/27/00 Elliott Phillips
98 11/08/00 11/01/00 10/25/00 South Central Nursing Homes, Inc.
99 11/07/00 11/01/00 08/20/00 CIN Preston Valley View GP, LLC
- ------------------------------------------------------------------------------------------------------------------------------------
100 11/17/00 11/14/00 11/17/00 Dona K. Christensen, Nels T. Christensen
101 01/03/01 12/04/00 11/27/00 Joe Wolf
102 09/24/00 10/26/00 11/01/00 Thomas Tatum, Jeffrey Kaplan, Donna Kaplan
103 11/30/00 11/27/00 12/04/00 Ruben C. Shohet
104 12/07/00 12/06/00 12/01/00 Michael Flesh, Robert Flesh
- ------------------------------------------------------------------------------------------------------------------------------------
105 11/28/00 11/28/00 11/16/00 Anthony Tambone, Antonio Tambone, Alma Tambone
106 01/19/01 01/19/01 01/11/01 Jordan E. Slone, Chuck Patty, LeFam Co. LP, MCLB Partnership
107 01/03/01 12/04/00 12/01/00 Joe Wolf
108 11/29/00 11/22/00 01/01/01 RHEC Associates LTD., Weston Road II, O.S. Trust, Barry G. Ross
109 09/22/00 09/07/00 09/12/00 Hal Lamb, Julian Betts
- ------------------------------------------------------------------------------------------------------------------------------------
110 07/21/00 07/21/00 07/18/00 Sol Heifetz
111 12/06/00 11/30/00 12/01/00 Bean Realty, Thomas E. Newton, William A. Oldacre, Jr.
112 11/09/00 11/08/00 11/21/00 William Bromiley, Dennis Geiler
113 Various 11/21/00 Various Stephen L. Clark, Orlin E. Ard Jr., James E. Harris, Jr.
113a 11/08/00 11/21/00 11/02/00
- ------------------------------------------------------------------------------------------------------------------------------------
113b 11/14/00 11/21/00 11/02/00
113c 11/07/00 11/21/00 11/13/00
113d 11/08/00 11/21/00 11/08/00
113e 11/08/00 11/21/00 11/08/00
113f 11/08/00 11/21/00 11/10/00
- ------------------------------------------------------------------------------------------------------------------------------------
114 05/10/00 05/11/00 05/05/00 Stephen J. Garchick, David W. Evans
115 02/01/01 01/31/01 1/25/01 Bayard, Inc., Mitchell Robbins
116 12/05/00 11/30/00 11/26/00 Bean Realty, Thomas E. Newton, William A. Oldacre, Jr.
117 01/16/01 01/05/01 01/12/01 Stephen P. Hayman, Alan J. Hayman, Neal Higgins Walters, The Hayman Company
118 09/19/00 09/20/00 09/19/00 Thomas Norton
- ------------------------------------------------------------------------------------------------------------------------------------
119 11/08/00 11/08/00 11/08/00 Art Fleming
120 12/04/00 12/07/00 11/22/00 Gurmale Grewal
121 09/19/00 09/19/00 09/27/00 Conrad Baker
122 10/30/00 10/30/00 04/18/01 H. Roger Boyer, Kem C. Gardner
123 03/28/00 03/27/00 03/24/00 Gottlieb Family Trust, Milton Gottlieb
- ------------------------------------------------------------------------------------------------------------------------------------
124 10/23/00 12/27/00 12/20/00 Reckson Associates Realty
125 08/01/00 07/31/00 08/04/00 Ronald D. Bettencourt, John P. Casper
126 11/02/00 10/31/00 10/24/00 Marion LLC, Various "Class A Members"
127 12/04/00 12/04/00 11/20/00 Gurmale Grewal, Lushman Grewal, Tahil Grewal, Jeat Grewal
128 01/09/01 11/10/00 11/10/00 Donald Hunt
- ------------------------------------------------------------------------------------------------------------------------------------
129 09/20/00 10/04/00 09/06/00 Jordan E. Slone, Herbert K. Bangel
130 09/20/00 10/04/00 09/06/00 Jordan E. Slone, Herbert K. Bangel
131 11/08/00 10/23/00 10/04/00 Edward Blumenfeld, David Blumental
132 11/28/00 12/01/00 11/20/00 John Hardy Jones, Marjorie W. Knight
133 12/14/00 12/19/00 12/04/00 Reckson Associates Realty
- ------------------------------------------------------------------------------------------------------------------------------------
134 10/03/00 09/25/00 09/25/00 Larry L. Johnson, William D. Mounger
135 01/25/01 01/03/01 12/7/00 Frank Lalezarian, Paul Maroof
136 01/04/01 01/05/01 12/14/00 Andrew Mainardi III, Stephen Mainardi
137 12/19/00 12/14/00 12/08/00 Luis A. Belmonte, Thomas J. Rocca
138 10/23/00 12/22/00 10/20/00 Reckson Associates Realty
- ------------------------------------------------------------------------------------------------------------------------------------
139 12/04/00 12/07/00 12/13/00 Jupiter Realty Corp.
140 07/11/00 07/18/00 08/31/00 Cabot J. Jaffee, Jr., Michael D. Fess, Michael D. Calhoun
141 02/08/01 10/06/00 10/02/00 Maximo Haddad
142 10/02/00 10/04/00 10/27/00 Horne Properties, Inc., Douglas A. Horne, Robert S. Talbott
143 02/21/01 01/17/01 02/19/01 View Pointe Investors, LLC, VPD, LLC, East Hill Developers
- ------------------------------------------------------------------------------------------------------------------------------------
144 12/14/00 12/16/00 12/08/00 Allen L. Boerner, Theodore G. Habing
145 11/01/00 12/21/00 01/02/01 Timothy J. Brasel
146 01/23/01 01/23/01 01/05/01 Anthony DiMarzo
147 09/20/00 08/28/00 08/27/00 Gottlieb Family Trust, Milton Gottlieb
148 10/20/00 12/06/00 01/01/01 Larry John, Rick Cheney, Richard Chun
- ------------------------------------------------------------------------------------------------------------------------------------
149 09/07/00 08/28/00 08/28/00 Gottlieb Family Trust, Milton Gottlieb
150 09/23/00 07/26/00 01/31/01 Brian McElwee, Richard Ireland
151 02/23/01 12/21/00 12/13/00 Jim Mair
152 10/26/00 10/27/00 10/16/00 Milton Bilak
153 12/27/00 12/21/00 12/21/00 Robert Winslow, E. Kim Evans
- ------------------------------------------------------------------------------------------------------------------------------------
(1) MGT - Morgan Guaranty Trust Company of New York, GECC - General Electric
Capital Corporation, BSFI - Bear, Stearns Funding, Inc.
(2) Denotes Shadow Anchored Retail Properties
(3) Monthly Debt Service Payments for loans with interest only periods are
shown after the expiration of the Interest-Only Period.
(4) One loan secured by multiple properties
(5) The Self Storage Plus loan Original Balance and First Payment Date were
$5,844,000 and 8/1/00, respectively. An additional funding of $786,000 was
made in March 2001, at which time the Mortgage Rate and the Monthly Debt
Service were amended to the values shown above. The Original Balance and
First Payment Date shown above are subsequent to the additional funding.
(6) The Roswell Corners Shopping Center loan Mortgage Rate was 7.9900% at the
time of closing (12/8/00). Upon meeting a debt service test following the
anticipated additional lease up at the property, the Mortgage Rate was
reduced to 7.8900% the Monthly Debt Service was then modified to the value
shown above to reamortize this fully amortizing loan.
(7) The Dal-Park Garage loan Original Balance and First Payment Date were
$5,200,000 and 2/1/01, respectively. Following a permitted additional
principal paydown of $200,000 in March, 2001, the Monthly Debt Service was
reduced to the value shown above to reamortize the loan over its remaining
amortization term. The Original Balance and First Payment Date shown above
are subsequent to the additional principal paydown.
ANNEX B
NEW ISSUE
PRELIMINARY TERM SHEET
ANY INVESTMENT DECISION WTH RESPECT TO THE SECURITIES SHOULD BE MADE BY YOU
BASED UPON THE INFORMATION CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND
PROSPECTUS RELATNG TO THE SECURITIES. THE INFORMATION HEREIN WILL BE SUPERSEDED
IN ITS ENTIRETY BY THE INFORMATION CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT
AND PROSPECTUS.
THE INFORMATION CONTAINED HEREIN SUPERSEDES THE INFORMATION IN ALL PRIOR TERM
SHEETS, IF ANY.
---------------------------------
$997,635,000 (APPROXIMATE)
GE CAPITAL COMMERCIAL MORTGAGE CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-1
---------------------------------
GE CAPITAL COMMERCIAL MORTGAGE CORPORATION--DEPOSITOR
GE CAPITAL LOAN SERVICES, INC.--MASTER SERVICER
MIDLAND LOAN SERVICES, INC.--SPECIAL SERVICER
GENERAL ELECTRIC CAPITAL CORPORATION--MORTGAGE LOAN SELLER
MORGAN GUARANTY TRUST COMPANY OF NEW YORK--MORTGAGE LOAN SELLER
BEAR, STEARNS FUNDING, INC. --MORTGAGE LOAN SELLER
---------------------------------
FOR FURTHER INFORMATION CONTACT:
JPMORGAN
Brian Baker Glenn Riis Andy Taylor
(212) 648-1413 (212) 834-3813 (212) 834-3813
JPMORGAN BEAR, STEARNS & CO. INC.
Book Running Manager
DEUTSCHE BANC ALEX. BROWN SALOMON SMITH BARNEY INC.
The analyses in this report are based upon information provided by General
Electric Capital Corporation, Morgan Guaranty Trust Company of New York and
Bear, Stearns Funding, Inc. (the "Sellers"). JPMorgan, a division of Chase
Securities Inc. ("Chase Securities"), Bear, Stearns & Co. Inc., Deutsche Bank
Securities Inc., and Salomon Smith Barney Inc. (the "Underwriters") make no
representations as to the accuracy or completeness of the information contained
herein. The information contained herein is qualified in its entirety by the
information in the Prospectus and Prospectus Supplement for the securities
referred to herein (the "Securities"). The information contained herein is
preliminary as of the date hereof, supersedes any previous information delivered
to you by the Underwriters and will be superseded by the applicable final
Prospectus and Prospectus Supplement and any other information subsequently
filed with the Securities and Exchange Commission. These materials are subject
to change, completion, or amendment from time to time without notice, and the
Underwriters are under no obligation to keep you advised of such changes. These
materials are not intended as an offer or solicitation with respect to the
purchase or sale of any Security. Any investment decision with respect to the
Securities should be made by you based upon the information contained in the
final Prospectus Supplement and Prospectus relating to the Securities. You
should consult your own counsel, accountant, and other advisors as to the legal,
tax, business, financial and related aspects of a purchase of the Securities.
The attached information contains certain tables and other statistical analyses
(the "Computational Materials") which have been prepared in reliance upon
information furnished by the Sellers. They may not be provided to any third
party other than the addressee's legal, tax, financial and/or accounting
advisors for the purposes of evaluating said material. Numerous assumptions were
used in preparing the Computational Materials which may or may not be reflected
therein. As such, no assurance can be given as to the Computational Materials'
accuracy, appropriateness or completeness in any particular context; nor as to
whether the Computational Materials and/or the assumptions upon which they are
based reflect present market conditions or future market performance. These
Computational Materials should not be construed as either projections or
predictions or as legal, tax, financial or accounting advice. Any weighted
average lives, yields and principal payment periods shown in the Computational
Materials are based on prepayment assumptions, and changes in such prepayment
assumptions may dramatically affect such weighted average lives, yields and
principal payment periods. In addition, it is possible that prepayments on the
underlying assets will occur at rates slower or faster than the rates shown in
the attached Computational Materials. Furthermore, unless otherwise provided,
the Computational Materials assume no losses on the underlying assets and no
interest shortfalls. The specific characteristics of the Securities may differ
from those shown in the Computational Materials due to differences between the
actual underlying assets and the hypothetical underlying assets used in
preparing the Computational Materials. The principal amount and designation of
any Security described in the Computational Materials are subject to change
prior to issuance. Neither the Underwriters nor any of their affiliates make any
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. THIS
INFORMATION IS FURNISHED TO YOU SOLELY BY THE UNDERWRITERS AND NOT BY THE ISSUER
OF THE SECURITIES OR ANY OF ITS AFFILIATES. THE UNDERWRITERS ARE NOT ACTING AS
AGENT FOR THE ISSUER OR ITS AFFILIATES IN CONNECTION WITH THE PROPOSED
TRANSACTION.
APRIL 2001
- --------------------------------------------------------------------------------
THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
SUMMARY OF CERTIFICATES
- ----------------------------------------------------------------------------------------------------------------------------------
INITIAL
INITIAL CLASS PASS- ASSUMED PASS- WEIGHTED EXPECTED PRINCIPAL OR
CERTIFICATE APPROXIMATE THROUGH FINAL THROUGH AVERAGE RATINGS NOTIONAL
BALANCE OR CREDIT RATE DISTRIBUTION RATE LIFE (YEARS) (MOODY'S PRINCIPAL
CLASS NOTIONAL AMOUNT (1) SUPPORT DESCRIPTION DATE (5) (APPROX.) (6) /FITCH) WINDOW (6)
- ----------------------------------------------------------------------------------------------------------------------------------
A-1 $176,850,000 22.500% Fixed 10/10 5.70 Aaa/AAA 5/01-10/10
A-2 $709,301,000 22.500% Fixed 3/11 9.74 Aaa/AAA 10/10-3/11
B $45,737,000 18.500% Fixed 4/11 9.89 Aa2/AA 3/11-4/11
C $50,025,000 14.125% Fixed (3) 4/11 9.96 A2/A 4/11-4/11
D $15,722,000 12.750% Fixed (3) 4/11 9.96 A3/A- 4/11-4/11
X1 $1,143,420,694 N/A Variable I/O (2) 1/21 N/A N/A N/A
X2 $641,484,000 N/A Variable I/O (2) 4/08 N/A N/A N/A
E $31,444,000 10.000% Fixed (3) 4/11 N/A N/A N/A
F $14,292,000 8.750% Variable (4) 4/11 N/A N/A N/A
G $25,727,000 6.500% Fixed (3) 4/11 N/A N/A N/A
H $18,581,000 4.875% Fixed (3) 5/11 N/A N/A N/A
I $10,005,000 4.000% Fixed (3) 5/11 N/A N/A N/A
J $10,005,000 3.125% Fixed (3) 5/11 N/A N/A N/A
K $14,293,000 1.875% Fixed (3) 5/11 N/A N/A N/A
L $4,287,000 1.500% Fixed (3) 5/11 N/A N/A N/A
M $17,151,694 N/A Fixed (3) 1/21 N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
(1) Approximate, subject to a permitted variance of plus or minus 10%.
(2) The aggregate of the pass-through rates on the Class X-1 and Class X-2
certificates (the "Class X Certificates") will be equal to the excess, if
any, of (1) the weighted average of the net interest rates on the mortgage
loans determined without regard to any reductions in the interest rate
resulting from modification of the mortgage loans (in each case converted,
if necessary, to a rate expressed on the basis of a 360-day year consisting
of twelve 30-day months), over (2) the weighted average of the pass-through
rates of the other certificates (other than the residual certificates and
the Class S certificates) as described in this prospectus supplement.
(3) For any distribution date, if the weighted average of the net interest
rates on the mortgage loans determined without regard to any reductions in
the interest rate resulting from modification of the mortgage loans (in
each case converted to a rate expressed on the basis of a 360-day year
consisting of twelve 30-day months) as of the first day of the related due
period is less than the rate specified for the Class C, Class D, Class E,
Class G, Class H, Class I, Class J, Class K, Class L and Class M
certificates with respect to the distribution date, then the pass-through
rate for that class of certificates on that distribution date will equal
the weighted average net mortgage interest rate.
(4) It is anticipated that the pass-through rate applicable to the Class F
certificates on each distribution date will be equal to the weighted
average of the net interest rates on the mortgage loans determined without
regard to any reductions in the interest rate resulting from modification
of the mortgage loans (in each case converted to a rate expressed on the
basis of a 360-day year consisting of twelve 30-day months) minus [ ]% per
annum.
(5) The assumed final distribution dates set forth have been determined on the
basis of the assumptions described in "Description of the
Certificates--Assumed Final Distribution Date; Rated Final Distribution
Date" in the prospectus supplement. The rated final distribution date for
each class of certificates is May 15, 2033. See "Description of the
Certificates--Assumed Final Distribution Date; Rated Final Distribution
Date" in the prospectus supplement.
(6) The weighted average life and period during which distributions of
principal would be received (or applied in the case of the notional amount
of Class X certificates) set forth in the foregoing table with respect to
each class of certificates is based on the assumptions set forth under
"Yield and Maturity Considerations--Weighted Average Life" in this
prospectus supplement and on the assumptions that there are no prepayments
(other than on each anticipated prepayment date, if any) or losses on the
mortgage loans and that there are no extensions of maturity dates of
mortgage loans.
The Class X-1, Class X-2, Class E, Class F, Class G, Class H, Class I, Class J,
Class K, Class L and Class M certificates are not offered by this prospectus
supplement. The Class S, Class R and Class LR certificates are not offered by
the prospectus supplement or represented in this table.
- --------------------------------------------------------------------------------
COLLATERAL OVERVIEW:
- --------------------
Aggregate Principal Balance: $1,143,420,694
Number of Mortgage Loans: 153
Number of Mortgaged Properties: 167
Average Principal Balance: $7,473,338
Weighted Average Current Mortgage Rate: 7.65%
Weighted Average Underwritten DSCR: 1.41x
Weighted Average Cut-off Date LTV: 70%
Weighted Average Original Term to Maturity (months): 121
Weighted Average Remaining Term to Maturity (months): 119
Weighted Average Original Amortization Term (months): 349
Balloon Loans as a % of Total: 85.39%
APD Loans as a % of Total: 13.20%
Fully Amortizing Loans as a % of Total: 1.42%
Ten Largest Loans as a % of Total: 28.12%
AGGREGATE LOAN
CUT-OFF DATE PER CUT-OFF PROPERTY
TEN LARGEST LOAN SUMMARY BALANCE % OF IPB SF/UNIT LTV DSCR TYPE
- ----------------------------------------------------------------------------------------------------------------------------
59 Maiden Lane (Aaa/AA) $50,000,000 4.37% $44.43 25.00% 2.75x Office
Long Wharf Maritime Center I 37,478,298 3.28 $90.16 68.14% 1.31x Office
Synergy Business Park I and II Loans 35,289,165 3.09 $67.20 70.73% 1.23x Office
818 West Seventh Avenue 33,781,053 2.95 $89.51 62.56% 1.61x Office
Ell Portfolio II (Baa1/BBB-) 32,925,976 2.88 $38,331 56.48% 2.11x Hotel
Shoppes at Dadeland 29,000,000 2.54 $275.72 80.56% 1.23X Retail
Pescadero Apartments 28,984,673 2.53 $170,498 64.41% 1.39X Multifamily
Information Resources 25,911,945 2.27 $102.83 61.70% 1.50x Office
Civic Executive Center 25,135,353 2.20 $150.41 69.82% 1.25x Office
510 Fifth Avenue 23,000,000 2.01 $376.07 78.50% 1.33x Office
Total/Weighted Average $321,506,464 28.12% 61.07% 1.65X
- ----------------------------------------------------------------------------------------------------------------------------
NUMBER OF AGGREGATE CUT-OFF % OF INITIAL
MORTGAGED DATE POOL
STATE PROPERTIES BALANCE BALANCE
- -------------------------------------------------------------------------
California 27 $228,604,488 19.99%
Florida 16 105,481,085 9.23
Texas 20 87,107,177 7.62
New York 5 85,541,641 7.48
Georgia 9 71,164,946 6.22
Other States 90 565,521,357 49.46
TOTAL 167 $1,143,420,694 100.00%
- -------------------------------------------------------------------------
KEY CHARACTERISTICS:
Lead Manager: JPMorgan (book and co-lead); Bear, Stearns
& Co. Inc. (co-lead)
Master Servicer: GE Capital Loan Services, Inc.
Special Servicer: Midland Loan Services, Inc.
Trustee: LaSalle Bank National Association
Mortgage Loan Sellers: General Electric Capital Corporation (58.70%)
Morgan Guaranty Trust Company of New York (30.47%)
Bear, Stearns Funding, Inc. (10.83%)
Closing: On or about April 30, 2001
Cut-off Date: April 11, 2001
Distribution Date: 15th day of each month or following business day
ERISA Eligible: All offered certificates are expected to be
ERISA eligible
SMMEA Eligible: No classes are eligible
Structure: Sequential Pay
Day Count: 30/360, payable monthly
Tax Treatment: REMIC
Rated Final
Distribution Date: May 15, 2033
Minimum Denominations: $10,000 initial principal amount for the publicly
offered certificates. Each certificate will be offered
in multiples of $1 in excess of the minimum
denomination.
Delivery: DTC, Clearstream Banking, Euroclear
AGGREGATE % OF
NUMBER OF CUT-OFF INITIAL
MORTGAGE DATE POOL
PREPAYMENT PROVISIONS LOANS BALANCE BALANCE
- --------------------------------------------------------------------------------
Lockout period followed by defeasance 151 $1,134,683,694 99.24%
Lockout period followed by yield maintenance 1 6,087,000 0.53
Lockout period followed by penalty charge 1 2,650,000 0.23
TOTAL 153 $1,143,420,694 100.00%
- --------------------------------------------------------------------------------
NUMBER OF AGGREGATE % OF INITIAL
MORTGAGED CUT-OFF DATE POOL
PROPERTY TYPE (1) PROPERTIES BALANCE BALANCE
- --------------------------------------------------------------------------------
Office 46 $479,400,087 41.93%
Retail 51 306,504,419 26.81
Multifamily 22 158,451,443 13.86
Hotel 11 69,061,668 6.04
Self-Storage 16 55,313,763 4.84
Manufactured Housing 12 39,188,531 3.43
Industrial 8 30,511,821 2.67
Parking Garage 1 4,988,962 0.44
TOTAL 167 $1,143,420,694 100.00%
- --------------------------------------------------------------------------------
JPMORGAN BEAR, STEARNS & CO. INC.
Book Running Manager
Page 2 of 16
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THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
COLLATERAL STATISTICS
NUMBER OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF INITIAL POOL
RANGE OF DSCR LOANS/PROPERTIES BALANCE BALANCE
- ---------------------------------------------------------------------------------------
1.143x to 1.209x 7/7 $60,237,631 5.27%
1.210x to 1.239x 22/22 133,258,473 11.65
1.240x to 1.259x 22/22 151,475,944 13.25
1.260x to 1.299x 27/32 185,297,877 16.21
1.300x to 1.359x 36/39 254,024,707 22.22
1.360x to 1.489x 27/27 159,380,208 13.94
1.490x to 2.750x 12/18 199,745,855 17.47
TOTAL 153/167 $1,143,420,694 100.00%
- ---------------------------------------------------------------------------------------
NUMBER OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF INITIAL POOL
RANGE OF LTV RATIOS LOANS/PROPERTIES BALANCE BALANCE
- ---------------------------------------------------------------------------------------
25.000% - 59.999% 10/16 $117,811,779 10.30%
60.000% - 64.999% 13/13 145,895,012 12.76
65.000% - 68.999% 15/15 122,846,832 10.74
69.000% - 72.999% 25/33 214,583,575 18.77
73.000% - 76.999% 37/37 187,393,465 16.39
77.000% - 79.999% 43/43 272,670,689 23.85
80.000% - 81.699% 10/10 82,219,341 7.19
TOTAL 153/167 $1,143,420,694 100.00%
- ---------------------------------------------------------------------------------------
NUMBER OF AGGREGATE
RANGE OF PRINCIPAL MORTGAGE CUT-OFF DATE % OF INITIAL POOL
CUT-OFF DATE BALANCES LOANS/PROPERTIES BALANCE BALANCE
- ---------------------------------------------------------------------------------------
$925,000 - 2,000,000 16/16 $25,108,204 2.20%
2,000,001 - 4,000,000 47/47 138,812,324 12.14
4,000,001 - 7,000,000 41/41 220,384,296 19.27
7,000,001 - 12,000,000 25/30 235,451,119 20.59
12,000,001 - 20,000,000 14/17 215,337,103 18.83
20,000,001 - 30,000,000 6/6 154,142,322 13.48
30,000,001 - 50,000,000 4/10 154,185,328 13.48
TOTAL 153/167 $1,143,420,694 100.00%
- ---------------------------------------------------------------------------------------
YEAR OF SCHEDULED NUMBER OF AGGREGATE
MATURITY ANTICIPATED MORTGAGE CUT-OFF DATE % OF INITIAL POOL
REPAYMENT DATE LOANS/PROPERTIES BALANCE BALANCE
- ---------------------------------------------------------------------------------------
2005 1/1 $6,883,056 0.60%
2006 2/2 15,872,657 1.39
2010 22/31 203,591,739 17.81
2011 125/130 894,773,657 78.25
2016 1/1 6,087,000 0.53
2020 1/1 2,483,722 0.22
2021 1/1 13,728,863 1.20
TOTAL 153/167 $1,143,420,694 100.00%
- ---------------------------------------------------------------------------------------
NUMBER OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF INITIAL POOL
RANGE OF MORTGAGE RATES LOANS/PROPERTIES BALANCE BALANCE
- ---------------------------------------------------------------------------------------
7.000% to 7.299% 9/9 $172,523,061 15.09%
7.300% to 7.499% 23/23 182,628,384 15.97
7.500% to 7.699% 50/50 347,609,106 30.40
7.700% to 7.999% 38/43 222,046,712 19.42
8.000% to 8.299% 24/33 156,276,493 13.67
8.300% to 8.599% 6/6 35,120,550 3.07
8.600% to 8.850% 3/3 27,216,387 2.38
TOTAL 153/167 $1,143,420,694 100.00%
- ---------------------------------------------------------------------------------------
NUMBER OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF INITIAL POOL
AMORTIZATION TYPES LOANS BALANCE BALANCE
- ---------------------------------------------------------------------------------------
Balloon Loans 135 $976,333,196 85.39%
APD Loans 16 150,874,914 13.20
Fully Amortizing Loans 2 16,212,585 1.42
TOTAL 153 $1,143,420,694 100.00%
- ---------------------------------------------------------------------------------------
NUMBER OF AGGREGATE
BASIS FOR ACCRUAL OF MORTGAGE CUT-OFF DATE % OF INITIAL POOL
INTEREST LOANS BALANCE BALANCE
- ---------------------------------------------------------------------------------------
Actual/360 152 $1,129,691,831 98.80%
30/360 1 13,728,863 1.20
TOTAL 153 $1,143,420,694 100.00%
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Page 3 of 16
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THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
SUMMARY OF ISSUE
ISSUE TYPE: Sequential pay multi-class commercial mortgage
REMIC
OFFERED SECURITIES: Classes A-1, A-2, B, C, and D
COLLATERAL: Approximately $1,143,420,694 pool of 153
fixed-rate commercial, multifamily and
manufactured housing community mortgage loans
LOAN SELLERS: General Electric Capital Corporation, Morgan
Guaranty Trust Company of New York and Bear,
Stearns Funding, Inc.
DEPOSITOR: GE Capital Commercial Mortgage Corporation
UNDERWRITERS: Lead Managers- JPMorgan (Book Runner); Bear,
Stearns & Co. Inc. Co-Managers- Deutsche Bank
Securities Inc.; Salomon Smith Barney Inc.
MASTER SERVICER: GE Capital Loan Services, Inc.
PRIMARY SERVICER: GE Capital Loan Services, Inc.
SPECIAL SERVICER: Midland Loan Services, Inc.
TRUSTEE: LaSalle Bank National Association
PAYING AGENT: The Chase Manhattan Bank
RATING AGENCIES: Moody's and Fitch
CUT-OFF DATE: April 11, 2001
CLOSING DATE: On or about April 30, 2001
DISTRIBUTION DATE: The 15th day of the month or, if that day is not
a business day, the next business day, beginning
in May 2001.
DETERMINATION DATE: The earlier of (i) the 11th day of the month in
which the related distribution date occurs, or if
such 11th day is not a business day then the
immediately preceding business day and (ii) the
4th business day prior to the related
distribution date.
DENOMINATIONS: The offered certificates will be offered in
minimum denominations of $10,000 initial
principal amount.
ERISA CONSIDERATIONS: All offered certificates are expected to be ERISA
eligible
SMMEA ELIGIBILITY: No certificates are eligible.
CERTIFICATE REGISTRATION: Certificate owners may hold their certificates
through DTC (in the United States) or Clearstream
Banking, societe anonyme or The Euroclear System
(in Europe) if they are participants of that
system, or indirectly through organizations that
are participants in those systems.
Page 4 of 16
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THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
STRUCTURAL CHARACTERISTICS
INTEREST ACCRUAL PERIOD: Interest will accrue on the offered certificates
during the calendar month prior to the related
distribution date and will be calculated assuming
that each month has 30 days and each year has 360
days.
PASS-THROUGH RATES: Certificates will accrue interest at an annual
rate called a pass-through rate which is set
forth below for each class:
Class A-1 [ ]%
Class A-2 [ ]%
Class B [ ]%
Class C [ ]% (1)
Class D [ ]% (1)
(1) For any distribution date, if the weighted
average of the net interest rates on the
mortgage loans determined without regard to
any reductions in the interest rate resulting
from modification of the mortgage loans (in
each case converted to a rate expressed on
the basis of a 360-day year consisting of
twelve 30-day months and net of all servicing
and trustee fees) as of the first day of the
related due period is less than the rate
specified for the Class C or Class D
certificates with respect to the distribution
date, then the pass-through rate for that
class of certificates on that distribution
date will equal such weighted average net
mortgage interest rate.
PRINCIPAL DISTRIBUTIONS: On each distribution date, funds available for
distribution from the mortgage loans, net of
specified trust expenses, will be distributed to
the class of certificates outstanding, with the
earliest alphabetical/numerical Class
designation, until its certificate balance is
reduced to zero. If the principal amount of each
class of certificates other than Class A-1 and
Class A-2 has been reduced to zero, funds
available for principal will be distributed to
Class A-1 and Class A-2, pro rata, rather than
sequentially.
Page 5 of 16
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THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
STRUCTURAL CHARACTERISTICS (continued)
INTEREST DISTRIBUTIONS: Each class of offered certificates will be
entitled on each distribution date to interest
accrued at its pass-through rate on the
outstanding certificate balance of such class
during the prior calendar month (on a 30/360 day
basis).
PREPAYMENT PROVISIONS: Each mortgage loan prohibits any prepayments or
defeasance for a specified period of time after
its date of origination (a "Lockout Period"). In
addition, the mortgage loans generally have open
prepayment periods for the final 2 to 7 scheduled
payments (including the scheduled payment on the
stated Maturity Date or Anticipated Prepayment
Date). Each mortgage loan restricts voluntary
prepayments in one of the following ways:
(1) 151 of the mortgage loans, representing
approximately 99.24% of the Initial Pool
Balance, permit only defeasance after the
expiration of the Lockout Period; and
(2) 1 of the mortgage loans, representing
approximately 0.53% of the Initial Pool
Balance, requires that any principal
prepayment made during a specified period of
time after the Lockout Period, be accompanied
by a yield maintenance charge.
(3) 1 of the mortgage loans, representing
approximately 0.23% of the Initial Pool
Balance, requires that any principal
prepayment made during a specified period of
time after the Lockout Period, be accompanied
by a prepayment premium that declines from 5%
to 1% during the fixed penalty period.
YIELD MAINTENANCE CHARGES: On any Distribution Date, yield maintenance
charges collected during the related Due Period
will be required to be distributed by the Paying
Agent and allocated between the Offered
Certificates, the Class E Certificates, the Class
F Certificates and the Class X Certificates. The
penalty charges will be allocated to the Class X
Certificates.
REPRESENTATIONS AND General Electric Capital Corporation, Morgan
WARRANTIES: Guaranty Trust Company of New York, and Bear,
Stearns Funding, Inc. will make certain
representations and warranties with respect to
each mortgage loan sold by General Electric
Capital Corporation, Morgan Guaranty Trust
Company of New York, and Bear, Stearns Funding,
Inc., respectively.
Page 6 of 16
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THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
59 MAIDEN LANE
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LOAN INFORMATION
- --------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $50,000,000 $50,000,000
% OF POOL BY IPB: 4.37%
SHADOW RATING: Moody's: Aaa / Fitch: AA
ORIGINATOR: MGT
LOAN DATE: 3/7/01
INTEREST RATE: 7.000%
REMAINING AMORTIZATION: 360 months
MATURITY DATE: 4/1/11
SPONSOR: George Karfunkel, Michael Karfunkel
CALL PROTECTION: Lockout followed by defeasance
RESERVES: Re-leasing reserve of $125,000 per month in years
eight and nine
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- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Single Asset
PROPERTY TYPE: Office
SQUARE FEET: 1,125,295
LOCATION: New York, NY
YEAR BUILT: 1966
COLLATERAL: 44-story office building located in the heart of
Manhattan's Downtown Financial District.
MAJOR TENANTS (% OF
TOTAL SF): NYC Dept. of Citywide Admin. (22.56%) The Home
Insurance Company (9.37%) Bluestone Capital
Partners (6.57%)
CURRENT OCCUPANCY: 86.62%
UWNCF: $10,977,191
APPRAISED VALUE: $200,000,000
APPRAISAL DATE: 1/1/01
CUT-OFF DATE LOAN/SF: $44.43
CUT-OFF DATE LTV: 25.00%
BALLOON LTV: 21.80%
UWNCF DSCR: 2.75x
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Page 7 of 16
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THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
LONG WHARF MARITIME CENTER I
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $37,500,000 $37,478,298
% OF POOL BY IPB: 3.28%
ORIGINATOR: MGT
LOAN DATE: 2/28/01
INTEREST RATE: 7.250%
REMAINING AMORTIZATION: 359 months
MATURITY DATE: 3/10/11
SPONSOR: Edmund J. Fusco, Sr.
CALL PROTECTION: Lockout followed by defeasance
CROSS-COLLATERALIZATION: No
LOCK BOX: None
RESERVES: Monthly Repl. Reserves: $2,837
Monthly TI/LC Reserves: $35,417
Re-leasing Reserve: $425,000 per year during
years 1-5. Following year 5 an additional $45,834
per month until 2008, up to a maximum of
$3,000,000.
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- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Single Asset
PROPERTY TYPE: Office
SQUARE FEET: 415,685
LOCATION: New Haven, CT
YEAR BUILT: 1985
COLLATERAL: 15-story, multi-tenant office building
constructed in 1985 and an adjacent six-story
1,719 space parking garage. The building contains
415,685 square feet of net rentable area.
MAJOR TENANTS (% OF
TOTAL SF): Southern New England Telephone (57.99%)
Curagen Corporation (8.65%)
Chubb (6.24%)
CURRENT OCCUPANCY: 99.34%
UWNCF: $4,030,078
APPRAISED VALUE: $55,000,000
APPRAISAL DATE: 1/15/01
CUT-OFF DATE LOAN/SF: $90.16
CUT-OFF DATE LTV: 68.14%
BALLOON LTV: 59.86%
UWNCF DSCR: 1.31x
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[GRAPHIC OMITTED]
Page 8 of 16
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THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
SYNERGY BUSINESS PARK- COLUMBIA I AND II LOANS
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE:
Synergy - Columbia I $17,925,000 $17,868,878
Synergy - Columbia II $17,475,000 $17,420,287
---------------------------------------
TOTAL: $35,400,000 $35,289,165
% OF POOL BY IPB: 3.09%
ORIGINATOR: GECC
LOAN DATE: 10/31/00
INTEREST RATE: 8.060%
REMAINING AMORTIZATION: 355 months
MATURITY DATE: 11/1/10
SPONSOR: Jordan E. Slone, Herbert K. Bangel. Jordan Slone
is the Chairman and CEO of Harbor Group
International, which controls approximately
2,000,000 square feet of office space, 1,900,000
square feet of retail space and 6,900 apartment
units.
CALL PROTECTION: Lockout followed by defeasance
RESERVES: Synergy Business Park - Columbia I Loan: Upfront
TI/LC Reserve: $527,000
Property Improvement Reserve: $270,000
Monthly Repl. Reserve: $4,155
Monthly TI/LC Reserve: $23,040
Synergy Business Park - Columbia II Loan:
Upfront TI/LC Reserve: $773,000
Property Improvement Reserve: $677,500
Monthly Repl. Reserve: $4,955
Monthly TI/LC Reserve: $24,480
- --------------------------------------------------------------------------------
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PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Portfolio
PROPERTY TYPE: Office
SQUARE FEET (AGGREGATE): 525,136
LOCATION: Columbia, SC
YEAR BUILT/YEAR RENOVATED: 1982 / 1998
COLLATERAL: Two loans secured by, respectively, 3 and 5
multi-tenanted office buildings comprising the
Synergy Business Park, formerly known as the
Koger Center. Located in the St. Andrews suburb,
3 miles from downtown Columbia, SC.
MAJOR TENANTS (% OF
TOTAL SF): SC Dept. Of Labor (13.63%)
Physicians Health Pl (6.48%)
SC Public Serv. Comm (6.04%)
CURRENT OCCUPANCY: 91.98%
UWNCF (AGGREGATE): $3,860,243 (total)
APPRAISED VALUE (AGGREGATE): $49,900,000 (total)
APPRAISAL DATE: 9/6/00
CUT-OFF DATE LOAN/SF: $67.20
(aggregate)
CUT-OFF DATE LTV: 70.73%
(aggregate)
BALLOON LTV: 63.53%
(aggregate)
UWNCF DSCR: 1.23x
(aggregate)
CROSS-COLLATERALIZATION: Partial releases within each loan are not
permitted, however the borrower is permitted to
obtain the release of all the properties securing
each respective loan, provided the outstanding
principal balance of such loan is defeased.
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[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
Page 9 of 16
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THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
818 WEST SEVENTH STREET
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LOAN INFORMATION
- --------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $33,800,000 $33,781,053
% OF POOL BY IPB: 2.95%
ORIGINATOR: GECC
LOAN DATE: 2/1/01
INTEREST RATE: 7.350%
REMAINING AMORTIZATION: 359 months
MATURITY DATE: 3/1/11
SPONSOR: Goodwin Gaw. Goodwin Gaw is president of Pioneer
Capital Investments, Inc. Pioneer has a portfolio
consisting of approximately 2.5 million square
feet of office buildings in Los Angeles, San
Francisco, New York and Hawaii.
CALL PROTECTION: Lockout followed by defeasance
CROSS-COLLATERALIZATION: No
RESERVES: Upfront TI/LC Reserve: $775,327
Upfront Tenant Security LOC: $1,045,237
Monthly Repl. Reserve: $6,250
Monthly TI/LC Reserve: $41,015
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PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Single Asset
PROPERTY TYPE: Office
SQUARE FEET: 377,405
LOCATION: Los Angeles, CA
YEAR BUILT/YEAR RENOVATED: 1926/1985
COLLATERAL: 12 story office building located in downtown Los
Angeles. Listed as a Los Angeles historical
monument.
MAJOR TENANTS (% OF
TOTAL SF): Level 3 Communications, Inc. (19.88%)
Pihana Pacific, Inc. (17.53%)
Southern California Association of
Governments (13.38%)
CURRENT OCCUPANCY: 100.00%
UWNCF: $4,497,188
APPRAISED VALUE: $54,000,000
APPRAISAL DATE: 7/18/00
CUT-OFF DATE LOAN/SF: $89.51
CUT-OFF DATE LTV: 62.56%
BALLOON LTV: 55.09%
UWNCF DSCR: 1.61x
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[GRAPHIC OMITTED]
Page 10 of 16
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THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
EII PORTFOLIO II
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $33,053,100 $32,925,976
% OF POOL BY IPB: 2.88%
SHADOW RATING: Moody's: Baa1 / Fitch: BBB-
ORIGINATOR: GECC
LOAN DATE: 11/7/00
INTEREST RATE: 8.250%
REMAINING AMORTIZATION: 296 months (116 months to APD)
APD: 12/1/10
SPONSOR: Equity Inns, Inc., a NYSE traded self-
administered REIT. As of 11/00 Equity Inns, Inc.
had a portfolio of 96 hotels comprising 12,284
rooms, located in 34 states.
CALL PROTECTION: Lockout followed by defeasance
CROSS-COLLATERALIZATION: Yes. Partial releases permitted providing
borrower defeases 125% of allocated loan amount,
subject to rating agency confirmation and
satisfaction of LTV/DSCR tests.
LOCK BOX: Soft at closing, springing hard at 1.45x DSCR
RESERVES: Quarterly FF& E Reserve: 4% of total revenues on
spend or accrue basis.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Portfolio
PROPERTY TYPE: Hotel
UNITS (AGGREGATE): 859
LOCATION: State College, PA; Madison Heights, MI; Dublin,
OH; Charleston, SC; Windsor Locks, CT; Rutland,
VT; Birmingham, AL
YEAR BUILT: Various
COLLATERAL: Six limited service hotels trading under the
Hampton Inns (5) and Comfort Inns (1) flags, and
1 extended stay hotel trading under the Homewood
Suites flag. Hampton Inns, Homewood Suites and
Comfort Inns are all flags of Hilton Hotels
Corporation.
CURRENT OCCUPANCY: 68.49%
UNDERWRITTEN ADR: $80.91
UNDERWRITTEN REVPAR: $54.03
UWNCF: $6,604,247
APPRAISED VALUE: $58,300,000
APPRAISAL DATE: Various
CUT-OFF DATE LOAN/ROOM: $38,331
CUT-OFF DATE LTV: 56.48
BALLOON LTV: 47.05%
UWNCF DSCR: 2.11x
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[GRAPHICS OMMITED]
Page 11 of 16
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THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
PESCADERO APARTMENTS
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $29,000,000 $28,984,673
% OF POOL BY IPB: 2.54%
ORIGINATOR: GECC
LOAN DATE: 2/15/01
INTEREST RATE: 7.530%
REMAINING AMORTIZATION: 359 months (119 months to APD)
APD: 3/11/11
SPONSOR: Michael H. Podell Trust, Catherine H. Podell
Trust
CALL PROTECTION: Lockout followed by defeasance
CROSS-COLLATERALIZATION: No
LOCK BOX: Soft at closing, springing hard
RESERVES: Monthly Repl. Reserve: $2,479
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Single Asset
PROPERTY TYPE: Multifamily
UNITS: 170
LOCATION: Redwood City, CA
YEAR BUILT: 1999
COLLATERAL: A fourteen building 170 unit class A apartment
complex located in Redwood City, San Mateo
County, CA. The complex includes an indoor
swimming pool and a health club.
CURRENT OCCUPANCY: 91.18%
UWNCF: $3,397,070
APPRAISED VALUE: $45,000,000
APPRAISAL DATE: 9/22/00
CUT-OFF DATE LOAN/UNIT: $170,498
CUT-OFF DATE LTV: 64.41%
BALLOON LTV: 56.98%
UWNCF DSCR: 1.39x
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[GRAPHIC OMITTED]
Page 12 of 16
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THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
SHOPPES AT DADELAND
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $29,000,000 $29,000,000
% OF POOL BY IPB: 2.54%
ORIGINATOR: GECC
LOAN DATE: 3/16/01
INTEREST RATE: 7.460%
REMAINING AMORTIZATION: 360 months
MATURITY DATE: 4/1/11
SPONSOR: Stephen Hayman, Alan Hayman, Neal Higgins
Walters. The Hayman Company manages approximately
9,000 apartment units and approximately 3,000,000
square feet of commercial space.
RESERVES: Monthly Repl. Reserve: $1,305
Monthly TI/LC Reserve: $6,667
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- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Single Asset
PROPERTY TYPE: Anchored Retail
SQUARE FEET: 105,181
LOCATION: Miami, FL
YEAR BUILT/YEAR RENOVATED: 1999
COLLATERAL: Two story shopping center located directly across
the street from the Dadeland Mall in Miami, FL.
The Dadeland Mall is a 1,400,000 square feet
regional shopping center anchored by Burdines,
Lord & Taylor, Saks Fifth Avenue, and Home
Gallery.
MAJOR TENANTS (% OF
TOTAL SF): Linens & Things (42.40%)
Container Store (24.20%)
Old Navy (17.50%)
CURRENT OCCUPANCY: 100.00%
UWNCF: $2,983,500
APPRAISED VALUE: $36,000,000
APPRAISAL DATE: 1/12/01
CUT-OFF DATE LOAN/SF: $275.72
CUT-OFF DATE LTV: 80.56%
BALLOON LTV: 71.11%
UWNCF DSCR: 1.23x
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
Page 13 of 16
- --------------------------------------------------------------------------------
THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
INFORMATION RESOURCES
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $26,000,000 $25,911,945
% OF POOL BY IPB: 2.27%
ORIGINATOR: MGT
LOAN DATE: 12/29/00
INTEREST RATE: 7.600%
REMAINING AMORTIZATION: 297 months
MATURITY DATE: 1/10/11
SPONSOR: W.P. Carey & Co., LLC
CALL PROTECTION: Lockout followed by defeasance
CROSS-COLLATERALIZATION: No
RESERVES: Upfront TI/LC Reserves: $500,000
Monthly Repl. Reserves: $5,267
Monthly TI/LC Reserves: $20,834
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Single Asset
PROPERTY TYPE: Office
SQUARE FEET: 252,000
LOCATION: Chicago, IL
YEAR BUILT/YEAR RENOVATED: 1908/1990
COLLATERAL: The Information Resources Inc. Corporate
Headquarters is comprised of 252,000 net rentable
square feet in two buildings in Chicago's West
Loop District.
TENANT: The property is 100% leased to Information
Resources Inc.
CURRENT OCCUPANCY: 100%
UWNCF: $3,479,019
APPRAISED VALUE: $42,000,000
APPRAISAL DATE: 12/1/00
CUT-OFF DATE LOAN/SF: $102.83
CUT-OFF DATE LTV: 61.70%
BALLOON LTV: 50.41%
UWNCF DSCR: 1.50x
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Page 14 of 16
- --------------------------------------------------------------------------------
THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
CIVIC EXECUTIVE CENTER
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $25,150,000 $25,135,353
% OF POOL BY IPB: 2.20%
ORIGINATOR: GECC
LOAN DATE: 2/1/01
INTEREST RATE: 7.230%
REMAINING AMORTIZATION: 359 months
MATURITY DATE: 3/1/11
SPONSOR: Sanford Diller. Sanford Diller has developed over
8,000 apartment units and approximately 2,700,000
square feet of office and retail space.
CALL PROTECTION: Lockout followed by defeasance
CROSS-COLLATERALIZATION: No
RESERVES: Annual Repl. Reserve: $58,088
Monthly TI/LC Reserve: $9,027
(capped at $541,632)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Single Asset
PROPERTY TYPE: Office
SQUARE FEET: 167,117
LOCATION: Walnut Creek, CA
YEAR BUILT: 1983
COLLATERAL: Three story, multi-tenanted office building
located in Walnut Creek, CA, 20 miles east of
downtown San Franciso.
MAJOR TENANTS (% OF
TOTAL SF): Brown and Caldwell (33.61%) Bank of the West
(12.67%) Laidlaw Transit (8.91%)
CURRENT OCCUPANCY: 97.99%
UWNCF: $2,558,547
APPRAISED VALUE: $36,000,000
APPRAISAL DATE: 12/7/00
CUT-OFF DATE LOAN/SF: $150.41
CUT-OFF DATE LTV: 69.82%
BALLOON LTV: 61.30%
UWNCF DSCR: 1.25x
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Page 15 of 16
- --------------------------------------------------------------------------------
THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
510 FIFTH AVENUE
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $23,000,000 $23,000,000
% OF POOL BY IPB: 2.01%
ORIGINATOR: MGT
LOAN DATE: 3/14/01
INTEREST RATE: 7.150%
REMAINING AMORTIZATION: 360 months
MATURITY DATE: 4/1/11
SPONSOR: Rodney M. Propp, Joseph Tahl
CALL PROTECTION: Lockout followed by defeasance
CROSS-COLLATERALIZATION: No
RESERVES: Monthly Repl. Reserves: $1,729
Monthly TI/LC Reserve: $8,333
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Single Asset
PROPERTY TYPE: Office
SQUARE FEET: 61,159
LOCATION: New York, NY
YEAR BUILT: 1954
COLLATERAL: 5-story, 100% leased, landmark office property
containing 61,159 square feet of gross leasable
area. The building is considered notable as it
was one of the first in the US to apply
International Style modernism to bank design.
MAJOR TENANTS (% OF
TOTAL SF): Tahari (37.24%)
Ricoh Corp (32.91%)
Chase Manhattan (29.85%)
CURRENT OCCUPANCY: 100.00%
UWNCF: $2,476,360
APPRAISED VALUE: $29,300,000
APPRAISAL DATE: 7/10/00
CUT-OFF DATE LOAN/SF: $376.07
CUT-OFF DATE LTV: 78.50%
BALLOON LTV: 68.73%
UWNCF DSCR: 1.33x
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Page 16 of 16
DATED APRIL 11, 2001
PROSPECTUS
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
GE CAPITAL COMMERCIAL MORTGAGE CORPORATION
(DEPOSITOR)
-----------------
GE Capital Commercial Mortgage Corporation from time to time will offer
commercial mortgage pass-through certificates in separate series. We will offer
the certificates through this prospectus and a separate prospectus supplement
for each series.
For each series we will establish a trust fund consisting primarily of a
segregated pool of various types of multifamily or commercial mortgage loans,
mortgage-backed securities 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 mortgage-backed securities.
If specified in the related prospectus supplement, the trust fund for a series
of certificates may include letters of credit, insurance policies, guarantees,
reserve funds or other types of credit support, interest rate exchange
agreements, interest rate cap or floor agreements or currency exchange
agreements as described in this prospectus.
The certificates of a series will evidence beneficial ownership interests in
the trust fund. We may divide the certificates of a series into two or more
classes which may have different interest rates and which may receive principal
payments in differing proportions and at different times. In addition, your
rights as holders of certain classes may be subordinate to the rights of
holders of other classes to receive principal and interest.
No series of certificates will represent an obligation of or interest in GE
Capital Commercial Mortgage Corporation, the Mortgage Asset Seller, the
Underwriter or any of their affiliates. Neither the certificates of any series
nor the assets in any trust fund will be guaranteed or insured by any
governmental agency or instrumentality or by any other person, unless otherwise
provided in the related prospectus supplement. The assets in each trust fund
will be held in trust for the benefit of the holders of the related series of
certificates, as more fully described in this prospectus.
No secondary market will exist for a series of certificates prior to its
offering. We cannot assure you that a secondary market will develop for the
certificates of any series, or, if it does develop, that it will continue.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 14 OF THIS
PROSPECTUS AND IN THE RELATED PROSPECTUS SUPPLEMENT.
----------------
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved of the offered certificates or notes or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
We may offer certain of the certificates of any series through one or more
different methods, including offerings through underwriters, as more fully
described in this prospectus under "Method of Distribution" and in the related
prospectus supplement. We may retain or hold for sale one or more classes of a
series of certificates. Offerings of certain classes of the certificates, if so
specified in the related prospectus supplement, may be made in one or more
transactions exempt from the registration requirements of the Securities Act of
1933, as amended. Those offerings are not being made pursuant to this
prospectus or the related registration statement.
This prospectus may not be used to consummate sales of the certificates of any
series unless accompanied by the prospectus supplement for that series.
The date of this Prospectus is April 11, 2001
TABLE OF CONTENTS
Important Notice About Information Presented in this Prospectus and Each Accompanying
Prospectus Supplement ................................................................... 5
SUMMARY OF PROSPECTUS .................................................................... 6
RISK FACTORS ............................................................................. 14
Limited Liquidity of Your Certificates .................................................. 14
Limited Assets of Each Trust Fund ....................................................... 14
Prepayment Considerations; Variability in Average Life of Offered Certificates; Special
Yield Considerations .................................................................. 15
Limited Nature of Ratings ............................................................... 16
Risks Associated with Certain Mortgage Loans and Mortgaged Properties ................... 16
Borrowers May Be Unable to Make Balloon Payments ........................................ 18
Credit Support Limitations .............................................................. 19
Leases and Rents ........................................................................ 19
Environmental Risks ..................................................................... 20
Special Hazard Losses ................................................................... 20
Some Certificates May Not Be Appropriate for ERISA Plans ................................ 21
Certain Federal Tax Considerations Regarding Residual Certificates ...................... 21
Certain Federal Tax Considerations Regarding Original Issue Discount .................... 21
Bankruptcy Proceedings Entail Certain Risks ............................................. 21
Book-Entry System for Certain Classes May Decrease Liquidity and Delay Payment .......... 22
Delinquent and Non-Performing Mortgage Loans ............................................ 23
DESCRIPTION OF THE TRUST FUNDS ........................................................... 24
General ................................................................................. 24
Mortgage Loans .......................................................................... 24
MBS ..................................................................................... 27
Certificate Accounts .................................................................... 28
Credit Support .......................................................................... 29
Cash Flow Agreements .................................................................... 29
YIELD AND MATURITY CONSIDERATIONS ........................................................ 30
General ................................................................................. 30
Pass-Through Rate ....................................................................... 30
Payment Delays .......................................................................... 30
Certain Shortfalls in Collections of Interest ........................................... 30
Yield and Prepayment Considerations ..................................................... 31
Weighted Average Life and Maturity ...................................................... 32
Controlled Amortization Classes and Companion Classes ................................... 33
Other Factors Affecting Yield, Weighted Average Life and Maturity ....................... 34
THE DEPOSITOR ............................................................................ 36
USE OF PROCEEDS .......................................................................... 36
DESCRIPTION OF THE CERTIFICATES .......................................................... 37
General ................................................................................. 37
Distributions ........................................................................... 37
Distributions of Interest on the Certificates ........................................... 38
Distributions of Principal on the Certificates .......................................... 39
Distributions on the Certificates in Respect of Prepayment Premiums or in Respect of
Equity Participations ................................................................. 39
Allocation of Losses and Shortfalls ..................................................... 39
Advances in Respect of Delinquencies .................................................... 40
2
Reports to Certificateholders ........................................... 41
Voting Rights ........................................................... 42
Termination ............................................................. 42
Book-Entry Registration and Definitive Certificates ..................... 43
DESCRIPTION OF THE POOLING AGREEMENTS .................................... 45
General ................................................................. 45
Assignment of Mortgage Loans; Repurchases ............................... 45
Representations and Warranties; Repurchases ............................. 46
Collection and Other Servicing Procedures ............................... 47
Sub-Servicers ........................................................... 47
Special Servicers ....................................................... 48
Certificate Account ..................................................... 48
Modifications, Waivers and Amendments of Mortgage Loans ................. 51
Realization Upon Defaulted Mortgage Loans ............................... 51
Hazard Insurance Policies ............................................... 53
Due-on-Sale and Due-on-Encumbrance Provisions ........................... 54
Servicing Compensation and Payment of Expenses .......................... 54
Evidence as to Compliance ............................................... 54
Certain Matters Regarding the Master Servicer and the Depositor ......... 55
Events of Default ....................................................... 56
Rights Upon Event of Default ............................................ 56
Amendment ............................................................... 57
List of Certificateholders .............................................. 57
The Trustee ............................................................. 58
Duties of the Trustee ................................................... 58
Certain Matters Regarding the Trustee ................................... 58
Resignation and Removal of the Trustee .................................. 58
DESCRIPTION OF CREDIT SUPPORT ............................................ 60
General ................................................................. 60
Subordinate Certificates ................................................ 60
Cross-Support Provisions ................................................ 60
Insurance or Guarantees with Respect to Mortgage Loans .................. 61
Letter of Credit ........................................................ 61
Certificate Insurance and Surety Bonds .................................. 61
Reserve Funds ........................................................... 61
Credit Support with Respect to MBS ...................................... 62
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS .................................. 63
General ................................................................. 63
Types of Mortgage Instruments ........................................... 63
Leases and Rents ........................................................ 63
Personalty .............................................................. 64
Foreclosure ............................................................. 64
Bankruptcy Laws ......................................................... 67
Environmental Risks ..................................................... 70
Due-on-Sale and Due-on-Encumbrance ...................................... 71
Subordinate Financing ................................................... 72
Default Interest and Limitations on Prepayments ......................... 72
Applicability of Usury Laws ............................................. 72
Soldiers' and Sailors' Civil Relief Act of 1940 ......................... 73
Type of Mortgaged Property .............................................. 73
3
Americans with Disabilities Act ....................................................... 73
Forfeitures In Drug and RICO Proceedings .............................................. 74
CERTAIN FEDERAL INCOME TAX CONSEQUENCES ................................................ 75
Federal Income Tax Consequences for REMIC Certificates ................................ 75
Taxation of Regular Certificates ...................................................... 78
Taxation of Residual Certificates ..................................................... 84
Taxes That May Be Imposed on the REMIC Pool ........................................... 91
Liquidation of the REMIC Pool ......................................................... 92
Administrative Matters ................................................................ 92
Limitations on Deduction of Certain Expenses .......................................... 92
Taxation of Certain Foreign Investors ................................................. 93
Backup Withholding .................................................................... 94
Reporting Requirements ................................................................ 94
Federal Income Tax Consequences for Certificates as to Which No REMIC Election Is Made 96
Standard Certificates ................................................................. 96
Stripped Certificates ................................................................. 99
Reporting Requirements and Backup Withholding ......................................... 101
Taxation of Certain Foreign Investors ................................................. 102
STATE AND OTHER TAX CONSIDERATIONS ..................................................... 102
CERTAIN ERISA CONSIDERATIONS ........................................................... 103
General ............................................................................... 103
Plan Asset Regulations ................................................................ 103
Administrative Exemptions ............................................................. 104
Insurance Company General Accounts .................................................... 104
Unrelated Business Taxable Income; Residual Certificates .............................. 105
LEGAL INVESTMENT ....................................................................... 105
METHOD OF DISTRIBUTION ................................................................. 107
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE ...................................... 108
LEGAL MATTERS .......................................................................... 108
FINANCIAL INFORMATION .................................................................. 108
RATING ................................................................................. 109
INDEX OF PRINCIPAL DEFINITIONS ......................................................... 110
4
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND EACH ACCOMPANYING PROSPECTUS SUPPLEMENT
Information about the offered certificates is contained in two separate
documents that progressively provide more detail: (a) this prospectus, which
provides general information, some of which may not apply to the offered
certificates; and (b) the accompanying prospectus supplement for each series,
which describes the specific terms of the offered certificates. IF THE TERMS OF
THE OFFERED CERTIFICATES VARY BETWEEN THIS PROSPECTUS AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN THE PROSPECTUS
SUPPLEMENT.
You should rely only on the information contained in this prospectus and
the accompanying prospectus supplement. We have not authorized anyone to
provide you with information that is different from that contained in this
prospectus and the related prospectus supplement. The information in this
prospectus is accurate only as of the date of this prospectus.
Certain capitalized terms are defined and used in this prospectus to
assist you in understanding the terms of the offered certificates and this
offering. The capitalized terms used in this prospectus are defined on the
pages indicated under the caption "Index of Principal Definitions" beginning on
page 106 in this prospectus.
In this prospectus, the terms "Depositor," "we," "us" and "our" refer to
GE Capital Commercial Mortgage Corporation.
----------------
If you require additional information, the mailing address of our
principal executive offices is GE Capital Commercial Mortgage Corporation, 292
Long Ridge Road, Stamford, Connecticut 06927, and telephone number is (203)
357-4000.
5
SUMMARY OF PROSPECTUS
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES
NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING AN
INVESTMENT DECISION. PLEASE READ THIS ENTIRE PROSPECTUS AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT AS WELL AS THE TERMS AND PROVISIONS OF THE RELATED
POOLING AND SERVICING AGREEMENT CAREFULLY TO UNDERSTAND ALL OF THE TERMS OF A
SERIES OF CERTIFICATES. AN INDEX OF PRINCIPAL DEFINITIONS IS INCLUDED AT THE
END OF THIS PROSPECTUS.
TITLE OF CERTIFICATES....... Mortgage pass-through certificates, issuable in
series.
DEPOSITOR................... GE Capital Commercial Mortgage Corporation is a
wholly-owned subsidiary of General Electric
Capital Corporation. All outstanding common stock
of General Electric Capital Corporation is owned
by General Electric Capital Services, Inc., the
common stock of which is in turn wholly owned
directly or indirectly by the General Electric
Company.
MASTER SERVICER............. The master servicer, if any, for a series of
certificates will be named in the related
prospectus supplement. The master servicer for
any series of certificates may be an affiliate of
the Depositor or a special servicer.
SPECIAL SERVICER............ One or more special servicers, if any, for a
series of certificates will be named, or the
circumstances under which a special servicer will
be appointed will be described, in the related
prospectus supplement. A special servicer for any
series of certificates may be an affiliate of the
Depositor or the master servicer.
TRUSTEE..................... The trustee for each series of certificates
will be named in the related prospectus
supplement.
THE TRUST ASSETS............ Each series of certificates will represent in
the aggregate the entire beneficial ownership
interest in a trust fund consisting primarily of:
A. MORTGAGE ASSETS.......... The mortgage assets with respect to each series
of certificates will, in general, consist of a
pool of loans secured by liens on, or security
interests in:
o residential properties consisting of five or
more rental or cooperatively-owned dwelling
units or by shares allocable to a number of
those units and the related leases; or
o office buildings, shopping centers, retail
stores and establishments, hotels or motels,
nursing homes, hospitals or other health-care
related facilities, manufactured housing
properties, warehouse facilities,
mini-warehouse facilities, self-storage
facilities, industrial plants, parking lots,
mixed use or various other types of
income-producing properties described in this
prospectus or unimproved land.
Mortgage loans may be secured by properties
backed by credit lease obligations of a tenant
or net lease obligations guaranteed
6
by another entity. Either the tenant or the
guarantor will have a credit rating form a
rating agency as described in the prospectus
supplement. If so specified in the related
prospectus supplement, a trust fund may include
mortgage loans secured by liens on real estate
projects under construction. No one will
guarantee the mortgage loans, unless otherwise
provided in the related prospectus supplement.
If so specified in the related prospectus
supplement, some mortgage loans may be
delinquent. In no event will delinquent mortgage
loans comprise 20 percent or more of the trust
fund at the time the mortgage loans are
transferred to the trust fund.
As described in the related prospectus
supplement, a mortgage loan:
o may provide for no accrual of interest or for
accrual of interest at a mortgage interest
rate that is fixed over its term or that
adjusts from time to time, or that the
borrower may elect to convert from an
adjustable to a fixed mortgage interest rate,
or from a fixed to an adjustable mortgage
interest rate;
o may provide for level payments to maturity or
for payments that adjust from time to time to
accommodate changes in the mortgage interest
rate or to reflect the occurrence of certain
events, and may permit negative amortization;
o may be fully amortizing or partially
amortizing or non-amortizing, with a balloon
payment due on its stated maturity date;
o may prohibit prepayments over its term or for
a certain period and/or require payment of a
premium or a yield maintenance penalty in
connection with certain prepayments;
o may permit defeasance with non-callable U.S.
Treasury securities or securities issued by
government agencies; and
o may provide for payments of principal,
interest or both, on due dates that occur
monthly, quarterly, semi-annually or at
another interval specified in the related
prospectus supplement.
Some or all of the mortgage loans in any trust
fund may have been originated by an affiliate of
the Depositor. See "Description of the Trust
Funds--Mortgage Loans" in this prospectus.
If specified in the related prospectus
supplement, the mortgage assets with respect to
a series of certificates may also include, or
consist of,
o private mortgage participations, mortgage
pass-through certificates or other
mortgage-backed securities, or
o certificates insured or guaranteed by any of
the Federal Home Loan Mortgage Corporation,
the Federal National Mortgage Association,
the Governmental National Mortgage
Association or the Federal Agricultural
Mortgage Corporation.
7
Each of the above mortgage assets will evidence
an interest in, or will be secured by a pledge
of, one or more mortgage loans that conform to
the descriptions of the mortgage loans contained
in this prospectus. See "Description of the
Trust Funds--MBS" in this prospectus.
B. CERTIFICATE ACCOUNT...... Each trust fund will include one or more
certificate accounts established and maintained
on behalf of the certificateholders. The person
or persons designated in the related prospectus
supplement will be required to, to the extent
described in this prospectus and in that
prospectus supplement, deposit all payments and
other collections received or advanced with
respect to the mortgage assets and other assets
in the trust fund into the certificate accounts.
A certificate account may be maintained as an
interest bearing or a non-interest bearing
account, and its funds may be held as cash or
invested in certain obligations acceptable to the
rating agencies rating one or more classes of the
related series of offered certificates. See
"Description of the Trust Funds--Certificate
Accounts" and "Description of the Pooling
Agreements--Certificate Account" in this
prospectus.
C. CREDIT SUPPORT........... 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 that
series, which other classes may include one or
more classes of offered certificates, or by one
or more other types of credit support, such as a
letter of credit, insurance policy, guarantee,
reserve fund or another type of credit support
described in this prospectus, or a combination of
these features. The amount and types of any
credit support, the identification of any entity
providing it and related information 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 "Description of Credit Support" in this
prospectus.
D. CASH FLOW AGREEMENTS..... If so provided in the related prospectus
supplement, a trust fund may include 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. The trust fund may also include
interest rate exchange agreements, interest rate
cap or floor agreements, or currency exchange
agreements, all of which are designed to reduce
the effects of interest rate or currency exchange
rate fluctuations on the mortgage assets or on
one or more classes of certificates. The
principal terms of that guaranteed investment
contract or other agreement, including, without
limitation, provisions relating to the timing,
manner and amount of any corresponding payments
and provisions relating to their termination,
will be described in the prospectus
8
supplement for the related series. In addition,
the related prospectus supplement will contain
certain information that pertains to the obligor
under any cash flow agreements of this type. See
"Description of the Trust Funds--Cash Flow
Agreements" in this prospectus.
DESCRIPTION OF
CERTIFICATES................ We will offer certificates in one or more classes
of a series of certificates issued pursuant to a
pooling and servicing agreement or other
agreement specified in the related prospectus
supplement. The certificates will represent in
the aggregate the entire beneficial ownership
interest in the trust fund created by that
agreement.
As described in the related prospectus
supplement, the certificates of each series, may
consist of one or more classes of certificates
that, among other things:
o are senior or subordinate to one or more
other classes of certificates in entitlement
to certain distributions on the certificates;
o are principal-only certificates entitled to
distributions of principal, with
disproportionately small, nominal or no
distributions of interest;
o are interest-only certificates entitled to
distributions of interest, with
disproportionately small, nominal or no
distributions of principal;
o provide for distributions of interest on, or
principal of, the certificates that begin
only after the occurrence of certain events,
such as the retirement of one or more other
classes of certificates of that series;
o provide for distributions of principal of the
certificates to be made, from time to time or
for designated periods, at a rate that is
faster, or slower than the rate at which
payments or other collections of principal
are received on the mortgage assets in the
related trust fund;
o provide for controlled distributions of
principal to be made based on a specified
schedule or other methodology, subject to
available funds; or
o provide for distributions based on
collections of prepayment premiums, yield
maintenance penalties or equity
participations on the mortgage assets in the
related trust fund.
Each class of certificates, other than
interest-only certificates and residual
certificates which are only entitled to a
residual interest in the trust fund, will have a
stated principal balance. Each class of
certificates, other than principal-only
certificates and residual certificates, will
accrue interest on its stated principal balance
or, in the case of interest-only certificates,
on a notional amount. Each class of certificates
entitled to interest will accrue interest
9
based on a fixed, variable or adjustable
pass-through interest rate. The related
prospectus supplement will specify the principal
balance, notional amount and/or fixed
pass-through interest rate, or, in the case of a
variable or adjustable pass-through interest
rate, the method for determining that rate, as
applicable, for each class of offered
certificates.
The certificates will not be guaranteed or
insured by anyone, unless otherwise provided in
the related prospectus supplement. See "Risk
Factors--Limited Assets of Each Trust Fund" and
"Description of the Certificates" in this
prospectus.
DISTRIBUTIONS OF INTEREST ON
THE CERTIFICATES........... Interest on each class of offered certificates,
other than certain classes of principal-only
certificates and certain classes of residual
certificates, of each series will accrue at the
applicable fixed, variable or adjustable
pass-through interest rate on the principal
balance or, in the case of certain classes of
interest-only certificates, on the notional
amount, outstanding from time to time. Interest
will be distributed to you as provided in the
related prospectus supplement on specified
distribution dates. Distributions of interest
with respect to one or more classes of accrual
certificates may not begin 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 before the occurrence of
that event will either be added to its principal
balance or otherwise deferred. 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 in this prospectus and
in the related prospectus supplement. See "Risk
Factors--Prepayment Considerations; Variability
in Average Life of Offered Certificates; Special
Yield Considerations", "Yield and Maturity
Considerations" and "Description of the
Certificates--Distributions of Interest on the
Certificates" in this prospectus.
DISTRIBUTIONS OF PRINCIPAL
OF THE CERTIFICATES........ Each class of certificates of each series,
other than certain classes of interest-only
certificates and certain classes of residual
certificates, will have a principal balance. The
principal balance of a class of certificates will
represent the maximum amount that you are
entitled to receive as principal from future cash
flows on the assets in the related trust fund.
Distributions of principal with respect to one
or more classes of certificates may:
o 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;
10
o 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;
o not commence until the occurrence of certain
events, such as the retirement of one or more
other classes of certificates of the same
series;
o be made, subject to certain limitations,
based on a specified principal payment
schedule resulting in a controlled
amortization class of certificates; or
o 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 that class. See "Description
of the Certificates--Distributions of Principal
on the Certificates" in this prospectus.
ADVANCES.................... If provided in the related prospectus
supplement, if a trust fund includes mortgage
loans, the master servicer, a 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 those mortgage loans. Any of the advances of
principal and interest made with respect to a
particular mortgage loan will be reimbursable
from subsequent recoveries from the related
mortgage loan and otherwise to the extent
described in this prospectus and in the related
prospectus supplement. If provided in the
prospectus supplement for a series of
certificates, any entity making these advances
may be entitled to receive interest on those
advances while they are outstanding, payable from
amounts in the related trust fund. If a trust
fund includes mortgage participations,
pass-through certificates or other
mortgage-backed securities, any comparable
advancing obligation will be described in the
related prospectus supplement. See "Description
of the Certificates--Advances in Respect of
Delinquencies" in this prospectus.
TERMINATION................. If so specified in the related prospectus
supplement, the mortgage assets in the related
trust fund may be sold, causing an early
termination of a series of certificates in the
manner set forth in the prospectus supplement. If
so provided in the related prospectus supplement,
upon the reduction of the principal balance of a
specified class or classes of certificates by a
specified percentage or amount, the party
specified in the prospectus supplement may be
authorized or required to bid for
11
or solicit bids for the purchase of all of the
mortgage assets of the related trust fund, or of
a sufficient portion of the mortgage assets to
retire the class or classes, as described in the
related prospectus supplement. See "Description
of the Certificates--Termination" in this
prospectus.
REGISTRATION OF BOOK-ENTRY
CERTIFICATES............... If so provided in the related prospectus
supplement, one or more classes of the offered
certificates of any series will be book-entry
certificates offered through the facilities of
The Depository Trust Company. Each class of
book-entry certificates will be initially
represented by one or more certificates
registered in the 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" in this
prospectus.
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES............... The federal income tax consequences to
certificateholders will vary depending on whether
one or more elections are made to treat the trust
fund or specified portions of the trust fund as
one or more "real estate mortgage investment
conduits" (each, a "REMIC") under the provisions
of the Internal Revenue Code. The prospectus
supplement for each series of certificates will
specify whether one or more REMIC elections will
be made. See "Certain Federal Income Tax
Consequences" in this prospectus.
CERTAIN ERISA
CONSIDERATIONS.............. If you are a fiduciary of any employee benefit
plans or certain other retirement plans and
arrangements, including individual retirement
accounts, annuities, Keogh plans, and collective
investment funds and insurance company general
and separate accounts in which those plans,
accounts, annuities or arrangements are invested,
that are subject to ERISA or Section 4975 of the
Internal Revenue Code or materially similar
provisions of applicable federal, state or local
law, you should carefully review with your 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, the Internal
Revenue Code or applicable similar law. See
"Certain ERISA Considerations" in this prospectus
and "ERISA Considerations" in the related
prospectus supplement.
LEGAL INVESTMENT............ The applicable prospectus supplement will
specify whether the offered certificates will
constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended. If your
investment authority is subject to legal
restrictions you should consult your own legal
advisors to determine if the offered certificates
constitute legal investments for you. See "Legal
Investment" in this prospectus and in the related
prospectus supplement.
12
RATING...................... At their dates of issuance, each class of
offered certificates will be rated at least
investment grade by one or more nationally
recognized statistical rating agencies. See
"Rating" in this prospectus and "Ratings" in the
related prospectus supplement.
13
RISK FACTORS
You should carefully consider the following risks and the risks described
under "RISK FACTORS" in the prospectus supplement for the applicable series of
certificates before making an investment decision. In particular, distributions
on your certificates will depend on payments received on and other recoveries
with respect to the mortgage loans. Thus, you should carefully consider the
risk factors relating to the mortgage loans and the mortgaged properties.
LIMITED LIQUIDITY OF YOUR CERTIFICATES
We cannot assure you that a secondary market for the certificates will
develop or, if it does develop, that it will provide you with liquidity of
investment or will continue for the life of your certificates. The prospectus
supplement for any series of offered certificates may indicate that an
underwriter intends to make a secondary market in those offered certificates;
however, no underwriter will be obligated to do so. Any resulting secondary
market may provide you with less liquidity than any comparable market for
certificates that evidence interests in single-family mortgage loans.
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 your certificates, will be
the periodic reports delivered to you. See "Description of the Certificates--
Reports to Certificateholders" in this prospectus. We cannot assure you that any
additional ongoing information regarding your certificates will be available
through any other source. The limited nature of the available information in
respect of a series of offered certificates may adversely affect its liquidity,
even if a secondary market for those certificates does develop.
Even if a secondary market does develop with respect to any series or
class of certificates, the market value of those certificates will be affected
by several factors, including:
o The perceived liquidity of the certificates;
o The anticipated cash flow of the certificates, which may vary widely
depending upon the prepayment and default assumptions applied in respect
of the underlying mortgage loans and prevailing interest rates;
o The price payable at any given time in respect of certain classes of
offered certificates may be extremely sensitive to small fluctuations in
prevailing interest rates, particularly, for a class with a relatively
long average life, a companion class to a controlled amortization class, a
class of interest-only certificates or principal-only certificates; and
o The relative change in price for an offered certificate in response to
an upward or downward movement in prevailing interest rates may not equal
the relative change in price for that certificate in response to an equal
but opposite movement in those rates. Accordingly, the sale of your
certificates in any secondary market that may develop may be at a discount
from the price you paid.
We are not aware of any source through which price information about the
offered certificates will be generally available on an ongoing basis.
Except to the extent described in this prospectus and in the related
prospectus supplement, you will have no redemption rights, and the certificates
of each series will be subject to early retirement only under certain specified
circumstances described in this prospectus and in the related prospectus
supplement. See "Description of the Certificates--Termination" in this
prospectus.
LIMITED ASSETS OF EACH TRUST FUND
Unless otherwise specified in the related prospectus supplement,
o The certificates of any series and the mortgage assets in the related
trust fund 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; and
14
o The certificate of any series will not 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
to make those payments. Additionally, certain amounts on deposit from time to
time in certain funds or accounts constituting part of a trust fund may be
withdrawn under certain conditions, as described in the related prospectus
supplement, for purposes other than the payment of principal of or interest on
the related series of certificates. If so provided in the prospectus supplement
for a series of certificates consisting of one or more classes of subordinate
certificates, if losses or shortfalls in collections have occurred with respect
to any distribution date, all or a portion of the amount of these 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 the prospectus
supplement.
PREPAYMENT CONSIDERATIONS; VARIABILITY IN AVERAGE LIFE OF OFFERED CERTIFICATES;
SPECIAL YIELD CONSIDERATIONS
As a result of, among other things, 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 those 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 offered certificates
of the related series.
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, legal and other factors. For example, if
prevailing interest rates fall significantly below the mortgage interest rates
of the mortgage loans included in a trust fund, then, subject to, among other
things, the particular terms of the mortgage loans and the ability of borrowers
to get new financing, principal prepayments on those mortgage loans are likely
to be higher than if prevailing interest rates remain at or above the rates on
those mortgage loans. Conversely, if prevailing interest rates rise
significantly above the mortgage interest rates of the mortgage loans included
in a trust fund, then principal prepayments on those mortgage loans are likely
to be lower than if prevailing interest rates remain at or below the rates on
those mortgage loans. We cannot assure you as to the actual rate of prepayment
on the mortgage loans in any trust fund or that the rate of prepayment will
conform to any model described in this prospectus 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
than expected.
The extent to which prepayments on the mortgage loans in any trust fund
ultimately affect the average life of your certificates will depend on the
terms of your certificates.
o A class of certificates that entitles the holders of those certificates
to a disproportionately large share of the prepayments on the mortgage
loans in the related trust fund increases the "call risk" or the
likelihood of early retirement of that class if the rate of prepayment
is relatively fast; and
o A class of certificates that entitles the holders of the certificates to
a disproportionately small share of the prepayments on the mortgage
loans in the related trust fund increases the likelihood of "extension
risk" or an extended average life of that class if the rate of
prepayment is relatively slow.
As described in the related prospectus supplement, the respective
entitlements of the various classes of certificate of any series to receive
payments, especially prepayments, of principal of the mortgage loans in the
related trust fund may vary based on the occurrence of certain events such as
the retirement of one or more classes of certificates of that series, or
subject to certain contingencies such as the rate of prepayments and defaults
with respect to those mortgage loans.
A series of certificates may include one or more controlled amortization
classes, which will entitle you 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
15
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 those certificates. Prepayment risk with respect to a given pool
of mortgage assets 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 you to a
disproportionately large share of prepayments on the mortgage loans in the
related trust fund when the rate of prepayment is relatively fast, or may
entitle you 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 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.
A series of certificates may include one or more classes of offered
certificates offered at a premium or discount. Yields on those classes of
certificates will be sensitive, and in some cases extremely sensitive, to
prepayments on the mortgage loans in the related trust fund. Where the amount
of interest payable with respect to a class is disproportionately large, as
compared to the amount of principal, as with certain classes of interest-only
certificates, you might fail to recover your 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 they are purchased at a discount or premium and the amount and
timing of distributions on those certificates. You 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 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 that is
lower than the anticipated yield. See "Yield and Maturity Considerations" in
this prospectus.
LIMITED NATURE OF RATINGS
Any rating assigned to a class of offered certificates by a rating agency
will only reflect its assessment of the probability that you will receive
payments to which you are entitled. This rating will not constitute an
assessment of the probability:
o that principal prepayments on the related mortgage loans will be made;
o of the degree to which the rate of prepayments might differ from the
rate of prepayments that was originally anticipated; or
o of the likelihood of early optional termination of the related trust
fund.
Furthermore, the rating will not address the possibility that prepayment
of the related mortgage loans at a higher or lower rate than you anticipated
may cause you to experience a lower than anticipated yield or that if you
purchase a certificate at a significant premium you might fail to recover your
initial investment under certain prepayment scenarios.
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 that
series. These criteria are sometimes based upon analysis of the behavior of
mortgage loans in a larger group. However, we cannot assure you that the
historical data supporting that 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, the criteria may be based
upon determinations of the values of the mortgaged properties that provide
security for the mortgage loans in the related trust fund. However, we cannot
assure you that those values will not decline in the future. See "Description
of Credit Support" and "Rating" in this prospectus.
RISKS ASSOCIATED WITH CERTAIN MORTGAGE LOANS AND MORTGAGED PROPERTIES
A description of risks associated with investments in mortgage loans is
included under "Certain Legal Aspects of Mortgage Loans" in this prospectus.
Commercial and multifamily lending generally exposes the
16
lender to a greater risk of loss than one-to four-family residential lending.
Commercial and multifamily lending typically involves larger loans to single
borrowers or groups of related borrowers than residential one- to four-family
mortgage loans. Further, the repayment of loans secured by income producing
properties is typically dependent upon the successful operation of the related
real estate project. If the cash flow from the project is reduced (for example,
if leases are not obtained or renewed), 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 those 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:
o Changes in general or local economic conditions and/or specific industry
segments;
o Declines in real estate values;
o Declines in rental or occupancy rates;
o Increases in interest rates, real estate tax rates and other operating
expenses;
o Changes in governmental rules, regulations and fiscal policies,
including environmental legislation;
o Acts of God; and
o Other factors beyond the control of a master servicer.
The type and use of a particular mortgaged property may present additional
risk. For instance:
o Mortgaged properties that operate as hospitals and nursing homes may
present special risks to lenders due to the significant governmental
regulation of the ownership, operation, maintenance and financing of
health care institutions.
o Hotel and motel properties are often operated pursuant to franchise,
management or operating agreements that may be terminable by the
franchisor or operator. Moreover, 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.
o 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:
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);
o 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;
17
o Deterioration in the financial strength or managerial capabilities of
the owner and operator of a hotel; and
o 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 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 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.
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 that 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, we cannot assure you that enforcement of
those 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" in this
prospectus.
Further, 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.
BORROWERS MAY BE UNABLE TO MAKE 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 principal payments (that is, balloon payments)
at their stated maturity. Mortgage loans of this type involve a greater degree
of risk 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:
18
o The value of the related mortgaged property;
o The level of available mortgage interest rates at the time of sale or
refinancing;
o The borrower's equity in the related mortgaged property;
o The financial condition and operating history of the borrower and the
related mortgaged property;
o Tax laws, rent control laws, with respect to certain residential
properties;
o Medicaid and Medicare reimbursement rates, with respect to hospitals and
nursing homes;
o Prevailing general economic conditions; and
o The availability of credit for loans secured by multifamily or
commercial real properties generally.
Neither the Depositor nor any of its affiliates will be required to
refinance any mortgage loan.
If described in this prospectus and in the related prospectus supplement,
to maximize recoveries on defaulted mortgage loans, the master servicer or a
special servicer may, within prescribed limits, extend and modify mortgage
loans that are in default or as to which a payment default is reasonably
foreseeable. While a master servicer or a special servicer generally will be
required to determine that any extension or modification is reasonably likely
to produce a greater recovery, taking into account the time value of money,
than liquidation, we cannot assure you that any extension or modification will
in fact increase the present value of receipts from or proceeds of the affected
mortgage loans.
CREDIT SUPPORT LIMITATIONS
The prospectus supplement for a series of certificates will describe any
credit support provided for those certificates. Any use of credit support will
be subject to the conditions and limitations described in this prospectus and
in the related prospectus supplement, and may not cover all potential losses or
risks. For example, it may or may not cover fraud or negligence by a mortgage
loan originator or other parties.
A series of certificates may include one or more classes of subordinate
certificates, if so provided in the related prospectus supplement. Although
subordination is intended to reduce the risk to holders of senior certificates
of delinquent distributions or ultimate losses, the amount of subordination
will be limited and may decline under certain circumstances described in the
related prospectus supplement. In addition, if principal payments on one or
more classes of certificates of a series are made in a specified order of
priority, any limits with respect to the aggregate amount of claims under any
related credit support may be exhausted before the principal of the later paid
classes of certificates of that 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 subordinate classes of certificates.
Moreover, if a form of credit support covers more than one series of
certificates, holders of certificates of one series will be subject to the risk
that the credit support will be exhausted by the claims of the holders of
certificates of one or more other series.
The amount of any applicable credit support supporting one or more classes
of offered certificates, including the subordination of one or more classes of
certificates, will be determined on the basis of criteria established by each
rating agency rating those classes of certificates. Such criteria will be based
on an assumed level of defaults, delinquencies and losses on the underlying
mortgage assets and certain other factors. However, we cannot assure you that
the default, delinquency or loss experience on the related mortgage assets will
not exceed the assumed levels. See "--Limited Nature of Ratings", "Description
of the Certificates" and "Description of Credit Support" in this prospectus.
LEASES AND RENTS
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 from those leases, as further security for the
related mortgage loan, while retaining a license to collect rents for so long
as there is no default. If the borrower defaults, the license terminates and
19
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 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" in
this prospectus.
ENVIRONMENTAL RISKS
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 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 the Mortgage Loans--Environmental Risks" in this
prospectus.
SPECIAL HAZARD LOSSES
Unless otherwise specified in a prospectus supplement, the master servicer
for the related trust fund will be required to cause the borrower on each
mortgage loan in that trust fund to maintain the insurance coverage in respect
of the related mortgaged property required under the related mortgage,
including hazard insurance. The master 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:
o fire;
o lightning;
o explosion;
o smoke;
o windstorm and hail; and
o riot, strike and civil commotion.
Each policy is subject to the conditions and exclusions specified in that
policy.
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The policies covering the mortgaged properties will be underwritten by
different insurers under different state laws, and therefore will not contain
identical terms and conditions. However, most policies do not typically 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 those causes, those
losses may be borne, at least in part, by the holders of one or more classes of
offered certificates of the related series, to the extent they are not covered
by any available credit support. See "Description of the Pooling Agreements--
Hazard Insurance Policies" in this prospectus.
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" in this prospectus.
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" in this prospectus. 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 their stated interest and principal. 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:
o generally, will not be subject to offset by losses from other
activities;
o if you are a tax-exempt holder, will be treated as unrelated business
taxable income; and
o 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.
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--
Federal Income Tax Consequences for REMIC Certificates--Taxation of Regular
Certificates" in this prospectus.
BANKRUPTCY PROCEEDINGS ENTAIL CERTAIN RISKS
Under the federal 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
21
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 federal 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:
o 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;
o 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;
o 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
o 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 participating organizations and
only then will they be credited to your account either directly or
indirectly through DTC's participating organizations.
22
See "Description of the Certificates--Book-Entry Registration and
Definitive Certificates" in this prospectus.
DELINQUENT AND NON-PERFORMING MORTGAGE LOANS
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.
In no event will the mortgage loans that are past due comprise 20 percent or
more of the trust fund at the time the mortgage loans are transferred to the
trust fund. None of the mortgage loans will be non-performing (i.e., more than
90 days delinquent or in foreclosure) at the time the mortgage loans are
transferred by the Depositor to a trust fund for a series. If so specified in
the related prospectus supplement, a special servicer may perform the servicing
of delinquent mortgage loans or mortgage loans that become non-performing after
the time they are transferred to a trust fund. Credit support provided with
respect to a particular series of certificates may not cover all losses related
to those delinquent or non-performing mortgage loans. You should consider the
risk that the inclusion of those mortgage loans in the trust fund may adversely
affect the rate of defaults and prepayments on the mortgage assets in the trust
fund and the yield on your certificates of that series. See "Description of the
Trust Funds--Mortgage Loans--General" in this prospectus.
23
DESCRIPTION OF THE TRUST FUNDS
GENERAL
The primary assets of each trust fund will consist of (1) various types of
multifamily or commercial mortgage loans, (2) 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 (3) a combination
of mortgage loans and MBS. GE Capital Commercial Mortgage Corporation (the
"Depositor") will establish each trust fund. 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 of the mortgage
asset (a "Mortgage Asset Seller"), which prior holder may or may not be the
originator of that mortgage loan or the issuer of that MBS and may be our
affiliate. The mortgage assets will not be guaranteed or insured by the
Depositor, the Mortgage Asset Seller, the Underwriters or any of their
affiliates or, unless otherwise provided in the related prospectus supplement,
by any governmental agency or instrumentality or by any other person. The
discussion under the heading "--Mortgage Loans" below, 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 liens on fee or leasehold estates in
properties (the "Mortgaged Properties") consisting of:
o Residential 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; or
o Office buildings, retail stores and establishments, hotels or motels,
nursing homes, assisted living facilities, continuum care facilities, day
care centers, schools, hospitals or other healthcare related facilities,
manufactured housing properties, warehouse facilities, mini-warehouse
facilities, self-storage facilities, distribution centers, transportation
centers, industrial plants, parking facilities, entertainment and/or
recreation facilities, mixed use properties and/or unimproved land.
The multifamily properties may include mixed commercial and residential
structures, apartment buildings owned by private cooperative housing
corporations ("Cooperatives"), and shares of the Cooperative allocable to one
or more dwelling units occupied by non-owner tenants or to vacant units. Each
Mortgage will create a first priority or junior priority mortgage lien on a
borrower's 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 that leasehold will exceed
the term of the Mortgage Note by at least two years. Unless otherwise specified
in the related prospectus supplement, a person other than the Depositor will
have originated each mortgage loan, and the originator may be or may have been
an affiliate of the Depositor.
If so specified in the related prospectus supplement, mortgage assets for
a series of certificates may include mortgage loans made on the security of
real estate projects under construction. In that case, the related prospectus
supplement will describe the procedures and timing for making disbursements
from construction reserve funds as portions of the related real estate project
are completed. In addition, the mortgage assets for a particular series of
certificates may include mortgage loans that are delinquent or non-performing
as of the date those certificates are issued. In that case, the related
prospectus supplement will set forth, as to those mortgage loans, available
information as to the period of the delinquency or non-performance of those
loans, 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.
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
24
property is typically dependent upon the successful operation of that property
(that is, its ability to generate income). Moreover, some or all of the
mortgage loans included in a particular trust fund may be non-recourse loans,
which means that, absent special facts, recourse in the case of default will be
limited to the Mortgaged Property and those other assets, if any, that were
pledged to secure repayment of the mortgage loan.
Lenders typically look to the Debt Service Coverage Ratio of a loan
secured by income-producing property as an important factor in evaluating the
risk of default on that 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 (1) the Net Operating Income derived from the
related Mortgaged Property for a twelve-month period or an annualized rent roll
to (2) the annualized scheduled payments 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 that period, minus the total operating expenses
incurred in respect of that Mortgaged Property during that period other than
o non-cash items such as depreciation and amortization,
o capital expenditures, and
o debt service on the related mortgage loan or on any other loans that are
secured by that Mortgaged Property.
The Net Operating Income of a Mortgaged Property will 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
non-owner 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 healthcare-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 plants. Commercial properties may be owner-occupied or leased to a
small number of tenants. Thus, the Net Operating Income of a commercial
property may depend substantially on the financial condition of the borrower or
a tenant, and mortgage loans secured by liens on those properties may pose
greater risks 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, labor costs and other
operating expenses, and/or to changes in governmental rules, regulations and
fiscal policies, may also affect the risk 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 these "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 risk of loss if a property must be liquidated following a
default. Unless otherwise defined in the related prospectus supplement, the
"Loan-to-Value RatioLoan-to-Value Ratio" of a mortgage loan at any given time
is the ratio (expressed as a percentage) of
o the then outstanding principal balance of the mortgage loan and any
other loans senior thereto that are secured by the related Mortgaged
Property to
o the Value of the related Mortgaged Property.
The "Value" of a Mortgaged Property is generally its fair market value
determined in an appraisal or market study obtained by the originator at the
origination of that loan. The lower the Loan-to-Value Ratio, the greater the
percentage of the borrower's equity in a Mortgaged Property, and thus
25
(a) the greater the incentive of the borrower to perform under the
terms of the related mortgage loan (in order to protect its 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 risk 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
changes in economic conditions, the real estate market and other factors
described in this prospectus. Moreover, even when current, an appraisal is not
necessarily a reliable estimate of value. Appraised values of income-producing
properties are generally based on
o the market comparison method (which compares recent resale value of
comparable properties at the date of the appraisal),
o the cost replacement method which calculates the cost of replacing the
property at that date,
o the income capitalization method which projects value based upon the
property's projected net cash flow, or
o upon a selection from or interpolation of the values derived from those
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 default and
loss risks, is even more difficult.
While we believe that the foregoing considerations are important factors
that generally distinguish loans secured by liens on income-producing real
estate from single-family mortgage loans, we cannot assure you that all of
these 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--Risks Associated with Certain Mortgage Loans
and Mortgaged Properties" and "--Borrowers May Be Unable to Make Balloon
Payments" in this prospectus.
Payment Provisions of the Mortgage Loans. In general, each mortgage loan
o will 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,
o may provide for no accrual of interest or for accrual of interest at an
interest 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 interest rate, or from a fixed to an adjustable
interest rate,
o may provide for level payments to maturity or for payments that adjust
from time to time to accommodate changes in the interest rate or to
reflect the occurrence of certain events, and may permit negative
amortization,
o may be fully amortizing or partially amortizing or non-amortizing, with
a balloon payment due on its stated maturity date, and
o may prohibit over its term or for a certain period prepayments (the
period of that 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 penalty (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 that Mortgaged Property or the benefit, if
any, resulting from the refinancing of the mortgage loan (this provision, an
"Equity
26
Participation"), as described in the related prospectus supplement. If holders
of any class or classes of offered certificates of a series will be entitled to
all or a portion of an Equity Participation in addition to payments of interest
on and/or principal of those offered certificates, the related prospectus
supplement will describe the Equity Participation and the method or methods by
which distributions will be made to holders of those certificates.
Mortgage Loan Information in Prospectus Supplements. Each prospectus
supplement will contain certain information pertaining to the mortgage loans in
the related trust fund, which will generally be current as of a date specified
in the related prospectus supplement and which, to the extent then applicable
and specifically known to the Depositor, will include the following:
o the aggregate outstanding principal balance and the largest, smallest
and average outstanding principal balance of the mortgage loans,
o the type or types of property that provide security for repayment of the
mortgage loans,
o the earliest and latest origination date and maturity date of the
mortgage loans,
o the original and remaining terms to maturity of the mortgage loans, or
the respective ranges of remaining terms to maturity, and the weighted
average original and remaining terms to maturity of the mortgage loans,
o the original Loan-to-Value Ratios of the mortgage loans, or the range of
the Loan-to-Value Ratios, and the weighted average original Loan-to-Value
Ratio of the mortgage loans,
o the interest rates borne by the mortgage loans, or range of the interest
rates, and the weighted average interest rate borne by the mortgage
loans,
o with respect to mortgage loans with adjustable mortgage interest rates
("ARM Loans"), the index or indices upon which those adjustments are
based, the adjustment dates, the range of gross margins and the
weighted average gross margin, and any limits on mortgage interest rate
adjustments at the time of any adjustment and over the life of the ARM
Loan,
o information regarding the payment characteristics of the mortgage loans,
including, without limitation, balloon payment and other amortization
provisions, Lock-out Periods and Prepayment Premiums,
o the Debt Service Coverage Ratios of the mortgage loans (either at
origination or as of a more recent date), or the range of the Debt
Service Coverage Ratios, and the weighted average of the Debt Service
Coverage Ratios, and
o 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 we are
unable to tabulate the specific information described above at the time offered
certificates of a series are initially offered, we will provide more general
information of the nature described above in the related prospectus supplement,
and specific information will be set forth in a report which we will make
available to purchasers of those certificates at or before the initial issuance
of the certificates and will be filed as part of a Current Report on Form 8-K
with the Securities and Exchange Commission within fifteen days following that
issuance.
MBS
MBS may include:
o private (that is, not guaranteed or insured by the United States or any
agency or instrumentality of the United States) mortgage participations,
mortgage pass-through certificates or other mortgage-backed securities,
or
27
o certificates 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 in
this prospectus.
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 have
entered into the MBS Agreement, generally 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 in this prospectus. The MBS
Issuer, the MBS Servicer or the MBS Trustee will make distributions in respect
of the MBS 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
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, to the extent available:
o the aggregate approximate initial and outstanding principal amount and
type of the MBS to be included in the trust fund,
o the original and remaining term to stated maturity of the MBS, if
applicable,
o the pass-through or bond rate of the MBS or the formula for determining
the rates,
o the payment characteristics of the MBS,
o the MBS Issuer, MBS Servicer and MBS Trustee, as applicable,
o a description of the credit support, if any,
o the circumstances under which the related underlying mortgage loans, or
the MBS themselves, may be purchased prior to their maturity,
o the terms on which mortgage loans may be substituted for those
originally underlying the MBS,
o the type of mortgage loans underlying the MBS and, to the extent
available to the Depositor and appropriate under the circumstances, the
other information in respect of the underlying mortgage loans described
under "--Mortgage Loans--Mortgage Loan Information in Prospectus
Supplements" above, and
o the characteristics of any cash flow agreements that relate to the MBS.
CERTIFICATE ACCOUNTS
Each trust fund will include one or more certificate accounts established
and maintained on behalf of the certificateholders into which the person or
persons designated in the related prospectus supplement will, to the extent
described in this prospectus and in that prospectus supplement, deposit all
payments and collections received or advanced with respect to the mortgage
assets and other assets in the trust fund.
28
A certificate account may be maintained as an interest bearing or a
non-interest bearing account, and funds held in a certificate account may be
held as cash or invested in certain obligations acceptable to each rating
agency rating one or more classes of the related series of offered
certificates.
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 that series in the form of subordination of one or more other
classes of certificates of that series or by one or more other types of credit
support, such as letters of credit, overcollateralization, insurance policies,
guarantees, surety bonds or reserve funds, or a combination of them. The amount
and types of credit support, the identification 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" in this prospectus.
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 those 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 currency
exchange agreements, which agreements are designed to reduce the effects of
interest rate or currency exchange rate fluctuations on the mortgage assets on
one or more classes of certificates. The principal terms of a guaranteed
investment contract or other agreement (any of these agreements, a "Cash Flow
Agreement"), and the identity of the Cash Flow Agreement obligor, will be
described in the prospectus supplement for a series of certificates.
29
YIELD AND MATURITY CONSIDERATIONS
GENERAL
The yield on any offered certificate will depend on the price you paid,
the fixed, variable or adjustable pass-through interest rate of the certificate
and the amount and timing of distributions on the certificate. See "Risk
Factors--Prepayment Considerations; Variability in Average Life of Offered
Certificates; Special Yield Considerations" in this prospectus. 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 that the MBS payment
characteristics 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 interest 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 interest rate for each class of offered certificates of that
series or, in the case of a class of offered certificates with a variable or
adjustable pass-through interest rate, the method of determining the
pass-through interest rate; the effect, if any, of the prepayment of any
mortgage loan on the pass-through interest 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 those payments are passed
through to certificateholders. That delay will effectively reduce the yield
that would otherwise be produced if payments on those mortgage loans were
distributed to certificateholders on or near 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 that prepayment
only through the date of prepayment, instead of through the Due Date for the
next succeeding scheduled payment. However, interest accrued on any series of
certificates and distributable on them on any distribution date will generally
correspond to interest accrued on the mortgage loans to their respective Due
Dates during the related Due Period. Unless otherwise specified in the
prospectus supplement for a series of certificates, a "Due Period" is a
specified time period generally corresponding in length to the time 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 or other specified person, be
distributed to the holders of the certificates of that 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 that prepayment is not accompanied by interest on it to the Due Date for
that mortgage loan in the related Due Period, then the interest charged to the
borrower (net of servicing and administrative fees) may be less (that
shortfall, a "Prepayment Interest Shortfall") than the corresponding amount of
interest accrued and otherwise payable on the certificates of the related
series. If that shortfall is allocated to a class of offered certificates,
their yield will be adversely affected. The prospectus supplement for each
series of certificates will describe the manner in which those shortfalls will
be allocated among the classes of those certificates. If so specified in the
prospectus supplement for a series of certificates, the master servicer for
that series will be required to apply some or all of its servicing
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compensation for the corresponding period to offset the amount of those
shortfalls. The related prospectus supplement will also describe any other
amounts available to offset those shortfalls. See "Description of the Pooling
Agreements--Servicing Compensation and Payment of Expenses" in this prospectus.
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 of principal to reduce the principal balance (or notional amount, if
applicable) of that certificate. The rate of principal payments on the mortgage
loans in any trust fund will in turn be affected by the amortization schedules
of the mortgage loans (which, in the case of ARM Loans, may change periodically
to accommodate adjustments to their mortgage interest rates), the dates on
which any balloon payments are due, and the rate of principal prepayments on
them (including for this purpose, prepayments resulting from liquidations of
mortgage loans due to defaults, casualties or condemnations affecting the
Mortgaged 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
more fully below), we cannot assure you as to that 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 those certificates, or, in the case of a
class of interest-only certificates, result in the reduction of its notional
amount. 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 that 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 those mortgage
loans could result in an actual yield to that 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 that investor's offered certificates at
a rate slower (or faster) than the rate anticipated by the investor during any
particular period, the consequent adverse effects on that investor's yield
would not be fully offset by a subsequent like increase (or decrease) in the
rate of principal payments.
A class of certificates, including a class of offered certificates, may
provide that on any distribution date the holders of those certificates are
entitled to a pro rata share of the prepayments on the mortgage loans in the
related trust fund that are distributable on that date, to a disproportionately
large share (which, in some cases, may be all) of those prepayments, or to a
disproportionately small share (which, in some cases, may be none) of those
prepayments. As described in the related prospectus supplement, the respective
entitlements of the various classes of certificates of any series to receive
distributions in respect of 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, such as, the retirement of one or more classes of
certificates of that series, or subject to certain contingencies, such as,
prepayment and default rates with respect to those mortgage loans.
In general, the notional amount of a class of interest-only certificates
will either (1) be based on the principal balances of some or all of the
mortgage assets in the related trust fund or (2) equal the principal balances
of one or more of the other classes of certificates of the same series.
Accordingly, the yield on those interest-only certificates will be inversely
related to the rate at which payments and other collections of principal are
received on those mortgage assets or distributions are made in reduction of the
principal balances of those classes of certificates, as the case may be.
Consistent with the foregoing, if a class of certificates of any series
consists of interest-only certificates or principal-only 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
principal-only certificates, and a higher than anticipated rate of principal
prepayments on those mortgage loans will negatively affect the yield to
investors in interest-only certificates. If the offered certificates of a
series include those certificates, the related prospectus supplement will
include a table showing the effect of various assumed levels of prepayment on
yields on those certificates. Those tables will be intended to illustrate the
sensitivity of
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yields to various assumed prepayment rates and will not be intended to predict,
or to provide information that will enable investors to predict, yields or
prepayment rates.
We are not aware of any relevant publicly available or authoritative
statistics with respect to the historical prepayment experience of a group of
multifamily or commercial mortgage loans. However, the extent of prepayments of
principal of the mortgage loans in any trust fund may be affected by a factors
such as:
o the availability of mortgage credit,
o the relative economic vitality of the area in which the Mortgaged
Properties are located,
o the quality of management of the Mortgaged Properties,
o the servicing of the mortgage loans,
o possible changes in tax laws and other opportunities for investment,
o the existence of Lock-out Periods,
o requirements that principal prepayments be accompanied by Prepayment
Premiums, and
o by the extent to which these provisions may be practicably enforced.
The rate of prepayment on a pool of mortgage loans is also 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
loan's interest rate, 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 interest rates on the
ARM Loans decline in a manner consistent therewith, the related borrowers may
have an increased incentive to refinance for purposes of either (1) converting
to a fixed rate loan and thereby "locking in" that rate or (2) taking advantage
of a different index, margin or rate cap or floor on another adjustable rate
mortgage loan.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell
Mortgaged Properties in order to realize their equity in the Mortgaged
Properties, to meet cash flow needs or to make other investments. In addition,
some borrowers may be motivated by federal and state tax laws (which are
subject to change) to sell Mortgaged Properties prior to the exhaustion of tax
depreciation benefits. We will make 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 those factors, as to the percentage of
the principal balance of the mortgage loans that will be paid as of any date or
as to the overall rate of prepayment on the 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 that series. 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 that
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,
liquidations due to default and purchases of mortgage loans out of the related
trust fund), is paid to that 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 loans for the life of those 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 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 the loans
in the first
32
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 loans. Moreover, the
CPR and SPA models were developed based upon historical prepayment experience
for single-family 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 those series and the percentage
of the initial principal balance of each class that would be outstanding on
specified distribution dates based on the assumptions stated in that 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 other rates specified in that prospectus supplement. Those 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.
CONTROLLED AMORTIZATION CLASSES AND COMPANION CLASSES
A series of certificates may include one or more controlled amortization
classes, which will entitle the holders of those certificates to receive
principal distributions according to a specified principal payment schedule,
which schedule is supported by creating priorities, as described in the related
prospectus supplement, to receive principal payments from the mortgage loans in
the related trust fund. Unless otherwise specified in the related prospectus
supplement, each controlled amortization class will either be a planned
amortization class or a targeted amortization class. In general, a planned
amortization class has a "prepayment collar", that is, a range of prepayment
rates that can be sustained without disruption, that determines the principal
cash flow of those certificates. That prepayment collar is not static, and may
expand or contract after the issuance of the planned amortization class
depending on the actual prepayment experience for the underlying mortgage
loans. Distributions of principal on a planned amortization class would be made
in accordance with the specified schedule so long as prepayments on the
underlying mortgage loans remain at a relatively constant rate within the
prepayment collar and, as described below, companion classes exist to absorb
"excesses" or "shortfalls" in principal payments on the underlying mortgage
loans. If the rate of prepayment on the underlying mortgage loans from time to
time falls outside the prepayment collar, or fluctuates significantly within
the prepayment collar, especially for any extended period of time, that event
may have material consequences in respect of the anticipated weighted average
life and maturity for a planned amortization class. A targeted amortization
class is structured so that principal distributions generally will be payable
on it in accordance with its specified principal payments schedule so long as
the rate of prepayments on the related mortgage assets remains relatively
constant at the particular rate used in establishing that schedule. A targeted
amortization class will generally afford the holders of those certificates some
protection against early retirement or some protection against an extended
average life, but not both.
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 those certificates. Prepayment risk
with respect to a given pool of mortgage assets 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 particularly described in the related prospectus supplement, a
companion class will entitle the holders of those certificates to a
disproportionately large share of prepayments on the mortgage loans in the
related trust fund when the rate of prepayment is relatively fast, and will
entitle the holders of those certificates to a disproportionately small share
of prepayments on the
33
mortgage loans in the related trust fund when the rate of prepayment is
relatively slow. A class of certificates that entitles the holders of those
certificates to a disproportionately large share of the prepayments on the
mortgage loans in the related trust fund enhances the risk of early retirement
of that class, or call risk, if the rate of prepayment is relatively fast;
while a class of certificates that entitles the holders of those certificates
to a disproportionately small share of the prepayments on the mortgage loans in
the related trust fund enhances the risk of an extended average life of that
class, or extension risk, if the rate of prepayment is relatively slow. Thus,
as 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.
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 risk that mortgage loans that
require balloon payments may default at maturity, or that the maturity of that
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 a special servicer, to the extent and under the
circumstances set forth in this prospectus 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 your certificates and, if those
certificates were purchased at a discount, reduce your yield.
Negative Amortization. The weighted average life of a class of
certificates can be affected by mortgage loans that permit negative
amortization to occur. A mortgage loan that provides for the payment of
interest calculated at a rate lower than the rate at which interest accrues on
it 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. This 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. In addition, negative
amortization on one or more mortgage loans in any trust fund may result in
negative amortization on the 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 on
them, which deferred interest may be added to the principal balance of the
certificates. Accordingly, the weighted average lives of mortgage loans that
permit negative amortization and that of the classes of certificates to which
the negative amortization would be allocated or that would bear the effects of
a slower rate of amortization on those mortgage loans, may increase as a result
of that feature.
Negative amortization also may occur in respect of an ARM Loan that limits
the amount by which its scheduled payment may adjust in response to a change in
its mortgage interest rate, provides that its scheduled payment will adjust
less frequently than its mortgage interest rate or provides for constant
scheduled payments notwithstanding adjustments to its mortgage interest rate.
Accordingly, during a period of declining interest rates, the scheduled payment
on that 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 interest rate, thereby resulting in the accelerated
amortization of that mortgage loan. This acceleration in amortization of its
principal balance will shorten the weighted average life of that mortgage loan
and, correspondingly, the weighted average lives of those classes of
certificates entitled to a portion of the principal payments on that mortgage
loan.
34
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 (1) whether that offered certificate
was purchased at a premium or a discount and (2) the extent to which the
payment characteristics of those mortgage loans delay or accelerate the
distributions of principal on that certificate or, in the case of an
interest-only certificate, delay or accelerate the amortization of the notional
amount of that certificate. 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, 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 on your
certificates will directly depend on the extent to which you 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
those losses and shortfalls. In general, the earlier that any 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 of the shortfall.
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, those
allocations may be effected by a reduction in the entitlements to interest
and/or principal balances of one or more classes of certificates, or by
establishing a priority of payments among those 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
of one or more classes of a series of certificates 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 those series, may provide for distributions of principal of
those certificates from (1) amounts attributable to interest accrued but not
currently distributable on one or more classes of accrual certificates, (2)
Excess Funds or (3) 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 (1) 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 that series, or (2) 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 on, or principal of,
those certificates.
The amortization of any class of certificates out of the sources described
in the preceding paragraph would shorten the weighted average life of those
certificates and, if those certificates were purchased at a premium, reduce the
yield on those certificates. 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 those sources would have any
material effect on the rate at which those certificates are amortized.
Optional Early 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 in the related prospectus supplement,
under the
35
circumstances and in the manner set forth in the prospectus supplement. If so
provided in the related prospectus supplement, upon the reduction of the
principal balance of a specified class or classes of certificates by a
specified percentage or amount, the specified party 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 those mortgage assets to
retire that class or classes, as set forth in the related prospectus
supplement. In the absence of other factors, any early retirement of a class of
offered certificates would shorten the weighted average life of those
certificates and, if those certificates were purchased at premium, reduce the
yield on those certificates.
THE DEPOSITOR
GE Capital Commercial Mortgage Corporation, the Depositor, is a Delaware
corporation organized on September 6, 2000. The Depositor is a wholly-owned
subsidiary of General Electric Capital Corporation. All outstanding common
stock of General Electric Capital Corporation is owned by General Electric
Capital Services, Inc., the common stock of which is in turn wholly owned
directly or indirectly by General Electric Company. The Depositor maintains its
principal office at 292 Long Ridge Road, Stamford, Connecticut 06927. Its
telephone number is (203) 357-4000. The Depositor does not have, nor is it
expected in the future to have, any significant assets.
USE OF PROCEEDS
We will apply the net proceeds to be received from the sale of the
certificates of any series to the purchase of Trust Assets or use the net
proceeds for general corporate purposes. We expect 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 we have
acquired, prevailing interest rates, availability of funds and general market
conditions.
36
DESCRIPTION OF THE CERTIFICATES
GENERAL
Each series of certificates will represent the entire beneficial ownership
interest in a trust fund. As described in the related prospectus supplement,
the certificates of each series, including the offered certificates of that
series, may consist of one or more classes of certificates that, among other
things:
o provide for the accrual of interest on the certificates at a fixed,
variable or adjustable rate;
o 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;
o are principal-only certificates entitled to distributions of principal,
with disproportionately small, nominal or no distributions of interest;
o are interest-only certificates entitled to distributions of interest,
with disproportionately small, nominal or no distributions of principal;
o provide for distributions of interest on, or principal of, those
certificates that commence only after the occurrence of certain events,
such as the retirement of one or more other classes of certificates of
that series;
o provide for distributions of principal of those certificates 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;
o provide for controlled distributions of principal of those certificates
to be made based on a specified payment schedule or other methodology,
subject to available funds; or
o provide for distributions based on collections of Prepayment Premiums
and Equity Participations on the mortgage assets in the related trust
fund.
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 interest-only certificates or 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 (those certificates, "Definitive Certificates") or
may be offered in book-entry format (those certificates, "Book-Entry
Certificates") through the facilities of The Depository Trust Company ("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. See "Risk
Factors--Limited Liquidity of Your Certificates" and "--Book-Entry System for
Certain Classes May Decrease Liquidity and Delay Payment" in this prospectus.
DISTRIBUTIONS
Distributions on the certificates of each series will be made on each
distribution date as specified in the related prospectus supplement from the
Available Distribution Amount for that series and that 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 on 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 that
series on that date. The particular components of the Available Distribution
Amount for any series on each distribution date will be more specifically
described in the related prospectus supplement.
37
Except as otherwise specified in the related prospectus supplement,
distributions on the certificates of each series, other than the final
distribution in retirement of that certificate, will be made to the persons in
whose names those 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
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 that
class. Payments will be made either by wire transfer in immediately available
funds to your account at a bank or other entity having appropriate facilities
for the transfer, if you have provided the person required to make those
payments with wiring instructions no later than the date specified in the
related prospectus supplement (and, if so provided in the related prospectus
supplement, that you hold certificates in the amount or denomination specified
in the prospectus supplement), or by check mailed to the address of that
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 those certificates at the location specified in
the notice to certificateholders of the final distribution.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of certificates of each series, other than certain classes of
principal-only certificates and residual certificates ("Residual Certificates")
that have no pass-through interest rate, may have a different pass-through
interest rate, which in each case may be fixed, variable or adjustable. The
related prospectus supplement will specify the pass-through interest rate or,
in the case of a variable or adjustable pass-through interest rate, the method
for determining the pass-through interest rate, for each class. 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 certain classes of certificates that will be entitled to distributions of
accrued interest commencing only on the distribution date, or under the
circumstances, specified in the related prospectus supplement ("Accrual
Certificates"), and other than any class of principal-only certificates or
Residual Certificates which are not entitled to distributions of interest) will
be made on each distribution date based on the Accrued Certificate Interest for
that class and that distribution date, subject to the sufficiency of the
portion of the Available Distribution Amount allocable to that class on that
distribution date. Prior to the time interest is distributable on any class of
Accrual Certificates, the amount of Accrued Certificate Interest otherwise
distributable on that class will be added to the principal balance of those
certificates on each distribution date. With respect to each class of
certificates, other than certain classes of interest-only 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 interest rate accrued for a specified time period generally
corresponding in length to the time period between distribution dates, on the
outstanding principal balance of that class of certificates immediately prior
to that distribution date.
Unless otherwise provided in the related prospectus supplement, the
Accrued Certificate Interest for each distribution date on a class of
interest-only certificates will be similarly calculated except that it will
accrue on a notional amount that is either (1) based on the principal balances
of some or all of the mortgage assets in the related trust fund, (2) equal to
the principal balances of one or more other classes of certificates of the same
series or (3) an amount or amounts specified in the applicable prospective
supplement. Reference to a notional amount with respect to a class of
interest-only 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 principal
balance of, one or more classes of the certificates of a series will be reduced
to the extent that any Prepayment Interest Shortfalls, as described under
"Yield and Maturity Considerations--Certain Shortfalls in Collections of
Interest" in this prospectus, exceed the amount of any sums that are applied to
offset the amount of those shortfalls. The particular manner in which those
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
38
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 principal
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 that 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 principal balance of that
class. See "Risk Factors--Prepayment Considerations; Variability in Average
Life of Offered Certificates; Special Yield Considerations" and "Yield and
Maturity Considerations" in this prospectus.
DISTRIBUTIONS OF PRINCIPAL ON THE CERTIFICATES
Each class of certificates of each series, other than certain classes of
interest-only certificates and Residual Certificates, will have a principal
balance which, at any time, will equal the then maximum amount that the holders
of certificates of that class will be entitled to receive in respect of
principal out of the future cash flow on the mortgage assets and other assets
included in the related trust fund. The outstanding principal balance of a
class of certificates will be reduced by distributions of principal made on the
certificates from time to time and, if 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 principal
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 to
that class from time to time, and will be increased, in the case of a class of
Accrual Certificates prior to the distribution date on which distributions of
interest on the certificates are required to commence, by the amount of any
Accrued Certificate Interest in respect of those certificates (reduced as
described above). The initial principal balance of each class of a series of
certificates will be specified in the related prospectus supplement. As
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 that series entitled
thereto until the principal balances of those 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, including 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 may be made, subject to
available funds, based on a specified principal payment schedule. Distributions
of principal with respect to one or more classes of certificates 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 that 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 that
prospectus supplement.
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
39
subject to the limitations, specified in the related prospectus supplement. As
described in the related prospectus supplement, those allocations may be
effected by a reduction in the entitlements to interest and/or principal
balances of one or more classes of certificates, or by establishing a priority
of payments among those classes of certificates.
ADVANCES IN RESPECT OF DELINQUENCIES
If provided in the related prospectus supplement, if a trust fund includes
mortgage loans, the master servicer, a 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 that distribution date, an amount up to
the aggregate of any payments of principal, other than any balloon payments,
and interest that were due on or in respect of those 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 received under any
instrument of credit support, respecting which those advances were made (as to
any mortgage loan, "Related Proceeds") and those 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,
collections on other mortgage loans in the related trust fund that would
otherwise be distributable to the holders of one or more classes of those
Subordinate Certificates. No advance will be required to be made by a master
servicer, special servicer or trustee if, in the good faith judgment of the
master servicer, special servicer or trustee, as the case may be, that advance
would not be recoverable from Related Proceeds or another specifically
identified source (each, a "Nonrecoverable Advance"); and, if previously made
by a master servicer, special servicer or trustee, a Nonrecoverable Advance
will be reimbursable to the advancing party 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, the advancing party
will be required to replace those funds in that certificate account on any
future distribution date to the extent that funds in that certificate account
on that distribution date are less than payments required to be made to the
related series of certificateholders on that 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 a surety bond, and the identity of any obligor on that
surety bond, will be set forth in the related prospectus supplement.
If so provided in the related prospectus supplement, any entity making
advances will be entitled to receive interest on those advances for the period
that those advances are outstanding at the rate specified in that prospectus
supplement, and that entity will be entitled to payment of that 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 described in the 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.
40
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 or
trustee, as provided in the related prospectus supplement, will forward to each
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:
o the amount of that distribution to holders of that class of offered
certificates that was applied to reduce the principal balance of those
certificates, expressed as a dollar amount per minimum denomination of
the relevant class of offered certificates or per a specified portion of
that minimum denomination;
o the amount of that distribution to holders of that class of offered
certificates that is allocable to Accrued Certificate Interest, expressed
as a dollar amount per minimum denomination of the relevant class of
offered certificates or per a specified portion of that minimum
denomination;
o the amount, if any, of that distribution to holders of that class of
offered certificates that is allocable to (A) Prepayment Premiums and (B)
payments on account of Equity Participations, expressed as a dollar
amount per minimum denomination of the relevant class of offered
certificates or per a specified portion of that minimum denomination;
o the amount, if any, by which that distribution is less than the amounts
to which holders of that class of offered certificates are entitled;
o if the related trust fund includes mortgage loans, the aggregate amount
of advances included in that distribution;
o 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 other customary information as the reporting
party deems necessary or desirable, or that a certificateholder
reasonably requests, to enable certificateholders to prepare their tax
returns;
o information regarding the aggregate principal balance of the related
mortgage assets on or about that distribution date;
o if the related trust fund includes mortgage loans, information regarding
the number and aggregate principal balance of those mortgage loans that
are delinquent in varying degrees;
o if the related trust fund includes mortgage loans, information regarding
the aggregate amount of losses incurred and principal prepayments made
with respect to those mortgage loans during the specified period,
generally equal in length to the time 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;
o the principal balance or notional amount, as the case may be, of each
class of certificates (including any class of certificates not offered
hereby) at the close of business on that distribution date, separately
identifying any reduction in that principal balance or notional amount
due to the allocation of any losses in respect of the related mortgage
assets, any increase in that principal balance or notional amount due to
the allocation of any negative amortization in respect of the related
mortgage assets and any increase in the principal balance of a class
of Accrual Certificates, if any, in the event that Accrued Certificate
Interest has been added to that balance;
o if the class of offered certificates has a variable pass-through
interest rate or an adjustable pass-through interest rate, the
pass-through interest rate applicable to that class for that distribution
date and, if determinable, for the next succeeding distribution date;
o the amount deposited in or withdrawn from any reserve fund on that
distribution date, and the amount remaining on deposit in that reserve
fund as of the close of business on that distribution date;
41
o if the related trust fund includes one or more instruments of credit
support, like a letter of credit, an insurance policy and/or a surety
bond, the amount of coverage under that instrument as of the close of
business on that distribution date; and
o to the extent not otherwise reflected through the information furnished
as described above, the amount of credit support being afforded by any
classes of Subordinate Certificates.
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 that series.
Within a reasonable period of time after the end of each calendar year,
the master servicer 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 that series a statement
containing the information set forth in the first three categories described
above, aggregated for that calendar year or the applicable portion of that year
during which that person was a certificateholder. This obligation will be
deemed to have been satisfied to the extent that substantially comparable
information is provided pursuant to any requirements of the Internal Revenue
Code of 1986, as amended (the "Code"), as are from time to time in force. See,
however, "Description of the Certificates--Book-Entry Registration and
Definitive Certificates" in this prospectus.
If the trust fund for a series of certificates includes MBS, the ability
of the related master servicer or trustee, as the case may be, to include in
any Distribution Date Statement information regarding the mortgage loans
underlying that MBS will depend on the reports received with respect to that
MBS. In those cases, the related prospectus supplement will describe the
loan-specific information 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.
VOTING RIGHTS
The voting rights evidenced by each series of certificates will be
allocated among the respective classes of that 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 agreement pursuant to
which the certificates are issued and as otherwise specified in the related
prospectus supplement. See "Description of the Pooling Agreements--Amendment"
in this prospectus. 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. See "Description of the Pooling Agreements--Events of Default",
"--Rights Upon Event of Default" and "--Resignation and Removal of the Trustee"
in this prospectus.
TERMINATION
The obligations created by the pooling and servicing or other agreement
creating a series of certificates will terminate following:
o the final payment or other liquidation of the last mortgage asset
underlying the series or the disposition of all property acquired upon
foreclosure of any mortgage loan underlying the series, and
o the payment to the certificateholders of the series of all amounts
required to be paid to them.
Written notice of termination 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 that 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 in the prospectus supplement, in the manner set forth in the
prospectus supplement. If so
42
provided in the related prospectus supplement, upon the reduction of the
principal balance of a specified class or classes of certificates by a
specified percentage or amount, a party designated in the prospectus supplement
may be authorized or required to bid for or solicit bids for the purchase of
all the mortgage assets of the related trust fund, or of a sufficient portion
of those mortgage assets to retire those class or classes, in the manner set
forth in the prospectus supplement.
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 that series will be offered
in book-entry format through the facilities of The Depository Trust Company,
and that class will be represented by one or more global certificates
registered in the name of DTC or its nominee.
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 "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its participating organizations
("Participants") and facilitate the clearance and settlement of securities
transactions between Participants through electronic computerized book-entry
changes in their accounts, thereby eliminating the need for physical movement
of securities certificates. "Direct Participants", which maintain accounts with
DTC, include securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. DTC is owned
by a number of its Direct 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 also is available to others
like banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants").
Purchases of Book-Entry Certificates under the DTC system must be made by
or through Direct Participants, which will receive a credit for the Book-Entry
Certificates on DTC's records. The ownership interest of each actual purchaser
of a Book-Entry Certificate (a "Certificate Owner") is in turn to be recorded
on the Direct and Indirect Participants' records. Certificate Owners will not
receive written confirmation from DTC of their purchases, but Certificate
Owners are expected to receive written confirmations providing details of those
transactions, as well as periodic statements of their holdings, from the Direct
or Indirect Participant through which each Certificate Owner entered into the
transaction. Transfers of ownership interest in the Book-Entry Certificates are
to be accomplished by entries made on the books of Participants acting on
behalf of Certificate Owners. Certificate Owners will not receive certificates
representing their ownership interests in the Book-Entry Certificates, except
in the event that use of the book-entry system for the Book-Entry Certificates
of any series is discontinued as described below.
DTC has no knowledge of the actual Certificate Owners of the Book-Entry
Certificates; DTC's records reflect only the identity of the Direct
Participants to whose accounts those certificates are credited, which may or
may not be the Certificate Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Certificate Owners will be governed
by arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Distributions on the Book-Entry Certificates will be made to DTC. DTC's
practice is to credit Direct 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 that date.
Disbursement of those distributions by Participants to 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 that Participant (and not
of DTC, the Depositor or any trustee or master servicer), subject to any
statutory or regulatory requirements as may be in effect from time to time.
Under a book-entry system, Certificate Owners may receive payments after the
related distribution date.
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Unless otherwise provided in the related prospectus supplement, the only
certificateholder of record will be the nominee of DTC, and the Certificate
Owners will not be recognized as certificateholders under the agreement
pursuant to which the certificates are issued. Certificate Owners will be
permitted to exercise the rights of certificateholders under that agreement
only indirectly through the Participants who in turn will exercise their rights
through DTC. The Depositor is informed that DTC will take action permitted to
be taken by a certificateholder under that agreement only at the direction of
one or more Participants to whose account with DTC interests in the Book-Entry
Certificates are credited.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants 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
take actions in respect of its interest in Book-Entry Certificates, may be
limited due to the lack of a physical certificate evidencing that 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
o 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 those certificates and the Depositor is unable to locate a
qualified successor, or
o the Depositor, at its option, elects to terminate the book-entry system
through DTC with respect to those certificates.
Upon the occurrence of either of the events described above, DTC will be
required to notify all 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 those instructions the Definitive Certificates to which they are entitled,
and thereafter the holders of those Definitive Certificates will be recognized
as certificateholders of record under the related agreement pursuant to which
the certificates are issued.
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DESCRIPTION OF THE POOLING AGREEMENTS
GENERAL
The certificates of each series will be issued pursuant to a pooling and
servicing agreement or other agreement specified in the related prospectus
supplement (in either case, a "Pooling Agreement"). In general, the parties to
a Pooling Agreement will include the Depositor, a trustee, a master servicer
and, in some cases, a special servicer appointed as of the date of the Pooling
Agreement. However, a Pooling Agreement may include a Mortgage Asset Seller as
a party, and a Pooling Agreement that relates to a trust fund that consists
solely of MBS may not include a master 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, an affiliate of the Depositor, or the
Mortgage Asset Seller or an affiliate of the Mortgage Asset Seller, may perform
the functions of master servicer or special servicer. Any party to a Pooling
Agreement may own certificates.
A form of a Pooling 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 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 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 in this prospectus 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 those provisions in the related prospectus
supplement. We 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 that series addressed to GE Capital Commercial
Mortgage Corporation, 292 Long Ridge Road, Stamford, Connecticut 06927,
Attention: President.
ASSIGNMENT OF MORTGAGE LOANS; REPURCHASES
At the time of issuance of any series of certificates, we will assign (or
cause to be assigned) to the designated trustee the mortgage loans to be
included in the related trust fund. The trustee will, concurrently with the
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 that series. Each mortgage loan will be identified in a
schedule. That 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 that property; the mortgage interest rate and, if
applicable, the applicable index, gross margin, adjustment date and any rate
cap information; the original and remaining term to maturity; the original
amortization term; and the original and outstanding principal balance.
With respect to each mortgage loan to be included in a trust fund, we will
deliver (or cause to be delivered) to the related trustee (or to a custodian
appointed by the trustee) certain loan documents which, unless otherwise
specified in the related prospectus supplement, will include the original
Mortgage Note endorsed, without recourse, to the order of the trustee, the
original Mortgage, or a certified copy, in each case with evidence of recording
indicated on it and an assignment of the Mortgage to the trustee in recordable
form. Unless otherwise provided in the prospectus supplement for a series of
certificates, the related Pooling Agreement will require us or another party to
the agreement to promptly cause each assignment of Mortgage to be recorded in
the appropriate public office for real property records.
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 of the mortgage loan
documents, and the trustee (or that custodian) will hold those documents in
trust for the benefit of the certificateholders of that series. Unless
otherwise specified in the related prospectus supplement, if that document is
found to be missing or defective, and that omission or defect, as the case
45
may be, materially and adversely affects the interests of the
certificateholders of the related series, the trustee (or that custodian) will
be required to notify the master servicer and the Depositor, and one of those
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 that notice, then,
except as otherwise specified below or in the related prospectus supplement,
the Mortgage Asset Seller will be obligated to repurchase the related mortgage
loan from the trustee at a price that will be specified in the related
prospectus supplement. 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 that series of certificates, to replace those
mortgage loans 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
loan documentation and neither the Depositor nor, unless it is the Mortgage
Asset Seller, the master servicer will be obligated to purchase or replace a
mortgage loan if a Mortgage Asset Seller defaults on its obligation to do so.
Notwithstanding the foregoing, if a document has not been delivered to the
related trustee (or to a custodian appointed by the trustee) because that
document has been submitted for recording, and neither that document nor a
certified copy, in either case with evidence of recording on it, can be
obtained because of delays on the part of the applicable recording office,
then, unless otherwise specified in the related prospectus supplement, the
Mortgage Asset Seller will not be required to repurchase or replace the
affected mortgage loan on the basis of that missing document so long as it
continues in good faith to attempt to obtain that document or that certified
copy.
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 those representations and
warranties, the "Warranting Party") covering, by way of example:
o the accuracy of the information set forth for that mortgage loan on the
schedule of mortgage loans delivered upon initial issuance of the
certificates;
o the enforceability of the related Mortgage Note and Mortgage and the
existence of title insurance insuring the lien priority of the related
Mortgage;
o the Warranting Party's title to the mortgage loan and the authority of
the Warranting Party to sell the mortgage loan; and
o 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, a 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 that Warranting Party cannot cure that breach within a
specified period following the date on which it was notified of the breach,
then, unless otherwise provided in the related prospectus supplement, it will
be obligated to repurchase that mortgage loan from the trustee at a price that
will be specified in the related prospectus supplement. 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 that series of certificates, to
46
replace that 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 address events that
may occur following the date as of which they were made. However, we will not
include any mortgage loan in the trust fund for any series of certificates if
anything has come to our attention that would cause us to believe that the
representations and warranties made in respect of that 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
The master servicer for any trust fund, directly or through sub-servicers,
will be required to make reasonable efforts to collect all scheduled payments
under the mortgage loans in that trust fund, and will be required to follow the
same collection procedures as it would follow with respect to mortgage loans
that are comparable to the mortgage loans in that trust fund and held for its
own account, provided those procedures are consistent with (1) the terms of the
related Pooling Agreement and any related instrument of credit support included
in that trust fund, (2) applicable law and (3) the servicing standard specified
in the related Pooling Agreement and prospectus supplement (the "Servicing
Standard").
The master servicer for any trust fund, directly or through sub-servicers,
will also be required to perform as to the mortgage loans in that 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 that trust fund through foreclosure, deed-in-lieu of foreclosure or
otherwise (each, an "REO Property"); and maintaining servicing records relating
to those mortgage loans. 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" in this prospectus.
SUB-SERVICERS
A master servicer may delegate its servicing obligations in respect of the
mortgage loans serviced thereby to one or more third-party servicers; provided
that, unless otherwise specified in the related prospectus supplement, the
master servicer will remain obligated under the related Pooling Agreement. A
sub-servicer for any series of certificates may be an affiliate of the
Depositor or master servicer. Unless otherwise provided in the related
prospectus supplement, each sub-servicing agreement between a master servicer
and a sub-servicer (a "Sub-Servicing Agreement") will provide that, if for any
reason the master servicer is no longer acting in that capacity, the trustee or
any successor master servicer may assume the master servicer's rights and
obligations under that Sub-Servicing Agreement. A master servicer will be
required to monitor the performance of sub-servicers retained by it and will
have the right to remove a sub-servicer retained by it at any time it considers
removal to be in the best interests of certificateholders.
Unless otherwise provided in the related prospectus supplement, a master
servicer will be solely liable for all fees owed by it to any sub-servicer,
irrespective of whether the master servicer's compensation pursuant to the
related Pooling Agreement is sufficient to pay those fees. Each sub-servicer
will be
47
reimbursed by the master servicer that retained it for certain expenditures
which it makes, generally to the same extent the master servicer would be
reimbursed under a Pooling Agreement. See "--Certificate Account" and
"--Servicing Compensation and Payment of Expenses" in this prospectus.
SPECIAL SERVICERS
To the extent so specified in the related prospectus supplement, one or
more special servicers may be a party to the related Pooling Agreement or may
be appointed by the master servicer or another specified party. A special
servicer for any series of certificates may be an affiliate of the Depositor or
the master servicer. A special servicer may be entitled to any of the rights,
and subject to any of the obligations, described in this prospectus in respect
of a master servicer. The related prospectus supplement will describe the
rights, obligations and compensation of any special servicer for a particular
series of certificates. The master servicer will not be liable for the
performance of a special servicer.
CERTIFICATE ACCOUNT
General. The master servicer, the trustee and/or a special servicer will,
as to each trust fund that includes mortgage loans, establish and maintain or
cause to be established and maintained one or more separate accounts for the
collection of payments on or in respect of those mortgage loans, 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
non-interest-bearing account and the funds held in a certificate account may be
invested pending each succeeding distribution date in United States government
securities and other obligations that are acceptable to each rating agency that
has rated any one or more classes of certificates of the related series
("Permitted Investments"). 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 any special
servicer as additional compensation. A certificate account may be maintained
with the related master servicer, special servicer 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 and so
specified in the related prospectus supplement, 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 any 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, a master servicer, trustee or
special servicer will be required to deposit or cause 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, the following payments and collections received or made by the
master servicer, the trustee or any special servicer subsequent to the cut-off
date (other than payments due on or before the cut-off date):
1. all payments on account of principal, including principal prepayments,
on the mortgage loans;
2. all payments on account of interest on the mortgage loans, including
any default interest collected, in each case net of any portion
retained by the master servicer or any special servicer as its
servicing compensation or as compensation to the trustee;
3. 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 in
accordance with the customary servicing practices of the master
servicer (or, if applicable, a special servicer) and/or the terms and
conditions of the related Mortgage) (collectively, "Insurance and
Condemnation Proceeds") and all other amounts received and retained in
connection with the liquidation of defaulted mortgage
48
loans or property acquired by foreclosure or otherwise ("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;
4. any amounts paid under any instrument or drawn from any fund that
constitutes credit support for the related series of certificates as
described under "Description of Credit Support" in this prospectus;
5. any advances made as described under "Description of the
Certificates--Advances in Respect of Delinquencies" in this
prospectus;
6. any amounts paid under any Cash Flow Agreement, as described under
"Description of the Trust Funds--Cash Flow Agreements" in this
prospectus;
7. all proceeds of the purchase of any mortgage loan, or property
acquired in respect of a mortgage loan, 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" in this prospectus, all proceeds of the
purchase of any defaulted mortgage loan as described under
"--Realization Upon Defaulted Mortgage Loans" in this prospectus, and
all proceeds of any mortgage asset purchased as described under
"Description of the Certificates--Termination" in this prospectus (all
of the foregoing, also "Liquidation Proceeds");
8. any amounts paid by the master servicer to cover Prepayment Interest
Shortfalls arising out of the prepayment of mortgage loans as
described under "--Servicing Compensation and Payment of Expenses" in
this prospectus;
9. to the extent that this item does not constitute additional servicing
compensation to the master servicer or a special servicer, any
payments on account of modification or assumption fees, late payment
charges, Prepayment Premiums or Equity Participations with respect to
the mortgage loans;
10. all payments required to be deposited in the certificate account with
respect to any deductible clause in any blanket insurance policy
described under "--Hazard Insurance Policies" in this prospectus;
11. any amount required to be deposited by the master servicer or the
trustee in connection with losses realized on investments for the
benefit of the master servicer or the trustee, as the case may be, of
funds held in the certificate account; and
12. any other amounts 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:
1. to make distributions to the certificateholders on each distribution
date;
2. to pay the master servicer, the trustee or a special servicer any
servicing fees not previously retained by them out of payments on the
particular mortgage loans as to which those fees were earned;
3. to reimburse the master servicer, a special servicer, the trustee or
any other specified person for any unreimbursed amounts advanced by it
as described under "Description of the Certificates-- Advances in
Respect of Delinquencies" in this prospectus, the reimbursement to be
made out of amounts received that were identified and applied by the
master servicer or a special servicer, as applicable, as late
collections of interest on and principal of the particular mortgage
loans with respect to which the advances were made or out of amounts
drawn under any form of credit support with respect to those mortgage
loans;
49
4. to reimburse the master servicer, the trustee or a special servicer
for unpaid servicing fees earned by it and certain unreimbursed
servicing expenses incurred by it with respect to mortgage loans in
the trust fund and properties acquired in respect of the mortgage
loans, the reimbursement to be made out of amounts that represent
Liquidation Proceeds and Insurance and Condemnation Proceeds collected
on the particular mortgage loans and properties, and net income
collected on the particular properties, with respect to which those
fees were earned or those expenses were incurred or out of amounts
drawn under any form of credit support with respect to those mortgage
loans and properties;
5. to reimburse the master servicer, a special servicer, the trustee or
other specified person for any advances described in clause (3) above
made by it and/or any servicing expenses referred to in clause (4)
above incurred by it that, in the good faith judgment of the master
servicer, special servicer, trustee or other specified person, as
applicable, will not be recoverable from the amounts described in
clauses (3) and (4), respectively, the reimbursement to be made from
amounts collected on other mortgage loans in the same trust fund or,
if so provided by the related Pooling Agreement and described in the
related prospectus supplement, only from that portion of amounts
collected on those other mortgage loans that is otherwise
distributable on one or more classes of Subordinate Certificates of
the related series;
6. if described in the related prospectus supplement, to pay the master
servicer, a special servicer, the trustee or any other specified
person interest accrued on the advances described in clause (3) above
made by it and the servicing expenses described in clause (4) above
incurred by it while they remain outstanding and unreimbursed;
7. 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 those Mortgaged Properties, as described under
"--Realization Upon Defaulted Mortgage Loans" in this prospectus;
8. to reimburse the master servicer, the special servicer, the Depositor,
or any of their respective directors, officers, employees and agents,
as the case may be, for certain expenses, costs and liabilities
incurred thereby, as described under "--Certain Matters Regarding the
Master Servicer and the Depositor" in this prospectus;
9. if described in the related prospectus supplement, to pay the fees of
the trustee;
10. to reimburse the trustee or any of its directors, officers, employees
and agents, as the case may be, for certain expenses, costs and
liabilities incurred thereby, as described under "--Certain Matters
Regarding the Trustee" in this prospectus;
11. if described in the related prospectus supplement, to pay the fees of
any provider of credit support;
12. if described in the related prospectus supplement, to reimburse prior
draws on any form of credit support;
13. to pay the master servicer, a special servicer or the trustee, as
appropriate, interest and investment income earned in respect of
amounts held in the certificate account as additional compensation;
14. to pay (generally from related income) for costs incurred in
connection with the operation, management and maintenance of any
Mortgaged Property acquired by the trust fund by foreclosure or
otherwise;
15. if one or more elections have been made to treat the trust fund or
designated portions of the trust fund as a REMIC, to pay any federal,
state or local taxes imposed on the trust fund or its assets or
transactions, as described under "Certain Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC
Certificates--Taxes That May Be Imposed on the REMIC Pool" in this
prospectus;
50
16. to pay for the cost of an independent appraiser or other expert in
real estate matters retained to determine a fair sale price for a
defaulted mortgage loan or a property acquired in respect a defaulted
mortgage loan in connection with the liquidation of that mortgage loan
or property;
17. to pay for the cost of various opinions of counsel obtained pursuant
to the related Pooling Agreement for the benefit of
certificateholders;
18. to make any other withdrawals permitted by the related Pooling
Agreement and described in the related prospectus supplement; and
19. to clear and terminate the certificate account upon the termination of
the trust fund.
MODIFICATIONS, WAIVERS AND AMENDMENTS OF MORTGAGE LOANS
A master servicer may 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 (1) will not
affect the amount or timing of any scheduled payments of principal or interest
on the mortgage loan, (2) will not, in the judgment of the master servicer,
materially impair the security for the mortgage loan or reduce the likelihood
of timely payment of amounts due on them and (3) will not adversely affect the
coverage under any applicable instrument of credit support. Unless otherwise
provided in the related prospectus supplement, a master servicer also may agree
to any other modification, waiver or amendment if, in its judgment, (1) a
material default on the mortgage loan has occurred or a payment default is
reasonably foreseeable, (2) the 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 (3) the
modification, waiver or amendment will not adversely affect the coverage under
any applicable instrument of credit support.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
A borrower'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 borrower that is unable to make mortgage loan payments may also be
unable to make timely payment of taxes and insurance premiums and to otherwise
maintain the related Mortgaged Property. In general, the master servicer or the
special servicer, if any, for a series of certificates will be required to
monitor any mortgage loan in the related trust fund 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 borrower if cure
is likely, inspect the related Mortgaged Property and take any other actions as
are consistent with the Servicing Standard. A significant period of time may
elapse before the servicer is able to assess the success of the corrective
action or the need for additional initiatives.
The time within which the 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 may vary considerably depending on the
particular mortgage loan, the Mortgaged Property, the borrower, 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 borrower files a
bankruptcy petition, the master servicer may not be permitted to accelerate the
maturity of the related mortgage loan or to foreclose on the related Mortgaged
Property for a considerable period of time, and that mortgage loan may be
restructured in the resulting bankruptcy proceedings. See "Certain Legal
Aspects of Mortgage Loans" in this prospectus.
A Pooling Agreement may grant to the master servicer, a 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 purchase price (which, if insufficient to
fully fund the entitlements of certificateholders to principal and interest on
the certificates, will be specified in the related
51
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, a servicer may offer to sell any defaulted
mortgage loan if and when the master servicer determines, consistent with the
applicable Servicing Standard, that a sale would produce a greater recovery,
taking into account the time value of money, than would liquidation of the
related Mortgaged Property. Unless otherwise provided in the related prospectus
supplement, the related Pooling Agreement will require that the servicer accept
the highest cash bid received from any person (including itself, the Depositor
or any affiliate of either of them or any certificateholder) that constitutes a
fair price for that defaulted mortgage loan. In the absence of any bid
determined in accordance with the related Pooling Agreement to be fair, the
master servicer will generally be required to proceed against the related
Mortgaged Property, subject to the discussion below.
If a default on a mortgage loan has occurred or, in the servicer's
judgment, a payment default is imminent, the 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, if that action is consistent with the Servicing
Standard. Unless otherwise specified in the related prospectus supplement, the
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 that
Mortgaged Property within the meaning of certain federal environmental laws,
unless the master servicer has previously determined, based on a report
prepared by a person who regularly conducts environmental audits (which report
will be an expense of the trust fund), that:
1. the Mortgaged Property is in compliance with applicable environmental
laws and regulations or, if not, that taking those actions as are
necessary to bring the Mortgaged Property into compliance therewith is
reasonably likely to produce a greater recovery, taking into account
the time value of money, than not taking those actions; and
2. 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, if those circumstances or conditions are present
for which that action could be required, taking those actions with
respect to the Mortgaged Property is reasonably likely to produce a
greater recovery, taking into account the time value of money, than
not taking those actions. See "Certain Legal Aspects of Mortgage
Loans--Environmental Risks" in this prospectus.
Unless otherwise provided in the related prospectus supplement, if title
to any Mortgaged Property is acquired by a trust fund as to which one or more
REMIC elections have been made, the servicer, on behalf of the trust fund, will
be required to sell the Mortgaged Property prior to the close of the third
calendar year following the year of acquisition, unless (1) the Internal
Revenue Service grants an extension of time to sell that property or (2) the
trustee receives an opinion of independent counsel to the effect that the
holding of the property by the trust fund beyond that period will not result in
the imposition of a tax on the trust fund or cause the trust fund (or any
designated portion) to fail to qualify as a REMIC under the Code at any time
that any certificate is outstanding. Subject to the foregoing, the servicer
will generally be required to solicit bids for any Mortgaged Property so
acquired in that manner as will be reasonably likely to realize a fair price
for that property. If the trust fund acquires title to any Mortgaged Property,
the servicer, on behalf of the trust fund, generally must retain an independent
contractor to manage and operate that property. The retention of an independent
contractor, however, will not relieve the servicer of its obligation to manage
that Mortgaged Property in a manner consistent with the Servicing Standard.
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 on the mortgage loan plus the aggregate amount of
reimbursable expenses incurred by the servicer in connection with that mortgage
loan, the trust fund will realize a loss in the amount of that shortfall. The
servicer will be entitled to reimbursement out of the Liquidation Proceeds
recovered on any defaulted mortgage loan, prior to the
52
distribution of those Liquidation Proceeds to certificateholders, 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.
If any Mortgaged Property suffers damage so that the proceeds, if any, of
the related hazard insurance policy are insufficient to restore fully the
damaged property, the servicer will not be required to expend its own funds to
effect that restoration unless (and to the extent not otherwise provided in the
related prospectus supplement) it determines (1) that the restoration will
increase the proceeds to certificateholders on liquidation of the mortgage loan
after reimbursement of the servicer for its expenses and (2) that the expenses
will be recoverable by it from related Insurance and Condemnation Proceeds or
Liquidation Proceeds.
HAZARD INSURANCE POLICIES
Unless otherwise specified in the related prospectus supplement, each
Pooling Agreement will require the master servicer to cause each mortgage loan
borrower to maintain a hazard insurance policy that provides for the coverage
required under the related Mortgage or, if the Mortgage permits the mortgagee
to dictate to the borrower the insurance coverage to be maintained on the
related Mortgaged Property, the coverage consistent with the requirements of
the Servicing Standard. Unless otherwise specified in the related prospectus
supplement, the coverage generally will be in an amount equal to the lesser of
the principal balance owing on that mortgage loan and the replacement cost of
the related Mortgaged Property. The ability of a master 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 under that 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 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 may satisfy its
obligation to cause each borrower to maintain a hazard insurance policy by
maintaining a blanket policy insuring against hazard losses on all of the
mortgage loans in a trust fund. If the blanket policy contains a deductible
clause, the master servicer will be required, in the event of a casualty
covered by the blanket policy, to deposit in the related certificate account
all sums that would have been deposited in that certificate account but for
that 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 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.
Accordingly, a Mortgaged Property may not be insured for losses arising from
that cause unless the related Mortgage specifically requires, or permits the
mortgagee to require, that 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, those clauses generally provide that the
insurer's liability in the event of partial loss does not exceed the lesser of
(1) the replacement cost of the improvements less physical depreciation and (2)
that proportion of the loss as the amount of insurance carried bears to the
specified percentage of the full replacement cost of those improvements.
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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 will determine whether to exercise any right the trustee may have
under that provision in a manner consistent with the Servicing Standard. Unless
otherwise specified in the related prospectus supplement, the master servicer
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" in this prospectus.
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.
Because that compensation is generally based on a percentage of the principal
balance of each mortgage loan outstanding from time to time, it will decrease
in accordance with the amortization of the mortgage loans. The prospectus
supplement with respect to a series of certificates may provide that, as
additional compensation, the master servicer may 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 certificate account. Any sub-servicer will receive a portion
of the master servicer's compensation as its sub-servicing compensation.
In addition to amounts payable to any sub-servicer, a master 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 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 those expenses at the rate specified in the prospectus supplement, and the
fees of any special servicer, may be required to be borne by the trust fund.
If provided in the related prospectus supplement, a master servicer may be
required to apply a portion of the servicing compensation otherwise payable to
it in respect of any period to Prepayment Interest Shortfalls. See "Yield and
Maturity Considerations--Certain Shortfalls in Collections of Interest" in this
prospectus.
EVIDENCE AS TO COMPLIANCE
Unless otherwise provided in the related prospectus supplement, each
Pooling Agreement will require, on or before a specified date in each year, the
master servicer to cause a firm of independent public accountants to furnish to
the trustee a statement to the effect that, on the basis of the examination by
that firm conducted substantially in compliance with either the Uniform Single
Audit Program for Mortgage Bankers or the Audit Program for Mortgages serviced
for FHLMC, the servicing by or on behalf of the master servicer of mortgage
loans under pooling and servicing agreements substantially similar to each
other (which may include that Pooling Agreement) was conducted through the
preceding calendar year or other specified twelve month period in compliance
with the terms of those agreements except for any significant exceptions or
errors in records that, in the opinion of the firm, either the Audit Program
for Mortgages serviced for FHLMC, or paragraph 4 of the Uniform Single Audit
Program for Mortgage Bankers, requires it to report.
Each Pooling Agreement will also require, on or before a specified date in
each year, the master servicer to furnish to the trustee a statement signed by
one or more officers of the master servicer to the
54
effect that the master servicer has fulfilled its material obligations under
that Pooling Agreement throughout the preceding calendar year or other
specified twelve month period.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE DEPOSITOR
The entity serving as master servicer under a Pooling Agreement may be an
affiliate of the Depositor and may have other normal business relationships
with the Depositor or the Depositor's affiliates. Unless otherwise specified in
the prospectus supplement for a series of certificates, the related Pooling
Agreement will permit the master servicer to resign from its obligations under
the Pooling Agreement only upon (a) the appointment of, and the acceptance of
that appointment by, a successor master servicer and receipt by the trustee of
written confirmation from each applicable rating agency that the resignation
and appointment will not have an adverse effect on the rating assigned by that
rating agency to any class of certificates of that series or (b) a
determination that those 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. This resignation will not become effective until
the trustee or a successor servicer has assumed the master servicer's
obligations and duties under the Pooling Agreement. Unless otherwise specified
in the related prospectus supplement, the master 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
Depositor or any director, officer, employee or agent of either 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. However, neither the master servicer nor the Depositor
will be protected against any breach of a representation, warranty or covenant
made in the Pooling Agreement, or against any expense or liability that they
are specifically required to bear pursuant to the terms of the Pooling
Agreement, or against any liability that would otherwise be imposed by reason
of willful misfeasance, bad faith or gross negligence in the performance of
their obligations or duties or by reason of reckless disregard of those
obligations and duties. Unless otherwise specified in the related prospectus
supplement, each Pooling Agreement will further provide that the master
servicer, the Depositor and any director, officer, employee or agent of either
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 the Pooling Agreement or the related series of certificates.
However, the indemnification will not extend to any loss, liability or expense
o that one or both of them are specifically required to bear pursuant to
the terms of the Pooling Agreement, or is incidental to the performance
of their obligations and duties and is not otherwise reimbursable
pursuant to the Pooling Agreement;
o incurred in connection with any breach of a representation, warranty or
covenant made in the Pooling Agreement;
o incurred by reason of misfeasance, bad faith or negligence in the
performance of their obligations or duties under that the Pooling
Agreement, or by reason of negligent disregard of those obligations or
duties; or
o incurred in connection with any violation of any state or federal
securities law.
In addition, each Pooling Agreement will provide that neither the master
servicer nor 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
and the Depositor will be permitted, in the exercise of its discretion, to
undertake any action that it may deem necessary or desirable with respect to
the enforcement and/or protection of the rights and duties of the parties to
the Pooling Agreement and the interests of the related series of
certificateholders. In that event, the legal expenses and costs of that action,
and any liability resulting from that action, will be expenses, costs and
liabilities of the related
55
series of certificateholders, and the master servicer or the Depositor, as the
case may be, will be entitled to charge the related certificate account for
those legal costs and expenses. Any person into which the master servicer or
the Depositor may be merged or consolidated, or any person resulting from any
merger or consolidation to which the master servicer or the Depositor is a
party, or any person succeeding to the business of the master servicer or the
Depositor, will be the successor of the master servicer or the Depositor, as
the case may be, under the related Pooling Agreement.
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
o any failure by the master servicer to distribute or cause to be
distributed to the certificateholders of that series, or to remit to the
trustee for distribution to those certificateholders, any amount
required to be so distributed or remitted, which failure continues
unremedied for five days after written notice of the failure has been
given to the master servicer by the trustee or the Depositor, or to the
master servicer, the Depositor and the trustee by certificateholders
entitled to not less than 25% (or other percentage specified in the
related prospectus supplement) of the voting rights for that series;
o any failure by the master 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 has been given to the master servicer by the
trustee or the Depositor, or to the master servicer, the Depositor and
the trustee by certificateholders entitled to not less than 25% (or
other percentage specified in the related prospectus supplement) of the
voting rights for that series; and
o certain events of insolvency, readjustment of debt, marshalling of
assets and liabilities, or similar proceedings in respect of or relating
to the master servicer and certain actions by or on behalf of the master
servicer indicating its insolvency or inability to pay its obligations.
Material variations to the foregoing Events of Default (other than to add
to them or shorten cure periods or eliminate notice requirements) will be
specified in the related prospectus supplement.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default occurs with respect to the master servicer under a
Pooling Agreement, then, in each and every 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 other percentage specified in the related prospectus
supplement) of the voting rights for that series, the trustee will be required,
to terminate all of the rights and obligations of the master servicer as master
servicer under the Pooling Agreement. Upon termination, the trustee will
succeed to all of the responsibilities, duties and liabilities of the master
servicer under the Pooling Agreement (except that if the master servicer is
required to make advances regarding delinquent mortgage loans, but the trustee
is prohibited by law from obligating itself to do so, or if the related
prospectus supplement so specifies, the trustee will not be obligated to make
those 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
other percentage specified in the related prospectus supplement) of the voting
rights for that series, it will be required to) appoint, or petition a court of
competent jurisdiction to appoint, a loan servicing institution that (unless
otherwise provided in the related prospectus supplement) is acceptable to each
applicable rating agency to act as successor to the master servicer under the
Pooling Agreement. Pending that appointment, the trustee will be obligated to
act in that capacity.
No certificateholder will have the right under any Pooling Agreement to
institute any proceeding with respect to the Pooling Agreement unless that
holder previously has given to the trustee written notice of default and unless
certificateholders of the same series entitled to not less than 25% (or other
percentage
56
specified in the related prospectus supplement) of the voting rights for that
series shall have made written request upon the trustee to institute that
proceeding in its own name as trustee and shall have offered to the trustee
reasonable indemnity, and the trustee for sixty days (or other period specified
in the related prospectus supplement) shall have neglected or refused to
institute that proceeding. The trustee, however, will be under no obligation to
exercise any of the trusts or powers vested in it by any Pooling Agreement or
to make any investigation of matters arising under the Pooling Agreement or to
institute, conduct or defend any litigation under the Pooling Agreement or in
relation to it at the request, order or direction of any of the holders of
certificates of the related series, unless those certificateholders have
offered to the trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred by that action.
AMENDMENT
Each Pooling Agreement may be amended, without the consent of any of the
holders of the related series of certificates,
1. to cure any ambiguity,
2. to correct a defective provision in the Pooling Agreement or to
correct, modify or supplement any of its provisions that may be
inconsistent with any other of its provisions,
3. to add any other provisions with respect to matters or questions
arising under the Pooling Agreement that are not inconsistent with its
provisions,
4. to comply with any requirements imposed by the Code, or
5. for any other purpose;
provided that the amendment (other than an amendment for the specific purpose
referred to in clause (4) above) may not (as evidenced by an opinion of counsel
to an effect satisfactory to the trustee) adversely affect in any material
respect the interests of any holder; and provided further that the amendment
(other than an amendment for one of the specific purposes referred to in
clauses (1) through (4) above) must be acceptable to each applicable rating
agency.
Unless otherwise specified in the related prospectus supplement, each
Pooling Agreement may also be amended, with the consent of the holders of the
related series of certificates entitled to not less than 51% (or other
percentage specified in the related prospectus supplement) of the voting rights
for that series allocated to the affected classes, for any purpose. However,
unless otherwise specified in the related prospectus supplement, that amendment
may not (1) reduce in any manner the amount of, or delay the timing of,
payments received or advanced on mortgage loans that are required to be
distributed in respect of any certificate without the consent of the holder of
that certificate, (2) adversely affect in any material respect the interests of
the holders of any class of certificates, in a manner other than as described
in clause (1), without the consent of the holders of all certificates of that
class or (3) modify the amendment provisions of the Pooling Agreement described
in this paragraph without the consent of the holders of all certificates of the
related series. Unless otherwise specified in the related prospectus
supplement, the trustee will be prohibited from consenting to any amendment of
a Pooling Agreement pursuant to which one or more REMIC elections are to be or
have been made unless the trustee shall first have received an opinion of
counsel to the effect that the amendment will not result in the imposition of a
tax on the related trust fund or cause the related trust fund, or the
designated portion, to fail to qualify as a REMIC at any time that the related
certificates are outstanding.
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 those certificateholders access during
normal business hours to the most recent list of certificateholders of that
series held by that person. If that list is of a date more than 90 days prior
to
57
the date of receipt of that certificateholder's request, then that person, if
not the registrar for that series of certificates, will be required to request
from that registrar a current list and to afford those 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 or special servicer 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, the
certificates or any underlying mortgage loan or related document and will not
be accountable for the use or application by or on behalf of the master
servicer for that series of any funds paid to the master servicer or any
special servicer in respect of the certificates or the underlying mortgage
loans, or any funds deposited into or withdrawn from the certificate account or
any other account for that series by or on behalf of the master servicer or any
special servicer. 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 those documents and to determine whether
they conform to the requirements of that agreement.
CERTAIN MATTERS REGARDING THE TRUSTEE
As 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 that 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.
However, the indemnification will not extend to any loss, liability or expense
that constitutes a specific liability imposed on the trustee pursuant to the
related Pooling Agreement, or 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 under the Pooling
Agreement, or by reason of its reckless disregard of those obligations or
duties, or as may arise from a breach of any representation, warranty or
covenant of the trustee made in the Pooling Agreement.
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 its
duties under that Pooling Agreement either directly or by or through agents or
attorneys, and the trustee will not be relieved of any of its duties or
obligations by virtue of the appointment of any agents or attorneys.
RESIGNATION AND REMOVAL OF THE TRUSTEE
A trustee will be permitted at any time to resign from its obligations and
duties under the related Pooling Agreement by giving written notice to the
Depositor, the servicer, the special servicer and to all certificateholders.
Upon receiving this notice of resignation, the Depositor, or other person as
may be specified in the related prospectus supplement, will be required to use
its best efforts to promptly appoint a successor trustee. If no successor
trustee shall have accepted an appointment within a specified period after the
giving of notice of resignation, the resigning trustee may petition any court
of competent jurisdiction to appoint a successor trustee.
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If at any time a trustee ceases to be eligible to continue as trustee
under the related Pooling Agreement, or if at any time the trustee becomes
incapable of acting, or if certain events of, or proceedings in respect of,
bankruptcy or insolvency occur with respect to the trustee, the Depositor will
be authorized to remove the trustee and appoint a successor trustee. In
addition, holders of the certificates of any series entitled to at least 51%
(or other percentage specified in the related prospectus supplement) of the
voting rights for that series may at any time, with or without cause, remove
the trustee under the related Pooling Agreement and appoint a successor
trustee.
Any resignation or removal of a trustee and appointment of a successor
trustee will not become effective until acceptance of appointment by the
successor trustee.
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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 letters of credit, overcollateralization,
the subordination of one or more classes of certificates, insurance policies,
surety bonds, guarantees or reserve funds, or any combination of the foregoing.
If so provided in the related prospectus supplement, any form of credit support
may provide credit enhancement for more than one series of certificates to the
extent described in that prospectus supplement.
Unless otherwise provided in the related prospectus supplement for a series
of certificates, the credit support will 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 not covered by that credit support, certificateholders will
bear their allocable share of deficiencies. Moreover, if a form of credit
support covers more than one series of certificates, holders of certificates of
one series will be subject to the risk that the credit support will be exhausted
by the claims of the holders of certificates of one or more other series before
the former receive their intended share of that coverage.
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
o the nature and amount of coverage under the credit support,
o any conditions to payment under the credit support not otherwise
described in this prospectus,
o any conditions under which the amount of coverage under the credit
support may be reduced and under which that credit support may be
terminated or replaced and
o the material provisions relating to the credit support.
Additionally, the related prospectus supplement will set forth certain
information with respect to the obligor under any instrument of credit support,
including
o a brief description of its principal business activities;
o its principal place of business, place of incorporation and the
jurisdiction under which it is chartered or licensed to do business,
o if applicable, the identity of regulatory agencies that exercise
primary jurisdiction over the conduct of its business and
o its total assets, and its stockholders' equity or policyholders'
surplus, if applicable, as of a date that will be specified in the
prospectus supplement. See "Risk Factors--Credit Support Limitations" in
this prospectus.
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 (or may
be limited to) 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 that subordination will be available.
CROSS-SUPPORT PROVISIONS
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
60
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 those 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. To the extent deemed by the
Depositor to be material, a copy of that instrument will accompany the Current
Report on Form 8-K to be filed with the SEC within 15 days of issuance of the
certificates of the related series.
LETTER OF CREDIT
If so provided in the prospectus supplement for a series of certificates,
deficiencies in amounts otherwise payable on those certificates or certain
classes of those certificates will be covered by one or more letters of credit,
issued by a bank or financial institution specified in the prospectus
supplement (the "L/C Bank"). Under a letter of credit, the L/C Bank will be
obligated to honor draws under a letter of credit in an aggregate fixed dollar
amount, net of unreimbursed payments, generally equal to a percentage specified
in the related prospectus supplement of the aggregate principal balance of the
mortgage assets on the related cut-off date or of the initial aggregate
principal 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 under the letter of credit and may otherwise be reduced
as described in the related prospectus supplement. The obligations of the L/C
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. A copy of that letter of credit will accompany
the Current Report on Form 8-K to be filed with the SEC within 15 days of
issuance of the certificates of the related series.
CERTIFICATE INSURANCE AND SURETY BONDS
If so provided in the prospectus supplement for a series of certificates,
insurance policies and/or surety bonds provided by one or more insurance
companies or sureties of the insurance companies will cover deficiencies in
amounts otherwise payable on those certificates or certain classes. Those
instruments may cover, with respect to one or more classes of certificates of
the related series, timely distributions of interest and/or full 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 that instrument. A copy of that instrument will accompany the
Current Report on Form 8-K to be filed with the SEC within 15 days of issuance
of the certificates of the related series.
RESERVE FUNDS
If so provided in the prospectus supplement for a series of certificates,
deficiencies in amounts otherwise payable on those certificates or certain
classes of those certificates will be covered, to the extent of available
funds, by one or more reserve funds in which cash, a letter of credit,
short-term debt obligations, a demand note or a combination of those features
will be deposited, in the amounts specified in the 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 the collections received
on the related mortgage assets.
Amounts on deposit in any reserve fund for a series, together with the
reinvestment income on those amounts, if any, will be applied for the purposes,
in the manner, specified in the related prospectus supplement. If so specified
in the related prospectus supplement, reserve funds may be established to
61
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 in that reserve fund may be released from it
under the conditions specified in the related prospectus supplement.
If so specified in the related prospectus supplement, amounts deposited in
any reserve fund will be invested in short-term debt obligations. Unless
otherwise specified in the related prospectus supplement, any reinvestment
income or other gain from those investments will be credited to the related
reserve fund for that series, and any loss resulting from those investments
will be charged to that reserve fund. However, that 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 in this prospectus. The related prospectus supplement will specify,
as to each form of credit support, the information indicated above with respect
to the credit support for each series, to the extent that information is
material and available.
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CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties.
Because those legal aspects are governed by applicable state law, which laws
may differ substantially, the summaries do not purport to be complete, to
reflect the laws of any particular state, or to encompass the laws of all
states 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 states. See
"Description of the Trust Funds--Mortgage Loans" in this prospectus.
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 in this
prospectus collectively referred to as "mortgages". A mortgage creates a lien
upon, or grants a title interest in, the real property covered thereby, and
represents the security for the repayment of the indebtedness customarily
evidenced by a promissory note. The priority of the lien created or interest
granted will depend on the terms of the mortgage and, in some cases, on the
terms of separate subordination agreements or intercreditor agreements with
others that hold interests in the real property, the knowledge of the parties
to the mortgage and, generally, the order of recordation of the mortgage in the
appropriate public recording office. However, the lien of a recorded mortgage
will generally be subordinate to later-arising liens for real estate taxes and
assessments and other charges imposed under governmental police powers.
TYPES OF MORTGAGE INSTRUMENTS
There are two parties to a mortgage: a mortgagor who is the borrower and
usually the owner of the subject property, and a mortgagee, who is the lender.
In contrast, a deed of trust is a three-party instrument, among a trustor who
is the equivalent of a borrower, a trustee to whom the real property is
conveyed, and a beneficiary, who is the lender, for whose benefit the
conveyance is made. Under a deed of trust, the trustor grants the property,
irrevocably until the debt is paid, in trust and generally with a power of
sale, to the trustee to secure repayment of the indebtedness evidenced by the
related note. A deed to secure debt typically has two parties. The grantor (the
borrower) conveys title to the real property to the grantee (the lender)
generally with a power of sale, until the time the debt is repaid. In a case
where the borrower is a land trust, there would be an additional party because
a land trustee holds legal title to the property under a land trust agreement
for the benefit of the borrower. At origination of a mortgage loan involving a
land trust, the borrower executes a separate undertaking to make payments on
the mortgage note. 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 (including, without limitation, the Soldiers' and Sailors' Civil Relief
Act of 1940) 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, 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, also known as the UCC, in cases
where hotels or motels constitute loan security, the
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borrower as additional security for the loan generally pledges the rates. In
general, the lender must file financing statements in order to perfect its
security interest in the rates and must file continuation statements, generally
every five years, to maintain perfection of that security interest. Even if the
lender's security interest in room rates is perfected under the UCC, it may be
required to commence a foreclosure action or otherwise take possession of the
property in order to collect the room rates following a default. See
"--Bankruptcy Laws" below.
PERSONALTY
In the case of certain types of mortgaged properties, for instance 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 in that
personal property, and must file continuation statements, generally every five
years, to maintain that perfection.
FORECLOSURE
General. Foreclosure is a legal procedure that allows the lender to
recover its mortgage debt by enforcing its rights and available legal remedies
under the mortgage. If the borrower defaults in payment or performance of its
obligations under the 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 non-judicial 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. Moreover, as discussed below,
even a non-collusive, regularly conducted foreclosure sale may be challenged as
a fraudulent conveyance, regardless of the parties' intent, if a court
determines that the sale was for less than fair consideration and that sale
occurred while the borrower was insolvent and within a specified period prior
to the borrower's filing for bankruptcy protection.
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. Those sales are made in accordance with
procedures that vary from state to state.
Equitable 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 those 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 lenders 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 non-monetary default, such as a failure to
adequately maintain the mortgaged property or an impermissible further
encumbrance of the
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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.
Non-Judicial Foreclosure/Power of Sale. Foreclosure of a deed of trust is
generally accomplished by a non-judicial 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 non-judicial 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 that sale, the trustee under the
deed of trust must record a notice of default and notice of sale and send a
copy to the borrower and to any other party who has recorded a request for a
copy of a notice of default and notice of sale. In addition, in some states the
trustee must provide notice to any other party having an interest of record in
the real property, including junior lienholders. A notice of sale must be
posted in a public place and, in most states, published for a specified period
of time in one or more newspapers. The borrower or junior lienholder may then
have the right, during a reinstatement period required in some states, to cure
the default by paying the entire actual amount in arrears (without regard to
the acceleration of the indebtedness), plus the lender's expenses incurred in
enforcing the obligation. In other states, the borrower or the junior
lienholder is not provided a period to reinstate the loan, but has only the
right to pay off the entire debt to prevent the foreclosure sale. Generally,
state law governs the procedure for public sale, the parties entitled to
notice, the method of giving notice and the applicable time periods.
Public Sale. A third party may be unwilling to purchase a mortgaged
property at a public sale because of the difficulty in determining the value of
that property at the time of sale, due to, among other things, redemption
rights which may exist and the possibility of physical deterioration of the
property during the foreclosure proceedings. Potential buyers may be reluctant
to purchase property at a foreclosure sale as a result of the 1980 decision of
the United States Court of Appeals for the Fifth Circuit in Durrett v.
Washington National Insurance Company and other decisions that have followed
its reasoning. The court in Durrett held that even a non-collusive, regularly
conducted foreclosure sale was a fraudulent transfer under the federal
bankruptcy code, as amended from time to time (11 U.S.C.) (the "Bankruptcy
Code") and, thus, could be rescinded in favor of the bankrupt's estate, if (1)
the foreclosure sale was held while the debtor was insolvent and not more than
one year prior to the filing of the bankruptcy petition and (2) the price paid
for the foreclosed property did not represent "fair consideration", which is
"reasonably equivalent value" under the Bankruptcy Code. Although the reasoning
and result of Durrett in respect of the Bankruptcy Code was rejected by the
United States Supreme Court in May 1994, the case could nonetheless be
persuasive to a court applying a state fraudulent conveyance law which has
provisions similar to those construed in Durrett. For these reasons, it is
common for the lender to purchase the mortgaged property for an amount equal to
the lesser of fair market value and the underlying debt and accrued and unpaid
interest plus the expenses of foreclosure. Generally, state law controls the
amount of foreclosure costs and expenses which may be recovered by a lender.
Thereafter, subject to the mortgagor's right in some states to remain in
possession during a redemption period, if applicable, the lender will become
the owner of the property and have both the benefits and burdens of ownership
of the mortgaged property. For example, the lender will have the obligation to
pay debt service on any senior mortgages, to pay taxes, obtain casualty
insurance and to make those repairs at its own expense as are necessary to
render the property suitable for sale. Frequently, the lender employs a third
party management company to manage and operate the property. The costs of
operating and maintaining a commercial or multifamily residential property may
be significant and may be greater than the income derived from that property.
The costs of management and operation of those mortgaged properties which are
hotels, motels or restaurants or nursing or convalescent homes or hospitals may
be particularly significant because of the expertise, knowledge and, with
respect to nursing or convalescent homes or hospitals, regulatory compliance,
required to run those operations and the effect which foreclosure and a change
in ownership may have on the public's and the industry's, including
franchisors', perception of the quality of those operations. The lender will
commonly obtain the services of a real estate broker and pay the broker's
commission in connection with the sale of the property. Depending
65
upon market conditions, the ultimate proceeds of the sale of the property may
not equal the amount of the mortgage against the property. Moreover, a lender
commonly incurs substantial legal fees and court costs in acquiring a mortgaged
property through contested foreclosure and/or bankruptcy proceedings.
Furthermore, a few states require that any environmental contamination at
certain types of properties be cleaned up before a property may be resold. In
addition, a lender may be responsible under federal or state law for the cost
of cleaning up a mortgaged property that is environmentally contaminated. See
"--Environmental Risks" below. Generally state law controls the amount of
foreclosure expenses and costs, including attorneys' fees, that may be
recovered by a lender.
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 (non-statutory) right which
should be distinguished from post-sale statutory rights of redemption. In some
states, after sale pursuant to a deed of trust or foreclosure of a mortgage,
the borrower and foreclosed junior lienors are given a statutory period in
which to redeem the property. In some states, statutory redemption may occur
only upon payment of the foreclosure sale price. In other states, redemption
may be permitted if the former borrower pays only a portion of the sums due.
The effect of a statutory right of redemption is to diminish the ability of the
lender to sell the foreclosed property because the exercise of a right of
redemption would defeat the title of any purchaser through a foreclosure.
Consequently, the practical effect of the redemption right is to force the
lender to maintain the property and pay the expenses of ownership until the
redemption period has expired. In some states, a post-sale statutory right of
redemption may exist following a judicial foreclosure, but not following a
trustee's sale under a deed of trust.
Anti-Deficiency Legislation. Some or all of the mortgage loans may be
nonrecourse loans, as to which recourse in the case of default will be limited
to the Mortgaged Property and those other assets, if any, that were pledged to
secure the mortgage loan. However, even if a mortgage loan by its terms
provides for recourse to the borrower's other assets, a lender's ability to
realize upon those assets may be limited by state law. For example, in some
states a lender cannot obtain a deficiency judgment against the borrower
following foreclosure or sale under a deed of trust. A deficiency judgment is a
personal judgment against the former borrower equal to the difference between
the net amount realized upon the public sale of the real property and the
amount due to the lender. Other statutes may require the lender to exhaust the
security afforded under a mortgage before bringing a personal action against
the borrower. In certain other states, the lender has the option of bringing a
personal action against the borrower on the debt without first exhausting that
security; however, in some of those states, the lender, following judgment on
that personal action, may be deemed to have elected a remedy and thus may be
precluded from foreclosing upon the security. Consequently, lenders in those
states where 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 Risks. 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
66
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.
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 non-owner tenants. Those 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. This kind of loan typically is subordinate to the
mortgage, if any, on the Cooperative's building which, if foreclosed, could
extinguish the equity in the building and the proprietary leases of the
dwelling units derived from ownership of the shares of the Cooperative.
Further, transfer of shares in a Cooperative are subject to various regulations
as well as to restrictions under the governing documents of the Cooperative,
and the shares may be cancelled in the event that associated maintenance
charges due under the related proprietary leases are not paid. Typically, a
recognition agreement between the lender and the Cooperative provides, among
other things, the lender with an opportunity to cure a default under a
proprietary lease.
Under the laws applicable in many states, "foreclosure" on Cooperative
shares is accomplished by a sale in accordance with the provisions of Article 9
of the UCC and the security agreement relating to the shares. Article 9 of the
UCC requires that a sale be conducted in a "commercially reasonable" manner,
which may be dependent upon, among other things, the notice given the debtor
and the method, manner, time, place and terms of the sale. Article 9 of the UCC
provides that the proceeds of the sale will be applied first to pay the costs
and expenses of the sale and then to satisfy the indebtedness secured by the
lender's security interest. A recognition agreement, however, generally
provides that the lender's right to reimbursement is subject to the right of
the Cooperative to receive sums due under the proprietary leases.
BANKRUPTCY LAWS
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 of a delay caused by an 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 a junior lien.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards for the lender are met, the amount and terms of a mortgage secured
by property of the debtor may be modified under certain circumstances. In many
jurisdictions, the outstanding amount of the loan secured by the real property
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 the value and the outstanding
balance of the loan. Other modifications may include the reduction in the
amount of each scheduled payment, which reduction may result from a reduction
in the rate of interest and/or the alteration of the repayment schedule (with
or without affecting the unpaid principal balance of the loan), and/or an
extension (or reduction) of the final maturity date. Some courts with federal
bankruptcy jurisdiction have approved plans, based on the particular facts of
the reorganization case, that effected the curing of a mortgage loan default by
paying arrearages over a number of years. Also, under federal bankruptcy law, a
bankruptcy court may permit a debtor through its rehabilitative plan to
de-accelerate a secured loan and to reinstate the loan even though the lender
accelerated the mortgage loan and final judgment of foreclosure had been
entered in state court (provided no sale of the property had yet occurred)
prior to the filing of the debtor's petition. This may be done even if the 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,
67
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.
Federal bankruptcy law 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 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
68
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.
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
69
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 RISKS
Real property pledged as security for a mortgage loan may be subject to
certain environmental risks. Under federal law, including the Comprehensive
Environmental Response and Liability Act of 1980, as amended (also known as
CERCLA) and the laws of certain states, failure to perform the remediation
required or demanded by the state or federal government of any condition or
circumstance that
o may pose an imminent or substantial endangerment to the public health
or welfare or the environment,
o may result in a release or threatened release of any hazardous
material, or
o may give rise to any environmental claim or demand,
may give rise to a lien on the property to ensure the reimbursement of remedial
costs incurred by the federal or state government. In several states, the lien
has priority over the lien of an existing mortgage against the property. Of
particular concern may be those mortgaged properties which are, or have been,
the site of manufacturing, industrial or disposal activity. Those environmental
risks may give rise to (a) a diminution in value of property securing a
mortgage note or the inability to foreclose against the property or (b) in
certain circumstances as more fully described below, liability for clean-up
costs or other remedial actions, which liability could exceed the value of the
property, the aggregate assets of the owner or operator, or the principal
balance of the related indebtedness.
The state of the law is currently unclear as to whether and under what
circumstances cleanup costs, or the obligation to take remedial actions, could
be imposed on a secured lender. Under the laws of some states and under CERCLA,
a lender may become liable as an "owner" or an "operator" of a contaminated
mortgaged property for the costs of remediation of releases or threatened
releases of hazardous substances at the mortgaged property. The liability may
attach if the lender or its agents or employees have participated in the
management of the operations of the borrower, even though the environmental
damage or threat was caused by a prior owner, operator, or other third party.
Excluded from CERCLA's definition of "owner or operator" is any person
"who, without participating in the management of a facility, holds indicia of
ownership primarily to protect his security interest" (the "secured-creditor
exemptionsecured-creditor exemption"). This exemption for holders of a security
interest such as a secured lender applies only in circumstances when the lender
seeks to protect its security interest in the contaminated facility or
property. Thus, if a lender's activities encroach on the actual management of
that facility or property, the lender faces potential liability as an "owner or
operator" under CERCLA. Similarly, when a lender forecloses and takes title to
a contaminated facility or property (whether it holds the facility or property
as an investment or leases it to a third party), under some circumstances the
lender may incur potential CERCLA liability.
Recent amendments to CERCLA list permissible actions that may be
undertaken by a lender holding security in a contaminated facility without
exceeding the bounds of the secured-creditor exemption, subject to certain
conditions and limitations. Additionally, the amendments provide certain
protections from CERCLA liability as an "owner or operator" to a lender who
forecloses on contaminated property, as long as it seeks to divest itself of
the facility at the earliest practicable commercially reasonable time on
commercially reasonable terms. The amendments also limit the liability of
lenders under the federal Solid Waste Disposal Act for costs of responding to
leaking underground storage tanks. However, the protections afforded lenders
under the amendments are subject to terms and conditions that have not been
clarified by the courts. Moreover, the CERCLA secured-creditor exemption does
not necessarily affect the potential for
70
liability in actions under other federal or state laws which may impose
liability on "owners or operators" but do not incorporate the secured-creditor
exemption. Furthermore, the secured-creditor exemption does not protect lenders
from other bases of CERCLA liability, such as that imposed on "generators" or
"transporters" of hazardous substances.
Environmental clean-up costs may be substantial. It is possible that those
costs could become a liability of the Trust and occasion a loss to
certificateholders if those remedial costs were incurred.
In a few states, transfers of some types of properties are conditioned
upon clean-up of contamination prior to transfer. It is possible that a
property securing a mortgage loan could be subject to these transfer
restrictions. If this occurs, and if the lender becomes the owner upon
foreclosure, the lender may be required to clean up the contamination before
selling the property.
The cost of remediating hazardous substance contamination at a property
can be substantial. If a lender is or becomes liable, it can bring an action
for contribution against the owner or operator that created the environmental
hazard, but that person or entity may be without substantial assets.
Accordingly, it is possible that these costs could become a liability of a
trust fund and occasion a loss to certificateholders of the related series.
To reduce the likelihood of this kind of loss, and unless otherwise
provided in the related prospectus supplement, the related Pooling Agreement
will provide that the master servicer may not, on behalf of the trust fund,
acquire title to a Mortgaged Property or take over its operation unless the
master servicer, based on a report prepared by a person who regularly conducts
environmental site assessments, has made the determination that it is
appropriate to do so, as described under "Description of the Pooling
Agreements-- Realization Upon Defaulted Mortgage Loans" in this prospectus.
Even when a lender is not directly liable for cleanup costs on property
securing loans, if a property securing a loan is contaminated, the value of the
security is likely to be affected. In addition, a lender bears the risk that
unanticipated cleanup costs may jeopardize the borrower's repayment. Neither of
these two issues is likely to pose risks exceeding the amount of unpaid
principal and interest of a particular loan secured by a contaminated property,
particularly if the lender declines to foreclose on a mortgage secured by the
property.
If a lender forecloses on a mortgage secured by a property the operations
of which are subject to environmental laws and regulations, the lender will be
required to operate the property in accordance with those laws and regulations.
Compliance may entail substantial expense.
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.
That disclosure may decrease the amount that prospective buyers are willing to
pay for the affected property and thereby lessen the ability of the lender to
recover its investment in a loan upon foreclosure.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE
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 those
clauses in many states. By virtue, however, of the Garn-St Germain Depository
Institutions Act of 1982 (the "Garn Act"), effective October 15, 1982, which
purports to preempt state laws that prohibit the enforcement of due-on-sale
clauses by providing among other matters, that "due-on-sale" clauses in certain
loans made after the effective date of the Garn Act are enforceable, within
certain limitations as set forth in the Garn Act, 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, regardless of the master servicer's ability to demonstrate that a
sale threatens its legitimate security interest.
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SUBORDINATE FINANCING
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.
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.
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 but not commercial,
first mortgage loans originated by certain lenders after March 31, 1980. A
similar Federal statute was in effect with respect to mortgage loans made
during the first three months of 1980. The statute 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.
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, no
mortgage loan originated after the date of that state action will (if
originated after that rejection or adoption) be eligible for inclusion in a
trust fund unless (1) the mortgage loan provides for an interest rate, discount
points and charges as are permitted in that state or (2) the mortgage loan
provides that the terms are to be construed in accordance with the laws of
another state under which the interest rate, discount points and charges would
not be usurious and the borrower's counsel has rendered an opinion that the
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.
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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 that 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 that 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 any 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 those certificates. In addition, the
Relief Act imposes limitations that would impair the ability of the 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.
TYPE OF MORTGAGED PROPERTY
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:
1. hotels and motels are typically operated pursuant to franchise,
management and operating agreements which may be terminable by the
operator; and
2. 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 or
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 (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, alterations to a place of public accommodation or a commercial facility
are to be made so that, to the maximum extent feasible, the altered portions
are readily accessible to and usable by disabled individuals. The "readily
achievable" standard takes into account, among other factors, the financial
resources of the affected 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 these 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.
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FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations statute, also known as "RICO", can be seized by the
government if the property was used in, or purchased with the proceeds of,
those crimes. Under procedures contained in the Comprehensive Crime Control Act
of 1984, the government may seize the property even before conviction. The
government must publish notice of the forfeiture proceeding and may give notice
to all parties "known to have an alleged interest in the property", including
the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
established that: (1) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (2) the lender was, at the
time of execution of the mortgage, "reasonably without cause to believe" that
the property was used in, or purchased with the proceeds of, illegal drug or
RICO activities.
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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 based are subject to change or differing
interpretations, and any change or interpretation could apply retroactively.
This discussion reflects the applicable provisions of 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, (1) references to the mortgage loans
include references to the mortgage loans underlying MBS included in the
mortgage assets and (2) 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 in the
trust fund as one or more REMICs within the meaning of Code Section 860D. A
trust fund or a portion of a trust fund 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, counsel to the Depositor, has advised the
Depositor that in the firm's opinion, assuming (1) the making of an election,
(2) compliance with the Pooling Agreement and (3) compliance with any changes
in the law, including any amendments to the Code or applicable Treasury
regulations under the Code, each REMIC Pool will qualify as a REMIC. In that
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" below shall be deemed to refer to
that 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" below.
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 that treatment.
REMIC Certificates held by a real estate investment trust will constitute "real
estate assets" within the meaning of Code Section 856(c)(4)(A), 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 treatments, the REMIC
Certificates will qualify for the corresponding status
75
in their entirety. For purposes of Code Section 856(c)(4)(A), payments of
principal and interest on the mortgage loans that are reinvested pending
distribution to holders of REMIC Certificates qualify for that 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%. Regular Certificates will be "qualified mortgages" for
another REMIC for purposes of Code Section 860(G)(a)(3) and "permitted assets"
for a financial asset securitization investment trust for purposes of Section
860(L)(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). The Small Business Job Protection Act of 1996 (the "SBJPA of 1996")
repealed the reserve method for bad debts of domestic building and loan
associations and mutual savings banks, and thus has eliminated the asset
category of "qualifying real property loans" in former Code Section 593(d) for
taxable years beginning after December 31, 1995. The requirement in the SBJPA
of 1996 that those institutions must "recapture" a portion of their existing
bad debt reserves is suspended if a certain portion of their assets are
maintained in "residential loans" under Code Section 7701(a)(19)(C)(v), but
only if those loans were made to acquire, construct or improve the related real
property and not for the purpose of refinancing. However, no effort will be
made to identify the portion of the mortgage loans of any Series meeting this
requirement, and no representation is made in this regard.
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" below.
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, (1) the fair market
value of the real property security (including buildings and structural
components) 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 (2) 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 (1) of the preceding sentence as of the date of the
last 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 (1) in exchange for any qualified mortgage within a
three-month period thereafter or (2) in exchange for a "defective obligation"
within a two-year period thereafter. A "defective obligation" includes
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o a mortgage in default or as to which default is reasonably foreseeable,
o a mortgage as to which a customary representation or warranty made at
the time of transfer to the REMIC Pool has been breached,
o a mortgage that was fraudulently procured by the mortgagor, and
o a mortgage that was not in fact principally secured by real property
(but only if the mortgage is disposed of within 90 days of discovery).
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 the 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, provided the Depositor had no knowledge that
the mortgage loan would go into default at the time it was transferred to the
REMIC Pool. Foreclosure property generally must be disposed of prior to 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 IRS.
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: (1) one or more classes of regular
interests or (2) 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. The
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 that 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 for each REMIC Pool of 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 that 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 in the REMIC Pool. 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
77
would occur absent regulatory relief. Investors should be aware, however, that
the Conference Committee Report to the Tax Reform Act of 1986 (the "Reform
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 those 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
that income. The following discussion is based in part on temporary and final
Treasury regulations issued on February 2, 1994, as amended on June 14, 1996
(the "OID Regulations") under Code Sections 1271 through 1273 and 1275 and in
part on the provisions of the Reform 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 those issues are not addressed in those regulations, the Depositor
intends to apply the methodology described in the Conference Committee Report
to the Reform Act. We cannot assure you that the IRS will not take a different
position as to those matters not currently addressed by the OID Regulations.
Moreover, the OID Regulations include an anti-abuse rule allowing the IRS to
apply or depart from the OID Regulations 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 in this prospectus 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 that 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 those 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 those interest payments are
unconditionally payable at intervals of one year or less during the entire term
of the Regular Certificate. Because there is no penalty or default remedy
78
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, we
intend 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 the Regular Certificates includes all
distributions of interest as well as principal on those Regular Certificates.
Likewise, we intend 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 the 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 Reform Act provides that the schedule of 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 that
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" below.
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. We intend to 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 Reform 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
1. 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
2. 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 (1) the yield to maturity of the
Regular Certificate at the issue date, (2) events (including actual
prepayments) that have occurred prior to the end of the accrual period and (3)
the Prepayment Assumption. For these purposes, the adjusted issue price of a
Regular Certificate at the beginning of any accrual period
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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 in the Regular Certificate's stated redemption price at maturity that
were made on the Regular Certificate in those 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 those Regular Certificates.
In the case of a Random Lot Certificate, we intend to determine the yield
to maturity of that 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 that unpaid principal balance, (a) the remaining unaccrued original issue
discount allocable to that certificate (or to that portion) will accrue at the
time of that distribution, and (b) the accrual of original issue discount
allocable to each remaining certificate of the 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 that class and the adjusted issue
price of that class to the extent attributable to the portion of the unpaid
principal balance of the class that was distributed. We believe 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. You are
advised to consult your 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 the adjusted issue
price and the denominator of which is the excess of the remaining stated
redemption price at maturity over the adjusted issue price. Alternatively, a
subsequent purchaser may elect to treat all of the acquisition premium under
the constant yield method, as described below under the heading "--Election to
Treat All Interest Under the Constant Yield Method" below.
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, (1) the issue price does not exceed the original principal
balance by more than a specified amount and (2) 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 the rate is subject to a fixed multiple that is greater than 0.65, but
not more than 1.35. The 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 determined using a single fixed formula
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and that is based on objective financial or economic information, provided that
the information is not (1) within the control of the issuer or a related party
or (2) 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 so that
it is considered significantly "front-loaded" or "back-loaded" within the
meaning of the OID Regulations. It is possible that a class of this type 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, those
regulations may lead to different timing of income inclusion than would be the
case under the OID Regulations. Furthermore, application of those 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 (1) 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 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 a rate that is
subject to one or more caps or floors, or (2) bearing one or more of these
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, we intend 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 that 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, we intend to treat 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, we intend 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 those 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 interest 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 (1) is exceeded by the then-current principal
amount of the Regular Certificate or (2) in the case of a Regular Certificate
having original issue discount, is exceeded by the adjusted issue price of that
Regular Certificate at the time of purchase. The purchaser generally will be
required to recognize ordinary income to the extent of accrued market discount
on the Regular Certificate as distributions includible in the stated redemption
price at maturity of the Regular Certificate are received, in an amount not
exceeding that distribution. The 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 Reform Act provides that
until regulations are issued, the market discount would accrue either (1) on
the basis of a constant interest rate or (2) in the ratio of stated interest
allocable to the relevant period to the sum of the interest for that period
plus the remaining interest as of the end of that 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 that period plus the remaining original
issue discount as of the end of that period. You 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. You 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 on those Regular Certificates. The deferred
portion of an interest expense in any taxable year generally will not exceed
the accrued market discount on the Regular Certificate for that year. The
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, you may elect to include
market discount in income currently as it accrues on all market discount
instruments you acquired 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
that election may be deemed to be made.
Market discount with respect to a Regular Certificate will be considered
to be zero if the market discount is less than 0.25% of the remaining stated
redemption price at maturity of the 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. You 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 you hold a Regular Certificate as a "capital asset" within the
meaning of Code Section 1221, you may elect under Code Section 171 to amortize
that premium under the constant yield method. Final regulations with respect to
amortization of bond premium do not by their terms apply to prepayable
obligations such as the Regular Certificates. However, the Conference
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Committee Report to the Reform 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 an election, (1) "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 (2) 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 an election on an instrument by instrument basis or for a
class or group of debt instruments. However, if the holder makes 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 IRS. You should consult
their own tax advisors regarding the advisability of making an election.
Sale or Exchange of Regular Certificates
If you sell or exchange a Regular Certificate, you 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
applicable holding period (described below). That gain will be treated as
ordinary income
1. 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 that transaction,
2. in the case of a non-corporate taxpayer, to the extent the taxpayer
has made an election under Code Section 163(d)(4) to have net capital
gains taxed as investment income at ordinary rates, or
3. to the extent that the 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 the Regular Certificate 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 that
holder with respect to the Regular Certificate.
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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). Long-term capital gains of
certain non-corporate taxpayers generally are subject to a lower maximum tax
rate (20%) than ordinary income or short-term capital gains of those taxpayers
(39.6%) 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.
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 those
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 IRS may take the position that original issue discount must
continue to be accrued in spite of its uncollectibility until the debt
instrument is disposed of in a taxable transaction or becomes worthless in
accordance with the rules of Code Section 166.
Under Code Section 166, 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, a loss sustained during the taxable year on account of those
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 those 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 that time as the
principal balance of any class or subclass of those Regular Certificates is
reduced to reflect losses resulting from any liquidated mortgage loans. The
IRS, however, could take the position that non-corporate holders will be
allowed a bad debt deduction to reflect those losses only after all mortgage
loans remaining in the trust fund have been liquidated or that class of Regular
Certificates has been otherwise retired. The IRS could also assert that losses
on the Regular Certificates are deductible based on some other method that may
defer those 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. You are urged to consult your own tax advisors regarding the
appropriate timing, amount and character of any loss sustained with respect to
the 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 IRS 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. Banks and thrift institutions
are advised to consult their tax advisors regarding the treatment of losses on
Regular Certificates.
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 certain classes 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 that quarter and
by allocating that daily portion among the Residual Certificateholders in
proportion to their respective holdings of certain classes of Residual
Certificates in the REMIC Pool on that day. REMIC taxable income is
84
generally determined in the same manner as the taxable income of an individual
using the accrual method of accounting, except that (1) the limitations on
deductibility of investment interest expense and expenses for the production of
income do not apply, (2) all bad loans will be deductible as business bad debts
and (3) 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 those mortgage loans is prepaid, the Residual
Certificateholder may recognize taxable income without being entitled to
receive a corresponding amount of cash because (1) the prepayment may be used
in whole or in part to make distributions in reduction of principal on the
Regular Certificates and (2) the discount on the mortgage loans which is
includible in income may exceed the deduction allowed upon those 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 those classes are not issued with
substantial discount. If taxable income attributable to that kind of
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 that 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 that mismatching or
unrelated deductions against which to offset that income, subject to the
discussion of "excess inclusions" below under "--Limitations on Offset or
Exemption of REMIC Income". The timing of that 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. In addition, a Residual
Certificateholder's taxable income during certain periods may exceed the income
reflected by that Residual Certificateholder for those periods in accordance
with generally accepted accounting principles. You should consult their own
accountants concerning the accounting treatment of your investment in Residual
Certificates.
Basis and Losses
The amount of any net loss of the REMIC Pool that you may take into
account 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 that Residual Certificate. The 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
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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 that loss was disallowed and may be used by that
Residual Certificateholder only to offset any income generated by the same
REMIC Pool.
You will not be permitted to amortize directly the cost of your 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.
That 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 under "--Taxation of REMIC Income" above, the period of time over
which the 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 a residual
interest as zero rather than a negative amount for purposes of determining the
REMIC Pool's basis in its assets. The preamble to the REMIC Regulations states
that the IRS may provide future guidance on the proper tax treatment of
payments made by a transferor of a residual interest to induce the transferee
to acquire the interest, and you should consult your 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
that basis until termination of the REMIC Pool unless future Treasury
regulations provide for periodic adjustments to the REMIC income otherwise
reportable by that 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 we intend 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. We make no representation as to the specific method that will
be used 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 you 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 under "--Taxation of Regular
Certificates--Original Issue Discount" and "--Variable Rate Regular
Certificates", without regard to the de minimis rule described in that section,
and "--Premium" above.
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 similar to the deferred interest
that accrues with respect to Regular Certificates as described under
"--Taxation of Regular Certificates--Deferred Interest" above.
Market Discount. The REMIC Pool will have market discount income in
respect of mortgage loans if, in general, their unpaid principal balances
exceed the basis of the REMIC Pool allocable to those mortgage loans. The REMIC
Pool's basis in those mortgage loans is generally the fair market value of the
mortgage loans immediately after the transfer of the mortgage loans to the
REMIC Pool. The REMIC Regulations provide that the 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 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 the 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 under "--Taxation of Regular Certificates--Market
Discount" above.
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Premium. Generally, if the basis of the REMIC Pool in the mortgage loans
exceeds the unpaid principal balances of the mortgage loans, the REMIC Pool
will be considered to have acquired those mortgage loans at a premium equal to
the amount of that 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 of the
mortgage loans 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
those mortgage loans may be deductible in accordance with a reasonable method
regularly employed by the related holder. The allocation of the premium pro
rata among principal payments should be considered a reasonable method;
however, the IRS may argue that the premium should be allocated in a different
manner, such as allocating the 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
your federal income tax liability 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 that quarterly period of (1) 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 (2) the adjusted issue price of such Residual Certificate at the
beginning of that 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 those daily accruals of REMIC
income described in this paragraph for all prior quarters, decreased by any
distributions made with respect to that Residual Certificate prior to the
beginning of that 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 that income as the adjusted issue price of the Residual
Certificates diminishes.
The portion of your REMIC taxable income consisting of the excess
inclusions generally may not be offset by other deductions, including net
operating loss carryforwards, on that Residual Certificateholder's return.
However, net operating loss carryovers are determined without regard to excess
inclusion income. Further, if you are an organization subject to the tax on
unrelated business income imposed by Code Section 511, the excess inclusions
will be treated as unrelated business taxable income of that 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 below under "--Tax-Related Restrictions on
Transfer of Residual Certificates--Foreign Investors" below, and that portion
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
SBJPA of 1996 has eliminated the special rule permitting Section 593
institutions ("thrift institutions") to use net operating losses and other
allowable deductions to offset their excess inclusion income from Residual
Certificates that have "significant value" within the meaning of the REMIC
Regulations, effective for taxable years beginning after December 31, 1995,
except with respect to Residual Certificates continuously held by thrift
institutions since November 1, 1995.
In addition, the SBJPA of 1996 provides three rules for determining the
effect of excess inclusions on your alternative minimum taxable income of a
Residual Certificateholder. First, your alternative minimum taxable income is
determined without regard to the special rule, discussed above, that taxable
income
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cannot be less than excess inclusions. Second, your 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. These rules
are effective for taxable years beginning after December 31, 1996, unless you
elect to have those rules apply only to taxable years beginning after August
20, 1996.
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 (1) the
present value of the total anticipated excess inclusions with respect to that
Residual Certificate for periods after the transfer and (2) 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. The tax generally would be imposed on the transferor of the
Residual Certificate, except that where the transfer is through an agent,
including a broker, nominee or other middleman, for a Disqualified
Organization, the tax would instead be imposed on that agent. However, a
transferor of a Residual Certificate would in no event be liable for the 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 the
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
that entity, then a tax is imposed on the entity equal to the product of (1)
the amount of excess inclusions on the Residual Certificate that are allocable
to the interest in the Pass-Through Entity during the period the interest is
held by the Disqualified Organization, and (2) the highest marginal federal
corporate income tax rate. This 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 the tax if it has received an affidavit from the record
holder that it is not a Disqualified Organization or stating the holder's
taxpayer identification number and, during the period that person is the record
holder of the Residual Certificate, the Pass-Through Entity does not have
actual knowledge that the affidavit is false.
For taxable years beginning on or after January 1, 1998, 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 the affidavits are false, is not available to
an electing partnership.
For these purposes, (1) "Disqualified Organization" means the United
States, any state or one of their political subdivisions, any foreign
government, any international organization, any agency or instrumentality of
any of the foregoing (provided, that the 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 one of those governmental entities),
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 that
organization is subject to the tax on unrelated business income imposed by Code
Section 511, (2) "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
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nominee for another will, with respect to that interest, be treated as a
Pass-Through Entity, and (3) 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 (1) the proposed transferee provides to the transferor and
the trustee an affidavit providing its taxpayer identification number and
stating that the transferee is the beneficial owner of the Residual
Certificate, is not a Disqualified Organization and is not purchasing the
Residual Certificates on behalf of a Disqualified Organization (i.e., as a
broker, nominee or other middleman), and (2) the transferor provides a
statement in writing to the Depositor and the trustee that it has no actual
knowledge that the 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 the restrictions on transfer, and each Residual
Certificateholder will be deemed to have agreed, as a condition of ownership of
the Residual Certificates, 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 IRS 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 that 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 under
"--Foreign Investors" below) 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, (1) 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 (2) 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 under "--Disqualified Organizations"
above. 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 (1) 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, and (2) the
transferee represents to the transferor that it understands that, as the holder
of the noneconomic residual interest, the transferee may incur tax 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. The Pooling Agreement with respect to each series of certificates
will require the transferee of a Residual Certificate to certify to the matters
in the preceding sentence as part of the affidavit described under the heading
"--Disqualified Organizations" above. The transferor must have no actual
knowledge or reason to know that those statements are false.
In addition to the two 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 proposed Treasury regulations would add a
third condition for the transferor to be presumed to lack such knowledge. This
third condition would require that the present value of the anticipated tax
liabilities associated with holding the noneconomic residual interest not
exceed the sum of:
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(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; and
(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 third condition, the transferee is
assumed to pay tax at the highest corporate rate of tax specified in Section
11(b)(1) of the Code (currently 35%). Further, present values generally are
computed using a discount rate equal to the applicable Federal rate set forth
in Section 1274(d) of the Code compounded semiannually. However, a lower rate
may be used if the transferee can demonstrate that it regularly borrows, in the
course of its trade or business, substantial funds at such lower rate from
unrelated third parties. In some situations, to satisfy this third condition,
the transferor of a noneconomic residual interest may have to pay more
consideration to the transferee than would otherwise be the case if the
proposed regulations were not applicable. If adopted, the proposed regulations
would apply to the transfer of a noneconomic residual interest made on or after
February 4, 2000. Prospective investors should consult their own tax advisors
as to the applicability and effect of the proposed regulations.
Additionally, the IRS has issued Revenue Procedure 2001-12 (the "Revenue
Procedure") dealing with the transfer of noneconomic residual interests such as
a Residual Certificate. The Revenue Procedure restates the safe harbor
described in the proposed Treasury regulations discussed above and adds an
alternative test for meeting the safe harbor. To meet the alternative test, (i)
the transferee must be a domestic "C" corporation (other than a corporation
exempt from taxation or a regulated investment company or real estate
investment trust) that meets certain asset tests; (ii) the transferee must
agree in writing that any subsequent transfer of the residual interest would be
to an eligible "C" corporation and would meet the requirements for a safe
harbor transfer under the Revenue Procedure; (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
interest will not be paid by the transferee.
Unless otherwise indicated in the applicable prospectus supplement, the
Pooling and Servicing Agreement will not require that transfers of the Residual
Certificates meet the safe harbor under either the test contained in the
proposed Treasury regulations or the alternative test provided by the Revenue
Procedure. Persons considering the purchase of the Residual Certificates should
consult their advisors regarding the advisability of meeting the safe harbor in
any transfer of the Residual Certificates.
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 the
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, (1) the future value
of expected distributions equals at least 30% of the anticipated excess
inclusions after the transfer, and (2) 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 Certificates 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.
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 a transfer may be made. The term "U.S. Person"
means a citizen or resident of the United States, a corporation, or partnership
(except to the extent provided in applicable Treasury regulations) created or
organized in or under the laws of the United States, any state, or the District
of Columbia, or their political subdivisions, including any entity treated as a
corporation or partnership for federal income tax purposes, 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
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primary supervision over the administration of that trust, and one or more such
U.S. Persons have the authority to control all substantial decisions of that
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).
Sale or Exchange of a Residual Certificate
Upon the sale or exchange of a Residual Certificate, you will recognize
gain or loss equal to the excess, if any, of the amount realized over your
adjusted basis, as described under "--Taxation of Residual Certificates--Basis
and Losses" above, in the Residual Certificate at the time of the sale or
exchange. In addition to reporting the taxable income of the REMIC Pool, you
will have taxable income to the extent that any cash distribution to it from
the REMIC Pool exceeds the adjusted basis on that distribution date. That
income will be treated as gain from the sale or exchange of the Residual
Certificates. It is possible that the termination of the REMIC Pool may be
treated as a sale or exchange of Residual Certificates, in which case, you have
an adjusted basis in the Residual Certificates remaining when its interest in
the REMIC Pool terminates, and if you hold the Residual Certificate as a
capital asset under Code Section 1221, then you will recognize a capital loss
at that time in the amount of the remaining adjusted basis.
Any gain on the sale of Residual Certificates will be treated as ordinary
income (1) if you hold the Residual Certificates as part of a "conversion
transaction" as defined in Code Section 1258(c), up to the amount of interest
that would have accrued on your 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 that transaction or (2) if you are a non-corporate taxpayer, to
the extent that you have 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 Reform 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 those certificates, during the period beginning six months before the
sale or disposition of the Residual Certificate and ending six months after the
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 IRS has issued regulations, the "Mark to Market Regulations", under
Code Section 475 relating to the requirement that a securities dealer mark to
market securities held for sale to customers. This mark-to-market requirement
applies to all securities of a dealer, except to the extent that the dealer has
specifically identified a security as held for investment. The Mark to Market
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. The Mark to Market Regulations apply to all Residual Certificates
acquired on or after January 4, 1995.
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
1. 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,
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2. the receipt of income from assets that are not the type of mortgages
or investments that the REMIC Pool is permitted to hold,
3. the receipt of compensation for services or
4. the receipt of gain from disposition of cash flow investments other
than pursuant to a qualified liquidation.
Notwithstanding (1) and (4) 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 (1) during the
three months following the Startup Day, (2) made to a qualified reserve fund by
a Residual Certificateholder, (3) in the nature of a guarantee, (4) made to
facilitate a qualified liquidation or clean-up call and (5) 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 that 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. In addition, unless otherwise disclosed in the
applicable prospectus supplement, it is not anticipated that any material state
income or franchise tax will be imposed on a REMIC Pool.
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 that 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.
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 that income tax return is Form
1066, U.S. Real Estate Mortgage Investment Conduit 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
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the IRS 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 the Residual Certificates,
to have agreed (1) to the appointment of the tax matters person as provided in
the preceding sentence and (2) 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 those 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 (1) 3% of the
excess, if any, of adjusted gross income over $132,950 for 2001 ($66,475 in the
case of a married individual filing a separate return) (subject to annual
adjustments for inflation) or (2) 80% of the amount of itemized deductions
otherwise allowable for that year. In the case of a REMIC Pool, those
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. Those investors who hold REMIC Certificates either
directly or indirectly through certain pass-through entities may have their pro
rata share of those expenses allocated to them as additional gross income, but
may be subject to those limitation on deductions. In addition, those expenses
are not deductible at all for purposes of computing the alternative minimum
tax, and may cause those 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, that additional gross income and limitation on deductions
will apply to the allocable portion of those expenses to holders of Regular
Certificates, as well as holders of Residual Certificates, where those Regular
Certificates are issued in a manner that is similar to pass-through
certificates in a fixed investment trust. In general, that 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 those 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, provided that the Non-U.S. Person (1) 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 (2) provides the
trustee, or the person who would otherwise be required to withhold tax from
those 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 that 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 the
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Non-U.S. Person. In the latter case, the 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 has issued final regulations (the "New Regulations") which provide
new procedures for satisfying the beneficial ownership certification
requirement described above. The New Regulations are effective January 1, 2001.
The New Regulations require, in the case of Regular Certificates held by a
foreign partnership, that (1) the certification described above be provided by
the partners rather than by the foreign partnership and (2) the partnership
provide certain information, including a United States taxpayer identification
number in certain circumstances. 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 the New
Regulations.
Residual Certificates
The Conference Committee Report to the Reform 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 (1) the mortgage loans (including mortgage loans underlying MBS) were
issued after July 18, 1984 and (2) the trust fund or segregated pool of assets
in the trust fund (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" above. 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 Non-U.S. Persons, 30% (or lower treaty
rate) withholding will not apply. Instead, the amounts paid to 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, those 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 31% 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 effected the sale of the Regular
Certificate, or that 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 IRS or allowed as a credit
against the Regular Certificateholder's federal income tax liability. The New
Regulations change certain of the rules relating to certain presumptions
currently available relating to information reporting and backup withholding.
Non-U.S. Persons are urged to contact their own tax advisors regarding the
application to them of backup and withholding and information reporting.
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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 IRS 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 that information for any
calendar quarter by telephone or in writing by contacting the person designated
in IRS Publication 938 with respect to a particular series of Regular
Certificates. Holders through nominees must request that information from the
nominee.
The IRS' 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 IRS concerning Code Section 67
expenses, see "--Limitations on Deduction of Certain Expenses" above, allocable
to those holders. Furthermore, under those regulations, information must be
furnished quarterly to Residual Certificateholders, furnished annually to
holders of Regular Certificates, and filed annually with the IRS concerning the
percentage of the REMIC Pool's assets meeting the qualified asset tests
described under "--Status of REMIC Certificates" above.
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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 in the trust fund) with respect to a series of
certificates that are not designated as "Stripped Certificates", as described
below, as a REMIC (certificates of that kind of series are referred to as
"Standard Certificates"), in the opinion of Cadwalader, Wickersham & Taft 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 a Standard Certificate (a "Standard
Certificateholder") in that 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 under "--Recharacterization of Servicing Fees" below.
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 those mortgage loans,
original issue discount (if any), prepayment fees, assumption fees, and late
payment charges received by the master servicer, in accordance with that
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 those 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 the administrative and other expenses of the trust fund, to the extent
that those 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 (1) 3% of the excess, if any, of
adjusted gross income over $132,950 for 2001 ($66,475 in the case of a married
individual filing a separate return) (subject to annual adjustments for
inflation), or (2) 80% of the amount of itemized deductions otherwise allowable
for that year. As a result, those 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 those
Standard Certificates with respect to interest at the pass-through rate on
those Standard Certificates. In addition, those expenses are not deductible at
all for purposes of computing the alternative minimum tax, and may cause the
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 under "--Stripped Certificates" and "--Recharacterization of
Servicing Fees", below.
Tax Status
In the opinion of Cadwalader, Wickersham & Taft, Standard Certificates
will have the following status for federal income tax purposes:
1. 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 that section of the Code.
2. 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)(4)(A) to the extent that the assets of the
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related trust fund consist of qualified assets, and interest income on
those 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. 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).
4. Standard Certificate owned by a financial asset securitization
investment trust will be considered to represent "permitted assets"
within the meaning of Code Section 860(L)(c).
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 under "--Federal Income
Tax Consequences for REMIC Certificates-- Taxation of Residual
Certificates--Treatment of Certain Items of REMIC Income and Expense--Premium"
above.
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 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, the 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 that
income. Unless indicated otherwise in the applicable prospectus supplement, no
prepayment assumption will be assumed for purposes of that 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 the mortgage loans acquired
by a Standard Certificateholder are purchased at a price equal to the then
unpaid principal amount of the mortgage loans, no original issue discount
attributable to the difference between the issue price and the original
principal amount of the mortgage loans (i.e., points) will be includible by
that 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 under "--Federal Income Tax Consequences for REMIC
Certificates--Taxation of Regular Certificates--Market Discount" above, except
that the ratable accrual methods described there 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
that accrual.
Recharacterization of Servicing Fees
If the servicing fee paid to the master servicer were deemed to exceed
reasonable servicing compensation, the amount of that excess would represent
neither income nor a deduction to
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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 the amount would exceed reasonable servicing compensation as to
some of the mortgage loans would be increased. IRS 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. That
guidance provides safe harbors for servicing deemed to be reasonable and
requires taxpayers to demonstrate that the value of servicing fees in excess of
those amounts is not greater than the value of the services provided.
Accordingly, if the IRS' approach is upheld, a servicer who receives a
servicing fee in excess of those 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 those mortgage loans as "stripped coupons" and "stripped
bonds". Subject to the de minimis rule discussed under "--Stripped
Certificates" below, 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 that holder. While Standard Certificateholders would
still be treated as owners of beneficial interests in a grantor trust for
federal income tax purposes, the corpus of the 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 that portion as a second
class of equitable interest. Applicable Treasury regulations treat that
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, 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 on those
Standard Certificates. 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), that 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 (1) 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 that transaction or (2) in the case of a
non-corporate taxpayer, to the extent the taxpayer has made an election under
Code Section 163(d)(4) to have net capital gains taxed as investment income at
ordinary income rates. Long-term capital gains of certain non-corporate
taxpayers generally are subject to a lower maximum tax rate (20%) than ordinary
income or short-term capital gains of those taxpayers (39.6%) 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.
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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 interest-only certificates
entitled to distributions of interest, with disproportionately small, nominal
or no distributions of principal and principal-only certificates entitled to
distributions of principal, with disproportionately small, nominal or no
distributions of interest as to which no REMIC election is made.
The certificates will be subject to those rules if (1) we or any of our
affiliates retain, for our 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, (2) 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 (3) 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.
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 those fees
represent reasonable compensation for services rendered. See discussion under
"--Standard Certificates--Recharacterization of Servicing Fees" above. 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 under "--Standard
Certificates--General" above, subject to the limitation described there.
Code Section 1286 treats a stripped bond or a stripped coupon as an
obligation issued at an original issue discount on the date that the 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 the Stripped Certificates are issued with respect to a
Mortgage Pool containing variable-rate mortgage loans, in the opinion of
Cadwalader, Wickersham & Taft (1) 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 (2) 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
under "--Taxation of Stripped Certificates--Possible Alternative
Characterizations" below, 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 that Stripped Certificate would be
treated as qualified stated interest under the OID Regulations. Further, these
final regulations provide that the
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purchaser of a Stripped Certificate will be required to account for any
discount as market discount rather than original issue discount if either (1)
the initial discount with respect to the Stripped Certificate was treated as
zero under the de minimis rule, or (2) no more than 100 basis points in excess
of reasonable servicing is stripped off the related mortgage loans. This market
discount would be reportable as described under "--Federal Income Tax
Consequences for REMIC Certificates--Taxation of Regular Certificates--Market
Discount" above, without regard to the de minimis rule there, assuming that a
prepayment assumption is employed in that 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, in the
opinion of Cadwalader, Wickersham & Taft Stripped Certificates owned by
applicable holders should be considered to represent "real estate assets"
within the meaning of Code Section 856(c)(4)(A), "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 856(c)(3)(B), provided that in each case the mortgage
loans and interest on those mortgage loans qualify for that treatment.
Taxation of Stripped Certificates
Original Issue Discount. Except as described under "--General" above, 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 that income. Based in part on the OID Regulations and the
amendments to the original issue discount sections of the Code made by the
Reform 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 under "--Federal Income Tax Consequences for
REMIC Certificates--Taxation of Regular Certificates--Original Issue Discount"
and "--Variable Rate Regular Certificates" above. However, with the apparent
exception of a Stripped Certificate qualifying as a market discount obligation,
as described under "--General" above, the issue price of a Stripped Certificate
will be the purchase price paid by each holder of the Stripped Certificate, 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 that 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 the original issue discount will be either increased or decreased
depending on the relative interests in principal and interest on each mortgage
loan represented by that 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 that Stripped Certificate to recognize an ordinary loss equal to that
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
the 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, those regulations may lead to different
timing of income inclusion that would be the case under the OID Regulations.
Furthermore, application of those 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.
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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 that Stripped Certificate, as described
under "--Federal Income Tax Consequences for REMIC Certificates--Taxation of
Regular Certificates--Sale or Exchange of Regular Certificates" above. To the
extent that a subsequent purchaser's purchase price is exceeded by the
remaining payments on the Stripped Certificates, that subsequent purchaser will
be required for federal income tax purposes to accrue and report that 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.
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 those 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
1. one installment obligation consisting of that Stripped Certificate's
pro rata share of the payments attributable to principal on each
mortgage loan and a second installment obligation consisting of that
Stripped Certificate's pro rata share of the payments attributable to
interest on each mortgage loan,
2. as many stripped bonds or stripped coupons as there are scheduled
payments of principal and/or interest on each mortgage loan or
3. 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 the Stripped Certificate, or classes of
Stripped Certificates in the aggregate, represent the same pro rata portion of
principal and interest on that 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 that year, the information, prepared on the basis described
above, as the trustee deems to be necessary or desirable to enable those
certificateholders to prepare their federal income tax returns. The 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, the reporting will be based upon a representative
initial offering price of each class of Stripped Certificates. The trustee will
also file the
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original issue discount information with the IRS. 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, 31%
backup withholding may be required in respect of any reportable payments, as
described under "--Federal Income Tax Consequences for REMIC
Certificates--Backup Withholding" above.
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 a 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 the sale or exchange of that certificate and attributable
to such mortgage loans also will be subject to federal income tax withholding
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 those persons will
be subject to the same certification requirements, described under "--Federal
Income Tax Consequences for REMIC Certificates--Taxation of Certain Foreign
Investors--Regular Certificates" above.
STATE AND OTHER TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Consequences" above, you 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. Thus, you should consult
your own tax advisors with respect to the various tax consequences of
investments in the offered certificates.
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CERTAIN ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended, or ERISA,
and the Code impose certain requirements on retirement plans, and on certain
other employee benefit plans and arrangements, including individual retirement
accounts, individual retirement annuities, Keogh plans, collective investment
funds, insurance company separate accounts and some insurance company general
accounts in which those plans, accounts or arrangements are invested that are
subject to the fiduciary responsibility provisions of ERISA and Section 4975 of
the Code (all of which are referred to as "ERISA Plans"), and on persons who
are fiduciaries with respect to ERISA Plans, in connection with the investment
of the ERISA Plan's assets. 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) are not subject to ERISA requirements. However, such plans
(collectively with ERISA Plans, "Plans") may be subject to the provisions of
other applicable federal, state or local law ("Similar Law") materially similar
to the foregoing provisions of ERISA and the Code. Moreover, any of these plans
which are qualified and exempt from taxation under Sections 401(a) and 501(a)
of the Code, however, are 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, ERISA and the Code prohibit a broad
range of transactions involving assets of a Plan and persons ("Parties in
Interest") who have certain specified relationships to the Plan, unless a
statutory or administrative exemption is available. Certain Parties in Interest
that participate in a prohibited transaction may be subject to an excise tax
imposed pursuant to Section 4975 of the Code, unless a statutory or
administrative exemption is available. These prohibited transactions generally
are set forth in Section 406 of ERISA and Section 4975 of the Code. Special
caution should be exercised before the assets of a Plan are used to purchase a
certificate if, with respect to those assets, the Depositor, the master
servicer or the trustee or one of their affiliates, either: (a) has investment
discretion with respect to the investment of those assets of that Plan; or (b)
has authority or responsibility to give, or regularly gives, investment advice
with respect to those assets for a fee and pursuant to an agreement or
understanding that the advice will serve as a primary basis for investment
decisions with respect to those assets and that the advice will be based on the
particular investment needs of the Plan.
Before purchasing any offered certificates, a Plan fiduciary should
consult with its counsel and determine whether there exists any prohibition to
that purchase under the requirements of ERISA, whether any prohibited
transaction class-exemption or any individual administrative prohibited
transaction exemption (as described below) applies, including whether the
appropriate conditions set forth in those exemptions would be met, or whether
any statutory prohibited transaction exemption is applicable, and further
should consult the applicable prospectus supplement relating to that series of
certificates.
PLAN ASSET REGULATIONS
A Plan's investment in certificates may cause the Trust Assets to be
deemed Plan assets. Section 2510.3-101 of the regulations of the United States
Department of Labor ("DOL") provides that when a Plan acquires an equity
interest in an entity, the Plan's assets include both the equity interest and
an undivided interest in each of the underlying assets of the entity, unless
certain exceptions not applicable to this discussion apply, or unless the
equity participation in the entity by "benefit plan investors" (including Plans
not subject to ERISA) is not "significant". For this purpose, in general,
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.
Any person who has discretionary authority or control respecting the
management or disposition of Plan assets, and any person who provides
investment advice with respect to those assets for a fee, is a fiduciary of the
investing Plan. If the Trust Assets constitute Plan assets, then any party
exercising management or discretionary control regarding those assets, such as
a master servicer, a special servicer or
103
any sub-servicer, may be deemed to be a Plan "fiduciary" with respect to the
investing Plan, and thus subject to the fiduciary responsibility provisions and
prohibited transaction provisions of ERISA and the Code. In addition, if the
Trust Assets 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 and the Code or a similar violation of a Similar Law.
ADMINISTRATIVE EXEMPTIONS
Several underwriters of mortgage-backed securities have applied for and
obtained individual administrative ERISA prohibited transaction exemptions (the
"Exemptions") which can only apply to the purchase and holding of
mortgage-backed securities which, among other conditions, are sold in an
offering with respect to which that underwriter serves as the sole or a
managing underwriter, or as a selling or placement agent. If that exemption
might be applicable to a series of certificates, the related prospectus
supplement will refer to the possibility, as well as provide a summary of the
conditions to the applicability.
INSURANCE COMPANY GENERAL ACCOUNTS
Sections I and III of Prohibited Transaction Class Exemption 95-60 ("PTCE
95-60") exempts from the application of the prohibited transaction provisions
of Sections 406(a), 406(b) and 407(a) of ERISA and Section 4975 of the Code
transaction in connection with the servicing, management and operation of a
trust (such as the trust fund) in which an insurance company general account
has an interest as a result of its acquisition of certificates issued by the
trust, provided that certain conditions are satisfied. If these conditions are
met, insurance company general accounts would be allowed to purchase certain
classes of certificates which do not meet the requirements of the Exemptions
solely because they (1) are subordinated to other classes of certificates
issued by the trust fund and/or (2) have not received a rating at the time of
the acquisition in one of the four highest rating categories from Standard &
Poor's Ratings Services, a division of The McGraw Hill Companies, Inc., Moody's
Investors Service, Inc. or Fitch IBCA, Inc. All other conditions of the
Exemptions would have to be satisfied in order for PTCE 95-60 to be available.
Before purchasing that class of certificates, an insurance company general
account seeking to rely on Sections I and III of PTCE 95-60 should itself
confirm that all applicable conditions and other requirements have been
satisfied.
The Small Business Job Protection Act of 1996 added a new Section 401(c)
to ERISA, which provides certain exemptive relief from the provisions of Part 4
of Title I of ERISA and Section 4975 of the Code, including the prohibited
transaction restrictions imposed by ERISA and the related excise taxes imposed
by the Code, for transactions involving an insurance company general account.
Pursuant to Section 401(c) of ERISA, the DOL was required to issue regulations
("401(c) Regulations") to provide guidance for the purpose of determining, in
cases where insurance policies supported by an insured's general account are
issued to or for the benefit of a Plan on or before December 31, 1998, which
general account assets constitute Plan assets. On January 5, 2000, the DOL
published the 401(c) Regulations. Section 401(c) of ERISA generally provides
that, until the date which is 18 months after the 401(c) Regulations become
final, no person shall be subject to liability under Part 4 of Title I of ERISA
and Section 4975 of the Code on the basis of a claim that the assets of an
insurance company general account constitute Plan assets, unless (1) as
otherwise provided by the Secretary of Labor in the 401(c) Regulations to
prevent avoidance of the regulations or (2) an action is brought by the
Secretary of Labor for certain breaches of fiduciary duty which would also
constitute a violation of federal or state criminal law. Any assets of an
insurance company general account which support insurance policies issued to a
Plan after December 31, 1998 or issued to Plans on or before December 31, 1998
for which the insurance company does not comply with the 401(c) Regulations may
be treated as Plan assets. In addition, because Section 401(c) does not relate
to insurance company separate accounts, separate account assets are still
treated as Plan assets of any Plan invested in that separate account. Insurance
companies contemplating the investment of general account assets in the offered
certificates should consult with their legal counsel with respect to the
applicability of Section 401(c) of ERISA, including the general account's
ability to continue to hold the offered certificates after the date which is 18
months after the date the 401(c) Regulations became final (i.e. July 5, 2001).
104
UNRELATED BUSINESS TAXABLE INCOME; RESIDUAL CERTIFICATES
The purchase of a Residual Certificate by any employee benefit plan
qualified under Code Section 401(a) and exempt from taxation under Code Section
501(a), including most varieties of Plans, may give rise to "unrelated business
taxable income" as described in Code Sections 511-515 and 860E. Further, prior
to the purchase of Residual Certificates, a prospective transferee may be
required to provide an affidavit to a transferor that it is not, nor is it
purchasing a Residual Certificate on behalf of, a "Disqualified Organization,"
which term as defined above includes certain tax-exempt entities not subject to
Code Section 511 including certain governmental plans, as discussed above under
the caption "Certain Federal Income Tax Consequences--Federal Income Tax
Consequences for REMIC Certificates--Taxation of Residual
Certificates--Tax-Related Restrictions on Transfer of Residual
Certificates--Disqualified Organizations."
Due to the complexity of these rules and the penalties imposed upon
persons involved in prohibited transactions, it is particularly important that
potential investors who are Plan fiduciaries consult with their counsel
regarding the consequences under ERISA, Section 4975 of the Code or Similar Law
of their acquisition and ownership of certificates.
The sale of certificates to a Plan is in no respect a representation by
the Depositor or the underwriter that this investment meets all relevant legal
requirements with respect to investments by Plans generally or by any
particular Plan, or that this investment is appropriate for Plans generally or
for any particular Plan.
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. The
appropriate characterization of those certificates not qualifying as "mortgage
related securities" ("Non-SMMEA Certificates") under various legal investment
restrictions, and thus the ability of investors subject to these restrictions
to purchase those certificates, may be subject to significant interpretive
uncertainties. Accordingly, investors whose investment authority is subject to
legal restrictions should consult their own legal advisors to determine whether
and to what extent the Non-SMMEA Certificates constitute legal investments for
them.
Generally, only classes of offered certificates that (1) are rated in one
of the two highest rating categories by one or more rating agencies and (2) are
part of a series evidencing interests in a trust fund consisting of loans
secured by first liens and originated by certain types of originators as
specified in SMMEA, will be "mortgage related securities" for purposes of
SMMEA. As "mortgage related securities," those classes will constitute legal
investments for persons, trusts, corporations, partnerships, associations,
business trusts and business entities, including depository institutions,
insurance companies, trustees and pension funds, created pursuant to or
existing under the laws of the United States or of any state, including the
District of 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 of its agencies or instrumentalities constitute legal investments for those
entities.
Under SMMEA, a number of states enacted legislation, on or prior to the
October 3, 1991 cut-off for those enactments, limiting to various 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 those types of offered certificates. Section 347
also provides that the enactment by a state of any of those legislative
restrictions shall not affect the validity of any contractual commitment to
purchase, hold or invest in
105
securities qualifying as "mortgage related securities" solely by reason of
Section 347 that was made, and shall not require the sale or disposition of any
securities acquired, prior to the enactment of that state legislation.
Accordingly, the investors affected by any of that kind of state legislation,
when and if enacted, will be authorized to invest in offered certificates
qualifying as "mortgage related securities" only to the extent provided in that
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 those securities, and
national banks may purchase those 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 those
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(1) 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
Supervision (the "OTS") has issued Thrift Bulletin 13a (December 1, 1998),
"Management of Interest Rate Risk, Investment Securities, and Derivative
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, 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 those authorities before purchasing any offered
certificates, as certain classes may be deemed unsuitable investments, or may
otherwise be restricted, under those 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.
106
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 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 that investor.
METHOD OF DISTRIBUTION
The offered certificates offered by this prospectus 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 our net proceeds from that sale.
We intend 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 a particular series of
certificates may be made through a combination of two or more of these methods.
Those methods are as follows:
1. by negotiated firm commitment underwriting and public offering by one
or more underwriters specified in the related prospectus supplement;
2. by placements through one or more placement agents specified in the
related prospectus supplement primarily with institutional investors
and dealers; and
3. through direct offerings by the Depositor.
If underwriters are used in a sale of any offered certificates (other than
in connection with an underwriting on a best efforts basis), those 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. The managing
underwriter or underwriters with respect to the offer and sale of a particular
series of certificates will be set forth in the cover of the prospectus
supplement relating to that series and the members of the underwriting
syndicate, if any, will be named in that prospectus supplement.
In connection with the sale of the offered certificates, underwriters may
receive compensation from us 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 those offered certificates, and any
discounts or commissions received by them from us 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 (the "Securities
Act").
It is anticipated that the underwriting agreement pertaining to the sale
of any series of certificates will provide that the obligations of the
underwriters will be subject to certain conditions precedent, that the
underwriters will be obligated to purchase all offered certificates if any are
purchased (other than in connection with an underwriting on a best efforts
basis) and that we will indemnify the several underwriters, and each person, if
any, who controls that underwriter within the meaning of Section 15 of the
Securities Act, against certain civil liabilities, including liabilities under
the Securities Act, or will contribute to payments required to be made in
respect of these liabilities.
The prospectus supplement with respect to any series offered by placements
through dealers will contain information regarding the nature of that offering
and any agreements to be entered into between us and purchasers of offered
certificates of that series.
107
We anticipate that the offered certificates offered by this prospectus and
the related prospectus supplement will be sold primarily to institutional
investors. Purchasers of offered certificates, including dealers, may,
depending on the facts and circumstances of those purchases, be deemed to be
"underwriters" within the meaning of the Securities Act in connection with
reoffers and sales by them of offered certificates. You should consult with
your legal advisors in this regard prior to any similar reoffer or sale.
As to each series of certificates, only those classes rated in an
investment grade rating category by any rating agency will be offered by this
prospectus. We may initially retain any unrated class and we may sell it at any
time to one or more institutional investors.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
With respect to each series of certificates offered by this prospectus,
there are incorporated in this prospectus and in the related prospectus
supplement 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 Securities Exchange Act of 1934, that relate specifically to
the related series of certificates. 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 that person, a copy of any or all documents or
reports incorporated in this prospectus by reference, in each case to the
extent the documents or reports relate to one or more of the classes of offered
certificates, other than the exhibits to those documents (unless the exhibits
are specifically incorporated by reference in those documents). Requests to the
Depositor should be directed in writing to its principal executive offices at
292 Long Ridge Road, Stamford, Connecticut 06927, Attention: President, or by
telephone at (203) 357-4000. The Depositor has determined that its financial
statements will not be material to the offering of any Offered Certificates.
The Depositor filed a registration statement (the "Registration
Statement") relating to the certificates with the Securities and Exchange
Commission. This prospectus is part of the Registration Statement, but the
Registration Statement includes additional information.
Copies of the Registration Statement may be obtained from the Public
Reference Section of the Securities and Exchange Commission, Washington, D.C.
20549, upon payment of the prescribed charges, or may be examined free of
charge at the Securities and Exchange Commission's offices, 450 Fifth Street
N.W., Washington, D.C. 20549 or at the regional offices of the Securities and
Exchange Commission located at Suite 1300, 7 World Trade Center, New York, New
York 10048 and Suite 1400, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661-2511. The Securities and Exchange Commission also maintains a
site on the World Wide Web at "http://www.sec.gov" at which you can view and
download copies of reports, proxy and information statements and other
information filed electronically through the Electronic Data Gathering,
Analysis and Retrieval ("EDGAR") system. The Depositor has filed the
Registration Statement, including all exhibits thereto, through the EDGAR
system, so the materials should be available by logging onto the Securities and
Exchange Commission's Web site. The Securities and Exchange Commission
maintains computer terminals providing access to the EDGAR system at each of
the offices referred to above.
LEGAL MATTERS
The validity of the certificates of each series and certain federal income
tax matters will be passed upon for us by Cadwalader, Wickersham & Taft, New
York, New York.
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.
108
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 of those certificates of all collections on the
underlying mortgage assets to which those holders are entitled. These ratings
address the structural, legal and issuer-related aspects associated with those
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 those prepayments might differ from those
originally anticipated. As a result, you might suffer a lower than anticipated
yield, and, in addition, holders of stripped interest certificates in extreme
cases might fail to recoup their initial investments.
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.
109
INDEX OF PRINCIPAL DEFINITIONS
PAGE
1998 Policy Statement ........................ 106
401(c) Regulations ........................... 104
Accrual Certificates ......................... 38
ADA .......................................... 73
ARM Loans .................................... 27
Bankruptcy Code .............................. 65
Cash Flow Agreement .......................... 29
Certificate Owner ............................ 43
Code ......................................... 42
Cooperatives ................................. 24
CPR .......................................... 32
Definitive Certificates ...................... 37
Depositor .................................... 5, 24
Determination Date ........................... 30
Disqualified Organization .................... 88, 105
Distribution Date Statement .................. 41
DOL .......................................... 103
DTC .......................................... 37
Due Dates .................................... 26
EDGAR ........................................ 108
Equity Participation ......................... 26
ERISA Plans .................................. 103
Events of Default ............................ 56
Exemptions ................................... 104
FAMC ......................................... 28
FHLMC ........................................ 28
FNMA ......................................... 28
Garn Act ..................................... 71
GNMA ......................................... 28
Government Securities ........................ 76
Indirect Participants ........................ 43
Insurance and Condemnation Proceeds .......... 48
L/C Bank ..................................... 61
Liquidation Proceeds ......................... 49
Mark to Market Regulations ................... 91
MBS .......................................... 24
MBS Agreement ................................ 28
MBS Issuer ................................... 28
MBS Servicer ................................. 28
MBS Trustee .................................. 28
Mortgage Asset Seller ........................ 24
Mortgage Notes ............................... 24
Mortgaged Properties ......................... 24
Mortgages .................................... 24
NCUA ......................................... 106
Net Leases ................................... 25
New Regulations .............................. 94
Non-SMMEA Certificates ....................... 105
Non-U.S. Person .............................. 94
Nonrecoverable Advance ....................... 40
PAGE
OCC .......................................... 106
OID Regulations .............................. 78
OTS .......................................... 106
Participants ................................. 43
Parties in Interest .......................... 103
Pass-Through Entity .......................... 88
Permitted Investments ........................ 48
Plans ........................................ 103
Pooling Agreement ............................ 45
Prepayment Assumption ........................ 79
Prepayment Interest Shortfall ................ 30
Prepayment Premium ........................... 26
PTCE 95-60 ................................... 104
Random Lot Certificates ...................... 78
Record Date .................................. 38
Reform Act ................................... 78
Registration Statement ....................... 108
Regular Certificateholder .................... 78
Regular Certificates ......................... 75
Related Proceeds ............................. 40
Relief Act ................................... 73
REMIC ........................................ 12, 75
REMIC Certificates ........................... 75
REMIC Pool ................................... 75
REMIC Regulations ............................ 75
REO Property ................................. 47
Residual Certificateholders .................. 84
Residual Certificates ........................ 38
Revenue Procedure ............................ 90
RICO ......................................... 74
SBJPA of 1996 ................................ 76
Securities Act ............................... 107
Senior Certificates .......................... 37
Servicing Standard ........................... 47
Similar Law .................................. 103
SMMEA ........................................ 105
SPA .......................................... 32
Standard Certificateholder ................... 96
Standard Certificates ........................ 96
Startup Day .................................. 76
Stripped Certificateholder ................... 100
Stripped Certificates ........................ 96
Sub-Servicing Agreement ...................... 47
Subordinate Certificates ..................... 37
thrift institutions .......................... 87
Title V ...................................... 72
Treasury ..................................... 75
Type IV securities ........................... 106
U.S. Person .................................. 90
Warranting Party ............................. 46
110
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YOU SHOULD RELY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION.
WE ARE NOT OFFERING THESE CERTIFICATES IN ANY STATE WHERE THE OFFER IS
NOT PERMITTED.
----------------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT PAGE
Summary of Certificates .............................. S-6
Summary of Terms ..................................... S-7
Risk Factors ......................................... S-33
Description of the Mortgage Pool ..................... S-55
Description of the Certificates ...................... S-84
Servicing of the Mortgage Loans ...................... S-107
Yield and Maturity Considerations .................... S-122
Certain Federal Income Tax Consequences .............. S-128
Method of Distribution ............................... S-129
Legal Matters ........................................ S-130
Ratings .............................................. S-131
Legal Investment ..................................... S-131
ERISA Considerations ................................. S-131
Index of Principal Definitions ....................... S-134
PROSPECTUS
Summary of Prospectus ................................ 6
Risk Factors ......................................... 14
Description of the Trust Funds ....................... 24
Yield and Maturity Considerations .................... 30
The Depositor ........................................ 36
Use of Proceeds ...................................... 36
Description of the Certificates ...................... 37
Description of the Pooling Agreements ................ 45
Description of Credit Support ........................ 60
Certain Legal Aspects of Mortgage Loans .............. 63
Certain Federal Income tax Consequences .............. 75
State and Other Tax Considerations ................... 102
Certain ERISA Considerations ......................... 103
Legal Investment ..................................... 105
Method Distribution .................................. 107
Incorporation of Certain Information By Reference .... 108
Legal Matters ........................................ 108
Financial Information ................................ 108
Rating ............................................... 109
Index of Principal Definitions ....................... 110
DEALERS WILL BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS WHEN ACTING AS UNDERWRITERS OF THESE CERTIFICATES AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. IN ADDITION, ALL DEALERS SELLING
THESE CERTIFICATES WILL DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS UNTIL
JULY [ ], 2001.
$997,635,000 (APPROXIMATE)
GE CAPITAL COMMERCIAL
MORTGAGE CORPORATION
(DEPOSITOR)
COMMERCIAL MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 2001-1
CLASS A-1 CERTIFICATES ......... $176,850,000
CLASS A-2 CERTIFICATES ......... $709,301,000
CLASS B CERTIFICATES ........... $ 45,737,000
CLASS C CERTIFICATES ........... $ 50,025,000
CLASS D CERTIFICATES ........... $ 15,722,000
------------------------
PROSPECTUS SUPPLEMENT
------------------------
JPMORGAN
BEAR, STEARNS & CO. INC.
DEUTSCHE BANC ALEX. BROWN
SALOMON SMITH BARNEY INC.
APRIL , 2001
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