Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-108944
PROSPECTUS SUPPLEMENT
(TO ACCOMPANY PROSPECTUS DATED NOVEMBER 14, 2003)
$1,050,087,000 (APPROXIMATE)
(OFFERED CERTIFICATES)
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2003-C9
WACHOVIA COMMERCIAL MORTGAGE SECURITIES, INC.
(DEPOSITOR)
[sidebar]
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE S-39 OF THIS
PROSPECTUS SUPPLEMENT AND ON PAGE 14 OF THE ACCOMPANYING PROSPECTUS.
Neither the offered certificates nor the underlying mortgage loans are insured
or guaranteed by any government agency or instrumentality.
The offered certificates will represent interests in the trust fund only. They
will not represent obligations of any other party. The offered certificates will
not be listed on any national securities exchange or any automated quotation
system of any registered securities association.
This prospectus supplement may be used to offer and sell the offered
certificates only if it is accompanied by the prospectus dated November 14,
2003.
[end sidebar]
THE TRUST FUND:
o As of December 15, 2003, the mortgage loans included in the trust fund will
have an aggregate principal balance of approximately $1,149,211,695.
o The trust fund will consist of a pool of 118 fixed rate mortgage loans.
o The mortgage loans are secured by first liens on commercial and multifamily
properties.
o All of the mortgage loans were originated or acquired by Wachovia Bank.
National Association, LaSalle Bank National Association, Citigroup Global
Markets Realty Corp., ABN AMRO Bank N.V., Chicago Branch and Eurohypo AG,
New York Branch.
THE CERTIFICATES:
o The trust fund will issue twenty-three classes of certificates.
o Only the eight classes of offered certificates described in the following
table are being offered by this prospectus supplement and the accompanying
prospectus.
===============================================================================================================================
ORIGINAL PERCENTAGE OF PASS-THROUGH ASSUMED FINAL EXPECTED
CERTIFICATE CUT-OFF DATE RATE DISTRIBUTION S&P/FITCH
CLASS BALANCE(1) POOL BALANCE DESCRIPTION DATE(2) CUSIP NO. RATING(4)
- -----------------------------------------------------------------------------------------------------------------------------
Class A-1 ......... $108,367,000 9.430% Fixed October 15, 2008 929766 MR1 AAA/AAA
Class A-2 ......... $123,823,000 10.775% Fixed December 15, 2008 929766 MS9 AAA/AAA
Class A-3 ......... $210,302,000 18.300% Fixed March 15, 2013 929766 MT7 AAA/AAA
Class A-4 ......... $508,476,000 44.246% Fixed(3) November 15, 2013 929766 MU4 AAA/AAA
Class B ........... $ 34,476,000 3.000% Fixed(3) December 15, 2013 929766 MV2 AA/AA
Class C ........... $ 17,238,000 1.500% Fixed(3) December 15, 2013 929766 MW02 AA-/AA-
Class D ........... $ 33,039,000 2.875% Fixed(3) December 15, 2013 929766 MX84 A/A
Class E ........... $ 14,366,000 1.250% Fixed(3) December 15, 2013 929766 MY6 A-/A-
===============================================================================================================================
(Footnotes explaining the table are on page S-2)
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE OFFERED CERTIFICATES OR HAS
DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Wachovia Capital Markets, LLC, ABN AMRO Incorporated and Citigroup Global
Markets Inc. are acting as co-lead managers for this offering. Goldman, Sachs &
Co. is acting as a co-manager for this offering. Citigroup Global Markets Inc.
is acting as sole bookrunner with respect to 32.16% of the Class A-4
certificates. Wachovia Capital Markets, LLC is acting as sole bookrunner with
respect to the remainder of the Class A-4 certificates and all other classes of
offered certificates. Wachovia Capital Markets, LLC, ABN AMRO Incorporated,
Citigroup Global Markets Inc. and Goldman, Sachs & Co. are required to purchase
the offered certificates from us, subject to certain conditions. The
underwriters will offer the offered certificates to the public from time to
time in negotiated transactions or otherwise at varying prices to be determined
at the time of sale. We expect to receive from this offering approximately
100.47% of the initial certificate balance of the offered certificates, plus
accrued interest from December 1, 2003 before deducting expenses.
We expect that delivery of the offered certificates will be made in
book-entry form on or about December 23, 2003.
WACHOVIA SECURITIES ABN AMRO INCORPORATED CITIGROUP
GOLDMAN, SACHS & CO.
December 11, 2003
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST
Commercial Mortgage Pass-Through Certificates, Series WBCMT 2003-C9
Georgraphic Overview of Mortgage Pool
[MAP OMITTED]
ARKANSAS MISSOURI NEVADA
1 property 1 property 3 properties
$10,000,000 $4,392,009 $62,068,858
0.9% of total 0.4% of total 5.4% of total
ILLINOIS MICHIGAN MINNESOTA
5 properties 5 properties 3 properties
$24,298,872 $15,851,357 $4,181,663
2.1% of total 1.4% of total 0.4% of total
PENNSYLVANIA NEW YORK OHIO
3 properties 12 properties 4 properties
$68,804,249 $141,433,216 $14,988,690
6.0% of total 12.3% of total 1.3% of total
NEW JERSEY DISTRICT OF COLUMBIA MASSACHUSETTS
3 properties 1 property 2 properties
$39,391,732 $5,000,000 $16,201,908
3.4% of total 0.4% of total 1.4% of total
VIRGINIA NORTH CAROLINA MARYLAND
3 properties 11 properties 2 properties
$107,280,221 $60,640,831 $16,960,853
9.3% of total 5.3% of total 1.5% of total
GEORGIA FLORIDA SOUTH CAROLINA
3 properties 11 properties 5 properties
$24,714,493 $153,603,015 $57,060,538
2.2% of total 13.4% of total 5.0% of total
ALABAMA TENNESSEE KENTUCKY
3 properties 1 property 1 property
$11,529,021 $1,185,271 $1,360,000
1.0% of total 0.1% of total 0.1% of total
TEXAS MISSISSIPPI LOUISIANA
7 properties 1 property 2 properties
$27,134,536 $2,250,000 $5,729,056
2.4% of total 0.2% of total 0.5% of total
ARIZONA COLORADO NEW MEXICO
4 properties 1 property 1 property
$14,726,343 $6,273,949 $3,300,000
1.3% of total 0.5% of total 0.3% of total
NORTHERN CALIFORNIA SOUTHERN CALIFORNIA CALIFORNIA
4 properties 14 properties 18 properties
$47,270,911 $186,597,584 $233,868,495
4.1% of total 16.2% of total 20.4% of total
WASHINGTON
1 property
$14,976,883
1.3% of total
MORTGAGED PROPERTIES BY PROPERTY TYPE [GRAPHIC OMITTED] (greater than) 10.0%
[GRAPHIC OMITTED] of Initial Pool Balance
Multifamily 27.6% [GRAPHIC OMITTED] (greater than) 5.0% - 10.0%
Office 15.9% of Initial Pool Balance
Mobile Home Park 3.4%
Mixed Use 2.9% [GRAPHIC OMITTED] (greater than) 1.0% - 5.0%
Self Storage 0.5% of Initial Pool Balance
Industrial 0.5%
Land 0.4% [GRAPHIC OMITTED] (less than or equal to) 1.0%
Parking Garage 0.3% of Initial Pool Balance
Retail 48.5%
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the offered certificates 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. You should read both this prospectus
supplement and the prospectus before investing in any of the offered
certificates.
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. THE INFORMATION IN THIS DOCUMENT
MAY ONLY BE ACCURATE AS OF THE DATE OF THIS DOCUMENT. IF THE DESCRIPTIONS OF THE
OFFERED CERTIFICATES VARY BETWEEN THE ACCOMPANYING PROSPECTUS AND THIS
PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS
SUPPLEMENT.
This prospectus supplement begins with several introductory sections
describing the offered certificates and the trust fund in abbreviated form:
o SUMMARY OF PROSPECTUS SUPPLEMENT, commencing on page S-5 of this
prospectus supplement, which gives a brief introduction of the key
features of the offered certificates and a description of the mortgage
loans included in the trust fund; and
o RISK FACTORS, commencing on page S-39 of this prospectus supplement,
which describes risks that apply to the offered certificates which are
in addition to those described in the prospectus.
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
accompanying prospectus identify the pages where these sections are located.
You can find a listing of the pages where capitalized terms used in this
prospectus supplement are defined under the caption "INDEX OF DEFINED TERMS"
beginning on page S-217 in this prospectus supplement.
In this prospectus supplement, the terms "depositor," "we," "us" and "our"
refer to Wachovia Commercial Mortgage Securities, Inc.
WE DO NOT INTEND THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
TO BE AN OFFER OR SOLICITATION:
o if used in a jurisdiction in which such offer or solicitation is not
authorized;
o if the person making such offer or solicitation is not qualified to do
so; or
o if such offer or solicitation is made to anyone to whom it is unlawful
to make such offer or solicitation.
This prospectus supplement and the accompanying prospectus may be used by
us, Wachovia Capital Markets, LLC, our affiliate, and any other of our
affiliates when required under the federal securities laws in connection with
offers and sales of offered certificates in furtherance of market-making
activities in offered certificates. Wachovia Capital Markets, LLC or any such
other affiliate may act as principal or agent in these transactions. Sales will
be made at prices related to prevailing market prices at the time of sale or
otherwise.
S-1
(Footnotes to table on the front cover)
- ----------
(1) Subject to a permitted variance of plus or minus 5.0%.
(2) The Assumed Final Distribution Date has been determined on the basis of the
assumptions set forth in the "DESCRIPTION OF THE CERTIFICATES--Assumed
Final Distribution Date; Rated Final Distribution Date" in this prospectus
supplement and a 0% CPR (as defined in "YIELD AND MATURITY
CONSIDERATIONS--Weighted Average Life" in this prospectus supplement). The
Rated Final Distribution Date is the distribution date to occur in December
2035. See "DESCRIPTION OF THE CERTIFICATES--Assumed Final Distribution
Date; Rated Final Distribution Date" and "RATINGS" in this prospectus
supplement.
(3) The pass-through rate applicable to the Class A-4, Class B, Class C, Class
D and Class E certificates will be subject to a maximum rate of the
applicable weighted average net mortgage rate (calculated as described
herein) for such date.
(4) By each of Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. and Fitch, Inc. See "RATINGS" in this
prospectus supplement.
S-2
TABLE OF CONTENTS
PAGE
------
SUMMARY OF PROSPECTUS SUPPLEMENT .......................................... S-5
OVERVIEW OF THE CERTIFICATES .............................................. S-6
THE PARTIES ............................................................... S-8
IMPORTANT DATES AND PERIODS ............................................... S-10
THE CERTIFICATES .......................................................... S-11
THE MORTGAGE LOANS ........................................................ S-27
RISK FACTORS .............................................................. S-39
DESCRIPTION OF THE MORTGAGE POOL .......................................... S-86
General .................................................................. S-86
Mortgage Loan History .................................................... S-87
Certain Terms and Conditions of the Mortgage Loans ....................... S-88
Certain State Specific Considerations .................................... S-92
Assessments of Property Condition ........................................ S-92
Co-Lender Loans .......................................................... S-94
Credit Lease Loans ....................................................... S-102
Additional Mortgage Loan Information ..................................... S-105
Twenty Largest Mortgage Loans ............................................ S-121
The Mortgage Loan Sellers ................................................ S-148
Underwriting Standards ................................................... S-149
Assignment of the Mortgage Loans; Repurchases and Substitutions .......... S-150
Representations and Warranties; Repurchases and Substitutions ............ S-153
Repurchase or Substitution of Cross-Collateralized Mortgage Loans ........ S-156
Changes in Mortgage Pool Characteristics ................................. S-157
SERVICING OF THE MORTGAGE LOANS ........................................... S-157
General .................................................................. S-157
The Master Servicer and the Special Servicer ............................. S-158
Servicing of the Park City Center Loan ................................... S-161
Servicing and Other Compensation and Payment of Expenses ................. S-162
Modifications, Waivers and Amendments .................................... S-165
The Controlling Class Representative ..................................... S-166
Defaulted Mortgage Loans; REO Properties; Purchase Option ................ S-169
Inspections; Collection of Operating Information ......................... S-171
DESCRIPTION OF THE CERTIFICATES ........................................... S-172
General .................................................................. S-172
Registration and Denominations ........................................... S-172
Certificate Balances and Notional Amount ................................. S-174
Pass-Through Rates ....................................................... S-176
Distributions ............................................................ S-179
Subordination; Allocation of Losses and Certain Expenses ................. S-189
P&I Advances ............................................................. S-191
Appraisal Reductions ..................................................... S-193
Reports to Certificateholders; Available Information ..................... S-194
Assumed Final Distribution Date; Rated Final Distribution Date ........... S-199
Voting Rights ............................................................ S-199
Termination .............................................................. S-200
The Trustee .............................................................. S-201
Paying Agent, Certificate Registrar and Authenticating Agent ............. S-201
S-3
PAGE
------
YIELD AND MATURITY CONSIDERATIONS ..................................................... S-203
Yield Considerations ................................................................. S-203
Weighted Average Life ................................................................ S-205
USE OF PROCEEDS ....................................................................... S-209
MATERIAL FEDERAL INCOME TAX CONSEQUENCES .............................................. S-210
General .............................................................................. S-210
Taxation of the Offered Certificates ................................................. S-210
ERISA CONSIDERATIONS .................................................................. S-211
LEGAL INVESTMENT ...................................................................... S-214
METHOD OF DISTRIBUTION ................................................................ S-214
LEGAL MATTERS ......................................................................... S-216
RATINGS ............................................................................... S-216
INDEX OF DEFINED TERMS ................................................................ S-217
ANNEX A-1
Certain Characteristics of the Mortgage Loans and Mortgaged Properties ............... A-1
ANNEX A-2
Certain Information Regarding Multifamily Mortgaged Properties ....................... A-2
ANNEX A-3
Reserve Account Information .......................................................... A-3
ANNEX A-4
Commercial Tenant Schedule ........................................................... A-4
ANNEX A-5
Certain Characteristics of the Mortgage Loans and Mortgaged Properties (Crossed and
Portfolios) ......................................................................... A-5
ANNEX A-6
Debt Service Payment Schedule for the Columbia Corporate Center Loan ................. A-6
ANNEX B
Form of Distribution Date Statement .................................................. B-1
ANNEX C
Class X-P Reference Rate ............................................................. C-1
S-4
SUMMARY OF PROSPECTUS SUPPLEMENT
o This summary highlights selected information from this prospectus
supplement and does not contain all of the information that you need
to consider in making your investment decision. To understand the
terms of the offered certificates, you must carefully read this entire
prospectus supplement and the accompanying prospectus.
o This summary provides an overview of certain calculations, cash flows
and other information to aid your understanding and is qualified by
the full description of these calculations, cash flows and other
information in this prospectus supplement and the accompanying
prospectus.
o We provide information in this prospectus supplement on the
certificates that are not offered by this prospectus supplement only
to enhance your understanding of the offered certificates. We are not
offering the non-offered certificates pursuant to this prospectus
supplement.
o Unless otherwise stated, all percentages of the mortgage loans
included in the trust fund, or of any specified group of mortgage
loans included in the trust fund, referred to in this prospectus
supplement are calculated using the aggregate principal balance of the
mortgage loans included in the trust fund as of the cut-off date
(which is December 1, 2003 with respect to 84 mortgage loans, December
11, 2003 with respect to 32 mortgage loans and December 15, 2003 with
respect to 2 mortgage loans) after giving effect to payments due on or
before such date whether or not received. The cut-off date balance of
each mortgage loan included in the trust fund and each cut-off date
certificate balance in this prospectus supplement assumes the timely
receipt of principal scheduled to be paid (if any) on each mortgage
loan and no defaults, delinquencies or prepayments on any mortgage
loan on or before the related cut-off date. Percentages of mortgaged
properties are references to the percentages of the aggregate
principal balance of all the mortgage loans included in the trust fund
as of the cut-off date represented by the aggregate principal balance
of the related mortgage loans as of the cut-off date.
o All numerical or statistical information concerning the mortgage loans
included in the trust fund is provided on an approximate basis.
S-5
OVERVIEW OF THE CERTIFICATES
The table below lists certain summary information concerning the Wachovia
Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates,
Series 2003-C9, which we are offering pursuant to the accompanying prospectus
and this prospectus supplement. Each certificate represents an interest in the
mortgage loans included in the trust fund and the other assets of the trust
fund. The table also describes the certificates that are not offered by this
prospectus supplement (other than the Class Z, Class R-I and Class R-II) which
have not been registered under the Securities Act of 1933, as amended, and which
will be sold to investors in private transactions.
CLOSING DATE
CERTIFICATE PERCENTAGE WEIGHTED CASH FLOW
BALANCE OR OF CUT-OFF PASS-THROUGH INITIAL AVERAGE OR PRINCIPAL EXPECTED
NOTIONAL DATE POOL CREDIT RATE PASS-THROUGH LIFE WINDOW S&P/FITCH
CLASS AMOUNT(1) BALANCE SUPPORT DESCRIPTION RATE (YEARS)(2) (MON./YR.)(2) RATING(3)
- ------------ ------------------ ------------ ------------ -------------- -------------- ------------ ------------------ -----------
Class A-1... $ 108,367,000 9.430% 17.250% Fixed 3.2910% 3.30 01/04 - 10/08 AAA/AAA
Class A-2... $ 123,823,000 10.775% 17.250% Fixed 3.9580% 4.87 10/08 - 12/08 AAA/AAA
Class A-3... $ 210,302,000 18.300% 17.250% Fixed 4.6080% 7.21 12/08 - 03/13 AAA/AAA
Class A-4... $ 508,476,000 44.246% 17.250% Fixed(4) 5.0120% 9.76 03/13 - 11/13 AAA/AAA
Class B .... $ 34,476,000 3.000% 14.250% Fixed(4) 5.1090% 9.89 11/13 - 12/13 AA/AA
Class C .... $ 17,238,000 1.500% 12.750% Fixed(4) 5.1600% 9.98 12/13 - 12/13 AA-/AA-
Class D .... $ 33,039,000 2.875% 9.876% Fixed(4) 5.2090% 9.98 12/13 - 12/13 A/A
Class E .... $ 14,366,000 1.250% 8.625% Fixed(4) 5.2890% 9.98 12/13 - 12/13 A-/A-
Class F .... $ 15,801,000 1.375% 7.251% WAC(5) 5.5448% (6) (6) (6)
Class G .... $ 15,802,000 1.375% 5.875% WAC(7) 5.5748% (6) (6) (6)
Class H .... $ 15,801,000 1.375% 4.501% WAC(7) 5.5748% (6) (6) (6)
Class J .... $ 8,619,000 0.750% 3.751% Fixed(4) 5.3280% (6) (6) (6)
Class K .... $ 5,746,000 0.500% 3.251% Fixed(4) 5.3280% (6) (6) (6)
Class L .... $ 4,310,000 0.375% 2.876% Fixed(4) 5.3280% (6) (6) (6)
Class M .... $ 4,309,000 0.375% 2.501% Fixed(4) 5.3280% (6) (6) (6)
Class N .... $ 5,746,000 0.500% 2.001% Fixed(4) 5.3280% (6) (6) (6)
Class O .... $ 2,873,000 0.250% 1.751% Fixed(4) 5.3280% (6) (6) (6)
Class P .... $ 20,117,695 1.751% 0.000% Fixed(4) 5.3280% (6) (6) (6)
Class X-P... $ 1,044,955,000 N/A NA WAC-IO(8) 0.8930% (8) (8) (8)
Class X-C... $ 1,149,211,695 N/A NA WAC-IO(8) 0.0493% (8) (8) (8)
- ----------
(1) Subject to a permitted variance of plus or minus 5.0%.
(2) Based on no prepayments and the other assumptions set forth under "YIELD
AND MATURITY CONSIDERATIONS--Weighted Average Life" in this prospectus
supplement.
(3) By each of Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. and Fitch, Inc. See "RATINGS" in this
prospectus supplement.
(4) The pass-through rates applicable to the Class A-4, Class B, Class C, Class
D, Class E, Class J, Class K, Class L, Class M, Class N, Class O and Class
P certificates for any distribution date will be subject to a maximum rate
of the applicable weighted average net mortgage rate (calculated as
described herein) for such date.
(5) The pass-through rate applicable to the Class F certificates for any
distribution date will be equal to the applicable weighted average net
mortgage rate (calculated as described herein) for such date less 0.03% per
annum.
(6) Not offered by this prospectus supplement. Any information we provide
herein regarding the terms of these certificates is provided only to
enhance your understanding of the offered certificates.
(7) The pass-through rates applicable to the Class G and Class H certificates
for any distribution date will be equal to the applicable weighted average
net mortgage rate (calculated as described herein) for such date.
S-6
(8) The Class X-C and Class X-P certificates are not offered by this prospectus
supplement. Any information we provide herein regarding the terms of these
certificates is provided only to enhance your understanding of the offered
certificates. The Class X-C and Class X-P certificates will not have
certificate balances and their holders will not receive distributions of
principal, but such holders are entitled to receive payments of the
aggregate interest accrued on the notional amount of the Class X-C or Class
X-P certificates, as the case may be, as described in this prospectus
supplement. The interest rates applicable to the Class X-C and Class X-P
certificates for each distribution date will be as described in this
prospectus supplement. See "DESCRIPTION OF THE CERTIFICATES--Pass-Through
Rates" in this prospectus supplement.
Offered certificates
Private certificates
S-7
THE PARTIES
THE TRUST FUND................ The trust fund will be created on or about
the closing date pursuant to a pooling and
servicing agreement, dated as of December 1,
2003, by and among the depositor, the master
servicer, the special servicer, the trustee and
the paying agent.
THE DEPOSITOR................. Wachovia Commercial Mortgage Securities, Inc.
We are a wholly owned subsidiary of Wachovia
Bank, National Association, which is one of the
mortgage loan sellers, the master servicer and
an affiliate of one of the underwriters. Our
principal executive office is located at 301
South College Street, Charlotte, North Carolina
28288-0166 and our telephone number is (704)
374-6161. Neither we nor any of our affiliates
have insured or guaranteed the offered
certificates. For more detailed information,
see "THE DEPOSITOR" in the accompanying
prospectus.
On the closing date, we will sell the mortgage
loans and related assets to be included in the
trust fund to the trustee to create the trust
fund.
THE ISSUER.................... The trust fund to be established under the
pooling and servicing agreement. For more
detailed information, see "DESCRIPTION OF THE
CERTIFICATES" in this prospectus supplement and
the accompanying prospectus.
THE MORTGAGE LOAN SELLERS..... Wachovia Bank, National Association, LaSalle
Bank National Association, Citigroup Global
Markets Realty Corp., ABN AMRO Bank N.V.,
Chicago Branch and Eurohypo AG, New York
Branch. For more information, see "DESCRIPTION
OF THE MORTGAGE POOL--The Mortgage Loan
Sellers" in this prospectus supplement. The
mortgage loan sellers will sell and assign to
us on the closing date the mortgage loans to be
included in the trust fund. See "DESCRIPTION OF
THE MORTGAGE POOL--Representations and
Warranties; Repurchases and Substitutions" in
this prospectus supplement.
Wachovia Bank, National Association originated
or acquired 35 of the mortgage loans to be
included in the trust fund representing 38.4%
of the cut-off date pool balance of all the
mortgage loans to be included in the trust
fund. LaSalle Bank National Association
originated or acquired 60 of the mortgage loans
to be included in the trust fund representing
24.6% of the cut-off date pool balance of all
the mortgage loans to be included in the trust
fund. Citigroup Global Markets Realty Corp.
originated or acquired 19 of the mortgage loans
to be included in the trust fund representing
14.2% of the cut-off date pool balance of all
the mortgage loans to be included in the trust
fund. ABN AMRO Bank N.V., Chicago Branch
originated or acquired 2 of the mortgage loans
to be included in the trust fund representing
11.5% of the cut-off
S-8
date pool balance of all the mortgage loans to
be included in the trust fund. Eurohypo AG, New
York Branch originated or acquired 2 of the
mortgage loans to be included in the trust fund
representing 11.4% of the cut-off date pool
balance of all the mortgage loans to be
included in the trust fund.
THE MASTER SERVICER........... Wachovia Bank, National Association. Wachovia
Bank, National Association is our affiliate and
is one of the mortgage loan sellers and an
affiliate of one of the underwriters. The
master servicer will be primarily responsible
for collecting payments and gathering
information with respect to the mortgage loans
included in the trust fund and 7 companion
loans which are not part of the trust fund;
provided, however, the Park City Center
mortgage loan and the Park City Center
companion loans will be serviced under the
pooling and servicing agreement entered into in
connection with the issuance of the Wachovia
Bank Commercial Mortgage Trust, Commercial
Mortgage Pass-Through Certificates, Series
2003-C8. The master servicer under the 2003-C8
pooling and servicing agreement is Wachovia
Bank, National Association.
See "SERVICING OF THE MORTGAGE LOANS--The
Master Servicer and the Special Servicer" and
"--Servicing of the Park City Center Loan" in
this prospectus supplement.
THE SPECIAL SERVICER.......... Lennar Partners, Inc. The special servicer
will be responsible for performing certain
servicing functions with respect to the
mortgage loans included in the trust fund and 7
companion loans which are not part of the trust
fund that, in general, are in default or as to
which default is imminent; provided, however,
the Park City Center mortgage loan and the Park
City Center companion loans will be specially
serviced under the pooling and servicing
agreement entered into in connection with the
issuance of the Wachovia Bank Commercial
Mortgage Trust, Commercial Mortgage
Pass-Through Certificates, Series 2003-C8. The
special servicer under the 2003-C8 pooling and
servicing agreement is Clarion Partners, LLC.
Some holders of certificates (initially the
holder of the Class P certificates) will have
the right to replace the special servicer and
to select a representative who may advise and
direct the special servicer and whose approval
is required for certain actions by the special
servicer under certain circumstances. In the
case of the Park City Center mortgage loan,
such rights will generally be shared with
holders of certain classes of certificates
issued under the 2003-C8 pooling and servicing
agreement and the related intercreditor
agreements. Additionally, certain of the
approval or consent rights with respect to each
other companion loan may be shared or
exercisable by the holder of the companion loan
in certain circumstances. See "SERVICING OF THE
MORTGAGE LOANS--The Master Servicer and Special
Servicer" and
S-9
"--The Controlling Class Representative" in
this prospectus supplement.
THE TRUSTEE................... Wells Fargo Bank Minnesota, N.A. See
"DESCRIPTION OF THE CERTIFICATES--The Trustee"
in this prospectus supplement.
THE PAYING AGENT.............. LaSalle Bank National Association. The paying
agent will be responsible for distributing
payments to certificateholders and delivering
to certificateholders certain reports on the
mortgage loans included in the trust fund and
the certificates. LaSalle Bank National
Association will also act as the certificate
registrar and authenticating agent. LaSalle
Bank National Association is also a mortgage
loan seller and is an affiliate of ABN AMRO
Incorporated, an underwriter, and ABN AMRO Bank
N.V., Chicago Branch, one of the mortgage loan
sellers. See "DESCRIPTION OF THE
CERTIFICATES--Paying Agent, Certificate
Registrar and Authenticating Agent" in this
prospectus supplement.
THE UNDERWRITERS.............. Wachovia Capital Markets, LLC, ABN AMRO
Incorporated, Citigroup Global Markets Inc. and
Goldman, Sachs & Co., Wachovia Capital Markets,
LLC is our affiliate and is an affiliate of
Wachovia Bank, National Association, which is
the master servicer and one of the mortgage
loan sellers. ABN AMRO Incorporated is an
affiliate of ABN AMRO Bank N.V., Chicago
Branch, which is one of the mortgage loan
sellers and of LaSalle Bank National
Association, which is one of the mortgage loan
sellers and is the paying agent. Citigroup
Global Markets Inc. is an affiliate of
Citigroup Global Markets Realty Corp., which is
one of the mortgage loan sellers. Wachovia
Capital Markets, LLC, ABN AMRO Incorporated and
Citigroup Global Markets Inc. are acting as
co-lead managers for this offering. Goldman,
Sachs & Co. is acting as a co-manager for this
offering. Citigroup Global Markets Inc. is
acting as sole bookrunner with respect to 32.1%
of the Class A-4 certificates. Wachovia Capital
Markets, LLC is acting as sole bookrunner with
respect to the remainder of the Class A-4
certificates and all other classes of offered
certificates.
IMPORTANT DATES AND PERIODS
CLOSING DATE.................. On or about December 23, 2003.
CUT-OFF DATE.................. For 84 mortgage loans, representing 62.5% of
the mortgage pool, December 1, 2003; for 32
mortgage loans, representing 37.1% of the
mortgage pool, December 11, 2003; and for 2
mortgage loans, representing 0.4% of the
mortgage pool, December 15, 2003. The cut-off
date balance of each mortgage loan included in
the trust fund and each cut-off date
certificate balance in this prospectus
supplement assumes the
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timely receipt of principal scheduled to be
paid (if any) on each mortgage loan and no
defaults, delinquencies or prepayments on any
mortgage loan as of the related cut-off date.
DISTRIBUTION DATE............. The fourth business day following the related
determination date.
DETERMINATION DATE............ The 11th day of each month, or if such 11th
day is not a business day, the next succeeding
business day, commencing in January 2004.
COLLECTION PERIOD............. For any distribution date, the period
beginning on the 12th day in the immediately
preceding month (or the day after the
applicable cut-off date in the case of the
first collection period) through and including
the 11th day of the month in which the
distribution date occurs, except that with
respect to 2 mortgage loans representing 0.4%
of the mortgage pool the 16th day in the
immediately preceding month (or the day after
the applicable cut-off date in the case of the
first collection period) through and including
the 15th day of the month in which the
distribution date occurs. Notwithstanding the
foregoing, in the event that the last day of a
collection period is not a business day, any
payments with respect to the mortgage loans
which relate to such collection period and are
received on the business day immediately
following such last day will be deemed to have
been received during such collection period and
not during any other collection period.
THE CERTIFICATES
OFFERED CERTIFICATES.......... We are offering to you the following 8
classes of certificates of our Commercial
Mortgage Pass-Through Certificates, Series
2003-C9 pursuant to this prospectus supplement:
Class A-1
Class A-2
Class A-3
Class A-4
Class B
Class C
Class D
Class E
PRIORITY OF DISTRIBUTIONS..... On each distribution date, the owners of the
certificates will be entitled to distributions
of payments or other collections on the
mortgage loans that the master servicer
collected or advanced during or with respect to
the related collection period after deducting
certain fees and expenses.
S-11
The paying agent will distribute amounts to the
extent that the money is available, in the
following order of priority, to pay:
Interest, pro rata, on the Class A-1, Class
A-2, Class A-3, Class A-4, Class X-C and Class
X-P certificates.
Principal of the Class A-1 certificates, up to
the principal distribution amount, until their
certificate balance is reduced to zero.
Principal of the Class A-2 certificates, up to
the principal distribution amount, until their
certificate balance is reduced to zero.
Principal of the Class A-3 certificates, up to
the principal distribution amount, until their
certificate balance is reduced to zero.
Principal of the Class A-4 certificates, up to
the principal distribution amount, until their
certificate balance is reduced to zero.
Reimbursement to the Class A-1, Class A-2,
Class A-3 and Class A-4 certificates, pro
rata, for any realized loss and trust fund
expenses borne by such classes.
Interest on the Class B certificates.
Principal of the Class B certificates, up to
the principal distribution amount, until their
certificate balance is reduced to zero.
Reimbursement to the Class B certificates for
any realized losses and trust fund expenses
borne by such class.
Interest on the Class C certificates.
Principal of the Class C certificates, up to
the principal distribution amount, until their
certificate balance is reduced to zero.
S-12
Reimbursement to the Class C certificates for
any realized losses and trust fund expenses
borne by such class.
Interest on the Class D certificates.
Principal of the Class D certificates, up to
the principal distribution amount, until their
certificate balance is reduced to zero.
Reimbursement to the Class D certificates for
any realized losses and trust fund expenses
borne by such class.
Interest on the Class E certificates.
Principal of the Class E certificates, up to
the principal distribution amount, until their
certificate balance is reduced to zero.
Reimbursement to the Class E certificates for
any realized losses and trust fund expenses
borne by such class.
If, on any distribution date, the certificate
balances of the Class B through Class P
certificates have been reduced to zero, but any
two or more of the Class A-1, Class A-2, Class
A-3 and Class A-4 certificates remain
outstanding, distributions of principal and
interest will be made, pro rata, to the
outstanding Class A-1, Class A-2, Class A-3 and
Class A-4 certificates. See "DESCRIPTION OF THE
CERTIFICATES--Distributions" in this prospectus
supplement.
INTEREST...................... On each distribution date each class of
certificates (other than the Class Z, Class R-I
and Class R-II certificates) will be entitled
to receive:
o for each such class of certificates, one
month's interest at the applicable
pass-through rate accrued during the
calendar month prior to the related
distribution date, on the certificate
balance or notional amount, as applicable,
of such class of certificates immediately
prior to such distribution date;
o plus any interest that such class of
certificates was entitled to receive on all
prior distribution dates to the extent not
received;
S-13
o minus (other than in the case of the Class
X-C and Class X-P certificates) such class'
share of any shortfalls in interest
collections due to prepayments on mortgage
loans included in the trust fund that are
not offset by certain payments made by the
master servicer; and
o minus (other than in the case of the Class
X-C and Class X-P certificates) such class'
allocable share of any reduction in
interest accrued on any mortgage loan as a
result of a modification that reduces the
related mortgage rate and allows the
reduction in accrued interest to be added
to the stated principal balance of the
mortgage loan.
See "DESCRIPTION OF THE CERTIFICATES,
Certificate Balances and Notional Amount" and
"--Distributions" in this prospectus
supplement.
The Class X-C and Class X-P certificates will
be entitled to distributions of interest-only
on their respective notional amounts. On each
distribution date, the notional amount of the
Class X-C certificates will generally be equal
to the aggregate outstanding certificate
balances of the sequential pay certificates on
such date.
The notional amount of the Class X-P
certificates generally will equal:
(1) until the distribution date in June 2004,
the sum of (a) the lesser of $103,235,000
and the certificate balance of the Class
A-1 certificates and (b) the aggregate
certificate balances of the Class A-2,
Class A-3, Class A-4, Class B, Class C,
Class D and Class E certificates;
(2) after the distribution date in June 2004
through and including the distribution
date in December 2004, the sum of (a) the
lesser of $97,127,000 and the certificate
balance of the Class A-1 certificates and
(b) the aggregate certificate balances of
the Class A-2, Class A-3, Class A-4,
Class B, Class C, Class D and Class E
certificates;
(3) after the distribution date in December
2004 through and including the
distribution date in June 2005, the sum
of (a) the lesser of $71,648,000 and the
certificate balance of the Class A-1
certificates and (b) the aggregate
certificate balances of the Class A-2,
Class A-3, Class A-4, Class B, Class C,
Class D and Class E certificates;
(4) after the distribution date in June 2005
through and including the distribution
date in December 2005, the sum of (a) the
lesser of $43,501,000 and the certificate
balance of the Class A-1 certificates and
(b) the aggregate certificate balances of
the Class A-2, Class A-3,
S-14
Class A-4, Class B, Class C, Class D and
Class E certificates;
(5) after the distribution date in December
2005 through and including the
distribution date in June 2006, the sum
of (a) the lesser of $15,367,000 and the
certificate balance of the Class A-1
certificates and (b) the aggregate
certificate balances of the Class A-2,
Class A-3, Class A-4, Class B, Class C,
Class D and Class E certificates;
(6) after the distribution date in June 2006
through and including the distribution
date in December 2006, the sum of (a) the
lesser of $112,093,000 and the
certificate balance of the Class A-2
certificates and (b) the aggregate
certificate balances of the Class A-3,
Class A-4, Class B, Class C, Class D and
Class E certificates;
(7) after the distribution date in December
2006 through and including the
distribution date in June 2007, the sum
of (a) the lesser of $85,318,000 and the
certificate balance of the Class A-2
certificates and (b) the aggregate
certificate balances of the Class A-3,
Class A-4, Class B, Class C, Class D and
Class E certificates;
(8) after the distribution date in June 2007
through and including the distribution
date in December 2007, the sum of (a) the
lesser of $59,682,000 and the certificate
balance of the Class A-2 certificates and
(b) the aggregate certificate balances of
the Class A-3, Class A-4, Class B, Class
C, Class D and Class E certificates;
(9) after the distribution date in December
2007 through and including the
distribution date in June 2008, the sum
of (a) the lesser of $27,366,000 and the
certificate balance of the Class A-2
certificates and (b) the aggregate
certificate balances of the Class A-3,
Class A-4, Class B, Class C, Class D and
Class E certificates;
(10) after the distribution date in June 2008
through and including the distribution
date in December 2008, the sum of (a) the
lesser of $94,248,000 and the certificate
balance of the Class A-3 certificates and
(b) the aggregate certificate balances of
the Class A-4, Class B, Class C, Class D
and Class E certificates;
(11) after the distribution date in December
2008 through and including the
distribution date in June 2009, the sum
of (a) the lesser of $74,073,000 and the
certificate balance of the Class A-3
certificates and (b) the aggregate
certificate balances of the Class A-4,
Class B, Class C, Class D and Class E
certificates;
(12) after the distribution date in June 2009
through and including the distribution
date in December 2009, the sum of (a) the
lesser of $54,794,000 and the certificate
S-15
balance of the Class A-3 certificates,
(b) the aggregate certificate balances
of the Class A-4, Class B, Class C, and
Class D certificates and (c) the lesser
of $13,754,000 and the certificate
balance of the Class E certificates;
(13) after the distribution date in December
2009 through and including the
distribution date in June 2010, the sum
of (a) the lesser of $35,795,000 and the
certificate balance of the Class A-3
certificates, (b) the aggregate
certificate balances of the Class A-4,
Class B, Class C and Class D certificates
and (c) the lesser of $6,599,000 and the
certificate balance of the Class E
certificates;
(14) after the distribution date in June 2010
through and including the distribution
date in December 2010, the sum of (a) the
lesser of $454,784,000 and the
certificate balance of the Class A-4
certificates, (b) the aggregate
certificate balances of the Class B and
Class C certificates and (c) the lesser
of $32,840,000 and the certificate
balance of the Class D certificates; and
(15) after the distribution date in December
2010, $0.
The Class X-C and Class X-P certificates will
accrue interest at a rate as described under
"Pass-Through Rates" below.
The certificates (other than the Class Z, Class
R-I and Class R-II certificates) will accrue
interest on the basis of a 360-day year
consisting of twelve 30-day months.
The interest accrual period with respect to any
distribution date and any class of certificates
(other than the Class Z, Class R-I and Class
R-II certificates) is the calendar month
preceding the month in which such distribution
date occurs.
As reflected in the chart under "Priority of
Distributions" beginning on page S-12 above, on
each distribution date, the paying agent will
distribute interest to the holders of the
offered certificates and the Class X
certificates:
o first, pro rata, to the Class X-C
certificates, Class X-P certificates, Class
A-1 certificates, Class A-2 certificates,
Class A--3 certificates and Class A--4
certificates as described above under
"Priority of Distribution", and then to
each other class of offered certificates in
alphabetical order; and
o only to the extent funds remain after the
paying agent makes all distributions of
interest and principal required to be made
on such date to each class of certificates
with a higher priority of distribution.
You may, in certain circumstances, also receive
distributions of prepayment premiums and yield
maintenance charges collected on the mortgage
loans included in the trust fund. Such
distributions are in addition to the
distributions of principal and interest
described above. See "DESCRIPTION
S-16
OF THE CERTIFICATES--Distributions" in this
prospectus supplement.
PASS-THROUGH RATES............ The pass-through rate for each class of
certificates (other than the Class X-C, Class
X-P, Class Z, Class R-I and Class R-II
certificates) on each distribution date is set
forth above under "Overview of the
Certificates."
The pass-through rate applicable to the Class
X-C certificates for the initial distribution
date will equal approximately 0.0493% per
annum.
The pass-through rate applicable to the Class
X-C certificates for each distribution date
will, in general, equal the weighted average of
the respective Class X-C strip rates at which
interest accrues from time to time on the
respective Class X-C components prior to such
distribution date (weighted on the basis of the
respective component balances of those Class
X-C components outstanding immediately prior to
such distribution date). Each Class X-C
component will be comprised of all or a
designated portion of the certificate balance
of one of the classes of sequential pay
certificates. In general, the certificate
balance of each class of sequential pay
certificates will constitute a separate Class
X-C component. However, if a portion, but not
all, of the certificate balance of any
particular class of sequential pay certificates
is identified under "--Interest" above as being
part of the notional amount of the Class X-P
certificates immediately prior to any
distribution date, then the identified portion
of the certificate balance will also represent
one or more Class X-C components for purposes
of calculating the pass-through rate of the
Class X-C certificates, and the remaining
portion of the certificate balance will
represent one or more other Class X-C
components for purposes of calculating the
pass-through rate of the Class X-C
certificates. For each distribution date
through and including the distribution date in
December 2010, the Class X-C strip rate for
each Class X-C component will be calculated as
follows:
(1) if such Class X-C component consists of
the entire certificate balance of any
class of sequential pay certificates, and
if the certificate balance does not, in
whole or in part, also constitute a Class
X-P component immediately prior to the
distribution date, then the applicable
Class X-C strip rate will equal the
excess, if any, of (a) the weighted
average net mortgage rate for the
distribution date, over (b) the
pass-through rate in effect for the
distribution date for the applicable
class of sequential pay certificates;
(2) if such Class X-C component consists of a
designated portion (but not all) of the
certificate balance of any class of
sequential pay certificates, and if the
designated portion of the certificate
balance does not also constitute
S-17
a Class X-P component immediately prior
to the distribution date, then the
applicable Class X-C strip rate will
equal the excess, if any, of (a) the
weighted average net mortgage rate for
the distribution date, over (b) the
pass-through rate in effect for the
distribution date for the applicable
class of sequential pay certificates;
(3) if such Class X-C component consists of a
designated portion (but not all) of the
certificate balance of any class of
sequential pay certificates, and if the
designated portion of the certificate
balance also constitutes a Class X-P
component immediately prior to the
distribution date, then the applicable
Class X-C strip rate will equal the
excess, if any, of (a) the weighted
average net mortgage rate for the
distribution date, over (b) the sum of
(i) the Class X-P strip rate for the
applicable Class X-P component, and (ii)
the pass-through rate in effect for the
distribution date for the applicable
class of sequential pay certificates; and
(4) if such Class X-C component consists of
the entire certificate balance of any
class of sequential pay certificates, and
if the certificate balance also
constitutes, in its entirety, a Class X-P
component immediately prior to such
distribution date, then the applicable
Class X-C strip rate will equal the
excess, if any, of (a) the weighted
average net mortgage rate for the
distribution date, over (b) the sum of
(i) the Class X-P strip rate for the
applicable Class X-P component, and (ii)
the pass-through rate in effect for the
distribution date for the applicable
class of sequential pay certificates.
For each distribution date after the
distribution date in December 2010, the
certificate balance of each class of sequential
pay certificates will constitute one or more
separate Class X-C components, and the
applicable Class X-C strip rate with respect to
each such Class X-C component for each
distribution date will equal the excess, if
any, of (a) the weighted average net mortgage
rate for the distribution date, over (b) the
pass-through rate in effect for the
distribution date for the class of sequential
pay certificates.
The pass-through rate applicable to the Class
X-P certificates for the initial distribution
date will equal approximately 0.8930% per
annum.
The pass-through rate applicable to the Class
X-P certificates for each subsequent
distribution date will equal the weighted
average of the respective Class X-P strip
rates, at which interest accrues from time to
time on the respective components prior to such
distribution date (weighted on the basis of the
balances of those Class X-P components
outstanding immediately prior to the
distribution date). Each Class X-P component
will be comprised of all or a designated
portion of
S-18
the certificate balance of a specified class of
sequential pay certificates. If all or a
designated portion of the certificate balance
of any class of sequential pay certificates is
identified under "--Interest" above as being
part of the notional amount of the Class X-P
certificates immediately prior to any
distribution date, then that certificate
balance (or designated portion thereof) will
represent one or more separate Class X-P
components for purposes of calculating the
pass-through rate of the Class X-P
certificates. For each distribution date
through and including the distribution date in
December 2010, the Class X-P strip rate for
each Class X-P component will equal (a) the
lesser of (1) the weighted average net mortgage
rate for such distribution date, and (2) the
reference rate specified on Annex C to this
prospectus supplement for such distribution
date minus 0.03% per annum, minus (b) the
pass-through rate for such component (but in no
event will any Class X-P strip rate be less
than zero).
After the distribution date in December 2010,
the Class X-P certificates will cease to accrue
interest and will have a 0% pass-through rate.
The weighted average net mortgage rate for each
distribution date is the weighted average of
the net mortgage rates for the mortgage loans
included in the trust fund as of the beginning
of the related collection period, weighted on
the basis of their respective stated principal
balances immediately following the preceding
distribution date; provided that, for the
purpose of determining the weighted average net
mortgage rate only, if the mortgage rate for
any mortgage loan included in the trust fund
has been modified in connection with a
bankruptcy or similar proceeding involving the
related borrower or a modification, waiver or
amendment granted or agreed to by the special
servicer, the weighted average net mortgage
rate for such mortgage loan will be calculated
without regard to such event. The net mortgage
rate for each mortgage loan included in the
trust fund will generally equal:
o the mortgage interest rate in effect for
such mortgage loan as of the closing date;
minus
o the applicable administrative cost rate,
as described in this prospectus
supplement.
For the purpose of calculating the weighted
average net mortgage rate, the mortgage rate of
each mortgage loan will be deemed adjusted as
described under "DESCRIPTION OF THE
CERTIFICATES--Pass-Through Rates" in this
prospectus supplement.
The stated principal balance of each mortgage
loan included in the trust fund will generally
equal the balance of that mortgage loan as of
the cut-off date, reduced as of any date of
determination (to not less than zero) by:
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o the portion of the principal distribution
amount for the related distribution date
that is attributable to such mortgage
loan; and
o the principal portion of any realized loss
incurred in respect of such mortgage loan
during the related collection period.
The stated principal balance of any mortgage
loan as to which the mortgage rate is reduced
through a modification may be increased in
certain circumstances by the amount of the
resulting interest reduction. See "DESCRIPTION
OF THE CERTIFICATES--Pass-Through Rates" in
this prospectus supplement.
PRINCIPAL DISTRIBUTIONS....... On the closing date, each class of
certificates (other than the Class X-C, Class
X-P, Class Z, Class R-I and Class R-II
certificates) will have the certificate balance
set forth above under "Overview of the
Certificates." The certificate balance for each
class of certificates entitled to receive
principal may be reduced by:
o distributions of principal; and
o allocations of realized losses and trust
fund expenses.
The certificate balance or notional amount of a
class of certificates may be increased in
certain circumstances by the allocation of any
increase in the stated principal balance of any
mortgage loan resulting from the reduction of
the related mortgage rate through modification.
See "DESCRIPTION OF THE
CERTIFICATES--Certificate Balances and Notional
Amount" in this prospectus supplement.
The Class X-C and Class X-P certificates do not
have principal balances and will not receive
distributions of principal.
As reflected in the chart under "Priority of
Distributions" above:
o principal is distributed to each class of
certificates entitled to receive
distributions of principal in alphabetical
and, if applicable, numerical designation;
o principal is only distributed on a class of
certificates to the extent funds remain
after the paying agent makes all
distributions of principal and interest on
each class of certificates with an earlier
alphabetical and, if applicable, numerical
designation; and
o generally, no class of certificates is
entitled to distributions of principal
until the certificate balance of each class
of certificates with an earlier
alphabetical and, if applicable, numerical
designation has been reduced to zero.
S-20
The amount of principal to be distributed for
each distribution date generally will be an
amount equal to:
o the scheduled principal payments (other
than balloon payments) due on the mortgage
loans included in the trust fund during the
related collection period whether or not
such scheduled payments are actually
received;
o balloon payments actually received with
respect to mortgage loans included in the
trust fund during the related collection
period;
o prepayments received with respect to the
mortgage loans included in the trust fund
during the related collection period; and
o all liquidation proceeds, insurance
proceeds, condemnation awards and
repurchase and substitution amounts
received during the related collection
period that are allocable to principal.
However, if the master servicer or the trustee
reimburses itself out of general collections on
the mortgage pool for any advance that it has
determined is not recoverable out of
collections on the related mortgage loan, then
that advance (together with accrued interest
thereon) will be deemed, to the fullest extent
permitted pursuant to the terms of the pooling
and servicing agreement, to be reimbursed first
out of payments and other collections of
principal otherwise distributable on the
principal balance certificates, prior to being
deemed reimbursed out of payments and other
collections of interest otherwise distributable
on the offered certificates.
SUBORDINATION; ALLOCATION OF
LOSSES AND CERTAIN EXPENSES.... Credit support for any class of certificates
(other than the Class Z, Class R-I and Class
R-II certificates) is provided by the
subordination of payments and allocation of any
losses to such classes of certificates which
have a later alphabetical class designation
(other than the Class X-C and Class X-P
certificates). The certificate balance of a
class of certificates (other than the Class
X-C, Class X-P, Class Z, Class R-I and Class
R-II certificates) will be reduced on each
distribution date by any losses on the mortgage
loans that have been realized and certain
additional trust fund expenses actually
allocated to such class of certificates on such
distribution date.
Losses on the mortgage loans that have been
realized and additional trust fund expenses
will first be allocated to the certificates
(other than the Class X-C, Class X-P, Class Z,
Class R-I and Class R-II certificates) that are
not offered by this prospectus supplement and
then to the certificates that are offered
certificates in reverse alphabetical order as
indicated on the following table.
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ORDER OF
ORIGINAL PERCENTAGE APPLICATION OF
CERTIFICATE CUT-OFF DATE LOSSES AND
CLASS DESIGNATION BALANCE POOL BALANCE EXPENSES
- -------------------------------- --------------- -------------- ---------------
Class A-1 .................... $108,367,000 9.430% 6
Class A-2 .................... 123,823,000 10.775% 6
Class A-3 .................... 210,302,000 18.300% 6
Class A-4 .................... 508,476,000 44.246% 6
Class B ...................... 34,476,000 3.000% 5
Class C ...................... 17,238,000 1.500% 4
Class D ...................... 33,039,000 2.875% 3
Class E ...................... 14,366,000 1.250% 2
Other non-offered
certificates (excluding
the Class X certificates)... $ 99,124,695 8.625% 1
Any losses realized on the mortgage loans
included in the trust fund or additional trust
fund expenses allocated in reduction of the
certificate balance of any class of sequential
pay certificates will result in a corresponding
reduction in the notional amount of the Class
X-C certificates and, with respect to the Class
A-2, Class A-3, Class A-4, Class B, Class C,
Class D and Class E certificates and portions
of the Class A-1 certificates, a corresponding
reduction in the notional amount of the Class
X-P certificates.
Any losses and expenses that are associated
with each of the mortgage loans secured by the
Park City Center mortgaged property will be
allocated in accordance with the terms of the
related intercreditor agreement first, to the
subordinate companion loan secured by the
related mortgaged property and second, pro
rata, between the two pari passu mortgage loans
secured by the related mortgaged property. The
portion of those losses and expenses that is
allocated to the mortgage loan that is included
in the trust fund will be allocated among the
Series 2003-C9 certificates in the manner
described above.
See "DESCRIPTION OF THE CERTIFICATES--
Subordination; Allocation of Losses and Certain
Expenses" in this prospectus supplement.
PREPAYMENT PREMIUMS; YIELD
MAINTENANCE CHARGES........... On each distribution date, any prepayment
premium or yield maintenance charge actually
collected during the related collection period
on a mortgage loan included in the trust fund
will be distributed to the holders of each
class of offered certificates and the Class F,
Class G and Class H certificates then entitled
to distributions as follows:
The holders of each class of offered
certificates and the Class F, Class G and Class
H certificates then entitled to distributions
of principal on such distribution date will
generally be entitled to a portion of
prepayment premiums or yield maintenance
charges equal to the product of:
S-22
o the amount of such prepayment premiums or
yield maintenance charges;
o a fraction (in no event greater than one),
the numerator of which is equal to the
excess, if any, of the pass-through rate of
such class of certificates over the
relevant discount rate, and the denominator
of which is equal to the excess, if any, of
the mortgage interest rate of the prepaid
mortgage loan over the relevant discount
rate; and
o a fraction, the numerator of which is equal
to the amount of principal distributable on
such class of certificates on such
distribution date, and the denominator of
which is the principal distribution amount
for such distribution date.
If there is more than one class of certificates
entitled to distributions of principal on any
particular distribution date on which a
prepayment premium or yield maintenance charge
is distributable, the aggregate amount of such
prepayment premium or yield maintenance charge
will be allocated among all such classes up to,
and on a pro rata basis in accordance with, the
foregoing entitlements.
The portion, if any, of the prepayment premiums
or yield maintenance charges remaining after
any payments described above will be
distributed as follows: (a) on or before the
distribution date in December 2010, 85% to the
holders of the Class X-C certificates and 15%
to the holders of the Class X-P certificates
and (b) thereafter, 100% to the holders of the
Class X-C certificates.
The "discount rate" applicable to any class of
offered certificates and the Class F, Class G
and Class H certificates will equal the yield
(when compounded monthly) on the U.S. Treasury
issue with a maturity date closest to the
maturity date for the prepaid mortgage loan or
mortgage loan for which title to the related
mortgaged property was acquired by the trust
fund.
o In the event that there are two or more
such U.S. Treasury issues with the same
coupon, the issue with the lowest yield
will be utilized; and
o In the event that there are two or more
such U.S. Treasury issues with maturity
dates equally close to the maturity date
for the prepaid mortgage loan, the issue
with the earliest maturity date will be
utilized.
S-23
EXAMPLES OF ALLOCATION OF PREPAYMENT PREMIUMS OR
YIELD MAINTENANCE CHARGES ON OR BEFORE DECEMBER 2010
Mortgage interest rate ......................... 8%
Pass-through rate for applicable class ......... 6%
Discount rate .................................. 5%
ALLOCATION ALLOCATION
ALLOCATION PERCENTAGE PERCENTAGE FOR PERCENTAGE FOR
FOR APPLICABLE CLASS CLASS X-P CLASS X-C
- ----------------------- --------------------- -----------------------
6% -- 5% = 33 1/3% (100% -- 33%) x 15% (100% -- 33 1/3%) x 85%
- ---------- = 10% = 56 2/3%
8% -- 5%
See "DESCRIPTION OF THE CERTIFICATES--
Distributions--Allocation of Prepayment
Premiums and Yield Maintenance Charges" in this
prospectus supplement.
ALLOCATION OF
ADDITIONAL INTEREST........... On each distribution date, any additional
interest collected on a mortgage loan with an
anticipated repayment date during the related
collection period will be distributed to the
holders of the Class Z certificates and will
not be available to provide credit support for
other classes of certificates or offset any
interest shortfalls.
ADVANCING..................... In the event the master servicer fails to
receive one or more scheduled payments of
principal and interest (other than balloon
payments) on a mortgage loan included in the
trust fund by the last day of the related
collection period and the master servicer
determines that such scheduled payment of
principal and interest will be ultimately
recoverable from the related mortgage loan, the
master servicer, or if it fails to do so, the
trustee is required to make a principal and
interest cash advance of such scheduled payment
of principal and interest.
With respect to the Park City Center mortgage
loan, in the event the master servicer under
the 2003-C8 pooling and servicing agreement
fails to receive one or more scheduled payments
of principal and interest (other than balloon
payments) on the Park City Center mortgage loan
by the last day of the related collection
period and such master servicer determines that
such scheduled payment of principal and
interest will ultimately be recoverable from
the Park City Center mortgage loan, the master
servicer under the 2003-C8 pooling and
servicing agreement, or if it fails to do so,
the master servicer under the pooling and
servicing agreement (so long as it has received
all information necessary to make a
recoverability determination), and if it fails
to do so, the trustee under the pooling and
servicing agreement, is required to make a
principal and interest cash advance of such
scheduled payment of principal and interest.
These cash advances are only intended to
maintain a regular flow of scheduled principal
and interest payments on the certificates and
are not intended to guarantee or insure against
losses. In other words, the advances are
intended to
S-24
provide liquidity (rather than credit
enhancement) to certificateholders. To the
extent described in this prospectus supplement,
the trust fund will pay interest to the master
servicer or the trustee, as the case may be, on
the amount of any principal and interest cash
advance calculated at the prime rate (provided,
that no principal and/or interest cash advance
shall accrue interest until after the
expiration of any applicable grace period for
the related scheduled payment) and will
reimburse the master servicer or the trustee
for any principal and interest cash advances
that are later determined to be not
recoverable. See "DESCRIPTION OF THE
CERTIFICATES--P&I Advances" in this prospectus
supplement.
OPTIONAL TERMINATION OF THE
TRUST FUND.................... The trust fund may be terminated when the
aggregate principal balance of the mortgage
loans included in the trust fund is less than
1.0% of the aggregate principal balance of the
mortgage loans included in the trust fund as of
the cut-off date. See "DESCRIPTION OF THE
CERTIFICATES--Termination" in this prospectus
supplement and in the accompanying prospectus.
The trust fund may also be terminated when the
Class A-1, Class A-2, Class A-3, Class A-4,
Class B, Class C, Class D and Class E
certificates have been paid in full and all of
the remaining certificates are held by a single
certificateholder. See "DESCRIPTION OF THE
CERTIFICATES--Termination" in this prospectus
supplement.
REGISTRATION AND
DENOMINATION................... The offered certificates will initially be
registered in the name of Cede & Co., as
nominee for The Depository Trust Company in the
United States, or in Europe through Clearstream
Banking societe anonyme or Euroclear Bank S.A./
N.V., as operator of the Euroclear System. You
will not receive a definitive certificate
representing your interest in the trust fund,
except in the limited circumstances described
in the accompanying prospectus. See
"DESCRIPTION OF THE CERTIFICATES--Book-Entry
Registration and Definitive Certificates" in
the accompanying prospectus.
Beneficial interests in the Class A-1, Class
A-2, Class A-3, Class A-4, Class B, Class C,
Class D and Class E certificates will be
offered in minimum denominations of $10,000
actual principal amount and in integral
multiples of $1 in excess of those amounts.
MATERIAL FEDERAL INCOME TAX
CONSEQUENCES.................. Two separate real estate mortgage investment
conduit (each, a "REMIC") elections will be
made with respect to most of the trust fund.
The offered certificates will evidence regular
interests in a REMIC and generally will be
treated as debt instruments of such REMIC. The
Class R-I and Class R-II
S-25
certificates will represent the residual
interests in such REMICs. In addition, separate
REMIC elections will be made with respect to
two early defeasance mortgage loans. The
principal balance of each early defeasance
mortgage loan will represent a "regular
interest" in its related REMIC. The Class Z
certificateholders' entitlement to any
additional interest that has accrued on a
related mortgage loan that provides for the
accrual of such additional interest if the
unamortized principal amount of such mortgage
loan is not repaid on the anticipated repayment
date set forth in the related mortgage note
will be treated as a grantor trust (as
described in the related prospectus) for United
States federal income tax purposes.
The offered certificates will be treated as
newly originated debt instruments for federal
income tax purposes. You will be required to
report income with respect to the offered
certificates using the accrual method of
accounting, even if you otherwise use the cash
method of accounting. It is anticipated that
the offered certificates will be treated as
having been issued at a premium for federal
income tax reporting purposes.
For further information regarding the federal
income tax consequences of investing in the
offered certificates, see "MATERIAL 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 the accompanying prospectus, the
following certificates may be eligible for
purchase by persons investing assets of
employee benefit plans, individual retirement
accounts, or other retirement plans and
accounts:
Class A-1
Class A-2
Class A-3
Class A-4
Class B
Class C
Class D
Class E
This is based on individual prohibited
transaction exemptions granted to each of
Wachovia Capital Markets, LLC, ABN AMRO
Incorporated, Citigroup Global Markets Inc.
and Goldman, Sachs & Co. by the U.S.
Department of Labor. See "ERISA
CONSIDERATIONS" in this prospectus supplement
and in the accompanying prospectus.
LEGAL INVESTMENT.............. The offered certificates will not constitute
"mortgage related securities" for purposes of
the Secondary Mortgage Market
S-26
Enhancement Act of 1984, as amended. If your
investment activities are subject to legal
investment laws and regulations, regulatory
capital requirements, or review by regulatory
authorities, then you may be subject to
restrictions on investment in the offered
certificates. You should consult your own legal
advisers for assistance in determining the
suitability of and consequences to you of the
purchase, ownership and sale of the offered
certificates.
See "LEGAL INVESTMENT" in this prospectus
supplement and in the accompanying prospectus.
RATINGS....................... The offered certificates will not be issued
unless they have received the following ratings
from Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. and
Fitch, Inc.:
EXPECTED RATING
CLASS FROM S&P/FITCH
--------------------- ----------------
Class A-1 ......... AAA/AAA
Class A-2 ......... AAA/AAA
Class A-3 ......... AAA/AAA
Class A-4 ......... AAA/AAA
Class B ........... AA/AA
Class C ........... AA-/AA-
Class D ........... A/A
Class E ........... A-/A-
The ratings on the offered certificates address
the likelihood of timely receipt of interest
and ultimate receipt of principal by the rated
final distribution date by the holders of
offered certificates. They do not address the
likely actual rate of prepayments. Such rate of
prepayments, if different than originally
anticipated, could adversely affect the yield
realized by holders of the offered
certificates. See "RATINGS" in this prospectus
supplement and in the accompanying prospectus
for a discussion of the basis upon which
ratings are given, the limitations and
restrictions on the ratings, and conclusions
that should not be drawn from a rating.
THE MORTGAGE LOANS
GENERAL....................... It is expected that the mortgage loans to be
included in the trust fund will have the
following approximate characteristics as of the
cut-off date. All information presented herein
(including loan-to-value ratios and debt
service coverage ratios) with respect to the 6
mortgage loans with companion loans is
calculated without regard to the related
companion loans except that with respect to
loan number 3 (the Park City Center mortgage
loan) and loan number 5 (the Meadows Mall
mortgage loan), unless otherwise specified, the
calculation of loan-to-value ratios and debt
service coverage ratios was based on the
aggregate indebtedness of each of these
mortgage loans and the related pari passu
companion
S-27
loans (but not any subordinate companion loan).
All percentages of the mortgage loans, or any
specified group of mortgage loans, referred to
in this prospectus supplement are approximate
percentages. The totals in the following tables
may not add up to 100% due to rounding.
ALL MORTGAGE LOANS
-------------------
Number of mortgage loans ........................... 118
Number of crossed loan pools ....................... 2
Number of mortgaged properties ..................... 118
Aggregate balance of all mortgage loans ............ $1,149,211,695
Number of mortgage loans with balloon
payments(1) ....................................... 95
Aggregate balance of mortgage loans with
balloon payments(1) ............................... $ 886,625,514
Number of mortgage loans with anticipated
repayment dates(2) ................................ 15
Aggregate balance of mortgage loans with
anticipated repayment dates(2) .................... $ 154,251,261
Number of fully amortizing mortgage loans .......... 6
Aggregate balance of fully amortizing mortgage
loans ............................................. $ 8,329,282
Number of non-amortizing mortgage loans ............ 2
Aggregate balance of non-amortizing mortgage
loans ............................................. $ 100,000,000
Average mortgage loan balance ...................... $ 9,739,082
Minimum mortgage loan balance ...................... $ 923,868
Maximum mortgage loan balance ...................... $ 95,000,000
Maximum balance for a group of
cross-collateralized and cross-defaulted
loans(3) .......................................... $ 10,964,227
Weighted average cut-off date loan-to-value
ratio ............................................. 69.6%
Minimum cut-off date loan-to-value ratio ........... 24.6%
Maximum cut-off date loan-to-value ratio ........... 82.8%
Weighted average underwritten debt service
coverage ratio .................................... 1.63x
Minimum underwritten debt service coverage
ratio ............................................. 1.01x
Maximum underwritten debt service coverage
ratio ............................................. 3.73x
Weighted average loan-to-value ratio at stated
maturity or anticipated repayment date ............ 60.1%
Weighted average mortgage interest rate ............ 5.442%
Minimum mortgage interest rate ..................... 4.120%
Maximum mortgage interest rate ..................... 7.400%
Weighted average remaining term to maturity
or anticipated repayment date (months) ............ 106
Minimum remaining term to maturity or
anticipated repayment date (months) ............... 57
Maximum remaining term to maturity or
anticipated repayment date (months) ............... 179
Weighted average occupancy rate .................... 94.2%
- ----------
(1) Does not include mortgage loans with anticipated repayment dates.
(2) Not including mortgage loans that are interest-only for their entire term.
(3) Consists of a group of 4 individual mortgage loans (loan numbers 78, 83, 89
and 100).
S-28
SECURITY FOR THE MORTGAGE
LOANS IN THE TRUST FUND....... Generally, all of the mortgage loans included
in the trust fund are non-recourse obligations
of the related borrowers.
o No mortgage loan included in the trust fund
is insured or guaranteed by any government
agency or private insurer.
o All of the mortgage loans included in the
trust fund are secured by first lien fee
mortgages and/or leasehold mortgages on
commercial or multifamily properties.
PROPERTY TYPES................ The following table describes the mortgaged
properties securing the mortgage loans expected
to be included in the trust fund as of the
cut-off date:
MORTGAGED PROPERTIES BY PROPERTY TYPE
NUMBER OF AGGREGATE PERCENTAGE OF
MORTGAGED CUT-OFF CUT-OFF DATE
PROPERTY TYPE PROPERTIES DATE BALANCE POOL BALANCE
- -------------------------- ------------ ----------------- --------------
Retail ................. 47 $ 556,892,676 48.5%
Retail--Anchored ...... 38 518,477,573 45.1
Retail--Unanchored .... 5 22,094,725 1.9
Retail--Shadow
Anchored(1) .......... 4 16,320,379 1.4
Multifamily ............ 43 317,035,668 27.6
Office ................. 7 183,222,012 15.9
Mobile Home Park ....... 13 38,688,024 3.4
Mixed Use .............. 4 32,944,257 2.9
Self Storage ........... 1 5,900,000 0.5
Industrial ............. 1 5,534,874 0.5
Land(2) ................ 1 5,000,000 0.4
Parking Garage ......... 1 3,994,183 0.3
-- -------------- -----
TOTAL ................ 118 $1,149,211,695 100.0%
=== ============== =====
[GRAPHIC OMITTED]
RETAIL 48.5%
MULTIFAMILY 27.6%
OFFICE 15.9%
MOBILE HOME PARK 3.4%
MIXED USE 2.9%
SELF STORAGE 0.5%
INDUSTRIAL 0.5%
LAND 0.4%
PARKING GARAGE 0.3%
- ----------
(1) A mortgaged property is considered shadow anchored if it is in close
proximity to an anchored retail property.
(2) Specifically the fee interest in land which the ground tenant has improved
and leased as an office building. The office building is not part of the
collateral and the source of funds for loan repayment is the ground rent
payment made to the borrower.
S-29
GEOGRAPHIC CONCENTRATIONS..... The mortgaged properties are located
throughout 28 states and the District of
Columbia. The following table describes the
number and percentage of mortgaged properties
in states which have concentrations of
mortgaged properties above 5.0%:
MORTGAGED PROPERTIES BY GEOGRAPHIC CONCENTRATION
PERCENTAGE
NUMBER OF AGGREGATE OF CUT-OFF
MORTGAGED CUT-OFF DATE DATE POOL
STATE PROPERTIES BALANCE BALANCE
- ----------------------- ------------ ----------------- -----------
CA .................. 18 $ 233,868,495 20.4%
Southern(1) ......... 14 186,597,584 16.2
Northern(1) ......... 4 47,270,911 4.1
FL .................. 11 153,603,015 13.4
NY .................. 12 141,433,216 12.3
VA .................. 3 107,280,221 9.3
PA .................. 3 68,804,249 6.0
NV .................. 3 62,068,858 5.4
NC .................. 11 60,640,831 5.3
Other ............... 57 321,512,811 28.0
-- -------------- -----
TOTAL ............... 118 $1,149,211,695 100.0%
=== ============== =====
- ----------
(1) For purposes of determining whether a mortgaged property is in Northern
California or Southern California, mortgaged properties located north of
San Luis Obispo County, Kern County and San Bernardino County were included
in Northern California and mortgaged properties located in or south of such
counties were included in Southern California.
PAYMENT TERMS................. All of the mortgage loans included in the
trust fund accrue interest at a fixed rate,
other than mortgage loans providing for an
anticipated repayment date, which provide for
an increase of fixed interest after a certain
date.
o Payments on the mortgage loans included in
the trust fund are due on the 1st day of
the month, except payments on 32 mortgage
loans, representing 37.1% of the mortgage
pool, are due on the 11th day of the month,
and payments on 2 mortgage loans,
representing 0.4% of the mortgage pool are
due on the 15th day of the month. No
mortgage loan due on the 1st day of the
month has a grace period that extends
payment beyond the 11th day of any calendar
month. The mortgage loans due on the 11th
and the 15th day of the month do not
provide for a grace period.
o As of the cut-off date, 115 of the mortgage
loans, representing 98.8% of the mortgage
pool, accrue interest on an actual/360
basis, and 3 of the mortgage loans,
representing 1.2% of the mortgage pool,
accrue interest on a 30/360 basis. Eleven
(11) of the mortgage loans, representing
15.0% of the mortgage pool, have periods
during which only interest is due and
periods in which principal and interest are
due. Two (2) mortgage loans,
S-30
representing 8.7% of the mortgage pool,
provide that only interest is due until
maturity or the anticipated repayment date.
The following tables set forth additional
characteristics of the mortgage loans that we
anticipate to be included in the trust fund as
of the cut-off date:
RANGE OF CUT-OFF DATE BALANCES
PERCENTAGE
AGGREGATE OF CUT-OFF
RANGE OF CUT-OFF DATE NUMBER OF CUT-OFF DATE DATE POOL
BALANCES ($) LOANS BALANCE BALANCE
- ------------------------------------- ----------- ----------------- -----------
(less than) 2,000,000 ... ........ 19 $ 26,920,192 2.3%
2,000,001 - 3,000,000 ............. 17 44,214,998 3.8
3,000,001 - 4,000,000 ............. 13 47,399,845 4.1
4,000,001 - 5,000,000 ............. 13 58,599,922 5.1
5,000,001 - 6,000,000 ............. 8 43,442,083 3.8
6,000,001 - 7,000,000 ............. 4 24,951,277 2.2
7,000,001 - 8,000,000 ............. 8 61,601,731 5.4
8,000,001 - 9,000,000 ............. 5 43,016,036 3.7
9,000,001 - 10,000,000 ............ 8 76,930,926 6.7
10,000,001 - 15,000,000 ........... 7 87,844,182 7.6
15,000,001 - 20,000,000 ........... 3 52,429,357 4.6
20,000,001 - 25,000,000 ........... 5 113,347,820 9.9
30,000,001 - 35,000,000 ........... 1 31,966,717 2.8
35,000,001 - 40,000,000 ........... 1 36,000,000 3.1
40,000,001 - 45,000,000 ........... 1 43,200,000 3.8
55,000,001 - 60,000,000 ........... 1 55,768,045 4.9
60,000,001 - 65,000,000 ........... 1 64,823,816 5.6
65,000,001 - 70,000,000 ........... 1 65,841,900 5.7
75,000,001 - 80,000,000 ........... 1 75,912,850 6.6
80,000,001 (greater than) ........ 1 95,000,000 8.3
-- -------------- -----
TOTAL ........................... 118 $1,149,211,695 100.0%
=== ============== =====
RANGE OF MORTGAGE RATES
PERCENTAGE
AGGREGATE OF CUT-OFF
NUMBER OF CUT-OFF DATE DATE POOL
RANGE OF MORTGAGE RATES (%) LOANS BALANCE BALANCE
- ----------------------------- ----------- ----------------- -----------
4.120 - 5.249 ............. 28 $ 266,086,822 23.2%
5.250 - 5.499 ............. 13 299,938,764 26.1
5.500 - 5.749 ............. 17 207,823,460 18.1
5.750 - 5.999 ............. 28 230,014,972 20.0
6.000 - 6.249 ............. 23 104,691,261 9.1
6.250 - 6.499 ............. 5 31,783,896 2.8
6.500 - 6.749 ............. 2 4,754,813 0.4
7.250 - 7.499 ............. 2 4,117,707 0.4
-- -------------- -----
TOTAL ................... 118 $1,149,211,695 100.0%
=== ============== =====
S-31
RANGE OF UNDERWRITTEN DSC RATIOS
PERCENTAGE
AGGREGATE OF CUT-OFF
NUMBER OF CUT-OFF DATE DATE POOL
RANGE OF DSCR (X) LOANS BALANCE BALANCE
- ----------------------- ----------- ----------------- -----------
1.00 - 1.04 ......... 2 $ 4,117,707 0.4%
1.20 - 1.24 ......... 12 74,338,623 6.5
1.25 - 1.29 ......... 10 115,026,785 10.0
1.30 - 1.34 ......... 20 193,603,204 16.8
1.35 - 1.39 ......... 16 117,739,479 10.2
1.40 - 1.44 ......... 14 91,323,179 7.9
1.45 - 1.49 ......... 5 18,452,252 1.6
1.50 - 1.54 ......... 8 31,480,726 2.7
1.55 - 1.59 ......... 5 65,201,734 5.7
1.60 - 1.64 ......... 4 16,432,847 1.4
1.65 - 1.69 ......... 2 13,900,000 1.2
1.70 - 1.74 ......... 5 69,462,306 6.0
1.75 - 1.79 ......... 1 1,464,000 0.1
1.80 - 1.84 ......... 1 1,440,000 0.1
1.95 - 1.99 ......... 2 141,754,750 12.3
2.00 - 2.19 ......... 5 78,599,253 6.8
2.30 - 2.76 ......... 5 109,874,849 9.6
3.70 - 3.74 ......... 1 5,000,000 0.4
-- -------------- -----
TOTAL ............. 118 $1,149,211,695 100.0%
=== ============== =====
RANGE OF CUT-OFF DATE LTV RATIOS*
PERCENTAGE
AGGREGATE OF CUT-OFF
RANGE OF CUT-OFF DATE LTV NUMBER OF CUT-OFF DATE DATE POOL
RATIOS (%) LOANS BALANCE BALANCE
- --------------------------- ----------- ----------------- -----------
20.01 - 25.00 ........... 1 $ 1,341,383 0.1%
25.01 - 30.00 ........... 1 5,000,000 0.4
30.01 - 35.00 ........... 1 9,960,842 0.9
35.01 - 40.00 ........... 1 1,185,271 0.1
40.01 - 50.00 ........... 3 6,824,780 0.6
50.01 - 55.00 ........... 2 96,346,767 8.4
60.01 - 65.00 ........... 7 299,589,467 26.1
65.01 - 70.00 ........... 16 70,309,241 6.1
70.01 - 75.00 ........... 32 251,300,827 21.9
75.01 - 80.24 ........... 52 403,235,410 35.1
81.00 - 82.81 ........... 2 4,117,707 0.4
-- -------------- -----
TOTAL ................. 118 $1,149,211,695 100.0%
=== ============== =====
S-32
RANGE OF REMAINING TERMS TO MATURITY DATE
OR ANTICIPATED REPAYMENT DATE*
PERCENTAGE
AGGREGATE OF CUT-OFF
RANGE OF REMAINING NUMBER OF CUT-OFF DATE DATE POOL
TERMS (MONTHS) LOANS BALANCE BALANCE
- ---------------------- ----------- ----------------- -----------
0 -- 60 ............ 23 $ 174,111,237 15.2%
61 -- 84 ........... 4 114,316,680 9.9
85 -- 108 .......... 6 38,741,110 3.4
109 -- 120 ......... 79 812,396,532 70.7
169 -- 180 ......... 6 9,646,137 0.8
-- -------------- -----
TOTAL ............ 118 $1,149,211,695 100.0%
=== ============== =====
- ----------
* With respect to the mortgage loans with anticipated repayment dates, the
remaining term to maturity was calculated as of the related anticipated
repayment date.
AMORTIZATION TYPES
PERCENTAGE
AGGREGATE OF CUT-OFF
NUMBER OF CUT-OFF DATE DATE POOL
AMORTIZATION TYPE LOANS BALANCE BALANCE
- ------------------------------ ----------- ----------------- -----------
Amortizing Balloon ......... 88 $ 762,920,310 66.4%
Interest-only, Amortizing
Balloon* .................. 6 113,750,000 9.9
Amortizing ARD ............. 10 95,051,261 8.3
Interest-only ARD .......... 1 95,000,000 8.3
Interest-only, Amortizing
ARD* ...................... 5 59,200,000 5.2
Various .................... 1 9,960,842 0.9
Fully Amortizing ........... 6 8,329,282 0.7
Interest-only .............. 1 5,000,000 0.4
-- -------------- -----
TOTAL .................... 118 $1,149,211,695 100.0%
=== ============== =====
- ----------
* These mortgage loans require payments of interest-only for a period of 11
to 36 months from origination prior to the commencement of payments of
principal and interest.
Balloon loans have amortization schedules
significantly longer than their terms to
maturity and have substantial principal
payments due on their maturity dates, unless
prepaid earlier.
Mortgage loans providing for anticipated
repayment dates fully or substantially amortize
through their terms to maturity. However, if
such a mortgage loan is not prepaid by a date
specified in its mortgage note, interest will
accrue at a higher rate and the borrower will
be required to apply all cash flow generated by
the mortgaged property in excess of its regular
debt service payments and certain other
permitted expenses and reserves to repay
principal on the mortgage loan.
In addition, because the fixed periodic payment
on the mortgage loans is determined assuming
interest is calculated
S-33
on a "30/360 basis," but interest actually
accrues and is applied on the majority of the
mortgage loans on an "actual/ 360 basis," there
will be less amortization, absent prepayments,
of the principal balance during the term of the
related mortgage loan, resulting in a higher
final payment on such mortgage loan. This will
occur even if a mortgage loan is a "fully
amortizing" mortgage loan.
See "DESCRIPTION OF THE MORTGAGE POOL-- Certain
Terms and Conditions of the Mortgage Loans," in
this prospectus supplement.
PREPAYMENT RESTRICTIONS....... All of the mortgage loans included in the
trust fund restrict or prohibit voluntary
prepayments of principal in some manner for
some period of time.
TYPES OF PREPAYMENT RESTRICTIONS
PERCENTAGE
AGGREGATE OF CUT-OFF
NUMBER OF CUT-OFF DATE DATE POOL
PREPAYMENT RESTRICTION TYPE LOANS BALANCE BALANCE
- --------------------------------- ----------- ----------------- -----------
Prohibit prepayment for most
of the term of the
mortgage loan; but permit
defeasance after date
specified in related
mortgage note for most or
all of the remaining term*... 109 $1,124,980,419 97.9%
Prohibit prepayment until
date specified in related
mortgage note and then
impose a yield maintenance
charge for most of the
remaining term* .............. 8 19,743,842 1.7
Impose a yield maintenance
charge for most of the
remaining term ............... 1 4,487,434 0.4
--- -------------- -----
TOTAL ....................... 118 $1,149,211,695 100.0%
=== ============== =====
- ----------
* For the purposes hereof, "remaining term" refers to either remaining term
to maturity or anticipated repayment date, as applicable.
See "DESCRIPTION OF THE MORTGAGE POOL--
Additional Mortgage Loan Information" in this
prospectus supplement. The ability of the
master servicer or special servicer to waive or
modify the terms of any mortgage loan relating
to the payment of a prepayment premium or yield
maintenance charge will be limited as described
in this prospectus supplement. See "SERVICING
OF THE MORTGAGE LOANS--Modifications, Waivers
and Amendments" in this prospectus supplement.
We make no representations as to the
enforceability of the provisions of any
mortgage notes requiring the payment of a
prepayment premium or
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yield maintenance charge or limiting
prepayments to defeasance or the ability of the
master servicer or special servicer to collect
any prepayment premium or yield maintenance
charge.
DEFEASANCE.................... One hundred nine (109) of the mortgage loans
included in the trust fund as of the cut-off
date, representing 97.9% of the mortgage pool,
permit the borrower, under certain conditions,
to substitute United States government
obligations as collateral for the related
mortgage loans (or a portion thereof) following
their respective lock-out periods. Upon such
substitution, the related mortgaged property
(or, in the case of a mortgage loan secured by
multiple mortgaged properties, one or more of
such mortgaged properties) will no longer
secure such mortgage loan. The payments on the
defeasance collateral are required to be at
least equal to an amount sufficient to make,
when due, all payments on the related mortgage
loan or allocated to the related mortgaged
property. Except with respect to 2 such
mortgage loans, representing 0.4% of the
mortgage pool, defeasance may not occur prior
to the second anniversary of the issuance of
the certificates. See "DESCRIPTION OF THE
MORTGAGE POOL--Certain Terms and Conditions of
the Mortgage Loans--Prepayment Provisions" in
this prospectus supplement.
TWENTY LARGEST MORTGAGE
LOANS......................... The following table describes certain
characteristics of the twenty largest mortgage
loans or groups of cross-collateralized
mortgage loans, in the trust fund by aggregate
principal balance as of the cut-off date. With
respect to the loans referred to as the Park
City Center mortgage loan and the Meadows Mall
mortgage loan in the immediately following
table, the loan balance per square foot, the
debt service coverage ratios and the
loan-to-value ratios set forth in such table,
in each case, are based on the aggregate
combined principal balance of each of the Park
City Center mortgage loan and the Meadows Mall
mortgage loan and its related pari passu
companion loan (but not any subordinate
companion loan) which, in each case, is pari
passu in the right of entitlement to payment
with each of the Park City Center mortgage loan
and the Meadows Mall mortgage loan, as
applicable. In each case, the related companion
loan is not included in the trust fund, and in
the case of the Park City Center mortgage loan,
the related subordinate companion loan is also
not included in the trust fund.
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NUMBER OF
MORTGAGE
LOANS/ % OF
MORTGAGE NUMBER OF CUT-OFF CUT-OFF
LOAN MORTGAGED DATE DATE POOL
LOAN NAME SELLER PROPERTIES BALANCE BALANCE
- ---------------------- ----------- ------------ -------------- -----------
TSA Office Building Wachovia 1 / 1 $ 95,000,000 8.3%
ABN
West Oaks Mall AMRO 1 / 1 75,912,850 6.6
Park City Center Eurohypo 1 / 1 65,841,900 5.7
Chula Vista Center Eurohypo 1 / 1 64,823,816 5.6
ABN
Meadows Mall AMRO 1 / 1 55,768,045 4.9
2 Rector Street Wachovia 1 / 1 43,200,000 3.8
Villas at Rancho
Palos Verdes Wachovia 1 / 1 36,000,000 3.1
Spring Valley
Market Place Wachovia 1 / 1 31,966,717 2.8
Chester Springs
Shopping Center Citigroup 1 / 1 24,949,094 2.2
T.J. Maxx Plaza Wachovia 1 / 1 24,600,000 2.1
------------ ------------ ----
SUBTOTAL/WTD. AVG. 10 / 10 $518,062,421 45.1%
============ ============ ====
Bellamay Grand LaSalle 1 / 1 $ 21,800,000 1.9%
Bellair Plaza Citigroup 1 / 1 21,779,381 1.9
Miller Place
Shopping Center Citigroup 1 / 1 20,219,345 1.8
Birkdale Commons LaSalle 1 / 1 18,179,357 1.6
Atlantic Palms LaSalle 1 / 1 18,000,000 1.6
Pavilion Crossings I Wachovia 1 / 1 16,250,000 1.4
Adagio Apartments Citigroup 1 / 1 14,976,883 1.3
Autumn Brook
Apartments Wachovia 1 / 1 13,450,629 1.2
Rolling Road
Commerce
Center & Mini
Storage Wachovia 1 / 1 12,966,670 1.1
Penn Station Studios Citigroup 1 / 1 12,800,000 1.1
------------ ------------ ----
SUBTOTAL/WTD. AVG. 10 / 10 $170,422,265 14.8%
============ ============ ====
TOTAL/WTD. AVG. 20 / 20 $688,484,686 59.9%
============ ============ ====
WEIGHTED WEIGHTED
AVERAGE AVERAGE
LOAN CUT-OFF LTV WEIGHTED
BALANCE WEIGHTED DATE RATIO AT AVERAGE
PER SF/ AVERAGE LTV MATURITY MORTGAGE
LOAN NAME PROPERTY TYPE UNIT DSCR RATIO OR ARD RATE
- ---------------------- ------------------- ----------- ---------- ---------- ---------- -----------
TSA Office Building Office - Suburban $ 193 2.51x 54.8% 54.8% 5.420%
West Oaks Mall Retail - Anchored $ 177 1.97x 62.0% 51.8% 5.252%
Park City Center Retail - Anchored $ 96 1.97x 60.4% 53.3% 4.736%
Chula Vista Center Retail - Anchored $ 155 2.05x 62.9% 57.4% 4.120%
Meadows Mall Retail - Anchored $ 357 1.74x 64.2% 53.8% 5.453%
2 Rector Street Office - CBD $ 104 1.58x 74.6% 63.0% 5.850%
Villas at Rancho Multifamily -
Palos Verdes Conventional $167,442 1.25x 70.2% 65.8% 5.517%
Spring Valley
Market Place Retail - Anchored $ 155 1.31x 78.8% 66.5% 5.770%
Chester Springs
Shopping Center Retail - Anchored $ 111 1.37x 76.5% 64.1% 5.510%
T.J. Maxx Plaza Retail - Anchored $ 194 1.25x 79.1% 75.9% 5.530%
SUBTOTAL/WTD. AVG. 1.87X 65.0% 58.0% 5.223%
Multifamily -
Bellamay Grand Conventional $ 60,556 1.32x 79.9% 67.6% 5.585%
Bellair Plaza Retail - Anchored $ 63 1.33x 63.8% 53.4% 5.400%
Miller Place
Shopping Center Retail - Anchored $ 211 1.35x 80.2% 67.9% 5.870%
Multifamily -
Birkdale Commons Conventional $ 58,267 1.43x 79.0% 65.7% 5.310%
Multifamily -
Atlantic Palms Conventional $ 57,692 1.34x 80.0% 70.0% 5.560%
Multifamily -
Pavilion Crossings I Conventional $ 56,424 1.23x 78.9% 68.1% 4.900%
Multifamily -
Adagio Apartments Conventional $ 74,884 1.36x 79.2% 66.9% 4.970%
Autumn Brook Multifamily -
Apartments Conventional $ 44,539 1.31x 70.4% 57.6% 4.750%
Rolling Road
Commerce
Center & Mini Mixed Use -
Storage Flex/Self Storage $ 56 1.44x 64.2% 50.4% 6.350%
Penn Station Studios Office - Suburban $ 170 1.66x 66.3% 59.4% 5.570%
SUBTOTAL/WTD. AVG. 1.37X 74.7% 63.1% 5.435%
TOTAL/WTD. AVG. 1.74X 67.4% 59.3% 5.275%
For more information on the twenty largest mortgage loans in the trust
fund, see "DESCRIPTION OF THE MORTGAGE POOL--Twenty Largest Mortgage Loans" in
this prospectus supplement.
CO-LENDER LOANS............... Six (6) mortgage loans to be included in the
trust that were originated or acquired by
Wachovia Bank, National Association, ABN AMRO
Bank N.V., Chicago Branch or Eurohypo AG, New
York Branch, representing approximately 15.8%
of the initial mortgage pool balance, are, in
each case, evidenced by one of two or more
notes which are secured by a single mortgaged
real property. In each case, the related
companion loan(s) will not be part of the trust
fund. One of these mortgage loans, loan number
3 (the Park City Center mortgage loan), is part
of a split loan structure where one of the
companion loans that is part of the split loan
structure is pari passu in right of entitlement
to payment and the other companion loan is
junior to the two mortgage loans that are pari
passu in right of entitlement to payment. One
of these
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mortgage loans, loan number 5 (the Meadows Mall
mortgage loan), is part of a split loan
structure where the companion loan that is part
of the split loan structure is pari passu in
right of entitlement to payment. The remaining
4 mortgage loans, loan numbers 7, 24, 26 and
66, are each part of a split loan structure in
which the related companion loan is junior to
the related mortgage loan. Each of these
mortgage loans and its related companion
loan(s) are subject to intercreditor
agreements. The intercreditor agreement for the
Park City Center mortgage loan and related
companion loans generally allocates collections
in respect of such loans first, to the related
mortgage loan and the related pari passu
companion loan on a pro rata basis and second,
to amounts due on the related subordinate
companion loan. The intercreditor agreement for
the Meadows Mall mortgage loan generally
allocates collections in respect of such
mortgage loan and the related companion loan on
a pari passu basis. With respect to the
mortgage loans where the related companion
loans are junior to such mortgage loan (other
than as described above for the Park City
Center loan), the related intercreditor
agreement, among other things, generally
allocates collections in respect of such loans
first, to amounts due on the mortgage loan in
the trust fund and second, to amounts due on
the related companion loan. The master servicer
and special servicer will service and
administer these mortgage loans and their
related companion loans (other than the Park
City Center mortgage loan and its related
companion loans) pursuant to the pooling and
servicing agreement and the related
intercreditor agreement for so long as the
related mortgage loan is part of the trust
fund. The Park City Center mortgage loan and
its related companion loans will be serviced
under the pooling and servicing agreement
entered into in connection with the issuance of
the Wachovia Bank Commercial Mortgage Trust,
Commercial Mortgage Pass-Through Certificates,
Series 2003-C8. The master servicer under the
2003-C8 pooling and servicing agreement is
Wachovia Bank, National Association and the
special servicer under the 2003-C8 pooling and
servicing agreement is Clarion Partners, LLC.
The terms of the 2003-C8 pooling and servicing
agreement are generally similar to the terms of
the pooling and servicing agreement for this
transaction. See "SERVICING OF THE MORTGAGE
LOANS--Servicing of the Park City Center Loan"
in this prospectus supplement.
With respect to 1 mortgage loan (loan number
24), the related intercreditor agreement allows
the trust fund and the related companion loan
to receive separate collections of principal
and interest prior to any material defaults.
Amounts attributable to any companion loan
will not be assets of the trust fund, and will
be beneficially owned by the holder of such
companion loan. See "DESCRIPTION OF
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THE MORTGAGE POOL--Co-Lender Loans" in this
prospectus supplement.
See "DESCRIPTION OF THE MORTGAGE
POOL--Co-Lender Loans" and "SERVICING OF THE
MORTGAGE LOANS" in this prospectus supplement
for a description of certain rights of the
holders of these companion loans to direct or
consent to the servicing of the related
mortgage loans.
S-38
RISK FACTORS
o You should carefully consider, among other things, the following risk
factors (as well as the risk factors set forth under "RISK FACTORS" in
the accompanying prospectus) before making your investment decision.
Additional risks are described elsewhere in this prospectus supplement
under separate headings in connection with discussions regarding
particular aspects of the mortgage loans included in the trust fund or
the certificates.
o The risks and uncertainties described below are not the only ones
relating to your certificates. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial may also
impair your investment.
o This prospectus supplement contains forward-looking statements that
involve risk and uncertainties. Actual results could differ materially
from those anticipated in these forward-looking statements as a result
of certain factors, including risks described below and elsewhere in
this prospectus supplement.
o If any of the following risks are realized, your investment could be
materially and adversely affected.
THE OFFERED CERTIFICATES
ONLY TRUST FUND ASSETS ARE
AVAILABLE TO PAY YOU......... Neither the offered certificates nor the
mortgage loans will be guaranteed or insured by
us or any of our affiliates, by any
governmental agency or instrumentality or by
any other person. If the assets of the trust
fund, primarily the mortgage loans, are
insufficient to make payments on the offered
certificates, no other assets will be available
for payment of the deficiency. See "RISK
FACTORS--The Assets of the Trust Fund May Not
Be Sufficient to Pay Your Certificates" in the
accompanying prospectus.
PREPAYMENTS WILL AFFECT
YOUR YIELD.................... Prepayments. The yield to maturity on the
offered certificates will depend on the rate
and timing of principal payments (including
both voluntary prepayments, in the case of
mortgage loans that permit voluntary
prepayment, and involuntary prepayments, such
as prepayments resulting from casualty or
condemnation, defaults, liquidations or
repurchases for breaches of representations or
warranties or other sales of defaulted mortgage
loans which in either case may not require any
accompanying prepayment premium or yield
maintenance charge) on the mortgage loans
included in the trust fund and how such
payments are allocated among the offered
certificates entitled to distributions of
In addition, upon the occurrence of certain
limited events, a party may be required or
permitted to repurchase or purchase a mortgage
loan from the trust fund and the money paid
would be passed through to the holders of the
certificates with the same effect as if such
mortgage loan had been prepaid in full (except
that no prepayment premium or yield maintenance
charge would be payable with respect to any
such purchase or repurchase). In addition,
certain mortgage loans may permit prepayment
without an accompanying prepayment premium or
yield maintenance charge if the mortgagee
elects to apply casualty or condemnation
proceeds to the mortgage loan. In fact, certain
mortgage loans
S-39
permit prepayment without an accompanying
prepayment premium or yield maintenance charge
in the event of a casualty or condemnation
affecting 10% or more of the value of the
mortgaged property. We cannot make any
representation as to the anticipated rate of
prepayments (voluntary or involuntary) on the
mortgage loans or as to the anticipated yield
to maturity of any certificate.
See "YIELD AND MATURITY CONSIDERATIONS" in this
prospectus supplement and "YIELD
CONSIDERATIONS" in the accompanying prospectus.
Yield. In general, if you purchase an offered
certificate at a premium and principal
distributions on that offered certificate occur
at a rate faster than you anticipated at the
time of purchase, and no prepayment premiums or
yield maintenance charges are collected, your
actual yield to maturity may be lower than you
had predicted at the time of purchase.
Conversely, if you purchase an offered
certificate at a discount and principal
distributions on that offered certificate occur
at a rate slower than you anticipated at the
time of purchase, your actual yield to maturity
may be lower than you had predicted at the time
of purchase.
The yield on the Class A-4, Class B, Class C,
Class D and Class E certificates could be
adversely affected if mortgage loans with
higher interest rates pay faster than 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.
Interest Rate Environment. Mortgagors generally
are less likely to prepay if prevailing
interest rates are at or above the rates borne
by their mortgage loans. On the other hand,
mortgagors are more likely to prepay if
prevailing interest rates fall significantly
below the mortgage interest rates of their
mortgage loans. Mortgagors are less likely to
prepay mortgage loans with a lockout period,
yield maintenance charge or prepayment premium
provision, to the extent enforceable, than
similar mortgage loans without such provisions,
with shorter lockout periods or with lower
yield maintenance charges or prepayment
premiums.
Performance Escrows. In connection with the
origination of some of the mortgage loans, the
related borrowers were required to escrow funds
or post a letter of credit related to obtaining
certain performance objectives. In general,
such funds will be released to the related
borrower upon the satisfaction of certain
conditions. If the conditions are not
satisfied, although the master servicer will be
directed in the pooling and servicing agreement
(in accordance with the servicing standard) to
hold the escrows, letters of credit or proceeds
of such letters of credit as additional
collateral and not use the funds to reduce the
principal balance of the related mortgage loan,
in the event such funds are required to be used
to reduce the principal balance of such
mortgage
S-40
loans, such amounts will be passed through to
the holders of the certificates as principal
prepayments.
Premiums. Provisions requiring prepayment
premiums and yield maintenance charges may not
be enforceable in some states and under federal
bankruptcy law, and may constitute interest for
usury purposes. Accordingly, we cannot provide
assurance that the obligation to pay such
premium or charge will be enforceable or, if
enforceable, that the foreclosure proceeds will
be sufficient to pay such prepayment premium or
yield maintenance charge. Additionally,
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, we cannot
provide assurance that a court would not
interpret such provisions as requiring a
prepayment premium or yield maintenance charge
and possibly determine that such provisions are
unenforceable or usurious under applicable law.
Prepayment premiums and yield maintenance
charges are generally not charged for
prepayments resulting from casualty or
condemnation and would not be paid in
connection with repurchases of mortgage loans
for breaches of representations or warranties.
No prepayment premium or yield maintenance
charge will be required for prepayments in
connection with a casualty or condemnation
unless, in the case of certain of the mortgage
loans, an event of default has occurred and is
continuing.
Pool Concentrations. Principal payments
(including prepayments) on the mortgage loans
included in the trust fund will occur at
different rates. In addition, mortgaged
properties can be released from the trust fund
as a result of prepayments, defeasance,
repurchases, casualties or condemnations. As a
result, the aggregate balance of the mortgage
loans concentrated in various property types in
the trust fund changes over time. You therefore
may be exposed to varying concentration risks
as the mixture of property types and relative
principal balance of the mortgage loans
associated with certain property types changes.
See the table entitled "Range of Remaining Term
to Maturity or Anticipated Repayment Date for
all Mortgage Loans as of the Cut-Off Date"
under "DESCRIPTION OF THE MORTGAGE
POOL--Additional Mortgage Loan Information" in
this prospectus supplement for a description of
the respective maturity dates of the mortgage
loans included in the trust fund. Because
principal on the certificates (other than the
Class X-C, Class X-P, Class Z, Class R-I and
Class R-II certificates) is payable in
sequential order to the extent described in
this prospectus supplement under "DESCRIPTION
OF THE CERTIFICATES--Distributions," classes
that have a lower priority of distributions are
more likely to be exposed to the risk of
changing concentrations discussed under
"--Special Risks Associated With High Balance
Mortgage Loans" below than classes with a
higher sequential priority.
S-41
OPTIONAL EARLY TERMINATION OF THE
TRUST FUND MAY RESULT IN AN
ADVERSE IMPACT ON YOUR YIELD OR
MAY RESULT IN A LOSS......... The offered certificates will be subject to
optional early termination by means of the
purchase of the mortgage loans in the trust
fund. We cannot assure you that the proceeds
from a sale of the mortgage loans will be
sufficient to distribute the outstanding
certificate balance plus accrued interest and
any undistributed shortfalls in interest
accrued on the certificates that are subject to
the termination. Accordingly, the holders of
offered certificates affected by such a
termination may suffer an adverse impact on the
overall yield on their certificates, may
experience repayment of their investment at an
unpredictable and inopportune time or may even
incur a loss on their investment. See
"DESCRIPTION OF THE CERTIFICATES--Termination"
in this prospectus supplement.
BORROWER DEFAULTS MAY ADVERSELY
AFFECT YOUR YIELD............ The aggregate amount of distributions on the
offered certificates, the yield to maturity of
the offered certificates, the rate of principal
payments on the offered certificates and the
weighted average life of the offered
certificates will be affected by the rate and
timing of delinquencies and defaults on the
mortgage loans included in the trust fund.
Delinquencies on the mortgage loans included in
the trust fund, if the delinquent amounts are
not advanced, may result in shortfalls in
distributions of interest and/or principal to
the offered certificates for the current month.
Any late payments received on or in respect of
the mortgage loans will be distributed to the
certificates in the priorities described more
fully in this prospectus supplement, but no
interest will accrue on such shortfall during
the period of time such payment is delinquent.
If you calculate your anticipated yield based
on an assumed default rate and an assumed
amount of losses on the mortgage pool that are
lower than the default rate and the amount of
losses actually experienced, and if such losses
are allocated to your class of certificates,
your actual yield to maturity will be lower
than the yield so calculated and could, under
certain scenarios, be negative. The timing of
any loss on a liquidated mortgage loan also
will affect the actual yield to maturity of the
offered certificates to which all or a portion
of such loss is allocable, even if the rate of
defaults and severity of losses are consistent
with your expectations. In general, the earlier
you bear a loss, the greater the effect on your
yield to maturity. See "YIELD AND MATURITY
CONSIDERATIONS" in this prospectus supplement
and "YIELD CONSIDERATIONS" in the accompanying
prospectus.
Even if losses on the mortgage loans included
in the trust fund are allocated to a particular
class of offered certificates, such losses may
affect the weighted average life and yield to
maturity of other certificates. Losses on the
mortgage loans,
S-42
to the extent not allocated to such class of
offered certificates, may result in a higher
percentage ownership interest evidenced by such
certificates than would otherwise have resulted
absent such loss. The consequent effect on the
weighted average life and yield to maturity of
the offered certificates will depend upon the
characteristics of the remaining mortgage
loans.
ADDITIONAL COMPENSATION TO THE
SERVICER WILL AFFECT YOUR RIGHT
TO RECEIVE DISTRIBUTIONS..... To the extent described in this prospectus
supplement, the master servicer or the trustee,
as applicable, will be entitled to receive
interest on unreimbursed advances and
unreimbursed servicing expenses. The right of
the master servicer or the trustee to receive
such payments of interest is senior to the
rights of certificateholders to receive
distributions on the offered certificates and,
consequently, may result in additional trust
fund expenses being allocated to the offered
certificates that would not have resulted
absent the accrual of such interest. In
addition, the special servicer will receive a
fee with respect to each specially serviced
mortgage loan and any collections thereon,
including specially serviced mortgage loans
which have been returned to performing status.
This will result in shortfalls which will be
allocated to the offered certificates.
SUBORDINATION OF SUBORDINATE
OFFERED CERTIFICATES......... As described in this prospectus supplement,
unless your certificates are Class A-1, Class
A-2, Class A-3, Class A-4, Class X-C or Class
X-P certificates, your rights to receive
distributions of amounts collected or advanced
on or in respect of the mortgage loans will be
subordinated to those of the holders of the
offered certificates with an earlier
alphabetical designation and the Class X-C and
Class X-P certificates.
See "DESCRIPTION OF THE CERTIFICATES--
Distributions--Application of the Available
Distribution Amount" and "DESCRIPTION OF THE
CERTIFICATES--Subordination; Allocation of
Losses and Certain Expenses" in this prospectus
supplement.
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
S-43
decision that you or other certificateholders
would have made and may negatively affect your
interests.
Under certain circumstances, the consent or
approval of less than all certificateholders
will be required to take, and will bind all
certificateholders to, certain actions relating
to the trust fund. The interests of those
certificateholders may be in conflict with
those of the other certificateholders. For
example, certificateholders of certain classes
that are subordinate in right of payment may
direct the actions of the special servicer with
respect to troubled mortgage loans and related
mortgaged properties. In certain circumstances,
the holder of a companion loan, mezzanine loan
or subordinate debt may direct the actions of
the special servicer with respect to the
related mortgage loan and the holder of
subordinate debt will have certain consent
rights relating to foreclosure or modification
of the related loans. The interests of such
holder of a companion loan, mezzanine loan or
subordinate debt may be in conflict with those
of the certificateholders.
Additionally, less than all of the
certificateholders may amend the pooling and
servicing agreement in certain circumstances.
See "SERVICING OF THE MORTGAGE LOANS--The
Controlling Class Representative" and
"DESCRIPTION OF THE CERTIFICATES--Voting
Rights" in this prospectus supplement and the
accompanying prospectus.
LIQUIDITY FOR CERTIFICATES
MAY BE LIMITED............... There is currently no secondary market for
the offered certificates. While each
underwriter has advised us that it intends to
make a secondary market in one or more classes
of the offered certificates, none of them are
under any obligation to do so. No secondary
market for your certificates may develop. If a
secondary market does develop, there can be no
assurance that it will be available for the
offered certificates or, if it is available,
that it will provide holders of the offered
certificates with liquidity of investment or
continue for the life of your certificates.
Lack of liquidity could result in a substantial
decrease in the market value of your
certificates. Your certificates will not be
listed on any securities exchange or traded in
any automated quotation system of any
registered securities association such as
NASDAQ.
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.
POTENTIAL CONFLICTS
OF INTEREST................... The master servicer is an affiliate of the
depositor and is one of the underwriters and
one of the mortgage loan sellers. This
affiliation could cause a conflict with the
master servicer's duties to the trust under the
pooling and servicing agreement.
S-44
However, the pooling and servicing agreement
provides that the mortgage loans shall be
administered in accordance with the servicing
standard described in this prospectus
supplement without regard to an affiliation
with any other party to the pooling and
servicing agreement. See "SERVICING OF THE
MORTGAGE LOANS--General" in this prospectus
supplement.
Wachovia Bank, National Association, which is
the master servicer, or one of its affiliates,
is also the holder of the companion loan with
respect to 1 mortgage loan, representing 0.4%
of the mortgage pool and may also purchase
certain classes of the certificates. This could
cause a conflict between Wachovia Bank,
National Association's duties to the trust
under the pooling and servicing agreement and
its or its affiliate's interest as a holder of
a companion loan.
The special servicer will be involved in
determining whether to modify or foreclose a
defaulted mortgage loan. The special servicer
or an affiliate of the special servicer may
purchase certain other non-offered certificates
(including the controlling class and the Class
Z certificates). An affiliate of the special
servicer may serve as the initial controlling
class representative. The special servicer or
its affiliates may acquire non-performing loans
or interests in non-performing loans, which may
include REO properties that compete with the
mortgaged properties securing mortgage loans in
the trust. The special servicer or its
affiliates own and are in the business of
acquiring assets similar in type to the assets
of the trust fund. The special servicer or its
affiliates may also make loans on properties
that may compete with the mortgaged properties
and may also advise other clients that own or
are in the business of owning properties that
compete with the mortgaged properties or that
own loans like the mortgage loans included in
the trust. Accordingly, the assets of the
special servicer and its affiliates may,
depending upon the particular circumstances
including the nature and location of such
assets, compete with the mortgaged properties
for tenants, purchasers, financing and so
forth. See "SERVICING OF THE MORTGAGE
LOANS--Modifications, Waivers and Amendments"
in this prospectus supplement.
This could cause a conflict between the special
servicer's duties to the trust under the
pooling and servicing agreement and its
interest as a holder of a certificate. However,
the pooling and servicing agreement provides
that the mortgage loans shall be administered
in accordance with the servicing standard
without regard to ownership of any certificate
by the master servicer, the special servicer or
any affiliate of the special servicer. See
"SERVICING OF THE MORTGAGE LOANS--General" in
this prospectus supplement.
LaSalle Bank National Association, which is
acting as the paying agent, authenticating
agent and certificate registrar, is also a
mortgage loan seller and an affiliate of one of
the underwriters and another mortgage loan
seller. This could
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cause a conflict between LaSalle Bank National
Association's duties to the trust under the
pooling and servicing agreement and its
interests as a mortgage loan seller and/or its
affiliate's interest as an underwriter and/or
mortgage loan seller, as applicable.
The Columbia Corporate Center mortgage loan
(loan number 26), representing 0.9% of the
mortgage pool, also has a subordinate companion
loan and the ownership interests of the related
borrower have been pledged to secure a
mezzanine loan. The holder of each of the
subordinate companion loan and mezzanine loan
is an affiliate of MONY Realty Capital, Inc.
MONY Realty Capital, Inc. will also be the
subservicer of the Columbia Corporate Center
mortgage loan and the related subordinate
companion loan. This could cause a conflict
between its interest as a subservicer, its
interest as holder of the subordinate companion
loan and its interest as a mezzanine lender. If
the mezzanine lender forecloses on its
ownership interest in the borrower, MONY is
required to be terminated as a subservicer of
the related mortgage loan and companion loan
pursuant ot the related subservicing agreement.
Pursuant to the interecreditor agreement
between the holder of the mortgage loan and the
holder of the companion loan, unless the
outstanding balance of the companion loan (less
all prepayments, appraisal reduction amounts
and realized losses) is less than 25% of the
initial balance of the companion loan, the
holder of the companion loan is entitled to
appoint an operating advisor to exercise
certain consent and other rights as described
under "DESCRIPTION OF THE MORTGAGE
POOL--Co-Lender Loans--Servicing Provisions of
the Intercreditor Agreements" in this
prospectus supplement. The operating advisor
may be the holder of the companion loan, one of
its affiliates or an unrelated third party
other than an affiliate of the related
borrower; however, if the mezzanine lender
forecloses on its interest, and an affiliate
thereof is the holder of the subordinate
companion loan, the holder of the subordinate
companion loan will not be permitted to
exercise certain of these control rights as
more fully described under "DESCRIPTION OF THE
MORTGAGE POOL--Co-Lender Loans--Servicing
Provisions of the Intercreditor Agreements."
However, a borrower or borrower affiliate owner
will still be permitted to consent to any sale
of the Loan Pair or the exercise of any rights
with respect to the master lease. See
"DESCRIPTION OF THE MORTGAGE POOL--Co-Lender
Loans--Servicing Provisions of the
Intercreditor Agreements" in this prospectus
supplement.
The mortgage loan secured by the Park City
Center mortgaged property and the related
companion loans is evidenced by two notes that
are pari passu in right of payment and one note
that is subordinate in right of payment to the
two notes that are pari passu in right of
payment. With respect to the Park City Center
mortgage loan, only one of these notes is
included in the trust fund. The pari passu
companion loan,
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which is not an asset of the trust fund, is
owned by the trust fund relating to the
Wachovia Bank Commercial Mortgage Trust,
Commercial Mortgage Pass-Through Certificates,
Series 2003-C8. The subordinate companion note
is owned by Eurohypo AG, New York Branch. The
Park City Center mortgage loan and the related
companion loans will be serviced pursuant to
the 2003-C8 pooling and servicing agreement.
In addition, the Villas at Rancho Palos Verdes
mortgage loan (loan number 7), representing
3.1% of the mortgage pool has a subordinate
companion loan that is held by principals of
the related borrower.
In addition, the related property managers and
borrowers may experience conflicts of interest
in the management and/or ownership of the
mortgaged properties securing the mortgage
loans 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;
o affiliates of the property manager
and/or the borrowers, or the property
managers and/or the borrowers themselves
also may own other properties, including
competing properties; or
o the mortgaged property is self managed.
In addition, certain mortgage loans included in
the trust may have been refinancings of debt
previously held by an affiliate of one of the
mortgage loan sellers.
RECENT TERRORIST ATTACKS MAY
ADVERSELY AFFECT
YOUR INVESTMENT............... On September 11, 2001, the United States was
subjected to multiple terrorist attacks which
resulted in considerable uncertainty in the
world financial markets. The full impact of
these events is not yet known, but could
include, among other things, increased
volatility in the price of securities including
your certificates. The terrorist attacks may
also adversely affect the revenues or costs of
operation of the mortgaged properties. The
terrorist attacks on the World Trade Center and
the Pentagon suggest an increased likelihood
that large public areas such as shopping malls
or large office buildings could become the
target of terrorist attacks in the future. The
possibility of such attacks could (i) lead to
damage to one or more of the mortgaged
properties if any such attacks occur, (ii)
result in higher costs for security and
insurance premiums, particularly for large
properties, which could adversely affect the
cash flow at such mortgaged properties, or
(iii) impact leasing patterns or shopping
patterns which could adversely impact leasing
revenue and mall
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traffic and percentage rent. As a result, the
ability of the mortgaged properties to
generate cash flow may be adversely affected.
See "--Insurance Coverage on Mortgaged
Properties May Not Cover Special Hazard
Losses" below.
The terrorist attacks and the military conflict
in Iraq may continue to significantly reduce
air travel throughout the United States, and,
therefore, continue to have a negative effect
on revenues in areas heavily dependent on
tourism. The decrease in air travel may have a
negative effect on certain of the mortgaged
properties, including hotel mortgaged
properties and those mortgaged properties
located in tourist areas, which could reduce
the ability of such mortgaged properties to
generate cash flow.
It is uncertain what continued effect armed
conflict involving the United States, including
the recent war between the United States and
Iraq or any future conflict with any other
country, will have on domestic and world
financial markets, economies, real estate
markets, insurance costs or business segments.
Foreign conflicts of any kind could have an
adverse effect on the mortgaged properties.
Accordingly, these disruptions, uncertainties
and costs could materially and adversely affect
your investment in the certificates.
THE MORTGAGE LOANS
RISKS ASSOCIATED WITH COMMERCIAL
LENDING MAY BE DIFFERENT THAN
FOR RESIDENTIAL LENDING...... Commercial and multifamily lending is
generally viewed as exposing a lender (and your
investment in the trust fund) to a greater risk
of loss than lending which is secured by
single-family residences, in part because it
typically involves making larger loans to
single borrowers or groups of related
mortgagors. In addition, unlike loans which are
secured by single-family residences, repayment
of loans secured by commercial and multifamily
properties depends upon the ability of the
related real estate project:
o to generate income sufficient to pay
debt service, operating expenses and
leasing commissions and to make
necessary repairs, tenant improvements
and capital improvements; and
o in the case of loans that do not fully
amortize over their terms, to retain
sufficient value to permit the borrower
to pay off the loan at maturity through
a sale or refinancing of the mortgaged
property.
FUTURE CASH FLOW AND PROPERTY
VALUES ARE NOT PREDICTABLE... A number of factors, many beyond the control
of the property owner, may affect the ability
of an income-producing real estate project to
generate sufficient net operating income to pay
debt service and/or to maintain its value.
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Among these factors are:
o economic conditions generally and in
the area of the project;
o the age, quality, functionality and
design of the project;
o the degree to which the project
competes with other projects in the
area;
o changes or continued weakness in
specific industry segments;
o increases in operating costs;
o the willingness and ability of the
owner to provide capable property
management and maintenance;
o the degree to which the project's
revenue is dependent upon a single
tenant or user, a small group of
tenants, tenants concentrated in a
particular business or industry and the
competition to any such tenants;
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 the location of a mortgaged property;
o whether a mortgaged property can be
easily converted (or converted at all)
to alternative uses;
o an increase in vacancy rates;
o perceptions regarding the safety,
convenience and attractiveness of such
properties;
o vulnerability to litigation by tenants
and patrons; and
o environmental contamination.
Many of the mortgaged properties securing
mortgage loans included in the trust fund have
leases that expire or may be subject to tenant
termination rights prior to the maturity date
of the related mortgage loan. Certain of such
loans may be leased entirely to a single
tenant. If leases are not renewed or replaced,
if tenants default, if rental rates fall and/or
if operating expenses increase, the borrower's
ability to repay the loan may be impaired and
the resale value of the property, which is
substantially dependent upon the property's
ability to generate income, may decline. Even
if borrowers successfully renew leases or relet
vacated space, the costs associated with
reletting, including tenant improvements,
leasing commissions and free rent, can exceed
the amount of any reserves maintained for that
purpose and reduce cash from the mortgaged
properties. Although some of the mortgage loans
included in the trust fund require the borrower
to
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maintain escrows for leasing expenses, there is
no guarantee that these reserves will be
sufficient. In addition, there are other
factors, including changes in zoning or tax
laws, restrictive covenants, tenant exclusives
and rights of first refusal to lease or
purchase, the availability of credit for
refinancing and changes in interest-rate levels
that may adversely affect the value of a
project and/or the borrower's ability to sell
or refinance without necessarily affecting the
ability to generate current income. In
addition, certain of the mortgaged properties
are leased in whole or in part by
government-sponsored tenants who may have
certain rights to cancel their leases or reduce
the rent payable with respect to such leases.
Each of the government tenants under the
Evergreen Valley Center mortgage loan (loan
number 38), representing 0.7% of the mortgage
pool, and the 2 Rector Street mortgage loan
(loan number 6), representing 3.8% of the
mortgage pool, which lease approximately 23.1%
and 17.3%, respectively, of the related
mortgaged properties, may terminate their
leases upon 90 days notice. The government
tenant under the Rolling Road Commerce Center &
Mini-Storage mortgage loan (loan number 19),
representing 1.1% of the mortgage pool, which
leases 21.1% of the related mortgaged property,
may terminate its lease at any time after
December 23, 2007. The government tenant under
the 90 State Street mortgage loan (loan number
27), representing 0.9% of the mortgage pool,
which leases approximately 26.4% of the related
mortgaged property, may terminate its lease
after August 30, 2004 upon 180 days notice. The
government tenant under the TSA Office Building
mortgage loan (loan number 1), representing
8.3% of the mortgage pool, which leases 100.0%
of the related mortgaged property, may
terminate its lease if the borrower fails to
deliver the leased space by the required
delivery dates. Pursuant to the lease, delivery
of the space was required to occur on phased
delivery dates with final occupancy of all
space to be completed by March 2004. As of
September 1, 2003 approximately 173,172 square
feet of space is still undelivered. A
Supplemental Lease Agreement, dated December 3,
2003, provides that the failure to deliver the
space in accordance with the foregoing schedule
will not give the tenant the right to terminate
the lease, and the borrower and the tenant are
finalizing a new delivery schedule. To the
extent a new delivery schedule is agreed upon,
we cannot assure you that the borrower will
deliver the required space to the tenant by any
new delivery date agreed to by the tenant under
the lease, or if the borrower fails to meet any
new delivery date, that the tenant will not be
permitted to terminate the lease at such time.
Because the lease is the sole source of income
to the borrower, in the event the lease is
terminated, the borrower would have no
immediate income to make the required debt
service payment unless it promptly relets the
premises. However, the lender required a $1.5
million letter of credit to be posted which
will only be
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released once the tenant has taken occupancy of
phase 3 and is paying full unabated rent. See
"--Single Tenants and Concentration of Tenants
Subject the Trust Fund to Increased Risk" below
and "DESCRIPTION OF THE MORTGAGE POOL--Twenty
Largest Mortgage Loans--TSA Office Building
Loan" in this prospectus supplement.
Other factors are more general in nature, such
as:
o national, regional or local economic
conditions (including plant and military
installation 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 changes in building codes and other
applicable laws.
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;
o the property's "operating leverage"
(i.e., the percentage of total property
expenses in relation to revenue, the
ratio of fixed operating expenses to
those that vary with revenues and the
level of capital expenditures required
to maintain the property and to retain
or replace tenants); and
o 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 property with short-term
revenue sources, such as short-term or
month-to-month leases, and may lead to
higher rates of delinquency or defaults.
SOME MORTGAGED PROPERTIES MAY
NOT BE READILY CONVERTIBLE TO
ALTERNATIVE USES............. Some of the mortgaged properties securing the
mortgage loans included in the trust fund may
not be readily convertible (or convertible at
all) to alternative uses if those properties
were to become unprofitable for any reason. For
example, a mortgaged property may not be
readily convertible due to restrictive
covenants related to such mortgaged property,
including mortgaged properties which are part
of a condominium regime, the use and other
restrictions imposed by the condominium
declaration and other related documents,
especially in a situation where a mortgaged
property does not represent the entire
condominium regime. In addition, converting
commercial properties to alternate uses
S-51
generally requires substantial capital
expenditures. The liquidation value of any
mortgaged property, subject to limitations of
the kind described above or other limitations
on convertibility of use, may be substantially
less than would be the case if the property
were readily adaptable to other uses.
See "--Special Risks Associated with Mobile
Home Park Properties" and "--Special Risks
Associated with Industrial and Mixed Use
Facilities" below.
LOANS NOT INSURED
OR GUARANTEED................. Generally, the mortgage loans included in the
trust fund will not be an obligation of, or be
insured or guaranteed by, any governmental
entity, by any private mortgage insurer, or by
the depositor, any mortgage loan seller, the
underwriters, the master servicer, the special
servicer, the trustee, the paying agent or any
of their respective affiliates.
We have not evaluated the significance of the
recourse provisions of mortgage loans that may
permit recourse against the related borrower or
another person in the event of a default.
Accordingly, you should assume all of the
mortgage loans included in the trust fund are
nonrecourse loans, and that recourse in the
case of default will be limited to the related
mortgaged property.
However, in certain circumstances a mortgage
loan seller will be obligated to repurchase or
substitute a mortgage loan sold by it if:
o there is a defect or omission with
respect to certain of the documents
relating to such mortgage loan and such
defect or omission materially and
adversely affects the value of a
mortgage loan or the interests of the
trust therein or the interests of any
certificateholder; or
o certain of their respective
representations or warranties concerning
such mortgage loan are breached, and
such breach materially and adversely
affects the value of such mortgage loan,
the interests of the trust therein or
the interests of any certificateholder
and is not cured as required.
We cannot provide assurance that the applicable
mortgage loan seller will be in a financial
position to make such a repurchase or
substitution.
RISKS RELATING TO CERTAIN
PROPERTY TYPES............... Particular types of income properties are
exposed to particular risks. For instance:
SPECIAL RISKS ASSOCIATED WITH
SHOPPING CENTERS AND OTHER
RETAIL PROPERTIES............ Shopping centers are affected by the health
of the retail industry, which is currently
undergoing a consolidation and is experiencing
changes due to the growing market share of
"off-price" retailing, including the popularity
of home shopping networks, shopping via
Internet web sites and
S-52
telemarketing. A particular shopping center may
be adversely affected by the bankruptcy or
decline in drawing power of an anchor, shadow
anchor or major tenant, a shift in consumer
demand due to demographic changes (for example,
population decreases or changes in average age
or income) and/or changes in consumer
preference (for example, to discount
retailers).
In the case of retail properties, the failure
of an anchor, shadow anchor or major tenant to
renew its lease, the termination of an anchor,
shadow anchor or major tenant's lease, the
bankruptcy or economic decline of an anchor,
shadow anchor or major tenant, or the cessation
of the business of an anchor, shadow anchor or
major tenant at its store, notwithstanding that
such tenant may continue payment of rent after
"going dark," may have a particularly negative
effect on the economic performance of a
shopping center property given the importance
of anchor tenants, shadow anchor tenants and
major tenants in attracting traffic to other
stores within the same shopping center. In
addition, the failure of one or more major
tenants, such as an anchor or shadow anchor
tenant, to operate from its premises may
entitle other tenants to rent reductions or the
right to terminate their leases. See "--The
Failure of a Tenant Will Have a Negative Impact
on Single and Tenant Concentration Properties"
below.
In addition, certain of the mortgage loans
secured by retail mortgaged properties, such as
the West Oaks Mall mortgage loan (loan number
2), representing 6.6% of the mortgage pool,
have movie theaters as tenants. These mortgaged
properties are exposed to certain unique risks.
In recent years, the theater industry has
experienced a high level of construction of new
theaters and an increase in competition among
theater operators. This new construction has
caused some operators to experience financial
difficulties, resulting in downgrades in their
credit ratings and, in certain cases,
bankruptcy filings. In addition, because of the
unique construction requirements of theaters,
any vacant theater space would not easily be
converted to other uses.
Retail properties, including shopping centers,
secure 47 of the mortgage loans included in the
trust fund as of the cut-off date, representing
48.5% of the mortgage pool.
SPECIAL RISKS ASSOCIATED WITH
MULTIFAMILY PROJECTS......... Multifamily projects are part of a market
that, in general, is characterized by low
barriers to entry. Thus, a particular apartment
market with historically low vacancies could
experience substantial new construction and a
resultant oversupply of units in a relatively
short period of time. Since multifamily
apartment units are typically leased on a
short-term basis, the tenants who reside in a
particular project within such a market may
easily move to alternative projects with more
desirable amenities or locations.
S-53
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 (for example, its
age, appearance and construction
quality);
o the location of the property (for
example, a change in the neighborhood
over time);
o the ability of management to provide
adequate maintenance and insurance;
o the types of services and amenities
that the property provides;
o the property's reputation;
o the level of mortgage interest rates
(which, if relatively low, may encourage
tenants to purchase rather than lease
housing);
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 dependence upon governmental programs
that provide rent subsidies to tenants
pursuant to tenant voucher programs or
tax credits to developers to provide
certain types of development;
o the presence of competing properties;
o adverse local or national economic
conditions; and
o state and local regulations.
Furthermore, multifamily projects may be
subject to various tax credit, city, state and
federal housing subsidies, rent stabilization
or similar programs. The limitations and
restrictions imposed by these programs could
result in realized losses on the mortgage
loans. In addition, in the event that the
program is cancelled, it could result in less
income for the project. These programs may
include:
o rent limitations that could adversely
affect the ability of borrowers to
increase rents to maintain the condition
of their mortgaged properties and
satisfy operating expenses; and
o tenant income restrictions that may
reduce the number of eligible tenants in
those mortgaged properties and result in
a reduction in occupancy rates.
The differences in rents between subsidized or
supported properties and other multifamily
rental properties in the same area may not be a
sufficient economic incentive for some eligible
tenants to reside at a subsidized or supported
property that may have fewer amenities or be
less attractive
S-54
as a residence. As a result, occupancy levels
at a subsidized or supported property may
decline, which may adversely affect the value
and successful operation of such property.
Multifamily properties secure 43 of the
mortgage loans included in the trust fund as of
the cut-off date, representing 27.6% of the
mortgage pool.
SPECIAL RISKS ASSOCIATED WITH
OFFICE PROPERTIES............ Office properties may require their owners to
expend significant amounts of cash to pay for
general capital improvements, tenant
improvements and costs of re-leasing space.
Office properties that are not equipped to
accommodate the needs of modern businesses may
become functionally obsolete and thus
non-competitive.
In addition, 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 physical attributes of the building
with respect to the technological needs
of the tenants, including the
adaptability of the building to changes
in the technological needs of the
tenants;
o the desirability of the area as a
business location;
o the presence of competing properties;
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 properties for new
tenants.
Office properties secure 7 of the mortgage
loans included in the trust fund as of the
cut-off date, representing 15.9% of the
mortgage pool.
SPECIAL RISKS ASSOCIATED WITH
MOBILE HOME PARK PROPERTIES.. Mortgage loans secured by liens on mobile
home park properties pose risks not associated
with mortgage loans secured by liens on other
types of income-producing real estate.
The successful operation of a mobile home park
property may depend upon the number of other
competing residential developments in the local
market, such as:
o other mobile home park properties;
o apartment buildings; and
S-55
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 mobile home park
property;
o the ability of management to provide
adequate maintenance and insurance;
o the types of services or amenities it
provides;
o the property's reputation; and
o state and local regulations, including
rent control and rent stabilization.
The mobile home park 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 mobile home park 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 mobile home park property may be
substantially less, relative to the amount
owing on the related mortgage loan, than would
be the case if the mobile home park property
were readily adaptable to other uses.
Mobile home park properties secure 13 of the
mortgage loans, representing 3.4% of the
mortgage pool.
SPECIAL RISKS ASSOCIATED WITH
INDUSTRIAL AND MIXED USE
FACILITIES .................. Industrial and mixed use facilities present
risks not associated with other properties.
Significant factors determining the value of
industrial properties include:
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 tenant.
In addition, properties used for many
industrial purposes are more prone to
environmental concerns than other property
types.
Aspects of building site design and
adaptability affect the value of an industrial
property. Site characteristics which are
valuable to an industrial property include
clear ceiling heights, column spacing, zoning
restrictions, number of bays and bay depths,
divisibility, truck turning radius and overall
functionality and accessibility. In addition,
because of the unique construction requirements
of many industrial properties, any vacant
industrial property may not be easily converted
to other uses. Location is also important
because an industrial
S-56
property requires the availability of labor
sources, proximity to supply sources and
customers and accessibility to rail lines,
major roadways and other distribution channels.
Industrial properties may be adversely affected
by reduced demand for industrial space
occasioned by a decline in a particular
industry segment (e.g., a decline in defense
spending), and a particular industrial 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 than with respect
to other properties and may result in a
substantial percentage of leases expiring in
the same year at any particular industrial
property.
Industrial and mixed use facilities secure 5 of
the mortgage loans included in the trust fund
as of the cut-off date, representing 3.3% of
the mortgage pool.
ENVIRONMENTAL LAWS MAY
ADVERSELY AFFECT THE VALUE
OF AND CASH FLOW FROM A
MORTGAGED PROPERTY........... If an adverse environmental condition exists
mortgage loan with respect to a mortgaged
property securing a included in the trust fund,
the trust fund may be subject to certain risks
including the following:
o a reduction in the value of such
mortgaged property which may make it
impractical or imprudent to foreclose
against such mortgaged property;
o the potential that the related borrower
may default on the related mortgage loan
due to such borrower's inability to pay
high remediation costs or costs of
defending lawsuits due to an
environmental impairment or difficulty
in bringing its operations into
compliance with environmental laws;
o liability for clean-up costs or other
remedial actions, which could exceed the
value of such mortgaged property or the
unpaid balance of the related mortgage
loan; and
o the inability to sell the related
mortgage loan in the secondary market or
to lease such mortgaged property to
potential tenants.
Under certain federal, state and local laws,
federal, state and local agencies may impose a
statutory lien over affected property to secure
the reimbursement of remedial costs incurred by
these agencies to correct adverse environmental
conditions. This lien may be superior to the
lien of an existing mortgage. Any such lien
arising with respect to a mortgaged property
securing a mortgage loan included in the trust
fund would adversely affect the value of such
mortgaged property and could make impracticable
the foreclosure by the special servicer on such
mortgaged property in the event of a default by
the related borrower.
Under various federal, state and local laws,
ordinances and regulations, a current or
previous owner or operator of real
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property, as well as certain other types of
parties, may be liable for the costs of
investigation, removal or remediation of
hazardous or toxic substances on, under,
adjacent to or in such property. The cost of
any required investigation, delineation and/or
remediation and the owner's liability therefor
is generally not limited under applicable laws.
Such liability could exceed the value of the
property and/or the aggregate assets of the
owner. Under some environmental laws, a secured
lender (such as the trust fund) may be found to
be an "owner" or "operator" of the related
mortgaged property if it is determined that the
lender actually participated in the hazardous
waste management of the borrower, regardless of
whether the borrower actually caused the
environmental damage. In such cases, a secured
lender may be liable for the costs of any
required investigation, removal or remediation
of hazardous substances. The trust fund's
potential exposure to liability for
environmental costs will increase if the trust
fund, or an agent of the trust fund, actually
takes possession of a mortgaged property or
control of its day-to-day operations. See
"CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND
LEASES--Environmental Considerations" in the
accompanying prospectus, and "DESCRIPTION OF
THE MORTGAGE POOL--Assessments of Property
Condition--Environmental Assessments" in this
prospectus supplement.
A third-party environmental consultant
conducted an environmental site assessment (or
updated a previously conducted environmental
site assessment) with respect to each mortgaged
property securing a mortgage loan included in
the trust fund. Such assessments do not
generally include invasive environmental
testing. In each case where the environmental
site assessment or update revealed a material
adverse environmental condition or circumstance
at any mortgaged property, then (depending on
the nature of the condition or circumstance)
one or more of the following actions has been
or is expected to be taken:
o an environmental consultant
investigated those conditions and
recommended no further investigations
or remediation; or
o an environmental insurance policy,
having the characteristics described
below, was obtained from a third-party
insurer; or
o either (i) an operations and maintenance
program, including, in several cases,
with respect to asbestos-containing
materials, lead-based paint, microbial
matter and/or radon, or periodic
monitoring of nearby properties, has
been or is expected to be implemented in
the manner and within the time frames
specified in the related loan documents,
or (ii) remediation in accordance with
applicable law or regulations has been
performed, is currently being performed
or is expected to be performed either by
the borrower or by the party responsible
for the contamination; or
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o an escrow or reserve was established to
cover the estimated cost of remediation,
with each remediation required to be
completed within a reasonable time frame
in accordance with the related loan
documents; or
o the related borrower or other
responsible party having financial
resources reasonably estimated to be
adequate to address the related
condition or circumstance is required to
take (or is liable for the failure to
take) actions, if any, with respect to
those circumstances or conditions that
have been required by the applicable
governmental regulatory authority or any
environmental law or regulation.
We cannot provide assurance, however, that the
environmental assessments identified all
environmental conditions and risks, that the
related borrowers will implement all
recommended operations and maintenance plans,
that such plans will adequately remediate the
environmental condition, or that any
environmental indemnity, insurance or escrow
will fully cover all potential environmental
conditions and risks. In addition, the
environmental condition of the underlying real
properties could be adversely affected by
tenants or by the condition of land or
operations in the vicinity of the properties,
such as underground storage tanks.
With respect to 11 mortgage loans, representing
2.7% of the mortgage pool, the related borrower
was required to obtain (or the related mortgage
loan seller has obtained) a secured creditor
impaired property environmental insurance
policy in lieu of or in addition to
environmental escrows established, or in
certain cases, in lieu of a guarantee of a
sponsor. The premium for each policy was paid
in full at origination of the loan and:
o with respect to 7 mortgage loans (loan
numbers 101, 107, 108, 109, 112, 113 and
116), representing approximately 0.9% of
the mortgage pool, the issuer has a
financial strength rating of "A+" from
S&P and each of these policies is in the
amount of the lesser of the loan amount
or the cost of cleanup with no
deductible;
o with respect to 2 mortgage loans (loan
numbers 34 and 68), representing
approximately 1.1% of the mortgage pool,
the issuer has a financial strength
rating of "AA" from S&P and each of
these policies is in the amount equal to
the loan amount with no deductible;
o with respect to 1 mortgage loan (loan
number 103), representing approximately
0.2% of the mortgage pool, the issuer
has a financial strength rating of "AA"
from S&P and this policy has a limit of
liability in an amount equal to 125% of
the full principal amount of the
applicable loan with no deductible; and
o with respect to 1 mortgage loan (loan
number 43),
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representing approximately 0.6% of the
mortgage pool, the issuer has a
financial strength rating of "AAA" from
S&P and each policy has a limit of
liability in an amount greater than or
equal to the full principal amount of
the applicable loan with no deductible.
We cannot provide assurance, however, that
should such coverage be needed, coverage would
be available or uncontested, that the terms and
conditions of such coverage would be met, that
coverage would be sufficient for the claims at
issue or that coverage would not be subject to
certain deductibles.
With respect to the Park City Center mortgage
loan (loan number 3), representing 5.7% of the
mortgage pool, a past release of gasoline
beneath the related mortgaged property impacted
the groundwater of an adjacent property. We
have been informed by the related mortgage loan
seller that the responsible parties have
undertaken a plan of remediation with the
approval and oversight of the Pennsylvania
Department of Environmental Protection and that
the related borrowers have provided an
environmental indemnity with respect to such
remediation. See "DESCRIPTION OF THE MORTGAGE
POOL--Twenty Largest Mortgage Loans--Park City
Center" in this prospectus supplement.
With respect to Chula Vista mortgage loan (loan
number 4), representing 5.6% of the mortgage
pool, a prior release of petroleum from a
former fuel station impacted the groundwater
and soil of the related mortgaged property. A
certified environmental professional was
engaged by the related borrower to notify the
San Diego County Department of Environmental
Health of the condition and address such
condition under their supervision. The related
borrower has provided an environmental
indemnity with respect to such remediation. See
"DESCRIPTION OF THE MORTGAGE POOL--Twenty
Largest Mortgage Loans--Chula Vista" in this
prospectus supplement.
With respect to the Chester Springs mortgage
loan (loan number 9), representing 2.2% of the
mortgage pool, a past release of dry cleaning
chemicals has been identified in soils and
groundwater on the mortgaged property. The
borrower entered into an agreement with the New
Jersey Department of Environmental Protection
to investigate and, if necessary, clean up the
contamination. The borrower submitted a claim
under the pollution legal liability policy that
covers the property and the issuing insurer, a
subsidiary of American International Group, has
agreed to cover the claim if remediation is
required, subject to a $50,000 deductible. See
"DESCRIPTION OF THE MORTGAGE POOL--Twenty
Largest Mortgage Loans--Chester Springs
Shopping Center" in this prospectus supplement.
With respect to the CVS-Wilmington, NC loan
(loan number 103), representing 0.2% of the
mortgage pool, a prior release of dry cleaning
chemicals on an adjacent site has migrated onto
the mortgaged property. We have been informed
by the
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related mortgage loan seller that the
responsible parties have been identified and a
plan of remediation and monitoring has been in
place since 1996. The responsible parties have
provided an indemnity for the benefit of the
owner of the mortgaged property and any
subsequent owner or mortgagee with respect to
such remediation, and the borrower has provided
a secured creditor impaired environmental
insurance policy with respect to the mortgaged
property.
The pooling and servicing agreement will
require that the special servicer obtain an
environmental site assessment of a mortgaged
property securing a mortgage loan included in
the trust fund prior to taking possession of
the property through foreclosure or otherwise
or assuming control of its operation. Such
requirement effectively precludes enforcement
of the security for the related mortgage note
until a satisfactory environmental site
assessment is obtained (or until any required
remedial action is thereafter taken), but will
decrease the likelihood that the trust fund
will become liable for a material adverse
environmental condition at the mortgaged
property. However, we cannot give assurance
that the requirements of the pooling and
servicing agreement will effectively insulate
the trust fund from potential liability for a
materially adverse environmental condition at
any mortgaged property. See "DESCRIPTION OF THE
POOLING AND SERVICING AGREEMENTS--Realization
upon Defaulted Mortgage Loans," "RISK
FACTORS--Environmental Liability May Affect the
Lien on a Mortgaged Property and Expose the
Lender to Costs" and "CERTAIN LEGAL ASPECTS OF
MORTGAGE LOANS AND LEASES--Environmental
Considerations" in the accompanying prospectus.
SPECIAL RISKS ASSOCIATED WITH
BALLOON LOANS AND ANTICIPATED
REPAYMENT DATE LOANS ......... One hundred twelve (112) of the mortgage loans,
representing 99.3% of the mortgage pool,
provide for scheduled payments of principal
and/or interestbased on amortization schedules
significantly longer than their respective
remaining terms to maturity or provide for
payments of interest only until the respective
maturity date and, in each case, a balloon
payment on their respective maturity dates.
Sixteen (16) of these mortgage loans included
in the trust fund as of the cut-off date,
representing 21.7% of the mortgage pool, are
anticipated repayment date loans, which provide
that if the principal balance of the loan is
not repaid on a date specified in the related
mortgage note, the loan will accrue interest at
an increased rate.
o A borrower's ability to make a balloon
payment or repay its anticipated
repayment date loan on the anticipated
repayment date typically will depend
upon its ability either to refinance
fully the loan or to sell the related
mortgaged property at a price sufficient
to permit the borrower to make such
payment.
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o Whether or not losses are ultimately
sustained, any delay in the collection
of a balloon payment on the maturity
date or repayment on the anticipated
repayment date that would otherwise be
distributable on your certificates will
likely extend the weighted average life
of your certificates.
o The ability of a borrower to effect a
refinancing or sale will be affected by
a number of factors, including (but not
limited to) the value of the related
mortgaged property, the level of
available mortgage rates at the time of
sale or refinancing, the borrower's
equity in the mortgaged property, the
financial condition and operating
history of the borrower and the
mortgaged property, rent rolling status,
rent control laws with respect to
certain residential properties, tax
laws, prevailing general and regional
economic conditions and the availability
of credit for loans secured by
multifamily or commercial properties, as
the case may be.
We cannot assure you that each borrower under a
balloon loan or an anticipated repayment date
loan will have the ability to repay the
principal balance of such mortgage loan on the
related maturity date or anticipated repayment
date, as applicable. In addition, fully
amortizing mortgage loans which pay interest on
an "actual/360" basis but have fixed monthly
payments may, in fact, have a small balloon
payment due at maturity. For additional
description of risks associated with balloon
loans, see "RISK FACTORS--Balloon Payments on
Mortgage Loans Result in Heightened Risk of
Borrower Default" in the accompanying
prospectus.
In order to maximize recoveries on defaulted
mortgage loans, the pooling and servicing
agreement permits the special servicer to
extend and modify mortgage loans that are in
material default or as to which a payment
default (including the failure to make a
balloon payment) is imminent; subject, however,
to the limitations described under "SERVICING
OF THE MORTGAGE LOANS--Modifications, Waivers
and Amendments" in this prospectus supplement.
We cannot provide assurance, however, that any
such extension or modification will increase
the present value of recoveries in a given
case. Any delay in collection of a balloon
payment that would otherwise be distributable
on your certificates, whether such delay is due
to borrower default or to modification of the
related mortgage loan, will likely extend the
weighted average life of your certificates. See
"YIELD AND MATURITY CONSIDERATIONS" in this
prospectus supplement and "YIELD
CONSIDERATIONS" in the accompanying prospectus.
ADVERSE CONSEQUENCES ASSOCIATED
WITH BORROWER CONCENTRATION,
BORROWERS UNDER COMMON CONTROL
AND RELATED BORROWERS ........ Certain borrowers under the mortgage loans
included in the trust fund are affiliated or
under common control with one another. In such
circumstances, any adverse circumstances
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relating to a borrower or an affiliate thereof
and affecting one of the related mortgage loans
or mortgaged properties could also affect other
mortgage loans or mortgaged properties of the
related borrower. In particular, the bankruptcy
or insolvency of any such borrower or affiliate
could have an adverse effect on the operation
of all of the mortgaged properties of that
borrower and its affiliates and on the ability
of such related mortgaged properties to produce
sufficient cash flow to make required payments
on the mortgage loans. For example, if a person
that owns or directly or indirectly controls
several mortgaged properties experiences
financial difficulty at one mortgaged property,
they could defer maintenance at one or more
other mortgaged properties in order to satisfy
current expenses with respect to the mortgaged
property experiencing financial difficulty, or
they could attempt to avert foreclosure by
filing a bankruptcy petition that might have
the effect of interrupting payments for an
indefinite period on all the related mortgage
loans. In particular, such person experiencing
financial difficulty or becoming subject to a
bankruptcy proceeding may have an adverse
effect on the funds available to make
distributions on the certificates and may lead
to a downgrade, withdrawal or qualification (if
applicable) of the ratings of the certificates.
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 included in
the trust fund; and
o have common general partners or managing
members which would increase the risk
that a financial failure or bankruptcy
filing would have a greater impact on
the pool of mortgage loans included in
the trust fund.
One group of Eckerd loans (loan numbers 78, 83,
89 and 100) consists of 4 mortgage loans which
collectively represent 1.0% of the mortgage
pool. These mortgage loans are
cross-collateralized and cross-defaulted and
share common sponsors. The sponsors of each
mortgage loan in this group of Eckerd loans are
Eliecer Sredni and Erwin Sredni.
The Norridge concentration (loan numbers 90 and
91) consists of 2 mortgage loans which
collectively represent 0.5% of the mortgage
pool. These mortgage loans are
cross-collateralized and cross-defaulted and
share a common sponsor. The sponsor of each
mortgage loan in the Norridge concentration is
John McLinden.
The GGP concentration (loan numbers 2, 3, 4,
and 5) consists of 4 mortgage loans which
collectively represent 22.8% of the mortgage
pool. These mortgage loans are not
cross-collateralized or cross-defaulted but
have a common sponsor.
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The sponsor of each mortgage loan in the GGP
concentration is General Growth Properties,
Inc. See "--Poor Property Management Will Lower
Performance of the Related Mortgaged Property"
and "DESCRIPTION OF THE MORTGAGE POOL--Twenty
Largest Mortgage Loans" in this prospectus
supplement.
Although the mortgage loans within an
individual portfolio are generally
cross-collateralized and cross-defaulted with
the other mortgage loans in such portfolio, the
mortgage loans in one portfolio are not
cross-collateralized or cross-defaulted with
the mortgage loans in the other portfolio. No
group or borrower concentration represents more
than 22.8% of the mortgage pool.
THE GEOGRAPHIC CONCENTRATION
OF MORTGAGED PROPERTIES
SUBJECTS THE TRUST FUND TO A
GREATER EXTENT TO STATE AND
REGIONAL CONDITIONS ......... Except as indicated in the following tables,
less than 5.0% of the mortgage loans, by cut-off
date pool balance, are secured by mortgaged
properties in any one state or the District of
Columbia.
MORTGAGED PROPERTIES BY GEOGRAPHIC CONCENTRATION
NUMBER OF PERCENTAGE OF
MORTGAGED AGGREGATE CUT-OFF CUT-OFF DATE
STATE PROPERTIES DATE BALANCE POOL BALANCE
- ----------------------- ------------ ------------------- --------------
CA .................. 18 $ 233,868,495 20.4%
Southern(1) ....... 14 186,597,584 16.2
Northern(1) ....... 4 47,270,911 4.1
FL .................. 11 153,603,015 13.4
NY .................. 12 141,433,216 12.3
VA .................. 3 107,280,221 9.3
PA .................. 3 68,804,249 6.0
NV .................. 3 62,068,858 5.4
NC .................. 11 60,640,831 5.3
Other ............... 57 321,512,811 28.0
-- -------------- -----
TOTAL ........... 118 $1,149,211,695 100.0%
=== ============== =====
- ----------
(1) For purposes of determining whether a mortgaged property is in Northern
California or Southern California, mortgaged properties located north of
San Luis Obispo County, Kern County and San Bernardino County were included
in Northern California and mortgaged properties located in or south of such
counties were included in Southern California.
The concentration of mortgaged properties in a
specific state or region will make the
performance of the trust fund as a whole more
sensitive to the following in the state or
region where the mortgagors and the mortgaged
properties are located:
o economic conditions;
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o conditions in the real estate market;
o changes in governmental rules and
fiscal policies;
o acts of God or terrorism (which may
result in uninsured losses); and
o other factors which are beyond the
control of the mortgagors.
For more information regarding the
concentration of mortgaged properties in
California, see "DESCRIPTION OF THE MORTGAGE
POOL--Certain State Specific Considerations" in
this prospectus supplement.
SPECIAL RISKS ASSOCIATED WITH
HIGH BALANCE MORTGAGE LOANS.... Several of the mortgage loans included in the
trust fund, individually or together with other
such mortgage loans with which they are
cross-collateralized, have principal balances
as of the cut-off date that are substantially
higher than the average principal balance of
the mortgage loans in the trust fund as of the
cut-off date.
In general, concentrations in a mortgage pool
of loans with larger-than-average balances can
result in losses that are more severe, relative
to the size of the pool, than would be the case
if the aggregate balance of the pool were more
evenly distributed.
o The largest single mortgage loan
included in the trust fund as of the
cut-off date represents 8.3% of the
mortgage pool.
o The largest group of cross-
collateralized mortgage loans included
in the trust fund as of the cut-off date
represents in the aggregate 1.0% of the
mortgage pool.
o The five largest mortgage loans or
groups of cross-collateralized mortgage
loans included in the trust fund as of
the cut-off date represent, in the
aggregate, 31.1% of the mortgage pool.
o The ten largest mortgage loans or groups
of cross-collateralized mortgage loans
included in the trust fund as of the
cut-off date represent, in the
aggregate, 45.1% of the mortgage pool.
CONCENTRATION OF MORTGAGED PROPERTY
TYPES SUBJECT THE TRUST FUND TO
INCREASED RISK OF DECLINE IN A
PARTICULAR INDUSTRY.......... A concentration of mortgaged property types
can increase the risk that a decline in a
particular industry or business would have a
disproportionately large impact on a pool of
mortgage loans. For example, if there is a
decline in tourism, the hotel industry might
be adversely affected, leading to increased
losses on loans secured by hospitality
properties as compared to the mortgage loans
secured by other property types.
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In that regard:
o mortgage loans included in the trust
fund and secured by retail properties
represent as of the cut-off date 48.5%
of the mortgage pool (based on the
primary property type for combined
office/retail properties);
o mortgage loans included in the trust
fund and secured by multifamily
properties represent as of the cut-off
date 27.6% of the mortgage pool;
o mortgage loans included in the trust
fund and secured by office properties
represent as of the cut-off date 15.9%
of the mortgage pool (based on the
primary property type for combined
office/retail properties);
o mortgage loans included in the trust
fund and secured by mobile home
properties represent as of the cut-off
date 3.4% of the mortgage pool; and
o mortgage loans included in the trust
fund and secured by industrial and mixed
use properties represent as of the
cut-off date 3.3% of the mortgage pool.
WE HAVE NOT REUNDERWRITTEN ANY
OF THE MORTGAGE LOANS......... We have not reunderwritten the mortgage loans
included in the trust fund. Instead, we have
relied on the representations and warranties
made by the mortgage loan sellers, and the
mortgage loan sellers' respective obligations
to repurchase, cure or substitute a mortgage
loan in the event that a representation or
warranty was not true when made and such breach
materially and adversely affects the value of
the mortgage loan, the interest of the trust or
the interests of any certificateholder. 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 included in
the trust fund, it is possible that the
reunderwriting process may have revealed
problems with a mortgage loan not covered by
representations or warranties given by the
mortgage loan sellers. In addition, we cannot
provide assurance that the mortgage loan
sellers will be able to repurchase or
substitute 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.
FORECLOSURE ON MORTGAGED
PROPERTIES MAY RESULT IN
ADVERSE TAX CONSEQUENCES..... One or more of the REMICs relating to the
assets of the trust fund might become subject
to federal (and possibly state or local) tax on
certain of its net income from the operation
and management of a mortgaged property
subsequent to the trust fund's acquisition of a
mortgaged property pursuant to a foreclosure or
deed-in-lieu of foreclosure. Any such tax
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would substantially reduce net proceeds
available for distribution to you. See
"MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of Owners of REMIC
Regular Certificates," and "--Taxation of
Owners of REMIC Residual Certificates" in the
accompanying prospectus. In addition, if the
trust fund were to acquire one or more
mortgaged properties pursuant to a foreclosure
or deed in lieu of foreclosure, upon
acquisition of those mortgaged properties, the
trust fund may in certain jurisdictions,
particularly in New York, be required to pay
state or local transfer or excise taxes upon
liquidation of such properties. Such state or
local taxes may reduce net proceeds available
for distribution to the certificateholders.
INSURANCE COVERAGE ON MORTGAGED
PROPERTIES MAY NOT COVER SPECIAL
HAZARD LOSSES................. The master servicer (with respect to mortgage
loans that are not specially serviced mortgage
loans) and/or special servicer (with respect to
specially serviced mortgage loans) will
generally be required to cause the borrower on
each mortgage loan included in the trust fund
and serviced by it to maintain such insurance
coverage on the related mortgaged property as
is required under the related mortgage,
including hazard insurance; provided that each
of the master servicer and/or the special
servicer may satisfy its obligation to cause
hazard insurance to be maintained with respect
to any mortgaged property by acquiring a
blanket or master single interest insurance
policy. In general, the standard form of fire
and extended coverage policy covers physical
damage to or destruction of the improvements
on the related mortgaged 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. The mortgage loans
generally do not require earthquake insurance.
Although the policies covering the mortgaged
properties are underwritten by different
insurers under different state laws in
accordance with different applicable state
forms, and therefore do not contain identical
terms and conditions, most such policies
typically may not cover any physical damage
resulting from:
o war;
o terrorism;
o revolution;
o governmental actions;
o floods, and other water-related causes;
o earth movement (including earthquakes,
landslides and mud flows);
o wet or dry rot;
o vermin;
o domestic animals;
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o sink holes or similarly occurring soil
conditions; and
o other kinds of risks not specified in
the preceding paragraph.
In light of the September 11, 2001 terrorist
attacks in New York City and the Washington,
D.C. area, many reinsurance companies (which
assume some of the risk of policies sold by
primary insurers) indicated that they intended
to eliminate coverage for acts of terrorism
from their reinsurance policies. Without that
reinsurance coverage, primary insurance
companies would have to assume that risk
themselves, which may cause them to eliminate
such coverage in their policies, increase the
amount of the deductible for acts of terrorism
or charge higher premiums for such coverage. In
order to offset this risk, Congress passed the
Terrorism Risk Insurance Act of 2002, which
established the Terrorism Insurance Program.
The Terrorism Insurance Program is administered
by the Secretary of the Treasury and was
established to provide financial assistance
from the United States government to insurers
in the event of another terrorist attack that
is subject of an insurance claim. The Terrorism
Risk Insurance Act of 2002 requires the
Treasury Department to establish procedures for
the Terrorism Insurance Program under which the
federal share of compensation will be equal to
90% of that portion of insured losses that
exceeds an applicable insurer deductible
required to be paid during each program year.
The federal share in the aggregate in any
program year may not exceed $100 billion. An
insurer that has paid its deductible is not
liable for the payment of any portion of total
annual United States-wide losses that exceed
$100 billion, regardless of the terms of the
individual insurance contracts.
The Terrorism Insurance Program required that
each insurer for policies in place prior to
November 26, 2002, provide its insureds with a
statement of the proposed premiums for
terrorism coverage, identifying the portion of
the risk that the federal government will
cover, within 90 days after November 26, 2002.
Insureds had 30 days to accept the continued
coverage and pay the premium. If an insured
does not pay the premium or authorizes the
exclusion, insurance for acts of terrorism may
be excluded from the policy. All policies for
insurance issued after November 26, 2002, must
make similar disclosure and provide a similar
opportunity for the insured to purchase
coverage. The Terrorism Risk Insurance Act of
2002 does not require insureds to purchase the
coverage nor does it stipulate the pricing of
the coverage.
Through December 2004, insurance carriers are
required under the program to provide terrorism
coverage in their basic "all-risk" policies. By
September 1, 2004, the Secretary of the
Treasury is required to determine whether
mandatory participation should be extended
through December 2005. Any commercial property
and casualty terrorism insurance exclusion that
was in force on November 26, 2002, is
automatically voided to the extent that it
excludes losses that
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would otherwise be insured losses, subject to
the immediately preceding paragraph. Any state
approval of such types of exclusions in force
on November 26, 2002, is also voided.
However, the Terrorism Insurance Program
applies to United States risks only and to acts
that are committed by an individual or
individuals acting on behalf of a foreign
person or foreign interest as an effort to
influence or coerce United States civilians or
the United States government. Further, the act
must be certified as an "act of terrorism" by
the federal government, which decision is not
subject to judicial review. It remains unclear
what acts will fall under the purview of the
Terrorism Insurance Program.
Furthermore, because the Terrorism Insurance
Program has only been recently passed into law,
there can be no assurance that it or state
legislation will substantially lower the cost
of obtaining terrorism insurance.
Finally, the Terrorism Insurance Program
terminates on December 31, 2004 (with a
potential to extend to December 31, 2005).
There can be no assurance that such temporary
program will create any long-term changes in
the availability and cost of such insurance.
Moreover, there can be no assurance that such
program will be renewed or subsequent terrorism
insurance legislation will be passed upon its
expiration.
No assurance can be given that the mortgaged
properties will continue to have the benefit of
insurance against terrorist acts. In addition,
no assurance can be given that the coverage for
such acts, if obtained or maintained, will be
broad enough to cover the particular act of
terrorism that may be committed or that the
amount of coverage will be sufficient to repair
and restore the mortgaged property or to repay
the mortgage loan in full. The insufficiency of
insurance coverage in any respect could have a
material and adverse affect on your
certificates.
Pursuant to the terms of the pooling and
servicing agreement, the master servicer or the
special servicer may not be required to
maintain insurance covering terrorist or
similar acts, nor will it be required to call a
default under a mortgage loan, if the related
borrower fails to maintain such insurance (even
if required to do so under the related loan
documents) if the special servicer has
determined, in consultation with the
controlling class representative, in accordance
with the servicing standard that either--
o such insurance is not available at
commercially reasonable rates and that
such hazards are not at the time
commonly insured against for properties
similar to the mortgaged property and
located in or around the region in which
such mortgaged property is located; or
o such insurance is not available at any
rate.
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In addition, with respect to certain mortgage
loans, the mortgagee has waived the right to
require terrorism insurance.
Any losses incurred with respect to mortgage
loans included in the trust fund due to
uninsured risks or insufficient hazard
insurance proceeds could adversely affect
distributions on your certificates.
ADDITIONAL DEBT ON SOME
MORTGAGE LOANS CREATES
ADDITIONAL RISKS..... In general, the borrowers are:
o required to satisfy any existing
indebtedness encumbering the related
mortgaged property as of the closing of
the related mortgage loan; and
o prohibited from encumbering the related
mortgaged property with additional
secured debt without the lender's prior
approval.
None of the mortgage loans included in the
trust fund, other than the mortgage loans with
companion loans, are secured by mortgaged
properties that secure other loans outside the
trust fund.
Two (2) mortgage loans (loan numbers 26 and
32), representing 1.6% of the mortgage pool,
provide that the related borrower, under
certain specified circumstances, may encumber
the related mortgaged property with subordinate
debt in the future.
One (1) mortgage loan (loan number 9),
representing 2.2% of the mortgage pool,
provides that the related borrower under
certain circumstances may incur, without lender
consent, additional unsecured indebtedness
other than in the ordinary course of business.
With respect to 8 mortgage loans (loan numbers
26, 36, 77, 101, 107, 108, 109 and 116)
representing 2.5% of the mortgage pool, the
ownership interests of the direct or indirect
owners of the related borrower have been
pledged as security for mezzanine debt, subject
to the terms of an intercreditor agreement
entered into in favor of the lender. In
addition, in the case of 5 mortgage loans (loan
numbers 10, 18, 32, 36 and 110) representing
4.9% of the mortgage pool, the related mortgage
loan documents provide that, under certain
circumstances, the entities with a controlling
ownership interest in the borrower may pledge
their interests in the borrower as security for
mezzanine debt in the future, subject to the
terms of a subordination and standstill
agreement to be entered into in favor of the
lender and the satisfaction of certain
financial conditions.
Secured subordinated debt encumbering any
mortgaged property may increase the difficulty
of refinancing the related mortgage loan at
maturity and the possibility that reduced cash
flow could result in deferred maintenance.
Also, in the event that the holder of the
subordinated debt has filed for
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bankruptcy or been placed in involuntary
receivership, foreclosure by any senior
lienholder (including the trust fund) on the
mortgaged property could be delayed. In
addition, substantially all of the mortgage
loans permit the related borrower to incur
limited indebtedness in the ordinary course of
business or for capital improvements that is
not secured by the related mortgaged property
which is generally limited to a specified
percentage of the outstanding principal balance
of the related mortgage loan.
Further, certain of the mortgage loans included
in the trust fund do not prohibit limited
partners or other owners of non-controlling
interests in the related borrower from pledging
their interests in the borrower as security for
mezzanine debt.
In addition, certain mortgage loans, which may
include the mortgage loans previously described
in this risk factor, permit the related
borrower to incur, or do not prohibit the
related borrower from incurring, unsecured debt
to an affiliate of, or owner of an interest in,
the borrower or to an affiliate of such an
owner, subject to certain conditions under the
related mortgage loan documents. Further,
certain of the mortgage loans permit additional
liens on the related mortgaged properties for
(1) assessments, taxes or other similar charges
or (2) liens which in the aggregate constitute
an immaterial and insignificant monetary amount
with respect to the net value of the related
borrower's assets. A default by the borrower on
such additional indebtedness could impair the
borrower's financial condition and result in
the bankruptcy or receivership of the borrower
which would cause a delay in the foreclosure by
the trust fund on the mortgaged property. It
may not be evident that a borrower has incurred
any such future subordinate second lien debt
until the related mortgage loan otherwise
defaults. In cases in which one or more
subordinate liens are imposed on a mortgaged
property or the borrower incurs other
indebtedness, the trust fund is subject to
additional risks, including, without
limitation, the following:
o the risk that the necessary maintenance
of the mortgaged property could be
deferred to allow the borrower to pay
the required debt service on the
subordinate financing and that the value
of the mortgaged property may fall as a
result;
o the risk that the borrower may have a
greater incentive to repay the
subordinate or unsecured indebtedness
first;
o the risk that it may be more difficult
for the borrower to refinance the
mortgage loan or to sell the mortgaged
property for purposes of making any
balloon payment upon the maturity of the
mortgage loan;
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o the existence of subordinated debt
encumbering any mortgaged property may
increase the difficulty of refinancing
the related mortgage loan at maturity
and the possibility that reduced cash
flow could result in deferred
maintenance; and
o the risk that, in the event that the
holder of the subordinated debt has
filed for bankruptcy or been placed in
involuntary receivership, foreclosing on
the mortgaged property could be delayed
and the trust may be subjected to the
costs and administrative burdens of
involvement in foreclosure or bankruptcy
proceedings or related litigation.
See "CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
AND LEASES--Subordinate Financing" and
"--Due-on-Sale and Due-on-Encumbrance" in the
accompanying prospectus and "DESCRIPTION OF THE
MORTGAGE POOL--Certain Terms and Conditions of
the Mortgage Loans--Other Financing" and
"--Due-on-Sale and Due-on-Encumbrance
Provisions" in this prospectus supplement.
Mezzanine debt is debt that is incurred by the
owner of equity in one or more borrowers and is
secured by a pledge of the equity ownership
interests in such borrowers. Because mezzanine
debt is secured by the obligor's equity
interest in the related borrowers, such
financing effectively reduces the obligor's
economic stake in the related mortgaged
property. The existence of mezzanine debt may
reduce cash flow on the borrower's mortgaged
property after the payment of debt service and
may increase the likelihood that the owner of a
borrower will permit the value or income
producing potential of a mortgaged property to
fall and may create a greater risk that a
borrower will default on the mortgage loan
secured by a mortgaged property whose value or
income is relatively weak.
Generally, upon a default under mezzanine debt,
the holder of such mezzanine debt would be
entitled to foreclose upon the equity in the
related mortgagor, which has been pledged to
secure payment of such mezzanine debt. Although
such transfer of equity may not trigger the due
on sale clause under the related mortgage loan,
it could cause the obligor under such mezzanine
debt to file for bankruptcy, which could
negatively affect the operation of the related
mortgaged property and such borrower's ability
to make payments on the related mortgage loan
in a timely manner.
Additionally, some intercreditor agreements
with respect to certain mezzanine debt may give
the holder of the mezzanine debt the right to
cure certain defaults and, upon a default, to
purchase the related mortgage loan for an
amount equal to the then-current outstanding
balance of such loan. Some intercreditor
agreements relating to mezzanine debt may also
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limit the special servicer's ability to enter
into certain modifications of the mortgage loan
without the consent of the related mezzanine
lender.
See "CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
AND LEASES--Due-on-Sale and Due-on-Encumbrance"
in the accompanying prospectus and "DESCRIPTION
OF THE MORTGAGE POOL--Certain Terms and
Conditions of the Mortgage Loans--Other
Financing" and "--Due-on-Sale and
Due-on-Encumbrance Provisions" in this
prospectus supplement.
Although the companion loans related to the 6
mortgage loans which are part of a loan pair
are not assets of the trust fund, the related
borrower is still obligated to make interest
and principal payments on the companion loans.
As a result, the trust fund is subject to
additional risks, including:
o the risk that the necessary maintenance
of the related mortgaged property could
be deferred to allow the borrower to pay
the required debt service on these
obligations and that the value of the
mortgaged property may fall as a result;
and
o the risk that it may be more difficult
for the borrower to refinance the
mortgage loan or to sell the mortgaged
property for purposes of making any
balloon payment on the entire balance of
both the loans contained in the loan
pair upon the maturity of the mortgage
loans.
In addition, although the companion loans with
respect to 5 of the mortgage loans are
subordinate to the related mortgage loan, with
respect to the Park City Center mortgage loan,
one of the related companion loans is pari
passu with the related mortgage loan and, with
respect to the Meadows Mall mortgage loan, the
related companion loan is pari passu with the
related mortgage loan. See "DESCRIPTION OF THE
MORTGAGE POOL--Twenty Largest Mortgage Loans"
in this prospectus supplement.
THE BORROWER'S FORM OF ENTITY
MAY CAUSE SPECIAL RISKS ....... Most of the borrowers are legal entities
rather than individuals. Mortgage loans made to
legal entities may entail risks of loss greater
than those of mortgage loans made to
individuals. For example, a legal entity, as
opposed to an individual, may be more inclined
to seek legal protection from its creditors
under the bankruptcy laws. Unlike individuals
involved in bankruptcies, most of the entities
generally do not have personal assets and
creditworthiness at stake. The bankruptcy of a
borrower, or a general partner or managing
member of a borrower, may impair the ability of
the lender to enforce its rights and remedies
under the related mortgage.
Many of the borrowers are not special purpose
entities structured to limit the possibility of
becoming insolvent or bankrupt, and therefore
may be more likely to become
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insolvent or the subject of a voluntary or
involuntary bankruptcy proceeding because such
borrowers may be:
o operating entities with businesses
distinct from the operation of the
property with the associated liabilities
and risks of operating an ongoing
business; or
o individuals that have personal
liabilities unrelated to the property.
However, any borrower, even a special purpose
entity structured to be bankruptcy-remote, as
an owner of real estate will be subject to
certain potential liabilities and risks. We
cannot provide assurances that any borrower
will not file for bankruptcy protection or that
creditors of a borrower or a corporate or
individual general partner or managing member
of a borrower will not initiate a bankruptcy or
similar proceeding against such borrower or
corporate or individual general partner or
managing member.
Furthermore, with respect to any related
borrowers, creditors of a common parent in
bankruptcy may seek to consolidate the assets
of such borrowers with those of the parent.
Consolidation of the assets of such borrowers
would likely have an adverse effect on the
funds available to make distributions on your
certificates, and may lead to a downgrade,
withdrawal or qualification of the ratings of
your certificates. See "CERTAIN LEGAL ASPECTS
OF MORTGAGE LOANS AND LEASES--Bankruptcy Laws"
in the accompanying prospectus.
In addition, with respect to 13 mortgage loans,
representing 9.5% of the mortgage pool, the
borrowers own the related mortgaged property as
tenants in common. These mortgage loans may be
subject to prepayment, including during periods
when prepayment might otherwise be prohibited,
as a result of partition. Although some of the
related borrowers have purported to waive any
right of partition, we cannot assure you that
any such waiver would be enforced by a court of
competent jurisdiction. In addition,
enforcement of remedies against
tenant-in-common borrowers may be prolonged if
the tenant-in-common borrowers become insolvent
or bankrupt at different times because each
time a tenant-in-common borrower files for
bankruptcy, the bankruptcy court stay is
reinstated.
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
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secured indebtedness to the then-current value
of the mortgaged property, which would make the
lender a general unsecured creditor for the
difference between the then-current value and
the amount of its outstanding mortgage
indebtedness. A bankruptcy court also may: (1)
grant a debtor a reasonable time to cure a
payment default on a mortgage loan; (2) reduce
periodic payments due under a mortgage loan;
(3) change the rate of interest due on a
mortgage loan; or (4) otherwise alter the
mortgage loan's repayment schedule.
Moreover, the filing of a petition in
bankruptcy by, or on behalf of, a junior
lienholder may stay the senior lienholder from
taking action to foreclose on the junior lien.
Additionally, the borrower's trustee or the
borrower, as debtor-in-possession, has certain
special powers to avoid, subordinate or
disallow debts. In certain circumstances, the
claims of the trustee may be subordinated to
financing obtained by a debtor-in-possession
subsequent to its bankruptcy.
Under federal bankruptcy law, the lender will
be stayed from enforcing a borrower's
assignment of rents and leases. Federal
bankruptcy law also may interfere with the
master servicer's or special servicer's ability
to enforce lockbox requirements. The legal
proceedings necessary to resolve these issues
can be time consuming and costly and may
significantly delay or diminish the receipt of
rents. Rents also may escape an assignment to
the extent they are used by the borrower to
maintain the mortgaged property or for other
court authorized expenses.
Additionally, pursuant to subordination
agreements for certain of the mortgage loans,
the subordinate lenders may have agreed that
they will not take any direct actions with
respect to the related subordinated debt,
including any actions relating to the
bankruptcy of the borrower, and that the holder
of the mortgage loan will have all rights to
direct all such actions. There can be no
assurance that in the event of the borrower's
bankruptcy, a court will enforce such
restrictions against a subordinated lender.
In its decision in In re 203 North LaSalle
Street Partnership, 246 B.R. 325 (Bankr. N.D.
Ill. March 10, 2000), the United States
Bankruptcy Court for the Northern District of
Illinois refused to enforce a provision of a
subordination agreement that allowed a first
mortgagee to vote a second mortgagee's claim
with respect to a Chapter 11 reorganization
plan on the grounds that pre-bankruptcy
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.
As a result of the foregoing, the trustee's
recovery with respect to borrowers in
bankruptcy proceedings may be
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significantly delayed, and the aggregate amount
ultimately collected may be substantially less
than the amount owed.
Certain of the mortgage loans have a sponsor
that has previously filed bankruptcy. In each
case, the related entity or person has emerged
from bankruptcy. However, we cannot assure you
that such sponsors will not be more likely than
other sponsors to utilize their rights in
bankruptcy in the event of any threatened
action by the mortgagee to enforce its rights
under the related loan documents.
INSPECTIONS AND APPRAISALS
MAY NOT ACCURATELY REFLECT
VALUE OR CONDITION OF
MORTGAGED PROPERTY ........... In general, appraisals represent only the
analysis and opinion of qualified experts and
are not guaranties of present or future value,
and may determine a value of a property that is
significantly higher than the amount that can
be obtained from the sale of a mortgaged
property under a distress or liquidation sale.
Information regarding the values of the
mortgaged properties at the date of such report
is presented under "DESCRIPTION OF THE MORTGAGE
POOL--Additional Mortgage Loan Information" in
this prospectus supplement for illustrative
purposes only. Any engineering reports or site
inspections obtained in connection with this
offering represent only the analysis of the
individual engineers or site inspectors
preparing such reports at the time of such
report, and may not reveal all necessary or
desirable repairs, maintenance or capital
improvement items.
THE MORTGAGED PROPERTIES MAY NOT
BE IN COMPLIANCE WITH CURRENT
ZONING LAWS .................. The mortgaged properties securing the mortgage
loans in cluded in the trust fund are typically
subject to building and zoning ordinances and
codes affecting the construction and use of
real property. Since the zoning laws applicable
to a mortgaged property (including, without
limitation, density, use, parking and set-back
requirements) are usually subject to change by
the applicable regulatory authority at any
time, the improvements upon the mortgaged
properties may not, currently or in the future,
comply fully with all applicable current and
future zoning laws. Such changes may limit the
ability of the related borrower to
rehabilitate, renovate and update the premises,
and to rebuild or utilize the premises "as is"
in the event of a casualty loss with respect
thereto. Such limitations may adversely affect
the cash flow of the mortgaged property
following such loss. Insurance proceeds may not
be sufficient to pay off such mortgage loan in
full. In addition, if the mortgaged property
were to be repaired or restored in conformity
with then-current law, its value could be less
than the remaining balance on the mortgage loan
and it may produce less revenue than before
such repair or restoration.
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RESTRICTIONS ON CERTAIN OF THE
MORTGAGED PROPERTIES MAY LIMIT
THEIR USE....................
Certain of the mortgaged properties securing
mortgage loans included in the trust fund which
are non-conforming may not be "legal
non-conforming" uses. The failure of a
mortgaged property to comply with zoning laws
or to be a "legal non-conforming" use may
adversely affect the market value of the
mortgaged property or the borrower's ability
to continue to use it in the manner it is
currently being used.
In addition, certain of the mortgaged
properties are subject to certain use
restrictions imposed pursuant to restrictive
covenants, governmental requirements,
reciprocal easement agreements or operating
agreements or, in the case of those mortgaged
properties that are condominiums, condominium
declarations or other condominium use
restrictions or regulations, especially in a
situation where the mortgaged property does not
represent the entire condominium building. Such
use restrictions include, for example,
limitations on the character of the
improvements or the properties, limitations
affecting noise and parking requirements, among
other things, and limitations on the borrowers'
right to operate certain types of facilities
within a prescribed radius. These limitations
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.
COMPLIANCE WITH APPLICABLE LAWS
AND REGULATIONS MAY RESULT
IN LOSSES..................... 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
securing a mortgage loan included in the trust
fund. Examples of these laws and regulations
include zoning laws and the Americans with
Disabilities Act of 1990, 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 AND LEASES--Americans with
Disabilities Act" in the accompanying
prospectus. The expenditure of such 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.
ENFORCEABILITY OF DUE-ON-SALE
CLAUSES AND ASSIGNMENTS OF
LEASES AND RENTS IS LIMITED... The mortgages securing the mortgage loans
included in the trust fund generally contain
due-on-sale clauses, which permit the
acceleration of the maturity of the related
mortgage loan if the borrower sells, transfers
or conveys the related mortgaged property or
its interest in the mortgaged property without
the consent of the lender. There also may be
limitations on the enforceability of such
clauses. The mortgages also generally include a
debt-acceleration clause, which
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permits the acceleration of the related
mortgage loan upon a monetary or non-monetary
default by the borrower. The courts of all
states will generally enforce clauses providing
for acceleration in the event of a material
payment default, but may refuse the foreclosure
of a mortgaged property when acceleration of
the indebtedness would be inequitable or unjust
or the circumstances would render acceleration
unconscionable. However, certain of the
mortgage loans included in the trust fund
permit one or more transfers of the related
mortgaged property to pre-approved borrowers or
pursuant to pre-approved conditions set forth
in the related mortgage loan documents without
the lender's approval. See "CERTAIN LEGAL
ASPECTS OF MORTGAGE LOANS AND LEASES--Due-on-
Sale and Due-on-Encumbrance" in the
accompanying prospectus.
The mortgage loans included in the trust fund
may also be secured by an assignment of leases
and rents pursuant to which the borrower
typically assigns its right, title and interest
as landlord under the leases on the related
mortgaged property and the income derived
therefrom to the lender as further security for
the related mortgage loan, while retaining a
license to collect rents for so long as there
is no default. In the event the borrower
defaults, the license terminates and the lender
is entitled to collect the rents. Such
assignments are typically not perfected as
security interests prior to the lender's taking
possession of the related mortgaged property
and/or appointment of a receiver. 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 AND LEASES--Leases
and Rents" in the accompanying prospectus.
LIMITATIONS ON THE BENEFITS OF
CROSS-COLLATERALIZED AND
CROSS-DEFAULTED PROPERTIES.... Two (2) groups of mortgage loans (loan numbers
78, 83, 89 and 100 and 90 and 91), representing
in the aggregate 1.4% of the mortgage pool, are
groups of mortgage loans that are
cross-collateralized and cross-defaulted with
each of the other mortgage loans in their
respective groups. In addition, some mortgage
loans are secured by first lien deeds of trust
or mortgages, as applicable, on multiple
properties securing the joint and several
obligations of multiple borrowers. Such
arrangements could be challenged as fraudulent
conveyances by creditors of any of the related
borrowers or by the representative of the
bankruptcy estate of any related borrower if
one or more of such borrowers becomes a debtor
in a bankruptcy case. Generally, under federal
and most state fraudulent conveyance statutes,
a lien granted by any such borrower could be
voided if a court determines that:
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o such borrower was insolvent at the time
of granting the lien, was rendered
insolvent by the granting of the lien,
was left with inadequate capital or was
not able to pay its debts as they
matured; and
o borrower did not, when it allowed its
mortgaged property to be encumbered by
the liens securing the indebtedness
represented by the other
cross-collateralized loans, receive
"fair consideration" or "reasonably
equivalent value" for pledging such
mortgaged property for the equal benefit
of the other related borrowers.
We cannot provide assurances that a lien
granted by a borrower on a cross-collateralized
loan to secure the mortgage loan of another
borrower, or any payment thereon, would not be
avoided as a fraudulent conveyance. See
"DESCRIPTION OF THE MORTGAGE POOL--Certain
Terms and Conditions of the Mortgage
Loans--Cross-Default and Cross-
Collateralization of Certain Mortgage Loans;
Certain Multi-Property Mortgage Loans" in this
prospectus supplement and Annex A-5 to this
prospectus supplement for more information
regarding the cross-collateralized loans. No
mortgage loan included in the trust fund (other
than the mortgage loans with companion loans)
is cross-collateralized with a mortgage loan
not included in the trust fund.
CERTAIN MORTGAGE LOANS ARE
SUBJECT TO EARLY DEFEASANCE.... Two (2) mortgage loans included in the trust
fund as of the cut-off date (loan numbers 94
and 104), representing 0.4% of the mortgage
pool, permit the related borrower to defease
its mortgage loan prior to the second
anniversary of the closing date. The applicable
mortgage loan seller has agreed to repurchase
such mortgage loans from the trust fund in the
event of defeasance prior to the second
anniversary of the startup day of the related
REMIC. In the event the applicable mortgage
loan seller fails or is unable to purchase such
mortgage loans prior to such early defeasance,
the special servicer will sell such mortgage
loans from the trust fund. Depending on the
price received from such liquidation, a loss
could result. See "DESCRIPTION OF THE MORTGAGE
POOL--Representations and Warranties;
Repurchases and Substitutions" in this
prospectus supplement.
SINGLE TENANTS AND CONCENTRATION
OF TENANTS SUBJECT THE TRUST
FUND TO INCREASED RISK ........ Twenty-four (24) of the mortgaged properties
securing mortgage loans included in the trust
fund, representing 15.0% of the mortgage pool,
are leased wholly to a single tenant or are
wholly owner occupied. The mortgaged property
related to 1 mortgage loan, representing
approximately 8.3% of the mortgage pool is
leased entirely to the United States Government
which has the right to terminate the related
lease if the borrower fails to deliver the
space to the tenant as required
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under the lease as described in "--Future Cash
Flows and Property Values Are Not Predictable"
above and "DESCRIPTION OF THE MORTGAGE
POOL--Twenty Largest Mortgage Loans--TSA Office
Building Loan" in this prospectus supplement.
Certain other of the mortgaged properties are
leased in large part to a single tenant or are
in large part owner occupied. Any default by a
major tenant could adversely affect the related
borrower's ability to make payments on the
related mortgage loan. Additionally, 4 mortgage
loans (loan numbers 6, 19, 27 and 38)
representing 6.4% of the mortgage pool are
leased by government tenants that have the
right to terminate their lease either after a
specified date or upon notice to the related
borrower. We cannot provide assurances that any
major tenant will continue to perform its
obligations under its lease or not terminate
its lease pursuant to termination rights (or,
in the case of an owner-occupied mortgaged
property, under the related mortgage loan
documents).
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 an option to purchase
all or a portion of the mortgaged property and
this provision, if not waived, may impede the
mortgagee's ability to sell the related
mortgaged property at foreclosure or adversely
affect the foreclosure proceeds.
In addition, certain of the mortgaged
properties that are leased to single tenants or
a major tenant may have leases that terminate
prior to the maturity date of the related
mortgage loan. Mortgaged properties leased to a
single tenant, or a small number of tenants,
are more likely to experience interruptions of
cash flow if a tenant fails to renew its lease
because there may be less or no rental income
until new tenants are found and it may be
necessary to expend substantial amounts of
capital to make the space acceptable to new
tenants.
Retail and office properties also may be
adversely affected if there is a concentration
of particular tenants among the mortgaged
properties or of tenants in a particular
business or industry. For example, with respect
to 6 mortgage loans (loan numbers 69, 73, 76,
77, 80 and 91), representing 1.9% of the
mortgage pool, the single tenant of each
mortgaged property is Walgreens. In addition,
with respect to 7 mortgage loans (loan numbers
78, 82, 83, 84, 86, 89 and 100), representing
1.7% of the mortgage pool, the single tenant of
each mortgaged property is Eckerd. For further
information regarding certain significant
tenants at the mortgaged properties, see Annex
A-4 to this prospectus supplement.
THE FAILURE OF A TENANT WILL
HAVE A NEGATIVE IMPACT ON SINGLE
TENANT AND TENANT CONCENTRATION
PROPERTIES.................... The bankruptcy or insolvency of a major tenant
or sole tenant, or a number of smaller tenants,
in retail, industrial
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and office properties may adversely affect the
income produced by a mortgaged property. Under
the Bankruptcy Code, a tenant has the option of
assuming or rejecting any unexpired lease. If
the tenant rejects the lease, the landlord's
claim for breach of the lease would be a
general unsecured claim against the tenant
(absent collateral securing the claim) and the
amounts the landlord could claim would be
limited.
LITIGATION MAY HAVE ADVERSE
AFFECT ON BORROWERS........... From time to time, there may be legal
proceedings pending, threatened or ongoing
against the borrowers, managers, sponsors and
their respective affiliates relating to the
business of, or arising out of the ordinary
course of business of, the borrowers, managers,
sponsors and their respective affiliates, and
certain of the borrowers, managers, sponsors
and their respective affiliates are subject to
legal proceedings relating to the business of,
or arising out of the ordinary course of
business of, the borrowers, managers, sponsors
or their respective affiliates. It is possible
that such proceedings may have a material
adverse effect on any borrower's ability to
meet its obligations under the related mortgage
loan and, thus, on distributions on your
certificates.
POOR PROPERTY MANAGEMENT WILL
LOWER THE PERFORMANCE OF THE
RELATED MORTGAGED PROPERTY.... 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 leases,
are generally more management intensive than
properties leased to creditworthy tenants under
long-term leases.
General Growth Properties, Inc., the related
borrower or another affiliate of General Growth
Properties, Inc., is managing the mortgaged
properties for 4 mortgage loans (loan numbers
2, 3, 4 and 5) which collectively represent
22.8% of the mortgage pool. The failure of
these property managers to properly manage
these properties or any financial difficulties
with respect to any of these property managers
could have a significant negative impact on the
continued income generation from these
mortgaged properties and therefore the
performance of the related mortgage loans. See
"--Adverse Consequences Associated with
Borrower Concentrations, Borrowers under Common
Control and Related
S-81
Borrowers" and "DESCRIPTION OF THE MORTGAGE
POOL--Twenty Largest Mortgage Loans" in this
prospectus supplement.
We cannot provide assurance regarding the
performance of any operators, leasing agents
and/or property managers or persons who may
become operators and/or property managers upon
the expiration or termination of management
agreements or following any default or
foreclosure under a mortgage loan. In addition,
the property managers are usually operating
companies and unlike limited purpose entities,
may not be restricted from incurring debt and
other liabilities in the ordinary course of
business or otherwise.
We make no representation or warranty as to the
skills of any present or future managers.
Additionally, we cannot provide assurance that
the property managers will be in a financial
condition to fulfill their management
responsibilities throughout the terms of their
respective management agreements.
CONDEMNATIONS OF MORTGAGED
PROPERTIES MAY RESULT IN
LOSSES..................... From time to time, there may be condemnations
pending or threatened against one or more of
the mortgaged properties securing mortgage
loans included in the trust fund. The proceeds
payable in connection with a total
condemnation may not be sufficient to restore
the related mortgaged property or to satisfy
the remaining indebtedness of the related
mortgage loan. The occurrence of a partial
condemnation may have a material adverse
effect on the continued use of, or income
generation from, the affected mortgaged
property. Therefore, we cannot give assurances
that the occurrence of any condemnation will
not have a negative impact upon distributions
on your certificates.
With respect to the Meadows Mall loan (loan
number 5), representing 4.9% of the mortgage
pool, the Depositor has been informed by the
applicable mortgage loan seller that the
borrower has received notice from the Nevada
Department of Public Transportation of the
potential condemnation of approximately 2.06
acres of the land comprising the Mortgaged
Property. Pursuant to the mortgage loan
documents, the borrower must satisfy certain
conditions prior to release to the borrower of
any condemnation proceeds, including that (i)
the remaining mortgaged property and the use
thereof shall be in compliance with all
applicable zoning laws, ordinances, rules and
regulations, and (ii) any necessary restoration
or construction shall be completed by the
borrower in accordance with applicable law.
THE STATUS OF A GROUND LEASE
MAY BE UNCERTAIN IN A
BANKRUPTCY PROCEEDING.......... Two (2) mortgage loans included in the trust
fund, representing 1.0% of the mortgage pool,
are secured by the borrower's leasehold
interests and 2 mortgage loans included in the
trust fund, representing 0.9% of the mortgage
pool, are secured in part by the borrower's
leasehold interest. Pursuant to Section
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365(h) of the Bankruptcy Code, ground lessees
in possession under a ground lease that has
commenced have the right to continue in a
ground lease even though the representative of
their bankrupt ground lessor rejects the lease.
The leasehold mortgages generally provide that
the borrower may not elect to treat the ground
lease as terminated on account of any such
rejection by the ground lessor without the
prior approval of the holder of the mortgage
note or otherwise prohibit the borrower from
terminating the ground lease. In a bankruptcy
of a ground lessee/borrower, the ground lessee/
borrower under the protection of the Bankruptcy
Code has the right to assume (continue) or
reject (breach and/or terminate) any or all of
its ground leases. If the ground lessor and the
ground lessee/borrower are concurrently
involved in bankruptcy proceedings, the trustee
may be unable to enforce the bankrupt ground
lessee/borrower's right to continue in a ground
lease rejected by a bankrupt ground lessor. In
such circumstances, a ground lease could be
terminated notwithstanding lender protection
provisions contained therein or in the related
mortgage. Further, in a recent decision by the
United States Court of Appeals for the Seventh
Circuit (Precision Indus. v. Qualitech Steel
SBQ, LLC, 327 F.3d 537 (7th Cir. 2003), the
court ruled with respect to an unrecorded lease
of real property that where a statutory sale of
the fee interest in leased property occurs
under Section 363(f) of the Bankruptcy Code (11
U.S.C. Section 363(f)) upon the bankruptcy of a
landlord, such sale terminates a lessee's
possessory interest in the property, and the
purchaser assumes title free and clear of any
interest, including any leasehold estates.
Pursuant to Section 363(e) of the Bankruptcy
Code (11 U.S.C. Section 363(a)), a lessee may
request the bankruptcy court to prohibit or
condition the statutory sale of the property so
as to provide adequate protection of the
leasehold interest; however, the court ruled
that this provision does not ensure continued
possession of the property, but rather entitles
the lessee to compensation for the value of its
leasehold interest, typically from the sale
proceeds. While there are certain circumstances
under which a "free and clear" sale under
Section 363(f) of the Bankruptcy Code would not
be authorized (including that the lessee could
not be compelled in a legal or equitable
proceeding to accept a monetary satisfaction of
his possessory interest, and that none of the
other conditions of Section 363(f)(1)-(4) of
the Bankruptcy Code otherwise permits the
sale), we cannot provide assurances that those
circumstances would be present in any proposed
sale of a leased premises. As a result, we
cannot provide assurances that, in the event of
a statutory sale of leased property pursuant to
Section 363(f) of the Bankruptcy Code, the
lessee may be able to maintain possession of
the property under the ground lease. In
addition, we cannot provide assurances that the
lessee and/or the lender will be able to
recuperate the full value of the leasehold
interest in bankruptcy court.
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In addition, certain of the mortgaged
properties securing the mortgage loans are
subject to operating leases. The operating
lessee then sublets space in the mortgaged
property to sub-tenants. Therefore, the cash
flow from the rented mortgaged property will be
subject to the bankruptcy risks with respect to
the operating lessee.
MORTGAGE LOAN SELLERS MAY NOT
BE ABLE TO MAKE A REQUIRED
REPURCHASE OR SUBSTITUTION OF
A DEFECTIVE MORTGAGE LOAN..... Each mortgage loan seller is the sole
warranting party in respect of the mortgage
loans sold by such mortgage loan seller to
us. Neither we nor any of our affiliates
(except, in certain circumstances, for
Wachovia Bank, National Association in its
capacity as a mortgage loan seller) are
obligated to repurchase or substitute any
mortgage loan in connection with either a
breach of any mortgage loan seller's
representations and warranties or any
document defects, if such mortgage loan
seller defaults on its obligation to do so.
We cannot provide assurances that the
mortgage loan sellers will have the
financial ability to effect such repurchases
or substitutions.
In addition, one or more of the mortgage loan
sellers has acquired a portion of the mortgage
loans included in the trust fund in one or more
secondary market purchases. Such purchases may
be challenged as fraudulent conveyances. Such a
challenge if successful, may have a negative
impact on the distributions on your
certificates. See "DESCRIPTION OF THE MORTGAGE
POOL--Assignment of the Mortgage Loans;
Repurchases and Substitutions" and
"--Representations and Warranties; Repurchases
and Substitutions" in this prospectus
supplement and "DESCRIPTION OF THE POOLING AND
SERVICING AGREEMENTS--Representations and
Warranties; Repurchases" in the accompanying
prospectus.
ONE ACTION JURISDICTION MAY
LIMIT THE ABILITY OF THE
SPECIAL SERVICER TO FORECLOSE
ON THE MORTGAGED PROPERTY..... Some states (including California) have laws
that prohibit more than one judicial action
to enforce a mortgage obligation, and some
courts have construed the term judicial
action broadly. Accordingly, the special
servicer is required to obtain advice of
counsel prior to enforcing any of the trust
fund's rights under any of the mortgage
loans that include mortgaged properties
where this rule could be applicable. In the
case of either a cross-collateralized and
cross-defaulted mortgage loan or a
multi-property mortgage loan which is
secured by mortgaged properties located in
multiple states, the special servicer may be
required to foreclose first on properties
located in states where such "one action"
rules apply (and where non-judicial
foreclosure is permitted) before foreclosing
on properties located in the states where
judicial foreclosure is the only permitted
method of foreclosure. As a result, the
special servicer may incur delay and
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expense in foreclosing on mortgaged properties
located in states affected by one action rules.
See "DESCRIPTION OF THE MORTGAGE POOL--Certain
State Specific Considerations" in this
prospectus supplement and "CERTAIN LEGAL
ASPECTS OF MORTGAGE LOANS AND
LEASES--Foreclosure" in the accompanying
prospectus.
S-85
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The pool of mortgage loans (each, a "Mortgage Loan") included in the Trust
Fund (the "Mortgage Pool") is expected to consist of 118 fixed rate mortgage
loans (the "Mortgage Loans"), with an aggregate principal balance (the "Cut-Off
Date Pool Balance") of $1,149,211,695. The "Cut-Off Date" for (i) 84 of the
Mortgage Loans is December 1, 2003, (ii) 32 of the Mortgage Loans is December
11, 2003 and (iii) 2 of the Mortgage Loans is December 15, 2003. The "Cut-Off
Date Balance" of each Mortgage Loan will equal the unpaid principal balance
thereof as of the related Cut-Off Date, after reduction for all payments of
principal due on or before such date, whether or not received. The Cut-Off Date
Balances of all of the Mortgage Loans in the Mortgage Pool range from $923,868
to $95,000,000. The Mortgage Loans in the Mortgage Pool have an average Cut-Off
Date Balance of $9,739,082. References to percentages of Mortgaged Properties
referred to in this Prospectus Supplement without further description are
references to the percentages of the Cut-Off Date Pool Balance represented by
the aggregate Cut-Off Date Balance of the related Mortgage Loans. 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. All percentages of the Mortgage Loans or any specified
group of Mortgage Loans referred to in this Prospectus Supplement are
approximate percentages. All numerical and statistical information presented
herein (including Cut-Off Date Balances, loan-to-value ratios and debt service
coverage ratios) with respect to the Co-Lender Loans are calculated without
regard to the related Companion Loan; provided that, with respect to the Park
City Center Loan (loan number 3) and the Meadows Mall Loan (loan number 5),
numerical and statistical information presented herein with respect to
loan-to-value ratios and debt service coverage ratios include the related Pari
Passu Loan (but not any related AB Companion Loan) as well as such Mortgage
Loan.
All of the Mortgage Loans are evidenced by a promissory note (each a
"Mortgage Note") and are secured by a mortgage, deed of trust or other similar
security instrument (each, a "Mortgage") that creates a first mortgage lien on a
fee simple estate (or, with respect to 2 Mortgage Loans, representing 0.9% of
the Cut-Off Date Pool Balance, on the related borrower's fee simple estate and
leasehold estate, or, with respect to 2 Mortgage Loans, representing 1.0% of the
Cut-Off Date Pool Balance, on the related borrower's leasehold estate) in an
income-producing real property (each, a "Mortgaged Property").
Set forth below are the number of Mortgage Loans, and the approximate
percentage of the Cut-Off Date Pool Balance represented by such Mortgage Loans,
that are secured by Mortgaged Properties operated for each indicated purpose:
S-86
MORTGAGED PROPERTIES BY PROPERTY TYPE
NUMBER OF AGGREGATE CUT-OFF PERCENTAGE OF CUT-OFF DATE
PROPERTY TYPE MORTGAGED PROPERTIES DATE BALANCE POOL BALANCE
- ------------------------------------- ---------------------- ------------------- ---------------------------
Retail .............................. 47 $ 556,892,676 48.5%
Retail--Anchored ................... 38 518,477,573 45.1
Retail--Unanchored ................. 5 22,094,725 1.9
Retail--Shadow Anchored(1) ......... 4 16,320,379 1.4
Multifamily ......................... 43 317,035,668 27.6
Office .............................. 7 183,222,012 15.9
Mobile Home Park .................... 13 38,688,024 3.4
Mixed Use ........................... 4 32,944,257 2.9
Self Storage ........................ 1 5,900,000 0.5
Industrial .......................... 1 5,534,874 0.5
Land(2) ............................. 1 5,000,000 0.4
Parking Garage ...................... 1 3,994,183 0.3
-- -------------- -----
TOTAL .............................. 118 $1,149,211,695 100.0%
=== ============== =====
- ----------
(1) A Mortgaged Property is classified as shadow anchored if it is in close
proximity to an anchored retail property.
(2) Specifically the fee interest in land, which the ground tenant has
improved and leased as an office building. The office building is not part
of the loan collateral, and the source of funds for loan repayment is the
ground rent payments made to the borrower.
[GRAPHIC OMITTED]
RETAIL 48.5%
MULTIFAMILY 27.6%
OFFICE 15.9%
MOBILE HOME PARK 3.4%
MIXED USE 2.9%
SELF STORAGE 0.5%
INDUSTRIAL 0.5%
LAND 0.4%
PARKING GARAGE 0.3%
MORTGAGE LOAN HISTORY
All of the Mortgage Loans will be acquired on the Closing Date by the
Depositor from the Mortgage Loan Sellers. Wachovia Bank, National Association
("Wachovia"), in its capacity as a Mortgage Loan Seller, originated or acquired
35 of the Mortgage Loans to be included in the Trust Fund representing 38.4% of
the Cut-Off Date Pool Balance. LaSalle Bank National Association ("LaSalle")
originated or acquired 60 of the Mortgage Loans to be included in the Trust Fund
representing 24.6% of the Cut-Off Date Pool Balance. Citigroup Global Markets
Realty Corp. ("Citigroup") originated or acquired 19 of the Mortgage Loans to be
included in the Trust Fund representing 14.2% of the Cut-Off Date Pool Balance.
ABN AMRO Bank N.V., Chicago Branch ("ABN AMRO Bank") originated or acquired 2 of
the Mortgage Loans to be included in the Trust Fund representing 11.5% of the
Cut-Off Date Pool Balance. Eurohypo AG, New York Branch ("Eurohypo") originated
or acquired 2 of the Mortgage Loans to be included in the Trust Fund
representing 11.4% of the Cut-Off Date Pool Balance. None of the Mortgage Loans
was 30 days or more delinquent as of the Cut-Off Date, and no Mortgage Loan has
been 30 days or more delinquent during the 12 months preceding the Cut-Off Date
(or since the date of origination if such Mortgage Loan has been originated
within the past 12 months).
S-87
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Mortgage Rates; Calculations of Interest. All of the Mortgage Loans bear
interest at rates (each a "Mortgage Rate") that will remain fixed for their
remaining terms, provided, however, that after the applicable Anticipated
Repayment Date, the interest rate on the related ARD Loans will increase as
described in this Prospectus Supplement. See "--Amortization" below. One hundred
fifteen (115) of the Mortgage Loans, representing 98.8% of the Cut-Off Date Pool
Balance, accrue interest on the basis (an "Actual/360 basis") of the actual
number of days elapsed over a 360 day year. Three (3) of the Mortgage Loans,
representing 1.2% of the Cut-Off Date Pool Balance, accrue interest on the basis
(a "30/360 basis") of a 360-day year consisting of 12 thirty-day months. Eleven
(11) of the Mortgage Loans, representing 15.0% of the Cut-Off Date Pool Balance,
have periods during which only interest is due and periods in which principal
and interest are due. Two (2) of the Mortgage Loans, representing 8.7% of the
Cut-Off Date Pool Balance, are interest-only for their entire term.
Mortgage Loan Payments. Scheduled payments of principal and/or interest
other than Balloon Payments (the "Periodic Payments") on all of the Mortgage
Loans are due monthly.
Due Dates. Generally, the Periodic Payment for each Mortgage Loan is due on
the date (each such date, a "Due Date") occurring on the 1st day of the month
(or in the case of 32 Mortgage Loans, the 11th day of the month, or in the case
of 2 Mortgage Loans, the 15th day of the month). No Mortgage Loan due on the 1st
day of the month has a grace period that extends payment beyond the 11th day of
any calendar month. The Mortgage Loans that pay on the 11th and the 15th day of
each month do not provide for a grace period.
Amortization. One hundred twelve (112) of the Mortgage Loans (the "Balloon
Loans") (including the ARD Loans), representing 99.3% of the Cut-Off Date Pool
Balance, provide for Periodic Payments based on amortization schedules
significantly longer than their respective terms to maturity, in each case with
payments on their respective scheduled maturity dates of principal amounts
outstanding (each such amount, together with the corresponding payment of
interest, a "Balloon Payment"). Two (2) of the Mortgage Loans, representing 8.7%
of the Cut-Off Date Pool Balance, provides for interest-only Periodic Payments
for the entire term and do not amortize. Six (6) of the Mortgage Loans (the
"Fully Amortizing Loans"), representing 0.7% of the Cut-Off Date Pool Balance,
fully or substantially amortize through their respective remaining terms to
maturity. In addition, because the fixed periodic payments on the Fully
Amortizing Loans are determined assuming interest is calculated on a 30/360
Basis, but interest actually accrues and is applied on the Fully Amortizing
Loans on an Actual/360 Basis, there will be less amortization, absent
prepayments, of the related principal balances during the terms of the Fully
Amortizing Loans, resulting in a higher final payment on the Fully Amortizing
Loans.
Sixteen (16) of the Mortgage Loans (the "ARD Loans"), representing 21.7% of
the Cut-Off Date Pool Balance, provide that if the unamortized principal amount
thereof is not repaid on a date set forth in the related Mortgage Note (the
"Anticipated Repayment Date"), the Mortgage Loan will accrue additional interest
(the "Additional Interest") at the rate set forth therein and the borrower will
be required to apply excess monthly cash flow (the "Excess Cash Flow") generated
by the Mortgaged Property (as determined in the related loan documents) to the
repayment of principal outstanding on the Mortgage Loan. On or before the
Anticipated Repayment Date, the ARD Loans generally require the related borrower
to enter into a cash management agreement whereby all Excess Cash Flow will be
deposited directly into a lockbox account. Any amount received in respect of
Additional Interest will be distributed to the holders of the Class Z
Certificates. Generally, Additional Interest will not be included in the
calculation of the Mortgage Rate for a Mortgage Loan, and will only be paid
after the outstanding principal balance of the Mortgage Loan together with all
interest thereon at the Mortgage Rate has been paid. With respect to such
Mortgage Loans, no Prepayment Premiums or Yield Maintenance Charges will be due
in connection with any principal prepayment after the Anticipated Repayment
Date.
Eleven (11) of the Balloon Loans and ARD Loans, representing 15.0% of the
Cut-Off Date Pool Balance, provide for monthly payments of interest-only for the
first 11 to 36 months of their respective terms followed by payments which
amortize a portion of the principal balance of the Mortgage Loans by their
related maturity dates or Anticipated Repayment Dates, as applicable, but not
the entire principal balance of the Mortgage Loans. Two (2) of the Balloon
Loans, representing 8.7% of the Cut-Off Date
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Pool Balance, provides for monthly payments of interest-only until maturity or
ARD and does not provide for any amortization of principal.
Prepayment Provisions. As of the Cut-Off Date, all of the Mortgage Loans
restrict or prohibit voluntary principal prepayment. In general, the Mortgage
Loans either (i) prohibit voluntary prepayment of principal until a date
specified in the related Mortgage Note, but permit defeasance after a date
specified in the related Mortgage Note for most or all of the remaining term 109
Mortgage Loans, or 97.9% of the Cut-Off Date Pool Balance, (ii) prohibit
voluntary prepayment of principal for a period ending on a date specified in the
related Mortgage Note, and thereafter impose a Yield Maintenance Charge for most
of the remaining term (8 Mortgage Loans, or 1.7% of the Cut-Off Date Pool
Balance), or (iii) permit voluntary principal prepayment at any time with the
imposition of a Yield Maintenance Charge for most of the remaining term (1
Mortgage Loan, or 0.4% of the Cut-Off Date Pool Balance); provided that, for
purposes of each of the foregoing, "remaining term" refers to either the
remaining term to maturity or the Anticipated Repayment Date, as applicable, of
the related Mortgage Loan. See "--Additional Mortgage Loan Information" in this
Prospectus Supplement. Prepayment Premiums and Yield Maintenance Charges, if and
to the extent collected, will be distributed as described under "DESCRIPTION OF
THE CERTIFICATES--Distributions--Allocation of Prepayment Premiums and Yield
Maintenance Charges" in this prospectus supplement. The Depositor makes no
representation as to the enforceability of the provisions of any Mortgage Note
requiring the payment of a Prepayment Premium or Yield Maintenance Charge, or of
the collectability of any Prepayment Premium or Yield Maintenance Charge.
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. The Mortgage Loans generally do not require the payment of Prepayment
Premiums or Yield Maintenance Charges in connection with a prepayment, in whole
or in part, of the related Mortgage Loan as a result of or in connection with a
total casualty or condemnation. Furthermore, the enforceability, under the laws
of a number of states, of provisions providing for payments comparable to the
Prepayment Premiums and/or Yield Maintenance Charges upon an involuntary
prepayment is unclear. No assurance can be given that, at the time a Prepayment
Premium or Yield Maintenance Charge is required to be made on a Mortgage Loan in
connection with an involuntary prepayment, any obligation to pay such Prepayment
Premium or Yield Maintenance Charge will be enforceable under applicable state
law.
The Mortgage Loans included in the Trust Fund (other than certain of the
Citigroup Mortgage Loans) provide that, in the event of a partial prepayment of
such Mortgage Loan due to the receipt of insurance proceeds or a condemnation
award in connection with a casualty or condemnation, the monthly debt service
payment of such Mortgage Loan will remain unchanged. See "RISK FACTORS--
Prepayments Will Affect Your Yield" in this Prospectus Supplement.
One hundred nine (109) of the Mortgage Loans, or 97.9% of the Cut-Off Date
Pool Balance, provide that, in general, under certain conditions, the related
borrower will have the right, no earlier than two years following the Closing
Date (except with respect to the Early Defeasance Loans), to substitute a pledge
of Defeasance Collateral in exchange for a release of the related Mortgaged
Property (or a portion thereof) from the lien of the related Mortgage without
the prepayment of the Mortgage Loan or the payment of the applicable Prepayment
Premium or Yield Maintenance Charge. Mortgage Loans secured by more than one
Mortgaged Property which provide for partial defeasance generally require that
(i) prior to the release of a related Mortgaged Property (or a portion thereof),
a specified percentage (generally 125% of the allocated loan amount for such
Mortgaged Property be defeased and (ii) that certain debt service coverage
ratios and loan-to-value ratio tests be satisfied with respect to the remaining
Mortgaged Properties after the defeasance. In general, "Defeasance Collateral"
is required to consist of United States government obligations that provide for
payments on or prior, but as close as possible, to all successive Due Dates and
the scheduled maturity date (or the Anticipated Repayment Date in the case of
the ARD Loans) (provided, that in the case of certain Mortgage Loans, such
defeasance payments may cease at the beginning of the open prepayment period
with respect to such Mortgage Loan, and the final payment on the Defeasance
Collateral may be sufficient to fully prepay the Mortgage Loan), with each such
payment being equal to or greater than (with any excess to be returned to the
borrower (in some cases, after the related Mortgage Loan is paid in full)) the
Periodic Payment due on such date or (i) in
S-89
the case of a Balloon Loan on the scheduled maturity date, the Balloon Payment,
or (ii) in the case of an ARD Loan, the principal balance on its Anticipated
Repayment Date. The Pooling and Servicing Agreement requires the Master Servicer
or the Special Servicer to require each borrower that proposes to prepay its
Mortgage Loan to pledge Defeasance Collateral in lieu of making a prepayment, to
the extent the related Mortgage Loan documents enable the Master Servicer or the
Special Servicer, as applicable, to make such requirement, but in each case
subject to certain conditions, including that the defeasance would not have an
adverse effect on REMIC status of any of the REMICs (accordingly, except as
described below, no defeasance would be required or permitted prior to the
second anniversary of the Closing Date). The cash amount a borrower must expend
to purchase, or deliver to the Master Servicer in order for the Master Servicer
to purchase, such Defeasance Collateral may be in excess of the principal
balance of the related Mortgage Loan. There can be no assurances that a court
would not interpret such portion of the cash amount that exceeds the principal
balance as a form of prepayment consideration and would not take it into account
for usury purposes. In some states some forms of prepayment consideration are
unenforceable. Two (2) of the Mortgage Loans (the "Early Defeasance Loans"),
representing 0.4% of the Cut-off Date Pool Balance, permit the related borrower
to defease the related Mortgage Loan prior to the second anniversary of the
Closing Date. The Early Defeasance Loans are indicated as loan numbers 94 and
104 on Annex A-1 to this Prospectus Supplement. Each Early Defeasance Loan will
constitute the primary asset of a separate loan REMIC (each, an "Early
Defeasance Loan REMIC" and together, the "Early Defeasance Loan REMICs"). The
applicable Mortgage Loan Seller has agreed to repurchase such Mortgage Loans
from the trust fund in the event of defeasance prior to the second anniversary
of the Closing Date. In the event the applicable Mortgage Loan Seller fails or
is unable to purchase such Mortgage Loans prior to such early defeasance, the
Special Servicer will sell such Mortgage Loans from the trust fund. See "RISK
FACTORS--Certain Mortgage Loans Are Subject to Early Defeasance" in this
prospectus supplement
Neither the Master Servicer nor the Special Servicer is permitted to waive
or modify the terms of any Mortgage Loan prohibiting voluntary prepayments
during a Lockout Period or requiring the payment of a Prepayment Premium or
Yield Maintenance Charge except under the circumstances described in "SERVICING
OF THE MORTGAGE LOANS--Modifications, Waivers and Amendments" in this prospectus
supplement.
Other Financing. With limited exceptions, all of the Mortgage Loans
prohibit the related borrower from encumbering the Mortgaged Property with
additional secured debt without the lender's prior consent. Two (2) mortgage
loans (loan numbers 26 and 32) representing 1.6% of the Cut-Off Date Pool
Balance, provide that the related borrower, under certain circumstances, may
encumber the related Mortgaged Property with subordinate debt in the future. One
(1) Mortgage Loan (loan number 9), representing 2.2% of the Cut-Off Date Pool
Balance, provides that the related borrower, under certain circumstances, may
incur additional unsecured indebtedness other than in the ordinary course of
business and without the consent of the mortgagee. In addition, in the case of
those Mortgage Loans which require or allow letters of credit to be posted by
the related borrowers as additional security for such Mortgage Loans, in lieu of
reserves or otherwise, the related borrower may be obligated to pay fees and
expenses associated with the letter of credit and/or to reimburse the letter of
credit issuer or others in the event of a draw upon the letter of credit by the
lender. See "--Due-On-Sale and Due-On-Encumbrance Provisions" below.
With respect to 8 Mortgage Loans (loan numbers 26, 36, 77, 101, 107, 108,
109 and 116), representing 2.5% of the Cut-Off Date Pool Balance, the ownership
interests of the direct or indirect owners of the related borrower have been
pledged as security for mezzanine debt, subject to the terms of an intercreditor
agreement. With respect to 5 Mortgage Loans (loan numbers 10, 18, 32, 36 and
110), representing 4.9% of the Cut-Off Date Pool Balance, the related Mortgage
Loan documents provide that, under certain circumstances, the owners with a
controlling ownership interest in the borrower may pledge their interests in the
borrower as security for debt financing, generally referred to as mezzanine
debt, in the future, subject to the terms of a subordination and standstill
agreement to be entered into in favor of the lender and the satisfaction of
certain financial conditions. See "RISK FACTORS--Some Mortgaged Properties May
Be Encumbered by Subordinated Debt Which May Delay Foreclosure" in this
prospectus supplement. Further, certain of the Mortgage Loans included in the
trust fund do not prohibit limited
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partners or other owners of non-controlling interests in the related borrower
from pledging their interests in the borrower as security for mezzanine debt.
See "RISK FACTORS--Additional Debt on Some Mortgage Loans Creates Additional
Risk" in this prospectus supplement.
In addition, with respect to the Co-Lender Loans, the related Mortgaged
Property also secures one or more Companion Loans. See "--Co-Lender Loans"
below.
Nonrecourse Obligations. The Mortgage Loans are generally nonrecourse
obligations of the related borrowers and, upon any such borrower's default in
the payment of any amount due under the related Mortgage Loan, the holder
thereof may look only to the related Mortgaged Property for satisfaction of the
borrower's obligations. In addition, in those cases where recourse to a borrower
or guarantor is purportedly permitted, the Depositor has not undertaken an
evaluation of the financial condition of any such person, and prospective
investors should therefore consider all of the Mortgage Loans to be nonrecourse.
Due-On-Sale and Due-On-Encumbrance Provisions. Substantially all of the
Mortgages contain "due-on-sale" and "due-on-encumbrance" clauses that, in
general, 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 or prohibit the borrower from doing so without
the consent of the holder of the Mortgage. However, certain of the Mortgage
Loans may permit one or more transfer of the related Mortgaged Property to
pre-approved borrowers or pursuant to pre-approved conditions without the
approval of the mortgagee. As provided in, and subject to, the Pooling and
Servicing Agreement, the Special Servicer will determine, in a manner consistent
with the servicing standard described under "SERVICING OF THE MORTGAGE
LOANS--General" in this prospectus supplement whether to exercise any right the
holder of any Mortgage may have under any such clause to accelerate payment of
the related Mortgage Loan upon, or to withhold its consent to, any transfer or
further encumbrance of the related Mortgaged Property.
Cross-Default and Cross-Collateralization of Certain Mortgage Loans;
Certain Multi-Property Mortgage Loans. Two (2) groups of Mortgage Loans (loan
numbers 78, 83, 89 and 100 and 90 and 91), representing 1.4% in aggregate of the
Cut-Off Date Pool Balance are groups of Mortgage Loans that are
cross-collateralized and cross-defaulted with the other Mortgage Loans in such
group as indicated in Annex A-5. Although the Mortgage Loans within each group
are cross-collateralized and cross-defaulted with the other mortgage loans in
such group, the Mortgage Loans in one group are not cross-collateralized or
cross-defaulted with the Mortgage Loans in the other group. As of the Closing
Date, no Mortgage Loan, except the Co-Lender Loans, will be cross-collateralized
or cross-defaulted with any loan that is not included in the Mortgage Pool. The
Master Servicer or the Special Servicer, as the case may be, will determine
whether to enforce the cross-default and cross-collateralization rights upon a
mortgage loan default with respect to any of these Mortgage Loans. The
Certificateholders will not have any right to participate in or control any such
determination. No other Mortgage Loans are subject to cross-collateralization or
cross-default provisions.
The two (2) groups of Mortgage Loans (six (6) of the Mortgage Loans (loan
numbers 78, 83, 89, and 100 and 90 and 91), representing 1.4% of the Cut-Off
Date Pool Balance), which are cross-collateralized and cross-defaulted with each
other each provide for the respective Mortgaged Properties to be released from
the effects of the cross in connection with a defeasance by: (a) delivering a
defeasance deposit sufficient for all remaining payments which would have been
due under the Crossed Loans being defeased; (b) meeting certain debt service
coverage tests and loan-to-value tests; and (c) partially defeasing the other
Crossed Loans in the related Crossed Group in an amount equal to 125% of the
principal balance of the note being defeased, less the current outstanding
principal balance of such note as of the date of the defeasance.
Partial Releases. Certain of the Mortgage Loans permit a partial release of
a portion of the related Mortgage Property not material to the underwriting of
the Mortgage Loan at the time of origination, without any prepayment or
defeasance of the Mortgage Loan.
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With respect to 3 Mortgage Loans (loan numbers 2, 3 and 5), representing
17.2% of the Cut-off Date Pool Balance, the loan documents provide that the
related borrower may obtain the release of a portion of the related Mortgaged
Property, provided certain conditions are satisfied, including: (i) evidence
that the released property may be separated from the Mortgaged Property without
a material diminution in the value of the Mortgaged Property; (ii) the released
property will be vacant, non-income producing and unimproved (or improved only
by surface parking areas); and (ii) a Rating Agency confirmation that the
release will not result in a downgrade, withdrawal or qualification of the then
current rating assigned to any Class of Certificates.
Notwithstanding the foregoing, the borrower under the Park City Center Loan
may convey fee simple title to the land which is identified in the loan
documents subject to the Boscov's lease upon the satisfaction of certain
conditions, including: (i) evidence that the land subject to the Boscov's lease
has been legally subdivided, that the remainder of the Mortgaged Property is in
compliance in all material respects with applicable legal requirements and
constitutes a separate tax lot, and a reciprocal easement agreement or other
agreement has been executed and recorded and (ii) delivery of a title
endorsement to the title insurance policy if the release would be expected to
materially adversely affect the lender's rights under the title insurance policy
as to the remainder of the Mortgaged Property.
CERTAIN STATE SPECIFIC CONSIDERATIONS
Eighteen (18) of the Mortgaged Properties, representing 20.4% of the Cut
Off Date Pool Balance, are located in the State of California. Mortgage loans in
California are generally secured by deeds of trust on the related real estate.
Foreclosure of a deed of trust in California may be accomplished by a non
judicial trustee's sale under a specific provision in the deed of trust or by
judicial foreclosure. Public notice of either the trustee's sale or the judgment
of foreclosure is given for a statutory period of time after which the mortgaged
real estate may be sold by the trustee, if foreclosed pursuant to the trustee's
power of sale, or by court appointed sheriff under a judicial foreclosure.
Following a judicial foreclosure sale, the borrower or its successor in interest
may, for a period of up to one year, redeem the property. California's "one
action rule" requires the lender to exhaust the security afforded under the deed
of trust by foreclosure in an attempt to satisfy the full debt before bringing a
personal action (if otherwise permitted) against the borrower for recovery of
the debt, except in certain cases involving environmentally impaired real
property. California case law has held that acts such as an offset of an
unpledged account constitute violations of such statutes. Violations of such
statutes may result in the loss of some or all of the security under the
mortgage loan. Other statutory provisions in California limit any deficiency
judgment (if otherwise permitted) against the borrower following a foreclosure
to the amount by which the indebtedness exceeds the fair value at the time of
the public sale and in no event greater than the difference between the
foreclosure sale price and the amount of the indebtedness. Further, under
California law, once a property has been sold pursuant to a power of sale clause
contained in a deed of trust, the lender is precluded from seeking a deficiency
judgment from the borrower or, under certain circumstances, guarantors.
California statutory provisions regarding assignments of rents and leases
require that a lender whose loan is secured by such an assignment must exercise
a remedy with respect to rents as authorized by statute in order to establish
its right to receive the rents after an event of default. Among the remedies
authorized by statute is the lender's right to have a receiver appointed under
certain circumstances.
ASSESSMENTS OF PROPERTY CONDITION
Property Inspections. Generally, the Mortgaged Properties were inspected by
or on behalf of the Mortgage Loan Sellers in connection with the origination or
acquisition of the related Mortgage Loans to assess their general condition. No
inspection revealed any patent structural deficiency or any deferred maintenance
considered material and adverse to the value of the Mortgaged Property as
security for the related Mortgage Loan, except in such cases where adequate
reserves have been established.
Appraisals. All of the Mortgaged Properties were appraised by a
state-certified appraiser or an appraiser belonging to the Appraisal Institute
in accordance with the Federal Institutions Reform, Recovery and Enforcement Act
of 1989. The primary purpose of each appraisal was to provide an opinion as to
the market value of the related Mortgaged Property. There can be no assurance
that another appraiser would have arrived at the same opinion of market value.
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Environmental Assessments. A "Phase I" environmental site assessment was
performed by independent environmental consultants with respect to each
Mortgaged Property in connection with the origination of the related Mortgage
Loans. "Phase I" environmental site assessments generally do not include
environmental testing. In certain cases, environmental testing, including in
some cases a "Phase II" environmental site assessment as recommended by such
"Phase I" assessment, was performed. Generally, in each case where environmental
assessments recommended corrective action, the originator of the Mortgage Loan
determined that the necessary corrective action had been undertaken in a
satisfactory manner, was being undertaken in a satisfactory manner or that such
corrective action would be adequately addressed post-closing. In some instances,
the originator required that reserves be established to cover the estimated cost
of such remediation or an environmental insurance policy was obtained from a
third party.
Engineering Assessments. In connection with the origination of all of the
Mortgage Loans, except for 1 Mortgage Loan (loan number 57) representing 0.4% of
the Cut-Off Date Pool Balance, a licensed engineer or architect inspected the
related Mortgaged Property to assess the condition of the structure, exterior
walls, roofing, interior structure and mechanical and electrical systems. The
resulting reports indicated deferred maintenance items and/or recommended
capital improvements on the Mortgaged Properties. Generally, with respect to a
majority of Mortgaged Properties, the related borrowers were required to deposit
with the lender an amount equal to at least 110% of the licensed engineer's
estimated cost of the recommended repairs, corrections or replacements to assure
their completion.
Earthquake Analyses. An architectural and/or engineering consultant
performed an analysis on certain Mortgaged Properties located in areas
considered to be an earthquake risk, which includes California, in order to
evaluate the structural and seismic condition of the property and to assess,
based primarily on statistical information, the maximum probable loss for the
property in an earthquake scenario. The resulting reports concluded that in the
event of an earthquake, none of the Mortgaged Properties are likely to suffer a
probable maximum loss in excess of 20% of the amount of the estimated
replacement cost of the improvements located on the related Mortgaged Property.
The Mortgaged Properties for 3 mortgage loans, representing 6.5% of the Cut-Off
Date Pool Balance have earthquake insurance in place.
Lease Enhancement Policies. One (1) Mortgage Loan (loan number 66), not
including any Credit Lease Loans, representing approximately 0.4% of the Cut-Off
Date Pool Balance, provides the tenant with termination and abatement rights
arising from certain condemnations and casualties ("Condemnation Rights") and
has the benefit of a noncancellable lease enhancement policy issued by Lexington
Insurance Company, a member of American International Group, Inc. (the
"Enhancement Insurer"), which as of November 26, 2003, had a senior unsecured
debt rating of "AAA" by S&P. The lease enhancement policy provides, subject to
customary exclusions, that in the event of a permitted termination by a tenant
of its lease as a result of a condemnation, the Enhancement Insurer will pay to
the Master Servicer on behalf of the Trust Fund the "Loss of Rents" (i.e., a
lump sum payment of all outstanding principal plus, subject to the limitation
below, accrued interest on the related mortgage loan). If the lease permits the
tenant to abate all or a portion of the rent in the event of a condemnation, the
"Loss of Rents" will be in an amount equal to the portion of any rescheduled
monthly rental payments not made by such tenant for the period from the date the
abatement commences until the earlier of the date the abatement ceases or the
expiration date of the initial term of such lease; provided that in the event
such payments would exceed the limits of liability under the policy, then the
Enhancement Insurer may, at its option, pay the present value of the stream of
partial abatement payments in a lump sum. The Enhancement Insurer is not
required to pay amounts due under the related Mortgage Loan other than principal
and, subject to the limitation above, accrued interest, and therefore is not
required to pay any Prepayment Premium or Yield Maintenance Change due
thereunder or any amounts the mortgagor is obligated to pay thereunder to
reimburse the master servicer or the trustee for outstanding advances.
The lease enhancement policy contains certain exclusions from coverage,
including loss arising from damage or destruction directly or indirectly caused
by war, insurrection, rebellion, revolution, usurped power, pollutants or
radioactive matter, or from a taking other than a condemnation by reason of
public health, public safety or the environment.
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For information about Lease Enhancement Policies with respect to Credit
Lease Loans, see "DESCRIPTION OF THE MORTGAGE POOL--Credit Lease Loans--Lease
Enhancement Policies" in this prospectus supplement.
CO-LENDER LOANS
General. Two (2) Mortgage Loans (loan number 3, the "Park City Center
Loan", and loan number 5, the "Meadows Mall Loan") acquired or originated by
Eurohypo AG, New York Branch or ABN AMRO Bank N.V., Chicago Branch are each
evidenced by one of two or more notes each secured by a single mortgage and a
single assignment of leases and rents. The Park City Center Loan is part of a
split loan structure where one companion loan that is part of this split loan
structure is pari passu in its right of entitlement to payment with the Park
City Center Loan and is not included as part of the trust (the "Park City Center
Pari Passu Loan") and one companion loan that is part of this split loan
structure is subordinate in its right of entitlement to payment with the Park
City Center Loan and the Park City Center Pari Passu Loan and is not included in
the trust (the "Park City Center AB Companion Loan" and, together with the Park
City Center Pari Passu Loan, the "Park City Center Companion Loans"). The Park
City Center Loan has a Cut-Off Date Balance of $65,841,900, representing 5.7% of
the Cut-Off Date Pool Balance.
The Meadows Mall Loan is part of a split loan structure where the companion
loan that is part of this split loan structure is pari passu in its right of
entitlement to payment with the related Mortgage Loan and is not included as
part of the trust (the "Meadows Mall Pari Passu Loan" and together with the Park
City Center Pari Passu Loan, the "Pari Passu Loans"). The Meadows Mall Loan has
a Cut-Off Date Balance of $55,768,045, representing 4.9% of the Cut-Off Date
Pool Balance.
Four (4) Mortgage Loans (loan number 7, the "Villas at Rancho Palos Verdes
Loan", loan number 24, the "Arbors of Pleasant Valley Apartments Loan", loan
number 26, the "Columbia Corporate Center Loan" and loan number 66, "Sav-on -
Norwalk Loan" are collectively referred to herein as the "AB Mortgage Loans"
and, together with the Park City Center Loan and the Meadows Mall Loan, the
"Co-Lender Loans". The AB Mortgage Loans are each represented by the senior
notes of two notes. None of the junior companion loans related to the AB
Mortgage Loans (the "AB Companion Loans") are included in the trust. The Park
City Center Pari Passu Loan, the Park City Center AB Companion Loan, the Meadows
Mall Pari Passu Loan and the AB Companion Loans are collectively referred to
herein as the "Companion Loans".
The trust created pursuant to the 2003-C8 Pooling and Servicing Agreement
is the holder of the Park City Center Pari Passu Loan, Eurohypo AG, New York
Branch is the holder of the Park City AB Companion Loan, and ABN AMRO Bank N.V.,
Chicago Branch is the holder of the Meadows Mall Pari Passu Loan. Cap Lease
Funding LLC ("CLF") is the holder of the Sav-on - Norwalk AB Companion Loan, but
may elect to sell the Sav-on - Norwalk AB Companion Loan at any time. Wachovia
Bank, National Association owns an equity interest in CLF and provides financing
to CLF secured by, among other things, the Sav-on - Norwalk Companion Loans.
Mezz Capsm is the holder of the Apartments at Pleasant Valley AB Companion Loan.
The Villas at Rancho Palos Verdes AB Companion Loan is held by principals of the
related borrower. The Columbia Corporate Center AB Companion Loan is held by an
affiliate of MONY Realty Capital, Inc. See "RISK FACTORS--Potential Conflicts of
Interest" in this prospectus supplement. The holders of the Companion Loans may
only sell each such Companion Loan with the prior written consent of the Master
Servicer or the Special Servicer or, without such consent, to certain
institutional lenders or other parties named in the related Intercreditor
Agreement, in each case after receiving prior confirmation from each Rating
Agency that such sale will not result in the withdrawal, downgrade or
qualification of the ratings assigned by the Rating Agency to any Class of
Certificates then rated by the Rating Agency.
With respect to the AB Mortgage Loans, under the terms of separate
intercreditor agreements (each, an "AB Intercreditor Agreement"), the holders of
the AB Companion Loans have each agreed to subordinate their interests in
certain respects to the related AB Mortgage Loans; provided, however, that with
respect to the Sav-on - Norwalk Loan, the holder of the Sav-on - Norwalk AB
Companion Loan has agreed to subordinate its interests in certain respects to
the Sav-on - Norwalk Loan, subject to its prior
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right to receive proceeds of a claim for accelerated future rent payments
payable upon a default under the related lease (a "Defaulted Lease Claim"). With
respect to the Park City Center Loan, the terms of an intercreditor agreement
(the "Park City Center Intercreditor Agreement" provide that the Park City
Center Loan and the Park City Center Pari Passu Loan are of equal priority with
each other and that the Park City Center AB Companion Loan is subordinate in
certain respects to both the Park City Center Loan and the Park City Center Pari
Passu Loan. With respect to the Meadows Mall Loan, the terms of an intercreditor
agreement (the "Meadows Mall Intercreditor Agreement" and together with the Park
City Center Intercreditor Agreement and the AB Intercreditor Agreements, the
"Intercreditor Agreements") provide that the Meadows Mall Loan and the Meadows
Mall Pari Passu Loan are of equal priority with each other and no portion of
either loan will have priority or preference over the other. Except with respect
to the Park City Center Loan and its related Companion Loans (which will be
serviced under the 2003-C8 Pooling and Servicing Agreement) the Master Servicer
and the Special Servicer will undertake to perform the obligations of the holder
of the Companion Loans under the related Intercreditor Agreements.
Servicing Provisions of the Intercreditor Agreements. The Park City Center
Loan and its related Companion Loans will be serviced under the pooling and
servicing agreement (the "2003-C8 Pooling and Servicing Agreement") entered into
in connection with the issuance of the Wachovia Bank Commercial Mortgage Trust,
Commercial Mortgage Pass-Through Certificates, Series 2003-C8. The master
servicer under the 2003-C8 Pooling and Servicing Agreement is Wachovia Bank,
National Association (the "2003-C8 Master Servicer"), the special servicer under
the 2003-C8 Pooling and Servicing Agreement is Clarion Partners, LLC (the
"2003-C8 Special Servicer"), and the trustee under the 2003-C8 Pooling and
Servicing Agreement is Wells Fargo Bank Minnesota, N.A. (the "2003-C8 Trustee").
The terms of the 2003-C8 Pooling and Servicing Agreement provide for servicing
arrangements that are generally similar to those under the Pooling and Servicing
Agreement, provided that with respect to the Park City Center Loan, neither the
2003-C8 Controlling Class Representative nor the Controlling Class
Representative will be entitled to approve (a) any termination of the related
property manager, (b) any determination to allow the related borrower not to
maintain terrorism insurance, or (c) any determination to decrease the time
period referenced in clause (g) of the definition of Servicing Transfer Event.
If the principal amount of the Park City Center AB Companion Loan, less any
existing related appraisal reduction amount, is at least equal to 25% of the
original principal amount of the Park City Center AB Companion Loan, the holder
of the Park City Center AB Companion Loan, or an advisor on its behalf, will be
entitled to advise and direct the 2003-C8 Master Servicer and/or 2003-C8 Special
Servicer with respect to certain matters, including, among other things,
foreclosure or material modifications of the Park City Center Loan. However, no
advice or direction may require or cause the 2003-C8 Master Servicer or the
2003-C8 Special Servicer to violate any provision of the 2003-C8 Pooling and
Servicing Agreement, including the 2003-C8 Master Servicer's and the 2003-C8
Special Servicer's obligation to act in accordance with the Servicing Standard
(as set forth in the 2003-C8 Pooling and Servicing Agreement). See "SERVICING OF
THE MORTGAGE LOANS--Servicing of the Park City Center Loan" and "--The
Controlling Class Representative" in this prospectus supplement.
In the event of any default under the Park City Center Loan or either of
the Park City Center Companion Loans, the holder of the Park City Center AB
Companion Loan will be entitled to (i) cure such default within ten business
days of receipt of notice from the 2003-C8 Master Servicer with respect to
monetary defaults and within thirty days of receipt of notice from the 2003-C8
Master Servicer with respect to nonmonetary defaults and/or (ii) purchase the
Park City Center Pari Passu Loan from the 2003-C8 Trust after the expiration of
the cure period subject to the conditions contained in the Park City Center
Intercreditor Agreement. Upon exercising its right to purchase the Park City
Center Pari Passu Loan, the holder of the Park City Center AB Companion Loan
will also be required to purchase the Park City Center Loan. The purchase price
will generally equal the unpaid aggregate principal balance of the Park City
Center Loan and the Park City Center Pari Passu Loan, together with all unpaid
interest thereon (other than default interest) at the related mortgage rate and
any unreimbursed servicing expenses, advances and interest on advances for which
the borrower under the Park City Center Loan is responsible. No prepayment
consideration will be payable in connection with such a purchase of the Park
City Center Loan and the Park City Center Pari Passu Loan.
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With respect to the Meadows Mall Loan, the Master Servicer and the Special
Servicer will service and administer the Meadows Mall Loan and the Meadows Mall
Companion Loan pursuant to the Pooling and Servicing Agreement and the Meadows
Mall Intercreditor Agreement for so long as the Meadows Mall Loan is a part of
the trust. The holder of the Meadows Mall Companion Loan or an advisor on its
behalf will generally share all of the rights that the controlling Class
Representative has with respect to directing the Master Servicer and/or the
Special Servicer with respect to the servicing of the Meadows Mall Loan. See
"SERVICING OF THE MORTGAGE LOANS--The Controlling Class Representative" in this
prospectus supplement.
With respect to the Arbors of Pleasant Valley Apartments Loan, the Master
Servicer and Special Servicer will service and administer such loan and its
related AB Companion Loan pursuant to the Pooling and Servicing Agreement and
the related Intercreditor Agreement for so long as the Arbors of Pleasant Valley
Apartments Loan is part of the trust. The Master Servicer and/or Special
Servicer may not enter into amendments, modifications or extensions of the
Arbors of Pleasant Valley Apartments Loan and the related AB Companion Loan
without the consent of the holder of such AB Companion Loan if the proposed
amendment, modification or extension adversely affects the holder of the related
AB Companion Loan in a material manner; provided, however, that such consent
right will expire when the repurchase period described in the next paragraph
expires. See "SERVICING OF THE MORTGAGE LOANS--The Controlling Class
Representative" in this prospectus supplement.
In the event that (i) any payment of principal or interest on the Arbors of
Pleasant Valley Apartments Loan or the related AB Companion Loan becomes 90 or
more days delinquent, (ii) the principal balance of the Arbors of Pleasant
Valley Apartments Loan or the related AB Companion Loan has been accelerated,
(iii) the principal balance of the Arbors of Pleasant Valley Apartments Loan or
the related AB Companion Loan is not paid at maturity, (iv) the borrower files a
petition for bankruptcy or is otherwise the subject of a bankruptcy proceeding
or (v) any other event where the cash flow payment under the related AB
Companion Loan has been interrupted and payments are made pursuant to the event
of default waterfall, the holder of the related AB Companion Loan will be
entitled to purchase the Arbors of Pleasant Valley Apartments Loan from the
trust for a period of 30 days after its receipt of a repurchase option notice,
subject to certain conditions set forth in the related Intercreditor Agreement.
The purchase price will generally equal the unpaid principal balance of the
Arbors of Pleasant Valley Apartments Loan, together with all unpaid interest on
the Arbors of Pleasant Valley Apartments Loan (other than default interest or
late payment charges) at the related mortgage rate and any outstanding servicing
expenses, advances and interest on advances for which the borrower under the
Arbors of Pleasant Valley Apartments Loan is responsible. Unless the borrower or
an affiliate is purchasing the Arbors of Pleasant Valley Apartments Loan, no
prepayment consideration will be payable in connection with the purchase of the
Arbors of Pleasant Valley Apartments Loan.
With respect to the Sav-on - Norwalk Loan, the Master Servicer and Special
Servicer will service and administer the Sav-on - Norwalk Loan and the related
Companion Loan pursuant to the Pooling and Servicing Agreement and the "Sav-on -
Norwalk Intercreditor Agreement" for so long as such Mortgage Loan is part of
the trust. The Sav-on - Norwalk Loan and its related Companion Loan are
cross-defaulted. However, upon an event of default which does not constitute a
payment default but is limited to a default in the performance by the related
borrower of its obligations under its lease, or the failure to reimburse a
servicing advance made to fulfill such obligations, the Master Servicer will
generally be required to make servicing advances to cure any such borrower
default and prevent a default under the lease, subject to customary standards of
recoverability, and will be prohibited from foreclosing on the Mortgaged
Property so long as any such advance, together with interest thereon, would be
recoverable. Further, the Special Servicer will not be permitted to amend the
Sav-on - Norwalk Loan or the related Companion Loan in a manner materially
adverse to the holder of the related Companion Loan without the consent of the
holder of such Companion Loan. The holder of the Sav-on - Norwalk AB Companion
Loan will not be entitled to advise the Special Servicer with respect to certain
matters related to the Sav-on - Norwalk Loan and the Sav-on - Norwalk AB
Companion Loan. See "SERVICING OF THE MORTGAGE LOANS--The Controlling Class
Representative" in this prospectus supplement.
In the event of an acceleration of the Sav-on - Norwalk Loan and the
related Companion Loan after an event of default under the related Sav-on -
Norwalk Loan documents, the holder of the Sav-on -
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Norwalk AB Companion Loan will be entitled to purchase the Sav-on - Norwalk Loan
from the trust for a purchase price equal to the sum of (i) the principal
balance of the Sav-on - Norwalk Loan, together with accrued and unpaid interest
thereon through the date of purchase, (ii) unreimbursed advances together with
accrued and unpaid interest thereon and (iii) any other amounts payable under
the Sav-on - Norwalk Loan documents.
With respect to the Villas at Rancho Palos Verdes Loan, for so long as the
initial related AB Companion Loan principal balance, less the sum of (x) any
payments of principal (whether as principal prepayments or otherwise) received
on the related AB Companion Loan and (y) any appraisal reduction amounts and
realized losses allocated to the related AB Companion Loan is less than or equal
to 25% of the initial related AB Companion Loan principal balance (so long as
the related AB Companion Loan is not held by the borrower or any affiliate), the
holder of the related AB Companion Loan will be entitled to advise or direct the
Special Servicer with respect to certain actions, including, any foreclosure of
the ownership of the Mortgaged Property and certain material modifications of
the Villas at Rancho Palos Verdes Loan Pair.
In the event that any monetary default or, to the extent that the Master
Servicer has knowledge thereof, non-monetary default exists with respect to the
Villas at Rancho Palos Verdes Loan, the holder of the related AB Companion Loan
will be entitled to (i) cure such default within five business days of receipt
of notice from the Master Servicer with respect to monetary defaults and within
thirty days of receipt of notice from the Master Servicer with respect to
nonmonetary defaults (provided that the holder of the related AB Companion Loan
may not cure more than 4 monetary defaults within any 12-month period or 4
non-monetary defaults ) and/or (ii) purchase the Villas at Rancho Palos Verdes
Loan from trust after the expiration of the cure period subject to the
conditions contained in the Villas at Rancho Palos Verdes intercreditor
agreement. If at any time that the borrower or its affiliate is the holder of
the related AB Companion Loan, the lock-out period under the Villas at Rancho
Palos Verdes Loan Pair must have ended for the borrower or its affiliate to
exercise the purchase option. The purchase price will generally equal the unpaid
aggregate principal balance of the Villas at Rancho Palos Verdes Loan, together
with all unpaid interest thereon (other than default interest) at the related
mortgage rate and any unreimbursed servicing expenses, advances and interest on
advances for which the borrower under the Villas at Rancho Palos Verdes Loan is
responsible and if the borrower or an affiliate is the purchaser, any and all
amounts due and owing under the loan documents or Pooling and Servicing
Agreement with respect to the Villas at Rancho Palos Verdes Loan, including,
without limitation, any prepayment premium, yield maintenance premium or exit
fees then applicable to the voluntary or involuntary prepayment of the loan, any
late fees and any and all other costs and expenses.
With respect to the Columbia Corporate Center Loan, for so long as the
initial related AB Companion Loan principal balance, less the sum of (x) any
payments of principal (whether as principal prepayments or otherwise) received
on the Companion Loan and (y) any appraisal reduction amounts and realized
losses allocated to the Companion Loan is less than or equal to 25% of the
initial AB Companion Loan principal balance, the holder of the related AB
Companion Loan will be entitled to advise or direct the Special Servicer with
respect to certain actions, including foreclosure of the related Mortgaged
Property and material modifications of the Columbia Corporate Center mortgage
loan.
Notwithstanding the foregoing, if and for so long as the owner of the
related Mortgaged Property is the holder of the Companion Loan or an affiliate,
the holder of the AB Companion Loan will not have the right to approve any of
the foregoing actions (other than the right to approve a sale of the Columbia
Corporate Center Loan Pair). Additionally, all rights of mortgagee under the
loan documents with respect to the master lease are exercisable solely by holder
of the related AB Companion Loan. Accordingly, without limitation, any approval
to amend the master lease to effect a release of a portion of the master lease
premises or to approve the proposed new lease is required to be made solely by
the holder of the related AB Companion Loan and the exercise by the mortgagee of
any remedies that may be available at law, or in equity or pursuant to the loan
documents arising as a result of a default under the master lease will be made
by the Special Servicer solely at the direction of holder of the related AB
Companion Loan.
In the event that any monetary default or, to the extent that the Master
Servicer has knowledge thereof, non-monetary default exists with respect to the
Columbia Corporate Center Loan, the holder of
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the related AB Companion Loan will be entitled to (i) cure such default within
five business days of receipt of notice from the Master Servicer with respect to
monetary defaults and within thirty days of receipt of notice from the Master
Servicer with respect to nonmonetary defaults (provided that the holder of the
related AB Companion Loan may not cure more than 3 successive identical defaults
within any 90-day period) and/or (ii) purchase the Columbia Corporate Center
Loan from trust after the expiration of the cure period subject to the
conditions contained in the Columbia Corporate Center intercreditor agreement.
The purchase price will generally equal the unpaid aggregate principal balance
of the Columbia Corporate Center Loan, together with all unpaid interest thereon
(other than default interest) at the related mortgage rate and any unreimbursed
servicing expenses, advances and interest on advances for which the borrower
under the Columbia Corporate Center Loan is responsible. No prepayment
consideration will be payable in connection with such a purchase of the Columbia
Corporate Center Loan.
Application of Payments. Pursuant to the Park City Center Intercreditor
Agreement, to the extent described below: (a) the right of the holder of the
Park City Center Pari Passu Loan to receive payments is pari passu to the rights
of the trust to receive payments with respect to the Park City Center Loan; and
(b) the right of the holder of the Park City Center AB Companion Loan to receive
payments is subordinated to the rights of the trust and the holder of the Park
City Center Pari Passu Loan to receive payments with respect to the Park City
Center Loan. Prior to the occurrence of an event of default with respect to the
Park City Center Loan or prior to a servicing transfer event under the 2003-C8
Pooling and Servicing Agreement related to the Park City Center Loan, after
payment or reimbursement of any advances, advance interest or other costs, fees
or expenses related to or allocable to the Park City Center Loan or the Park
City Center Companion Loans, all payments and proceeds (of whatever nature)
received with respect to the Park City Center Loan and the Park City Center
Companion Loans will be paid first, pro rata, between the trust and the holder
of the Park City Center Pari Passu Loan, in an amount equal to interest due with
respect to the Park City Center Loan and Park City Center Pari Passu Loan;
second, pro rata, among the trust and the holder of the Park City Center Pari
Passu Loan, in an amount equal to the principal payments received, if any, with
respect to the Park City Center Loan and the Park City Center Pari Passu loan;
third, to the holder of the Park City Center AB Companion Loan, in an amount
equal to interest due with respect to the Park City Center AB Companion Loan;
fourth, to the holder of the Park City Center AB Companion Loan, in an amount
equal to the principal payments received, if any, with respect to the Park City
Center AB Companion Loan; fifth, pro rata, among the trust, the holder of the
Park City Center Pari Passu Loan and the holder of the Park City Center AB
Companion Loan, in an amount equal to the Yield Maintenance Charges and
Prepayment Premiums, to the extent actually paid, allocable to the Park City
Center Whole Loan; sixth, pro rata, among the trust and the holder of the Park
City Center Pari Passu Loan, in an amount equal to any unreimbursed costs and
expenses owing thereto, respectively, and then to the holder of the Park City
Center AB Companion Loan, in an amount equal to any unreimbursed costs and
expenses owing thereto, up to the amount of such unreimbursed costs and
expenses; and seventh, pro rata, to the trust, the holder of the Park City
Center Pari Passu Loan and the Park City Center AB Companion Loan, in an amount
equal to the unpaid default interest respectively accrued under the Park City
Center Loan and each of the Park City Center Companion Loans, to the extent
actually paid, allocable to the Park City Center Loan and each of the Park City
Center Companion Loans. If any excess amount is paid by the related borrower,
and not otherwise applied in accordance with the foregoing six clauses, such
amount will be paid to the trust, the holder of the Park City Center Pari Passu
Loan and the holder of the Park City Center AB Companion Loan, based upon their
respective outstanding principal balances; provided that if such principal
balances are each equal to zero, then based upon the respective initial
principal balances thereof.
Following the occurrence and during the continuance of an event of default
with respect to the Park City Center Loan or such mortgage loan becoming a
specially serviced mortgage loan pursuant to the Park City Center Intercreditor
Agreement, and subject to the holder of the Park City Center AB Companion Loan's
right to purchase the Park City Center Loan from the trust, after payment or
reimbursement of any advances, advance interest or other costs, fees or expenses
related to or allocable to the Park City Center Loan and each of the Park City
Center Companion Loans, all payments and proceeds (of whatever nature) on the
Park City Center Loan and the Park City Center Companion Loans will be paid
first, pro rata, to the trust and the holder of the Park City Center Pari Passu
Loan, in an
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amount equal to interest due with respect to the Park City Center Loan and the
Park City Center Pari Passu Loan; second, pro rata, to the trust and the holder
of the Park City Center Pari Passu Loan, in an amount equal to the principal
balance of the Park City Center Loan and the Park City Center Pari Passu Loan,
until paid in full; third, to the holder of the Park City Center AB Companion
Loan in an amount equal to accrued and unpaid interest due with respect to the
Park City Center AB Companion Loan; fourth, to the holder of the Park City
Center AB Companion Loan, in an amount equal to the principal balance of the
Park City Center AB Companion Loan, until paid in full; fifth, pro rata, to the
trust and the holder of the Park City Center Pari Passu Loan, in an amount equal
to any unreimbursed costs and expenses owing thereto, respectively, and then to
the holder of the Park City Center AB Companion Loan, in an amount equal to any
unreimbursed costs and expenses owing thereto up to the amount of such
unreimbursed costs and expenses; sixth, pro rata, to the trust and the holder of
the Park City Center Pari Passu Loan, in an amount equal to the Yield
Maintenance Charges and Prepayment Premiums, to the extent actually paid,
allocable to the Park City Center Loan and Park City Center Pari Passu Loan;
seventh, pro rata, to the trust and the holder of the Park City Center Pari
Passu Loan, in an amount equal to the unpaid default interest respectively
accrued under the Park City Center Loan and the Park City Center Pari Passu
Loan, to the extent actually paid, allocable to the Park City Center Loan and
the Park City Center Pari Passu Loan; eighth, to the holder of the Park City
Center AB Companion Loan, in an amount equal to the Yield Maintenance Charges
and Prepayment Premiums, to the extent actually paid, allocable to the Park City
Center AB Companion Loan; ninth, to the holder of the Park City Center AB
Companion Loan, in an amount equal to the unpaid default interest accrued under
the Park City Center AB Companion Loan, to the extent actually paid, allocable
to the Park City Center AB Companion Loan; and tenth, pro rata, any excess to
the trust, the holder of the Park City Center Pari Passu Loan and the Park City
Center AB Companion Loan, based upon the respective outstanding principal
balances; provided that if the principal balance of the Park City Center AB
Companion Loan is equal to zero, then based upon the respective initial
principal balances thereof.
Pursuant to the Meadows Mall Intercreditor Agreement, all payments,
proceeds and other recoveries on or in respect of the Meadows Mall Loan and/or
the Meadows Mall Companion Loan (subject in each case to the rights of the
Master Servicer, the Special Servicer and the Trustee to payments and
reimbursements as set forth in the Pooling and Servicing Agreement) will be
applied to the Meadows Mall Loan and the Meadows Mall Companion Loan on a pro
rata basis according to their respective principal balances.
With respect to the Arbors of Pleasant Valley Apartments Loan, pursuant to
the related Intercreditor Agreement and prior to the occurrence of (i) the
acceleration of the Arbors of Pleasant Valley Apartments Loan or related AB
Companion Loan, (ii) a monetary event of default or (iii) an event of default
triggered by the bankruptcy of the borrower, the related borrower will make
separate monthly payments of principal and interest to the Master Servicer and
the holder of the related AB Companion Loan. Any escrow and reserve payments
required in respect of the Arbors of Pleasant Valley Apartments Loan or the
related AB Companion Loan will be paid to the Master Servicer.
Following the occurrence and during the continuance of (i) the acceleration
of the Arbors of Pleasant Valley Apartments Loan or the related AB Companion
Loan, (ii) a monetary event of default or (iii) an event of default triggered by
the bankruptcy of the borrower, and subject to certain rights of the holder of
the related AB Companion Loan to purchase the Arbors of Pleasant Valley
Apartments Loan from the trust, all payments and proceeds (of whatever nature)
on the related AB Companion Loan will be subordinated to all payments due on the
Arbors of Pleasant Valley Apartments Loan and the amounts with respect to such
Loan Pair will be paid first, to the Master Servicer, Special Servicer, Trustee
or Paying Agent, up to the amount of any unreimbursed costs and expenses paid by
such entity, including unreimbursed advances and interest thereon, second, to
the Master Servicer and the Special Servicer, in an amount equal to the accrued
and unpaid servicing fees earned by such entity, third, to the trust, in an
amount equal to interest due with respect to the Arbors of Pleasant Valley
Apartments Loan; fourth, to the trust, in an amount equal to the principal
balance of the Arbors of Pleasant Valley Apartments Loan until paid in full;
fifth, to the trust, in an amount equal to any prepayment premium, to the extent
actually paid, allocable to the Arbors of Pleasant Valley Apartments Loan;
sixth, to the holder of the related AB Companion Loan, up to the amount of any
unreimbursed costs and expenses paid by the holder of the
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related AB Companion Loan, seventh, to the holder of the related AB Companion
Loan, in an amount equal to interest due with respect to the related AB
Companion Loan, eighth, to the holder of the related AB Companion Loan, in an
amount equal to the principal balance of the related AB Companion Loan until
paid in full; ninth, to the holder of the related AB Companion Loan, in an
amount equal to any prepayment premium, to the extent actually paid, allocable
to the related AB Companion Loan; tenth, to the trust and the holder of the
related AB Companion Loan, in an amount equal to any unpaid default interest
accrued on the Arbors of Pleasant Valley Apartments Loan and related AB
Companion Loan, respectively; and eleventh, any excess, to the trust and the
holder of the related AB Companion Loan, pro rata, based upon the outstanding
principal balances; provided that if the principal balance of the related AB
Companion Loan is equal to zero, then based upon the initial principal balances.
Pursuant to the Columbia Corporate Center Intercreditor Agreement, prior to
the occurrence of an event of default with respect to the Columbia Corporate
Center Loan or such loan becoming a specially serviced mortgage loan as a result
of an event of default, an acceleration of the loan or the maturity date of the
loan, after payment or reimbursement of any advances (other than P&I advances
made by the holder of the related AB Companion Loan), advance interest,
Additional Trust Fund Expenses, or other costs, fees or expenses related to or
allocable to the Columbia Corporate Center Loan or the related Companion Loan,
all payments and proceeds (of whatever nature) received with respect to the
Columbia Corporate Center Loan and the related AB Companion Loan will be paid
first, to the trust, in an amount equal to interest due with respect to the
Columbia Corporate Center Loan; second, to the holder of the related AB
Companion Loan, in an amount equal to interest due with respect to such AB
Companion Loan; third, to the trust and the holder of the related AB Companion
Loan, pro rata (based upon the outstanding principal balance of the Columbia
Corporate Center Loan and the related AB Companion Loan), in an amount equal to
the principal payments received, if any; fourth, to the trust and the holder of
the related AB Companion Loan, pro rata (based upon the outstanding principal
balance of the Columbia Corporate Center Loan and the related AB Companion
Loan), in an amount equal to any prepayment premium, to the extent actually
paid; fifth, to the trust and the holder of the related AB Companion Loan, pro
rata, based upon any unreimbursed costs and expenses owing to the trust or the
holder of the related AB Companion Loan, respectively, up to the amount of any
such unreimbursed costs and expenses; and sixth, to the trust and the holder of
the related AB Companion Loan, pro rata, based upon the default interest
respectively accrued under the Columbia AB Corporate Center Loan and the related
AB Companion Loan, to the extent actually paid. If any excess amount is paid by
the related borrower, and not otherwise applied in accordance with the foregoing
six clauses, such amount will be paid to the trust and the holder of the related
Companion Loan on a pro rata basis.
Following the occurrence and during the continuance of an event of default
with respect to the Columbia Corporate Center Loan such loan becoming a
specially serviced mortgage loan as a result of an event of default, an
acceleration of the loan or the maturity date of the loan pursuant to the
Columbia Corporate Center Intercreditor Agreement, and subject to the holder of
the related Companion Loan's right to purchase the Columbia Corporate Center
Loan from the trust, after payment or reimbursement of any advances (other than
P&I advances made by the holder of the Columbia Corporate Center Companion
Loan), advance interest, Additional Trust Fund Expenses, or other costs, fees or
expenses related to or allocable to the Columbia Corporate Center Loan, all
payments and proceeds (of whatever nature) on the related Companion Loan will be
subordinated to all payments due on and the amounts with respect to the Columbia
Corporate Center Loan and the related Companion Loan will be paid first, to the
trust, in an amount equal to interest due with respect to the Columbia Corporate
Center Loan; second, to the trust, in an amount equal to the principal balance
of the Columbia Corporate Center Loan until paid in full; third, to the holder
of the related Companion Loan, in an amount equal to (a) interest due with
respect to the related Companion Loan and (b) all unreimbursed advances made by
the holder of the related Companion Loan; fourth, to the holder of the related
Companion Loan, in an amount equal to the principal balance of such Companion
Loan until paid in full to the trust; fifth, with respect to the Columbia
Corporate Center Loan, to the trust, in an amount equal to any prepayment
premium, to the extent actually paid, allocable to the Columbia Corporate Center
Loan; sixth, with respect to the Columbia Corporate Center Loan, to the trust,
in an amount equal to any unpaid default interest accrued on the Columbia
Corporate Center Loan; seventh, to the holder of the related Companion Loan, in
an
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amount equal to any prepayment premium, to the extent actually paid, allocable
to the related Companion Loan; eighth, to the holder of the related Companion
Loan, in an amount equal to any unpaid default interest accrued on the related
Companion Loan; ninth, to the trust and the holder of the related Companion
Loan, pro rata, based upon the amount of any unreimbursed costs and expenses,
respectively, up to the amount of any such unreimbursed costs and expenses; and
tenth, any excess, to the trust and the holder of the related Companion Loan,
pro rata, based upon the outstanding principal balances; provided that if the
principal balance of the related Companion Loan is equal to zero, then based
upon the initial principal balances.
Pursuant to the Sav-on - Norwalk intercreditor agreement, to the extent
described below, the right of the holders of the Sav-on - Norwalk AB Companion
Loan to receive payments with respect to such Companion Loan (other than
payments in respect of Defaulted Lease Claims) is subordinated to the payment
rights of the trust to receive payments with respect to the Sav-on - Norwalk
Loan. All payments and proceeds of the Sav-on - Norwalk Loan and the related AB
Companion Loan (including, among other things, regular payments, insurance
proceeds and liquidation proceeds), other than in respect of Defaulted Lease
Claims, whether before or after the occurrence of an event of default with
respect to the Sav-on - Norwalk Loan, will be applied first, in the event of
liquidation of the real property, a determination that applicable servicing
advances are nonrecoverable, or a lease acceleration or termination, first to
reimbursement of servicing advances together with interest thereon. All
remaining amounts (or all amounts if no such liquidation, nonrecoverability
determination or lease acceleration or termination has occurred), will be
applied first, to the trust, in an amount equal to interest due with respect to
the Sav-on - Norwalk Loan at the pre-default interest rate thereon; second to
the trust, in an amount equal to the portion of any scheduled payments of
principal allocable to the Sav-on - Norwalk Loan (including, following
acceleration, the full principal balance thereof); third, to fund any applicable
reserves under the terms of the Sav-on - Norwalk Loan documents; fourth, to the
holder of the Sav-on - Norwalk AB Companion Loan, in an amount equal to amounts
then due with respect to the Sav-on - Norwalk AB Companion Loan (including
reimbursement of any advances made by or on behalf of the holder of the Sav-on -
Norwalk AB Companion Loan, interest due with respect to the Sav-on - Norwalk AB
Companion Loan at the pre-default interest rate thereon and any scheduled
payments of principal allocable to the related AB Companion Loan); fifth, to
reimburse the Master Servicer, Special Servicer or the holder of the Sav-on -
Norwalk AB Companion Loan for any outstanding advances made by either such party
on the Sav-on - Norwalk Loan or the Sav-on - Norwalk AB Companion Loan, to the
extent then deemed to be nonrecoverable and not previously reimbursed; sixth,
sequentially to the Sav-on-Norwalk Loan and then the Sav-on - Norwalk AB
Companion Loan, in each case until paid in full, any unscheduled payments of
principal with respect thereto; seventh, to any prepayment premiums or yield
maintenance charges (allocated pro rata based on the principal then prepaid),
and eighth, to any default interest, first to the default interest accrued on
the Sav-on - Norwalk Mortgage Loan and then default interest accrued on the
Sav-on - Norwalk AB Companion Loan. Proceeds of Defaulted Lease Claims will be
applied first to payment of amounts due under the Sav-on - Norwalk AB Companion
Loan, and thereafter will be payable to the trust. If any excess amount is paid
by the related borrower, and not otherwise applied in accordance with the
foregoing seven clauses, such amount will be paid to the trust and the holder of
the Sav-on - Norwalk AB Companion Loan on a pro rata basis.
Pursuant to the Villas at Rancho Palos Verdes intercreditor agreement,
prior to the occurrence and continuance of an event of default with respect to
the Villas at Rancho Palos Verdes Loan, the acceleration of the Villas at Rancho
Palos Verdes Loan, the Villas at Rancho Palos Verdes Loan becoming a specially
serviced loan as a result of an event of default or the occurrence of the
maturity date, after payment or reimbursement of the fees due to the Master
Servicer, any Additional Trust Fund Expenses and/or advances or other fees costs
or expenses related to or allocable to the Villas at Rancho Palos Verdes Loan or
the related Companion Loan, all payments and proceeds (of whatever nature)
received with respect to the Villas at Rancho Palos Verdes Loan and the related
Companion Loan will be paid first, to the Villas at Rancho Palos Verdes Loan in
an amount equal to the accrued and unpaid interest due thereon, second, to the
Villas at Rancho Palos Verdes Companion Loan in an amount equal to the accrued
and unpaid interest due thereon, third, to the Villas at Rancho Palos Verdes
Loan and the Villas at Rancho Palos Verdes Companion Loan, pro rata (based upon
their outstanding principal balances), in an
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amount equal to the principal payments received, fourth, to the Villas at Rancho
Palos Verdes Loan and the Villas at Rancho Palos Verdes Companion Loan, pro rata
(based upon their outstanding principal balances), in an amount equal to any
prepayment premium actually paid, fifth, to the Villas at Rancho Palos Verdes
Companion Loan up to the amount of any unreimbursed costs and expenses; and
sixth, any excess, pro rata, to the Villas at Rancho Palos Verdes Loan and the
Villas at Rancho Palos Verdes Companion Loan based upon their outstanding
principal balances.
After the occurrence of and during the continuance of an event of default
with respect to the Villas at Rancho Palos Verdes Loan, the acceleration of the
Villas at Rancho Palos Verdes Loan, the Villas at Rancho Palos Verdes Loan
becoming a specially serviced loan as a result of an event of default or the
occurrence of the maturity date, after payment or reimbursement of the fees due
to the Master Servicer, any Additional Trust Fund Expenses and/or advances or
other fees costs or expenses related to or allocable to the Villas at Rancho
Palos Verdes Loan or the related Companion Loan, all payments and proceeds (of
whatever nature) received with respect to the Villas at Rancho Palos Verdes Loan
and the related AB Companion Loan will be paid first, to the Villas at Rancho
Palos Verdes Loan, in an amount equal to accrued and unpaid interest thereon,
second, to the Villas at Rancho Palos Verdes Loan, in an amount equal to the
principal balance of the Villas at Rancho Palos Verdes Loan until paid in full,
third, to the Villas at Rancho Palos Verdes Loan, in an amount equal to any
prepayment premium actually paid, allocable to the Villas at Rancho Palos Verdes
Loan, fourth, to the Villas at Rancho Palos Verdes Loan in an amount equal to
any default interest accrued thereon, fifth, to the Villas at Rancho Palos
Verdes Companion Loan in an amount equal to accrued and unpaid interest thereon,
sixth, to the Villas at Rancho Palos Verdes Companion Loan, in an amount equal
to the principal balance of the Villas at Rancho Palos Verdes Companion Loan
until paid in full, seventh, to the Villas at Rancho Palos Verdes Companion
Loan, in an amount equal to any prepayment premium actually paid, allocable to
the Villas at Rancho Palos Verdes Companion Loan, eighth, to The Villas at
Rancho Palos Verdes Companion Loan in an amount equal to any default interest
accrued thereon ninth, to the Villas at Rancho Palos Verdes Companion Loan up to
the amount of any unreimbursed costs and expenses, and tenth, any excess, pro
rata, to the Villas at Rancho Palos Verdes Loan and the Villas at Rancho Palos
Verdes Companion Loan based upon their outstanding principal balances.
Application of Amounts Paid to Trust. On or before each distribution date,
amounts payable to the trust as holder of any Co-Lender Loan pursuant to the
Intercreditor Agreements will be included in the Available Distribution Amount
for such Distribution Date to the extent described in this Prospectus Supplement
and amounts payable to the holder of the related Companion Loan will be
distributed to the holder net of fees and expenses on such Companion Loan, and,
in the case of the Park City Center Loan, will be applied and distributed in
accordance with the 2003-C8 Pooling and Servicing Agreement.
CREDIT LEASE LOANS
Two (2) of the Mortgage Loans (loan numbers 94 and 104), representing 0.4%
of the Cut-Off Date Pool Balance (the "Credit Lease Loans"), were underwritten
based upon the financial strength of the tenant (each a "Tenant") to which the
related Mortgaged Property is leased. With respect to the Credit Lease Loans,
the Tenant possesses (or the related parent or other affiliate guarantees the
Tenant's lease obligation possesses) the rating indicated in the Credit Lease
Loan Table below. Scheduled monthly rent payments (the "Monthly Rental
Payments") under the related lease are generally determined in underwriting to
be sufficient to pay in full and on a timely basis all interest and principal
scheduled to be paid with respect to the related Credit Lease Loans (other than
any Balloon Payment, which is covered by a Residual Value Insurance Policy). The
obligations under the related leases (the "Credit Leases") generally provide
that the Tenant is responsible for all costs and expenses incurred in connection
with the maintenance and operation of the related Mortgaged Property, other than
maintenance of the roof, structural and exterior portions of the related
Mortgaged Property.
The payment of interest and principal on Credit Lease Loans is dependent
principally on the payment by each Tenant or guarantor of the Tenant's Credit
Lease (the "Guarantor"), if any, of Monthly Rental Payments and other payments
due under the terms of its Credit Lease. Each Credit Lease has a primary lease
term (the "Primary Term") that expires on or after the scheduled final maturity
date of the related Credit Lease Loan. The Credit Lease Loans are scheduled to
be fully repaid from (i) Monthly
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Rental Payments made over the Primary Term of the related Credit Lease or (ii)
with respect to Credit Lease Loans which are Balloon Loans, Monthly Rental
Payments and the related Residual Value Insurance Policy or a refinancing by the
borrower.
The amount of the Monthly Rental Payments payable by each Tenant is equal
to or greater than the scheduled payment of all principal, interest and other
amounts due each month on the related Credit Lease Loan (other than any Balloon
Payments).
One (1) of the Credit Lease Loans, representing 0.2% of the Cut-Off Date
Pool Balance, which is a Balloon Loan is insured to the extent of the related
Balloon Payment through an insurance policy (such policy, a "Residual Value
Insurance Policy"). Pursuant to the terms of such Residual Value Insurance
Policy, if a default occurs under such Credit Lease Loans and no recovery is
available from the related mortgagor, the Special Servicer will be entitled to
recover in full the amount of the Balloon Payment due under such Credit Lease
Loan after the maturity date for such Credit Lease Loan.
Set forth in the table below (the "Credit Lease Loan Table") for each
Credit Lease Loan, is the name of the Tenant, the Cut-Off Date Balance of the
related Credit Lease Loan, the Guarantor, if any, the rating of the Tenant or
Guarantor and the Credit Lease type.
CREDIT LEASE LOAN TABLE
CUT-OFF
DATE PROPERTY LEASE GUARANTOR/ S&P/FITCH
LOAN NUMBER PROPERTY NAME BALANCE TYPE TYPE(1) TENANT RATING(2)
- ------------- ----------------------------- ------------- ---------- --------- ------------ ----------
94........... Rite Aid -- Chester NY $2,496,742 Retail NN Rite Aid B+/NR
104 ......... Rite Aid -- Mountaintop, PA $1,620,965 Retail NN Rite Aid B+/NR
- ----------
(1) "NN" means double net lease.
(2) Unless otherwise indicated, such ratings were the highest assigned to the
applicable Tenant or Guarantor, as applicable, by S&P or Fitch.
In the case of 1 Credit Lease Loan, the related Credit Lease provides that
the related Tenant is responsible for all real property taxes and assessments
levied or assessed against the related Mortgaged Property. In the case of 1
Credit Lease Loan, the related Credit Lease provides that the landlord is
responsible for all real property taxes and assessments levied against the
related Mortgaged Property, and the Tenant will pay as additional rent the
actual real estate taxes paid by the landlord for the related Mortgaged
Property. In addition, each Credit Lease provides that the related Tenant is
responsible for all charges for utility services, insurance and other operating
expenses incurred in connection with the operation of the related Mortgaged
Property; provided, however, with respect to 1 Credit Lease Loan, the landlord
will maintain insurance for Loss of Rents and the Tenant will reimburse the
landlord for the reasonable cost thereof .
Generally, each Credit Lease Loan provides that if the Tenant defaults
beyond applicable notice and grace periods in the performance of any covenant or
agreement in such Credit Lease (a "Credit Lease Default"), then the holder of
the related Mortgage may require the related mortgagor either (i) to terminate
such Credit Lease or (ii) refrain from the exercise of any of its rights
thereunder. A Credit Lease Default will constitute a default under the related
Credit Lease Loan, although in certain cases the mortgagor may possess certain
cure rights.
In addition, each Credit Lease permits the Tenant, at its own expense,
subject to certain conditions, to make alterations or improvements on the
related Mortgaged Property as the Tenant may deem necessary or desirable. Such
actions, if undertaken by the Tenant, will not affect the Tenant's obligations
under the related Credit Lease.
Lease termination rights and rent abatement rights may be divided into
three categories: (i) termination and abatement rights directly arising from
certain casualty occurrences or condemnations ("Casualty or Condemnation
Rights"), (ii) termination and abatement rights arising from a mortgagor's
default relating to its obligations under a Credit Lease to perform required
maintenance, repairs or replacements with respect to the related Mortgaged
Property ("Maintenance Rights") and (iii) termination and abatement rights
arising from a mortgagor's default in the performance of various other
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obligations under the Credit Lease, including remediating environmental
conditions not caused by the Tenant, enforcement of restrictive covenants
affecting other property owned by the mortgagor in the area of the related
Mortgaged Property and complying with laws affecting such Mortgaged Property or
common areas related to such Mortgaged Property ("Additional Rights"). The
Credit Leases provide Casualty or Condemnation Rights, Maintenance Rights and
Additional Rights ("Double Net Leases"). If the mortgagor defaults in the
performance of certain obligations under a Double Net Lease and the Tenant
exercises its Additional Rights or Maintenance Rights, there could be a
disruption in the stream of Monthly Rental Payments available to pay principal
and interest to the Credit Lease Loans. Generally, Additional Rights and
Maintenance Rights are mitigated by repair and maintenance reserve and, prior to
the disbursement of such Mortgage Loan, receiving Tenant estoppel certificates
(i.e., Tenant certificates confirming the non-existence of landlord default). In
addition, to the extent the mortgagor fails to fulfill certain obligations under
the related Credit Lease, the Tenant is entitled to exercise Additional Rights
or Maintenance Rights only after notice to the Master Servicer or the Special
Servicer, as applicable, giving the Master Servicer or the Special Servicer, as
applicable, an opportunity to cure.
Credit Leases with respect to the 2 Credit Lease Loans, representing 0.4%
of the Cut-Off Date Pool Balance are Double Net Leases.
Pursuant to the terms of each assignment of a Credit Lease (the "Credit
Lease Assignment"), the related mortgagor has assigned to the mortgagee of the
related Credit Lease Loan, as security for such mortgagor's obligations
thereunder, such mortgagor's rights under the Credit Leases and its rights to
all income and profits to be derived from the operation and leasing of the
related Mortgaged Property including, but not limited to, an assignment of any
guarantee of the Tenant's obligations under the Credit Lease and an assignment
of the right to receive all Monthly Rental Payments due under the Credit Leases.
Pursuant to the terms of the Credit Lease Assignments, each Tenant is obligated
under its Credit Lease to make all Monthly Rental Payments directly to the owner
of the related Credit Lease Loan. Repayment of the Credit Lease Loans and other
obligations of the mortgagors are expected to be funded from such Monthly Rental
Payments and Balloon Payments, if any. Notwithstanding the foregoing, the
mortgagors remain liable for all obligations under the Credit Lease Loans
(subject to the non-recourse provisions thereof).
Lease Enhancement Policies. Each Credit Lease Loan that provides the Tenant
with a Casualty or Condemnation Right has the benefit of a noncancellable lease
enhancement policy (the "Lease Enhancement Policy") issued by Lexington
Insurance Company, a member of American International Group, Inc. (the
"Enhancement Insurer"), which, as of November 26, 2003, was rated "AAA" by S&P.
Each Lease Enhancement Policy provides, subject to customary exclusions, that in
the event of a permitted termination by a Tenant of its Credit Lease as a result
of a casualty or condemnation, the Enhancement Insurer will pay to the Master
Servicer on behalf of the Trustee the "Loss of Rents" (that is, an amount equal
to all periodic payments of fixed rent due under the related Credit Lease, in a
lump sum or periodically, on the date such payments would have been required of
the Tenant under the Credit Lease had it not been terminated. If the Enhancement
Insurer pays the Loss of Rents in a lump sum, in no event will the Enhancement
Insurer's obligation exceed the outstanding principal balance of the Credit
Lease Loan plus accrued, unpaid interest from the date the Enhancement Insurer
is obligated to make payment until the date the Loss of Rents is paid in full.
If the Enhancement Insurer pays the Loss of Rents in periodic payments, in no
event will the Enhancement Insurer's obligation exceed the sum of all periodic
payments of fixed rent that would be payable under the Credit Lease, if the
Credit Lease had not been terminated, for the period commencing on the date the
Credit Lease was terminated and continuing until the stated expiration date of
the initial term of the Credit Lease. If the Credit Lease permits the Tenant to
abate all or a portion of the rent in the event of a condemnation, the "Loss of
Rents" will be in an amount equal to the portion of any Monthly Rental Payments
not made by such Tenant for the period from the date the abatement commences
until the earlier of the date the abatement ceases or the expiration date of the
initial term of such Credit Lease; provided that the related Enhancement Insurer
may, at its option, pay the present value of the stream of partial abatement
payments in a lump sum. The Enhancement Insurer is not required to pay amounts
due under the Credit Lease Loan other than amounts equal to principal and,
subject to the limitation above, accrued interest, and therefore is not
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required to pay any Prepayment Premium or Yield Maintenance Charge due
thereunder or any amounts the mortgagor is obligated to pay thereunder to
reimburse the Master Servicer or the Trustee for outstanding Advances.
Each Lease Enhancement Policy contains certain exclusions from coverage,
including loss arising from damage or destruction directly or indirectly caused
by war, insurrection, rebellion, revolution, usurped power, pollutants or
radioactive matter, or from a taking or prohibition against use of the Mortgaged
Property by reason of danger to public health, public safety or the environment
(other than a taking by condemnation by reason of public health, public safety
or the environment).
The Mortgage Loans which are Credit Lease Loans are indicated on Annex A-1
to this Prospectus Supplement.
ADDITIONAL MORTGAGE LOAN INFORMATION
The Mortgage Pool. For a detailed presentation of certain of the
characteristics of the Mortgage Loans and the Mortgaged Properties, on an
individual basis, see Annexes A-1, A-2, A-3, A-4 and A-5 to this Prospectus
Supplement. For purposes of numerical and statistical information set forth in
this Prospectus Supplement and Annexes A-1, A-2, A-3, A-4 and A-5, such
numerical and statistical information excludes any Companion Loan relating to an
AB Mortgage Loan. For purposes of the calculation of DSC Ratios and LTV Ratios
with respect to the Park City Center Loan and the Meadows Mall Loan, such ratios
are calculated based upon the aggregate indebtedness of such Mortgage Loan and
the related Pari Passu Loan (but excluding the Park City Center AB Companion
Loan). Certain additional information regarding the Mortgage Loans is contained
under "--Assignment of the Mortgage Loans; Repurchases and Substitutions" and
"--Representations and Warranties; Repurchases and Substitutions" in this
prospectus supplement, and under "DESCRIPTION OF THE TRUST FUNDS" and "CERTAIN
LEGAL ASPECTS OF MORTGAGE LOANS AND LEASES" in the prospectus.
In the schedule and tables set forth in Annexes A-1, A-2, A-3, A-4 and A-5
to this Prospectus Supplement, cross-collateralized Mortgage Loans are not
grouped together; instead, references are made under the heading
"Cross-Collateralized Group" with respect to the other Mortgage Loans with which
they are cross-collateralized.
Each of the following tables sets forth certain characteristics of the
Mortgage Pool presented, where applicable, as of the Cut-Off Date. For purposes
of the tables and Annexes A-1, A-2, A-3, A-4 and A-5:
(i) References to "DSC Ratio" and "DSCR" are references to debt service
coverage ratios. Debt service coverage ratios are used by income property
lenders to measure the ratio of (a) cash currently generated by a property that
is available for debt service (that is, cash that remains after average cost of
non-capital expenses of operation, tenant improvements, leasing commissions and
replacement reserves during the term of the Mortgage Loan) to (b) required debt
service payments. However, debt service coverage ratios only measure the
current, or recent, ability of a property to service mortgage debt. The DSC
Ratio for any Mortgage Loan is the ratio of "Net Cash Flow" produced by the
related Mortgaged Property to the annualized amount of debt service that will be
payable under that Mortgage Loan commencing after the origination date. The Net
Cash Flow for a Mortgaged Property is the "net cash flow" of such Mortgaged
Property as set forth in, or determined by the applicable Mortgage Loan Seller
on the basis of, Mortgaged Property operating statements, generally unaudited,
and certified rent rolls (as applicable) supplied by the related borrower in the
case of multifamily, mixed use, retail, mobile home park, industrial,
residential health care, self-storage and office properties (each a "Rental
Property"); provided, however, for purposes of calculating the DSC Ratios and
DSCR provided herein with respect to 11 Mortgage Loans (loan numbers 7, 10, 11,
15, 16, 20, 22, 30, 32, 37 and 45), representing 15.0% of the Cut-Off Date Pool
Balance, where Periodic Payments are interest-only for a certain amount of time
after origination after which date the Mortgage Loan amortizes principal for the
remaining term of the loan the debt service used is the annualized amount of
debt service that will be payable under the Mortgage Loan commencing after the
amortization period begins. In general, the Mortgage Loan Sellers relied on
either full-year operating statements, rolling 12-month operating statements
and/or applicable year-to-date financial statements, if available, and on rent
rolls for all Rental Properties that were current as of a date not earlier than
six months prior to the respective date of origination in determining Net Cash
Flow for the Mortgaged Properties.
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In general, "net cash flow" is the revenue derived from the use and
operation of a Mortgaged Property less 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) and
replacement reserves and an allowance for vacancies and credit losses. Net cash
flow does not reflect interest expenses and non-cash items such as depreciation
and amortization, and generally does not reflect capital expenditures, but does
reflect reserves for replacements and an allowance for vacancies and credit
losses.
In determining the "revenue" component of Net Cash Flow for each Rental
Property, the applicable Mortgage Loan Seller generally relied on the most
recent rent roll and/or other known, signed tenant leases or executed extension
options supplied and, where the actual vacancy shown thereon and the market
vacancy was less than 5.0%, assumed a 5.0% vacancy in determining revenue from
rents, except that in the case of certain non-multifamily properties, space
occupied by such 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 such 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 applicable Mortgage Loan Seller
determined revenue from rents by generally relying on the most recent rent roll
and/or other known, signed leases or executed lease extension options supplied
and the greater of (a) actual historical vacancy at the related Mortgaged
Property, (b) historical vacancy at comparable properties in the same market as
the related Mortgaged Property, and (c) 5.0%. In determining rental revenue for
multifamily, self storage and mobile home park properties, the Mortgage Loan
Sellers generally either reviewed rental revenue shown on the certified rolling
12-month operating statements, the rolling 3-month operating statements for
multifamily properties 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 certified
rent roll (as applicable), after applying the vacancy factor, without further
regard to the terms (including expiration dates) of the leases shown thereon. In
the case of hospitality properties, gross receipts were generally determined
based upon the average occupancy not to exceed 75.0% and daily rates achieved
during the prior two-to-three year annual reporting period. In the case of
residential health care facilities, receipts were based on historical occupancy
levels, historical operating revenues and the then current occupancy rates.
Occupancy rates for the private health care facilities were generally within the
then current market ranges, and vacancy levels were generally a minimum of 5.0%.
In general, any non-recurring items and non-property related revenue were
eliminated from the calculation except in the case of residential health care
facilities.
In determining the "expense" component of Net Cash Flow for each Mortgaged
Property, the Mortgage Loan Sellers generally relied on rolling 12-month
operating statements and/or full-year or year-to-date financial statements
supplied by the related borrower, except that (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 7.0% of effective gross revenue (except with
respect to full service hospitality properties, where a minimum of 3.5% of gross
receipts was assumed, with respect to limited service hospitality properties,
where a minimum of 4.0% of gross receipts was assumed, and with respect to
single tenant properties, where fees as low as 3.0% of effective gross receipts
were 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. See
"--Underwriting Standards--Escrow Requirements--Replacement Reserves" in this
Prospectus Supplement. In addition, in some instances, the Mortgage Loan Sellers
recharacterized as capital expenditures those items reported by borrowers as
operating expenses (thus increasing "net cash flow") where the Mortgage Loan
Sellers determined appropriate.
The borrowers' financial information used to determine Net Cash Flow was in
most cases borrower certified, but unaudited, and neither the Mortgage Loan
Sellers nor the Depositor verified their accuracy.
(ii) References to "Cut-Off Date LTV" and "Cut-Off Date LTV Ratio" are
references to the ratio, expressed as a percentage, of the Cut-Off Date
Balance of a Mortgage Loan to the appraised
S-106
value of the related Mortgaged Property as shown on the most recent
third-party appraisal thereof available to the Mortgage Loan Sellers.
(iii) References to "Maturity Date LTV Ratio" and "LTV at ARD or
Maturity" are references to the ratio, expressed as a percentage, of the
expected balance of a Balloon Loan on its scheduled maturity date (or ARD
Loan on its Anticipated Repayment Date) (prior to the payment of any
Balloon Payment or principal prepayments) to the appraised value of the
related Mortgaged Property as shown on the most recent third-party
appraisal thereof available to the Mortgage Loan Sellers.
(iv) References to "Loan per Sq. Ft., Unit, Bed, Pad or Room" are, for
each Mortgage Loan secured by a lien on a multifamily property (including a
mobile home park property), hospitality property or assisted living
facility or other healthcare property, respectively, references to the
Cut-Off Date Balance of such Mortgage Loan divided by the number of
dwelling units, pads, guest rooms or beds, respectively, that the related
Mortgaged Property comprises, and, for each Mortgage Loan secured by a lien
on a retail, industrial/warehouse, self-storage or office property,
references to the Cut-Off Date Balance of such Mortgage Loan divided by the
net rentable square foot area of the related Mortgaged Property.
(v) References to "Year Built" are references to the year that a
Mortgaged Property was originally constructed or substantially renovated.
With respect to any Mortgaged Property which was constructed in phases, the
"Year Built" refers to the year that the first phase was originally
constructed.
(vi) References to "weighted averages" are references to averages
weighted on the basis of the Cut-Off Date Balances of the related Mortgage
Loans.
(vii) References to "Underwritten Replacement Reserves" represent
estimated annual capital costs, as used by the Mortgage Loan Sellers in
determining Net Cash Flow.
(viii) References to "Administrative Cost Rate" for each Mortgage Loan
represent the sum of (a) the Master Servicing Fee Rate for such Mortgage
Loan, and (b) 0.00210%, which percentage represents the trustee fee rate
with respect to each Mortgage Loan. The Administrative Cost Rate for each
Mortgage Loan is set forth on Annex A-1 hereto.
(ix) References to "Remaining Term to Maturity" represent, with
respect to each Mortgage Loan, the number of months remaining from the
Cut-Off Date to the stated maturity date of such Mortgage Loan (or the
remaining number of months to the Anticipated Repayment Date with respect
to each ARD Loan).
(x) References to "Remaining Amortization Term" represent, with
respect to each Mortgage Loan, the number of months remaining from the
later of the Cut-Off Date and the end of any interest-only period, if any,
to the month in which such Mortgage Loan would fully or substantially
amortize in accordance with such loan's amortization schedule without
regard to any Balloon Payment, if any, due on such Mortgage Loan.
(xi) References to "L ( )" or "Lockout" or "Lockout Period" represent,
with respect to each Mortgage Loan, the period during which prepayments of
principal are prohibited and no substitution of Defeasance Collateral is
permitted. The number indicated in the parentheses indicates the number of
monthly payments of such period (calculated for each Mortgage Loan from the
date of its origination). References to "O ( )" represent the number of
monthly payments for which (a) no Prepayment Premium or Yield Maintenance
Charge is assessed and (b) defeasance is no longer required. References to
"YM ( )" represent the period for which the Yield Maintenance Charge is
assessed. "3% ( )", "2% ( )" and "1% ( )" each represents the period for
which a Prepayment Premium is assessed and the respective percentage used
in the calculation thereof. The periods, if any, between consecutive Due
Dates occurring prior to the maturity date or Anticipated Repayment Date,
as applicable, of a Mortgage Loan during which the related borrower will
have the right to prepay such Mortgage Loan without being required to pay a
Prepayment Premium or a Yield Maintenance Charge (each such period, an
"Open Period") with respect to all of the Mortgage Loans
S-107
have been calculated as those Open Periods occurring immediately prior to
the maturity date or Anticipated Repayment Date, as applicable, of such
Mortgage Loan as set forth in the related Mortgage Loan documents.
(xii) References to "D ( )" or "Defeasance" represent, with respect to
each Mortgage Loan, the period (in months) during which the related holder
of the Mortgage has the right to require the related borrower, in lieu of
a principal prepayment, to pledge to such holder Defeasance Collateral.
(xiii) References to "Occupancy Percentage" are, with respect to any
Mortgaged Property, references as of the most recently available rent rolls
to (a) in the case of multifamily properties, mobile home park properties
and assisted living facilities, the percentage of units or pads rented, (b)
in the case of office and retail properties, the percentage of the net
rentable square footage rented, and (c) in the case of self-storage
facilities, either the percentage of the net rentable square footage rented
or the percentage of units rented (depending on borrower reporting), and is
exclusive of hospitality properties.
(xiv) References to "Original Term to Maturity" are references to the
term from origination to maturity for each Mortgage Loan (or the term from
origination to the Anticipated Repayment Date with respect to each ARD
Loan).
(xv) References to "NA" indicate that with respect to a particular
category of data, that such data is not applicable.
(xvi) References to "NAV" indicate that, with respect to a particular
category of data, such data is not available.
(xvii) References to "Capital Imp. Reserve" are references to funded
reserves escrowed for repairs, replacements and corrections of issues
outlined in the engineering reports.
(xviii) References to "Replacement Reserve" are references to funded
reserves escrowed for ongoing items such as repairs and replacements,
including, in the case of hospitality properties, reserves for furniture,
fixtures and equipment. In certain cases, however, the subject reserve will
be subject to a maximum amount, and once such maximum amount is reached,
such reserve will not thereafter be funded, except, in some such cases, to
the extent it is drawn upon.
(xix) References to "TI/LC Reserve" are references to funded reserves
escrowed for tenant improvement allowances and leasing commissions. In
certain cases, however, the subject reserve will be subject to a maximum
amount, and once such maximum amount is reached, such reserve will not
thereafter be funded, except, in some such cases, to the extent it is drawn
upon.
(xx) The sum in any column of any of the following tables may not
equal the indicated total due to rounding.
S-108
MORTGAGE LOANS BY PROPERTY TYPE
NUMBER OF AGGREGATE % OF AVERAGE HIGHEST
NUMBER OF MORTGAGED CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
PROPERTY TYPE LOANS PROPERTIES BALANCE POOL BALANCE BALANCE BALANCE
- ------------------- ----------- ------------ ----------------- -------------- -------------- --------------
Retail ............ 47 47 $ 556,892,676 48.5% $11,848,780 $75,912,850
Retail --
Anchored ........ 38 38 518,477,573 45.1 $13,644,147 $75,912,850
Retail --
Unanchored....... 5 5 22,094,725 1.9 $ 4,418,945 $ 8,000,000
Retail --
Shadow
Anchored(3)...... 4 4 16,320,379 1.4 $ 4,080,095 $ 5,141,680
Multifamily ....... 43 43 317,035,668 27.6 $ 7,372,923 $36,000,000
Office ............ 7 7 183,222,012 15.9 $26,174,573 $95,000,000
Mobile Home
Park ............. 13 13 38,688,024 3.4 $ 2,976,002 $ 8,466,075
Mixed Use ......... 4 4 32,944,257 2.9 $ 8,236,064 $12,966,670
Self Storage ...... 1 1 5,900,000 0.5 $ 5,900,000 $ 5,900,000
Industrial ........ 1 1 5,534,874 0.5 $ 5,534,874 $ 5,534,874
Land(4) ........... 1 1 5,000,000 0.4 $ 5,000,000 $ 5,000,000
Parking Garage..... 1 1 3,994,183 0.3 $ 3,994,183 $ 3,994,183
-- -- --------------
118 118 $1,149,211,695 100.0% $ 9,739,082 $95,000,000
=== === ==============
WTD. AVG.
STATED
WTD. AVG. REMAINING
WTD. AVG. LTV TERM TO WTD. AVG. MINIMUM MAXIMUM WTD. AVG. WTD. AVG.
CUT-OFF DATE RATIO AT MATURITY DSC DSC DSC OCCUPANCY MORTGAGE
PROPERTY TYPE LTV RATIO MATURITY(1) (MOS.)(1) RATIO RATIO RATIO RATE(2) RATE
- ------------------- -------------- ------------- ----------- ----------- --------- --------- ----------- ----------
Retail ............ 69.1% 58.9% 103 1.62x 1.01x 2.05x 95.2% 5.394%
Retail --
Anchored ........ 68.7% 58.8% 102 1.64x 1.20x 2.05x 95.1% 5.349%
Retail --
Unanchored....... 72.7% 55.1% 108 1.30x 1.01x 1.50x 96.0% 6.161%
Retail --
Shadow
Anchored(3)...... 78.3% 66.1% 118 1.42x 1.31x 1.59x 95.1% 5.771%
Multifamily ....... 75.4% 65.0% 104 1.38x 1.22x 2.76x 93.0% 5.405%
Office ............ 61.6% 56.7% 115 2.09x 1.25x 2.65x 97.0% 5.572%
Mobile Home
Park ............. 73.5% 59.4% 90 1.55x 1.20x 2.33x 76.8% 5.154%
Mixed Use ......... 69.4% 57.0% 118 1.59x 1.32x 2.15x 97.4% 5.945%
Self Storage ...... 74.3% 62.8% 120 1.23x 1.23x 1.23x 78.8% 5.870%
Industrial ........ 71.0% 60.7% 117 1.27x 1.27x 1.27x 90.3% 6.184%
Land(4) ........... 27.9% 27.9% 120 3.73x 3.73x 3.73x 100.0% 5.710%
Parking Garage..... 65.5% 50.7% 119 1.46x 1.46x 1.46x 100.0% 5.950%
69.6% 60.1% 106 1.63X 1.01X 3.73X 94.2% 5.442%
- -------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
(2) Occupancy Rates were calculated based upon rent rolls made available to
the applicable Mortgage Loan Seller by the related borrowers as of the
rent roll date set forth on Annex A-1 to this Prospectus Supplement.
(3) A Mortgaged Property is considered "shadow anchored" if it is in close
proximity to the anchored property.
(4) Specifically, the fee interest in land, which the ground tenant has
improved and leased as an office building. The office building is not part
of the loan collateral, and the source of funds for loan repayment is the
ground rent payments made to the borrower.
S-109
RANGE OF CUT-OFF DATE BALANCES
RANGE OF AGGREGATE % OF AVERAGE
CUT-OFF NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
DATE BALANCES ($) OF LOANS BALANCE POOL BALANCE BALANCE
- ---------------------------- ---------- ----------------- -------------- --------------
(less than) 2,000,000 ... .. 19 $ 26,920,192 2.3% $ 1,416,852
2,000,001 -- 3,000,000 ..... 17 44,214,998 3.8 $ 2,600,882
3,000,001 -- 4,000,000 ..... 13 47,399,845 4.1 $ 3,646,142
4,000,001 -- 5,000,000 ..... 13 58,599,922 5.1 $ 4,507,686
5,000,001 -- 6,000,000 ..... 8 43,442,083 3.8 $ 5,430,260
6,000,001 -- 7,000,000 ..... 4 24,951,277 2.2 $ 6,237,819
7,000,001 -- 8,000,000 ..... 8 61,601,731 5.4 $ 7,700,216
8,000,001 -- 9,000,000 ..... 5 43,016,036 3.7 $ 8,603,207
9,000,001 -- 10,000,000 .... 8 76,930,926 6.7 $ 9,616,366
10,000,001 -- 15,000,000 ... 7 87,844,182 7.6 $12,549,169
15,000,001 -- 20,000,000 ... 3 52,429,357 4.6 $17,476,452
20,000,001 -- 25,000,000 ... 5 113,347,820 9.9 $22,669,564
30,000,001 -- 35,000,000 ... 1 31,966,717 2.8 $31,966,717
35,000,001 -- 40,000,000 ... 1 36,000,000 3.1 $36,000,000
40,000,001 -- 45,000,000 ... 1 43,200,000 3.8 $43,200,000
55,000,001 -- 60,000,000 ... 1 55,768,045 4.9 $55,768,045
60,000,001 -- 65,000,000 ... 1 64,823,816 5.6 $64,823,816
65,000,001 -- 70,000,000 ... 1 65,841,900 5.7 $65,841,900
75,000,001 -- 80,000,000 ... 1 75,912,850 6.6 $75,912,850
80,000,001 (greater than) .. 1 95,000,000 8.3 $95,000,000
-- -------------- -----
118 $1,149,211,695 100.0% $ 9,739,082
=== ============== =====
WTD. AVG.
STATED
WTD. AVG. REMAINING
RANGE OF HIGHEST WTD. AVG. LTV TERM TO WTD. AVG. WTD. AVG.
CUT-OFF CUT-OFF DATE CUT-OFF DATE RATIO AT MATURITY DSC MORTGAGE
DATE BALANCES ($) BALANCE LTV RATIO MATURITY* (MOS.)* RATIO RATE
- ---------------------------- --------------- ------------- ------------ --------- ----------- ----------
(less than) 2,000,000 ... .. $ 1,926,148 68.5% 48.4% 101 1.64x 5.632%
2,000,001 -- 3,000,000 ..... $ 2,963,305 74.0% 57.6% 117 1.46x 5.762%
3,000,001 -- 4,000,000 ..... $ 4,000,000 71.8% 59.4% 106 1.44x 5.752%
4,000,001 -- 5,000,000 ..... $ 5,000,000 71.5% 62.1% 110 1.58x 5.831%
5,000,001 -- 6,000,000 ..... $ 5,900,000 72.3% 62.4% 103 1.39x 5.592%
6,000,001 -- 7,000,000 ..... $ 6,300,000 71.8% 60.3% 118 1.33x 5.995%
7,000,001 -- 8,000,000 ..... $ 8,000,000 74.1% 64.1% 103 1.54x 5.613%
8,000,001 -- 9,000,000 ..... $ 8,900,000 76.2% 64.8% 94 1.39x 5.353%
9,000,001 -- 10,000,000 .... $10,000,000 71.9% 61.6% 106 1.49x 5.653%
10,000,001 -- 15,000,000 ... $14,976,883 73.1% 61.7% 115 1.38x 5.581%
15,000,001 -- 20,000,000 ... $18,179,357 79.3% 67.9% 118 1.34x 5.269%
20,000,001 -- 25,000,000 ... $24,949,094 76.0% 65.9% 105 1.32x 5.572%
30,000,001 -- 35,000,000 ... $31,966,717 78.8% 66.5% 119 1.31x 5.770%
35,000,001 -- 40,000,000 ... $36,000,000 70.2% 65.8% 84 1.25x 5.517%
40,000,001 -- 45,000,000 ... $43,200,000 74.6% 63.0% 120 1.58x 5.850%
55,000,001 -- 60,000,000 ... $55,768,045 64.2% 53.8% 116 1.74x 5.453%
60,000,001 -- 65,000,000 ... $64,823,816 62.9% 57.4% 58 2.05x 4.120%
65,000,001 -- 70,000,000 ... $65,841,900 60.4% 53.3% 82 1.97x 4.736%
75,000,001 -- 80,000,000 ... $75,912,850 62.0% 51.8% 116 1.97x 5.252%
80,000,001 (greater than) .. $95,000,000 54.8% 54.8% 119 2.51x 5.420%
$95,000,000 69.6% 60.1% 106 1.63X 5.442%
- -------
* Calculated with respect to the Anticipated Repayment Date for ARD Loans
S-110
MORTGAGED PROPERTIES BY STATE
NUMBER OF AGGREGATE % OF AVERAGE
MORTGAGED CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
STATE PROPERTIES BALANCE POOL BALANCE BALANCE
- ---------------------- ------------ ----------------- -------------- --------------
CA ................... 18 $ 233,868,495 20.4% $12,992,694
Southern(2) ......... 14 186,597,584 16.2 $13,328,399
Northern(2) ......... 4 47,270,911 4.1 $11,817,728
FL ................... 11 153,603,015 13.4 $13,963,910
NY ................... 12 141,433,216 12.3 $11,786,101
VA ................... 3 107,280,221 9.3 $35,760,074
PA ................... 3 68,804,249 6.0 $22,934,750
NV ................... 3 62,068,858 5.4 $20,689,619
NC ................... 11 60,640,831 5.3 $ 5,512,803
SC ................... 5 57,060,538 5.0 $11,412,108
NJ ................... 3 39,397,370 3.4 $13,132,457
TX ................... 7 27,134,536 2.4 $ 3,876,362
GA ................... 3 24,714,493 2.2 $ 8,238,164
IL ................... 5 24,298,872 2.1 $ 4,859,774
MD ................... 2 16,960,853 1.5 $ 8,480,427
MA ................... 2 16,201,908 1.4 $ 8,100,954
MI ................... 5 15,851,357 1.4 $ 3,170,271
OH ................... 4 14,988,690 1.3 $ 3,747,172
WA ................... 1 14,976,883 1.3 $14,976,883
AZ ................... 4 14,726,343 1.3 $ 3,681,586
AL ................... 3 11,529,021 1.0 $ 3,843,007
AR ................... 1 10,000,000 0.9 $10,000,000
CO ................... 1 6,273,949 0.5 $ 6,273,949
LA ................... 2 5,729,056 0.5 $ 2,864,528
DC ................... 1 5,000,000 0.4 $ 5,000,000
MO ................... 1 4,392,009 0.4 $ 4,392,009
MN ................... 3 4,181,663 0.4 $ 1,393,888
NM ................... 1 3,300,000 0.3 $ 3,300,000
MS ................... 1 2,250,000 0.2 $ 2,250,000
KY ................... 1 1,360,000 0.1 $ 1,360,000
TN ................... 1 1,185,271 0.1 $ 1,185,271
-- -------------- -----
118 $1,149,211,695 100.0% $ 9,739,082
=== ============== =====
WTD. AVG.
STATED
WTD. AVG. REMAINING
HIGHEST WTD. AVG. LTV TERM TO WTD. AVG. WTD. AVG.
CUT-OFF DATE CUT-OFF DATE RATIO AT MATURITY DSC MORTGAGE
STATE BALANCE LTV RATIO MATURITY(1) (MOS.)(1) RATIO RATE
- ---------------------- -------------- -------------- ------------- ----------- ----------- ----------
CA ................... $64,823,816 69.9% 62.9% 87 1.54x 5.294%
Southern(2) ......... $64,823,816 68.6% 61.5% 88 1.57x 5.198%
Northern(2) ......... $ 24,600,00 75.2% 68.3% 87 1.43x 5.670%
FL ................... $75,912,850 68.0% 57.6% 110 1.69x 5.302%
NY ................... $43,200,000 76.6% 65.3% 108 1.41x 5.710%
VA ................... $95,000,000 57.3% 56.0% 119 2.39x 5.487%
PA ................... $65,841,900 60.2% 51.0% 85 1.96x 4.804%
NV ................... $55,768,045 64.5% 54.3% 114 1.72x 5.460%
NC ................... $16,250,000 77.3% 65.2% 117 1.35x 5.636%
SC ................... $18,179,357 77.7% 66.1% 119 1.37x 5.579%
NJ ................... $24,949,094 65.1% 53.2% 118 1.69x 5.629%
TX ................... $ 5,141,680 75.4% 62.9% 114 1.46x 5.674%
GA ................... $13,450,629 73.1% 60.5% 115 1.43x 5.022%
IL ................... $ 8,451,347 72.9% 59.1% 118 1.46x 5.383%
MD ................... $12,966,670 64.5% 50.5% 118 1.44x 6.256%
MA ................... $ 8,900,000 75.3% 66.0% 117 1.47x 5.691%
MI ................... $ 4,414,552 76.5% 67.6% 90 1.45x 5.398%
OH ................... $ 8,459,323 78.0% 62.5% 107 1.33x 6.033%
WA ................... $14,976,883 79.2% 66.9% 107 1.36x 4.970%
AZ ................... $ 5,581,502 68.3% 61.8% 79 1.59x 5.527%
AL ................... $ 7,384,932 75.1% 66.8% 87 1.46x 5.717%
AR ................... $10,000,000 80.0% 71.2% 84 1.37x 5.210%
CO ................... $ 6,273,949 74.7% 58.2% 117 1.21x 6.070%
LA ................... $ 2,963,305 77.4% 63.2% 99 1.31x 6.080%
DC ................... $ 5,000,000 27.9% 27.9% 120 3.73x 5.710%
MO ................... $ 4,392,009 79.0% 67.2% 118 1.32x 6.030%
MN ................... $ 2,070,911 66.9% 0.9% 178 1.21x 5.994%
NM ................... $ 3,300,000 70.2% 45.0% 120 1.40x 5.406%
MS ................... $ 2,250,000 77.6% 65.3% 120 1.50x 5.728%
KY ................... $ 1,360,000 78.6% 72.6% 60 1.62x 5.093%
TN ................... $ 1,185,271 35.1% 0.2% 118 2.02x 5.700%
$95,000,000 69.6% 60.1% 106 1.63X 5.442%
- -------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
(2) For purposes of determining whether a Mortgaged Property is in Northern
California or Southern California, Mortgaged Properties north of San Luis
Obispo County, Kern County and San Bernardino County were included in
Northern California and Mortgaged Properties in or south of such counties
were included in Southern California.
S-111
RANGE OF DSC RATIOS
AGGREGATE % OF AVERAGE
NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
RANGE OF DSC RATIOS (X) OF LOANS BALANCE POOL BALANCE BALANCE
- ------------------------- ---------- ----------------- -------------- --------------
1.00 -- 1.04 ............ 2 $ 4,117,707 0.4% $ 2,058,853
1.20 -- 1.24 ............ 12 74,338,623 6.5 $ 6,194,885
1.25 -- 1.29 ............ 10 115,026,785 10.0 $11,502,679
1.30 -- 1.34 ............ 20 193,603,204 16.8 $ 9,680,160
1.35 -- 1.39 ............ 16 117,739,479 10.2 $ 7,358,717
1.40 -- 1.44 ............ 14 91,323,179 7.9 $ 6,523,084
1.45 -- 1.49 ............ 5 18,452,252 1.6 $ 3,690,450
1.50 -- 1.54 ............ 8 31,480,726 2.7 $ 3,935,091
1.55 -- 1.59 ............ 5 65,201,734 5.7 $13,040,347
1.60 -- 1.64 ............ 4 16,432,847 1.4 $ 4,108,212
1.65 -- 1.69 ............ 2 13,900,000 1.2 $ 6,950,000
1.70 -- 1.74 ............ 5 69,462,306 6.0 $13,892,461
1.75 -- 1.79 ............ 1 1,464,000 0.1 $ 1,464,000
1.80 -- 1.84 ............ 1 1,440,000 0.1 $ 1,440,000
1.95 -- 1.99 ............ 2 141,754,750 12.3 $70,877,375
2.00 -- 2.19 ............ 5 78,599,253 6.8 $15,719,851
2.30 -- 2.76 ............ 5 109,874,849 9.6 $21,974,970
3.70 -- 3.74 ............ 1 5,000,000 0.4 $ 5,000,000
-- -------------- -----
118 $1,149,211,695 100.0% $ 9,739,082
=== ============== =====
WTD. AVG.
STATED
WTD. AVG. REMAINING
HIGHEST WTD. AVG. LTV TERM TO WTD. AVG. WTD. AVG.
CUT-OFF DATE CUT-OFF DATE RATIO AT MATURITY DSC MORTGAGE
RANGE OF DSC RATIOS (X) BALANCE LTV RATIO MATURITY* (MOS.)* RATIO RATE
- ------------------------- -------------- -------------- ----------- ---------- ----------- ----------
1.00 -- 1.04 ............ $ 2,496,742 82.1% 20.1% 177 1.01x 7.341%
1.20 -- 1.24 ............ $16,250,000 76.8% 61.6% 121 1.22x 5.715%
1.25 -- 1.29 ............ $36,000,000 74.2% 66.8% 91 1.26x 5.743%
1.30 -- 1.34 ............ $31,966,717 75.1% 63.7% 114 1.32x 5.690%
1.35 -- 1.39 ............ $24,949,094 77.5% 66.5% 106 1.36x 5.606%
1.40 -- 1.44 ............ $18,179,357 74.2% 62.5% 109 1.42x 5.578%
1.45 -- 1.49 ............ $ 7,275,000 73.8% 61.6% 113 1.46x 5.609%
1.50 -- 1.54 ............ $ 7,891,892 76.4% 67.1% 94 1.51x 5.548%
1.55 -- 1.59 ............ $43,200,000 74.2% 62.5% 119 1.58x 5.722%
1.60 -- 1.64 ............ $ 8,466,075 78.1% 70.7% 65 1.63x 4.474%
1.65 -- 1.69 ............ $12,800,000 66.5% 59.7% 102 1.66x 5.532%
1.70 -- 1.74 ............ $55,768,045 65.3% 54.9% 112 1.74x 5.343%
1.75 -- 1.79 ............ $ 1,464,000 80.0% 73.9% 60 1.78x 5.093%
1.80 -- 1.84 ............ $ 1,440,000 71.1% 65.7% 60 1.80x 5.093%
1.95 -- 1.99 ............ $75,912,850 61.2% 52.5% 100 1.97x 5.012%
2.00 -- 2.19 ............ $64,823,816 62.2% 55.0% 70 2.06x 4.360%
2.30 -- 2.76 ............ $95,000,000 52.1% 50.6% 118 2.52x 5.447%
3.70 -- 3.74 ............ $ 5,000,000 27.9% 27.9% 120 3.73x 5.710%
$95,000,000 69.6% 60.1% 106 1.63X 5.442%
- -------
* Calculated with respect to the Anticipated Repayment Date for ARD Loans
S-112
RANGE OF LTV RATIOS AS THE CUT-OFF DATE
AGGREGATE % OF AVERAGE
RANGE OF CUT-OFF LTV NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
RATIOS (%) OF LOANS BALANCE POOL BALANCE BALANCE
- ------------------------ ---------- ----------------- -------------- --------------
20.01 -- 25.00 ......... 1 $ 1,341,383 0.1% $ 1,341,383
25.01 -- 30.00 ......... 1 5,000,000 0.4 $ 5,000,000
30.01 -- 35.00 ......... 1 9,960,842 0.9 $ 9,960,842
35.01 -- 40.00 ......... 1 1,185,271 0.1 $ 1,185,271
40.01 -- 50.00 ......... 3 6,824,780 0.6 $ 2,274,927
50.01 -- 55.00 ......... 2 96,346,767 8.4 $48,173,383
60.01 -- 65.00 ......... 7 299,589,467 26.1 $42,798,495
65.01 -- 70.00 ......... 16 70,309,241 6.1 $ 4,394,328
70.01 -- 75.00 ......... 32 251,300,827 21.9 $ 7,853,151
75.01 -- 80.24 ......... 52 403,235,410 35.1 $ 7,754,527
81.01 -- 82.81 ......... 2 4,117,707 0.4 $ 2,058,853
-- -------------- -----
118 $1,149,211,695 100.0% $ 9,739,082
=== ============== =====
WTD. AVG.
STATED
REMAINING
HIGHEST WTD. AVG. WTD. AVG. TERM TO WTD. AVG. WTD. AVG.
RANGE OF CUT-OFF LTV CUT-OFF DATE CUT-OFF DATE LTV RATIO MATURITY DSC MORTGAGE
RATIOS (%) BALANCE LTV RATIO AT MATURITY* (MOS.)* RATIO RATE
- ------------------------ -------------- -------------- -------------- ---------- ----------- ----------
20.01 -- 25.00 ......... $ 1,341,383 24.6% 0.1% 119 2.54x 5.166%
25.01 -- 30.00 ......... $ 5,000,000 27.9% 27.9% 120 3.73x 5.710%
30.01 -- 35.00 ......... $ 9,960,842 32.7% 21.8% 118 2.65x 5.730%
35.01 -- 40.00 ......... $ 1,185,271 35.1% 0.2% 118 2.02x 5.700%
40.01 -- 50.00 ......... $ 3,252,156 43.6% 33.6% 107 2.27x 5.365%
50.01 -- 55.00 ......... $95,000,000 54.7% 54.5% 120 2.50x 5.426%
60.01 -- 65.00 ......... $75,912,850 62.5% 53.8% 96 1.87x 4.984%
65.01 -- 70.00 ......... $12,800,000 67.9% 54.1% 114 1.46x 5.654%
70.01 -- 75.00 ......... $43,200,000 72.8% 62.8% 106 1.42x 5.673%
75.01 -- 80.24 ......... $31,966,717 78.9% 67.9% 107 1.35x 5.578%
81.01 -- 82.81 ......... $ 2,496,742 82.1% 20.1% 177 1.01x 7.341%
$95,000,000 69.6% 60.1% 106 1.63X 5.442%
- -------
* Calculated with respect to the Anticipated Repayment Date for ARD Loans
S-113
RANGE OF LTV RATIOS AS OF THE MATURITY DATE
AGGREGATE % OF AVERAGE
RANGE OF MATURITY DATE LTV NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
RATIOS (%) OF LOANS BALANCE POOL BALANCE BALANCE
- ---------------------------- ---------- ----------------- -------------- --------------
0.00 -- 5.00 ............... 6 $ 8,329,282 0.7% $ 1,388,214
20.01 -- 30.00 ............. 3 18,212,998 1.6 $ 6,070,999
30.01 -- 40.00 ............. 3 6,141,132 0.5 $ 2,047,044
40.01 -- 50.00 ............. 3 6,151,853 0.5 $ 2,050,618
50.01 -- 55.00 ............. 9 342,644,182 29.8 $38,071,576
55.01 -- 60.00 ............. 16 158,248,369 13.8 $ 9,890,523
60.01 -- 65.00 ............. 30 201,006,161 17.5 $ 6,700,205
65.01 -- 70.00 ............. 31 303,155,303 26.4 $ 9,779,203
70.01 -- 75.00 ............. 16 80,722,414 7.0 $ 5,045,151
75.01 -- 80.00 ............. 1 24,600,000 2.1 $24,600,000
-- -------------- -----
118 $1,149,211,695 100.0% $ 9,739,082
=== ============== =====
WTD. AVG.
STATED
REMAINING
HIGHEST WTD. AVG. WTD. AVG. TERM TO WTD. AVG. WTD. AVG.
RANGE OF MATURITY DATE LTV CUT-OFF DATE CUT-OFF DATE LTV RATIO MATURITY DSC MORTGAGE
RATIOS (%) BALANCE LTV RATIO AT MATURITY* (MOS.)* RATIO RATE
- ---------------------------- -------------- -------------- -------------- ---------- ----------- ----------
0.00 -- 5.00 ............... $ 2,070,911 58.3% 0.5% 160 1.50x 6.063%
20.01 -- 30.00 ............. $ 9,960,842 32.8% 24.2% 118 2.84x 5.639%
30.01 -- 40.00 ............. $ 2,496,742 62.2% 35.4% 155 1.73x 6.459%
40.01 -- 50.00 ............. $ 3,300,000 65.0% 44.8% 107 1.65x 5.474%
50.01 -- 55.00 ............. $95,000,000 60.5% 53.3% 110 1.99x 5.307%
55.01 -- 60.00 ............. $64,823,816 67.2% 58.0% 91 1.71x 4.969%
60.01 -- 65.00 ............. $43,200,000 74.3% 62.9% 115 1.43x 5.845%
65.01 -- 70.00 ............. $36,000,000 77.4% 67.1% 108 1.33x 5.582%
70.01 -- 75.00 ............. $18,000,000 79.5% 71.7% 83 1.42x 5.205%
75.01 -- 80.00 ............. $24,600,000 79.1% 75.9% 59 1.25x 5.530%
$95,000,000 69.6% 60.1% 106 1.63X 5.442%
- -------
* Calculated with respect to the Anticipated Repayment Date for ARD Loans
S-114
RANGE OF MORTGAGE RATES AS OF THE CUT-OFF DATE
AGGREGATE % OF AVERAGE
RANGE OF NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
MORTGAGE RATES (%) OF LOANS BALANCE POOL BALANCE BALANCE
- ------------------------ ---------- ----------------- -------------- --------------
4.120 -- 5.249 ......... 28 $ 266,086,822 23.2% $ 9,503,101
5.250 -- 5.499 ......... 13 299,938,764 26.1 $23,072,213
5.500 -- 5.749 ......... 17 207,823,460 18.1 $12,224,909
5.750 -- 5.999 ......... 28 230,014,972 20.0 $ 8,214,820
6.000 -- 6.249 ......... 23 104,691,261 9.1 $ 4,551,794
6.250 -- 6.499 ......... 5 31,783,896 2.8 $ 6,356,779
6.500 -- 6.749 ......... 2 4,754,813 0.4 $ 2,377,406
7.250 -- 7.499 ......... 2 4,117,707 0.4 $ 2,058,853
-- -------------- -----
118 $1,149,211,695 100.0% $ 9,739,082
=== ============== =====
WTD. AVG.
STATED
REMAINING
HIGHEST WTD. AVG. WTD. AVG. TERM TO WTD. AVG. WTD. AVG.
RANGE OF CUT-OFF DATE CUT-OFF DATE LTV RATIO MATURITY DSC MORTGAGE
MORTGAGE RATES (%) BALANCE LTV RATIO AT MATURITY* (MOS.)* RATIO RATE
- ------------------------ -------------- -------------- -------------- ---------- ----------- ----------
4.120 -- 5.249 ......... $65,841,900 68.5% 60.6% 79 1.73x 4.655%
5.250 -- 5.499 ......... $95,000,000 62.4% 55.0% 115 1.97x 5.367%
5.500 -- 5.749 ......... $36,000,000 71.6% 63.4% 101 1.50x 5.575%
5.750 -- 5.999 ......... $43,200,000 75.6% 63.1% 120 1.39x 5.854%
6.000 -- 6.249 ......... $11,500,000 75.3% 61.9% 116 1.32x 6.096%
6.250 -- 6.499 ......... $12,966,670 70.2% 58.3% 118 1.36x 6.322%
6.500 -- 6.749 ......... $ 3,007,628 69.6% 60.2% 117 1.37x 6.638%
7.250 -- 7.499 ......... $ 2,496,742 82.1% 20.1% 177 1.01x 7.341%
$95,000,000 69.6% 60.1% 106 1.63X 5.442%
- -------
* Calculated with respect to the Anticipated Repayment Date for ARD Loans
S-115
RANGE OF ORIGINAL TERMS TO MATURITY OR ANTICIPATED REPAYMENT DATE
AS OF THE CUT-OFF DATE
RANGE OF ORIGINAL TERMS TO AGGREGATE % OF AVERAGE
MATURITY OR ANTICIPATED NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
REPAYMENT DATE (MONTHS) OF LOANS BALANCE POOL BALANCE BALANCE
- ---------------------------- ---------- ----------------- -------------- --------------
0 -- 60 .................... 23 $ 174,111,237 15.2% $ 7,570,054
61 -- 84 ................... 4 114,316,680 9.9 $28,579,170
85 -- 108 .................. 6 38,741,110 3.4 $ 6,456,852
109 -- 120 ................. 79 812,396,532 70.7 $10,283,500
169 -- 180 ................. 4 5,528,430 0.5 $ 1,382,107
229 -- 240 ................. 2 4,117,707 0.4 $ 2,058,853
-- -------------- -----
118 $1,149,211,695 100.0% $ 9,739,082
=== ============== =====
WTD. AVG.
STATED
REMAINING
RANGE OF ORIGINAL TERMS TO HIGHEST WTD. AVG. WTD. AVG. TERM TO WTD. AVG. WTD. AVG.
MATURITY OR ANTICIPATED CUT-OFF DATE CUT-OFF DATE LTV RATIO MATURITY DSC MORTGAGE
REPAYMENT DATE (MONTHS) BALANCE LTV RATIO AT MATURITY* (MOS.)* RATIO RATE
- ---------------------------- -------------- -------------- -------------- ---------- ----------- ----------
0 -- 60 .................... $64,823,816 71.1% 65.9% 58 1.66x 4.761%
61 -- 84 ................... $65,841,900 65.6% 59.2% 83 1.68x 5.037%
85 -- 108 .................. $14,976,883 74.5% 63.4% 104 1.45x 5.482%
109 -- 120 ................. $95,000,000 69.6% 59.3% 118 1.63x 5.631%
169 -- 180 ................. $ 2,070,911 63.3% 9.0% 178 1.41x 5.954%
229 -- 240 ................. $ 2,496,742 82.1% 20.1% 177 1.01x 7.341%
$95,000,000 69.6% 60.1% 106 1.63X 5.442%
* Calculated with respect to the Anticipated Repayment Date for ARD Loans
S-116
RANGE OF REMAINING TERMS TO MATURITY OR ANTICIPATED REPAYMENT DATE
AS THE CUT-OFF DATE
RANGE OF REMAINING TERMS TO AGGREGATE % OF AVERAGE
MATURITY OR ANTICIPATED NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
REPAYMENT DATE (MONTHS) OF LOANS BALANCE POOL BALANCE BALANCE
- ----------------------------- ---------- ----------------- -------------- --------------
0 -- 60 ..................... 23 $ 174,111,237 15.2% $ 7,570,054
61 -- 84 .................... 4 114,316,680 9.9 $28,579,170
85 -- 108 ................... 6 38,741,110 3.4 $ 6,456,852
109 -- 120 .................. 79 812,396,532 70.7 $10,283,500
169 -- 180 .................. 6 9,646,137 0.8 $ 1,607,689
-- -------------- -----
118 $1,149,211,695 100.0% $ 9,739,082
=== ============== =====
WTD. AVG.
STATED
REMAINING
RANGE OF REMAINING TERMS TO HIGHEST WTD. AVG. WTD. AVG. TERM TO WTD. AVG. WTD. AVG.
MATURITY OR ANTICIPATED CUT-OFF DATE CUT-OFF DATE LTV RATIO MATURITY DSC MORTGAGE
REPAYMENT DATE (MONTHS) BALANCE LTV RATIO AT MATURITY* (MOS.)* RATIO RATE
- ----------------------------- -------------- -------------- -------------- ---------- ----------- ----------
0 -- 60 ..................... $64,823,816 71.1% 65.9% 58 1.66x 4.761%
61 -- 84 .................... $65,841,900 65.6% 59.2% 83 1.68x 5.037%
85 -- 108 ................... $14,976,883 74.5% 63.4% 104 1.45x 5.482%
109 -- 120 .................. $95,000,000 69.6% 59.3% 118 1.63x 5.631%
169 -- 180 .................. $ 2,496,742 71.3% 13.7% 178 1.24x 6.546%
$95,000,000 69.6% 60.1% 106 1.63X 5.442%
- -------
* Calculated with respect to the Anticipated Repayment Date for ARD Loans
S-117
RANGE OF REMAINING AMORTIZATION TERMS
AS OF THE CUT-OFF DATE
RANGE OF REMAINING AGGREGATE % OF AVERAGE
AMORTIZATION NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
TERMS (MONTHS)(1) OF LOANS BALANCE POOL BALANCE BALANCE
- ----------------------- ---------- ----------------- -------------- --------------
85 -- 120 ............. 2 $ 2,526,654 0.2% $ 1,263,327
145 -- 180 ............ 4 5,802,628 0.5 $ 1,450,657
229 -- 264 ............ 4 10,625,751 0.9 $ 2,656,438
265 -- 300 ............ 11 57,929,135 5.0 $ 5,266,285
301 -- 348 ............ 2 23,146,767 2.0 $11,573,383
349 -- 360 ............ 92 939,219,918 81.7 $10,208,912
Interest only ......... 2 100,000,000 8.7 $50,000,000
-- -------------- -----
Variable .............. 1 9,960,842 0.9 $ 9,960,842
118 $1,149,211,695 100.0% $ 9,739,082
=== ============== =====
WTD. AVG.
STATED
REMAINING
RANGE OF REMAINING HIGHEST WTD. AVG. WTD. AVG. TERM TO WTD. AVG. WTD. AVG.
AMORTIZATION CUT-OFF DATE CUT-OFF DATE LTV RATIO MATURITY DSC MORTGAGE
TERMS (MONTHS)(1) BALANCE LTV RATIO AT MATURITY(2) (MOS.)(2) RATIO RATE
- ----------------------- -------------- -------------- ---------------- ----------- ----------- ----------
85 -- 120 ............. $ 1,341,383 29.5% 0.2% 118 2.30x 5.417%
145 -- 180 ............ $ 2,070,911 70.9% 0.7% 178 1.16x 6.345%
229 -- 264 ............ $ 3,300,000 63.9% 36.5% 132 1.48x 5.931%
265 -- 300 ............ $12,966,670 72.2% 56.3% 114 1.33x 6.079%
301 -- 348 ............ $21,800,000 78.3% 65.6% 123 1.36x 5.599%
349 -- 360 ............ $75,912,850 71.5% 62.1% 102 1.55x 5.386%
Interest only ......... $95,000,000 53.4% 53.4% 119 2.57x 5.435%
Variable .............. $ 9,960,842 32.7% 21.8% 118 2.65x 5.730%
$95,000,000 69.6% 60.1% 106 1.63X 5.442%
- -------
The weighted average remaining amortization term for all Mortgage Loans
(excluding non-amortizing loans and variable loans) is 352 months.
(1) The remaining amortization term shown for any Mortgage Loan that is
interest-only for part of its term does not include the number of months
during which is in interest-only, but rather is the number of months
remaining at the end of such interest-only period.
(2) Calculated with respect to the Anticipated Repayment Date for ARD Loans
S-118
AMORTIZATION TYPE
AGGREGATE % OF AVERAGE
NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
AMORTIZATION TYPE OF LOANS BALANCE POOL BALANCE BALANCE
- ---------------------------- ---------- ----------------- -------------- --------------
Amortizing Balloon ......... 88 $ 762,920,310 66.4% $ 8,669,549
Interest-only, Amortizing
Balloon(2) ................ 6 113,750,000 9.9 $18,958,333
Amortizing ARD ............. 10 95,051,261 8.3 $ 9,505,126
Interest-only, ARD ......... 1 95,000,000 8.3 $95,000,000
Interest-only, Amortizing
ARD(2) .................... 5 59,200,000 5.2 $11,840,000
Various .................... 1 9,960,842 0.9 $ 9,960,842
Fully Amortizing ........... 6 8,329,282 0.7 $ 1,388,214
Non-Amortizing ............. 1 5,000,000 0.4 $ 5,000,000
-- -------------- -----
118 $1,149,211,695 100.0% $ 9,739,082
=== ============== =====
WTD. AVG.
STATED
REMAINING
HIGHEST WTD. AVG. WTD. AVG. TERM TO WTD. AVG. WTD. AVG.
CUT-OFF DATE CUT-OFF DATE LTV RATIO MATURITY DSC MORTGAGE
AMORTIZATION TYPE BALANCE LTV RATIO AT MATURITY(1) (MOS.)(1) RATIO RATE
- ---------------------------- -------------- -------------- ---------------- ----------- ----------- ----------
Amortizing Balloon ......... $75,912,850 70.4% 60.0% 103 1.60x 5.349%
Interest-only, Amortizing
Balloon(2) ................ $36,000,000 75.0% 66.7% 106 1.33x 5.455%
Amortizing ARD ............. $31,966,717 74.7% 61.6% 119 1.39x 5.953%
Interest-only, ARD ......... $95,000,000 54.8% 54.8% 119 2.51x 5.420%
Interest-only, Amortizing
ARD(2) .................... $24,600,000 77.1% 70.9% 86 1.24x 5.684%
Various .................... $ 9,960,842 32.7% 21.8% 118 2.65x 5.730%
Fully Amortizing ........... $ 2,070,911 58.3% 0.5% 160 1.50x 6.063%
Non-Amortizing ............. $ 5,000,000 27.9% 27.9% 120 3.73x 5.710%
$95,000,000 69.6% 60.1% 106 1.63X 5.442%
- -------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
(2) These Mortgage Loans require payments of interest-only for a period of 11
to 36 months from origination prior to the commencement of payments of
principal and interest.
S-119
RANGE OF OCCUPANCY RATES(1)
AGGREGATE % OF AVERAGE
NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
RANGE OF OCCUPANCY RATES (%) OF LOANS BALANCE POOL BALANCE BALANCE
- ------------------------------ ---------- ----------------- -------------- --------------
35.00 -- 39.99 ............... 1 $ 8,466,075 0.7% $ 8,466,075
65.00 -- 69.99 ............... 1 4,223,078 0.4 $ 4,223,078
70.00 -- 74.99 ............... 2 25,779,381 2.2 $12,889,691
75.00 -- 79.99 ............... 3 19,373,394 1.7 $ 6,457,798
80.00 -- 84.99 ............... 1 4,487,434 0.4 $ 4,487,434
85.00 -- 89.99 ............... 9 125,772,743 10.9 $13,974,749
90.00 -- 94.99 ............... 29 240,638,280 20.9 $ 8,297,872
95.00 -- 99.99 ............... 33 462,887,944 40.3 $14,026,907
100.00 -- 100.00 ............. 39 257,583,366 22.4 $ 6,604,702
-- -------------- -----
118 $1,149,211,695 100.0% $ 9,739,082
=== ============== =====
WTD. AVG.
STATED
REMAINING
HIGHEST WTD. AVG. WTD. AVG. TERM TO WTD. AVG. WTD. AVG.
CUT-OFF DATE CUT-OFF DATE LTV RATIO MATURITY DSC MORTGAGE
RANGE OF OCCUPANCY RATES (%) BALANCE LTV RATIO AT MATURITY(2) (MOS.)(2) RATIO RATE
- ------------------------------ -------------- -------------- ---------------- ----------- ----------- ----------
35.00 -- 39.99 ............... $ 8,466,075 79.3% 72.7% 57 1.63x 4.300%
65.00 -- 69.99 ............... $ 4,223,078 77.6% 71.1% 57 1.63x 4.300%
70.00 -- 74.99 ............... $21,779,381 66.3% 56.6% 107 1.34x 5.389%
75.00 -- 79.99 ............... $ 7,891,892 74.3% 64.5% 101 1.42x 5.682%
80.00 -- 84.99 ............... $ 4,487,434 73.6% 62.7% 117 1.36x 6.070%
85.00 -- 89.99 ............... $64,823,816 67.6% 59.7% 84 1.75x 4.672%
90.00 -- 94.99 ............... $43,200,000 75.2% 65.0% 105 1.39x 5.637%
95.00 -- 99.99 ............... $75,912,850 70.1% 59.9% 106 1.61x 5.402%
100.00 -- 100.00 ............. $95,000,000 64.1% 55.2% 119 1.89x 5.742%
$95,000,000 69.6% 60.1% 106 1.63X 5.442%
- -------
(1) Occupancy rates were calculated based upon rent rolls made available to
the applicable Mortgage Loan Seller by the related borrowers as of the
rent roll date set forth on Annex A-1 to this Prospectus Supplement.
(2) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-120
TWENTY LARGEST MORTGAGE LOANS
The following table and summaries describe the twenty largest Mortgage
Loans or groups of cross-collateralized mortgage loans in the Mortgage Pool by
Cut-Off Date Balance.
NUMBER OF
MORTGAGE % OF
LOANS/ CUT-OFF
MORTGAGE NUMBER OF CUT-OFF DATE
LOAN MORTGAGED DATE POOL
LOAN NAME SELLER PROPERTIES BALANCE BALANCE
- -------------------------- ----------- ------------ -------------- ---------
TSA Office Building ...... Wachovia 1/1 $ 95,000,000 8.3%
West Oaks Mall ........... ABN AMRO 1/1 75,912,850 6.6
Park City Center ......... Eurohypo 1/1 65,841,900 5.7
Chula Vista Center ....... Eurohypo 1/1 64,823,816 5.6
Meadows Mall ............. ABN AMRO 1/1 55,768,045 4.9
2 Rector Street .......... Wachovia 1/1 43,200,000 3.8
Villas at Rancho Palos
Verdes .................. Wachovia 1/1 36,000,000 3.1
Spring Valley Market
Place ................... Wachovia 1/1 31,966,717 2.8
Chester Springs
Shopping Center ......... Citigroup 1/1 24,949,094 2.2
T.J. Maxx Plaza .......... Wachovia 1/1 24,600,000 2.1
----- ------------ ----
SUBTOTAL/WTD. AVG. ....... 10/10 $518,062,421 45.1%
===== ============ ====
Bellamay Grand ........... LaSalle 1/1 $ 21,800,000 1.9%
Bellair Plaza ............ Citigroup 1/1 21,779,381 1.9
Miller Place Shopping
Center .................. Citigroup 1/1 20,219,345 1.8
Birkdale Commons ......... LaSalle 1/1 18,179,357 1.6
Atlantic Palms ........... LaSalle 1/1 18,000,000 1.6
Pavilion Crossings I ..... Wachovia 1/1 16,250,000 1.4
Adagio Apartments ........ Citigroup 1/1 14,976,883 1.3
Autumn Brook
Apartments .............. Wachovia 1/1 13,450,629 1.2
Rolling Road Commerce
Center & Mini
Storage ................. Wachovia 1/1 12,966,670 1.1
----- ------------ ----
Penn Station Studios ..... Citigroup 1/1 12,800,000 1.1
SUBTOTAL/WTD. AVG. ....... 10/10 $170,422,265 14.8%
===== ============ ====
TOTAL/WTD. AVG. .......... 20/20 $688,484,686 59.9%
===== ============ ====
WEIGHTED
LOAN WEIGHTED AVERAGE WEIGHTED
BALANCE WEIGHTED AVERAGE LTV RATIO AVERAGE
PROPERTY PER SF/ AVERAGE CUT-OFF DATE AT MATURITY MORTGAGE
LOAN NAME TYPE UNIT DSCR LTV RATIO OR ARD RATE
- -------------------------- ------------------------------- ----------- ---------- -------------- ------------- -----------
TSA Office Building ...... Office - Suburban $ 193 2.51x 54.8% 54.8% 5.420%
West Oaks Mall ........... Retail - Anchored $ 177 1.97x 62.0% 51.8% 5.252%
Park City Center ......... Retail - Anchored $ 96 1.97x 60.4% 53.3% 4.736%
Chula Vista Center ....... Retail - Anchored $ 357 2.05x 62.9% 57.4% 4.120%
Meadows Mall ............. Retail - Anchored $ 179 1.74x 64.2% 53.8% 5.453%
2 Rector Street .......... Office - CBD $ 104 1.58x 74.6% 63.0% 5.850%
Villas at Rancho Palos
Verdes .................. Multifamily - Conventional $167,442 1.25x 70.2% 65.8% 5.517%
Spring Valley Market
Place ................... Retail - Anchored $ 155 1.31x 78.8% 66.5% 5.770%
Chester Springs
Shopping Center ......... Retail - Anchored $ 111 1.37x 76.5% 64.1% 5.510%
T.J. Maxx Plaza .......... Retail - Anchored $ 194 1.25x 79.1% 75.9% 5.530%
SUBTOTAL/WTD. AVG. ....... 1.87X 65.0% 58.0% 5.223%
Bellamay Grand ........... Multifamily - Conventional $ 60,556 1.32x 79.9% 67.6% 5.585%
Bellair Plaza ............ Retail - Anchored $ 63 1.33x 63.8% 53.4% 5.400%
Miller Place Shopping
Center .................. Retail - Anchored $ 211 1.35x 80.2% 67.9% 5.870%
Birkdale Commons ......... Multifamily - Conventional $ 58,267 1.43x 79.0% 65.7% 5.310%
Atlantic Palms ........... Multifamily - Conventional $ 57,692 1.34x 80.0% 70.0% 5.560%
Pavilion Crossings I ..... Multifamily - Conventional $ 56,424 1.23x 78.9% 68.1% 4.900%
Adagio Apartments ........ Multifamily - Conventional $ 74,884 1.36x 79.2% 66.9% 4.970%
Autumn Brook
Apartments .............. Multifamily - Conventional $ 44,539 1.31x 70.4% 57.6% 4.750%
Rolling Road Commerce
Center & Mini
Storage ................. Mixed Use - Flex/Self Storage $ 56 1.44x 64.2% 50.4% 6.350%
Penn Station Studios ..... Office - Suburban $ 170 1.66x 66.3% 59.4% 5.570%
SUBTOTAL/WTD. AVG. ....... 1.37X 74.7% 63.1% 5.435%
TOTAL/WTD. AVG. .......... 1.74X 67.4% 59.3% 5.275%
TSA Office Building
The Loan. The Mortgage Loan (the "TSA Office Building Loan") is secured by
a first mortgage encumbering the borrower's fee interest in an office building
located in Arlington, Virginia. The TSA Office Building Loan represents
approximately 8.3% of the Cut-Off Date Pool Balance. The TSA Office Building
Loan was originated on November 5, 2003 and has a principal balance as of the
Cut-Off Date of $95,000,000. The TSA Office Building Loan provides for
interest-only payments for the length of the loan term.
The TSA Office Building Loan has a remaining term of 119 months to its
anticipated repayment date of November 11, 2013. The TSA Office Building Loan
may be prepaid on or after September 11, 2013 and permits defeasance with United
States government obligations beginning four years after the first payment date.
The Borrower. The borrower is CNLR DC Acquisitions I, LLC, a special
purpose entity. Legal counsel to the borrower delivered a non-consolidation
opinion in connection with the origination of the TSA Office Building Loan. The
sponsor is Commercial Net Lease Realty, Inc. Commercial Net Lease Realty ("CNL")
invests in high quality, single-tenant retail, office and industrial properties
subject to long-term, net leases with established tenants, such as Barnes &
Noble, Best Buy, Eckerd, OfficeMax, Wal-Mart and the United States of America.
As of September 30, 2003, CNL owned, either directly or through investment
interests, 348 properties in 39 states with a gross leasable area of
approximately 7.4 million square feet.
The Property. The Mortgaged Property is an approximately 491,126 square
foot office building situated on approximately 4.9 acres. The Mortgaged
Property was constructed in 1982. The Mortgaged Property is located in
S-121
Arlington, Virginia, within the Washington-Baltimore, DC-MD-VA-WV metropolitan
statistical area. As of October 31, 2003, the occupancy rate for the Mortgaged
Property securing the TSA Office Building Loan was approximately 100.0%.
The single tenant is the Transportation Security Administration of the
United States of America ("USA") occupying approximately 491,126 square feet, or
approximately 100.0% of the net rentable area. The USA leases the Mortgaged
Property to serve as the headquarters of the Transportation Security
Administration. The Transportation Security Administration provides security for
the nation's transportation industry. The USA lease expires in February 2014. As
of November 24, 2003, the USA was rated "Aaa" (Moody's), "AAA"(S&P) and
"AAA"(Fitch).
Pursuant to the lease of the TSA Office Building, the borrower was required
to deliver the property to the tenant in three phases and if the borrower did
not meet the required delivery dates, the tenant was permitted to terminate the
lease. Pursuant to the lease, the borrower was required to deliver all space by
March 2004. As of September 1, 2003 approximately 173,172 square feet of space
has not yet been delivered. Pursuant to a Supplemental Lease Agreement, dated
December 3, 2003, the tenant has waived its right to terminate the lease for a
failure to deliver the space in accordance with the original schedule and the
borrower and the tenant are finalizing a new delivery schedule. However, the
lender required a $1.5 million letter of credit to be posted which will only be
released once the tenant has taken occupancy of phase 3 and is paying full
unabated rent. See "RISK FACTORS--Single Tenants and Concentration of Tenants
Subject the Trust Fund to Increased Risk" in this prospectus supplement.
The following table presents information relating to the major tenant at
the Mortgaged Property:
% OF NET % OF
RATINGS NET RENTABLE RENTABLE ACTUAL ACTUAL DATE OF LEASE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA RENT PSF ACTUAL RENT RENT EXPIRATION
- ------------- ------------------- -------------- ---------- ---------- ------------- ----------- --------------
USA ......... Aaa / AAA / AAA 491,126 100.0% $ 34.75 $17,066,629 100.0% February 2014
The following table presents information relating to the lease rollover
schedule at the Mortgaged Property:
WA BASE CUMULATIVE % % OF ACTUAL CUMULATIVE % OF
# OF LEASES RENT/SF TOTAL SF % OF TOTAL OF SF RENT ACTUAL RENT
YEAR ROLLING ROLLING ROLLING SF ROLLING* ROLLING* ROLLING* ROLLING*
- -------------- ------------- ----------- ---------- ------------- -------------- ------------- ----------------
2014 ......... 1 $ 34.75 491,126 100.0% 100.0% 100.0% 100.0%
- ---------
* Calculated based on approximate square footage occupied by each tenant.
Escrows. The loan documents do not require escrows. See Annex A-3 to this
prospectus supplement for information regarding escrow reserves.
Lock Box Account. All tenant payments due under the applicable tenant
leases are deposited into a mortgagee designated lock box account.
Hyper-amortization. Commencing on the anticipated repayment date of
November 11, 2013, if the TSA Office Building Loan is not repaid in full, the
TSA Office Building Loan enters into a hyper-amortization period through
November 11, 2033. The interest rate applicable to the TSA Office Building Loan
during such hyper-amortization period will increase to the greater of 3.0% over
the mortgage rate or 3.0% over the treasury rate as specified in the loan
documents.
Management. Spaulding and Slye LLC ("Spaulding & Slye")is the property
manager for the Mortgaged Property securing the TSA OfficeBuilding Loan.
Spaulding & Slye manages approximately 16.6 million square feet of commercial
space.
West Oaks Mall
The Loan. The Mortgage Loan (the "West Oaks Mall Loan") is secured by a
first mortgage encumbering the borrower's fee interest in the in-line component
of a regional mall located in Ocoee, Florida, commonly known as the West Oaks
Mall. The West Oaks Mall Loan represents approximately 6.6% of the Cut-Off Date
Pool Balance. The West Oaks Mall Loan was originated on October 24, 2003, and
has a principal balance as of the Cut-Off Date of $75,912,850.
The West Oaks Mall Loan has a remaining term of 116 months and matures on
August 1, 2013. The West Oaks Mall Loan may be prepaid on or after May 1, 2013,
and permits defeasance with United States government obligations beginning two
years after the Closing Date.
S-122
The Borrower. The borrower is West Oaks Mall Trust, a special purpose
entity. Legal counsel to the borrower delivered a non-consolidation opinion in
connection with the origination of the West Oaks Mall Loan. The sponsor of the
borrower is GGP/Homart, Inc. GGP/Homart, Inc. is owned 50% by the New York State
Common Retirement Fund ("NYSCRF") and 50% by GGP Limited Partnership and has
approximately 118 preferred non-voting stockholders. General Growth Properties,
Inc. ("General Growth") is a self-administered and self-managed publicly traded
real estate investment trust rated "Ba3" (Moody's), "BBB-" (S&P) and "BB"
(Fitch). General Growth owns, leases, manages, acquires and develops regional
shopping malls and single tenant retail properties in the United States. General
Growth and its affiliates currently have interests in approximately 150
properties in 41 states, totaling approximately 146 million square feet. As of
December 31, 2002, the value of the NYSCRF was $98.7 billion.
The Property. The Mortgaged Property is approximately 429,318 square feet
of an approximately 1,072,800 square foot regional mall situated on
approximately 129.0 acres. The Mortgaged Property was constructed in 1996 and is
located in Ocoee, Florida, within the Orlando metropolitan statistical area. As
of October 1, 2003, the occupancy rate for the Mortgaged Property securing the
West Oaks Mall Loan was approximately 96.4%.
The West Oaks Mall is anchored by Sears, Dillard's, JCPenney and Parisian
(a division of Sak's, Inc.), none of which are part of the collateral. The
largest tenant is American Multi-Cinema, Inc., doing business as AMC Theatres
("AMC") occupying approximately 57,274 square feet, or approximately 13.3% of
the net rentable area. As of November 29, 2003, AMC was rated "Caa1" (Moody's)
and "B" (S&P). The AMC lease expires in March 2017. The second largest tenant is
Toys "R" Us -- Delaware, Inc. ("Toys "R" Us"), occupying approximately 30,347
square feet, or approximately 7.1% of the net rentable area. As of November 25,
2003, Toys "R" Us was rated "Baa3" (Moody's), "BBB-" (S&P) and "BB+" (Fitch).
The Toys "R" Us lease expires in January 2013. The third largest tenant is Ocoee
Properties Limited Partnership, doing business as Borders Books & Music
("Borders"), occupying approximately 25,000 square feet, or approximately 5.8%
of the net rentable area. The Borders lease expires in January 2018.
The following table presents information relating to the major tenants at
the Mortgaged Property:
% OF NET
RATINGS(2) NET RENTABLE RENTABLE
TENANT(1) MOODY'S/S&P/FITCH AREA (SF) AREA
- -------------------------------- ------------------- -------------- ----------
Parisian (Anchor owned, not
part of collateral) ........... B1/BB/BB- 212,506
Dillard's (Anchor owned, not
part of collateral) ........... Ba3/BB/BB- 190,075
Sears (Anchor owned, not
part of collateral) ........... Baa1/BBB/BBB+ 144,907
JCPenney (Anchor owned,
not part of collateral) ....... Ba3/BB+/BB 95,994
AMC ............................ Caa1/B/NR 57,274 13.3%
Toys "R" Us (ground lease) ..... Baa3/BBB-/BB+ 30,347 7.1
Borders (ground lease) ......... NR/NR/NR 25,000 5.8
Gap/Gap Kids ................... Ba3/BB+/BB- 10,632 2.5
Express/Bath & Body Works....... Baa1/BBB+/NR 10,425 2.4
------- ----
TOTAL .......................... 133,678 31.1%
======= ====
% OF
ACTUAL ACTUAL DATE OF LEASE
TENANT(1) RENT PSF ACTUAL RENT RENT EXPIRATION
- -------------------------------- ---------- ------------- ---------- ----------------
Parisian (Anchor owned, not
part of collateral) ...........
Dillard's (Anchor owned, not
part of collateral) ...........
Sears (Anchor owned, not
part of collateral) ...........
JCPenney (Anchor owned,
not part of collateral) .......
AMC ............................ $ 18.00 $1,030,932 10.6% March 2017
Toys "R" Us (ground lease) ..... $ 5.17 156,996 1.6 January 2013
Borders (ground lease) ......... $ 7.84 195,996 2.0 January 2018(3)
Gap/Gap Kids ................... $ 24.50 260,484 2.7 January 2005
Express/Bath & Body Works....... $ 22.00 229,350 2.4 January 2006
---------- ----
TOTAL .......................... $1,873,758 19.3%
========== ====
- ---------
(1) This table excludes the Old Navy lease (14,958 SF), as no income was
attributed to the space for purposes of the underwriting of the West Oaks
Mall Loan, and no income from February 2004 through October 2004 was
attributed for purposes of the appraisal of the Mortgaged Property.
Pursuant to an early termination option triggered by a gross sales
threshold, the tenant terminated its lease on October 31, 2003. The tenant
is presently operating at the Mortgaged Property on a month-to-month basis
and is paying the borrower only its pro rata share of real estate taxes
and water and sewer charges, which are approximately $53,000 per year.
Pursuant to a non-binding letter of intent regarding the execution of a
new lease, the tenant will be permitted to continue operations at the
Mortgaged Property until October 31, 2005, on the same payment terms
described in the preceding sentence.
(2) Certain ratings are those of the parent company whether or not the parent
guarantees the lease.
(3) The tenant under the Borders ground lease has an option to purchase the
premises and improvements beginning any time after October 1, 2016,
through the end of the lease term, for a purchase price of $1,200,000,
which purchase price increases by 4% for each calendar year thereafter.
S-123
The following table presents information relating to the lease rollover
schedule at the Mortgaged Property:
WA BASE CUMULATIVE % % OF ACTUAL CUMULATIVE % OF
# OF LEASES RENT/SF TOTAL SF % OF TOTAL OF SF RENT ACTUAL RENT
YEAR ROLLING ROLLING ROLLING SF ROLLING* ROLLING* ROLLING* ROLLING*
- -------------- ------------- --------- ---------- ------------- -------------- ------------- ----------------
2003 ......... 0 $ 0.00 0 0.0% 0.0% 0.0% 0.0%
2004 ......... 23 $ 20.66 44,198 10.3% 10.3% 9.4% 9.4%
2005 ......... 6 $ 15.80 28,884 6.7% 17.0% 4.7% 14.1%
2006 ......... 20 $ 31.60 46,014 10.7% 27.7% 15.0% 29.1%
2007 ......... 47 $ 35.24 85,134 19.8% 47.6% 30.9% 59.9%
2008 ......... 8 $ 22.92 34,070 7.9% 55.5% 8.0% 68.0%
2009 ......... 5 $ 39.58 17,029 4.0% 59.5% 6.9% 74.9%
2010 ......... 1 $ 35.00 1,745 0.4% 59.9% 0.6% 75.5%
2011 ......... 3 $ 24.06 8,906 2.1% 62.0% 2.2% 77.7%
2012 ......... 3 $ 29.02 6,444 1.5% 63.5% 1.9% 79.7%
2013 ......... 3 $ 7.22 33,476 7.8% 71.3% 2.5% 82.2%
- ---------
* Calculated based on approximate square footage occupied by each tenant.
Escrows. The loan documents provide for certain monthly escrows of real
estate taxes and insurance (unless the insurance policies are blanket policies)
(i) upon the occurrence and continuance of an event of default or (ii) from the
determination by the mortgagee that the net operating income from the Mortgaged
Property for the trailing 12 month period is less than $8,670,000 and until the
mortgagee subsequently determines that such net operating income is equal to or
in excess of $8,670,000 for two consecutive subsequent calendar quarters
(collectively, a "West Oaks Trigger Event"). In addition, upon the occurrence
and continuance of a West Oaks Trigger Event, the borrower will be required to
make monthly deposits of (a) $25,849.75 into a tenant improvement and leasing
commission reserve, until such time as the balance of the tenant improvement and
leasing commission reserve equals $310,197, and (b) $5,169.92 into a replacement
reserve, until such time as the balance of the replacement reserve equals
$62,039. In the event that the balance in the tenant improvement and leasing
commission and/or the replacement reserves drop below the target amounts set
forth in clauses (a) and (b) above, as applicable, the borrower will be required
to resume making monthly deposits until the applicable target level(s) are
achieved. See Annex A-3 to this prospectus supplement for more information
regarding escrow reserves.
Lock Box Account. All tenant payments due under the applicable tenant
leases are deposited into a mortgagee designated lock box account. Funds in the
lock box account are disbursed to the borrower on a daily basis unless a West
Oaks Trigger Event has occurred and is continuing, during which time funds in
the lock box account will not be available to the borrower and will be available
solely to the mortgagee.
Management. General Growth Management, Inc. is the property manager for
the Mortgaged Property securing the West Oaks Mall Loan. The property manager
is affiliated with the sponsor.
Release of Parcels. The borrower may obtain the release of certain
non-improved, non-income producing property upon the satisfaction of certain
conditions, including: (i) the borrower provides evidence that (a) the released
property is not necessary for the borrower's operation or its then current use
of the Mortgaged Property and may be separated from the remaining Mortgaged
Property without a material diminution in the value of the Mortgaged Property,
and (b) the released property will be vacant, non-income producing and
unimproved (or improved only by surface parking areas); (ii) no event of default
has occurred and is continuing; and (iii) the borrower delivers a rating agency
confirmation that the release will not result in a downgrade, withdrawal or
qualification of the then current rating assigned to the Certificates.
Park City Center
The Loan. The Mortgage Loan (the "Park City Center Loan") is secured by a
first mortgage encumbering the borrower's fee interest in a regional mall
located in Lancaster, Pennsylvania. The Park City Center Loan represents
approximately 5.7% of the Cut-Off Date Pool Balance. The Park City Center Loan
was originated on September 12, 2003 and has a principal balance as of the
Cut-Off Date of $65,841,900. The Park City Center Loan is a portion of a whole
loan with an original principal balance of $163,000,000. The other loans related
to the Park City Center Loan are evidenced by two separate notes dated September
12, 2003, the "Park City Center Pari Passu Loan", with an original principal
balance of $66,000,000 and the "Park City Center Subordinate Loan", with an
original principal balance of $31,000,000. The Park City Center Pari Passu Loan
and Park City Center Subordinate Loan will not be assets of the trust. The Park
City Center Loan, the Park City Center Pari Passu Loan and the Park City Center
Subordinate Loan will be governed by an intercreditor agreement and will be
serviced pursuant to the terms of the
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pooling and servicing agreement entered into in connection with the issuance of
the Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2003-C8, as described under "DESCRIPTION OF THE MORTGAGE
POOL -- Co-Lender Loans" in this prospectus supplement.
The Park City Center Loan has a remaining term of 82 months and matures on
October 1, 2010. The Park City Center Loan may be prepaid on or after July 1,
2010 and permits defeasance with United States government obligations beginning
on the date that is the earlier of (i) September 13, 2006 and (ii) two years
from the date of the last securitization of any portion of the Park City Center
Loan and its related companion loans.
The Borrower. The borrower is Lancaster Trust, a special purpose entity.
Legal counsel to the borrower delivered a non- consolidation opinion in
connection with the origination of the Park City Center Loan. The sponsor of the
borrower is GGP Ivanhoe III, Inc., which is a subsidiary of General Growth
Properties, Inc. ("General Growth"). General Growth is a self-administered and
self-managed publicly traded real estate investment trust rated "Ba3" (Moody's),
"BBB-" (S&P) and "BB" (Fitch). General Growth owns, leases, manages, acquires
and develops regional shopping malls, shopping centers and single tenant retail
properties in the United States. General Growth and its affiliates currently
have interests in approximately 150 properties in 41 states, totaling
approximately 146 million square feet.
The Property. The Mortgaged Property is an approximately 1,367,529 square
foot anchored retail center situated on approximately 133.3 acres. The Mortgaged
Property was constructed in 1970 and renovated in 1997. The Mortgaged Property
is located in Lancaster, Pennsylvania, within the Lancaster, Pennsylvania
metropolitan statistical area. As of October 13, 2003, the occupancy rate for
the Mortgaged Property securing the Park City Center Loan was approximately
96.4%.
The largest tenant is J.C. Penney Company, Inc. ("JCPenney"), occupying
approximately 243,478 square feet, or approximately 17.8% of the net rentable
area. JCPenney is a major retailer in the United States. The company also has
interests in drug, catalog, and e-commerce merchandising. As of October 29,
2003, JCPenney was rated "Ba3" (Moody's), "BB+" (S&P) and "BB" (Fitch). The
JCPenney lease expires in July 2005. The second largest tenant is Bon-Ton
("Bon-Ton"), occupying approximately 142,259 square feet, or approximately 10.4%
of the net rentable area. The company's strategy focuses on being the premier
fashion retailer in smaller secondary markets that demand, but often have
limited access to, better branded merchandise. The Bon-Ton stores also offer
home furnishings, cosmetics, accessories, shoes and other items. The Bon-Ton
lease expires in September 2005. The third largest tenant is Kohl's ("Kohl's"),
occupying approximately 92,472 square feet, or approximately 6.8% of the net
rentable area. Kohl's is one of the fastest growing family-oriented department
store chains in the United States. As of October 29, 2003, Kohl's was rated "A3"
(Moody's), "A-" (S&P) and "A" (Fitch). The Kohl's lease expires in January 2017.
The following table presents information relating to the major tenants at
the Mortgaged Property:
% OF NET % OF
RATINGS* NET RENTABLE RENTABLE ACTUAL ACTUAL DATE OF LEASE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA RENT PSF ACTUAL RENT RENT EXPIRATION
- ------------------------------- ------------------- -------------- ---------- ---------- ------------- -------- ---------------
JCPenney ...................... Ba3/BB+/BB 243,478 17.8% $ 1.23 $ 298,572 2.1% July 2005
Boscov (ground lease) ......... NR/NR/NR 226,652 16.6 $ 0.00 1 0.0 July 2005
Sears (ground lease) .......... Baa1/BBB/BBB+ 158,329 11.6 $ 0.22 35,004 0.2 April 2023
Bon-Ton ....................... NR/NR/NR 142,259 10.4 $ 1.69 239,856 1.7 September 2005
Kohl's ........................ A3/A-/A 92,472 6.8 $ 5.81 537,139 3.7 January 2017
Kids "R" US ................... Baa3/BBB-/BB+ 21,580 1.6 $ 10.60 228,744 1.6 January 2012
H & M ......................... NR/NR/NR 17,456 1.3 $ 25.00 436,404 3.0 January 2014
Foot Locker Triplex ........... Ba3/BB+/NR 17,198 1.3 $ 9.59 165,000 1.1 January 2009
Express ....................... Baa1/BBB+/NR 15,224 1.1 $ 22.50 342,540 2.4 January 2007
Borders Books & Music ......... NR/NR/NR 15,000 1.1 $ 14.50 217,500 1.5 January 2008
------- ---- ---------- ----
TOTAL ......................... 949,648 69.4% $2,500,760 17.3%
======= ==== ========== ====
- ---------
* Certain ratings are those of the parent company whether or not the parent
guarantees the lease.
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The following table presents information relating to the lease rollover
schedule at the Mortgaged Property:
WA BASE CUMULATIVE % % OF ACTUAL CUMULATIVE % OF
# OF LEASES RENT/SF TOTAL SF % OF TOTAL OF SF RENT ACTUAL RENT
YEAR ROLLING ROLLING ROLLING SF ROLLING* ROLLING* ROLLING* ROLLING*
- -------------- ------------- ----------- ---------- ------------- -------------- ------------- ----------------
2003 ......... 6 $ 25.20 21,406 1.6% 1.6% 3.7% 3.7%
2004 ......... 9 $ 38.19 16,089 1.2% 2.7% 4.2% 8.0%
2005 ......... 23 $ 2.67 642,661 46.7% 49.5% 11.8% 19.8%
2006 ......... 17 $ 26.89 52,833 3.8% 53.3% 9.8% 29.6%
2007 ......... 20 $ 25.42 73,377 5.3% 58.6% 12.9% 42.5%
2008 ......... 18 $ 27.39 58,507 4.3% 62.9% 11.1% 53.5%
2009 ......... 13 $ 24.89 49,504 3.6% 66.5% 8.5% 62.0%
2010 ......... 16 $ 37.87 37,721 2.7% 69.2% 9.9% 71.9%
2011 ......... 7 $ 36.99 13,903 1.0% 70.3% 3.6% 75.5%
2012 ......... 9 $ 25.26 50,455 3.7% 73.9% 8.8% 84.3%
2013 ......... 10 $ 37.05 23,546 1.7% 75.6% 6.0% 90.3%
- ---------
* Calculated based on approximate square footage occupied by each tenant.
Escrows. The loan documents provide for certain monthly escrows of real
estate taxes and insurance (unless the policies are blanket policies) following
an event of default under the loan documents or if the debt service coverage
ratio is less than 1.30x (collectively, a "Park City Center Trigger Event"). In
addition, following a Park City Center Trigger Event, the borrower will be
required to deposit with the lender on each payment date (i) $78,727 into the
tenant improvement and leasing commissions reserve, until such time as the
balance in the tenant improvement and leasing commissions reserve equals
$1,889,448 and (ii) approximately $19,682 into the replacement reserve, until
such time as the balance in the replacement reserve equals $472,362. Once the
balance in the rollover reserve and/or the replacement reserve drops below the
target amount set forth in clause (i) or (ii) above, as applicable, the borrower
will be required to resume making deposits into such reserve until the target
level is achieved. See Annex A-3 to the prospectus supplement for information
regarding escrow reserves.
Lock Box Account. All tenant payments due under the applicable tenant
leases shall be directly deposited into a mortgagee designated lock box account.
Management. The Mortgaged Property securing the Park City Center Mall Loan
is currently self-managed.
Release of Parcel. The borrower may obtain a release of certain
non-improved, non-income producing property, except for certain parcels
identified in the loan documents, upon providing satisfaction of certain
conditions, including: (i) evidence that the released property is not necessary
for the borrower's operation and its then current use of the Mortgaged Property
and may be separated from the Mortgaged Property without a material diminution
in the value of the Mortgaged Property; (ii) the released property will be
vacant, non-income producing and unimproved (or improved only by surface parking
areas) and (iii) a rating agency confirmation that the release will not result
in a downgrade, withdrawal or qualification of the then current rating assigned
to the Certificates. Notwithstanding the foregoing, the borrower may convey fee
simple title to the land which is identified in the loan documents subject to
the Boscov's lease upon the satisfaction of certain conditions, including: (i)
evidence that the land subject to the Boscov's lease has been legally
subdivided, that the remainder of the Mortgaged Property is in compliance in all
material respects with applicable legal requirements and constitutes a separate
tax lot, and a reciprocal easement agreement or other agreement has been
executed and recorded and (ii) delivery of a title endorsement to the title
insurance policy if the release would be expected to materially adversely affect
the lender's rights under the title insurance policy as to the remainder of the
Mortgaged Property.
Environmental. A release of gasoline beneath the Mortgaged Property from an
automobile servicing building adjacent to JCPenney impacted the groundwater of
an adjacent property. JCPenney and the operator of the automobile servicing
building at the time of the release accepted responsibility for the remediation
thereof. The Pennsylvania Department of Environmental Protection has approved of
the responsible parties' plan of remediation of the impacted groundwater and is
currently supervising the application of such plan of remediation. General
Growth Properties, Inc. has provided an environmental indemnity with respect to
such remediation.
Chula Vista Center
The Loan. The Mortgage Loan (the "Chula Vista Center Loan") is secured by
a first mortgage encumbering the borrower's fee interest in a regional mall
located in Chula Vista, California. The Chula Vista Center Loan
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represents approximately 5.6% of the Cut-Off Date Pool Balance. The Chula Vista
Center Loan was originated on September 12, 2003 and has a principal balance as
of the Cut-Off Date of $64,823,816.
The Chula Vista Center Loan has a remaining term of 58 months and matures
on October 1, 2008. The Chula Vista Center Loan may be prepaid on or after July
1, 2008 and permits defeasance with United States government obligations
beginning two years after the Closing Date.
The Borrower. The borrower is C.V. Center, Inc., a special purpose entity.
Legal counsel to the borrower delivered a non-consolidation opinion in
connection with the origination of the Chula Vista Center Loan. The sponsor of
the borrower is GGP/Homart, Inc. GGP/Homart, Inc. is owned 50% by New York State
Common Retirement Fund ("NYSCRF") and 50% by GGP Limited Partnership and has
approximately 118 preferred non-voting stockholders. General Growth Properties,
Inc. ("General Growth") is a self-administered and self-managed publicly traded
real estate investment trust rated "Ba3" (Moody's), "BBB-" (S&P) and "BB"
(Fitch). General Growth owns, leases, manages, acquires and develops regional
shopping malls, shopping centers and single tenant retail properties in the
United States. General Growth and its affiliates currently have interests in
approximately 150 properties in 41 states, totaling approximately 146 million
square feet. As of December 31, 2002, the value of the NYSCRF was $98.7 billion.
The Property. The Mortgaged Property is an approximately 892,179 square
foot anchored retail center situated on approximately 55.3 acres. The Mortgaged
Property was constructed in 1962 and renovated in 1994. The Mortgaged Property
is located in Chula Vista, California, within the San Diego metropolitan
statistical area. As of October 14, 2003, the occupancy rate for the Mortgaged
Property securing the Chula Vista Center Loan was approximately 88.4%. The
Mortgaged Property is anchored by Sears, Macy's, and Mervyn's, which are not
part of the collateral and JCPenney, which is part of the collateral. The
largest tenant is JCPenney occupying approximately 80,000 square feet, or
approximately 19.1% of the net rentable area. JCPenney is a major retailer in
the United States. The company also has interests in drug, catalog, and
e-commerce merchandising. As of October 29, 2003, JCPenney was rated "Ba3"
(Moody's), "BB+" (S&P) and "BB" (Fitch). The JCPenney lease expires in November
2008. The second largest tenant is Ultrastar Theaters occupying approximately
34,037 square feet, or approximately 8.1% of the net rentable area. Ultrastar
Theaters operates a 10-screen cineplex at the Mortgaged Property. The Ultrastar
Theaters lease expires in May 2013. The third largest tenant is Sav-on Drugs
occupying approximately 21,344 square feet, or approximately 5.1% of the net
rentable area. Sav-on Drugs, a subsidiary of Albertsons, Inc. operates a drug
store at the Mortgaged Property. As of November 29, 2003, Sav-on was rated
"Baa2" (Moody's), "BBB" (S&P) and "BBB" (Fitch). The Sav-on Drugs lease expires
in March 2008.
The following table presents information relating to the major tenants at
the Mortgaged Property:
% OF NET
RATINGS* NET RENTABLE RENTABLE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA
- ------------------------------------- ------------------- -------------- ----------
Sears (Anchor owned, not part of
collateral) ........................ Baa1/BBB/BBB+ 250,000
Macy's (Anchor owned, not part of
collateral) ........................ Baa1/BBB+/BBB+ 142,500
Mervyn's (Anchor owned, not part
of collateral) ..................... A2/A+/A 81,600
JCPenney ............................ Ba3/BB+/BB 80,000 19.1%
Ultrastar Theaters .................. NR/NR/NR 34,037 8.1
Sav-on Drugs ........................ Baa2/BBB/BBB 21,344 5.1
Foot Locker/Lady/Kids ............... Ba3/BB+/NR 15,073 3.6
Lerner New York ..................... Baa1/BBB+/NR 13,417 3.2
Olive Garden ........................ NR/NR/NR 12,000 2.9
G.W. School Supplies ................ NR/NR/NR 11,149 2.7
------- ----
TOTALS .............................. 187,020 44.7%
======= ====
% OF
ACTUAL ACTUAL ACTUAL DATE OF LEASE
TENANT RENT PSF RENT RENT EXPIRATION
- ------------------------------------- ---------- ------------- -------- --------------
Sears (Anchor owned, not part of
collateral) ........................
Macy's (Anchor owned, not part of
collateral) ........................
Mervyn's (Anchor owned, not part
of collateral) .....................
JCPenney ............................ $ 0.00 $ 0 0.0% November 2008
Ultrastar Theaters .................. $ 21.48 731,004 10.7 May 2013
Sav-on Drugs ........................ $ 14.00 298,812 4.4 March 2008
Foot Locker/Lady/Kids ............... $ 15.00 226,092 3.3 January 2008
Lerner New York ..................... $ 18.00 241,512 3.5 January 2004
Olive Garden ........................ $ 15.25 183,000 2.7 July 2005
G.W. School Supplies ................ $ 12.73 141,927 2.1 June 2008
---------- ---- ---------------
TOTALS .............................. $1,822,347 26.6%
========== ====
- ---------
* Certain ratings are those of the parent company whether or not the parent
guarantees the lease.
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The following table presents information relating to the lease rollover
schedule at the Mortgaged Property:
WA BASE CUMULATIVE % % OF ACTUAL CUMULATIVE % OF
# OF LEASES RENT/SF TOTAL SF % OF TOTAL OF SF RENT ACTUAL RENT
YEAR ROLLING ROLLING ROLLING SF ROLLING* ROLLING* ROLLING* ROLLING*
- -------------- ------------- ----------- ---------- ------------- -------------- ------------- ----------------
2003 ......... 5 $ 32.79 8,265 2.0% 2.0% 4.0% 4.0%
2004 ......... 11 $ 20.58 41,569 9.9% 11.9% 12.5% 16.4%
2005 ......... 14 $ 28.33 30,919 7.4% 19.3% 12.8% 29.2%
2006 ......... 6 $ 28.73 14,887 3.6% 22.9% 6.2% 35.5%
2007 ......... 6 $ 27.13 10,696 2.6% 25.4% 4.2% 39.7%
2008 ......... 7 $ 6.64 133,707 32.0% 57.4% 13.0% 52.7%
2009 ......... 8 $ 28.85 18,302 4.4% 61.8% 7.7% 60.4%
2010 ......... 8 $ 27.26 23,363 5.6% 67.4% 9.3% 69.7%
2011 ......... 4 $ 19.18 16,707 4.0% 71.4% 4.7% 74.4%
2012 ......... 8 $ 25.84 21,998 5.3% 76.6% 8.3% 82.7%
2013 ......... 5 $ 23.35 40,736 9.7% 86.4% 13.9% 96.6%
- ---------
* Calculated based on approximate square footage occupied by each tenant.
Escrows. The loan documents provide for certain escrows of real estate
taxes and insurance (unless the policies are blanket policies) following an
event of default under the loan documents or if the debt service coverage ratio
is less than 1.25x (collectively, a "Chula Vista Center Trigger Event"). In
addition, following a Chula Vista Center Trigger Event, the borrower will be
required to deposit with the lender on each payment date (i) $33,487 into the
rollover reserve, until such time as the balance in the rollover reserve equals
$803,688 and (ii) $8,371.75 into the replacement reserve until such time as the
balance in the replacement reserve account equals $200,922. Once the balance in
the rollover reserve and/or the replacement reserve drops below the target
amount set forth in clause (i) or (ii) above, as applicable, the borrower will
be required to resume making deposits into such reserve until the target level
is achieved.
Lock Box Account. All tenant payments due under the applicable tenant
leases shall be directly deposited into a mortgagee designated lock box account.
Funds deposited into the lock box account are disbursed to the borrower on a
daily basis until the occurrence of certain trigger events as defined in the
loan documents, at which time the funds in the lock box account will no longer
be available to the borrower, and will be available solely to the mortgagee.
Management. General Growth Management, Inc. is the property manager for
the Mortgaged Property securing the Chula Vista Center Loan.
Release of Parcel. The borrower may obtain a release of certain property,
upon providing satisfaction of certain conditions, including: (i) evidence that
the released property may be separated from the Mortgaged Property without a
material diminution in the value of the Mortgaged Property; (ii) the released
property will be vacant, non-income producing and unimproved (or improved only
by surface parking areas); and (iii) a rating agency confirmation that the
release will not result in a downgrade, withdrawal or qualification of the then
current rating assigned to the Certificates.
Environmental. A prior release of petroleum from a former fuel station
impacted the groundwater and soil of the Mortgaged Property. A certified
environmental professional was engaged by the related borrower to notify the San
Diego County Department of Environmental Health of the condition and address
suchcondition under the supervision. The borrower has provided an environmental
indemnity with respect to such remediation.
Meadows Mall
The Loan. The Mortgage Loan (the "Meadows Mall Loan") is secured by a first
deed of trust encumbering the borrower's fee interest in the in-line component
of a regional mall located in Las Vegas, Nevada, commonly known as the Meadows
Mall. The Meadows Mall Loan represents approximately 4.9% of the Cut-Off Date
Pool Balance. The Meadows Mall Loan was originated on July 31, 2003 and has a
principal balance as of the Cut-Off Date of $55,768,045. The Meadows Mall Loan,
which is evidenced by a pari passu note dated November 17, 2003, is a portion of
a whole loan with an original principal balance of $112,000,000. The other
portion of the whole loan is evidenced by a separate note dated November 17,
2003 (the "Meadows Mall Pari Passu Loan" and together with the Meadows
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Mall Loan, the "Meadows Mall Whole Loan"). The Meadows Mall Pari Passu Loan will
not be an asset of the trust. The Meadows Mall Loan and the Meadows Mall Pari
Passu Loan will be governed by an intercreditor agreement and will be serviced
pursuant to the terms of the pooling and servicing agreement, as described under
"DESCRIPTION OF THE MORTGAGE POOL -- Co-Lender Loans" in this prospectus
supplement.
The Meadows Mall Loan has a remaining term of 116 months and matures on
August 1, 2013. The Meadows Mall Loan may be prepaid on or after May 1, 2013,
and permits defeasance with United States government obligations beginning two
years after the closing date of the securitization into which the Meadows Mall
Pari Passu Loan is contributed.
The Borrower. The borrower is GGP Meadows Mall L.L.C., a special purpose
entity. Legal counsel to the borrower delivered a non-consolidation opinion in
connection with the origination of the Meadows Mall Loan. The sponsor of the
borrower is GGP Ivanhoe III, Inc., which is a subsidiary of General Growth
Properties, Inc. ("General Growth"). General Growth is a self-administered and
self-managed publicly traded real estate investment trust rated "Ba3" (Moody's),
"BBB-" (S&P) and "BB" (Fitch). General Growth owns, leases, manages, acquires
and develops regional shopping malls and single tenant retail properties in the
United States. General Growth and its affiliates currently have interests in
approximately 150 properties in 41 states, totaling approximately 146 million
square feet.
The Property. The Mortgaged Property is approximately 312,210 square feet
of an approximately 949,063 square foot regional mall situated on approximately
88.9 acres. The Mortgaged Property was constructed in 1978 and renovated in
1987, 1996, and 2003. The Mortgaged Property is located in Las Vegas, Nevada,
within the Las Vegas metropolitan statistical area. As of August 31, 2003, the
occupancy rate for the Mortgaged Property securing the Meadows Mall Loan was
approximately 96.6%.
The Meadows Mall is anchored by Sears, Dillard's, Macy's and JCPenney, none
of which are part of the collateral. The largest tenant is Express, Inc.
("Express"), occupying approximately 8,342 square feet, or approximately 2.7% of
the net rentable area. Express is wholly owned by Limited Brands Inc. As of
November 25, 2003, Limited Brands Inc. was rated "Baa1" (Moody's) and "BBB+"
(S&P). The Express lease expires in January 2007. The second largest tenant is
HUB Distributing, Inc., doing business as Anchor Blue ("Anchor Blue"), occupying
approximately 7,823 square feet, or approximately 2.5% of the net rentable area.
The Anchor Blue lease expires in October 2010. The third largest tenant is
Lawrence Merchandising Corporation of Nevada, Inc., doing business as Charlotte
Russe ("Charlotte Russe"), occupying approximately 7,673 square feet, or
approximately 2.5% of the net rentable area. The Charlotte Russe lease expires
in January 2006.
The following table presents information relating to the major tenants at
the Mortgaged Property:
NET % OF NET ACTUAL % OF
RATINGS* RENTABLE RENTABLE RENT ACTUAL DATE OF LEASE
MOODY'S/S&P/FITCH AREA (SF) AREA PSF ACTUAL RENT RENT EXPIRATION
TENANT ------------------- ----------- ---------- ----------- ------------- -------- --------------
Dillard's (Anchor owned, not part
of collateral) ................. Ba3/BB/BB- 182,493
Macy's (Anchor owned, not part
of collateral) ................. Baa1/BBB+/BBB+ 163,250
JCPenney (Anchor owned, not
part of collateral) ............ Ba3/BB+/BB 146,519
Sears (Anchor owned, not part of
collateral) .................... Baa1/BBB/BBB+ 144,591
Express ......................... Baa1/BBB+/NR 8,342 2.7% $ 22.00 $183,528 1.6% January 2007
Anchor Blue ..................... NR/NR/NR 7,823 2.5 $ 21.00 164,280 1.5 October 2010
Charlotte Russe ................. NR/NR/NR 7,673 2.5 $ 20.00 153,456 1.4 January 2006
Hollister Co. ................... NR/NR/NR 7,538 2.4 $ 22.00 165,840 1.5 October 2013
Lerner New York ................. Baa1/BBB+/NR 7,379 2.4 $ 19.00 140,196 1.2 January 2014
------- ---- -------- ---
TOTAL ........................... 38,755 12.4% $807,300 7.2%
======= ==== ======== ===
- ---------
* Certain ratings are those of the parent company whether or not the parent
guarantees the lease.
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The following table presents information relating to the lease rollover
schedule at the Mortgaged Property:
WA BASE CUMULATIVE %
# OF LEASES RENT/SF TOTAL SF % OF TOTAL SF CUMULATIVE % % OF ACTUAL OF ACTUAL RENT
YEAR ROLLING ROLLING ROLLING ROLLING* OF SF ROLLING* RENT ROLLING* ROLLING*
- -------------- ------------- ----------- ---------- --------------- ---------------- --------------- ---------------
2003 ......... 4 $ 39.67 10,180 3.3% 3.3% 3.6% 3.6%
2004 ......... 13 $ 30.91 31,413 10.1% 13.3% 8.6% 12.2%
2005 ......... 6 $ 39.13 8,836 2.8% 16.2% 3.1% 15.2%
2006 ......... 18 $ 38.66 36,760 11.8% 27.9% 12.6% 27.8%
2007 ......... 20 $ 30.17 52,164 16.7% 44.6% 13.9% 41.8%
2008 ......... 18 $ 37.18 34,772 11.1% 55.8% 11.5% 53.2%
2009 ......... 14 $ 57.64 23,632 7.6% 63.3% 12.1% 65.3%
2010 ......... 10 $ 35.99 26,008 8.3% 71.7% 8.3% 73.6%
2011 ......... 6 $ 55.39 16,462 5.3% 76.9% 8.1% 81.7%
2012 ......... 5 $ 28.61 13,722 4.4% 81.3% 3.5% 85.2%
2013 ......... 9 $ 38.87 22,680 7.3% 88.6% 7.8% 93.0%
- ---------
* Calculated based on approximate square footage occupied by each tenant.
Escrows. The loan documents provide for certain monthly escrows of real
estate taxes and insurance (unless the insurance policies are blanket policies)
(i) upon the occurrence and continuance of an event of default or (ii) from the
determination by the mortgagee that the net operating income from the Mortgaged
Property for the trailing 12 month period is less than $11,135,000 and until the
mortgagee subsequently determines that such net operating income is equal to or
in excess of $11,135,000 for two consecutive subsequent calendar quarters
(collectively, a "Meadows Trigger Event"). In addition, upon the occurrence and
continuance of a Meadows Trigger Event, the borrower will be required to make
monthly deposits of (a) $26,017.50 into a tenant improvement and leasing
commission reserve, until such time as the balance of the tenant improvement and
leasing commission reserve equals $309,983, and (b) $5,167 into a replacement
reserve, until such time as the balance of the replacement reserve equals
$61,997. In the event that the balance in the tenant improvement and leasing
commission and/or the replacement reserves drop below the target amounts set
forth in clauses (a) and (b) above, as applicable, the borrower will be required
to resume making monthly deposits until the applicable target level(s) are
achieved. See Annex A-3 to the prospectus supplement for more information
regarding escrow reserves.
Lock Box Account. All tenant payments due under the applicable tenant
leases are deposited into a mortgagee designated lock box account. Funds in the
lock box account are disbursed to the borrower on a daily basis unless a Meadows
Trigger Event has occurred and is continuing, during which time funds in the
lock box account will not be available to the borrower and will be available
solely to the mortgagee.
Management. The Mortgaged Property is self-managed by the borrower.
Release of Parcels. Upon the securitization of the Meadows Mall Pari Passu
Loan, the borrower may obtain the release of certain non-improved, non-income
producing property upon the satisfaction of certain conditions, including: (i)
the borrower provides evidence that (a) the released property is not necessary
for the borrower's operation or its then current use of the Mortgaged Property
and may be separated from the remaining Mortgaged Property without a material
diminution in the value of the Mortgaged Property, and (b) the released property
will be vacant, non-income producing and unimproved (or improved only by surface
parking areas); (ii) no event of default has occurred and is continuing; and
(iii) the borrower delivers a rating agency confirmation that the release will
not result in a downgrade,withdrawal or qualification of the then current rating
assigned to the Certificates.
2 Rector Street
The Loan. The Mortgage Loan (the "2 Rector Street Loan") is secured by a
first mortgage encumbering the borrower's fee interest in an office building
located in New York, New York. The 2 Rector Street Loan represents approximately
3.8% of the Cut-Off Date Pool Balance. The 2 Rector Street Loan was originated
on November 21, 2003 and has a principal balance as of the Cut-Off Date of
$43,200,000.
The 2 Rector Street Loan has a remaining term of 120 months and matures on
December 11, 2013. The 2 Rector Street Loan may be prepaid on or after September
11, 2013 and permits defeasance with United States government obligations
beginning two years after the Closing Date.
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The Borrower. The borrower is Rector Trinity Associates, L.L.C., a special
purpose entity. Legal counsel to the borrower delivered a non-consolidation
opinion in connection with the origination of the 2 Rector Street Loan. The
sponsor is Laurence Gluck. Laurence Gluck is the principal of Stellar
Management, which owns and operates approximately 9,000 apartment units and 3
million square feet of office space throughout the country.
The Property. The Mortgaged Property is an approximately 415,434 square
foot office building situated on approximately 0.4 acres. The Mortgaged Property
was constructed in 1907 and renovated in 1983. The Mortgaged Property is located
in New York, New York, within the New York City metropolitan statistical area.
As of October 22, 2003, the occupancy rate for the Mortgaged Property securing
the 2 Rector Street Loan was approximately 93.9%.
The largest tenant is The City of New York Department of Citywide
Administrative Services occupying approximately 72,070 square feet, or
approximately 17.3% of the net rentable area. This office is currently operated
by the New York City Department of Transportation ("NYCDOT"). NYCDOT manages
much of the city's transportation infrastructure, including city streets,
highways, sidewalks and bridges. As of November 24, 2003, The City of New York
had a municipal debt rating of "A2" (Moody's), "A" (S&P), and "A" (Fitch). The
NYCDOT lease expires in July 2005. The second largest tenant is ABN AMRO Sage
Corporation ("ABN AMRO Sage") occupying approximately 51,971 square feet, or
approximately 12.5% of the net rentable area. ABN AMRO is a wholly owned
subsidiary of ABN AMRO Bank N.V. ABN AMRO Bank N.V. is a global financial
organization that operates more than 800 offices in Holland and another 2,600 in
75 other countries around the world. As of November 24, 2003, ABN AMRO Sage had
a senior unsecured debt rating of "Aa3" (Moody's), "AA-" (S&P), and "AA-"
(Fitch). The ABN AMRO Sage lease expires in October 2006. The third largest
tenant is Barry, McTiernan & Moore, ("Barry, McTiernan, & Moore") occupying
approximately 17,830 square feet, or approximately 4.3% of the net rentable
area. Barry, McTiernan & Moore is a full service law firm specializing in
personal injury litigation. The Mortgaged Property serves as the headquarters
location of the firm. The Barry, McTiernan & Moore lease expires in November
2012.
The following table presents information relating to major tenants at the
Mortgaged Property:
% OF NET
RATINGS* NET RENTABLE RENTABLE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA
- ---------------------------------- ------------------- -------------- ----------
The City of New York
Department of Citywide
Administrative Services ......... A2/A/A 72,070 17.3%
ABN AMRO Sage
Corporation ..................... Aa3/AA-/AA- 51,971 12.5
Barry, McTiernan & Moore ......... NR/NR/NR 17,830 4.3
PAX Clearing Co., Ltd.
Partner ......................... NR/NR/NR 17,451 4.2
Morgan Guarantee Trust
Company of New York ............. A1/NR/A+ 17,442 4.2
------ ----
TOTAL ............................ 176,764 42.5%
======= ====
% OF
ACTUAL ACTUAL ACTUAL DATE OF LEASE
TENANT RENT PSF RENT RENT EXPIRATION
- ---------------------------------- ---------- ------------- ---------- --------------
The City of New York
Department of Citywide
Administrative Services ......... $ 18.00 $1,297,260 13.4% July 2005
ABN AMRO Sage
Corporation ..................... $ 29.40 1,528,027 15.8 October 2006
Barry, McTiernan & Moore ......... $ 22.89 408,129 4.2 November 2012
PAX Clearing Co., Ltd.
Partner ......................... $ 23.00 401,373 4.1 August 2005
Morgan Guarantee Trust
Company of New York ............. $ 29.76 519,074 5.4 February 2009
---------- ----
TOTAL ............................ $4,153,863 42.8%
========== ====
- ---------
* Certain ratings are those of the parent company whether or not the parent
guarantees the lease.
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The following table presents information relating to the lease rollover
schedule at the Mortgaged Property:
WA BASE CUMULATIVE % % OF ACTUAL CUMULATIVE % OF
# OF LEASES RENT/SF TOTAL SF % OF TOTAL OF SF RENT ACTUAL RENT
YEAR ROLLING ROLLING ROLLING SF ROLLING* ROLLING* ROLLING* ROLLING*
- -------------- ------------- --------- ---------- ------------- -------------- ------------- ----------------
2003 ......... 0 $ 0.00 0 0.0% 0.0% 0.0% 0.0%
2004 ......... 2 $ 10.53 2,670 0.6% 0.6% 0.3% 0.3%
2005 ......... 2 $ 18.97 89,521 21.5% 22.2% 17.5% 17.8%
2006 ......... 6 $ 29.59 69,805 16.8% 39.0% 21.3% 39.1%
2007 ......... 6 $ 22.13 24,279 5.8% 44.8% 5.5% 44.6%
2008 ......... 3 $ 31.56 14,931 3.6% 48.4% 4.9% 49.5%
2009 ......... 6 $ 26.32 54,350 13.1% 61.5% 14.7% 64.3%
2010 ......... 4 $ 40.45 12,749 3.1% 64.6% 5.3% 69.6%
2011 ......... 2 $ 34.54 3,250 0.8% 65.4% 1.2% 70.7%
2012 ......... 2 $ 23.89 19,093 4.6% 70.0% 4.7% 75.4%
2013 ......... 6 $ 26.10 30,016 7.2% 77.2% 8.1% 83.5%
- ---------
* Calculated based on approximate square footage occupied by each tenant.
Escrows. The loan documents provide for certain escrows of real estate
taxes, insurance and replacement reserves. In addition, the loan documents
require the borrower to deposit with mortgagee (i) at the closing of the 2
Rector Street loan, a sum of $1,000,000 for general tenant improvements and
lease commissions and (ii) in connection with The City of New York lease
expiration in July 2005, commencing on the first monthly Payment Date under the
Note and continuing through July 2005, borrower is required to pay a deposit in
an amount equal to $55,619.50 with monthly deposits adjusting to $34,619.50
commencing on the Payment Date in August 2005, subject to The City of New York
renewing its lease or the borrower re-tenanting the space on economic terms
favorable to the lender. To the extent The City of New York renews its lease or
the borrower re-tenants the space on economic terms favorable to the lender, and
the balance in the leasing reserve should equal or exceed $1,000,000, then the
borrower's obligations to make the foregoing monthly deposits to the leasing
reserve shall be suspended provided that such monthly obligations shall be
reinstated to the extent the balance in the leasing reserve shall ever be less
than $1,000,000 in any month to the extent that, after deducting any pending
requests for disbursements from the leasing reserve, such deposit would increase
the balance in the leasing reserve above $1,000,000. See Annex A-3 to the
prospectus supplement for more information regarding escrow reserves.
Lock Box Account. All tenant payments due under the applicable tenant
leases shall be directly deposited into a mortgagor designated lock box account;
however, in the event that The City of New York exercises their right to
terminate their lease prior to the July 2005 expiration, the borrower must
notify the tenants that any and all tenant payments due under the applicable
tenant leases shall be directly deposited into a mortgagee designated lock box
account.
Management. Stellar Management ("Stellar") is the property manager for the
Mortgaged Property securing the 2 Rector Street Loan. Stellar is an affiliate
of the sponsor of the borrower.
Villas at Rancho Palos Verdes
The Loan. The Mortgage Loan (the "Villas at Rancho Palos Verdes Loan") is
secured by a first mortgage encumbering the borrower's fee interest in a
215-unit multifamily complex located in Rancho Palos Verdes, California. The
Villas at Rancho Palos Verdes Loan represents approximately 3.1% of the Cut-Off
Date Pool Balance. The Villas at Rancho Palos Verdes Loan was originated on
November 18, 2003 and has a principal balance as of the Cut-Off Date of
$36,000,000. The companion loan also secured by the Mortgaged Property securing
the Villas at Rancho Palos Verdes Loan is evidenced by a separate note dated
November 18, 2003 (the "Villas at Rancho Palos Verdes Companion Loan") and has a
principal balance of $4,700,000 as of the Cut-Off Date. The Villas at Rancho
Palos Verdes Companion Loan will not be an asset of the trust. The Villas at
Rancho Palos Verdes Loan and the Villas at Rancho Palos Verdes Companion Loan
will be governed by an intercreditor and servicing agreement, as described under
"DESCRIPTION OF THE MORTGAGE POOL -- Co-Lender Loans" in the prospectus
supplement and will be serviced pursuant to the terms of the Pooling and
Servicing Agreement.
The Villas at Rancho Palos Verdes Loan provides for interest-only payments
for the first 30 months of its term, and thereafter, fixed monthly payments of
principal and interest. The Villas at Rancho Palos Verdes Loan has a
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remaining term of 84 months and matures on December 11, 2010. The Villas at
Rancho Palos Verdes Loan may be prepaid on or after October 11, 2010, and
permits defeasance with United States government obligations beginning four
years after its first payment date.
The Borrower. The borrowers are VRPV, LLC and Clemson Palos Verdes, LLC,
each of which is a special purpose entity and own the Mortgaged Property as
tenants in common. Legal counsel to the borrower delivered a non-consolidation
opinion in connection with the origination of the Villas at Rancho Palos Verdes
Loan. The sponsors are Alvin J. Wolff Jr. and Eugenia E. Wolff. The Wolff
Companies control the borrowing entities. The Wolff Companies was founded in
1946 and is based in Spokane, Washington. The Wolff Companies is involved in
commercial real estate ownership, management, development, brokerage, and
corporate housing. The Wolff Companies specializes in Class A multifamily
properties and currently owns approximately 3,500 apartment units, including the
subject property.
The Property. The Mortgaged Property is a 215-unit garden-style apartment
complex consisting of 8 buildings situated on approximately 5.6 acres. The
Mortgaged Property was constructed in 1968 and renovated in 2002 and is located
in Rancho Palos Verdes, California, within the Los Angeles, California
metropolitan statistical area. As of November 6, 2003, the occupancy rate for
the Mortgaged Property securing the Villas at Rancho Palos Verdes Loan was
approximately 93.0%. The Mortgaged Property includes such amenities as a
swimming pool, tennis court, fitness center, extensive landscaping and ocean
views.
The following table presents information relating to the unit configuration
of the Mortgaged Property:
APPROXIMATE APPROXIMATE % OF NET
NO. OF UNIT NET RENTABLE RENTABLE ASKING RENTAL
UNITS SIZE (SF) AREA (SF) AREA (SF) RANGE
UNIT MIX -------- ------------- -------------- ----------- --------------------
1-BR/1-BA ...................... 28 775 21,700 9.1% $ 1,550-$1,550
2-BR/1-BA ...................... 147 1,131 166,218 69.5 $ 1,725-$2,775
2-BR/2-BA ...................... 16 1,145 18,320 7.7 $ 2,380-$2,380
3-BR/2-BA ...................... 24 1,376 33,024 13.8 $ 2,550-$2,550
--- ------- -----
TOTAL/WEIGHTED AVERAGE ......... 215 1,113 239,262 100.0% $ 1,988/$1.79/SF
=== ======= =====
Escrows. The loan documents provide for certain escrows of real estate
taxes and insurance and provide for replacement reserves. See Annex A-3 to this
prospectus supplement for information regarding escrow reserves.
Lock Box Account. At any time during the term of the Villas at Rancho Palos
Verdes Loan, (i) if the debt service coverage ratio, as computed by the
mortgagee, is less than 1.10x, or (ii) upon the occurrence of an event of
default under the loan documents, the borrower must notify the tenants that any
and all tenant payments due under the applicable tenant leases shall be directly
deposited into a mortgagee designated lock box account.
Property Management. Fairfield Properties is the property manager for the
Mortgaged Property securing the Villas at Rancho Palos VerdesLoan. Fairfield
Properties currently manages approximately 160 Class A and Class B apartment
communities located in 15 states.
Spring Valley Market Place
The Loan. The Mortgage Loan (the "Spring Valley Market Place Loan") is
secured by a first mortgage encumbering the borrower's fee interest in an
anchored retail center located in Spring Valley, New York. The Spring Valley
Market Place Loan represents approximately 2.8% of the Cut-Off Date Pool
Balance. The Spring Valley Market Place Loan was originated on November 7, 2003
and has a principal balance as of the Cut-Off Date of $31,966,717.
The Spring Valley Market Place Loan has a remaining term of 119 months to
its anticipated repayment date of November 11, 2013. The Spring Valley Market
Place Loan may be prepaid on or after August 11, 2013, and permits defeasance
with United States government obligations beginning two years after the Closing
Date.
The Borrower. The Borrower is Spring Valley Improvements, LLC, a special
purpose entity. Legal counsel to the borrower delivered a non-consolidation
opinion in connection with the origination of the Spring Valley Market Place
Loan. The sponsor of the borrower is DLC Management Corporation, represented by
Adam Ifshin. Formed in 1991, DLC Management Corporation's holdings currently
consist of 36 properties located in 18 states, totaling approximately 7 million
square feet.
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The Property. The Mortgaged Property is a 206,013 square foot anchored
retail center situated on approximately 28.5 acres, constructed in 1988 and most
recently renovated in 1999. The Mortgaged Property is located in Spring Valley,
New York, within the New York City metropolitan statistical area. As of
September 16, 2003, the occupancy rate for the Mortgaged Property securing the
Spring Valley Market Place Loan was approximately 98.8%
The largest tenant is Inserra Supermarkets, Inc., operating a Shop Rite
store ("Shop Rite"), occupying approximately 60,828 square feet, or
approximately 29.5% of the net rentable area. Inserra Supermarkets Inc. owns and
operates 21 Shop Rite supermarkets and superstores in northern New Jersey and
southeastern New York state. Owned by the Inserra family, Inserra Supermarkets
Inc. is the fourth largest member of Wakefern Corporation, the owner of the Shop
Rite name. The Shop Rite lease expires in December 2007. The second largest
tenant is Christmas Tree Shops, Inc. ("Christmas Tree Shops"), occupying
approximately 50,000 square feet, or approximately 24.3% of the net rentable
area. Christmas Tree Shops, a retailer of giftware and household items, operates
23 stores in 6 northeastern states and is a subsidiary of Bed Bath & Beyond Inc.
("Bed Bath & Beyond"). As of November 21, 2003, Bed Bath & Beyond Inc. had a
senior unsecured debt rating of "BBB" (S&P). The Christmas Tree Shops lease
expires in May 2023. The third largest tenant is T.J. Maxx, occupying
approximately 36,011 square feet, or approximately 17.5% of the net rentable
area. T.J. Maxx, a subsidiary of TJX Companies, Inc. ("TJX"), sells brand-name
apparel, shoes, domestics, giftware, and jewelry at discount prices.. As of
November 21, 2003, TJX had senior unsecured debt ratings of "A3" (Moody's) and
"A" (S&P). The T.J. Maxx lease expires in September 2006.
The following table presents information relating to the major tenants at
the Mortgaged Property:
% OF NET
RATINGS* NET RENTABLE RENTABLE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA
- --------------------------------- ------------------- -------------- ----------
Shop Rite ....................... NR/NR/NR 60,828 29.5%
Christmas Tree Shops, Inc. ...... NR/BBB/NR 50,000 24.3
T.J. Maxx ....................... A3/A/NR 36,011 17.5
David's Bridal .................. Baa1/BBB+/BBB+ 10,500 5.1
Seven Days Enterprises .......... NR/NR/NR 7,000 3.4
------ ----
TOTAL ........................... 164,339 79.8%
======= ====
% OF
ACTUAL ACTUAL DATE OF LEASE
TENANT RENT PSF ACTUAL RENT RENT EXPIRATION
- --------------------------------- ---------- ------------- ---------- ---------------
Shop Rite ....................... $ 11.00 $ 669,108 20.4% December 2007
Christmas Tree Shops, Inc. ...... $ 18.00 900,000 27.4 May 2023
T.J. Maxx ....................... $ 7.41 266,842 8.1 September 2006
David's Bridal .................. $ 25.00 262,500 8.0 July 2013
Seven Days Enterprises .......... $ 30.00 210,000 6.4 September 2013
---------- ----
TOTAL ........................... $2,308,450 70.3%
========== ====
- ---------
* Certain ratings are those of the parent company whether or not the parent
guarantees the lease.
The following table presents information relating to the lease rollover
schedule at the Mortgaged Property:
WA BASE CUMULATIVE % % OF ACTUAL CUMULATIVE % OF
# OF LEASES RENT/SF TOTAL SF % OF TOTAL OF SF RENT ACTUAL RENT
YEAR ROLLING ROLLING ROLLING SF ROLLING* ROLLING* ROLLING* ROLLING*
- -------------- ------------- --------- ---------- ------------- -------------- ------------- ----------------
2003 ......... 0 $ 0.00 0 0.0% 0.0% 0.0% 0.0%
2004 ......... 2 $ 30.73 2,714 1.3% 1.3% 2.5% 2.5%
2005 ......... 0 $ 0.00 0 0.0% 1.3% 0.0% 2.5%
2006 ......... 2 $ 7.77 37,011 18.0% 19.3% 8.7% 11.3%
2007 ......... 1 $ 11.00 60,828 29.5% 48.8% 20.4% 31.7%
2008 ......... 8 $ 25.60 19,019 9.2% 58.0% 14.8% 46.5%
2009 ......... 2 $ 21.49 3,000 1.5% 59.5% 2.0% 48.4%
2010 ......... 0 $ 0.00 0 0.0% 59.5% 0.0% 48.4%
2011 ......... 1 $ 17.00 3,000 1.5% 61.0% 1.6% 50.0%
2012 ......... 0 $ 0.00 0 0.0% 61.0% 0.0% 50.0%
2013 ......... 7 $ 26.59 27,948 13.6% 74.5% 22.6% 72.6%
- ---------
* Calculated based on approximate square footage occupied by each tenant.
Escrows. The loan documents provide for certain escrows of real estate
taxes, insurance and replacement reserves. The loan documents also required the
borrower to deposit with mortgagee at the origination date a sum of
approximately $414,869 for tenant improvements and leasing commissions. In
addition, the borrower is required to deposit with the mortgagee a sum of $5,000
monthly to fund a Shop Rite leasing reserve.
Lock Box Account. All tenant payments due under the applicable tenant
leases are deposited into a mortgagor designated lock box account. At any time
during the term of the Spring Valley Market Place Loan upon the occurrence of an
event of default under the loan documents, or one month prior to
hyper-amortization or the failure by Shop Rite to give notice of its intention
to renew its lease by December 2006, the borrower must notify the tenants that
any and all tenant payments due under the applicable tenant leases shall be
directly deposited into a mortgagee designated lock box account.
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Hyper-amortization. Commencing on the anticipated repayment date of
November 11, 2013, if the Spring Valley Market Place Loan is not paid in full,
the Spring Valley Market Place Loan enters into a hyper-amortization period
through November 11, 2033. The interest rate applicable to the Spring Valley
Market Place Loan during such hyper-amortization period will increase to the
greater of the mortgage rate plus 3% or the treasury rate plus 3.0%.
Management. The Spring Valley Market Place property is managed by DLC
Management Corp. ("DLC"). DLC is a privately-owned developer and owner of
shopping centers nationwide. Per Shopping Center World's April 2003 annual
survey of the 100 largest shopping center owners, DLC is the country's 59th
largest shopping center owner. DLC's holdings currently consist of 36
properties, totaling over 7,000,000 square feet, which are located in 18 states.
Chester Springs Shopping Center
The Loan. The Mortgage Loan (the "Chester Springs Shopping Center Loan") is
secured by a first mortgage encumbering the borrower's fee interest in an
anchored retail center located in Chester, New Jersey. The Chester Springs
Shopping Center Loan represents approximately 2.2% of the Cut-Off Date Pool
Balance. The Chester Springs Shopping Center Loan was originated on October 1,
2003 and has a principal balance as of the Cut-Off Date of $24,949,094.
The Chester Springs Shopping Center Loan has a remaining term of 118 months
and matures on October 1, 2013. The Chester Springs Shopping Center Loan may be
prepaid on or after September 1, 2013, and permits defeasance with United States
government obligations beginning two years after the Closing Date.
The Borrower. The borrower is Chester Springs SC, LLC, a special purpose
entity. Legal counsel to the borrower delivered a non-consolidation opinion in
connection with the origination of the Chester Springs Shopping Center Loan. The
sponsor of the borrower is Ramco-Gershenson Properties, LP., an affiliate of
Ramco-Gershenson Properties Trust ("RPT"), a Maryland REIT. The principals of
RPT have been acquiring and managing commercial real estate for more than 45
years. RPT's portfolio consists of 59 shopping centers, with a combined square
footage of approximately 11.5 million square feet, located in twelve states.
The Property. The Mortgaged Property is an approximately 224,138 square
foot anchored retail center situated on approximately 22.7 acres. The Mortgaged
Property was constructed in 1978 and renovated in 1998. The Mortgaged Property
is located in Chester, New Jersey, within the Newark, New Jersey metropolitan
statistical area. As of September 1, 2003, the occupancy rate for the Mortgaged
Property securing the Chester Springs Shopping Center Loan was approximately
100.0%.
The largest tenant is Village Supermarket, Inc. dba Shop Rite ("Village
Supermarket"), occupying approximately 60,960 square feet, or approximately
27.2% of the net rentable area. Village Supermarket operates approximately 20
Shop Rite locations in New Jersey. The Village Supermarket lease expires in
November 2016. The second largest tenant is Staples, Inc. ("Staples"), occupying
approximately 20,800 square feet, or approximately 9.3% of the net rentable
area. Staples is an office supplies retailer with 1,488 stores in the United
States and worldwide. As of November 17, 2003, Staples was rated "Baa2"
(Moody's), "BBB-" (S&P) and "BBB" (Fitch). The Staples lease expires in January
2008. The third largest tenant is Xercise, Inc. ("Xercise, Inc.") occupying
approximately 17,849 square feet, or approximately 8.0% of the net rentable
area. Xercise Inc. operates as the health club, Excellence in Exercise, and
operates an additional health club in New Jersey. The Excellence in Exercise
lease expires in September 2006.
The following table presents information relating to the major tenants at
the Mortgaged Property:
% OF NET
RATINGS* NET RENTABLE RENTABLE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA
- -------------------------------- ------------------- -------------- ----------
Shop Rite ...................... NR/NR/NR 60,960 27.2%
Staples ........................ Baa2/BBB-/BBB 20,800 9.3
Excellence in Exercise ......... NR/NR/NR 17,849 8.0
Mars Stores of Chester ......... NR/NR/NR 14,388 6.4
CVS Corporation ................ A2/A/NR 13,724 6.1
------ ----
TOTAL .......................... 127,721 57.0%
======= ====
% OF
ACTUAL ACTUAL DATE OF LEASE
TENANT RENT PSF ACTUAL RENT RENT EXPIRATION
- -------------------------------- ---------- ------------- ---------- ---------------
Shop Rite ...................... $ 9.11 $ 555,498 19.0% November 2016
Staples ........................ $ 9.50 197,600 6.8 January 2008
Excellence in Exercise ......... $ 10.08 180,000 6.2 September 2006
Mars Stores of Chester ......... $ 10.96 157,718 5.4 September 2016
CVS Corporation ................ $ 4.22 57,893 2.0 July 2008
---------- ----
TOTAL .......................... $1,148,709 39.3%
========== ====
- ---------
* Certain credit ratings are those of the parent company whether or not the
parent guarantees the lease.
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The following table presents information relating to the lease rollover
schedule at the Mortgaged Property:
WA BASE CUMULATIVE % % OF ACTUAL CUMULATIVE % OF
# OF LEASES RENT/SF TOTAL SF % OF TOTAL OF SF RENT ACTUAL RENT
YEAR ROLLING ROLLING ROLLING SF ROLLING* ROLLING* ROLLING* ROLLING*
- -------------- ------------- ----------- ---------- ------------- -------------- ------------- ----------------
2003 ......... 4 $ 13.26 10,855 4.8% 4.8% 4.9% 4.9%
2004 ......... 2 $ 19.06 2,106 0.9% 5.8% 1.4% 6.3%
2005 ......... 5 $ 18.69 12,194 5.4% 11.2% 7.8% 14.1%
2006 ......... 6 $ 14.52 32,107 14.3% 25.5% 16.0% 30.1%
2007 ......... 8 $ 21.34 14,450 6.4% 32.0% 10.6% 40.6%
2008 ......... 8 $ 10.42 58,311 26.0% 58.0% 20.8% 61.4%
2009 ......... 1 $ 23.00 3,024 1.3% 59.4% 2.4% 63.8%
2010 ......... 0 $ 0.00 0 0.0% 59.4% 0.0% 63.8%
2011 ......... 2 $ 19.50 5,750 2.6% 61.9% 3.8% 67.7%
2012 ......... 0 $ 0.00 0 0.0% 61.9% 0.0% 67.7%
2013 ......... 2 $ 19.32 7,055 3.1% 65.1% 4.7% 72.3%
- ---------
* Calculated based on approximate square footage occupied by each tenant.
Escrows The loan documents provide for certain escrows of real estate taxes
and insurance and provide for replacement reserves. In addition, the loan
documents required the borrower to deposit with mortgagee at the closing of the
Chester Springs Shopping Center Loan, a sum of $150,000 to address certain
environmental issues at the Mortgaged Property. See Annex A-3 to the prospectus
supplement for information regarding escrow reserves.
Lock Box Account. The loan documents do not require a lock box account.
Environmental. The borrower has entered into an agreement with the New
Jersey Department of Environmental Protection to investigate and, if necessary,
clean up dry cleaning chemicals-related contamination at the property. The
borrower has submitted a claim under its pollution legal liability policy for
this contamination, and the insurer, a subsidiary of AIG, has agreed to cover
the claim if remediation is required, subject to a $50,000 deductible.
Management. Ramco-Gershenson Inc. is the property manager for the
Mortgaged Property securing the Chester Springs Shopping Center Loan. The
property manager is affiliated with the borrower.
T.J. Maxx Plaza
The Loan. The Mortgage Loan (the "T.J. Maxx Plaza Loan") is secured by a
first mortgage encumbering the borrower's fee interest in an anchored retail
center located in Sacramento, California. The T.J. Maxx Plaza Loan represents
approximately 2.1% of the Cut-Off Date Pool Balance. The T.J. Maxx Plaza Loan
was originated on October 28, 2003 and has a principal balance as of the Cut-Off
Date of $24,600,000. The T.J. Maxx Plaza Loan provides for interest-only
payments for the first 24 months of its term, and thereafter, fixed monthly
payments of principal and interest.
The T.J. Maxx Plaza Loan has a remaining term of 59 months to its
anticipated repayment date of November 11, 2008. The T.J. Maxx Plaza Loan may be
prepaid on or after September 11, 2008, and permits defeasance with United
States government obligations beginning four years after its first payment date.
The Borrower. The borrower is Roseville Plaza, LLC, a special purpose
entity. Legal counsel to the borrower delivered a non-consolidation opinion in
connection with the origination of the T.J. Maxx Plaza Loan. The sponsors of
the borrower are two principals of the the Hill Companies, LLC ("Hill
Companies"), Jim Hill and Steve Heath. The Hill Companies focus on the
acquisition of real estate projects of all types with particular focus on
commercial and multifamily assets. Mr. Hill and Mr. Heath combined have
approximately 40 years of real estate investment experience.
The Property. The Mortgaged Property is an approximately 126,768 square
foot anchored retail center situated on approximately 11.2 acres. The Mortgaged
Property was constructed in 1987. The Mortgaged Property is located in
Sacramento, California, within the Sacramento-Yolo, California metropolitan
statistical area. As of October 31, 2003, the occupancy rate for the Mortgaged
Property securing the T.J. Maxx Plaza Loan was approximately 97.9%.
The largest tenant is T.J. Maxx ("T.J. Maxx") occupying approximately
25,200 square feet, or approximately 19.9% of the net rentable area. T.J. Maxx
sells brand-name family apparel, accessories, women's shoes, domestics,
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giftware, and jewelry at discount prices at more than 1,840 stores nationwide.
As of November 24, 2003, The TJX Companies, Inc. was rated "A3" (Moody's) and
"A" (S&P). The T.J. Maxx lease expires in January 2008. The second largest
tenant is Dunn-Edwards Paints ("Dunn-Edwards Paints"), occupying approximately
9,200 square feet, or approximately 7.3% of the net rentable area. Dunn-Edwards
Paints manufactures paints, varnishes, lacquers, enamels, and other
paint-related products, and operates stores throughout Arizona, California,
Nevada, New Mexico and Texas. The Dunn-Edwards Paints lease expires in October
2008. The third largest tenant is Aaron Brothers ("Aaron Brothers"), occupying
approximately 7,500 square feet, or approximately 5.9% of the net rentable area.
Aaron Brothers, a subsidiary of Michaels Stores, Inc. ("Michaels") sells art and
hobby supplies, decor, frames, needlecraft kits, party supplies, seasonal
products, and silk and dried flowers. As of November 24, 2003, Michaels was
rated "Ba1" (Moody's) and "BB+" (S&P). The Aaron Brothers lease expires in
October 2007.
The following table presents information relating to the major tenants at
the Mortgaged Property:
% OF NET % OF
RATINGS* NET RENTABLE RENTABLE ACTUAL ACTUAL DATE OF LEASE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA RENT PSF ACTUAL RENT RENT EXPIRATION
- ----------------------- ------------------- -------------- ---------- ---------- ------------- -------- --------------
T.J. Maxx ............. A3/A/NR 25,200 19.9% $ 6.50 $163,800 6.8% January 2008
Dunn-Edwards Paints ... NR/NR/NR 9,200 7.3 $ 19.80 182,160 7.6 October 2008
Aaron Brothers ........ Ba1/BB+/NR 7,500 5.9 $ 9.52 71,424 3.0 October 2007
Lakeshore Learning .... NR/NR/NR 7,200 5.7 $ 21.00 151,200 6.3 June 2013
Leather Factory ....... NR/NR/NR 6,250 4.9 $ 30.00 187,500 7.8 May 2007
------ ---- -------- ----
TOTAL ................. 55,350 43.7% $756,084 31.4%
====== ==== ======== ====
- ---------
* Certain ratings are those of the parent company whether or not the parent
guarantees the lease.
The following table presents information relating to the lease rollover
schedule at the Mortgaged Property:
WA BASE CUMULATIVE % % OF ACTUAL CUMULATIVE % OF
# OF LEASES RENT/SF TOTAL SF % OF TOTAL OF SF RENT ACTUAL RENT
YEAR ROLLING ROLLING ROLLING SF ROLLING* ROLLING* ROLLING* ROLLING*
- -------------- ------------- ----------- ---------- ------------- -------------- ------------- ----------------
2003 ......... 2 $ 23.67 2,800 2.2 % 2.2 % 2.7% 2.7%
2004 ......... 7 $ 24.07 10,916 8.6% 10.8% 10.9% 13.6%
2005 ......... 8 $ 22.23 20,622 16.3% 27.1% 19.0% 32.7%
2006 ......... 5 $ 24.33 11,916 9.4% 36.5% 12.0% 44.7%
2007 ......... 6 $ 21.94 25,015 19.7% 56.2% 22.8% 67.4%
2008 ......... 5 $ 12.45 40,056 31.6% 87.8% 20.7% 88.1%
2009 ......... 0 $ 0.00 0 0.0% 87.8% 0.0% 88.1%
2010 ......... 1 $ 24.00 3,298 2.6% 90.4% 3.3% 91.4%
2011 ......... 1 $ 24.60 2,270 1.8% 92.2% 2.3% 93.7%
2012 ......... 0 $ 0.00 0 0.0% 92.2% 0.0% 93.7%
2013 ......... 1 $ 21.00 7,200 5.7% 97.9% 6.3% 100.0%
- ---------
* Calculated based on approximate square footage occupied by each tenant.
Escrows. The loan documents provide for certain escrows of real estate
taxes and insurance and provide for replacement reserves. In addition, the loan
documents require the borrower to deposit with mortgagee at the closing of the
T.J. Maxx Plaza Loan, a sum of $490,000 for tenant improvements and leasing
commissions. See Annex A-3 to the prospectus supplement for information
regarding escrow reserves.
Lockbox Account. Upon the anticipated repayment date of November 11, 2008
or at any time during the term of the T.J. Maxx Plaza Loan in the event of a
default, the borrower must notify the tenants that any and all tenant payments
due under the applicable tenant leases shall be directly deposited into a
mortgagee designated lockbox account.
Hyper-amortization. Commencing on the anticipated repayment date of
November 11, 2008, if the T.J. Maxx Plaza Loan is not paid in full, the T.J.
Maxx Plaza Loan enters into a hyper-amortization period through November 11,
2033. The interest rate applicable to the T.J. Maxx Plaza Loan during such
hyper-amortization period will increase to the greater of the mortgage rate plus
2.5% or the treasury rate plus 2.5%, in each case subject to an annual increase
of 0.25%.
Management. GRE Management Services, Inc. ("GRE") is the property manager
for the Mortgaged Property securing the T.J. Maxx Plaza Loan. GRE has
approximately 50 years experience in development, leasing, management,
acquisition and sales of commercial real estate and has been providing property
management services to outside clients for fifteen years. Currently GRE manages
approximately 567,000 square feet of commercial space.
S-137
Bellamay Grand
- ----------------------------------------------------------------------
PROPERTY INFORMATION
Number of Mortgaged Real Properties ............. 1
Location (City, State) .......................... Gainesville, FL
Property Type ................................... Multifamily --
Conventional
Size (Units) .................................... 360
Occupancy as of October 27, 2003 ................ 95.3%
Year Built/Year Renovated ....................... 2001/NA
Appraisal Value ................................. $27,270,000
Underwritten Occupancy .......................... 94.0%
Underwritten Revenues ........................... $ 3,229,747
Underwritten Total Expenses ..................... $ 1,138,609
Underwritten Net Operating Income (NOI) ......... $ 2,091,138
Underwritten Net Cash Flow (NCF) ................ $ 2,001,138
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
Mortgage Loan Seller ............................ LaSalle
Cut-Off Date Balance ............................ $21,800,000
Percentage of Cut-Off Date Pool Balance ......... 1.9%
Cut-Off Date Loan Balance Per Unit .............. $ 60,556
Number of Mortgage Loans ........................ 1
Type of Security ................................ Fee
Mortgage Rate ................................... 5.585%
Original Term/Amortization ...................... 120/348
Remaining Term/Amortization ..................... 120/348
Cut-Off Date LTV ................................ 79.9%
Maturity Date LTV ............................... 67.6%
Underwritten DSCR on NOI ........................ 1.38x
Underwritten DSCR on NCF ........................ 1.32x
- ----------------------------------------------------------------------
APPROXIMATE UNIT APPROXIMATE NET % OF NET ASKING RENTAL
UNIT MIX NO. OF UNITS SIZE (SF) RENTABLE AREA (SF) RENTABLE AREA RANGE
- --------------------------------- -------------- ------------------ -------------------- --------------- ------------------
1-BR/2-BA ....................... 72 782 56,304 15.6% $ 705-$705
2-BR/2-BA ....................... 252 1,008 254,016 70.4 $ 740-$830
3-BR/2-BA ....................... 36 1,404 50,544 14.0 $ 1,020-$1,020
--- ------- -----
TOTAL/WEIGHTED AVERAGE .......... 360 1,002 360,864 100.0% $ 800/$0.80/SF
=== ======= ===== ==============
S-138
Bellair Plaza
- ----------------------------------------------------------------------
PROPERTY INFORMATION
Number of Mortgaged Real Properties ......... 1
Location (City/State) ....................... Daytona Beach, FL
Property Type ............................... Retail -- Anchored
Size (SF) ................................... 345,995
Occupancy as of October 28, 2003 ............ 71.3%
Year Built/Year Renovated ................... 1960/2002
Appraisal Value ............................. $34,130,000
Underwritten Occupancy ...................... 68.5%
Underwritten Revenues ....................... $ 3,096,798
Underwritten Total Expenses ................. $ 994,641
Underwritten Net Operating Income
(NOI) ..................................... $ 2,102,156
Underwritten Net Cash Flow (NCF) ............ $ 1,958,402
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
Mortgage Loan Seller ............................ Citigroup
Cut-Off Date Balance ............................ $21,779,381
Percentage of Cut-Off Date Pool Balance ......... 1.9%
Cut-off Date Loan Balance Per SF ................ $ 63
Number of Mortgage Loans ........................ 1
Type of Security ................................ Fee
Mortgage Rate ................................... 5.400%
Original Term/Amortization ...................... 120/360
Remaining Term/Amortization ..................... 116/356
Cut-Off Date LTV ................................ 63.8%
Maturity Date LTV ............................... 53.4%
Underwritten DSCR on NOI ........................ 1.43x
Underwritten DSCR on NCF ........................ 1.33x
- ----------------------------------------------------------------------
The following table presents information relating to the major tenants at
the Mortgaged Property:
% OF NET % OF
RATINGS(1) NET RENTABLE RENTABLE ACTUAL ACTUAL DATE OF LEASE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA RENT PSF ACTUAL RENT RENT EXPIRATION
- ---------------------------- ------------------- -------------- ---------- ---------- ------------- ---------- --------------
Publix ..................... NR/NR/NR 44,270 12.8% $ 8.80 $ 389,576 10.8% January 2022
Beall's Department Store ... NR/NR/NR 40,000 11.6 $ 7.00 280,000 7.7 April 2016
Bellair Lanes .............. NR/NR/NR 30,225 8.7 $ 4.11 124,177 3.4 October 2008
Beall's Outlet Store ....... NR/NR/NR 21,190 6.1 $ 5.24 111,000 3.1 April 2008
Walgreens(2) ............... Aa3/A+/NR 15,120 4.4 $ 17.20 260,000 7.2 July 2061
------ ---- ---------- ----
TOTAL ...................... 150,805 43.6% $1,164,753 32.2%
======= ==== ========== ====
- ---------
(1) Certain credit ratings are those of the parent company whether or not the
parent guarantees the lease.
(2) The Walgreens lease has a term of 60 years and expires in July 2061;
however, the tenant has a lease termination option beginning in the 240th
month through the 300th month of the lease.
S-139
Miller Place Shopping Center
- --------------------------------------------------------------------
PROPERTY INFORMATION
Number of Mortgaged Real Properties ......... 1
Location (City/State) ....................... Miller Place, NY
Property Type ............................... Retail -- Anchored
Size (SF) ................................... 95,665
Occupancy as of September 18, 2003 .......... 90.7%
Year Built/Year Renovated ................... 2002/NA
Appraisal Value ............................. $25,200,000
Underwritten Occupancy ...................... 89.5%
Underwritten Revenues ....................... $ 2,582,009
Underwritten Total Expenses ................. $ 608,223
Underwritten Net Operating Income
(NOI) ..................................... $ 1,973,786
Underwritten Net Cash Flow (NCF) ............ $ 1,942,520
- --------------------------------------------------------------------
- --------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
Mortgage Loan Seller ............................ Citigroup
Cut-Off Date Balance ............................ $20,219,345
Percentage of Cut-Off Date Pool Balance ......... 1.8%
Cut-off Date Loan Balance Per SF ................ $ 211
Number of Mortgage Loans ........................ 1
Type of Security ................................ Fee
Mortgage Rate ................................... 5.870%
Original Term/Amortization ...................... 120/360
Remaining Term/Amortization ..................... 119/359
Cut-Off Date LTV ................................ 80.2%
Maturity Date LTV ............................... 67.9%
Underwritten DSCR on NOI ........................ 1.37x
Underwritten DSCR on NCF ........................ 1.35x
- --------------------------------------------------------------------
The following table presents information relating to the major tenants at
the Mortgaged Property:
NET % OF NET ACTUAL % OF
RATINGS* RENTABLE RENTABLE RENT ACTUAL ACTUAL DATE OF LEASE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA PSF RENT RENT EXPIRATION
- ----------------------------------- ------------------- ----------- ---------- ----------- ------------- ---------- ---------------
Stop & Shop ....................... B1/BB-/BB- 67,715 70.8% $ 23.48 $1,589,730 69.6% March 2023
Ruby Tuesday ...................... NR/NR/NR 6,090 6.4 $ 21.35 130,000 5.7 September 2013
Washington Mutual Bank ............ A2/A-/A 3,500 3.7 $ 25.00 87,500 3.8 March 2013
La Casa Pizzeria & Restaurant Inc.. NR/NR/NR 3,500 3.7 $ 25.00 87,500 3.8 April 2012
R & T Enterprises ................. NR/NR/NR 2,000 2.1 $ 25.00 50,000 2.2 July 2012
------ ---- ---------- ----
TOTAL ............................. 82,805 86.6% $1,944,730 85.1%
====== ==== ========== ====
* Certain credit ratings are those of the parent company whether or not the
parent guarantees the lease.
S-140
Birkdale Commons
- --------------------------------------------------------------------
PROPERTY INFORMATION
Number of Mortgaged Real Properties ......... 1
Location (City, State) ...................... Myrtle Beach , SC
Property Type ............................... Multifamily --
Conventional
Size (Units) ................................ 312
Occupancy as of September 22, 2003 .......... 95.2%
Year Built/Year Renovated ................... 2002/NA
Appraisal Value ............................. $23,000,000
Underwritten Occupancy ...................... 87.5%
Underwritten Revenues ....................... $ 2,710,893
Underwritten Total Expenses ................. $ 893,044
Underwritten Net Operating Income
(NOI) ..................................... $ 1,817,849
Underwritten Net Cash Flow (NCF) ............ $ 1,739,849
- --------------------------------------------------------------------
- --------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
Mortgage Loan Seller ............................ LaSalle
Cut-Off Date Balance ............................ $18,179,357
Percentage of Cut-Off Date Pool Balance ......... 1.6%
Cut-Off Date Loan Balance Per Unit .............. $ 58,267
Number of Mortgage Loans ........................ 1
Type of Security ................................ Fee
Mortgage Rate ................................... 5.310%
Original Term/Amortization ...................... 120/360
Remaining Term/Amortization ..................... 119/359
Cut-Off Date LTV ................................ 79.0%
Maturity Date LTV ............................... 65.7%
Underwritten DSCR on NOI ........................ 1.50x
Underwritten DSCR on NCF ........................ 1.43x
- --------------------------------------------------------------------
APPROXIMATE UNIT SIZE APPROXIMATE NET % OF NET ASKING RENTAL
UNIT MIX NO. OF UNITS (SF) RENTABLE AREA (SF) RENTABLE AREA RANGE
- --------------------------------- -------------- ----------------------- -------------------- --------------- ------------------
1-BR/1-BA ....................... 84 787 66,108 21.4% $ 680-$680
2-BR/2-BA ....................... 156 989 154,284 49.9% $ 780-$780
3-BR/2-BA ....................... 72 1,229 88,488 28.6% $ 940-$940
--- ------- -----
TOTAL/WEIGHTED AVERAGE .......... 312 990 308,880 100.0% $ 790/$0.80/SF
=== ======= =====
S-141
Atlantic Palms
- --------------------------------------------------------------------
PROPERTY INFORMATION
Number of Mortgaged Real Properties ......... 1
Location (City/State) North Charleston, SC
Property Type ............................... Multifamily --
Conventional
Size (Units) ................................ 312
Occupancy as of September 24, 2003 .......... 90.7%
Year Built/Year Renovated ................... 2001/NA
Appraisal Value ............................. $22,510,000
Underwritten Occupancy ...................... 90.0%
Underwritten Revenues ....................... $ 2,728,708
Underwritten Total Expenses ................. $ 998,665
Underwritten Net Operating Income
(NOI) ..................................... $ 1,730,043
Underwritten Net Cash Flow (NCF) ............ $ 1,652,043
- --------------------------------------------------------------------
- --------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
Mortgage Loan Seller ............................ LaSalle
Cut-Off Date Balance ............................ $18,000,000
Percentage of Cut-Off Date Pool Balance ......... 1.6%
Cut-off Date Loan Balance Per Unit .............. $ 57,692
Number of Mortgage Loans ........................ 1
Type of Security ................................ Fee
Mortgage Rate ................................... 5.560%
Original Term/Amortization ...................... 120/360
Remaining Term/Amortization ..................... 120/360
Cut-Off Date LTV ................................ 80.0%
Maturity Date LTV ............................... 70.0%
Underwritten DSCR on NOI ........................ 1.40x
Underwritten DSCR on NCF ........................ 1.34x
- --------------------------------------------------------------------
APPROXIMATE APPROXIMATE NET % OF NET ASKING RENTAL
UNIT MIX NO. OF UNITS UNIT SIZE (SF) RENTABLE AREA (SF) RENTABLE AREA RANGE
- -------------------------------- -------------- ---------------- -------------------- --------------- ------------------
1-BR/1-BA ...................... 78 830 64,740 19.7% $ 670-$670
2-BR/2-BA ...................... 162 1,063 172,206 52.4 $ 730-$845
3-BR/2-BA ...................... 72 1,270 91,440 27.8 $ 905-$905
--- ------- -----
TOTAL/WEIGHTED AVERAGE ......... 312 1,053 328,386 100.0% $ 770/$0.73/SF
=== ======= =====
S-142
Pavilion Crossings I
- --------------------------------------------------------------------
PROPERTY INFORMATION
Number of Mortgaged Real Properties ......... 1
Location (City, State) ...................... Charlotte, NC
Property Type ............................... Multifamily --
Conventional
Size (Units) ................................ 288
Occupancy as of October 31, 2003 ............ 88.5%
Year Built/Year Renovated ................... 2001/NA
Appraisal Value ............................. $20,600,000
Underwritten Occupancy ...................... 80.0%
Underwritten Revenues ....................... $ 2,301,984
Underwritten Total Expenses ................. $ 959,616
Underwritten Net Operating Income
(NOI) ..................................... $ 1,342,368
Underwritten Net Cash Flow (NCF) ............ $ 1,270,368
- --------------------------------------------------------------------
- --------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
Mortgage Loan Seller ............................ Wachovia
Cut-Off Date Balance ............................ $16,250,000
Percentage of Cut-Off Date Pool Balance ......... 1.4%
Cut-Off Date Loan Balance Per Unit .............. $ 56,424
Number of Mortgage Loans ........................ 1
Type of Security ................................ Fee
Mortgage Rate ................................... 4.900%
Original Term/Amortization ...................... 120/360
Remaining Term/Amortization ..................... 115/360
Cut-Off Date LTV ................................ 78.9%
Maturity Date LTV ............................... 68.1%
Underwritten DSCR on NOI ........................ 1.30x
Underwritten DSCR on NCF ........................ 1.23x
- --------------------------------------------------------------------
The following table presents information relating to the unit configuration
of the Mortgaged Property.
APPROXIMATE % OF NET
NO. OF APPROXIMATE NET RENTABLE RENTABLE ASKING RENTAL
UNIT MIX UNITS UNIT SIZE (SF) AREA (SF) AREA (SF) RANGE
- -------------------------------- -------- ---------------- -------------- ----------- ------------------
1-BR/1-BA ...................... 132 823 108,600 37.3% $ 645-$675
2-BR/2-BA ...................... 132 1,119 147,642 50.7 $ 805-$850
3-BR/2-BA ...................... 24 1,452 34,848 12.0 $1,058-$1,058
--- ------- -----
TOTAL/WEIGHTED AVERAGE ......... 288 1,011 291,090 100.0% $ 770/$0.76/SF
=== ======= =====
S-143
Adagio Apartments
- --------------------------------------------------------------------
PROPERTY INFORMATION
Number of Mortgaged Real Properties ......... 1
Location (City/State) ....................... Covington, WA
Property Type ............................... Mutlifamily --
Conventional
Size (Units) ................................ 200
Occupancy as of October 3, 2003 ............. 92.5%
Year Built/Year Renovated ................... 2003/NA
Appraisal Value ............................. $18,900,000
Underwritten Occupancy ...................... 89.9%
Underwritten Revenues ....................... $ 2,196,548
Underwritten Total Expenses ................. $ 836,736
Underwritten Net Operating Income
(NOI) ..................................... $ 1,359,812
Underwritten Net Cash Flow (NCF) ............ $ 1,309,812
- --------------------------------------------------------------------
- --------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
Mortgage Loan Seller ............................ Citigroup
Cut-Off Date Balance ............................ $14,976,883
Percentage of Cut-Off Date Pool Balance ......... 1.3%
Cut-off Date Loan Balance Per Unit .............. $ 74,884
Number of Mortgage Loans ........................ 1
Type of Security ................................ Fee
Mortgage Rate ................................... 4.970%
Original Term/Amortization ...................... 108/360
Remaining Term/Amortization ..................... 107/359
Cut-Off Date LTV ................................ 79.2%
Maturity Date LTV ............................... 66.9%
Underwritten DSCR on NOI ........................ 1.41x
Underwritten DSCR on NCF ........................ 1.36x
- --------------------------------------------------------------------
The following table presents information relating to the major tenants at
the Mortgaged Property:
APPROXIMATE APPROXIMATE % OF NET
NO. OF UNIT SIZE NET RENTABLE RENTABLE AREA ASKING RENTAL
UNIT MIX UNITS (SF) AREA (SF) (SF) RANGE
- -------------------------------- -------- ------------- -------------- --------------- ------------------
1-BR/1-BA ...................... 68 784 53,312 28.1% $ 750-$900
2-BR/2-BA ...................... 84 971 81,564 43.0 $ 950-$1,020
3-BR/2-BA ...................... 48 1,139 54,672 28.8 $1,125-$1,225
-- ------ -----
TOTAL/WEIGHTED AVERAGE ......... 200 948 189,548 100.0% $ 962/$1.02/SF
=== ======= =====
S-144
Autumn Brook Apartments
- -------------------------------------------------------------------
PROPERTY INFORMATION
Number of Mortgaged Real Properties ......... 1
Location (City, State) ...................... Dunwoody, GA
Property Type ............................... Multifamily --
Conventional
Size (Units) ................................ 302
Occupancy as of September 26, 2003 .......... 88.4%
Year Built/Year Renovated ................... 1984/NA
Appraisal Value ............................. $19,100,000
Underwritten Occupancy ...................... 85.5%
Underwritten Revenues ....................... $ 2,419,679
Underwritten Total Expenses ................. $ 1,238,290
Underwritten Net Operating Income
(NOI) ..................................... $ 1,181,389
Underwritten Net Cash Flow (NCF) ............ $ 1,105,889
- -------------------------------------------------------------------
- -------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
Mortgage Loan Seller ............................ Wachovia
Cut-Off Date Balance ............................ $13,450,629
Percentage of Cut-Off Date Pool Balance ......... 1.2%
Cut-Off Date Loan Balance Per Unit .............. $ 44,539
Number of Mortgage Loans ........................ 1
Type of Security ................................ Fee
Mortgage Rate ................................... 4.750%
Original Term/Amortization ...................... 120/360
Remaining Term/Amortization ..................... 117 /357
Cut-Off Date LTV ................................ 70.4%
Maturity Date LTV ............................... 57.6%
Underwritten DSCR on NOI ........................ 1.40x
Underwritten DSCR on NCF ........................ 1.31x
- -------------------------------------------------------------------
The following table presents information relating to the unit configuration
of the Mortgaged Property:
APPROXIMATE % OF NET ASKING
APPROXIMATE NET RENTABLE RENTABLE AREA RENTAL
UNIT MIX NO. OF UNITS UNIT SIZE (SF) AREA (SF) (SF) RATE
- -------------------------------- -------------- ---------------- -------------- --------------- ------------------
1-BR/1-BA ...................... 100 1,075 107,500 29.9% $ 810
2-BR/2-BA ...................... 202 1,250 252,500 70.1 $ 875
--- ------- -----
TOTAL/WEIGHTED AVERAGE ......... 302 1,192 360,000 100.0% $ 853/$0.72/SF
=== ======= =====
S-145
Rolling Road Commerce Center & Mini-Storage
- -------------------------------------------------------------------
PROPERTY INFORMATION
Number of Mortgaged Real Properties ......... 1
Location (City, State) ...................... Baltimore, MD
Property Type ............................... Mixed Use --
Flex/Self Storage
Size (SF) ................................... 230,350
Occupancy as of October 21, 2003 ............ 97.4%
Year Built/Year Renovated ................... 2001/NA
Appraisal Value ............................. $20,200,000
Underwritten Occupancy ...................... 92.0%
Underwritten Revenues ....................... $ 2,503,042
Underwritten Total Expenses ................. $ 911,303
Underwritten Net Operating
Income (NOI) .............................. $ 1,591,739
Underwritten Net Cash Flow (NCF) ............ $ 1,500,131
- -------------------------------------------------------------------
- -------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
Mortgage Loan Seller ............................ Wachovia
Cut-Off Date Balance ............................ $12,966,670
Percentage of Cut-Off Date Pool Balance ......... 1.1%
Cut-Off Date Loan Balance Per SF ................ $ 56
Number of Mortgage Loans ........................ 1
Type of Security ................................ Fee
Mortgage Rate ................................... 6.350%
Original Term to ARD/Amortization ............... 120/300
Remaining Term to ARD/Amortization .............. 118/298
Cut-Off Date LTV ................................ 64.2%
Maturity Date LTV ............................... 50.4%
Underwritten DSCR on NOI ........................ 1.53x
Underwritten DSCR on NCF ........................ 1.44x
- -------------------------------------------------------------------
NET % OF NET
RATINGS RENTABLE RENTABLE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA
- ---------------------------------------- ------------------- ----------- ----------
General Services Administration ........ Aaa/AAA/AAA 48,632 21.1%
Carisam -- Samuel Meisel & Co. Inc...... NR/NR/NR 27,600 12.0
DSI Distributing ....................... NR/NR/NR 16,200 7.0
Moran Materials ........................ NR/NR/NR 10,200 4.4
Sardi Design, LLC ...................... NR/NR/NR 9,000 3.9
W.W. Grainger, Inc. .................... NR/NR/NR 9,000 3.9
------ ----
TOTAL .................................. 120,632 52.4%
======= ====
ACTUAL
RENT ACTUAL % OF ACTUAL DATE OF LEASE
TENANT PSF RENT RENT EXPIRATION
- ---------------------------------------- ----------- ------------- ------------- ---------------
General Services Administration ........ $ 13.63 $ 662,854 27.8% December 2012
Carisam -- Samuel Meisel & Co. Inc...... $ 6.07 167,532 7.0 September 2008
DSI Distributing ....................... $ 6.25 101,250 4.2 May 2008
Moran Materials ........................ $ 6.25 63,750 2.7 February 2013
Sardi Design, LLC ...................... $ 7.58 68,220 2.9 June 2007
W.W. Grainger, Inc. .................... $ 7.50 67,500 2.8 August 2006
---------- ----
TOTAL .................................. $1,131,106 47.4%
========== ====
In addition to the 151,244 square feet of total office space, the property also
has 789 units of mini-storage space, which total approximately 79,106 square
feet.
S-146
Penn Station Studios
- -------------------------------------------------------------------
PROPERTY INFORMATION
Number of Mortgaged Real Properties ......... 1
Location (City/State) ....................... Santa Monica, CA
Property Type ............................... Office -- Suburban
Size (SF) ................................... 75,336
Occupancy as of September 8, 2003 ........... 89.5%
Year Built/Year Renovated ................... 1973/1998
Appraisal Value ............................. $19,300,000
Underwritten Occupancy ...................... 87.0%
Underwritten Revenues ....................... $ 2,104,764
Underwritten Total Expenses ................. $ 462,771
Underwritten Net Operating Income
(NOI) ..................................... $ 1,641,993
Underwritten Net Cash Flow (NCF) ............ $ 1,459,924
- -------------------------------------------------------------------
- -------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
Mortgage Loan Seller ............................ Citigroup
Cut-Off Date Balance ............................ $12,800,000
Percentage of Cut-Off Date Pool Balance ......... 1.1%
Cut-off Date Loan Balance Per SF ................ $ 170
Number of Mortgage Loans ........................ 1
Type of Security ................................ Fee
Mortgage Rate ................................... 5.570%
Original Term/Amortization ...................... 108/360
Remaining Term/Amortization ..................... 106/360
Cut-Off Date LTV ................................ 66.3%
Maturity Date LTV ............................... 59.4%
Underwritten DSCR on NOI ........................ 1.87x
Underwritten DSCR on NCF ........................ 1.66x
- -------------------------------------------------------------------
The following table presents information relating to the major tenants at
the Mortgaged Property:
% OF NET
RATINGS* NET RENTABLE RENTABLE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA
- ---------------------------------- ------------------- -------------- ----------
Sony Computer Entertainment
America, Inc. ................... A1/A+/NR 19,268 25.6%
Summit Entertainment, LP ......... NR/NR/NR 13,782 18.3
Steelcase, Inc. .................. Ba1/BBB-/NR 12,377 16.4
HLW International LLP ............ NR/NR/NR 11,411 15.1
Murphy O'Brien
Communications .................. NR/NR/NR 7,159 9.5
------ ----
TOTAL ............................ 63,997 84.9%
====== ====
% OF
ACTUAL ACTUAL DATE OF LEASE
TENANT RENT PSF ACTUAL RENT RENT EXPIRATION
- ---------------------------------- ---------- ------------- ---------- --------------
Sony Computer Entertainment
America, Inc. ................... $ 23.64 $ 455,412 24.3% May 2009
Summit Entertainment, LP ......... $ 22.95 316,347 16.9 October 2008
Steelcase, Inc. .................. $ 22.77 281,878 15.0 July 2008
HLW International LLP ............ $ 27.82 317,483 16.9 March 2009
Murphy O'Brien
Communications .................. $ 29.24 209,355 11.2 February 2004
---------- ----
TOTAL ............................ $1,580,476 84.3%
========== ====
- ---------
* Certain credit ratings are those of the parent company whether or not the
parent guarantees the lease.
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THE MORTGAGE LOAN SELLERS
The Depositor will acquire the Mortgage Loans from the Mortgage Loan
Sellers on or prior to the Closing Date pursuant to separate mortgage loan
purchase agreements (each, a "Mortgage Loan Purchase Agreement" and together,
the "Mortgage Loan Purchase Agreements"). The Mortgage Loan Sellers originated
or acquired the Mortgage Loans as described above under "--Mortgage Loan
History."
Thirty-five (35) of the Mortgage Loans (the "Wachovia Mortgage Loans"),
representing 38.4% of the Cut-Off Date Pool Balance, were originated or acquired
by Wachovia Bank, National Association ("Wachovia"). Wachovia is a national
banking association whose principal offices are located in Charlotte, North
Carolina. Wachovia's business is subject to examination and regulation by
federal banking authorities and its primary federal bank regulatory authority is
the Office of the Comptroller of the Currency. Wachovia is a wholly-owned
subsidiary of Wachovia Corporation. As of September 30, 2003, Wachovia had total
assets of approximately $389 billion. Wachovia is acting as the Master Servicer.
Wachovia Capital Markets, LLC is acting as an Underwriter for this transaction
and is an affiliate of Wachovia.
Sixty (60) of the Mortgage Loans (the "LaSalle Mortgage Loans"),
representing 24.6% of the Cut-Off Date Pool Balance, were originated or acquired
by LaSalle Bank National Association, a national banking association
("LaSalle"). LaSalle's principal offices are located in Chicago, Illinois.
LaSalle offers a variety of banking services to customers including commercial
and retail banking trust services and asset management. LaSalle's business is
subject to examination and regulation by federal banking authorities and its
primary federal bank regulatory authority is the office of the Comptroller of
the Currency. LaSalle is a subsidiary of ABN AMRO North America, Inc., which is
owned by ABN AMRO Bank N.V., a bank organized under the laws of The Netherlands.
As of September 30, 2003, LaSalle had total assets of approximately $63 billion.
LaSalle is acting as the Paying Agent, the Authenticating Agent and the
Certificate Registrar. LaSalle is an affiliate of ABN AMRO Bank N.V., Chicago
Branch, which is one of the mortgage loan sellers, and of ABN AMRO Incorporated,
which is acting as an Underwriter for this transaction.
Nineteen (19) of the Mortgage Loans (the "Citigroup Mortgage Loans"),
representing 14.2% of the Cut-Off Date Pool Balance, were originated or acquired
by Citigroup Global Markets Realty Corp., a New York corporation whose principal
offices are located in New York, New York that is primarily engaged in the
business of purchasing and originating commercial mortgage loans. Citigroup is a
subsidiary of Citigroup Financial Products, Inc. An affiliate of Citigroup,
Citigroup Global Markets Inc., is acting as an Underwriter for this transaction.
Two (2) of the Mortgage Loans (the "ABN AMRO Mortgage Loans"), representing
11.5% of the Cut-Off Date Pool Balance, were originated or acquired by ABN AMRO
Bank N.V., Chicago Branch ("ABN AMRO Bank"). ABN AMRO Bank is a public company
with limited liability engaged in the business of originating and securitizing
U.S. commercial mortgage loans. ABN AMRO Bank N.V., Chicago Branch, is a
subsidiary of ABN AMRO Bank N.V., a bank organized under the laws of The
Netherlands. As of September 30, 2003, ABN AMRO Bank had total assets of
approximately $15 billion. ABN AMRO Bank is an affiliate of LaSalle, which is
acting as a Mortgage Loan Seller, the Paying Agent, the Authenticating Agent and
the Certificate Registrar. An affiliate of ABN AMRO Bank, ABN AMRO Incorporated,
is acting as an Underwriter for this transaction.
Two (2) of the Mortgage Loans (the "Eurohypo Mortgage Loans"), representing
11.4% of the Cut-Off Date Pool Balance, were originated by Eurohypo AG, New York
Branch. Eurohypo AG, New York Branch is the New York branch of a German banking
corporation. Eurohypo AG, New York Branch is a German banking corporation
focusing on real estate and public finance banking. Eurohypo AG, New York Branch
has total assets of approximately 228.4 billion EUR ($261 billion) of which
approximately 95.77 billion EUR ($109 billion) are real estate loans. Eurohypo
AG, New York Branch has three offices in the United States located in New York,
Chicago and Los Angeles with over 60 professionals concentrating on real estate
investment banking. Eurohypo AG originates its loans in the United States
through its New York branch.
Wachovia has no obligation to repurchase or substitute any of the Citigroup
Mortgage Loans, the LaSalle Mortgage Loans, the ABN AMRO Mortgage Loans or the
Eurohypo Mortgage Loans, LaSalle
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has no obligation to repurchase or substitute any of the Wachovia Mortgage
Loans, the Citigroup Mortgage Loans, the ABN AMRO Mortgage Loans or the Eurohypo
Mortgage Loans, Citigroup has no obligation to repurchase or substitute any of
the Wachovia Mortgage Loans, the LaSalle Mortgage Loans, the ABN AMRO Mortgage
Loans or the Eurohypo Mortgage Loans, ABN AMRO Bank has no obligation to
repurchase or substitute any of the Wachovia Mortgage Loans, the Citigroup
Mortgage Loans, the LaSalle Mortgage Loans or the Eurohypo Mortgage Loans, and
Eurohypo has no obligation to repurchase or substitute any of the Wachovia
Mortgage Loans, the LaSalle Mortgage Loans, the ABN AMRO Mortgage Loans or the
Citigroup Mortgage Loans.
All information concerning the Wachovia Mortgage Loans contained herein or
used in the preparation of this Prospectus Supplement is as underwritten by
Wachovia. All information concerning the Citigroup Mortgage Loans contained
herein or used in the preparation of this Prospectus Supplement is as
underwritten by Citigroup. All information concerning the LaSalle Mortgage Loans
contained herein or used in the preparation of this Prospectus Supplement is as
underwritten by LaSalle. All information concerning the ABN AMRO Mortgage Loans
contained herein or used in the preparation of this Prospectus Supplement is as
underwritten by ABN AMRO Bank. All information concerning the Eurohypo Mortgage
Loans contained herein or used in the preparation of this Prospectus Supplement
is as underwritten by Eurohypo.
UNDERWRITING STANDARDS
General. Each Mortgage Loan Seller's commercial real estate finance or
commercial mortgage banking group has the authority, with the approval from the
appropriate credit committee, to originate fixed-rate, first lien mortgage loans
for securitization. Each Mortgage Loan Seller's commercial real estate finance
or commercial mortgage banking operation is staffed by real estate
professionals. Each Mortgage Loan Seller's loan underwriting group is an
integral component of the commercial real estate finance or commercial mortgage
banking group which also includes groups responsible for loan origination and
closing mortgage loans.
Upon receipt of a loan application, the respective Mortgage Loan Seller's
loan underwriters commence an extensive review of the borrower's financial
condition and creditworthiness and the real estate which will secure the loan.
Loan Analysis. Generally, each Mortgage Loan Seller performs both a credit
analysis and collateral analysis with respect to a loan applicant and the real
estate that will secure the loan. In general, credit analysis of the borrower
and the real estate includes a review of historical financial statements,
including rent rolls (generally unaudited), third party credit reports,
judgment, lien, bankruptcy and pending litigation searches and, if applicable,
the loan payment history of the borrower. Each Mortgage Loan Seller typically
performs a qualitative analysis which incorporates independent credit checks and
published debt and equity information with respect to certain principals of the
borrower as well as the borrower itself. Borrowers are generally required to be
single-purpose entities although they are generally not required to be
structured to limit the possibility of becoming insolvent or bankrupt. The
collateral analysis typically includes an analysis of the historical property
operating statements, rent rolls, and a projection of future performance, if
applicable, and a review of tenant leases. Each Mortgage Loan Seller generally
requires third party appraisals, as well as environmental and building condition
reports. Each report is reviewed for acceptability by a staff member of the
applicable Mortgage Loan Seller or a third-party consultant for compliance with
program standards. Generally, the results of these reviews are incorporated into
the underwriting report. One (1) Mortgage Loan (representing 0.9% of the Cut-Off
Date Pool Balance sold to the Depositor by Wachovia, was originated by Mutual of
New York and 2 Mortgage Loans (representing 0.4% of the Cut-Off Date Pool
Balance) sold to the Depositor by Wachovia were originated by Cap Lease Funding
LLC. In each case, the related Mortgage Loan Seller re-underwrote such Mortgage
Loan to the related Mortgage Loan Seller's underwriting guidelines. In some
instances, one or more provisions of the guidelines were waived or modified by
the related Mortgage Loan Seller where it was determined not to adversely affect
the mortgage loans originated or acquired by it in any material respect.
Loan Approval. Prior to commitment, all mortgage loans must be approved by
the applicable Mortgage Loan Seller's credit committee in accordance with its
credit policies.
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Debt Service Coverage Ratio and LTV Ratio. Each Mortgage Loan Seller's
underwriting standards generally mandate minimum debt service coverage ratios
and maximum loan-to-value ratios. The debt service coverage ratio guidelines are
generally calculated based on net cash flow at the time of origination. In
addition, each Mortgage Loan Seller's underwriting guidelines generally permit a
maximum amortization period of 30 years. However, notwithstanding such
guidelines, in certain circumstances the actual debt service coverage ratios,
loan-to-value ratios and amortization periods for the mortgage loans originated
by such Mortgage Loan Seller may vary from these guidelines.
Escrow Requirements. Generally, each Mortgage Loan Seller requires most
borrowers to fund various escrows for taxes and insurance, capital expenses and
replacement reserves. Generally, the required escrows for mortgage loans
originated by each Mortgage Loan Seller 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 the
Mortgage Loan Seller with sufficient funds to satisfy all taxes and
assessments. Where a tenant is responsible for the payment of property
taxes, this escrow may sometimes be waived.
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 the Mortgage Loan Seller with
sufficient funds to pay all insurance premiums. Where a tenant is
responsible for the payment of insurance premiums, this escrow may
sometimes be waived.
o Replacement Reserves--Replacement reserves are generally calculated in
accordance with the expected useful life of the components of the property
during the term of the mortgage loan.
o Completion Repair/Environmental Remediation--Typically, a completion
repair or remediation reserve is required where an environmental or
engineering report suggests that such reserve is necessary. Upon funding
of the applicable Mortgage Loan, the Mortgage Loan Seller generally
requires that at least 110% of the estimated costs of repairs or
replacements be reserved and generally requires that repairs or
replacements be completed within a year after the funding of the
applicable Mortgage Loan.
o Tenant Improvement/Lease Commissions--In some cases, major tenants have
lease expirations within the Mortgage Loan term. To mitigate this risk,
special reserves may be required to be funded either at closing of the
Mortgage Loan and/or during the Mortgage Loan term to cover certain
anticipated leasing commissions or tenant improvement costs which might be
associated with re-leasing the space occupied by such tenants.
ASSIGNMENT OF THE MORTGAGE LOANS; REPURCHASES AND SUBSTITUTIONS
On the Closing Date, the Depositor will transfer the Mortgage Loans,
without recourse, to the Trustee for the benefit of the Certificateholders. In
connection with such transfer, the Depositor will require each Mortgage Loan
Seller to deliver to the Trustee or to a document custodian appointed by the
Trustee (a "Custodian"), among other things, the following documents with
respect to each Mortgage Loan originated or acquired by the applicable Mortgage
Loan Seller (the "Mortgage File"): (i) the original Mortgage Note, endorsed on
its face or by allonge attached thereto, without recourse, to the order of the
Trustee or in blank (or, if the original Mortgage Note has been lost, an
affidavit to such effect from the applicable Mortgage Loan Seller or another
prior holder, together with a copy of the Mortgage Note); (ii) the original or a
copy of the Mortgage, together with an original or copy of any intervening
assignments of the Mortgage, in each case (unless not yet returned by the
applicable recording office) with evidence of recording indicated thereon or
certified by the applicable recorder's office; (iii) the original or a copy of
any related assignment of leases and of any intervening assignments thereof (if
such item is a document separate from the Mortgage), in each case (unless not
yet returned by the applicable recording office) with evidence of recording
indicated thereon or certified by the applicable recorder's office; (iv) an
original assignment of the Mortgage in favor of the Trustee or in blank and
(subject to the completion of certain missing recording information) in
recordable form; (v) an original assignment of any related
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assignment of leases (if such item is a document separate from the Mortgage) in
favor of the Trustee or in blank and (subject to the completion of certain
missing recording information) in recordable form; (vi) the original assignment
of all unrecorded documents relating to the Mortgage Loan, if not already
assigned pursuant to items (iv) or (v) above; (vii) originals or copies of all
modification, consolidation, assumption and substitution agreements in those
instances in which the terms or provisions of the Mortgage or Mortgage Note have
been modified or the Mortgage Loan has been assumed or consolidated; (viii) the
original or a copy of the policy or certificate of lender's title insurance
issued on the date of the origination of such Mortgage Loan, or, if such policy
has not been issued or located, an irrevocable, binding commitment (which may be
a marked version of the policy that has been executed by an authorized
representative of the title company or an agreement to provide the same pursuant
to binding escrow instructions executed by an authorized representative of the
title company) to issue such title insurance policy; (ix) any filed copies
(bearing evidence of filing) or other evidence of filing satisfactory to the
Trustee of any UCC financing statements, related amendments and continuation
statements in the possession of the applicable Mortgage Loan Seller; (x) an
original assignment in favor of the Trustee of any financing statement executed
and filed in favor of the applicable Mortgage Loan Seller in the relevant
jurisdiction; (xi) the original or copy of any ground lease, ground lessor
estoppel, environmental insurance policy or guaranty relating to such Mortgage
Loan; (xii) any intercreditor agreement relating to permitted debt (including
mezzanine debt) of the mortgagor; (xiii) copies of any loan agreement, escrow
agreement, or security agreement relating to such Mortgage Loan; and (xiv) a
copy of any letter of credit and related transfer documents related to such
Mortgage Loan. Notwithstanding the foregoing, with respect to the Park City
Center Loan, the 2003-C8 Trustee will hold the original documents related to the
Park City Center Loan for the benefit of the trust fund formed by the 2003-C8
Pooling and Servicing Agreement and the Trust Fund formed by the Pooling and
Servicing Agreement, other than the related Mortgage Notes that are not assets
of the trust fund formed by the 2003-C8 Pooling and Servicing Agreement, which
will be held (i) in the case of the Mortgage Note related to the Park City
Center AB Companion Loan, by holder of the Park City Center AB Companion Loan
and (ii) in the case of the Mortgage Note related to the Park City Center Loan,
by the Trustee under the Pooling and Servicing Agreement.
As provided in the Pooling and Servicing Agreement, the Trustee or a
Custodian on its behalf is required to review each Mortgage File within a
specified period following its receipt thereof. If any of the documents
described in the preceding paragraph is found during the course of such review
to be missing from any Mortgage File or defective, and in either case such
omission or defect materially and adversely affects the value of the applicable
Mortgage Loan, the interest of the Trust or the interests of any
Certificateholder, the applicable Mortgage Loan Seller, if it does not deliver
the document or cure the defect (other than omissions solely due to a document
not having been returned by the related recording office) within a period of 90
days following such Mortgage Loan Seller's receipt of notice thereof, will be
obligated pursuant to the applicable Mortgage Loan Purchase Agreement (or, with
respect to the Park City Center Loan, a breach under the applicable mortgage
loan purchase agreement entered into in connection with the issuance of the
Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2003-C8) (the relevant rights under which will be assigned
by the Depositor to the Trustee) to (1) repurchase the affected Mortgage Loan
within such 90-day period at a price (the "Purchase Price") generally equal to
the sum of (i) the unpaid principal balance of such Mortgage Loan, (ii) the
unpaid accrued interest on such Mortgage Loan (calculated at the applicable
Mortgage Rate) to but not including the Due Date in the Collection Period in
which the purchase is to occur and (iii) certain Additional Trust Fund Expenses
in respect of such Mortgage Loan, including but not limited to, servicing
expenses that are reimbursable to the Master Servicer, the Special Servicer, the
Paying Agent or the Trustee plus any interest thereon and on any related P&I
Advances or (2) substitute a Qualified Substitute Mortgage Loan for such
Mortgage Loan and pay the Master Servicer for deposit into the Certificate
Account a shortfall amount equal to the difference between the Purchase Price of
the deleted Mortgage Loan calculated as of the date of substitution and the
Stated Principal Balance of such Qualified Substitute Mortgage Loan as of the
date of substitution (the "Substitution Shortfall Amount"); provided that,
unless the breach would cause the Mortgage Loan not to be a qualified mortgage
within the meaning of Section 860G(a)(3) of the Code, the applicable Mortgage
Loan Seller will generally have an additional 90-day period to deliver the
document or cure the defect, as the case may be, if it is diligently
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proceeding to effect such delivery or cure and provided further, no such
document omission or defect (other than with respect to the Mortgage Note, the
Mortgage, the title insurance policy, the ground lease, any letter of credit,
any franchise agreement, comfort letter, and comfort letter transfer document
(the "Core Material Documents")) will be considered to materially and adversely
affect the interests of the Certificateholders in, or the value of, the affected
Mortgage Loans unless the document with respect to which the document omission
or defect exists is required in connection with an imminent enforcement of the
mortgagee's rights or remedies under the related Mortgage Loan, defending any
claim asserted by any borrower or third party with respect to the Mortgage Loan,
establishing the validity or priority of any lien or any collateral securing the
Mortgage Loan or for any immediate significant servicing obligation. With
respect to material document defects other than those involving the Core
Material Documents, any applicable cure period may be extended if the document
involved is not needed imminently. Such extension will end upon 30 days notice
of such need as reasonably determined by the Master Servicer or Special Servicer
(with a possible 30 day extension if the Master Servicer or Special Servicer
agrees that the applicable Mortgage Loan Seller is diligently pursuing a cure).
All material document defects regardless of the document involved will be cured
no later than 2 years after the Closing Date; provided, however, that the
initial 90 day cure period described herein will not be reduced.
The foregoing repurchase or substitution obligation constitutes the sole
remedy available to the Certificateholders and the Trustee for any uncured
failure to deliver, or any uncured defect in, a constituent Mortgage Loan
document. Each Mortgage Loan Seller is solely responsible for its repurchase or
substitution obligation, and such obligations will not be the responsibility of
the Depositor.
To the extent set forth in the Pooling and Servicing Agreement the Trustee
will promptly cause each of the assignments described in clauses (iv), (v) and
(x) of the second preceding paragraph to be submitted for recording or filing,
as applicable, in the appropriate public records. See "DESCRIPTION OF THE
POOLING AND SERVICING AGREEMENTS--Assignment of Mortgage Assets; Repurchases" in
the prospectus.
A "Qualified Substitute Mortgage Loan" is a mortgage loan which must, on
the date of substitution: (i) have an outstanding Stated Principal Balance,
after application of all scheduled payments of principal and interest due during
or prior to the month of substitution, not in excess of the Stated Principal
Balance of the deleted Mortgage Loan as of the Due Date in the calendar month
during which the substitution occurs; (ii) have a Mortgage Rate not less than
the Mortgage Rate of the deleted Mortgage Loan; (iii) have the same Due Date as
the deleted Mortgage Loan; (iv) accrue interest on the same basis as the deleted
Mortgage Loan (for example, on the basis of a 360-day year consisting of twelve
30-day months); (v) 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; (vi) 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;
(vii) comply as of the date of substitution with all of the representations and
warranties set forth in the applicable Mortgage Loan Purchase Agreement; (viii)
have an environmental report with respect to the related Mortgaged Property
which will be delivered as a part of the related servicing file; (ix) have an
original debt service coverage ratio not less than the original debt service
coverage ratio of the deleted Mortgage Loan; (x) be determined by an opinion of
counsel to be a "qualified replacement mortgage" within the meaning of Section
860G(a)(4) of the Code; (xi) not have a maturity date after the date two years
prior to the Rated Final Distribution Date; (xii) not be substituted for a
deleted Mortgage Loan unless the Trustee and the Paying Agent have received
prior confirmation in writing by each Rating Agency that such substitution will
not result in the withdrawal, downgrade or qualification of the rating assigned
by the Rating Agency to any Class of Certificates then rated by the Rating
Agency (the cost, if any, of obtaining such confirmation to be paid by the
applicable Mortgage Loan Seller); (xiii) have a date of origination that is not
more than 12 months prior to the date of substitution; (xiv) have been approved
by the Controlling Class Representative; and (xv) not be substituted for a
deleted Mortgage Loan if it would result in the termination of the REMIC status
of any of the REMICs or the imposition of tax on any of the REMICs 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, then the amounts
described in clause (i) shall be determined on the basis of aggregate principal
balances
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and the rates described in clause (ii) above and the remaining term to stated
maturity referred to in clause (v) above shall be determined on a weighted
average basis; provided, that no individual Mortgage Loan shall have a Mortgage
Rate, net of the related Administrative Cost Rate, that is less than the highest
Pass-Through Rate of any Class of Sequential Pay Certificates bearing a fixed
rate. When a Qualified Substitute Mortgage Loan is substituted for a deleted
Mortgage Loan, the applicable Mortgage Loan Seller will be required to certify
that such Mortgage Loan meets all of the requirements of the above definition
and shall send such certification to the Trustee and the Paying Agent.
REPRESENTATIONS AND WARRANTIES; REPURCHASES AND SUBSTITUTIONS
In each Mortgage Loan Purchase Agreement, the applicable Mortgage Loan
Seller has represented and warranted with respect to each Mortgage Loan (subject
to certain exceptions specified in each Mortgage Loan Purchase Agreement), as of
the Closing Date, or as of such other date specifically provided in the
representation and warranty, among other things, generally that:
(i) the information set forth in the schedule of Mortgage Loans attached
to the applicable Mortgage Loan Purchase Agreement (which contains certain of
the information set forth in Annex A-1 to this Prospectus Supplement) was
true and correct in all material respects as of the Cut-Off Date;
(ii) as of the date of its origination, such Mortgage Loan complied in all
material respects with, or was exempt from, all requirements of federal,
state or local law relating to the origination of such Mortgage Loan;
(iii) immediately prior to the sale, transfer and assignment to the
Depositor, the applicable Mortgage Loan Seller had good and marketable 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, security
interests or any other ownership interests of any nature encumbering such
Mortgage Loan;
(iv) the proceeds of such Mortgage Loan have been fully disbursed and
there is no requirement for future advances thereunder;
(v) each related Mortgage Note, Mortgage, assignment of leases, if any,
and other agreements executed in connection with such Mortgage Loan is the
legal, valid and binding obligation of the related mortgagor (subject to any
nonrecourse provisions therein and any state anti-deficiency or market value
limit deficiency legislation), enforceable in accordance with its terms,
except (a) that certain provisions contained in such Mortgage Loan documents
are or may be unenforceable in whole or in part under applicable state or
federal laws, but neither the application of any such laws to any such
provision nor the inclusion of any such provision renders any of the Mortgage
Loan documents invalid as a whole and such Mortgage Loan documents taken as a
whole are enforceable to the extent necessary and customary for the practical
realization of the rights and benefits afforded thereby, and (b) as such
enforcement may be limited by bankruptcy, insolvency, receivership,
reorganization, moratorium, redemption, liquidation or other laws affecting
the enforcement of creditors' rights generally, and by general principles of
equity (regardless of whether such enforcement is considered in a proceeding
in equity or at law);
(vi) as of the date of its origination, there was no valid offset,
defense, counterclaim, abatement or right to rescission with respect to any
of the related Mortgage Notes, Mortgage(s) or other agreements executed in
connection therewith, and, as of the Cut-Off Date, there was no valid offset,
defense, counterclaim or right to rescission with respect to such Mortgage
Note, Mortgage(s) or other agreements, except in each case, with respect to
the enforceability of any provisions requiring the payment of default
interest, late fees, additional interest, prepayment premiums or yield
maintenance charges and the applicable Mortgage Loan Seller has no knowledge
of any such rights, defenses or counterclaims having been asserted;
(vii) each related assignment of Mortgage and assignment of assignment of
leases from the applicable Mortgage Loan Seller to the Trustee constitutes
the legal, valid and binding first priority assignment from such Mortgage
Loan Seller (subject to the customary limitations set forth in (v) above);
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(viii) the related Mortgage is a valid and enforceable first lien on the
related Mortgaged Property except for the exceptions set forth in paragraph
(v) above and (a) the lien of 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 and adversely interferes with the current use of the Mortgaged
Property or the security intended to be provided by such Mortgage or with the
mortgagor's ability to pay its obligations under the Mortgage Loan when they
become due or materially and adversely affects the value of the Mortgaged
Property, (c) the exceptions (general and specific) and exclusions set forth
in the related title insurance policy or appearing of record, none of which,
individually or in the aggregate, materially and adversely interferes with
the current use of the Mortgaged Property or the security intended to be
provided by such Mortgage or with the mortgagor's ability to pay its
obligations under the Mortgage Loan when they become due or materially and
adversely affects the value of the Mortgaged Property, (d) other matters to
which like properties are commonly subject, none of which, individually or in
the aggregate, materially and adversely interferes with the current use of
the Mortgaged Property or the security intended to be provided by such
Mortgage or with the mortgagor's ability to pay its obligations under the
Mortgage Loan when they become due or materially and adversely affects the
value of the Mortgaged Property, (e) the right of tenants (whether under
ground leases, space leases or operating leases) at the Mortgaged Property to
remain following a foreclosure or similar proceeding (provided that such
tenants are performing under such leases) and (f) if such Mortgage Loan is
cross-collateralized with any other Mortgage Loan, the lien of the Mortgage
for such other Mortgage Loan, none of which, individually or in the
aggregate, materially and adversely interferes with the current use of the
Mortgaged Property or the security intended to be provided by such Mortgage
or with the mortgagor's ability to pay its obligations under the Mortgage
Loan when they become due or materially and adversely affects the value of
the Mortgaged Property;
(ix) all real estate taxes and governmental assessments, or installments
thereof, which would be a lien on the Mortgaged Property and that prior to
the Cut-Off Date have become delinquent in respect of the related Mortgaged
Property have been paid, or an escrow of funds in an amount sufficient to
cover such payments has been established;
(x) each Mortgaged Property was covered by (1) a fire and extended perils
included within the classification "All Risk of Physical Loss" insurance
policy in an amount (subject to a customary deductible) at least equal to the
lesser of the replacement cost of improvements located on such Mortgaged
Property, with no deduction for depreciation, or the outstanding principal
balance of the Mortgage Loan and in any event, the amount necessary to avoid
the operation of any co-insurance provisions; (2) business interruption or
rental loss insurance in an amount at least equal to 12 months of operations
of the related Mortgaged Property; and (3) comprehensive general liability
insurance against claims for personal and bodily injury, death or property
damage occurring on, in or about the related Mortgaged Property in an amount
customarily required by prudent commercial mortgage lenders, but not less
than $1 million; such insurance is required by the Mortgage or related
Mortgage Loan documents and was in full force and effect with respect to each
related Mortgaged Property at origination and to the knowledge of the
Mortgage Loan Seller, all insurance coverage required under each Mortgage is
in full force and effect with respect to each Mortgaged Property; and no
notice of termination or cancellation with respect to any such insurance
policy has been received by the Mortgage Loan Seller; except for certain
amounts not greater than amounts which would be considered prudent by a
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 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
are customarily acceptable to commercial and multifamily mortgage lending
institutions, or the reduction of the outstanding principal balance of the
Mortgage Loan and accrued interest thereon; to the Mortgage Loan Seller's
knowledge, the insurer with respect to each policy is qualified to do
business in the relevant jurisdiction to the extent required; the insurance
policies contain a standard mortgagee
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clause or names the mortgagee, 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 without 30 days prior written notice to the mortgagee (or,
with respect to non-payment of premiums, 10 days prior written notice to the
mortgagee) or such lesser period as prescribed by applicable law; and each
Mortgage requires that the mortgagor maintain insurance as described above or
permits the mortgagee to require insurance as described above;
(xi) as of the Closing Date, each Mortgage Loan was 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; and
(xii) one or more environmental site assessments or updates thereof were
performed by an environmental consulting firm independent of the applicable
Mortgage Loan Seller and the applicable Mortgage Loan Seller's affiliates
with respect to each related Mortgaged Property during the 18-month period
preceding the origination of the related Mortgage Loan, and 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 actual knowledge and has received no notice of any material
and adverse environmental condition or circumstance affecting such Mortgaged
Property that was not disclosed in such report(s).
In the case of a breach of any of the representations and warranties in any
Mortgage Loan Purchase Agreement that materially and adversely affects the value
of a Mortgage Loan, the interests of the Trust therein or the interests of any
Certificateholder, the applicable Mortgage Loan Seller, if it does not cure such
breach within a period of 90 days following its receipt of notice thereof, is
obligated pursuant to the applicable Mortgage Loan Purchase Agreement (the
relevant rights under which have been assigned by the Depositor to the Trustee)
to either substitute a Qualified Substitute Mortgage Loan and pay any
Substitution Shortfall Amount or to repurchase the affected Mortgage Loan within
such 90-day period at the applicable Purchase Price; provided that, unless the
breach would cause the Mortgage Loan not to be a qualified mortgage within the
meaning of Section 860G(a)(3) of the Code, the applicable Mortgage Loan Seller
generally has an additional 90-day period to cure such breach if it is
diligently proceeding with such cure. Each Mortgage Loan Seller is solely
responsible for its repurchase or substitution obligation, and such obligations
will not be the responsibility of the Depositor.
The foregoing substitution or repurchase obligation constitutes the sole
remedy available to the Certificateholders and the Trustee for any uncured
breach of any Mortgage Loan Seller's representations and warranties regarding
its Mortgage Loans. There can be no assurance that the applicable Mortgage Loan
Seller will have the financial resources to repurchase any Mortgage Loan at any
particular time. Each Mortgage Loan Seller is the sole warranting party in
respect of the Mortgage Loans sold by such Mortgage Loan Seller to the
Depositor, and none of the Depositor nor any of such party's affiliates (except
with respect to Wachovia Bank, National Association in its capacity as a
Mortgage Loan Seller) will be obligated to substitute or repurchase any such
affected Mortgage Loan in connection with a breach of a Mortgage Loan Seller's
representations and warranties if such Mortgage Loan Seller defaults on its
obligation to do so.
With respect to any Mortgage Loan which has become a Defaulted Mortgage
Loan under the Pooling and Servicing Agreement or with respect to which the
related Mortgaged Property has been foreclosed and in each case, which is the
subject of a repurchase claim under the related Mortgage Loan Purchase
Agreement, the Special Servicer with the consent of the Controlling Class
Representative will be required to notify the related Mortgage Loan Seller in
writing of its intention to sell such Defaulted Mortgage Loan or such foreclosed
Mortgaged Property at least 45 days prior to commencing any such action. Such
Mortgage Loan Seller shall have 10 business days to determine whether or not to
consent to such sale. If such Mortgage Loan Seller does not consent to such
sale, the Special Servicer shall contract with a third party set forth in the
Pooling and Servicing Agreement (a "Determination Party") as to the merits of
such sale. If the related Determination Party determines that the proposed sale
is reasonable, given the circumstances, and subsequent to such sale, a court of
competent jurisdiction determines that such Mortgage Loan Seller was liable
under the related Mortgage Loan Agreement and required to repurchase
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such Defaulted Mortgage Loan or REO Property in accordance with the terms
thereof, then such Mortgage Loan Seller will be required to pay an amount equal
to the difference (if any) between the proceeds of the related action and the
price at which such Mortgage Loan Seller would have been obligated to pay had
such Mortgage Loan Seller repurchased such Defaulted Mortgage Loan or REO
Property in accordance with the terms thereof which shall generally include the
costs related to contracting with the Determination Party. In the event that (a)
the Special Servicer ignores the determination of the Determination Party and
liquidates the related Defaulted Mortgage Loan or REO Property and/or (b) a
court of competent jurisdiction determines that such Mortgage Loan Seller was
not obligated to repurchase the related Defaulted Mortgage or REO Property, the
costs of contracting with the Determination Party will constitute Additional
Trust Fund Expenses and the Mortgage Loan Seller is not liable for any such
difference.
In the event that the related borrower wants to defease an Early Defeasance
Loan on or before the second anniversary of the Closing Date, the related
Mortgage Loan Seller will be required to repurchase such Early Defeasance Loan
from the trust prior to the date of such early defeasance at the applicable
Purchase Price. In the event the applicable Mortgage Loan Seller fails to
purchase the Early Defeasance Loan as required, the Special Servicer will sell
such Early Defeasance Loan from the trust at the highest available price as soon
as reasonably practicable and prior to the date of such early defeasance. In
connection with such a repurchase or sale, the special servicer will effect a
"qualified liquidation" of the applicable Early Defeasance Loan REMIC, within
the meaning of Section 860F(a)(4) of the Code. The applicable Mortgage Loan
Seller will be responsible for the payment of the amount, if any, by which the
aggregate of the Purchase Price exceeds the proceeds received with respect to
such sale and liquidation of such Early Defeasance Loan. There will be no yield
maintenance payable on any repurchase of any Early Defeasance Loan by the
related Mortgage Loan Seller.
REPURCHASE OR SUBSTITUTION OF CROSS-COLLATERALIZED MORTGAGE LOANS
If (i) any Mortgage Loan is required to be repurchased or substituted for
in the manner described above in "--Assignment of the Mortgage Loans;
Repurchases and Substitutions" or "--Representations and Warranties; Repurchases
and Substitutions", (ii) such Mortgage Loan is cross-collateralized and
cross-defaulted with one or more other Mortgage Loans (each a "Crossed Loan"
and, collectively, a "Crossed Group"), and (iii) the applicable document
omission or defect (a "Defect") or breach of a representation and warranty (a
"Breach") does not constitute a Defect or Breach, as the case may be, as to any
other Crossed Loan in such Crossed Group (without regard to this paragraph),
then the applicable Defect or Breach, as the case may be, will be deemed to
constitute a Defect or Breach, as the case may be, as to any other Crossed Loan
in the Crossed Group for purposes of this paragraph, and the related Mortgage
Loan Seller will be required to repurchase or substitute for such other Crossed
Loan(s) in the related Crossed Group as provided above in "--Assignment of the
Mortgage Loans; Repurchases and Substitutions" or "--Representations and
Warranties; Repurchases and Substitutions" unless: (i) the debt service coverage
ratio for all of the remaining Crossed Loans for the four calendar quarters
immediately preceding the repurchase or substitution is not less than the debt
service coverage ratio for all such related Crossed Loans, including the
affected Crossed Loan, for the four calendar quarters immediately preceding the
repurchase or substitution, (ii) the loan-to-value ratio for any of the
remaining related Crossed Loans, determined at the time of repurchase or
substitution, is not greater than the loan-to-value ratio for all such related
Crossed Loans, including the affected Crossed Loan, determined at the time of
repurchase or substitution, and (iii) the Trustee receives an opinion of counsel
to the effect that such repurchase or substitution is permitted by the REMIC
provisions. In the event that one or more of such other Crossed Loans satisfy
the aforementioned criteria, the Mortgage Loan Seller may elect either to
repurchase or substitute for only the affected Crossed Loan as to which the
related Breach or Defect exists or to repurchase or substitute for all of the
Crossed Loans in the related Crossed Group.
To the extent that the related Mortgage Loan Seller repurchases or
substitutes for an affected Crossed Loan as described in the immediately
preceding paragraph while the Trustee continues to hold any related Crossed
Loans, the related Mortgage Loan Seller and the Depositor have agreed in the
related Mortgage Loan Purchase Agreement to forbear from enforcing any remedies
against the other's Primary Collateral (as defined below), but each is permitted
to exercise remedies against the Primary
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Collateral securing its respective affected Crossed Loans, including, with
respect to the Trustee, the Primary Collateral securing Mortgage Loans still
held by the Trustee. If the exercise of remedies by one party would materially
impair the ability of the other party to exercise its remedies with respect to
the Primary Collateral securing the Crossed Loans held by such party, then both
parties have agreed in the related Mortgage Loan Purchase Agreement to forbear
from exercising such remedies until the loan documents evidencing and securing
the relevant Mortgage Loans can be modified in a manner that complies with the
Mortgage Loan Purchase Agreement to remove the threat of material impairment as
a result of the exercise of remedies or some other accommodation can be reached.
"Primary Collateral" means the Mortgaged Property directly securing a Crossed
Loan and excluding any property as to which the related lien may only be
foreclosed upon by virtue of the cross collateralization features of such loans.
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The descriptions in this Prospectus Supplement of the Mortgage Loans and
the Mortgaged Properties are based upon the Mortgage Pool as it is expected to
be constituted as of the close of business on the Closing Date, assuming that
(i) all scheduled principal and interest payments due on or before the Cut-Off
Date will be made, and (ii) there will be no principal prepayments on or before
the Cut-Off Date. Prior to the issuance of the Certificates, Mortgage Loans may
be removed from the Mortgage Pool as a result of prepayments, delinquencies,
incomplete documentation or otherwise, if the Depositor or the applicable
Mortgage Loan Seller deems such removal necessary, appropriate or desirable. A
limited number of other mortgage loans may be included in the Mortgage Pool
prior to the issuance of the Certificates, unless including such mortgage loans
would materially alter the characteristics of the Mortgage Pool 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 Mortgage Pool 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 fifteen days after the initial
issuance of the Offered Certificates.
SERVICING OF THE MORTGAGE LOANS
GENERAL
The Master Servicer and the Special Servicer, either directly or through
sub-servicers, are required to service and administer the Mortgage Loans (other
than the Park City Center Loan) for the benefit of the Certificateholders, and
the Companion Loans (other than the Park City Center Companion Loans) for the
holder of such Companion Loans, in accordance with applicable law, the terms of
the Pooling and Servicing Agreement, the terms of the related Intercreditor
Agreement, if applicable, and the terms of the respective Mortgage Loans and, if
applicable, the Companion Loans, to the extent consistent with the foregoing,
(a) in 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, generally services and administers similar mortgage loans with similar
borrowers (i) for other third-parties, giving due consideration to customary and
usual standards of practice of prudent institutional commercial mortgage lenders
servicing their own loans, or (ii) held in its own portfolio, whichever standard
is higher, (b) with a view to the maximization of the recovery on such Mortgage
Loans on a net present value basis and the best interests of the
Certificateholders and the Trust or, if a Co-Lender Loan (other than the Park
City Center Loan) and its related Companion Loan (a "Loan Pair") are involved,
with view towards the maximization of recovery on such Loan Pair to the
Certificateholders, the holder of the related Companion Loan and the Trust Fund
(as a collective whole, taking into account that the Companion Loans related to
the AB Mortgage Loans are subordinate to the applicable AB Mortgage Loans to and
that the Meadows Mall Pari Passu Loan is pari passu in right of entitlement to
payment to the Meadows Mall Loan the extent set forth in the related
Intercreditor Agreement), and (c) without regard to (i) any relationship that
the Master Servicer or the Special Servicer, as the case may be, or any
affiliate thereof, may have with the
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related borrower, the Mortgage Loan Sellers or any other party to the Pooling
and Servicing Agreement or any affiliate thereof; (ii) the ownership of any
Certificate or Companion Loan by the Master Servicer or the Special Servicer, as
the case may be, or by any affiliate thereof; (iii) the right of the Master
Servicer or the Special Servicer, as the case may be, to receive compensation or
other fees for its services rendered pursuant to the Pooling and Servicing
Agreement; (iv) the obligation of the Master Servicer to make Advances (as
defined in this Prospectus Supplement); (v) the ownership, servicing or
management by the Master Servicer or the Special Servicer or any affiliate
thereof for others of any other mortgage loans or real property; (vi) any
obligation of the Master Servicer, or any affiliate thereof, to repurchase or
substitute a Mortgage Loan as a Mortgage Loan Seller; (vii) any obligation of
the Master Servicer or any affiliate thereof to cure a breach of a
representation and warranty with respect to a Mortgage Loan; and (viii) any debt
the Master Servicer or Special Servicer or any affiliate of either has extended
to any obligor on a Mortgage Note (the foregoing referred to as the "Servicing
Standard"). See "--Servicing of the Park City Center Loan" below for a
description of the Servicing of the Park City Center Loan.
The Master Servicer and the Special Servicer may appoint sub-servicers with
respect to the Mortgage Loans; provided that the Master Servicer and the Special
Servicer will remain obligated under the Pooling and Servicing Agreement for the
servicing of the Mortgage Loans (other than the Park City Center Loan). The
Trust Fund will not be responsible for any fees owed to any sub-servicer
retained by the Master Servicer or the Special Servicer. Each sub-servicer
retained thereby will be reimbursed by the Master Servicer or the Special
Servicer, as the case may be, for certain expenditures which it makes, generally
to the same extent the Master Servicer or Special Servicer would be reimbursed
under the Pooling and Servicing Agreement.
Set forth below, following the subsection captioned "--The Master Servicer
and the Special Servicer," is a description of certain pertinent provisions of
the Pooling and Servicing Agreement relating to the servicing of the Mortgage
Loans and Companion Loans (but excluding the Park City Center Loan and its
respective Companion Loans). Reference is also made to the Prospectus, in
particular to the section captioned "DESCRIPTION OF THE POOLING AND SERVICING
AGREEMENTS", for important information in addition to that set forth in this
prospectus supplement regarding the terms and conditions of the Pooling and
Servicing Agreement as they relate to the rights and obligations of the Master
Servicer and Special Servicer thereunder. The Special Servicer generally has all
of the rights to indemnity and reimbursement, and limitations on liability, that
the Master Servicer is described as having in the Prospectus and certain
additional rights to indemnity as provided in the Pooling and Servicing
Agreement relating to actions taken at the direction of the Controlling Class
Representative (and, in certain circumstances, the holder of an AB Companion
Loan), and the Special Servicer rather than the Master Servicer will perform the
servicing duties described in the prospectus with respect to Specially Serviced
Mortgage Loans and REO Properties (each as described in this prospectus
supplement). In addition to the circumstances for resignation of the Master
Servicer set forth in the prospectus, the Master Servicer and the Special
Servicer each has the right to resign at any other time provided that (i) a
willing successor thereto has been found, (ii) each of the Rating Agencies
confirms in writing that the successor's appointment will not result in a
withdrawal, qualification or downgrade of any rating or ratings assigned to any
class of Certificates, (iii) the resigning party pays all costs and expenses in
connection with such transfer, and (iv) the successor accepts appointment prior
to the effectiveness of such resignation. See "DESCRIPTION OF THE POOLING AND
SERVICING AGREEMENTS--Certain Matters Regarding the Master Servicer and the
Depositor" in the prospectus.
THE MASTER SERVICER AND THE SPECIAL SERVICER
Wachovia Bank, National Association, in its capacity as Master Servicer
under the Pooling and Servicing Agreement (in such capacity, the "Master
Servicer"), will be responsible for servicing the Mortgage Loans (other than
Specially Serviced Mortgage Loans, REO Properties and the Park City Center
Loan). Although the Master Servicer will be authorized to employ agents,
including sub-servicers, to directly service the Mortgage Loans for which it
will be responsible, the Master Servicer will remain liable for its servicing
obligations under the Pooling and Servicing Agreement.
Wachovia Bank, National Association is a wholly owned subsidiary of
Wachovia Corporation, and is our affiliate and one of the Mortgage Loan Sellers
and an affiliate of one of the Underwriters. Wachovia
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Bank, National Association's principal servicing offices are located at NC 1075,
8739 Research Drive URP4, Charlotte, North Carolina 28262.
As of September 30, 2003, Wachovia Bank, National Association and its
affiliates were responsible for master or primary servicing approximately 9,536
commercial and multifamily loans, totaling approximately $83.2 billion in
aggregate outstanding principal amounts, including loans securitized in
mortgage-backed securitization transactions.
The information set forth in this Prospectus Supplement concerning Wachovia
Bank, National Association has been provided by Wachovia Bank, National
Association, and neither the Depositor nor the Underwriters make any
representation or warranty as to the accuracy or completeness of such
information. Wachovia Bank, National Association (apart from its obligations as
a Mortgage Loan Seller and except for the information in the first three
paragraphs under this heading) will make no representations as to the validity
or sufficiency of the Pooling and Servicing Agreement, the Certificates, the
Mortgage Loans, this Prospectus Supplement or related documents.
Lennar Partners, Inc., a Florida corporation, (the "Special Servicer") is a
subsidiary of LNR Property Corporation ("LNR") and will be responsible for
special servicing any Specially Serviced Mortgage Loans and REO Properties. The
principal executive offices of the Special Servicer are located at 1601
Washington Avenue, Miami Beach, Florida 33139, and its telephone number is (305)
695-5600. LNR, its subsidiaries and affiliates are involved in the real estate
investment and management business and engage principally in (i) acquiring,
developing, managing and repositioning commercial and multifamily residential
real estate properties, (ii) acquiring (often in partnership with financial
institutions or real estate funds) and managing portfolios of mortgage loans and
other real estate assets, (iii) investing in unrated and non-investment grade
rated commercial mortgage-backed securities as to which LNR has the right to be
special servicer, and (iv) making high yielding real estate related loans and
equity investments. As of April 30, 2003, the Special Servicer and its
affiliates were managing a portfolio which included an original count of over
14,800 assets in most states with an original face value of over $94 billion,
most of which are commercial real estate assets. Included in this managed
portfolio are $91 billion of commercial real estate assets representing 108
securitization transactions, for which the Special Servicer is servicer or
special servicer.
The Special Servicer and its affiliates own and are in the business of
acquiring assets similar in type to the assets of the Trust Fund. Accordingly,
the assets of the Special Servicer and its affiliates may, depending upon the
particular circumstances including the nature and location of such assets,
compete with the Mortgaged Properties for tenants, purchasers, financing and so
forth.
The information set forth herein regarding the Special Servicer has been
provided by Lennar Partners, Inc. and neither the Depositor nor any Underwriter
makes any representation or warranty as to the accuracy or completeness of such
information.
The Pooling and Servicing Agreement permits the holder (or holders) of the
majority of the Voting Rights allocated to the Controlling Class to replace the
Special Servicer and to select a representative (the "Controlling Class
Representative") who may advise the Special Servicer and whose approval is
required for certain actions by the Special Servicer under certain
circumstances. The Controlling Class Representative is selected by holders of
Certificates representing more than 50% of the Certificate Balance of the
Controlling Class. See "--The Controlling Class Representative" in this
Prospectus Supplement. Such holder (or holders) will be required to pay all
out-of-pocket costs related to the transfer of servicing if the Special Servicer
is replaced other than due to an event of default under the Pooling and
Servicing Agreement, including without limitation, any costs relating to Rating
Agency confirmation and legal fees associated with the transfer. The
"Controlling Class" is the Class of Sequential Pay Certificates, (a) which bears
the latest alphabetical Class designation and (b) the Certificate Balance of
which is greater than 25% of its original Certificate Balance; provided,
however, that if no Class of Sequential Pay Certificates satisfies clause (b)
above, the Controlling Class shall be the outstanding Class of Certificates
(other than the Class Z Certificates, the REMIC Residual Certificates or the
Class X Certificates) bearing the latest alphabetical Class designation. The
Class A-1, Class A-2, Class A-3 and Class A-4 Certificates will be treated as
one Class for determining the Controlling Class. Any such replacement of a
Special Servicer will be subject to, among other things, (i) the delivery of
notice of the proposed replacement to the Rating
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Agencies and receipt of written confirmation from the Rating Agencies that the
replacement will not result in a qualification, downgrade or withdrawal of any
of the then current ratings assigned to the Certificates, and (ii) the written
agreement of the successor Special Servicer to be bound by the terms and
conditions of the Pooling and Servicing Agreement. See "DESCRIPTION OF THE
CERTIFICATES--Voting Rights" in this prospectus supplement and the accompanying
prospectus.
The Special Servicer is responsible for servicing and administering any
Mortgage Loan (other than the Park City Center Loan) or Companion Loan (other
than the Park City Center Pari Passu Loan and the Park City Center AB Companion
Loan) as to which (a) the related mortgagor has (i) failed to make within 60
days of the date due any Balloon Payment unless the Master Servicer has, on or
prior to such 60th day, received written evidence from an institutional lender
of such lender's binding commitment to refinance such Mortgage Loan or Companion
Loan within 120 days after the due date of such Balloon Payment (provided that
if such refinancing does not occur during such time specified in the commitment,
a Servicing Transfer Event will be deemed to have occurred), or (ii) failed to
make when due any Periodic Payment (other than a Balloon Payment), and such
failure has continued unremedied for 60 days; (b) the Master Servicer or the
Special Servicer (in the case of the Special Servicer, with the consent of the
Controlling Class Representative) has determined, in its good faith reasonable
judgment and in accordance with the Servicing Standard, based on communications
with the related mortgagor, that a default in making a Periodic Payment
(including a Balloon Payment) is likely to occur and is likely to remain
unremedied for at least 60 days; (c) there shall have occurred a default (other
than as described in clause (a) above and, in certain circumstances, the failure
to maintain insurance for terrorist or similar attacks or for other risks
required by the mortgage loan documents to be insured against pursuant to the
terms of the Pooling and Servicing Agreement) that the Master Servicer or the
Special Servicer (in the case of the Special Servicer, with the consent of the
Controlling Class Representative) shall have determined, in its good faith and
reasonable judgment and in accordance with the Servicing Standard, materially
impairs the value of the Mortgaged Property as security for the Mortgage Loan
and, if applicable, Companion Loan or otherwise materially adversely affects the
interests of Certificateholders and that continues unremedied beyond the
applicable grace period under the terms of the Mortgage Loan (or, if no grace
period is specified, for 60 days and provided that a default that gives rise to
an acceleration right without any grace period shall be deemed to have a grace
period equal to zero); (d) a decree or order under any bankruptcy, insolvency or
similar law shall have been entered against the related borrower and such decree
or order shall have remained in force, undischarged, undismissed or unstayed for
a period of 60 days; (e) the related borrower shall consent to the appointment
of a conservator or receiver or liquidator in any insolvency or similar
proceedings of or relating to such related borrower or of or relating to all or
substantially all of its property; (f) the related borrower shall admit in
writing its inability to pay its debts generally as they become due, file a
petition to take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors, or voluntarily
suspend payment of its obligations; (g) the Master Servicer shall have force
placed insurance against damages or losses arising from acts of terrorism due to
the failure of the related borrower to maintain or cause such insurance to be
maintained and (1) subsequent to such force placement such borrower fails to
maintain or cause to be maintained insurance coverage against damages or losses
arising from acts of terrorism for a period of 60 days (or such shorter time
period as the Controlling Class Representative may consent to) or (2) the Master
Servicer fails to have been reimbursed for any servicing advances made in
connection with the force placement of such insurance coverage (unless the
circumstances giving rise to such forced placement of such insurance coverage
have otherwise been cured and the Master Servicer has been reimbursed for any
servicing advances made in connection with the forced placement of such
insurance coverage); or (h) the Master Servicer shall have received notice of
the commencement of foreclosure or similar proceedings with respect to the
related Mortgaged Property (each event described in clauses (a) through (h)
above, a "Servicing Transfer Event").
In general, as long as the related Co-Lender Loan (other than the Park City
Center Loan) is owned by the Trust, each Companion Loan will be serviced and
administered under the Pooling and Servicing Agreement as if it were a Mortgage
Loan and the holder of the related Mortgage Note were a Certificateholder. If a
Companion Loan (other than the Park City Center Pari Passu Loan or the Park City
Center AB Companion Loan) becomes specially serviced, then the Co-Lender Loan
will become a
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Specially Serviced Mortgage Loan. If a Co-Lender Loan (other than the Park City
Center Loan) becomes a Specially Serviced Mortgage Loan, then the related
Companion Loan will become a Specially Serviced Mortgage Loan. If the Park City
Center Pari Passu Loan becomes a specially serviced mortgage loan under the
2003-C8 Pooling and Servicing Agreement, the Park City Center Loan will become a
specially serviced mortgage loan under the 2003-C8 Pooling and Servicing
Agreement.
If any amounts due under the AB Mortgage Loans or the related Companion
Loans are accelerated after an event of default under the applicable Mortgage
Loan documents, the holder of the related Companion Loan will be entitled to
purchase the related Mortgage Loan at the price described under "DESCRIPTION OF
THE MORTGAGE POOL--Co-Lender Loans" in this prospectus supplement.
If a Servicing Transfer Event occurs with respect to any Mortgage Loan
(other than the Park City Center Loan) or a related Companion Loan, the Master
Servicer is in general required to transfer its servicing responsibilities with
respect to such Mortgage Loan and Companion Loan to the Special Servicer.
Notwithstanding such transfer, the Master Servicer will continue to receive
payments on such Mortgage Loan and Companion Loan (including amounts collected
by the Special Servicer), to make certain calculations with respect to such
Mortgage Loan and Companion Loan, and to make remittances (including, if
necessary, P&I Advances) and prepare certain reports to the Paying Agent with
respect to such Mortgage Loan. If title to the related Mortgaged Property is
acquired by the Trust Fund (upon acquisition, an "REO Property"), whether
through foreclosure, deed in lieu of foreclosure or otherwise, the Special
Servicer will continue to be responsible for the management thereof. Mortgage
Loans and Companion Loans serviced by the Special Servicer are referred to in
this Prospectus Supplement as "Specially Serviced Mortgage Loans" and, together
with any REO Properties, constitute "Specially Serviced Trust Fund Assets". The
Master Servicer has no responsibility for the Special Servicer's performance of
its duties under the Pooling and Servicing Agreement.
A Mortgage Loan (other than the Park City Center Loan) or Companion Loan
(other than the Park City Center Pari Passu Loan or the Park City Center AB
Companion Loan) will cease to be a Specially Serviced Mortgage Loan (and will
become a "Corrected Mortgage Loan" as to which the Master Servicer will
re-assume servicing responsibilities):
(a) with respect to the circumstances described in clause (a) of the
definition of Servicing Transfer Event, when the related borrower has made
three consecutive full and timely Periodic Payments under the terms of such
Mortgage Loan (as such terms may be changed or modified in connection with a
bankruptcy or similar proceeding involving the related borrower or by reason
of a modification, waiver or amendment granted or agreed to by the Special
Servicer);
(b) with respect to any of the circumstances described in clauses (b),
(d), (e) and (f) of the definition of Servicing Transfer Event, when such
circumstances cease to exist in the good faith, reasonable judgment of the
Special Servicer, but, with respect to any bankruptcy or insolvency
proceedings described in clauses (d), (e) and (f) no later than the entry of
an order or decree dismissing such proceeding;
(c) with respect to the circumstances described in clause (c) of the
definition of Servicing Transfer Event, when such default is cured; and
(d) with respect to the circumstances described in clause (g) of the
definition of Servicing Transfer Event, when such proceedings are
terminated;
so long as at that time no other Servicing Transfer Event then exists and
provided no additional default is foreseeable in the reasonable good faith
judgment of the Special Servicer.
SERVICING OF THE PARK CITY CENTER LOAN
The Park City Center Loan and any related REO Property are being serviced
under the 2003-C8 Pooling and Servicing agreement and therefore the 2003-C8
Master Servicer and/or the 2003-C8 Trustee will generally make advances and
remit collections on the Park City Center Loan to or on behalf of the Trust
Fund. The servicing arrangements under the 2003-C8 Pooling and Servicing
Agreement are generally similar to the servicing arrangements under the Pooling
and Servicing Agreement.
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In that regard:
o The 2003-C8 Master Servicer is Wachovia Bank, National Association and the
2003-C8 Special Servicer is Clarion Partners, LLC, who will respectively
be the master servicer and the special servicer for the Park City Center
Loan.
o The 2003-C8 Trustee is Wells Fargo Bank Minnesota, N.A., who will be
the mortgagee of record for the Park City Center Loan.
o The Master Servicer, the Special Servicer or the Trustee under the
Pooling and Servicing Agreement will have no obligation or authority to
(a) supervise the 2003-C8 Master Servicer, the 2003-C8 Special Servicer
or 2003-C8 Trustee or (b) make servicing advances with respect to the
Park City Center Loan. The obligation of the Master Servicer to provide
information and collections to the Trustee and the Certificateholders
with respect to the Park City Center Loan is dependent on its receipt of
the corresponding information and collection from the 2003-C8 Master
Servicer or the 2003-C8 Special Servicer.
o After a Park City Center Threshold Event (as defined below), the
Controlling Class Representative will generally share with the 2003-C8
Controlling Class Representative the rights given to the 2003-C8
Controlling Class Representative under the 2003-C8 Pooling and Servicing
Agreement to direct the servicing of the Park City Center Loan. Prior to
a Park City Center Threshold Event, the 2003-C8 Controlling Class
Representative will not be entitled to exercise any of the rights and
powers described in the 2003-C8 Pooling and Servicing Agreement with
respect to the Park City Center Loan and, instead, the holder of the Park
City Center AB Companion Loan or its designee will have the right to
direct the servicing of the Park City Center Loan. See "--The Controlling
Class Representative" below, provided that with respect to the Park City
Center Loan, neither the 2003-C8 Controlling Class Representative nor the
Controlling Class Representative will be entitled to approve (a) any
termination of the related property manager, (b) any determination to
allow the related borrower not to maintain terrorism insurance, or (c)
any determination to decrease the time period referenced in clause (g) of
the definition of Servicing Transfer Event.
o Pursuant to the 2003-C8 Pooling and Servicing Agreement, the workout fee
and liquidation fee with respect to the Park City Center Loan will be
generally the same as under the Pooling and Servicing Agreement.
o The Master Servicer will be required to make P&I Advances with respect to
the Park City Center Loan that the 2003-C8 Master Servicer is required
but fails to make, unless the 2003-C8 Master Servicer or the Master
Servicer has determined that such advance would not be recoverable from
collections on the Park City Center Loan.
o If the 2003-C8 Master Servicer determines that a servicing advance it
made with respect to the Park City Center Loan or the related Mortgaged
Property is nonrecoverable, it will be entitled to be reimbursed from
general collections on all Mortgage Loans.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The principal compensation to be paid to the Master Servicer in respect of
its servicing activities is the Master Servicing Fee. The "Master Servicing Fee"
is payable monthly on a loan-by-loan basis from amounts received in respect of
interest on each Mortgage Loan (including each Specially Serviced Mortgage Loan,
and from REO Revenue with respect to each REO Mortgage Loan), is calculated on
the basis of a 360-day year consisting of twelve 30-day months, accrues at the
related Master Servicing Fee Rate and is computed on the basis of the same
principal amount respecting which any related interest payment due on the
Mortgage Loan is computed. The "Master Servicing Fee Rate" is a per annum rate
ranging from 0.0400% to 0.1450%. As of the Cut-Off Date the weighted average
Master Servicing Fee Rate will be approximately 0.0444% per annum. The Master
Servicer will not be entitled to receive a separate fee with respect to a
Companion Loan unless such fee is expressly set forth in the related
Intercreditor Agreement. Otherwise, all references in this section to "Mortgage
Loans" will include the Companion Loans.
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The Park City Center Loan will be serviced by the 2003-C8 Master Servicer.
Notwithstanding the foregoing, the Master Servicer shall receive a Master
Servicing Fee with respect to the Park City Center Loan at a Master Servicing
Fee Rate of 0.02%.
If a borrower prepays a Mortgage Loan on a date that is prior to its Due
Date in any Collection Period, the amount of interest (net of related Master
Servicing Fees and, if applicable, Additional Interest) that accrues on the
Mortgage Loan during such Collection Period will be less (such shortfall, a
"Prepayment Interest Shortfall") than the amount of interest (net of related
Master Servicing Fees and, if applicable, Additional Interest and without regard
to any Prepayment Premium or Yield Maintenance Charge actually collected) that
would have accrued on the Mortgage Loan through its Due Date. If such a
principal prepayment occurs during any Collection Period after the Due Date for
such Mortgage Loan in such Collection Period, the amount of interest (net of
related Master Servicing Fees) that accrues and is collected on the Mortgage
Loans during such Collection Period will exceed (such excess, a "Prepayment
Interest Excess") the amount of interest (net of related Master Servicing Fees,
and without regard to any Prepayment Premium or Yield Maintenance Charge
actually collected) that would have been collected on the Mortgage Loan during
such Collection Period if the borrower had not prepaid. Any Prepayment Interest
Excesses collected will be paid to the Master Servicer as additional servicing
compensation. However, with respect to each Distribution Date, the Master
Servicer is required to deposit into the Certificate Account (such deposit, a
"Compensating Interest Payment"), without any right of reimbursement therefor,
with respect to each Mortgage Loan (other than a Specially Serviced Mortgage
Loan and other than any Mortgage Loan on which the Special Servicer has waived a
prepayment restriction) that was subject to a voluntary principal prepayment
during the most recently ended Collection Period creating a Prepayment Interest
Shortfall, an amount equal to the lesser of (i) the sum of (a) the Master
Servicing Fee (up to a Master Servicing Fee Rate of 0.0200% per annum) received
by the Master Servicer during such Collection Period on such Mortgage Loan and
(b) investment income earned by the Master Servicer on the related principal
prepayment during the most recently ended Collection Period, and (ii) the amount
of the related Prepayment Interest Shortfall; provided, however, to the extent
any such Prepayment Interest Shortfall is the result of the Master Servicer's
failure to enforce the applicable Mortgage Loan documents, the amount in clause
(a) shall include the entire Master Servicing Fee on the applicable Mortgage
Loan for such Collection Period; provided, further, however, with respect to the
2 Mortgage Loans that have a Due Date on the 15th of each month, in the event of
a Prepayment Interest Shortfall, the Master Servicer will deposit in the
Certificate Account, without any right to reimbursement therefor, one full month
of interest on such prepayment. Compensating Interest Payments will not cover
shortfalls in Mortgage Loan interest accruals that result from any liquidation
of a defaulted Mortgage Loan, or of any REO Property acquired in respect
thereof, that occurs during a Collection Period prior to the related Due Date
therein or involuntary prepayments.
The principal compensation to be paid to the Special Servicer in respect of
its special servicing activities is the Special Servicing Fee (together with the
Master Servicing Fee, the "Servicing Fees") and, under the circumstances
described in this Prospectus Supplement, Liquidation Fees and Workout Fees. The
"Special Servicing Fee" is calculated on the basis of a 360-day year consisting
of twelve 30-day months, accrues at a rate (the "Special Servicing Fee Rate")
equal to 0.2500% per annum and is computed on the basis of the same principal
amount respecting which any related interest payment due on such Specially
Serviced Mortgage Loan or REO Mortgage Loan, as the case may be. However, earned
Special Servicing Fees are payable out of general collections on the Mortgage
Loans then on deposit in the Certificate Account. The Special Servicing Fee with
respect to any Specially Serviced Mortgage Loan (or REO Mortgage Loan) will
cease to accrue if such loan (or the related REO Property) is liquidated or if
such loan becomes a Corrected Mortgage Loan. The Special Servicer is entitled to
a "Liquidation Fee" with respect to each Specially Serviced Trust Fund Asset,
which Liquidation Fee generally will be in an amount equal to 1.0000% of all
amounts received in respect of such Mortgage Loan or the related REO Property,
as applicable, payable by withdrawal from such amounts on deposit in the
Certificate Account. However, no Liquidation Fee will be payable in connection
with, or out of, insurance proceeds, condemnation proceeds or liquidation
proceeds resulting from the purchase of any Specially Serviced Trust Fund Asset
(i) by a Mortgage Loan Seller (as described under "DESCRIPTION OF THE MORTGAGE
POOL--Assignment of the Mortgage Loans; Repurchases and Substitutions" and
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"--Representations and Warranties; Repurchases and Substitutions" in this
prospectus supplement), (ii) by the Master Servicer, the Special Servicer, the
Majority Subordinate Certificateholder or the purchasing Certificateholder as
described under "DESCRIPTION OF THE CERTIFICATES--Termination" in this
prospectus supplement or (iii) in certain other limited circumstances, including
in connection with the purchase of the Co-Lender Loans as described under
"DESCRIPTION OF THE MORTGAGE POOL--Co-Lender Loans" in this prospectus
supplement. The Special Servicer also is entitled to a "Workout Fee" with
respect to each Corrected Mortgage Loan, which is generally equal to 1.0000% of
all payments of interest and principal received on such Mortgage Loan for so
long as it remains a Corrected Mortgage Loan, payable by withdrawal from such
amounts on deposit in the Certificate Account. If the Special Servicer is
terminated or resigns, it will retain the right to receive any and all Workout
Fees payable with respect to any Mortgage Loan that became a Corrected Mortgage
Loan during the period that it acted as Special Servicer and remained a
Corrected Mortgage Loan at the time of its termination or resignation or if the
Special Servicer resolved the circumstances and/or conditions (including by way
of a modification of the related Mortgage Loan documents) causing the Mortgage
Loan to be a Specially Serviced Mortgage Loan, but the Mortgage Loan had not as
of the time the Special Servicer is terminated or resigns become a Corrected
Mortgage Loan because the related borrower had not made three consecutive
monthly debt service payments and subsequently becomes a Corrected Mortgage Loan
as a result of making such three consecutive payments. The successor Special
Servicer will not be entitled to any portion of those Workout Fees.
As additional servicing compensation, the Master Servicer or the Special
Servicer is entitled to retain all modification fees, assumption fees,
defeasance fees, assumption application fees, late payment charges and default
interest (to the extent not used to offset interest on Advances, Additional
Trust Fund Expenses (other than Special Servicing Fees, Workout Fees and/or
Liquidation Fees) and the cost of property inspections as provided in the
Pooling and Servicing Agreement) and Prepayment Interest Excesses collected from
borrowers on Mortgage Loans. In addition, to the extent the Master Servicer or
the Special Servicer receives late payment charges or default interest on a
Mortgage Loan for which interest on Advances or Additional Trust Fund Expenses
(other than Special Servicing Fees, Workout Fees and/or Liquidation Fees)
related to such Mortgage Loan has been paid and not previously reimbursed to the
Trust Fund, such late payment charges or default interest will be used to
reimburse the Trust Fund for such payment of interest or Additional Trust Fund
Expenses. In addition, each of the Master Servicer and the Special Servicer is
authorized to invest or direct the investment of funds held in those accounts
maintained by it that relate to the Mortgage Loans or REO Properties, as the
case may be, in certain short-term United States government securities and
certain other permitted investment grade obligations, and the Master Servicer
and the Special Servicer each will be entitled to retain any interest or other
income earned on such funds held in those accounts maintained by it, but shall
be required to cover any losses on investments of funds held in those accounts
maintained by it, from its own funds without any right to reimbursement, except
in certain limited circumstances described in the Pooling and Servicing
Agreement.
Each of the Master Servicer and Special Servicer is, in general, required
to pay all ordinary expenses incurred by it in connection with its servicing
activities under the Pooling and Servicing Agreement, including the fees of any
sub-servicers retained by it, and is not entitled to reimbursement therefor
except as expressly provided in the Pooling and Servicing Agreement. However,
each of the Master Servicer and Special Servicer is permitted to pay certain of
such expenses (including certain expenses incurred as a result of a Mortgage
Loan default) directly out of the Certificate Account and at times without
regard to the Mortgage Loan with respect to which such expenses were incurred.
See "DESCRIPTION OF THE CERTIFICATES--Distributions" in this prospectus
supplement and "DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS--Certificate
Account" and "--Servicing Compensation and Payment of Expenses" in the
prospectus.
As and to the extent described in this Prospectus Supplement under
"DESCRIPTION OF THE CERTIFICATES--P&I Advances," each of the Master Servicer and
the Trustee is entitled to receive interest, at the Reimbursement Rate, on any
reimbursable servicing expenses incurred by it. Such interest will compound
annually and will be paid, contemporaneously with the reimbursement of the
related servicing expense, first out of late payment charges and default
interest received on the related Mortgage
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Loan and then from general collections on the Mortgage Loans then on deposit in
the Certificate Account. In addition, to the extent the Master Servicer receives
late payment charges or default interest on a Mortgage Loan for which interest
on servicing expenses related to such Mortgage Loan has been paid from general
collections on deposit in the Certificate Account and not previously reimbursed,
such late payment charges or default interest will be used to reimburse the
Trust Fund for such payment of interest.
MODIFICATIONS, WAIVERS AND AMENDMENTS
The Pooling and Servicing Agreement permits the Special Servicer (subject,
with respect to the Co-Lender Loans, to certain rights of the holder of any
related Companion Loan) to modify, waive or amend any term of any Mortgage Loan
(other than the Park City Center Loan) if (a) it determines, in accordance with
the Servicing Standard, that it is appropriate to do so and the Special Servicer
determines that such modification, waiver or amendment is not "significant"
within the meaning of Treasury Regulations Section 1.860G-2(b), and (b) except
as described in the following paragraph, such modification, waiver or amendment,
will not (i) affect the amount or timing of any related payments of principal,
interest or other amount (including Prepayment Premiums and Yield Maintenance
Charges) payable under the Mortgage Loan, (ii) affect the obligation of the
related borrower to pay a Prepayment Premium or Yield Maintenance Charge or
permit a principal prepayment during the applicable Lockout Period, (iii) except
as expressly provided by the related Mortgage or in connection with a material
adverse environmental condition at the related Mortgaged Property, result in a
release of the lien of the related Mortgage on any material portion of such
Mortgaged Property without a corresponding principal prepayment in an amount not
less than the fair market value of the property released, (iv) if such Mortgage
Loan is equal to or in excess of 5% of the then aggregate current principal
balances of all Mortgage Loans or $35,000,000, or is one of the ten largest
Mortgage Loans by Stated Principal Balance as of such date, permit the transfer
of (A) the related Mortgaged Property or any interest therein or (B) equity
interests in the related borrower or an equity owner of the borrower that would
result, in the aggregate during the term of the related Mortgage Loan, in a
transfer greater than 49% of the total interest in the borrower and/or any
equity owner of the borrower or a transfer of voting control in the borrower or
an equity owner of the borrower without the prior written confirmation from each
Rating Agency (as applicable) that such change will not result in the
qualification, downgrade or withdrawal of the ratings then assigned to the
Certificates, (v) allow any additional lien on the related Mortgaged Property if
such Mortgage Loan is equal to or in excess of 2% of the then aggregate current
principal balances of the Mortgage Loans or $20,000,000, is one of the ten
largest Mortgage Loans by Stated Principal Balance as of such date, or with
respect to S&P only, has an aggregate LTV that is equal to or greater than 85%
or has an aggregate DSCR that is less than 1.20x, without the prior written
confirmation from each Rating Agency (as applicable) that such change will not
result in the qualification, downgrade or withdrawal of the ratings then
assigned to the Certificates, (vi) in the good faith, reasonable judgment of the
Special Servicer, materially impair the security for the Mortgage Loan or reduce
the likelihood of timely payment of amounts due thereon, or (vii) impair the
value or enforceability of a Lease Enhancement Policy.
Notwithstanding clause (b) of the preceding paragraph and, with respect to
the Co-Lender Loans (other than the Park City Center Loan), subject to certain
rights of the holders of any related Companion Loan, the Special Servicer may
(i) reduce the amounts owing under any Specially Serviced Mortgage Loan by
forgiving principal, accrued interest and/or any Prepayment Premium or Yield
Maintenance Charge, (ii) reduce the amount of the Periodic Payment on any
Specially Serviced Mortgage Loan, including by way of a reduction in the related
Mortgage Rate, (iii) forbear in the enforcement of any right granted under any
Mortgage Note or Mortgage relating to a Specially Serviced Mortgage Loan, (iv)
extend the maturity date of any Specially Serviced Mortgage Loan (and the Master
Servicer may extend the maturity of Mortgage Loans with an original maturity of
five years or less with Controlling Class approval for up to two six-month
extensions), and/or (v) accept a principal prepayment during any Lockout Period;
provided that (x) the related borrower is in default with respect to the
Specially Serviced Mortgage Loan or, in the reasonable, good faith judgment of
the Special Servicer, such default by the borrower is reasonably foreseeable,
(y) in the reasonable, good faith judgment of the Special Servicer, such
modification, would increase the recovery to Certificateholders on a net present
value basis and (z)
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such modification, waiver or amendment does not result in a tax being imposed on
the Trust Fund or cause any REMIC relating to the assets of the Trust Fund to
fail to qualify as a REMIC at any time the Certificates are outstanding. In no
event, however, is the Special Servicer permitted to (i) extend the maturity
date of a Mortgage Loan beyond a date that is two years prior to the Rated Final
Distribution Date, (ii) reduce the Mortgage Rate of a Mortgage Loan to less than
the lesser of (a) the original Mortgage Rate of such Mortgage Loan, (b) the
highest Pass-Through Rate of any Class of Certificates (other than any Class of
Class X Certificates) then outstanding, or (c) a rate below the then prevailing
interest rate for comparable loans, as determined by the Special Servicer, (iii)
if the Mortgage Loan is secured by a ground lease (and not also by the
corresponding fee simple interest), extend the maturity date of such Mortgage
Loan beyond a date which is 20 years prior to the expiration of the term of such
ground lease or (iv) defer interest due on any Mortgage Loan in excess of 10% of
the Stated Principal Balance of such Mortgage Loan or defer the collection of
interest on any Mortgage Loan without accruing interest on such deferred
interest at a rate at least equal to the Mortgage Rate of such Mortgage Loan.
The Special Servicer will have the ability, subject to the servicing standard
described under "--General" above, to modify Mortgage Loans with respect to
which default is reasonably foreseeable, but which are not yet in default.
The Special Servicer is required to notify the Trustee, the Paying Agent,
the Master Servicer, the Controlling Class Representative and the Rating
Agencies and, with respect to the Co-Lender Loans (other than the Park City
Center Loan), subject to certain rights of the holders of the related Companion
Loan, of any material modification, waiver or amendment of any term of any
Specially Serviced Mortgage Loan, and to deliver to the Trustee or the related
Custodian (with a copy to the Master Servicer), for deposit in the related
Mortgage File, an original counterpart of the agreement related to such
modification, waiver or amendment, promptly (and in any event within ten
business days) following the execution thereof. Copies of each agreement whereby
any such modification, waiver or amendment of any term of any Specially Serviced
Mortgage Loan is effected are required to be available for review during normal
business hours at the offices of the Special Servicer. See "DESCRIPTION OF THE
CERTIFICATES--Reports to Certificateholders; Available Information" in this
prospectus supplement.
For any Mortgage Loan other than a Specially Serviced Mortgage Loan and
other than the Park City Center Loan and subject to the rights of the Special
Servicer, the Master Servicer is responsible for any request by a borrower for
the consent to modify, waive or amend certain terms as specified in the Pooling
and Servicing Agreement, including, without limitation, (i) approving certain
leasing activity, (ii) approving certain substitute property managers, (iii)
approving certain waivers regarding the timing or need to audit certain
financial statements and (iv) approving certain consents with respect to
right-of-ways and easements and consents to subordination of the related
Mortgage Loan to such easements or right-of-ways.
THE CONTROLLING CLASS REPRESENTATIVE
Subject to the succeeding paragraphs, and other than with respect to the
Park City Center Loan, the Controlling Class Representative is entitled to
advise the Special Servicer with respect to the following actions of the Special
Servicer, and the Special Servicer is not permitted to take any of the following
actions as to which the Controlling Class Representative, has objected in
writing within ten business days of being notified thereof (provided that if
such written objection has not been received by the Special Servicer within such
ten business day period, then the Controlling Class Representative's approval
will be deemed to have been given):
(i) any actual or proposed 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 or waiver of any term of the related Mortgage
Loan Documents of a Mortgage Loan that relates to the Maturity Date,
Mortgage Rate, principal balance, amortization term, payment frequency or
any provision requiring the payment of a Prepayment Premium or Yield
Maintenance Charge (other than a modification consisting of the extension
of the maturity date of a Mortgage Loan for one year or less) or a material
non-monetary term;
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(iii) any actual or proposed sale of an REO Property (other than in
connection with the termination of the Trust Fund as described under
"DESCRIPTION OF THE CERTIFICATES-- Termination" in this prospectus
supplement or pursuant to a Purchase Option as described below under
"--Defaulted Mortgage Loans; REO Properties; Purchase Option");
(iv) any determination to bring an REO Property into compliance with
applicable environmental laws or to otherwise address hazardous materials
located at an REO Property;
(v) any acceptance of substitute or additional collateral or release
of material collateral for a Mortgage Loan unless required by the
underlying loan documents;
(vi) any waiver of a "due-on-sale" or "due-on-encumbrance" clause;
(vii) any release of any performance or "earn-out" reserves, escrows
or letters of credit;
(viii) any acceptance of an assumption agreement releasing a borrower
from liability under a Mortgage Loan;
(ix) any termination of the related property manager for Mortgage
Loans having an outstanding principal balance of greater than $5,000,000;
(x) any determination to allow a borrower not to maintain terrorism
insurance; and
(xi) any determination to decrease the time period referenced in
clause (g) of the definition of Servicing Transfer Event.
In addition, the Controlling Class Representative may, direct the Special
Servicer to take, or to refrain from taking, such other actions as the
Controlling Class Representative may deem advisable or as to which provision is
otherwise made in the Pooling and Servicing Agreement; provided that no such
direction and no objection contemplated by the prior paragraph may (i) require
or cause the Special Servicer to violate any REMIC provisions, any provision of
the Pooling and Servicing Agreement or applicable law, including the Special
Servicer's obligation to act in accordance with the Servicing Standard, or (ii)
expose the Master Servicer, the Special Servicer, the Trust Fund, the Paying
Agent or the Trustee to liability, or materially expand the scope of the Special
Servicer or its responsibilities under the Pooling and Servicing Agreement or
cause the Special Servicer to act or fail to act in a manner which, in the
reasonable judgment of the Special Servicer, is not in the best interests of the
Certificateholders. Allied Capital Corporation will be the initial Controlling
Class Representative.
Notwithstanding the foregoing, pursuant to the 2003-C8 Pooling and
Servicing Agreement and the Park City Center Intercreditor Agreement, after a
Park City Center Threshold Event, the Controlling Class Representative will
generally share with the 2003-C8 Controlling Class Representative the rights
given to the 2003-C8 Controlling Class Representative to direct the 2003-C8
Master Servicer and/or the 2003-C8 Special Servicer with respect to the
servicing of the Park City Center Loan, the Park City Center Pari Passu Loan and
the Park City Center AB Companion Loan. In general, after a Park City Center
Threshold Event, in the event that the 2003-C8 Controlling Class Representative
is required to give its consent or advice or otherwise take any action with
respect to the Park City Center Loan, the 2003-C8 Controlling Class
Representative will generally be required to confer with the Controlling Class
Representative regarding such advice or consent. In the event the 2003-C8
Controlling Class Representative and the Controlling Class Representative
disagree with respect to such advice, consent or action, the related
Intercreditor Agreement and the 2003-C8 Pooling and Servicing Agreement provide
that the 2003-C8 Controlling Class Representative and the Controlling Class
Representative will contract with a third party designated under the related
Intercreditor Agreement to resolve such disagreement and the decision of such
third party will be binding upon the 2003-C8 Controlling Class Representative
and the Controlling Class Representative in accordance with the related
Intercreditor Agreement. See "SERVICING OF THE MORTGAGE LOANS--Servicing of the
Park City Center Loan" in this prospectus supplement.
Notwithstanding the foregoing, if the unpaid principal amount of the Park
City Center AB Companion Loan, as applicable, net of any existing related
appraisal reduction amount with respect to the Park City Center Loan under the
2003-C8 Pooling and Servicing Agreement, the Park City Center Pari Passu Loan
and the Park City Center AB Companion Loan (calculated as if the Park City
Center Loan, the Park City Center Pari Passu Loan and the Park City Center AB
Companion Loan were a single mortgage loan), is equal to or greater than 25% of
the original unpaid principal amount of the Park City Center AB Companion Loan
(a "Park City Center Threshold Event"), then (i) the controlling class
representative under the 2003-C8 Pooling and Servicing Agreement (the "2003-C8
Controlling Class
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Representative") or the Controlling Class Representative under the Pooling and
Servicing Agreement will not be entitled to exercise any of the rights and
powers described in the 2003-C8 Pooling and Servicing Agreement with respect to
the Park City Center Loan, the Park City Center Pari Passu Loan or the Park City
Center AB Companion Loan and, instead, the holder of the Park City Center AB
Companion Loan or its designee will be entitled to exercise the same or similar
rights and powers with respect to the Park City Center Loan, the Park City
Center Pari Passu Loan and the Park City Center AB Companion Loan and (ii)
subject to the requirements of the 2003-C8 Pooling and Servicing Agreement and
the Park City Center Intercreditor Agreement, the holder of the Park City Center
AB Companion Loan, as applicable, or its designee will be entitled to direct the
2003-C8 Special Servicer with respect to the acceptance of a discounted payoff
with respect to the Park City AB Companion Loan, the modification, extension,
amendment or waiver of any material non-monetary term of the Park City Center
Loan, the Park City Center Pari Passu Loan and the Park City Center AB Companion
Loan if a servicing transfer event occurs under the 2003-C8 Pooling and
Servicing Agreement, and any release of collateral for the Park City Center
Loan, the Park City Center Pari Passu Loan and the Park City Center AB Companion
Loan (other than in accordance with the related Mortgage Loan documents). In
addition, subject to the requirements of the preceding paragraphs and the
immediately preceding sentence, the holder of the Park City Center AB Companion
Loan or its designee will also be entitled to direct the 2003-C8 Special
Servicer with respect to the renewal or replacement of then existing insurance
policies or any waiver, modification or amendment of any insurance requirements
under the related Mortgage Loan documents (to the extent the related lender's
consent is required under the related Mortgage Loan documents), any approval of
material capital expenditures (to the extent the related lender's consent is
required under the related Mortgage Loan documents) or any waiver of default
interest or any late payment charges. See "DESCRIPTION OF THE MORTGAGE
POOL--Co-Lender Loans--Servicing Provisions of the Intercreditor Agreements" in
this prospectus supplement.
Notwithstanding the foregoing, the holder of the Meadows Mall Companion
Loan or an advisor on its behalf will generally share all of the rights that the
Controlling Class Representative has with respect to directing the Master
Servicer and/or the Special Servicer with respect to the servicing of the
Meadows Mall Loan.
Notwithstanding the foregoing, if the unpaid principal amount of each of
the AB Companion Loans related to the Villas at Rancho Palos Verdes Loan and the
Columbia Corporate Center Loan, net of any existing related appraisal reductions
allocated to the related AB Companion Loan, any realized losses and payments of
principal, is equal to or greater than 25% of the original unpaid principal
amount of the related AB Companion Loan, then (i) the Controlling Class
Representative will not be entitled to exercise any of the rights and powers
described above with respect to the related Loan Pair and, instead, the holder
of the related AB Companion Loan or its designee will be entitled to exercise
the same or similar rights and powers with respect to the related Loan Pair,
subject to certain restrictions if the borrower or an affiliate is the holder of
the related AB Companion Loan. See "DESCRIPTION OF THE MORTGAGE POOL-Co-Lender
Loans--Servicing Provisions of the Intercreditor Agreements" in this prospectus
supplement.
Notwithstanding the foregoing, the holder of the Arbors of Pleasant Valley
Companion Loan may exercise certain approval rights relating to a modification
of such Arbors of Pleasant Valley Companion Loan that materially and adversely
affects the holder of such Arbors of Pleasant Valley Companion Loan prior to the
expiration of the related repurchase period. See "DESCRIPTION OF THE MORTGAGE
POOL--Co-Lender Loans--Servicing Provisions of the Intercreditor Agreements" in
this prospectus supplement.
In addition, the holder of the Sav-on - Norwalk AB Companion Loan may
exercise certain approval rights relating to a modification of such Companion
Loan that materially and adversely affects the holder of such Companion Loan
prior to the expiration of the related repurchase period. In addition, the
holder of the Sav-on - Norwalk AB Companion Loan may exercise certain approval
rights relating to a modification of the Sav-on - Norwalk Loan or the Sav-on -
Norwalk AB Companion Loan that materially and adversely affects the holder of
such Companion Loan and certain other matters related to Defaulted Lease Claims.
See "DESCRIPTION OF THE MORTGAGE POOL--Co-Lender Loans--Servicing Provisions of
the Intercreditor Agreements" in this prospectus supplement.
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Limitation on Liability of the Controlling Class Representative. The
Controlling Class Representative will not have any liability to the
Certificateholders for any action taken, or for refraining from the taking of
any action, or for errors in judgment; provided, however, that the Controlling
Class Representative will not be protected against any liability to a
Controlling Class Certificateholder 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. By its acceptance of a
Certificate, each Certificateholder confirms its understanding that the
Controlling Class Representative may take actions that favor the interests of
one or more Classes of the Certificates over other Classes of the Certificates,
and that the Controlling Class Representative may have special relationships and
interests that conflict with those of holders of some Classes of the
Certificates; and each Certificateholder agrees to take no action against the
Controlling Class Representative or any of its officers, directors, employees,
principals or agents as a result of such a special relationship or conflict.
DEFAULTED MORTGAGE LOANS; REO PROPERTIES; PURCHASE OPTION
The Pooling and Servicing Agreement contains provisions requiring, within
60 days after a Mortgage Loan (other than the Park City Center Loan) becomes a
Defaulted Mortgage Loan, the Special Servicer to determine the fair value of the
Mortgage Loan in accordance with the Servicing Standard. A "Defaulted Mortgage
Loan" is a Mortgage Loan (i) that is delinquent sixty days or more with respect
to a Periodic Payment (not including the Balloon Payment) or (ii) that is
delinquent in respect of its Balloon Payment unless the Master Servicer has, on
or prior to the due date of such Balloon Payment, received written evidence from
an institutional lender of such lender's binding commitment to refinance such
Mortgage Loan within 120 days after the due date of such Balloon Payment
(provided that if such refinancing does not occur during such time specified in
the commitment, the related Mortgage Loan will immediately become a Defaulted
Mortgage Loan), in either case such delinquency to be determined without giving
effect to any grace period permitted by the related Mortgage Loan documents and
without regard to any acceleration of payments under the related Mortgage and
Mortgage Note or (iii) as to which the Master Servicer or Special Servicer has,
by written notice to the related mortgagor, accelerated the maturity of the
indebtedness evidenced by the related Mortgage Note. The Special Servicer will
be permitted to change, from time to time, its determination of the fair value
of a Defaulted Mortgage Loan based upon changed circumstances, new information
or otherwise, in accordance with the Servicing Standard; provided, however, that
the Special Servicer will update its determination of the fair value of a
Defaulted Mortgage Loan at least once every 90 days.
In the event a Mortgage Loan (other than the Park City Center Loan) becomes
a Defaulted Mortgage Loan, the Majority Subordinate Certificateholder will have
an assignable option to purchase (subject to, in certain instances, the rights
of subordinated secured creditors to purchase the related Mortgage Loan) (the
"Purchase Option") the Defaulted Mortgage Loan from the Trust Fund at a price
(the "Option Price") equal to (i) the outstanding principal balance of the
Defaulted Mortgage Loan as of the date of purchase, plus all accrued and unpaid
interest on such balance plus all related fees and expenses, if the Special
Servicer has not yet determined the fair value of the Defaulted Mortgage Loan,
or (ii) the fair value of the Defaulted Mortgage Loan as determined by the
Special Servicer, if the Special Servicer has made such fair value
determination. If the Purchase Option is not exercised by the Majority
Subordinate Certificateholder or any assignee thereof within 60 days of a
Mortgage Loan becoming a Defaulted Mortgage Loan, then the Majority Subordinate
Certificateholder shall assign the Purchase Option to the Special Servicer for
fifteen days. If the Purchase Option is not exercised by the Special Servicer or
its assignee within such fifteen day period, then the Purchase Option shall
revert to the Majority Subordinate Certificateholder.
In the event the Park City Center Loan becomes a "Defaulted Mortgage Loan"
(as determined under the 2003-C8 Pooling and Servicing Agreement), the holder of
the Park City Center AB Companion Loan will have an assignable option to
purchase the defaulted Park City Center Loan at the option price determined
under the 2003-C8 Pooling and Servicing Agreement. If such purchase option is
not exercised within 45 days of the Park City Center Loan becoming a Defaulted
Mortgage Loan, then the purchase option shall be assigned to the holder of the
Park City Center Pari Passu Loan for 8 days, and if not exercised within such
8-day period, then such purchase option shall be assigned to the Majority
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Subordinate Certificateholder for 7 days. If such purchase option is not
exercised within such 7-day period, then such purchase option shall be assigned
to the Special Servicer for 15 days.
Unless and until the Purchase Option with respect to a Defaulted Mortgage
Loan is exercised, the Special Servicer will be required to pursue such other
resolution strategies available under the Pooling and Servicing Agreement,
including workout and foreclosure, consistent with the Servicing Standard, but
the Special Servicer generally will not be permitted to sell the Defaulted
Mortgage Loan other than pursuant to the exercise of the Purchase Option.
If not exercised sooner, the Purchase Option with respect to any Defaulted
Mortgage Loan will automatically terminate upon (i) the related mortgagor's cure
of all defaults on the Defaulted Mortgage Loan, (ii) the acquisition on behalf
of the Trust Fund of title to the related Mortgaged Property by foreclosure or
deed in lieu of foreclosure or (iii) the modification or pay-off (full or
discounted) of the Defaulted Mortgage Loan in connection with a workout. In
addition, the Purchase Option with respect to a Defaulted Mortgage Loan held by
any person will terminate upon the exercise of the Purchase Option by any other
holder of the Purchase Option.
Any person exercising the related purchase option with respect to the Park
City Center Pari Passu Loan pursuant to the terms of the 2003-C8 Pooling and
Servicing Agreement will also be required to purchase the Park City Center Loan
at the option price set forth in the 2003-C8 Pooling and Servicing Agreement
(with respect to the purchase of the Park City Center Loan).
If (a) the Purchase Option is exercised with respect to a Defaulted
Mortgage Loan and the person expected to acquire the Defaulted Mortgage Loan
pursuant to such exercise is the Majority Subordinate Certificateholder, the
Special Servicer, or any affiliate of any of them (in other words, the Purchase
Option has not been assigned to another unaffiliated person) and (b) the Option
Price is based on the Special Servicer's determination of the fair value of the
Defaulted Mortgage Loan, the Trustee will be required to determine if the Option
Price represents a fair price for the Defaulted Mortgage Loan. In making such
determination, the Trustee will be entitled to rely on the most recent appraisal
of the related Mortgaged Property that was prepared in accordance with the terms
of the Pooling and Servicing Agreement and may rely upon the opinion and report
of an independent third party in making such determination, the cost of which
will be advanced by the Master Servicer.
If title to any Mortgaged Property is acquired by the Trustee on behalf of
the Certificateholders pursuant to foreclosure proceedings instituted by the
Special Servicer or otherwise, the Special Servicer, after notice to the
Controlling Class Representative, shall use its reasonable best efforts to sell
any REO Property as soon as practicable in accordance with the Servicing
Standard but prior to the end of the third calendar year following the year of
acquisition, unless (i) the Internal Revenue Service grants an extension of time
to sell such property (an "REO Extension") or (ii) it obtains an opinion of
counsel generally to the effect that the holding of the property for more than
three years after the end of the calendar year in which it was acquired will not
result in the imposition of a tax on the Trust Fund or cause any REMIC relating
to the assets of the Trust Fund to fail to qualify as a REMIC under the Code. If
the Special Servicer on behalf of the Trustee has not received an Extension or
such opinion of counsel and the Special Servicer is not able to sell such REO
Property within the period specified above, or if an REO Extension has been
granted and the Special Servicer is unable to sell such REO Property within the
extended time period, the Special Servicer shall auction the property pursuant
to the auction procedure set forth below.
The Special Servicer shall give the Controlling Class Representative, the
Master Servicer, the Trustee and the Paying Agent not less than five days' prior
written notice of its intention to sell any such REO Property, and shall auction
the REO Property to the highest bidder (which may be the Special Servicer) in
accordance with the Servicing Standard; provided, however, that the Master
Servicer, Special Servicer, Majority Subordinate Certificateholder, any
independent contractor engaged by the Master Servicer or the Special Servicer
pursuant to the Pooling and Servicing Agreement (or any officer or affiliate
thereof) shall not be permitted to purchase the REO Property at a price less
than the outstanding principal balance of such Mortgage Loan as of the date of
purchase, plus all accrued but unpaid interest and related fees and expenses,
except in limited circumstances set forth in the Pooling and Servicing
Agreement; and provided, further, that if the Special Servicer intends to bid on
any REO Property, (i) the Special Servicer shall notify the Trustee of such
intent, (ii) the Trustee shall promptly obtain, at the expense of the Trust
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an appraisal of such REO Property (or internal valuation in accordance with the
procedures specified in the Pooling and Servicing Agreement) and (iii) the
Special Servicer shall not bid less than the greater of (x) the fair market
value set forth in such appraisal (or internal valuation) or (y) the outstanding
principal balance of such Mortgage Loan, plus all accrued but unpaid interest
and related fees and expenses.
Subject to the REMIC provisions, the Special Servicer shall act on behalf
of the Trust in negotiating and taking any other action necessary or appropriate
in connection with the sale of any REO Property or the exercise of the Purchase
Option, including the collection of all amounts payable in connection therewith.
Notwithstanding anything to the contrary herein, neither the Trustee, in its
individual capacity, nor any of its affiliates may bid for any REO Property or
purchase any Defaulted Mortgage Loan. Any sale of a Defaulted Mortgage Loan
(pursuant to the Purchase Option) or REO Property shall be without recourse to,
or representation or warranty by, the Trustee, the Paying Agent, the Depositor,
any Mortgage Loan Seller, the Special Servicer, the Master Servicer or the
Trust. Notwithstanding the foregoing, nothing herein shall limit the liability
of the Master Servicer, the Special Servicer , the Paying Agent or the Trustee
to the Trust and the Certificateholders for failure to perform its duties in
accordance with the Pooling and Servicing Agreement. None of the Special
Servicer, the Master Servicer, the Depositor, the Paying Agent or the Trustee
shall have any liability to the Trust or any Certificateholder with respect to
the price at which a Defaulted Mortgage Loan is sold if the sale is consummated
in accordance with the terms of the Pooling and Servicing Agreement. The
proceeds of any sale after deduction of the expenses of such sale incurred in
connection therewith shall be deposited within one business day in the
certificate account.
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
The Special Servicer or the Master Servicer is required to perform or cause
to be performed a physical inspection of a Mortgaged Property (other than the
Mortgaged Property related to the Park City Center Loan) as soon as practicable
after the related Mortgage Loan becomes a Specially Serviced Mortgage Loan or
the related debt service coverage ratio is below 1.00x; the expense of which
will be payable first, out of penalty interest and late payment charges
otherwise payable to the Special Servicer or the Master Servicer, as the case
may be, and received in the Collection Period during which such inspection
related expenses were incurred, then at the Trust Fund's expense. In addition,
beginning in 2004, with respect to each Mortgaged Property securing a Mortgage
Loan (other than the Mortgaged Property related to the Park City Center Loan)
with a principal balance (or allocated loan amount) at the time of such
inspection of more than or equal to $2,000,000, the Master Servicer (with
respect to each such Mortgaged Property securing a Mortgage Loan other than a
Specially Serviced Mortgage Loan) and the Special Servicer (with respect to each
Mortgaged Property securing a Specially Serviced Mortgage Loan) is required at
its expense to inspect or cause to be inspected the Mortgaged Property every
calendar year and with respect to each Mortgaged Property securing a Mortgage
Loan with a principal balance (or allocated loan amount) at the time of such
inspection of less than $2,000,000 once every other calendar year; provided that
the Master Servicer is not obligated to inspect any Mortgaged Property that has
been inspected by the Special Servicer in the previous 6 months. The Special
Servicer and the Master Servicer each will be required to prepare a written
report of each such inspection performed by it that describes the condition of
the Mortgaged Property and that specifies the existence with respect thereto of
any sale, transfer or abandonment or any material change in its condition or
value.
The Special Servicer or the Master Servicer is also required consistent
with the Servicing Standard to collect from the related borrower and review the
quarterly and annual operating statements of each Mortgaged Property (other than
the Mortgaged Property related to the Park City Center Loan) and to cause annual
operating statements to be prepared for each REO Property. Generally, the
Mortgage Loans require the related borrower to deliver an annual property
operating statement. However, there can be no assurance that any operating
statements required to be delivered will in fact be delivered, nor is the Master
Servicer or Special Servicer likely to have any practical means of compelling
such delivery in the case of an otherwise performing Mortgage Loan.
Copies of the inspection reports and operating statements referred to above
are required to be available for review by Certificateholders during normal
business hours at the offices of the Special Servicer or the Master Servicer, as
applicable. See "DESCRIPTION OF THE CERTIFICATES--Reports to Certificateholders;
Available Information" in this prospectus supplement.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage
Pass-Through Certificates, Series 2003-C9 (the "Certificates") will be issued
pursuant to a Pooling and Servicing Agreement, dated as of December 1, 2003,
among the Depositor, the Master Servicer, the Special Servicer, the Trustee and
the Paying Agent (the "Pooling and Servicing Agreement"). The Certificates
represent in the aggregate the entire beneficial ownership interest in a trust
fund (the "Trust Fund") consisting primarily of: (i) the Mortgage Loans and all
payments and other collections in respect of the Mortgage Loans received or
applicable to periods after the applicable Cut-Off Date (exclusive of payments
of principal and interest due, and principal prepayments received, on or before
the Cut-Off Date); (ii) any REO Property acquired on behalf of the Trust Fund;
(iii) such funds or assets as from time to time are deposited in the Certificate
Account, the Distribution Account, the REO Accounts, the Additional Interest
Account, the Gain on Sale Reserve Account and the Interest Reserve Account (see
"DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS--Certificate Account" in
the prospectus); and (iv) certain rights of the Depositor under each Mortgage
Loan Purchase Agreement relating to Mortgage Loan document delivery requirements
and the representations and warranties of the Mortgage Loan Sellers regarding
the Mortgage Loans.
The Certificates consist of the following classes (each, a "Class")
designated as: (i) the Class A-1, Class A-2, Class A-3 and Class A-4
Certificates (collectively, the "Class A Certificates"); (ii) the Class B, Class
C, Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class
M, Class N, Class O and Class P Certificates (collectively, the "Subordinate
Certificates" and, together with the Class A Certificates, the "Sequential Pay
Certificates"); (iii) the Class X-C and Class X-P Certificates (collectively,
the "Class X Certificates" and collectively with the Sequential Pay
Certificates, the "REMIC Regular Certificates"); (iv) the Class R-I and Class
R-II Certificates (collectively, the "REMIC Residual Certificates"); and (v) the
Class Z Certificates.
Only the Class A-1, Class A-2, Class A-3, Class A-4, Class B, Class C,
Class D and Class E Certificates (collectively, the "Offered Certificates") are
offered hereby. The Class F, Class G, Class H, Class J, Class K, Class L, Class
M, Class N, Class O, Class P, Class X-C and Class X-P Certificates
(collectively, the "Non-Offered Certificates"), the Class Z Certificates and the
REMIC Residual Certificates have not been registered under the Securities Act
and are not offered hereby. Accordingly, information in this Prospectus
Supplement regarding the terms of the Non-Offered Certificates, the Class Z
Certificates and the REMIC Residual Certificates is provided solely because of
its potential relevance to a prospective purchaser of an Offered Certificate.
REGISTRATION AND DENOMINATIONS
The Offered Certificates will be made available in book-entry format
through the facilities of The Depository Trust Company ("DTC"). The Class A-1,
Class A-2, Class A-3, Class A-4, Class B, Class C, Class D and Class E
Certificates will be offered in denominations of not less than $10,000 actual
principal amount and in integral multiples of $1 in excess thereof.
The holders of Offered Certificates may hold their Certificates through DTC
(in the United States) or Clearstream Banking, societe anonyme ("Clearstream")
or Euroclear Bank S.A./N.V., as operator (the "Euroclear Operator") of the
Euroclear System (the "Euroclear System") (in Europe) if they are participants
of such respective system ("Participants"), or indirectly through organizations
that are Participants in such systems. Clearstream and Euroclear will hold
omnibus positions on behalf of the Clearstream Participants and the Euroclear
Participants, respectively, through customers' securities accounts in
Clearstream and Euroclear's names on the books of their respective depositaries
(collectively, the "Depositaries") which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of DTC.
DTC is a limited-purpose trust company organized under the New York Banking Law,
a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to Section 17A of the Securities
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Exchange Act of 1934, as amended. DTC was created to hold securities for its
Participants and to facilitate the clearance and settlement of securities
transactions between Participants through electronic computerized book-entries,
thereby eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants").
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Clearstream Participants and Euroclear Participants will occur
in accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly through Clearstream Participants or
Euroclear Participants, on the other, will be effected in DTC in accordance with
DTC rules on behalf of the relevant European international clearing system by
its Depositary; however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system in accordance with its rules and procedures. If the
transaction complies with all relevant requirements, the Euroclear Operator or
Clearstream, as the case may be, will then deliver instructions to the
Depositary to take action to effect final settlement on its behalf.
Because of time-zone differences, it is possible that credits of securities
in Clearstream or the Euroclear Operator as a result of a transaction with a DTC
Participant will be made during the subsequent securities settlement processing,
dated the business day following the DTC settlement date, and such credits or
any transactions in such securities settled during such processing will be
reported to the relevant Clearstream Participant or Euroclear Participant on
such business day. Cash received in Clearstream or the Euroclear Operator as a
result of sales of securities by or through a Clearstream Participant or a
Euroclear Participant to a DTC Participant will be received with value on the
DTC settlement date, due to time zone differences may be available in the
relevant Clearstream or the Euroclear Operator cash account only as of the
business day following settlement in DTC.
The holders of Offered Certificates that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Offered Certificates may do so only through Participants and
Indirect Participants. In addition, holders of Offered Certificates will receive
all distributions of principal and interest from the Paying Agent through the
Participants who in turn will receive them from DTC. Similarly, reports
distributed to Certificateholders pursuant to the Pooling and Servicing
Agreement and requests for the consent of Certificateholders will be delivered
to beneficial owners only through DTC, the Euroclear Operator, Clearstream and
their respective Participants. Under a book-entry format, holders of Offered
Certificates may experience some delay in their receipt of payments, reports and
notices, since such payments, reports and notices will be forwarded by the
Paying Agent to Cede & Co., as nominee for DTC. DTC will forward such payments,
reports and notices to its Participants, which thereafter will forward them to
Indirect Participants, Clearstream, the Euroclear Operator or holders of Offered
Certificates, as applicable.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Offered Certificates among Participants on whose behalf it acts with respect to
the Offered Certificates and to receive and transmit distributions of principal
of, and interest on, the Offered Certificates. Participants and Indirect
Participants with which the holders of Offered Certificates have accounts with
respect to the Offered Certificates similarly are required to make book-entry
transfers and receive and transmit such payments on behalf of their respective
holders of Offered Certificates. Accordingly, although the holders of Offered
Certificates will not possess the Offered Certificates, the Rules provide a
mechanism by which Participants will receive payments on Offered Certificates
and will be able to transfer their interest.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a holder of
Offered Certificates to pledge such Certificates to persons or entities that do
not participate in the DTC system, or to otherwise act with respect to such
Certificates, may be limited due to the lack of a physical certificate for such
Certificates.
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DTC has advised the Depositor that it will take any action permitted to be
taken by a holder of an Offered Certificate under the Pooling and Servicing
Agreement only at the direction of one or more Participants to whose accounts
with DTC the Offered Certificates are credited. DTC may take conflicting actions
with respect to other undivided interests to the extent that such actions are
taken on behalf of Participants whose holdings include such undivided interests.
Except as required by law, none of the Depositor, the Underwriters, the
Master Servicer, the Paying Agent nor the Trustee will have any liability 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
such beneficial ownership interests.
Clearstream is a limited liability company (a societe anonyme) organized
under the laws of Luxembourg. Clearstream holds securities for its participating
organizations ("Clearstream Participants") and facilitates the clearance and
settlement of securities transactions between Clearstream Participants through
electronic book-entry changes in accounts of Clearstream Participants, thereby
eliminating the need for physical movement of certificates.
The Euroclear System was created in 1968 to hold securities for
participants of Euroclear ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment. The Euroclear System is owned by Euroclear.
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.
The information in this Prospectus Supplement concerning DTC, Clearstream
or the Euroclear Operator and their book-entry systems has been obtained from
sources believed to be reliable, but neither the Depositor nor any of the
Underwriters takes any responsibility for the accuracy or completeness thereof.
CERTIFICATE BALANCES AND NOTIONAL AMOUNT
Subject to a permitted variance of plus or minus 5.0%, the respective
Classes Certificates described below will have the Certificate Balances
representing the approximate percentage of the Cut-Off Date Pool Balance as set
forth in the following table:
CLOSING DATE PERCENTAGE OF
CERTIFICATE CUT-OFF DATE
CLASS OF CERTIFICATES BALANCE POOL BALANCE
- -------------------------------------------------------------- -------------- --------------
Class A-1 Certificates ....................................... $108,367,000 9.430%
Class A-2 Certificates ....................................... $123,823,000 10.775%
Class A-3 Certificates ....................................... $210,302,000 18.300%
Class A-4 Certificates ....................................... $508,476,000 44.246%
Class B Certificates ......................................... $ 34,476,000 3.000%
Class C Certificates ......................................... $ 17,238,000 1.500%
Class D Certificates ......................................... $ 33,039,000 2.875%
Class E Certificates ......................................... $ 14,366,000 1.250%
Non-Offered Certificates (other than Class X Certificates) ... $ 99,124,695 8.625%
The "Certificate Balance" of any Class of Sequential Pay Certificates
outstanding at any time represents the maximum amount that the holders thereof
are entitled to receive as distributions allocable to principal from the cash
flow on the Mortgage Loans and the other assets in the Trust Fund. The
Certificate Balance of each Class of Sequential Pay Certificates will be reduced
on each Distribution Date
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by any distributions of principal actually made on such Class of Certificates on
such Distribution Date, and further by any Realized Losses and Additional Trust
Fund Expenses actually allocated to such Class of Certificates on such
Distribution Date.
The Class X Certificates do not have Certificate Balances, but represent
the right to receive the distributions of interest in amounts equal to the
aggregate interest accrued on the applicable notional amount (each, a "Notional
Amount") of the related Class of Class X Certificates. On each Distribution
Date, the Notional Amount of the Class X-C Certificates generally will be equal
to the aggregate outstanding Certificate Balances of the Sequential Pay
Certificates on such Distribution Date. The initial Notional Amount of the Class
X-C Certificates will equal approximately $1,149,206,057 (subject to a permitted
variance of plus or minus 5.0%).
The Notional Amount of the Class X-P Certificates will generally equal:
(1) until the Distribution Date in June 2004, the sum of (a) the lesser of
$103,235,000 and the Certificate Balance of the Class A-1 Certificates
and (b) the aggregate Certificate Balances of the Class A-2, Class
A-3, Class A-4, Class B, Class C, Class D and Class E Certificates;
(2) after the Distribution Date in June 2004 through and including the
Distribution Date in December 2004, the sum of (a) the lesser of
$97,127,000 and the Certificate Balance of the Class A-1 Certificates
and (b) the aggregate Certificate Balances of the Class A-2, Class
A-3, Class A-4, Class B, Class C, Class D and Class E Certificates;
(3) after the Distribution Date in December 2004 through and including the
Distribution Date in June 2005, the sum of (a) the lesser of
$71,648,000 and the Certificate Balance of the Class A-1 Certificates
(b) the aggregate Certificate Balances of the Class A-2, Class A-3,
Class A-4, Class B, Class C, Class D and Class E Certificates;
(4) after the Distribution Date in June 2005 through and including the
Distribution Date in December 2005, the sum of (a) the lesser of
$43,501,000 and the Certificate Balance of the Class A-1 Certificates
and (b) the aggregate Certificate Balances of the Class A-2, Class
A-3, Class A-4, Class B, Class C, Class D and Class E Certificates;
(5) after the Distribution Date in December 2005 through and including the
Distribution Date in June 2006, the sum of (a) the lesser of
$15,367,000 and the Certificate Balance of the Class A-1 Certificates
and (b) the aggregate Certificate Balances of the Class A-2, Class
A-3, Class A-4, Class B, Class C, Class D and Class E Certificates;
(6) after the Distribution Date in June 2006 through and including the
Distribution Date in December 2006, the sum of (a) the lesser of
$112,093,000 and the Certificate Balance of the Class A-2 Certificates
and (b) the aggregate Certificate Balances of the Class A-3, Class
A-4, Class B, Class C, Class D and Class E Certificates;
(7) after the Distribution Date in December 2006 through and including the
Distribution Date in June 2007, the sum of (a) the lesser of
$85,318,000 and the Certificate Balance of the Class A-2 Certificates
and (b) the aggregate Certificate Balances of the Class A-3, Class
A-4, Class B, Class C, Class D and Class E Certificates;
(8) after the Distribution Date in June 2007 through and including the
Distribution Date in December 2007, the sum of (a) the lesser of
$59,682,000 and the Certificate Balance of the Class A-2 Certificates
and (b) the aggregate Certificate Balances of the Class A-3, Class
A-4, Class B, Class C, Class D and Class E Certificates;
(9) after the Distribution Date in December 2007 through and including the
Distribution Date in June 2008, the sum of (a) the lesser of
$27,366,000 and the Certificate Balance of the Class A-2 Certificates
and (b) the aggregate Certificate Balances of the Class A-3, Class
A-4, Class B, Class C, Class D and Class E Certificates;
(10) after the Distribution Date in June 2008 through and including the
Distribution Date in December 2008, the sum of (a) the lesser of
$94,248,000 and the Certificate Balance of the Class A-3 Certificates
and (b) the aggregate Certificate Balances of the Class A-4, Class B,
Class C, Class D and Class E Certificates;
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(11) after the Distribution Date in December 2008 through and including the
Distribution Date in June 2009, the sum of (a) the lesser of
$74,073,000 and the Certificate Balance of the Class A-3 Certificates
and (b) the aggregate Certificate Balances of the Class A-4, Class B,
Class C, Class D and Class E Certificates;
(12) after the Distribution Date in June 2009 through and including the
Distribution Date in December 2009, the sum of (a) the lesser of
$54,794,000 and the Certificate Balance of the Class A-3 Certificates,
(b) the aggregate Certificate Balances of the Class A-4, Class B,
Class C and Class D Certificates and (c) the lesser of $13,754,000 and
the Certificate Balance of the Class E Certificates;
(13) after the Distribution Date in December 2009 through and including the
Distribution Date in June 2010, the sum of (a) the lesser of
$35,795,000 and the Certificate Balance of the Class A-3 Certificates,
(b) the aggregate Certificate Balances of the Class A-4, Class B,
Class C and Class D Certificates and (c) the lesser of $6,599,000 and
the Certificate Balance of the Class E Certificates;
(14) after the Distribution Date in June 2010 through and including the
Distribution Date in December 2010, the sum of (a) the lesser of
$454,784,000 and the Certificate Balance of the Class A-4
Certificates, (b) the aggregate Certificate Balances of the Class B
and Class C Certificates and (c) the lesser of $32,840,000 and the
Certificate Balance of the Class D Certificates; and
(15) after the Distribution Date in December 2010, $0.
The initial Notional Amount of the Class X-P Certificates will be
$1,044,955,000.
The Certificate Balance of any Class of Sequential Pay Certificates may be
increased by the amount, if any, of Certificate Deferred Interest added to such
Class Certificate Balance. With respect to any Mortgage Loan as to which the
Mortgage Rate has been reduced through a modification on any Distribution Date,
"Mortgage Deferred Interest" is the amount by which (a) interest accrued at such
reduced rate is less than (b) the amount of interest that would have accrued on
such Mortgage Loan at the Mortgage Rate before such reduction, to the extent
such amount has been added to the outstanding principal balance of such Mortgage
Loan. On each Distribution Date the amount of interest distributable to a Class
of Sequential Pay Certificates will be reduced by the amount of Mortgage
Deferred Interest allocable to such Class (any such amount, "Certificate
Deferred Interest"), such allocation being in reverse alphabetical order (except
with respect to the Class A-1, Class A-2, Class A--3 and Class A-4,
Certificates, which amounts shall be applied pro rata (based on remaining Class
Certificate Balances) to such Classes). The Certificate Balance of each Class of
Sequential Pay Certificates to which Certificate Deferred Interest has been so
allocated on a Distribution Date will be increased by the amount of Certificate
Deferred Interest. Any increase in the Certificate Balance of a Class of
Sequential Pay Certificates will result in an increase in the Notional Amount of
the Class X-C Certificates, and to the extent there is an increase in the
Certificate Balance of the Class A-1, Class A-2, Class A-3, Class A-4, Class B,
Class C, Class D or Class E Certificates and subject to the limits described in
the description of the Notional Amount of the Class X-P Certificates above, the
Class X-P Certificates.
The REMIC Residual Certificates do not have Certificate Balances or
Notional Amounts, but represent the right to receive on each Distribution Date
any portion of the Available Distribution Amount (as defined below) for such
date that remains after the required distributions have been made on all the
REMIC Regular Certificates. It is not anticipated that any such portion of the
Available Distribution Amount will result in more than a de minimis distribution
to the REMIC Residual Certificates.
The Class Z Certificates do not have Certificate Balances or Notional
Amounts, but represent the right to receive on each Distribution Date any
amounts of Additional Interest received in the related Collection Period.
PASS-THROUGH RATES
The Pass-Through Rate applicable to the Class A-1, Class A-2, Class A-3,
Class A-4, Class B, Class C, Class D and Class E Certificates for each
Distribution Date will equal the respective fixed rate per
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annum set forth on the front cover of this Prospectus Supplement. Each of the
Class X-C Components and the Class X-P Components will be deemed to have a
Pass-Through Rate equal to the Pass-Through Rate on the related Class of
Certificates.
The Pass-Through Rate applicable to the Class X-C Certificates for the
initial Distribution Date will equal approximately 0.0493% per annum.
The Pass-Through Rate applicable to the Class X-C Certificates for each
subsequent Distribution Date will equal the weighted average of the respective
Class X-C Strip Rates, at which interest accrues from time to time on the
respective components (the "Class X-C Components") of the Class X-C Certificates
outstanding immediately prior to such Distribution Date (weighted on the basis
of the outstanding balances of those Class X-C Components immediately prior to
the Distribution Date). Each Class X-C Component will be comprised of all or a
designated portion of the Certificate Balance of one of the Classes of
Sequential Pay Certificates. In general, the Certificate Balance of each Class
of Sequential Pay Certificates will constitute a separate Class X-C Component.
However, if a portion, but not all, of the Certificate Balance of any particular
Class of Sequential Pay Certificates is identified under "--Certificate Balances
and Notional Amount" above as being part of the Notional Amount of the Class X-P
Certificates immediately prior to any Distribution Date, then the identified
portion of the Certificate Balance will also represent one or more separate
Class X-C Components for purposes of calculating the Pass-Through Rate of the
Class X-C Certificates, and the remaining portion of the Certificate Balance
will represent one or more other separate Class X-C Components for purposes of
calculating the Pass-Through Rate of the Class X-C Certificates. For each
Distribution Date through and including the Distribution Date in December 2010,
the "Class X-C Strip Rate" for each Class X-C Component will be calculated as
follows:
(1) if such Class X-C Component consists of the entire Certificate Balance
of any Class of Sequential Pay Certificates, and if the Certificate
Balance does not, in whole or in part, also constitute a Class X-P
Component immediately prior to the Distribution Date, then the
applicable Class X-C Strip Rate will equal the excess, if any, of (a)
the Weighted Average Net Mortgage Rate for the Distribution Date, over
(b) the Pass-Through Rate in effect for the Distribution Date for the
applicable Class of Sequential Pay Certificates;
(2) if such Class X-C Component consists of a designated portion (but not
all) of the Certificate Balance of any Class of Sequential Pay
Certificates, and if the designated portion of the Certificate Balance
does not also constitute a Class X-P Component immediately prior to
the Distribution Date, then the applicable Class X-C Strip Rate will
equal the excess, if any, of (a) the Weighted Average Net Mortgage
Rate for the Distribution Date, over (b) the Pass-Through Rate in
effect for the Distribution Date for the applicable Class of
Sequential Pay Certificates;
(3) if such Class X-C Component consists of a designated portion (but not
all) of the Certificate Balance of any Class of Sequential Pay
Certificates, and if the designated portion of the Certificate Balance
also constitutes a Class X-P Component immediately prior to the
Distribution Date, then the applicable Class X-C Strip Rate will equal
the excess, if any, of (a) the Weighted Average Net Mortgage Rate for
the Distribution Date, over (b) the sum of (i) the Class X-P Strip
Rate for the applicable Class X-P Component, and (ii) the Pass-Through
Rate in effect for the Distribution Date for the applicable Class of
Sequential Pay Certificates; and
(4) if such Class X-C Component consists of the entire Certificate Balance
of any Class of Sequential Pay Certificates, and if the Certificate
Balance also constitutes, in its entirety, a Class X-P Component
immediately prior to such Distribution Date, then the applicable Class
X-C Strip Rate will equal the excess, if any, of (a) the Weighted
Average Net Mortgage Rate for the Distribution Date, over (b) the sum
of (i) the Class X-P Strip Rate for the applicable Class X-P
Component, and (ii) the Pass-Through Rate in effect for the
Distribution Date for the applicable Class of Sequential Pay
Certificates.
For each Distribution Date after the Distribution Date in December 2010,
the entire Certificate Balance of each Class of Sequential Pay Certificates will
constitute one or more separate Class X-C Components, and the applicable Class
X-C Strip Rate with respect to each such Class X-C Component
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for each Distribution Date will equal the excess, if any, of (a) the Weighted
Average Net Mortgage Rate for the Distribution Date, over (b) the Pass-Through
Rate in effect for the Distribution Date for the Class of Sequential Pay
Certificates.
The Pass-Through Rate applicable to the Class X-P Certificates for the
initial Distribution Date will equal approximately 0.8930% per annum.
The Pass-Through Rate applicable to the Class X-P Certificates for each
subsequent Distribution Date will equal the weighted average of the respective
Class X-P Strip Rates, at which interest accrues from time to time on the
respective components (the "Class X-P Components") of the Class X-P Certificates
outstanding immediately prior to such Distribution Date (weighted on the basis
of the balances of those Class X-P Components immediately prior to the
Distribution Date). Each Class X-P Component will be comprised of all or a
designated portion of the Certificate Balance of a specified Class of Sequential
Pay Certificates. If all or a designated portion of the Certificate Balance of
any Class of Sequential Pay Certificates is identified under "--Certificate
Balances and Notional Amount" above as being part of the Notional Amount of the
Class X-P Certificates immediately prior to any Distribution Date, then that
Certificate Balance (or designated portion thereof) will represent one or more
separate Class X-P Components for purposes of calculating the Pass-Through Rate
of the Class X-P Certificates. For each Distribution Date through and including
the Distribution Date in December 2010, the "Class X-P Strip Rate" for each
Class X-P Component will equal (x) the lesser of (1) the Weighted Average Net
Mortgage Rate for such Distribution Date, and (2) the reference rate specified
on Annex C to this Prospectus Supplement for such Distribution Date minus 0.03%
per annum, minus (y) the Pass-Through Rate for such Component (but in no event
will any Class X-P Strip Rate be less than zero).
After the Distribution Date in December 2010, the Class X-P Certificates
will cease to accrue interest and will have a 0% Pass-Through Rate.
In the case of each Class of REMIC Regular Certificates, interest at the
applicable Pass-Through Rate will be payable monthly on each Distribution Date
and will accrue during each Interest Accrual Period on the Certificate Balance
(or, in the case of the Class X Certificates, the respective Notional Amount) of
such Class of Certificates immediately following the Distribution Date in such
Interest Accrual Period (after giving effect to all distributions of principal
made on such Distribution Date). Interest on each Class of REMIC Regular
Certificates will be calculated on the basis of a 360-day year consisting of
twelve 30-day months. With respect to any Class of REMIC Regular Certificates
and any Distribution Date, the "Interest Accrual Period" will be the preceding
calendar month which will be deemed to consist of 30 days.
The Class Z Certificates will not have a Pass-Through Rate or be entitled
to distributions in respect of interest other than Additional Interest.
The "Weighted Average Net Mortgage Rate" for each Distribution Date is the
weighted average of the Net Mortgage Rates for the Mortgage Loans as of the
commencement of the related Collection Period, weighted on the basis of their
respective Stated Principal Balances immediately following the preceding
Distribution Date; provided that, for the purpose of determining the Weighted
Average Net Mortgage Rate only, if the Mortgage Rate for any Mortgage Loan has
been modified in connection with a bankruptcy or similar proceeding involving
the related borrower or a modification, waiver or amendment granted or agreed to
by the Special Servicer, the Weighted Average Net Mortgage Rate for such
Mortgage Loan will be calculated without regard to such event. The "Net Mortgage
Rate" for each Mortgage Loan will generally equal (x) the Mortgage Rate in
effect for such Mortgage Loan as of the Cut-Off Date, minus (y) the applicable
Administrative Cost Rate for such Mortgage Loan. Notwithstanding the foregoing,
because no Mortgage Loan, other than 3 Mortgage Loans (loan numbers 26, 94 and
104), accrue interest on the basis of a 360-day year consisting of twelve 30-day
months (which is the basis on which interest accrues in respect of the REMIC
Regular Certificates), then, solely for purposes of calculating the Weighted
Average Net Mortgage Rate for each Distribution Date, the Mortgage Rate of each
Mortgage Loan, other than 3 Mortgage Loans, representing 1.2% of the Cut-Off
Date Pool Balance, which accrues interest on a 30/360 basis, in effect during
any calendar month will be deemed to be the annualized rate at which interest
would have to accrue in respect of such loan on a 30/360 basis in order to
derive the aggregate amount of interest (other than default interest) actually
accrued in respect
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of such loan during such calendar month; provided, however, that, the Mortgage
Rate in effect during (a) December of each year that does not immediately
precede a leap year, and January of each year will be the per annum rate stated
in the related Mortgage Note unless the final Distribution Date occurs in
January or February immediately following such December or January and (b) in
February of each year will be determined inclusive of the one day of interest
retained from the immediately preceding January and, if applicable, December.
The "Stated Principal Balance" of each Mortgage Loan outstanding at any time
will generally be an amount equal to the principal balance thereof as of the
Cut-Off Date, (a) reduced on each Distribution Date (to not less than zero) by
(i) the portion of the Principal Distribution Amount for that date which is
attributable to such Mortgage Loan and (ii) the principal portion of any
Realized Loss incurred in respect of such Mortgage Loan during the related
Collection Period and (b) increased on each Distribution Date by any Mortgage
Deferred Interest added to the principal balance of such Mortgage Loan on such
Distribution Date. The Stated Principal Balance of a Mortgage Loan may also be
reduced in connection with any forced reduction of the actual unpaid principal
balance thereof imposed by a court presiding over a bankruptcy proceeding in
which the related borrower is a debtor. In addition, to the extent that
principal from general collections is used to reimburse nonrecoverable Advances,
and such amount has not been included as part of the Principal Distribution
Amount, such amount shall continue to be deemed to be distributable for purposes
of calculating the Stated Principal Balance. Notwithstanding the foregoing, if
any Mortgage Loan is paid in full, liquidated or otherwise removed from the
Trust Fund, commencing as of the first Distribution Date following the
Collection Period during which such event occurred, the Stated Principal Balance
of such Mortgage Loan will be zero. With respect to any Companion Loan on any
date of determination, the Stated Principal Balance shall equal the unpaid
principal balance of such Companion Loan.
The "Collection Period" for each Distribution Date is the period that
begins on the 12th day in the month immediately preceding the month in which
such Distribution Date occurs (or the day after the applicable Cut-Off Date in
the case of the first Collection Period) and ends on and includes the 11th day
in the same month as such Distribution Date except that with respect to 2
Mortgage Loans representing 0.4% of the Cut-Off Date Pool Balance the period
that begins on the 16th day in the month immediately preceding the month in
which such Distribution Date occurs (or the day after the applicable Cut-Off
Date in the case of the first Collection Period) and ends on and includes the
15th day in the same month as such Distribution Date. Notwithstanding the
foregoing, in the event that the last day of a Collection Period is not a
business day, any payments received with respect to the Mortgage Loans relating
to such Collection Period on the business day immediately following such day
will be deemed to have been received during such Collection Period and not
during any other Collection Period. The "Determination Date" will be, for any
Distribution Date, the 11th day of each month, or if such 11th day is not a
business day, the next succeeding business day, commencing in January 2004.
DISTRIBUTIONS
General. Distributions on the Certificates are made by the Paying Agent, to
the extent of the Available Distribution Amount, on the fourth business day
following the related Determination Date (each, a "Distribution Date"). Except
as described below, all such distributions will be made to the persons in whose
names the Certificates are registered (the "Certificateholders") at the close of
business on the last business day of the month preceding the month in which the
related Distribution Date occurs and shall be made by wire transfer of
immediately available funds, if such Certificateholder shall have provided
wiring instructions no less than five business days prior to such record date,
or otherwise by check mailed to the address of such Certificateholder as it
appears in the Certificate register. The final distribution on any Certificate
(determined without regard to any possible future reimbursement of any Realized
Loss or Additional Trust Fund Expense previously allocated to such Certificate)
will be made only upon presentation and surrender of such Certificate at the
location that will be specified in a notice of the pendency of such final
distribution. All distributions made with respect to a Class of Certificates
will be allocated pro rata among the outstanding Certificates of such Class
based on their respective percentage interests in such Class. The first
Distribution Date on which investors in the Offered Certificates may receive
distributions will be the Distribution Date occurring in January 2004.
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The Available Distribution Amount. The aggregate amount available for
distributions of interest and principal to Certificateholders on each
Distribution Date (the "Available Distribution Amount") will, in general, equal
the sum of the following amounts:
(a) the total amount of all cash received on or in respect of the
Mortgage Loans and any REO Properties by the Master Servicer as of the close
of business on the last day of the related Collection Period (or, in the
event that the Collection Period is deemed to end on the business day prior
to the Distribution Date, amounts collected by or on behalf of the Master
Servicer as of 3:00 p.m. New York City time) and not previously distributed
with respect to the Certificates or applied for any other permitted purpose,
exclusive of any portion thereof that represents one or more of the
following:
(i) any Periodic Payments collected but due on a Due Date after
the related Collection Period;
(ii) any Prepayment Premiums and Yield Maintenance Charges;
(iii) all amounts in the Certificate Account that are payable or
reimbursable to any person other than the Certificateholders,
including any Servicing Fees and Trustee Fees on the Mortgage Loans;
(iv) any amounts deposited in the Certificate Account in error;
(v) any Additional Interest on the ARD Loans (which is separately
distributed to the Class Z Certificates); and
(vi) if such Distribution Date occurs during February of any year
or during January of any year that is not a leap year, the Interest
Reserve Amounts with respect to the Mortgage Loans to be deposited in
the Interest Reserve Account and held for future distribution.
(b) all P&I Advances made by the Master Servicer or the Trustee with
respect to such Distribution Date;
(c) any Compensating Interest Payment made by the Master Servicer to
cover the aggregate of any Prepayment Interest Shortfalls experienced
during the related Collection Period; and
(d) if such Distribution Date occurs during March of any year or if
such Distribution Date is the final Distribution Date and occurs in
February or, if such year is not a leap year, in January, the aggregate of
the Interest Reserve Amounts then on deposit in the Interest Reserve
Account in respect of each Mortgage Loan.
See "SERVICING OF THE MORTGAGE LOANS--Servicing and Other Compensation and
Payment of Expenses" in this prospectus supplement, "--P&I Advances" below and
"DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS--Certificate Account" in
the prospectus.
Any Prepayment Premiums or Yield Maintenance Charges actually collected
will be distributed separately from the Available Distribution Amount. See
"--Distributions--Allocation of Prepayment Premiums and Yield Maintenance
Charges" below.
Interest Reserve Account. The Master Servicer will establish and maintain
an "Interest Reserve Account" in the name of the Trustee for the benefit of the
holders of the Certificates. With respect to each Distribution Date occurring in
February and each Distribution Date occurring in any January which occurs in a
year that is not a leap year, there will be withdrawn from the Certificate
Account and deposited to the Interest Reserve Account in respect of each
Mortgage Loan (the "Interest Reserve Loans") which accrues interest on an
Actual/360 Basis an amount equal to one day's interest at the related Mortgage
Rate on its Stated Principal Balance, as of the Due Date in the month in which
such Distribution Date occurs, to the extent a Periodic Payment or P&I Advance
is timely made in respect thereof for such Due Date (all amounts so deposited in
any consecutive January (if applicable) and February in respect of each Interest
Reserve Loan, the "Interest Reserve Amount"). With respect to each Distribution
Date occurring in March, or in the event the final Distribution Date occurs in
February or, if such year is not a leap year, in January, there will be
withdrawn from the Interest Reserve Account the amounts deposited from the
immediately preceding February and, if applicable, January, and such withdrawn
amount is to be included as part of the Available Distribution Amount for such
Distribution Date.
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Distribution Account. The Paying Agent will establish and will maintain a
"Distribution Account" in the name of the Paying Agent on behalf of the Trustee
for the benefit of the Certificateholders and will maintain the Distribution
Account as an eligible account pursuant to the terms of the Pooling and
Servicing Agreement. Funds on deposit in the Distribution Account, to the extent
of the Available Distribution Amount, will be used to make distributions on the
Certificates. Funds in the Distribution Account will not be invested.
Gain on Sale Reserve Account. The Paying Agent will establish and will
maintain a "Gain on Sale Reserve Account" in the name of the Paying Agent on
behalf of the Trustee for the benefit of the Certificateholders. To the extent
that gains realized on sales of Mortgaged Properties, if any, are not used to
offset Realized Losses previously allocated to the Certificates, such gains will
be held and applied to offset future Realized Losses, if any.
Additional Interest Account. The Paying Agent will establish and will
maintain an "Additional Interest Account" in the name of the Paying Agent on
behalf of the Trustee for the benefit of the holders of the Class Z
Certificates. Prior to the applicable Distribution Date, an amount equal to the
Additional Interest received during the related Collection Period will be
deposited into the Additional Interest Account.
Application of the Available Distribution Amount. On each Distribution
Date, the Paying Agent will (except as otherwise described under "--Termination"
below) apply amounts on deposit in the Distribution Account, to the extent of
the Available Distribution Amount, in the following order of priority:
(1) to distributions of interest to the holders of the Class A-1
Certificates, Class A-2 Certificates, Class A-3 Certificates, Class
A-4 Certificates, Class X-C Certificates and Class X-P Certificates
(in each case, so long as any such Class remains outstanding), pro
rata, in accordance with the respective amounts of Distributable
Certificate Interest in respect of such Classes of Certificates on
such Distribution Date, in an amount equal to all Distributable
Certificate Interest in respect of each such Class of Certificates for
such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(2) to distributions of principal to the holders of the Class A-1
Certificates in an amount (not to exceed the then outstanding
Certificate Balance of the Class A-1 Certificates) equal to the
Principal Distribution Amount for such Distribution Date;
(3) after the Class A-1 Certificates have been retired, to distributions
of principal to the holders of the Class A-2 Certificates in an amount
(not to exceed the then outstanding Certificate Balance of the Class
A-2 Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of
the Class A-1 Certificates on such Distribution Date;
(4) after the Class A-1 Certificates and Class A-2 Certificates have been
retired, to distributions of principal to the holders of the Class A-3
Certificates in an amount (not to exceed the then outstanding
Certificate Balance of the Class A-3 Certificates) equal to the
Principal Distribution Amount for such Distribution Date, less any
portion thereof distributed in respect of the Class A-1 Certificates
or Class A-2 Certificates on such Distribution Date;
(5) after the Class A-1 Certificates, Class A-2 Certificates and Class A-3
Certificates have been retired to distributions of principal to the
holders of the Class A-4 Certificates in an amount (not to exceed the
then outstanding Certificate Balance of the Class A-4 Certificates)
equal to the Principal Distribution Amount for such Distribution Date,
less any portion thereof distributed in respect of the Class A-1
Certificates, Class A-2 Certificates or Class A-3 Certificates on such
Distribution Date;
(6) to distributions to the holders of the Class A-1 Certificates, Class
A-2 Certificates, Class A--3 Certificates and Class A-4 Certificates,
pro rata, in accordance with the respective amounts of Realized Losses
and Additional Trust Fund Expenses, if any, previously allocated to
such Classes of Certificates and for which no reimbursement has
previously been received, to reimburse such holders for all such
Realized Losses and Additional Trust Fund Expenses, if any;
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(7) to distributions of interest to the holders of the Class B
Certificates in an amount equal to all Distributable Certificate
Interest in respect of such Class of Certificates for such
Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(8) after the Class A-1 Certificates, the Class A-2 Certificates, the
Class A-3 Certificates and the Class A-4 Certificates have been
retired, to distributions of principal to the holders of the Class B
Certificates in an amount (not to exceed the then outstanding
Certificate Balance of the Class B Certificates) equal to the
Principal Distribution Amount for such Distribution Date, less any
portion thereof distributed in respect of the Class A-1 Certificates,
the Class A-2 Certificates, the Class A-3 Certificates and the Class
A-4 Certificates on such Distribution Date;
(9) to distributions to the holders of the Class B Certificates to
reimburse such holders for all Realized Losses and Additional Trust
Fund Expenses, if any, previously allocated to such Class of
Certificates and for which no reimbursement has previously been
received;
(10) to distributions of interest to the holders of the Class C
Certificates in an amount equal to all Distributable Certificate
Interest in respect of such Class of Certificates for such
Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(11) after all Classes of Certificates with an earlier alphabetical and
numerical designation have been retired, to distributions of principal
to the holders of the Class C Certificates in an amount (not to exceed
the then outstanding Certificate Balance of the Class C Certificates)
equal to the Principal Distribution Amount for such Distribution Date,
less any portion thereof distributed in respect of all Classes of
Certificates with an earlier alphabetical and numerical designation on
such Distribution Date;
(12) to distributions to the holders of the Class C Certificates to
reimburse such holders for all Realized Losses and Additional Trust
Fund Expenses, if any, previously allocated to such Class of
Certificates and for which no reimbursement has previously been
received;
(13) to distributions of interest to the holders of the Class D
Certificates in an amount equal to all Distributable Certificate
Interest in respect of such Class of Certificates for such
Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(14) after all Classes of Certificates with an earlier alphabetical and
numerical designation have been retired, to distributions of principal
to the holders of the Class D Certificates in an amount (not to exceed
the then outstanding Certificate Balance of the Class D Certificates)
equal to the Principal Distribution Amount for such Distribution Date,
less any portion thereof distributed in respect of all Classes of
Certificates with an earlier alphabetical and numerical designation on
such Distribution Date;
(15) to distributions to the holders of the Class D Certificates to
reimburse such holders for all Realized Losses and Additional Trust
Fund Expenses, if any, previously allocated to such Class of
Certificates and for which no reimbursement has previously been
received;
(16) to distributions of interest to the holders of the Class E
Certificates in an amount equal to all Distributable Certificate
Interest in respect of such Class of Certificates for such
Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(17) after all Classes of Certificates with an earlier alphabetical and
numerical designation have been retired, to distributions of principal
to the holders of the Class E Certificates in an amount (not to exceed
the then outstanding Certificate Balance of the Class E Certificates)
equal to the Principal Distribution Amount for such Distribution Date,
less any portion thereof distributed in respect of all Classes of
Certificates with an earlier alphabetical and numerical designation
and/or Class D Certificates on such Distribution Date;
(18) to distributions to the holders of the Class E Certificates to
reimburse such holders for all Realized Losses and Additional Trust
Fund Expenses, if any, previously allocated to such Class of
Certificates and for which no reimbursement has previously been
received;
(19) to distributions of interest to the holders of the Class F
Certificates in an amount equal to all
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Distributable Certificate Interest in respect of such Class of
Certificates for such Distribution Date and, to the extent not
previously paid, for all prior Distribution Dates;
(20) after all Classes of Certificates with an earlier alphabetical and
numerical designation have been retired, to distributions of principal
to the holders of the Class F Certificates in an amount (not to exceed
the then outstanding Certificate Balance of the Class F Certificates)
equal to the Principal Distribution Amount for such Distribution Date,
less any portion thereof distributed in respect of all Classes of
Certificates with an earlier alphabetical and numerical designation on
such Distribution Date;
(21) to distributions to the holders of the Class F Certificates to
reimburse such holders for all Realized Losses and Additional Trust
Fund Expenses, if any, previously allocated to such Class of
Certificates and for which no reimbursement has previously been
received;
(22) to distributions of interest to the holders of the Class G
Certificates in an amount equal to all Distributable Certificate
Interest in respect of such Class of Certificates for such
Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(23) after all Classes of Certificates with an earlier alphabetical and
numerical designation have been retired, to distributions of principal
to the holders of the Class G Certificates in an amount (not to exceed
the then outstanding Certificate Balance of the Class G Certificates)
equal to the Principal Distribution Amount for such Distribution Date,
less any portion thereof distributed in respect of all Classes of
Certificates with an earlier alphabetical and numerical designation on
such Distribution Date;
(24) to distributions to the holders of the Class G Certificates to
reimburse such holders for all Realized Losses and Additional Trust
Fund Expenses, if any, previously allocated to such Class of
Certificates and for which no reimbursement has previously been
received;
(25) to distributions of interest to the holders of the Class H
Certificates in an amount equal to all Distributable Certificate
Interest in respect of such Class of Certificates for such
Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(26) after all Classes of Certificates with an earlier alphabetical and
numerical designation have been retired, to distributions of principal
to the holders of the Class H Certificates in an amount (not to exceed
the then outstanding Certificate Balance of the Class H Certificates)
equal to the Principal Distribution Amount for such Distribution Date,
less any portion thereof distributed in respect of all Classes of
Certificates with an earlier alphabetical and numerical designation on
such Distribution Date;
(27) to distributions to the holders of the Class H Certificates to
reimburse such holders for all Realized Losses and Additional Trust
Fund Expenses, if any, previously allocated to such Class of
Certificates and for which no reimbursement has previously been
received;
(28) to distributions of interest to the holders of the Class J
Certificates in an amount equal to all Distributable Certificate
Interest in respect of such Class of Certificates for such
Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(29) after all Classes of Certificates with an earlier alphabetical and
numerical designation have been retired, to distributions of principal
to the holders of the Class J Certificates in an amount (not to exceed
the then outstanding Certificate Balance of the Class J Certificates)
equal to the Principal Distribution Amount for such Distribution Date,
less any portion thereof distributed in respect of all Classes of
Certificates with an earlier alphabetical and numerical designation on
such Distribution Date;
(30) to distributions to the holders of the Class J Certificates to
reimburse such holders for all Realized Losses and Additional Trust
Fund Expenses, if any, previously allocated to such Class of
Certificates and for which no reimbursement has previously been
received;
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(31) to distributions of interest to the holders of the Class K
Certificates in an amount equal to all Distributable Certificate
Interest in respect of such Class of Certificates for such
Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(32) after all Classes of Certificates with an earlier alphabetical and
numerical designation have been retired, to distributions of principal
to the holders of the Class K Certificates in an amount (not to exceed
the then outstanding Certificate Balance of the Class K Certificates)
equal to the Principal Distribution Amount for such Distribution Date,
less any portion thereof distributed in respect of all Classes of
Certificates with an earlier alphabetical and numerical designation on
such Distribution Date;
(33) to distributions to the holders of the Class K Certificates to
reimburse such holders for all Realized Losses and Additional Trust
Fund Expenses, if any, previously allocated to such Class of
Certificates and for which no reimbursement has previously been
received;
(34) to distributions of interest to the holders of the Class L
Certificates in an amount equal to all Distributable Certificate
Interest in respect of such Class of Certificates for such
Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(35) after all Classes of Certificates with an earlier alphabetical and
numerical designation have been retired, to distributions of principal
to the holders of the Class L Certificates in an amount (not to exceed
the then outstanding Certificate Balance of the Class L Certificates)
equal to the Principal Distribution Amount for such Distribution Date,
less any portion thereof distributed in respect of all Classes of
Certificates with an earlier alphabetical and numerical designation on
such Distribution Date;
(36) to distributions to the holders of the Class L Certificates to
reimburse such holders for all Realized Losses and Additional Trust
Fund Expenses, if any, previously allocated to such Class of
Certificates and for which no reimbursement has previously been
received;
(37) to distributions of interest to the holders of the Class M
Certificates in an amount equal to all Distributable Certificate
Interest in respect of such Class of Certificates for such
Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(38) after all Classes of Certificates with an earlier alphabetical and
numerical designation have been retired, to distributions of principal
to the holders of the Class M Certificates in an amount (not to exceed
the then outstanding Certificate Balance of the Class M Certificates)
equal to the Principal Distribution Amount for such Distribution Date,
less any portion thereof distributed in respect of all Classes of
Certificates with an earlier alphabetical and numerical designation on
such Distribution Date;
(39) to distributions to the holders of the Class M Certificates to
reimburse such holders for all Realized Losses and Additional Trust
Fund Expenses, if any, previously allocated to such Class of
Certificates and for which no reimbursement has previously been
received;
(40) to distributions of interest to the holders of the Class N
Certificates in an amount equal to all Distributable Certificate
Interest in respect of such Class of Certificates for such
Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(41) after all Classes of Certificates with an earlier alphabetical and
numerical designation have been retired, to distributions of principal
to the holders of the Class N Certificates in an amount (not to exceed
the then outstanding Certificate Balance of the Class N Certificates)
equal to the Principal Distribution Amount for such Distribution Date,
less any portion thereof distributed in respect of all Classes of
Certificates with an earlier alphabetical and numerical designation on
such Distribution Date;
(42) to distributions to the holders of the Class N Certificates to
reimburse such holders for all Realized Losses and Additional Trust
Fund Expenses, if any, previously allocated to such Class of
Certificates and for which no reimbursement has previously been
received;
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(43) to distributions of interest to the holders of the Class O
Certificates in an amount equal to all Distributable Certificate
Interest in respect of such Class of Certificates for such
Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(44) after all Classes of Certificates with an earlier alphabetical and
numerical designation have been retired, to distributions of principal
to the holders of the Class O Certificates in an amount (not to exceed
the then outstanding Certificate Balance of the Class O Certificates)
equal to the Principal Distribution Amount for such Distribution Date,
less any portion thereof distributed in respect of all Classes of
Certificates with an earlier alphabetical and numerical designation on
such Distribution Date;
(45) to distributions to the holders of the Class O Certificates to
reimburse such holders for all Realized Losses and Additional Trust
Fund Expenses, if any, previously allocated to such Class of
Certificates and for which no reimbursement has previously been
received;
(46) to distributions of interest to the holders of the Class P
Certificates in an amount equal to all Distributable Certificate
Interest in respect of such Class of Certificates for such
Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(47) after all Classes of Certificates with an earlier alphabetical and
numerical designation have been retired, to distributions of principal
to the holders of the Class P Certificates in an amount (not to exceed
the then outstanding Certificate Balance of the Class P Certificates)
equal to the Principal Distribution Amount for such Distribution Date,
less any portion thereof distributed in respect of all Classes of
Certificates with an earlier alphabetical and numerical designation on
such Distribution Date;
(48) to distributions to the holders of the Class P Certificates to
reimburse such holders for all Realized Losses and Additional Trust
Fund Expenses, if any, previously allocated to such Class of
Certificates and for which no reimbursement has previously been
received; and
(49) to distributions to the holders of the REMIC Residual Certificates in
an amount equal to the balance, if any, of the Available Distribution
Amount remaining after the distributions to be made on such
Distribution Date as described in clauses (1) through (48) above;
provided that, on each Distribution Date, if any, after the aggregate of the
Certificate Balances of the Subordinate Certificates has been reduced to zero as
a result of the allocations of Realized Losses and Additional Trust Fund
Expenses, and in any event on the final Distribution Date in connection with a
termination of the Trust Fund (see "--Termination" below), the payments of
principal to be made as contemplated by clauses (2), (3), (4) and (5) above with
respect to the Class A-1 Certificates, the Class A-2 Certificates, the Class
A--3 Certificates and the Class A--4 Certificates will be so made to the holders
of the respective Classes of such Certificates which remain outstanding up to an
amount equal to, and pro rata as between such Classes in accordance with, the
respective then outstanding Certificate Balances of such Classes of Certificates
and without regard to the Principal Distribution Amount for such date.
Distributable Certificate Interest. The "Distributable Certificate
Interest" in respect of each Class of REMIC Regular Certificates for each
Distribution Date equals the Accrued Certificate Interest in respect of such
Class of Certificates for such Distribution Date, reduced (other than in the
case of the Class X Certificates) (to not less than zero) by (i) such Class's
allocable share (calculated as described below) of the aggregate of any
Prepayment Interest Shortfalls resulting from principal prepayments made on the
Mortgage Loans during the related Collection Period that are not covered by the
Master Servicer's Compensating Interest Payment for such Distribution Date (the
aggregate of such Prepayment Interest Shortfalls that are not so covered, as to
such Distribution Date, the "Net Aggregate Prepayment Interest Shortfall") and
(ii) any Certificate Deferred Interest allocated to such Class of REMIC Regular
Certificates.
The "Accrued Certificate Interest" in respect of each Class of Sequential
Pay Certificates for each Distribution Date will equal one month's interest at
the Pass-Through Rate applicable to such Class of Certificates for such
Distribution Date accrued for the related Interest Accrual Period on the
related Certificate Balance outstanding immediately prior to such Distribution
Date. The "Accrued Certificate
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Interest" in respect of the Class X-C and Class X-P Certificates for any
Distribution Date will equal the amount of one month's interest at the related
Pass-Through Rate on the Notional Amount of the Class X-C or Class X-P
Certificates, as the case may be, outstanding immediately prior to such
Distribution Date. Accrued Certificate Interest will be calculated on a 30/360
basis.
The portion of the Net Aggregate Prepayment Interest Shortfall for any
Distribution Date that is allocable to each Class of REMIC Regular Certificates
(other than the Class X Certificates) will equal the product of (a) such Net
Aggregate Prepayment Interest Shortfall, multiplied by (b) a fraction, the
numerator of which is equal to the Accrued Certificate Interest in respect of
such Class of Certificates for such Distribution Date, and the denominator of
which is equal to the aggregate Accrued Certificate Interest in respect of all
Classes of REMIC Regular Certificates (other than the Class X Certificates) for
such Distribution Date.
Any such Prepayment Interest Shortfalls allocated to the Senior
Certificates, to the extent not covered by the Master Servicer's Compensating
Interest Payment for such Distribution Date, will reduce the Distributable
Certificate Interest as described above.
With respect to the Meadows Mall Loan, prepayment interest shortfalls will
be allocated pro rata between the related promissory notes based on their
outstanding principal balances. The portion of such shortfall allocated to the
Meadows Mall Loan, net of amounts payable to the Master Servicer, will be
included in the Net Aggregate Prepayment Interest Shortfalls.
With respect to the Park City Center Loan, prepayment interest shortfalls
will be allocated first to the promissory note related to the Park City Center
AB Companion Loan and second, pro rata, between the promissory notes related to
the Park City Center Loan and the Park City Center Pari Passu Loan. The portion
of such shortfall allocated to the Park City Center Loan, net of amounts payable
by the Master Servicer, will be included in the Net Aggregate Prepayment
Interest Shortfall.
With respect to the AB Mortgage Loans, prepayment interest shortfalls will
be allocated first to the promissory note related to the related AB Companion
Loan and second to the promissory note related to the related AB Mortgage Loan.
The portion of such shortfall allocated to the AB Mortgage Loans, net of amounts
payable by the Master Servicer, will be included in the Net Aggregate Prepayment
Interest Shortfall.
Principal Distribution Amount. The "Principal Distribution Amount" for each
Distribution Date will generally equal the aggregate of the following (without
duplication) to the extent paid by the related borrower during the related
Collection Period or advanced by the Master Servicer or the Trustee, as
applicable:
(a) the aggregate of the principal portions of all Scheduled Payments
(other than Balloon Payments) and of any Assumed Scheduled Payments due or
deemed due, on or in respect of the Mortgage Loans for their respective Due
Dates occurring during the related Collection Period, to the extent not
previously paid by the related borrower or advanced by the Master Servicer
or Trustee, as applicable, prior to such Collection Period;
(b) the aggregate of all principal prepayments received on the
Mortgage Loans during the related Collection Period;
(c) with respect to any Mortgage Loan as to which the related stated
maturity date occurred during or prior to the related Collection Period,
any payment of principal made by or on behalf of the related borrower
during the related Collection Period (including any Balloon Payment), net
of any portion of such payment that represents a recovery of the principal
portion of any Scheduled Payment (other than a Balloon Payment) due, or the
principal portion of any Assumed Scheduled Payment deemed due, in respect
of such Mortgage Loan on a Due Date during or prior to the related
Collection Period and not previously recovered;
(d) the aggregate of the principal portion of all liquidation
proceeds, insurance proceeds, condemnation awards and proceeds of
repurchases of Mortgage Loans and Substitution Shortfall Amounts and, to
the extent not otherwise included in clause (a), (b) or (c) above, payments
and other amounts that were received on or in respect of Mortgage Loans
during the related Collection Period
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and that were identified and applied by the Master Servicer as recoveries
of principal, in each case net of any portion of such amounts that
represents a recovery of the principal portion of any Scheduled Payment
(other than a Balloon Payment) due, or of the principal portion of any
Assumed Scheduled Payment deemed due, in respect of the related Mortgage
Loan on a Due Date during or prior to the related Collection Period and not
previously recovered; and
(e) if such Distribution Date is subsequent to the initial
Distribution Date, the excess, if any, of the Principal Distribution Amount
for the immediately preceding Distribution Date, over the aggregate
distributions of principal made on the Certificates on such immediately
preceding Distribution Date;
provided that the Principal Distribution Amount for any Distribution Date shall
be reduced by the amount of any reimbursements of nonrecoverable Advances plus
interest on such nonrecoverable Advances that are paid or reimbursed from
principal collections on the Mortgage Loans in a period during which such
principal collections would have otherwise been included in the Principal
Distribution Amount for such Distribution Date (provided, further, if any of the
amounts that were reimbursed from principal collections on the Mortgage Loans
are subsequently recovered on the related Mortgage Loan, such recovery will
increase the Principal Distribution Amount for the Distribution Date related to
the period in which such recovery occurs).
The "Scheduled Payment" due on any Mortgage Loan on any related Due Date is
the amount of the Periodic Payment (including Balloon Payments) that is or would
have been, as the case may be, due thereon on such date, without regard to any
waiver, modification or amendment of such Mortgage Loan granted or agreed to by
the Special Servicer or otherwise resulting from a bankruptcy or similar
proceeding involving the related borrower, without regard to the accrual of
Additional Interest on or the application of any Excess Cash Flow to pay
principal on an ARD Loan, without regard to any acceleration of principal by
reason of default, and with the assumption that each prior Scheduled Payment has
been made in a timely manner. The "Assumed Scheduled Payment" is an amount
deemed due (i) on any Balloon Loan that is delinquent in respect of its Balloon
Payment beyond the first Determination Date that follows its stated maturity
date and (ii) on an REO Mortgage Loan. The Assumed Scheduled Payment deemed due
on any such Balloon Loan on its stated maturity date and on each successive
related Due Date that it remains or is deemed to remain outstanding will equal
the Scheduled Payment that would have been due thereon on such date if the
related Balloon Payment had not come due but rather such Mortgage Loan had
continued to amortize in accordance with such loan's amortization schedule, if
any, and to accrue interest at the Mortgage Rate in effect as of the Closing
Date. The Assumed Scheduled Payment deemed due on any REO Mortgage Loan on each
Due Date that the related REO Property remains part of the Trust Fund will equal
the Scheduled Payment that would have been due in respect of such Mortgage Loan
on such Due Date had it remained outstanding (or, if such Mortgage Loan was a
Balloon Loan and such Due Date coincides with or follows what had been its
stated maturity date, the Assumed Scheduled Payment that would have been deemed
due in respect of such Mortgage Loan on such Due Date had it remained
outstanding).
Distributions of the Principal Distribution Amount will constitute the only
distributions of principal on the Certificates. Reimbursements of previously
allocated Realized Losses and Additional Trust Fund Expenses 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 any such reimbursement is made.
Treatment of REO Properties. Notwithstanding that any Mortgaged Property
may be acquired as part of the Trust Fund through foreclosure, deed in lieu of
foreclosure or otherwise, the related Mortgage Loan will be treated, for
purposes of determining (i) distributions on the Certificates, (ii) allocations
of Realized Losses and Additional Trust Fund Expenses to the Certificates, and
(iii) the amount of Trustee Fees and Servicing Fees payable under the Pooling
and Servicing Agreement, as having remained outstanding until such REO Property
is liquidated. In connection therewith, operating revenues and other proceeds
derived from such REO Property (net of related operating costs) will be
"applied" by the Master Servicer as principal, interest and other amounts that
would have been "due" on such Mortgage Loan, and the Master Servicer will be
required to make P&I Advances in respect of such Mortgage Loan,
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in all cases as if such Mortgage Loan had remained outstanding. References to
"Mortgage Loan" or "Mortgage Loans" in the definitions of "Principal
Distribution Amount" and "Weighted Average Net Mortgage Rate" are intended to
include any Mortgage Loan as to which the related Mortgaged Property has become
an REO Property (an "REO Mortgage Loan").
Allocation of Prepayment Premiums and Yield Maintenance Charges. In the
event a borrower is required to pay any Prepayment Premium or Yield Maintenance
Charge, the amount of such payments actually collected will be distributed in
respect of the Offered Certificates and the Class F, Class G and Class H
Certificates as set forth below. "Yield Maintenance Charges" are fees paid or
payable, as the context requires, as a result of a prepayment of principal on a
Mortgage Loan, which fees have been calculated (based on Scheduled Payments on
such Mortgage Loan) to compensate the holder of the Mortgage for reinvestment
losses based on the value of a discount rate at or near the time of prepayment.
Any other fees paid or payable, as the context requires, as a result of a
prepayment of principal on a Mortgage Loan, which are calculated based upon a
specified percentage (which may decline over time) of the amount prepaid are
considered "Prepayment Premiums".
Any Prepayment Premiums or Yield Maintenance Charges collected on a
Mortgage Loan during the related Collection Period will be distributed as
follows: on each Distribution Date and with respect to the collection of any
Prepayment Premiums or Yield Maintenance Charges on the Mortgage Loans, the
holders of each Class of Offered Certificates and the Class F, Class G and Class
H Certificates then entitled to distributions of principal on such Distribution
Date will be entitled to an amount of Prepayment Premiums or Yield Maintenance
Charges equal to the product of (a) the amount of such Prepayment Premiums or
Yield Maintenance Charges; (b) a fraction (which in no event may be greater than
one), the numerator of which is equal to the excess, if any, of the Pass-Through
Rate of such Class of Certificates over the relevant Discount Rate (as defined
below), and the denominator of which is equal to the excess, if any, of the
Mortgage Rate of the prepaid Mortgage Loan over the relevant Discount Rate; and
(c) a fraction, the numerator of which is equal to the amount of principal
distributable on such Class of Certificates on such Distribution Date, and the
denominator of which is the Principal Distribution Amount for such Distribution
Date. If there is more than one such Class of Certificates entitled to
distributions of principal on any particular Distribution Date on which a
Prepayment Premium or Yield Maintenance Charge is distributable, the aggregate
amount of such Prepayment Premium or Yield Maintenance Charge will be allocated
among all such Classes up to, and on a pro rata basis in accordance with, their
respective entitlements thereto in accordance with, the first sentence of this
paragraph. The portion, if any, of the Prepayment Premiums or Yield Maintenance
Charges remaining after any such payments described above will be distributed as
follows: (a) on or before the Distribution Date in December 2010, 85% to the
holders of the Class X-C Certificates and 15% to the holders of the Class X-P
Certificates, and (b) thereafter, 100% to the holders of the Class X-C
Certificates.
The "Discount Rate" applicable to any Class of Offered Certificates and the
Class F, Class G and Class H Certificates will equal the yield (when compounded
monthly) on the U.S. Treasury issue with a maturity date closest to the maturity
date for the prepaid Mortgage Loan or REO Mortgage Loan. In the event that there
are two or more such U.S. Treasury issues (a) with the same coupon, the issue
with the lowest yield will be utilized, and (b) with maturity dates equally
close to the maturity date for the prepaid Mortgage Loan or REO Mortgage Loan,
the issue with the earliest maturity date will be utilized.
For an example of the foregoing allocation of Prepayment Premiums and Yield
Maintenance Charges, see "SUMMARY OF PROSPECTUS SUPPLEMENT" in this prospectus
supplement. The Depositor makes no representation as to the enforceability of
the provision of any Mortgage Note requiring the payment of a Prepayment Premium
or Yield Maintenance Charge, or of the collectability of any Prepayment Premium
or Yield Maintenance Charge. See "DESCRIPTION OF THE MORTGAGE POOL--Certain
Terms and Conditions of the Mortgage Loans--Prepayment Provisions" in this
prospectus supplement.
Distributions of Additional Interest. On each Distribution Date, any
Additional Interest collected on an ARD Loan during the related Collection
Period will be distributed to the holders of the Class Z Certificates. There can
be no assurance that any Additional Interest will be collected on the ARD Loans.
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SUBORDINATION; ALLOCATION OF LOSSES AND CERTAIN EXPENSES
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 Class A and Class X Certificates and each other such
Class of Subordinate Certificates, if any, with an earlier alphabetical Class
designation. This subordination provided by the Subordinate Certificates, is
intended to enhance the likelihood of timely receipt by the holders of the Class
A and Class X Certificates of the full amount of Distributable Certificate
Interest payable in respect of such Classes of Certificates on each Distribution
Date, and the ultimate receipt by the holders of each Class of the Class A
Certificates of principal in an amount equal to the entire related Certificate
Balance. Similarly, but to decreasing degrees, this subordination is also
intended to enhance the likelihood of timely receipt by the holders of the Class
B, Class C, Class D and Class E Certificates of the full amount of Distributable
Certificate Interest payable in respect of such Classes of Certificates on each
Distribution Date, and the ultimate receipt by the holders of such Certificates
of, in the case of each such Class thereof, principal equal to the entire
related Certificate Balance. The protection afforded (a) to the holders of the
Class E Certificates by means of the subordination of the Non-Offered
Certificates (other than the Class X Certificates) (b) to the holders of the
Class D Certificates by means of the subordination of the Class E and the
Non-Offered Certificates (other than the Class X Certificates), (c) to the
holders of the Class C Certificates by means of the subordination of the Class
D, Class E and the Non-Offered Certificates (other than the Class X
Certificates), (d) to the holders of the Class B Certificates by means of the
subordination of the Class C, Class D, Class E and the Non-Offered Certificates
(other than the Class X Certificates), and (e) to the holders of the Class A and
Class X Certificates by means of the subordination of the Subordinate
Certificates, will be accomplished by (i) the application of the Available
Distribution Amount on each Distribution Date in accordance with the order of
priority described under "--Distributions--Application of the Available
Distribution Amount" above and (ii) by the allocation of Realized Losses and
Additional Trust Fund Expenses as described below. Until the first Distribution
Date after the aggregate of the Certificate Balances of the Subordinate
Certificates has been reduced to zero, the Class A-4 Certificates will receive
principal payments only after the Certificate Balance of the Class A-3
Certificates has been reduced to zero, the Class A-3 Certificates will receive
principal payments only after the Certificate Balance of the Class A-2
Certificates has been reduced to zero and the Class A-2 Certificates will
receive principal payments only after the Certificate Balance of the Class A-1
Certificates has been reduced to zero. However, after the Distribution Date on
which the Certificate Balances of the Subordinate Certificates have been reduced
to zero, the Class A-1, Class A-2, Class A-3 and Class A-4 Certificates, to the
extent such Certificates remain outstanding, will bear shortfalls in collections
and losses incurred in respect of the Mortgage Loans pro rata in respect of
distributions of principal and then the Class A-1, Class A-2, Class A-3, Class
A-4, Class X-C and Class X-P Certificates, to the extent such Certificates
remain outstanding, will bear such shortfalls pro rata in respect of
distributions of interest. No other form of credit support will be available for
the benefit of the holders of the Offered Certificates.
Allocation to the Class A-1, Class A-2, Class A-3 and Class A-4
Certificates (unless the aggregate Certificate Balance of each Class of
Subordinate Certificates has been reduced to zero, first to the Class A-1
Certificates until the Certificate Balance thereof has been reduced to zero,
then to the Class A-2 Certificates until the Certificate Balance thereof has
been reduced to zero, then to the Class A-3 Certificates until the Certificate
Balance thereof has been reduced to zero and then to the Class A-4 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-1, Class A-2, Class A-3 and Class A-4 Certificates at a
proportionately faster rate than the rate at which the aggregate Stated
Principal Balance of the Mortgage Pool will reduce. Thus, as principal is
distributed to the holders of such Class A-1, Class A-2, Class A-3 and Class A-4
Certificates, the percentage interest in the Trust Fund evidenced by such Class
A-1, Class A-2, Class A-3 and Class A-4 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 such Class A-1, Class A-2,
Class A-3 and Class A-4 Certificates by the Subordinate Certificates.
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On each Distribution Date, following all distributions on the Certificates
to be made on such date, the aggregate of all Realized Losses and Additional
Trust Fund Expenses related to all Mortgage Loans that have been incurred since
the Cut-Off Date through the end of the related Collection Period and that have
not previously been allocated as described below will be allocated among the
respective Classes of Sequential Pay Certificates (in each case in reduction of
their respective Certificate Balances) as follows, but in the aggregate only to
the extent that the aggregate Certificate Balance of all Classes of Sequential
Pay Certificates remaining outstanding after giving effect to the distributions
on such Distribution Date exceeds the aggregate Stated Principal Balance of the
Mortgage Pool that will be outstanding immediately following such Distribution
Date: first, to the Class P Certificates, until the remaining Certificate
Balance of such Class of Certificates is reduced to zero; second, to the Class O
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; third, to the Class N Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
fourth, to the Class M Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; fifth, to the Class L
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; sixth, to the Class K Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
seventh, to the Class J Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; eighth, to the Class H
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; ninth, to the Class G Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
tenth, to the Class F Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; eleventh, to the Class E
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; twelfth, to the Class D Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
thirteenth, to the Class C Certificates, until the remaining Certificate Balance
of such Class of Certificates is reduced to zero; fourteenth, to the Class B
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; and, last, to the Class A-1 Certificates, the
Class A-2 Certificates, the Class A-3 Certificates and the Class A-4
Certificates, pro rata, in proportion to their respective outstanding
Certificate Balances, until the remaining Certificate Balances of such Classes
of Certificates are reduced to zero.
Any losses and expenses that are associated with each of the Park City
Center Loan and the Park City Center Companion Loans will be allocated in
accordance with the terms of the Park City Center Intercreditor Agreement first,
to the Park City Center AB Companion Loan and second, pro rata, between the Park
City Center Loan and the Park City Center Pari Passu Loan. The portion of those
losses and expenses allocated to the Park City Center Loan will be allocated
among the Certificates in the manner described above.
"Realized Losses" are losses arising from the inability to collect all
amounts due and owing under any defaulted Mortgage Loan, including by reason of
the fraud or bankruptcy of the borrower or a casualty of any nature at the
related Mortgaged Property, to the extent not covered by insurance. The Realized
Loss in respect of a liquidated Mortgage Loan (or related REO Property) is an
amount generally equal to the excess, if any, of (a) the outstanding principal
balance of such Mortgage Loan as of the date of liquidation, together with (i)
all accrued and unpaid interest thereon to but not including the Due Date in the
Collection Period in which the liquidation occurred (exclusive of any related
default interest in excess of the Mortgage Rate, Additional Interest, Prepayment
Premium or Yield Maintenance Charges) and (ii) certain related unreimbursed
servicing expenses (including any unreimbursed interest on any Advances), over
(b) the aggregate amount of liquidation proceeds, if any, recovered in
connection with such liquidation. If any portion of the debt due under a
Mortgage Loan (other than Additional Interest and default interest in excess of
the Mortgage Rate) is forgiven, whether in connection with a modification,
waiver or amendment granted or agreed to by the Special Servicer or in
connection with the bankruptcy or similar proceeding involving the related
borrower, the amount so forgiven also will be treated as a Realized Loss. The
Realized Loss in respect of a Mortgage Loan for which a Final Recovery
Determination has been made includes nonrecoverable Advances (including interest
on such nonrecoverable Advances) to the extent amounts have been paid from the
Principal Distribution Amount pursuant to the Pooling and Servicing Agreement.
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"Additional Trust Fund Expenses" include, among other things, (i) any
Special Servicing Fees, Liquidation Fees, Determination Party fees (in certain
circumstances) or Workout Fees paid to the Special Servicer, (ii) any interest
paid to the Master Servicer, and/or the Trustee in respect of unreimbursed
Advances (to the extent not otherwise offset by penalty interest and late
payment charges) and amounts payable to the Special Servicer in connection with
certain inspections of Mortgaged Properties required pursuant to the Pooling and
Servicing Agreement (to the extent not otherwise offset by penalty interest and
late payment charges otherwise payable to the Special Servicer and received in
the Collection Period during which such inspection related expenses were
incurred) and (iii) any of certain unanticipated expenses of the Trust Fund,
including certain indemnities and reimbursements to the Paying Agent and the
Trustee of the type described under "DESCRIPTION OF THE POOLING AND SERVICING
AGREEMENTS--Certain Matters Regarding the Trustee" in the prospectus (the Paying
Agent having the same rights to indemnity and reimbursement as described
thereunder with respect to the Trustee), certain indemnities and reimbursements
to the Master Servicer, the Special Servicer and the Depositor of the type
described under "DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS--Certain
Matters Regarding the Master Servicer and the Depositor" in the prospectus (the
Special Servicer having the same rights to indemnity and reimbursement as
described thereunder with respect to the Master Servicer), certain Rating Agency
fees to the extent such fees are not paid by any other party and certain
federal, state and local taxes and certain tax related expenses, payable from
the assets of the Trust Fund and described under "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of Owners of REMIC Residual Certificates--Prohibited
Transactions Tax and Other Taxes" in the prospectus and "SERVICING OF THE
MORTGAGE LOANS--Defaulted Mortgage Loans; REO Properties; Purchase Option" in
this prospectus supplement. Additional Trust Fund Expenses will reduce amounts
payable to Certificateholders and, subject to the distribution priorities
described above, may result in a loss on one or more Classes of Offered
Certificates.
P&I ADVANCES
On or about each Distribution Date, the Master Servicer is obligated,
subject to the recoverability determination described in the next paragraph, to
make advances (each, a "P&I Advance") out of its own funds or, subject to the
replacement thereof as provided in the Pooling and Servicing Agreement, from
funds held in the Certificate Account that are not required to be distributed to
Certificateholders (or paid to any other Person pursuant to the Pooling and
Servicing Agreement) on such Distribution Date, in an amount that is generally
equal to the aggregate of all Periodic Payments (other than Balloon Payments)
and any Assumed Scheduled Payments, net of related Master Servicing Fees, in
respect of the Mortgage Loans (other than the Park City Center Loan, as provided
below) and any REO Loans during the related Collection Period, in each case to
the extent such amount was not paid by or on behalf of the related borrower or
otherwise collected (or previously advanced by the Master Servicer) as of the
close of business on the last day of the Collection Period. P&I Advances are
intended to maintain a regular flow of scheduled interest and principal payments
to the holders of the Class or Classes of Certificates entitled thereto, rather
than to insure against losses. The Master Servicer's obligations to make P&I
Advances in respect of any Mortgage Loan, subject to the recoverability
determination, will continue until liquidation of such Mortgage Loan or
disposition of any REO Property acquired in respect thereof. However, if the
Periodic Payment on any Mortgage Loan has been reduced in connection with a
bankruptcy or similar proceeding or a modification, waiver or amendment granted
or agreed to by the Special Servicer, the Master Servicer will be required to
advance only the amount of the reduced Periodic Payment (net of related
Servicing Fees) in respect of subsequent delinquencies. In addition, if it is
determined that an Appraisal Reduction Amount exists with respect to any
Required Appraisal Loan (as defined below), then, with respect to the
Distribution Date immediately following the date of such determination and with
respect to each subsequent Distribution Date for so long as such Appraisal
Reduction Amount exists, the Master Servicer will be required in the event of
subsequent delinquencies to advance in respect of such Mortgage Loan only an
amount equal to the sum of (i) the amount of the interest portion of the P&I
Advance that would otherwise be required without regard to this sentence, minus
the product of (a) such Appraisal Reduction Amount and (b) the per annum
Pass-Through Rate (i.e., for any month, one twelfth of the Pass-Through Rate)
applicable to the Class of Certificates, to which such Appraisal Reduction
Amount is allocated as described in "--Appraisal Reductions" below and (ii) the
amount of the principal
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portion of the P&I Advance that would otherwise be required without regard to
this sentence. Pursuant to the terms of the Pooling and Servicing Agreement, if
the Master Servicer fails to make a P&I Advance required to be made, the Trustee
shall then be required to make such P&I Advance, in such case, subject to the
recoverability standard described below. Neither the Master Servicer nor Trustee
will be required to make a P&I Advance or any other advance for any Balloon
Payments, default interest, late payment charges, Prepayment Premiums, Yield
Maintenance Charges or Additional Interest.
In general, neither the Master Servicer nor the Trustee will be required to
make any P&I Advances with respect to the Park City Center Loan under the
Pooling and Servicing Agreement. Those advances will be made by the 2003-C8
Master Servicer in accordance with the 2003-C8 Pooling and Servicing Agreement
on generally the same terms and conditions as are applicable under the Pooling
and Servicing Agreement. Furthermore, the amount of principal and interest
advances to be made with respect to the Park City Center Loan may be reduced by
an appraisal reduction amount as calculated under the 2003-C8 Pooling and
Servicing Agreement, which amount will be calculated in a manner generally the
same as an Appraisal Reduction Amount. If the 2003-C8 Master Servicer fails to
make a required principal and interest advance on the Park City Center Loan
pursuant to the 2003-C8 Pooling and Servicing Agreement (other than based on a
determination that such advance will not be recoverable out of collections on
the Park City Center Loan), the Master Servicer will be required to make the P&I
Advances so long as it has received all information necessary to make a
recoverability determination. If the Master Servicer fails to make the required
P&I Advance, the Trustee is required to make such P&I Advance, subject to the
same limitations, and with the same rights, as described above for the Master
Servicer. The Master Servicer and the Trustee may conclusively rely on the
non-recoverability determination of the 2003-C8 Master Servicer. If any
principal and interest advances are made with respect to the Park City Center
Loan under the 2003-C8 Pooling and Servicing Agreement or under the Pooling and
Servicing Agreement, the party making that advance will be entitled to be
reimbursed with interest thereon as set forth in the 2003-C8 Pooling and
Servicing Agreement or the Pooling and Servicing Agreement, as applicable,
including in the event that the 2003-C8 Master Servicer has made a principal and
interest advance on the Park City Center Loan that it subsequently determines is
not recoverable from expected collections on the Park City Center Loan, from
general collections on all Mortgage Loans in this trust.
The Master Servicer (or the Trustee) is entitled to recover any P&I Advance
made out of its own funds from any amounts collected in respect of the Mortgage
Loan (net of related Master Servicing Fees with respect to collections of
interest and net of related Liquidation Fees and Workout Fees with respect to
collections of principal) as to which such P&I Advance was made whether such
amounts are collected in the form of late payments, insurance and condemnation
proceeds or liquidation proceeds, or any other recovery of the related Mortgage
Loan or REO Property ("Related Proceeds"). Neither the Master Servicer nor the
Trustee is obligated to make any P&I Advance that it determines in accordance
with the Servicing Standard would, if made, not be recoverable from Related
Proceeds (a "Nonrecoverable P&I Advance"), and the Master Servicer (or the
Trustee) is entitled to recover, from general funds on deposit in the
Certificate Account, any P&I Advance made that it later determines to be a
Nonrecoverable P&I Advance plus interest at the Reimbursement Rate. See
"DESCRIPTION OF THE CERTIFICATES--Advances in Respect of Delinquencies" and
"DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS--Certificate Account" in
the prospectus.
In connection with the recovery by the Master Servicer or the Trustee of
any P&I Advance made by it or the recovery by the Master Servicer or the Trustee
of any reimbursable servicing expense (which may include non-recoverable
advances to the extent deemed to be in the best interest of the
Certificateholders) incurred by it (each such P&I Advance or servicing expense,
an "Advance"), the Master Servicer or the Trustee, as applicable, is entitled to
be paid interest compounded annually at a per annum rate equal to the
Reimbursement Rate. Such interest will be paid contemporaneously with the
reimbursement of the related Advance first out of late payment charges and
default interest received on the related Mortgage Loan in the Collection Period
in which such reimbursement is made and then from general collections on the
Mortgage Loans then on deposit in the Certificate Account; provided, however, no
P&I Advance shall accrue interest until after the expiration of any applicable
grace period for the related Periodic Payment. In addition, to the extent the
Master Servicer receives late payment charges or default interest on a Mortgage
Loan for which interest on Advances related to such Mortgage Loan has been paid
from
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general collections on deposit in the Certificate Account and not previously
reimbursed to the Trust Fund, such late payment charges or default interest will
be used to reimburse the Trust Fund for such payment of interest. The
"Reimbursement Rate" is equal to the "prime rate" published in the "Money Rates"
section of The Wall Street Journal, as such "prime rate" may change from time to
time, accrued on the amount of such Advance from the date made to but not
including the date of reimbursement. To the extent not offset or covered by
amounts otherwise payable on the Non-Offered Certificates, interest accrued on
outstanding Advances will result in a reduction in amounts payable on the
Offered Certificates, subject to the distribution priorities described in this
Prospectus Supplement.
Upon a determination that a previously made Advance is not recoverable,
instead of obtaining reimbursement out of general collections immediately, the
Master Servicer, or the Trustee, as applicable, may, in its sole discretion,
elect to obtain reimbursement for such nonrecoverable Advance over time (not to
exceed 6 months or such longer period of time as agreed to by the Master
Servicer and the Controlling Class Representative, each in its sole discretion)
and the unreimbursed portion of such Advance will accrue interest at the prime
rate. At any time after such a determination to obtain reimbursement over time,
the Master Servicer, the Special Servicer or the Trustee, as applicable, may, in
its sole discretion, decide to obtain reimbursement immediately. The fact that a
decision to recover such nonrecoverable Advances over time, or not to do so,
benefits some Classes of Certificateholders to the detriment of other Classes
shall not, with respect to the Master Servicer, constitute a violation of the
Servicing Standard and/or with respect to the Trustee, constitute a violation of
any fiduciary duty to Certificateholders or contractual duty under the Pooling
and Servicing Agreement.
If the Master Servicer or the Trustee, as applicable, reimburses itself out
of general collections on the Mortgage Pool for any Advance that it has
determined is not recoverable out of collections on the related Mortgage Loan,
then that Advance (together with accrued interest thereon) will be deemed, to
the fullest extent permitted pursuant to the terms of the Pooling and Servicing
Agreement, to be reimbursed first out of the Principal Distribution Amount
otherwise distributable on the Certificates (prior to being deemed reimbursed
out of payments and other collections of interest on the underlying Mortgage
Loans otherwise distributable on the Certificates), thereby reducing the
Principal Distribution Amount of the Certificates. To the extent any Advance is
determined to be nonrecoverable, the Advance is reimbursed out of the Principal
Distribution Amount as described above and the item for which the Advance was
originally made is subsequently collected from payments or other collections on
the related Mortgage Loan, then the Principal Distribution Amount for the
Distribution Date corresponding to the Collection Period in which this item was
recovered will be increased by the lesser of (a) the amount of the item and (b)
any previous reduction in the Principal Distribution Amount for a prior
Distribution Date pursuant to this paragraph.
APPRAISAL REDUCTIONS
Other than with respect to the Park City Center Loan, upon the earliest of
the date (each such date, a "Required Appraisal Date") that (1) any Mortgage
Loan is 60 days delinquent in respect of any Periodic Payments, (2) any REO
Property is acquired on behalf of the Trust Fund in respect of any Mortgage
Loan, (3) any Mortgage Loan has been modified by the Special Servicer to reduce
the amount of any Periodic Payment, other than a Balloon Payment, (4) a receiver
is appointed and continues in such capacity in respect of the Mortgaged Property
securing any Mortgage Loan, (5) a borrower with respect to any Mortgage Loan
becomes subject to any bankruptcy proceeding or (6) a Balloon Payment with
respect to any Mortgage Loan has not been paid on its scheduled maturity date,
unless the Master Servicer has, on or prior to 60 days following the scheduled
maturity date of such Balloon Payment, received written evidence from an
institutional lender of such lender's binding commitment to refinance such
Mortgage Loan within 60 days after the Due Date of such Balloon Payment
(provided that if such refinancing does not occur during such time specified in
the commitment, the related Mortgage Loan will immediately become a Required
Appraisal Loan) or (7) any Mortgage Loan is outstanding 60 days after the third
anniversary of an extension of its scheduled maturity date (each such Mortgage
Loan, including an REO Mortgage Loan, a "Required Appraisal Loan"), the Special
Servicer is required to obtain (within 60 days of the applicable Required
Appraisal Date) an appraisal of the related Mortgaged Property prepared in
accordance with 12 CFR Section 225.62 and conducted in accordance with the
standards of
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the Appraisal Institute by a Qualified Appraiser (or with respect to any
Mortgage Loan with an outstanding principal balance less than $2 million, an
internal valuation performed by the Special Servicer), unless such an appraisal
had previously been obtained within the prior twelve months. A "Qualified
Appraiser" is an independent appraiser, selected by the Special Servicer or the
Master Servicer, that is a member in good standing of the Appraisal Institute,
and that, if the state in which the subject Mortgaged Property is located
certifies or licenses appraisers, is certified or licensed in such state, and in
each such case, who has a minimum of five years experience in the subject
property type and market. The cost of such appraisal will be advanced by the
Master Servicer, subject to the Master Servicer's right to be reimbursed
therefor out of Related Proceeds or, if not reimbursable therefrom, out of
general funds on deposit in the Certificate Account. As a result of any such
appraisal, it may be determined that an "Appraisal Reduction Amount" exists with
respect to the related Required Appraisal Loan, such determination to be made by
the Master Servicer as described below. The Appraisal Reduction Amount for any
Required Appraisal Loan will equal the excess, if any, of (a) the sum (without
duplication), as of the first Determination Date immediately succeeding the
Master Servicer's obtaining knowledge of the occurrence of the Required
Appraisal Date if no new appraisal is required or the date on which the
appraisal or internal valuation, if applicable, is obtained and each
Determination Date thereafter so long as the related Mortgage Loan remains a
Required Appraisal Loan, of (i) the Stated Principal Balance of such Required
Appraisal Loan, (ii) to the extent not previously advanced by or on behalf of
the Master Servicer or the Trustee, all unpaid interest on the Required
Appraisal Loan through the most recent Due Date prior to such Determination Date
at a per annum rate equal to the related Net Mortgage Rate (exclusive of any
portion thereof that constitutes Additional Interest), (iii) all accrued but
unpaid Servicing Fees and all accrued but unpaid Additional Trust Fund Expenses
in respect of such Required Appraisal Loan, (iv) all related unreimbursed
Advances (plus accrued interest thereon) made by or on behalf of the Master
Servicer, the Special Servicer or the Trustee with respect to such Required
Appraisal Loan and (v) all currently due and unpaid real estate taxes and
reserves owed for improvements and assessments, insurance premiums, and, if
applicable, ground rents in respect of the related Mortgaged Property, over (b)
an amount equal to the sum of (i) all escrows, reserves and letters of credit
held for the purposes of reserves (provided such letters of credit may be drawn
upon for reserve purposes under the related Mortgage Loan documents) held with
respect to such Required Appraisal Loan, plus (ii) 90% of the appraised value
(net of any prior liens and estimated liquidation expenses) of the related
Mortgaged Property as determined by such appraisal less any downward adjustments
made by the Special Servicer (without implying any obligation to do so) based
upon its review of the Appraisal and such other information as the Special
Servicer deems appropriate. If the Special Servicer has not obtained a new
appraisal (or performed an internal valuation, if applicable) within the time
limit described above, the Appraisal Reduction Amount for the related Mortgage
Loan will equal 25% of the principal balance of such Mortgage Loan, to be
adjusted upon receipt of the new appraisal (or internal valuation, if
applicable).
As a result of calculating an Appraisal Reduction Amount with respect to a
Mortgage Loan, the P&I Advance for such Mortgage Loan for the related
Distribution Date will be reduced, which will have the effect of reducing the
amount of interest available for distribution to the Subordinate Certificates in
reverse alphabetical order of the Classes. See "--P&I Advances" above. With
respect to the Park City Center Loan, the appraisal reduction amount will be
calculated under the 2003-C8 Pooling and Servicing Agreement in a manner
generally the same as an Appraisal Reduction Amount as described above. See
"SERVICING OF THE MORTGAGE LOANS--Servicing of the Park City Center Loan" in
this prospectus supplement. For the purpose of calculating P&I Advances only,
the aggregate Appraisal Reduction Amounts will be allocated to the Certificate
Balance of each Class of Sequential Pay Certificates in reverse alphabetical
order.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
Paying Agent Reports. Based solely on information provided in monthly
reports prepared by the Master Servicer and the Special Servicer (and subject to
the limitations with respect thereto) and delivered to the Paying Agent, the
Paying Agent is required to provide or make available either electronically (on
the Paying Agent's internet website initially located at "www.etrustee.net") or
by first class mail on each Distribution Date to each Certificateholder:
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(a) A statement (a "Distribution Date Statement"), substantially in
the form of Annex B to this Prospectus Supplement, setting forth, among
other things, for each Distribution Date:
(i) the amount of the distribution to the holders of each Class
of REMIC Regular Certificates in reduction of the Certificate Balance
thereof;
(ii) the amount of the distribution to the holders of each Class
of REMIC Regular Certificates allocable to Distributable Certificate
Interest;
(iii) the amount of the distribution to the holders of each Class
of REMIC Regular Certificates allocable to Prepayment Premiums and
Yield Maintenance Charges;
(iv) the amount of the distribution to the holders of each Class
of REMIC Regular Certificates in reimbursement of previously allocated
Realized Losses and Additional Trust Fund Expenses;
(v) the Available Distribution Amount for such Distribution Date;
(vi)(a) the aggregate amount of P&I Advances made in respect of
such Distribution Date and (b) the aggregate amount of servicing
advances as of the close of business on the related Determination
Date;
(vii) the aggregate unpaid principal balance of the Mortgage Pool
outstanding as of the close of business on the related Determination
Date;
(viii) the aggregate Stated Principal Balance of the Mortgage
Pool outstanding immediately before and immediately after such
Distribution Date;
(ix) the number, aggregate unpaid principal balance, weighted
average remaining term to maturity or Anticipated Repayment Date and
weighted average Mortgage Rate of the Mortgage Loans as of the close
of business on the related Determination Date;
(x) the number and aggregate Stated Principal Balance
(immediately after such Distribution Date) (and with respect to each
delinquent Mortgage Loan, a brief description of the reason for
delinquency, if known by the Master Servicer or Special Servicer, as
applicable) of Mortgage Loans (a) delinquent 30-59 days, (b)
delinquent 60-89 days, (c) delinquent 90 days or more, and (d) as to
which foreclosure proceedings have been commenced;
(xi) as to each Mortgage Loan referred to in the preceding clause
(x) above: (a) the loan number thereof, (b) the Stated Principal
Balance thereof immediately following such Distribution Date and (c) a
brief description of any loan modification;
(xii) with respect to any Mortgage Loan as to which a liquidation
event occurred during the related Collection Period (other than a
payment in full), (a) the loan number thereof, (b) the aggregate of
all liquidation proceeds and other amounts received in connection with
such liquidation event (separately identifying the portion thereof
allocable to distributions on the Certificates), and (c) the amount of
any Realized Loss in connection with such liquidation event;
(xiii) with respect to any REO Property included in the Trust
Fund as to which the Special Servicer has determined, in accordance
with accepted servicing standards, that all payments or recoveries
with respect to such property have been ultimately recovered (a "Final
Recovery Determination") was made during the related Collection
Period, (a) the loan number of the related Mortgage Loan, (b) the
aggregate of all liquidation proceeds and other amounts received in
connection with such Final Recovery 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 Property in connection with such Final Recovery
Determination;
(xiv) the Accrued Certificate Interest in respect of each Class
of REMIC Regular Certificates for such Distribution Date;
(xv) any unpaid Distributable Certificate Interest in respect of
each Class of REMIC Regular Certificates after giving effect to the
distributions made on such Distribution Date;
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(xvi) the Pass-Through Rate for each Class of REMIC Regular
Certificates for such Distribution Date;
(xvii) the Principal Distribution Amount for such Distribution
Date (and, in the case of any principal prepayment or other
unscheduled collection of principal received during the related
Collection Period, the loan number for the related Mortgage Loan and
the amount of such prepayment or other collection of principal);
(xviii) the aggregate of all Realized Losses incurred during the
related Collection Period and all Additional Trust Fund Expenses
incurred during the related Collection Period;
(xix) the aggregate of all Realized Losses and Additional Trust
Fund Expenses that were allocated to each Class on such Distribution
Date;
(xx) the Certificate Balance of each Class of REMIC Regular
Certificates (other than the Class X Certificates) and the Notional
Amount of the Class X-C and Class X-P Certificates immediately before
and immediately after such Distribution Date, separately identifying
any reduction therein due to the allocation of Realized Losses and
Additional Trust Fund Expenses on such Distribution Date;
(xxi) the certificate factor for each Class of REMIC Regular
Certificates immediately following such Distribution Date;
(xxii) the aggregate amount of interest on P&I Advances paid to
the Master Servicer or the Trustee during the related Collection
Period;
(xxiii) the aggregate amount of interest on servicing advances
paid to the Master Servicer, the Special Servicer and the Trustee
during the related Collection Period;
(xxiv) the aggregate amount of servicing fees and Trustee Fees
paid to the Master Servicer, the Special Servicer and the Trustee, as
applicable, during the related Collection Period;
(xxv) the loan number for each Required Appraisal Loan and any
related Appraisal Reduction Amount as of the related Determination
Date;
(xxvi) the original and then current credit support levels for
each Class of REMIC Regular Certificates;
(xxvii) the original and then current ratings for each Class of
REMIC Regular Certificates;
(xxviii) the aggregate amount of Prepayment Premiums and Yield
Maintenance Charges collected during the related Collection Period;
(xxix) the amounts, if any, actually distributed with respect to
the Class R-I Certificates, Class R-II Certificates and Class Z
Certificates on such Distribution Date; and
(xxx) the value of any REO Property included in the Trust Fund at
the end of the Collection Period, based on the most recent appraisal
or valuation.
(b) A "CMSA Loan Periodic Update File" and a "CMSA Property File" (in
electronic form and substance as provided by the Master Servicer and/or the
Special Servicer) setting forth certain information (with respect to CMSA
Loan Periodic Update File, as of the related Determination Date) with
respect to the Mortgage Loans and the Mortgaged Properties, respectively.
(c) A "CMSA Collateral Summary File" and a "CMSA Bond File" setting
forth certain information with respect to the Mortgage Loans and the
Certificates, respectively.
The Master Servicer and/or the Special Servicer is required to deliver (in
electronic format acceptable to the Paying Agent and Master Servicer) to the
Paying Agent prior to each Distribution Date, and the Paying Agent is required
to provide or make available electronically or by first class mail to each
Certificateholder, the Depositor, the Underwriters, the Trustee and each Rating
Agency on each Distribution Date, the following reports:
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(a) CMSA Delinquent Loan Status Report;
(b) CMSA Historical Loan Modification and Corrected Mortgage Loan
Report;
(c) CMSA Historical Liquidation Report;
(d) CMSA REO Status Report;
(e) CMSA Servicer Watch List/Portfolio Review Guidelines;
(f) CMSA Operating Statement Analysis Report;
(g) CMSA NOI Adjustment Worksheet;
(h) CMSA Comparative Financial Status Report;
(i) CMSA Loan Level Reserve/LOC Report; and
(j) An "Updated Collection Report" identifying each mortgage loan
with respect to which the Master Servicer received a Periodic Payment or
principal payment after the Determination Date and before the business day
immediately preceding the Distribution Date for the related month.
Each of the reports referenced as CMSA reports will be in the form
prescribed in the standard Commercial Mortgage Securities Association ("CMSA")
investor reporting package. Forms of these reports are available at the CMSA's
website located at www.cmbs.org.
The reports identified in clauses (a), (b), (c), (d), (i) and (j) above are
referred to in this Prospectus Supplement as the "Unrestricted Servicer
Reports", and the reports identified in clauses (e), (f), (g) and (h) above are
referred to in this Prospectus Supplement as the "Restricted Servicer Reports".
In addition, within a reasonable period of time after the end of each
calendar year, the Paying Agent is required to send to each person who at any
time during the calendar year was a Certificateholder of record, a report
summarizing on an annual basis (if appropriate) certain items provided to
Certificateholders in the monthly Distribution Date Statements and such other
information as may be required to enable such Certificateholders to prepare
their federal income tax returns. Such information is required to include the
amount of original issue discount accrued on each Class of Certificates and
information regarding the expenses of the Trust Fund. Such requirements shall be
deemed to be satisfied to the extent such information is provided pursuant to
applicable requirements of the Code in force from time to time.
The information that pertains to Specially Serviced Trust Fund Assets
reflected in reports will be based solely upon the reports delivered by the
Special Servicer or the Master Servicer to the Paying Agent prior to related
Distribution Date. Absent manifest error, none of the Master Servicer, the
Special Servicer or the Paying Agent will be responsible for the accuracy or
completeness of any information supplied to it by a mortgagor or third party
that is included in any reports, statements, materials or information prepared
or provided by the Master Servicer, the Special Servicer or the Paying Agent, as
applicable.
Book-Entry Certificates. Until such time as definitive Offered Certificates
are issued in respect of the Book-Entry Certificates, the foregoing information
will be available to the holders of the Book-Entry Certificates only to the
extent it is forwarded by or otherwise available through DTC and its
Participants. Any beneficial owner of a Book-Entry Certificate who does not
receive information through DTC or its Participants may request that the Paying
Agent reports be mailed directly to it by written request to the Paying Agent
(accompanied by evidence of such beneficial ownership) at the Corporate Trust
Office of the Paying Agent. The manner in which notices and other communications
are conveyed by DTC to its Participants, and by its Participants to the holders
of the Book-Entry Certificates, will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time. The Master Servicer, the Special Servicer, the Trustee, the Paying
Agent and the Depositor are required to recognize as Certificateholders only
those persons in whose names the Certificates are registered on the books and
records of the Certificate Registrar.
Information Available Electronically. On or prior to each Distribution
Date, the Paying Agent will make available to any interested party via its
internet website initially located at "www.etrustee.net", (i)
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the related Distribution Date Statement, (ii) the CMSA Loan Periodic Update
File, CMSA loan setup file, CMSA Bond File and CMSA Collateral Summary File,
(iii) the Unrestricted Servicer Reports, (iv) as a convenience for interested
parties (and not in furtherance of the distribution thereof under the securities
laws), the Prospectus Supplement, the Prospectus and the Pooling and Servicing
Agreement, and (v) any other items at the request of the Depositor.
In addition, on each Distribution Date, the Paying Agent will make
available on a restricted basis, (i) the Restricted Servicer Reports and (ii)
the CMSA Property File. The Paying Agent shall provide access to such restricted
reports, upon written request, to any Privileged Person and to any other person
upon the direction of the Depositor.
The Paying Agent and Master Servicer make no representations or warranties
as to the accuracy or completeness of any report, document or other information
made available on its internet website and assumes no responsibility therefor.
In addition, the Paying Agent and the Master Servicer may disclaim
responsibility for any information distributed by the Paying Agent or the Master
Servicer, as the case may be, for which it is not the original source.
The Master Servicer may make available each month via the Master Servicer's
internet website, initially located at "www.wachovia.com" (i) to any interested
party, the Unrestricted Servicer Reports, the CMSA loan setup file and the CMSA
Loan Periodic Update File, and (ii) to any Privileged Person, with the use of a
password provided by the Master Servicer to such Privileged Person, the
Restricted Servicer Reports and the CMSA Property File. For assistance with the
Master Servicer's internet website, investors may call (800) 326-1334.
"Privileged Person" means any Certificateholder or any person identified to
the Paying Agent or the Master Servicer, as applicable, as a prospective
transferee of an Offered Certificate or any interests therein (that, with
respect to any such holder or Certificate Owner or prospective transferee, has
provided to the Paying Agent or the Master Servicer, as applicable, a
certification in the form attached to the Pooling and Servicing Agreement), any
Rating Agency, the Mortgage Loan Sellers, any holder of a Companion Loan, the
Depositor and its designees, the Underwriters or any party to the Pooling and
Servicing Agreement.
In connection with providing access to the Paying Agent's internet website
or the Master Servicer's internet website, the Paying Agent or the Master
Servicer, as applicable, may require registration and the acceptance of a
disclaimer. Neither the Paying Agent nor the Master Servicer shall be liable for
the dissemination of information in accordance with the Pooling and Servicing
Agreement.
Other Information. The Pooling and Servicing Agreement requires that the
Master Servicer or the Special Servicer make available at its offices primarily
responsible for administration of the Trust Fund, during normal business hours,
or send the requesting party at the expense of such requesting party, for review
by any holder or Certificate Owner owning an Offered Certificate or an interest
therein or any person identified by the Paying Agent to the Master Servicer or
Special Servicer, as the case may be, as a prospective transferee of an Offered
Certificate or an interest therein, originals or copies of, among other things,
the following items: (a) the Pooling and Servicing Agreement and any amendments
thereto, (b) all Distribution Date Statements delivered to holders of the
relevant Class of Offered Certificates since the Closing Date, (c) all officer's
certificates delivered by the Master Servicer since the Closing Date as
described under "DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS--Evidence
as to Compliance" in the prospectus, (d) all accountants' reports delivered with
respect to the Master Servicer since the Closing Date as described under
"DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS--Evidence as to Compliance"
in the prospectus, (e) the most recent property inspection report prepared by or
on behalf of the Master Servicer in respect of each Mortgaged Property, (f) the
most recent Mortgaged Property annual operating statements and rent roll, if
any, collected by or on behalf of the Master Servicer, (g) any and all
modifications, waivers and amendments of the terms of a Mortgage Loan entered
into by the Special Servicer, (h) the Mortgage File relating to each Mortgage
Loan, and (i) any and all officers' certificates and other evidence prepared by
the Master Servicer or the Special Servicer to support its determination that
any Advance was or, if made, would not be recoverable from Related Proceeds.
Copies of any and all of the foregoing items will be available from the Master
Servicer or Special Servicer, as the case may be, upon request; however, the
Master Servicer
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or Special Servicer, as the case may be, will be permitted to require (other
than from the Rating Agencies) a certification from the person seeking such
information (covering among other matters, confidentiality) and payment of a sum
sufficient to cover the reasonable costs and expenses of providing such
information to Certificateholders, Certificate Owners and their prospective
transferees, including, without limitation, copy charges and reasonable fees for
employee time and for space.
ASSUMED FINAL DISTRIBUTION DATE; RATED FINAL DISTRIBUTION DATE
The "Assumed Final Distribution Date" with respect to any Class of REMIC
Regular Certificates is the Distribution Date on which the Certificate Balance
of such Class of Certificates would be reduced to zero based on the assumption
that no Mortgage Loan is voluntarily prepaid prior to its stated maturity date
(except for the ARD Loans which are assumed to be paid in full on their
respective Anticipated Repayment Dates) and otherwise based on the "Table
Assumptions" set forth under "YIELD AND MATURITY CONSIDERATIONS--Weighted
Average Life" in this prospectus supplement, which Distribution Date shall in
each case be as follows:
ASSUMED FINAL
CLASS DESIGNATION DISTRIBUTION DATE
- ------------------------ ------------------
Class A-1 .............. October 15, 2008
Class A-2 .............. December 15, 2008
Class A-3 .............. March 15, 2013
Class A-4 .............. November 15, 2013
Class B ................ December 15, 2013
Class C ................ December 15, 2013
Class D ................ December 15, 2013
Class E ................ December 15, 2013
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 be 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 (as defined in this Prospectus Supplement)
(except that it is assumed that the ARD Loans pay their respective principal
balances on their related Anticipated Repayment Dates) and no losses on the
Mortgage Loans. Because the rate of principal payments (including prepayments)
on the Mortgage Loans can be expected to exceed the scheduled rate of principal
payments, and could exceed such scheduled rate by a substantial amount, and
because losses may occur in respect of the Mortgage Loans, 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 principal 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 no assurance can be given as to actual principal payment experience.
Finally, the Assumed Final Distribution Dates were calculated assuming there
would not be an early termination of the Trust Fund. See "YIELD AND MATURITY
CONSIDERATIONS" and "DESCRIPTION OF THE MORTGAGE POOL" in this prospectus
supplement.
The "Rated Final Distribution Date" with respect to each Class of Offered
Certificates is the Distribution Date in December 2035 the first Distribution
Date that follows the second anniversary of the end of the amortization term for
the Mortgage Loan that, as of the Cut-Off Date, has the longest remaining
amortization term. The rating assigned by a Rating Agency to any Class of
Offered Certificates entitled to receive distributions in respect of principal
reflects an assessment of the likelihood that Certificateholders of such Class
will receive, on or before the Rated Final Distribution Date, all principal
distributions to which they are entitled. See "RATINGS" in this prospectus
supplement.
VOTING RIGHTS
At all times during the term of the Pooling and Servicing Agreement, 100%
of the voting rights for the Certificates (the "Voting Rights") will be
allocated among the respective Classes of Certificates as
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follows: (i) 4% in the aggregate in the case of the Class X Certificates
(allocated, pro rata, between the Classes of Class X Certificates based on
Notional Amount) and (ii) in the case of any other Class of Certificates, a
percentage equal to the product of 96% and a fraction, the numerator of which is
equal to the aggregate Certificate Balance of such Class of Certificates (as
adjusted by treating any Appraisal Reduction Amount as a Realized Loss solely
for the purposes of adjusting Voting Rights) and the denominator of which is
equal to the aggregate Certificate Balances of all Classes of Certificates,
determined as of the Distribution Date immediately preceding such time;
provided, however, that the treatment of any Appraisal Reduction Amount as a
Realized Loss shall not reduce the Certificate Balances of any Class for the
purpose of determining the Controlling Class, the Controlling Class
Representative or the Majority Subordinate Certificateholder. The holders of the
Class R-I, Class R-II and Class Z Certificates will not be entitled to any
Voting Rights. Voting Rights allocated to a Class of Certificates will be
allocated among the related Certificateholders in proportion to the percentage
interests in such Class evidenced by their respective Certificates. The Class
A-1, Class A-2, Class A--3 and Class A-4 Certificates will be treated as one
Class for determining the Controlling Class. In addition, if either the Master
Servicer or the Special Servicer is the holder of any Sequential Pay
Certificate, neither of the Master Servicer or Special Servicer, in its capacity
as a Certificateholder, will have Voting Rights with respect to matters
concerning compensation affecting the Master Servicer or the Special Servicer.
See "DESCRIPTION OF THE CERTIFICATES--Voting Rights" in the prospectus.
TERMINATION
The obligations created by the Pooling and Servicing Agreement will
terminate following the earlier of (i) the final payment (or advance in respect
thereof) or other liquidation of the last Mortgage Loan or REO Property subject
thereto, and (ii) the purchase of all of the Mortgage Loans and all of the REO
Properties, if any, remaining in the Trust Fund by the Master Servicer, the
Special Servicer or any single Certificateholder (so long as such
Certificateholder is not an affiliate of the Depositor or a Mortgage Loan
Seller) that is entitled to greater than 50% of the Voting Rights allocated to
the Class of Certificates with the latest alphabetical class designation then
outstanding (or if no Certificateholder is entitled to greater than 50% of the
Voting Rights of such Class, the Certificateholder with the largest percentage
of Voting Rights allocated to such Class) (the "Majority Subordinate
Certificateholder") and distribution or provision for distribution thereof to
the Certificateholders. 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 Paying Agent or other registrar for the
Certificates or at such other location as may be specified in such notice of
termination.
Any such purchase by the Master Servicer, the Special Servicer or the
Majority Subordinate Certificateholder of all the Mortgage Loans and all of the
REO Properties, if any, remaining in the Trust Fund is required to be made at a
price equal to (i) the aggregate Purchase Price of all the Mortgage Loans (other
than REO Mortgage Loans) then included in the Trust Fund, plus (ii) the fair
market value of all REO Properties then included in the Trust Fund, as
determined by an independent appraiser selected by the Master Servicer and
approved by the Trustee (which may be less than the Purchase Price for the
corresponding REO Loan), minus (iii) if the purchaser is the Master Servicer,
the aggregate of amounts payable or reimbursable to the Master Servicer under
the Pooling and Servicing Agreement. Such purchase will effect early retirement
of the then outstanding Offered Certificates, but the right of the Master
Servicer, the Special Servicer or the Majority Subordinate Certificateholder to
effect such purchase is subject to the requirement that the aggregate principal
balance of the Mortgage Loans is less than 1% of the Cut-Off Date Pool Balance.
The purchase price paid in connection with the purchase of all Mortgage
Loans and REO Properties remaining in the Trust Fund, exclusive of any portion
thereof payable or reimbursable to any person other than the Certificateholders,
will constitute part of the Available Distribution Amount for the final
Distribution Date. The Available Distribution Amount for the final Distribution
Date will be distributed by the Paying Agent generally as described in this
Prospectus Supplement under "--Distributions--Application of the Available
Distribution Amount," except that the distributions of principal on any Class of
Sequential Pay Certificates described thereunder will be made, subject to
available funds and the distribution priorities described thereunder, in an
amount equal to the entire Certificate Balance of such Class remaining
outstanding.
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An exchange by any Certificateholder of all of the then outstanding
Certificates for all of the Mortgage Loans and each REO Property remaining in
the Trust Fund may be made: (i) if the then outstanding Certificates are held by
a single Certificateholder, (ii) after the Class A-1, Class A-2, Class A-3,
Class A-4, Class B, Class C, Class D and Class E Certificates have been paid in
full, and (iii) by giving written notice to each of the parties to the Pooling
and Servicing Agreement no later than 30 days prior to the anticipated date of
exchange. In the event that such Certificateholder elects to exchange its
Certificates for all of the Mortgage Loans and each REO Property remaining in
the Trust Fund, such Certificateholder must deposit in the Certificate Account
in immediately available funds in an amount equal to all amounts then due and
owing to the Master Servicer, the Special Servicer, the Trustee, the Paying
Agent, the Certificate Registrar, the REMIC Administrator and their respective
agents under the Pooling and Servicing Agreement.
THE TRUSTEE
Wells Fargo Bank Minnesota, N.A. ("Wells Fargo") is acting as Trustee
pursuant to the Pooling and Servicing Agreement. Wells Fargo, a direct, wholly
owned subsidiary of Wells Fargo & Company, is a national banking association
originally chartered in 1872 and is engaged in a wide range of activities
typical of a national bank. Wells Fargo's office, for purposes of holding the
Mortgage File, is located at Wells Fargo Center, Sixth Street and Marquette
Avenue, Minneapolis, MN 55479. Wells Fargo otherwise conducts its trustee and
securities administration services at its offices in Columbia, Maryland. Its
address there is 9062 Old Annapolis Road, Columbia, Maryland 21045-1951.
Certificateholders and other interested parties should direct their inquiries to
Wells Fargo CMBS Customer Service office. The telephone number is (301)
815-6600. See "DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS--The
Trustee," "--Duties of the Trustee," "--Certain Matters Regarding the Trustee"
and "--Resignation and Removal of the Trustee" in the prospectus. As
compensation for its services, the Trustee will be entitled to receive monthly,
from general funds on deposit in the Certificate Account, the Trustee Fee. The
"Trustee Fee" for each Mortgage Loan and REO Loan for any Distribution Date
equals one month's interest for the most recently ended calendar month
(calculated on the basis of a 360-day year consisting of twelve 30-day months),
accrued at the Trustee Fee rate on the Stated Principal Balance of such Mortgage
Loan or REO Loan, as the case may be, outstanding immediately following the
prior Distribution Date (or, in the case of the initial Distribution Date, as of
the Closing Date). The Trustee Fee also includes the fee payable to the Paying
Agent. The Trustee Fee rate is a per annum rate set forth in the Pooling and
Servicing Agreement. 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 expenses incurred in the ordinary
course of performing its duties as Trustee under the Pooling and Servicing
Agreement, and not including any such expense, disbursement or advance as may
arise from its willful misconduct, negligence or bad faith. The Trustee will not
be entitled to any fee with respect to any Companion Loan.
PAYING AGENT, CERTIFICATE REGISTRAR AND AUTHENTICATING AGENT
LaSalle Bank National Association will be the paying agent (the "Paying
Agent") under the Pooling and Servicing Agreement. In addition, LaSalle Bank
National Association will initially serve as registrar (in such capacity, the
"Certificate Registrar") for purposes of recording and otherwise providing for
the registration of the Offered Certificates and of transfers and exchanges of
the definitive, fully registered Certificates, if issued, and as authenticating
agent of the Certificates (in such capacity, the "Authenticating Agent"). The
Paying Agent also has certain duties with respect to REMIC Administration (in
such capacity, the "REMIC Administrator"). See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of Owners of REMIC Residual Certificates--Reporting and
other Administrative Matters" in the prospectus. LaSalle Bank National
Association is one of the mortgage loan sellers and is an affiliate of ABN AMRO
Bank N.V., Chicago Branch, a Mortgage Loan Seller, and ABN AMRO Incorporated,
one of the Underwriters.
As compensation for its duties as Paying Agent, Certificate Registrar and
Authenticating Agent, LaSalle Bank National Association will be paid a portion
of the monthly Trustee Fee as set forth in the
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Pooling and Servicing Agreement. The Trustee Fee rate is a per annum rate set
forth in the Pooling and Servicing Agreement. In addition, the Paying Agent will
be entitled to recover from the Trust Fund all reasonable unanticipated expenses
and disbursements incurred or made by the Paying Agent 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 Paying
Agent under the Pooling and Servicing Agreement, and not including any such
expense, disbursement or advance as may arise from its willful misconduct,
negligence or bad faith.
The Paying Agent is also authorized to invest or direct the investment of
funds held in the Distribution Account and the Additional Interest Account
maintained by it that relate to the Mortgage Loans or REO Properties, as the
case may be, in certain short-term United States government securities and
certain other permitted investment grade obligations, and the Paying Agent will
be entitled to retain any interest or other income earned on such funds held in
those accounts maintained by it, but shall be required to cover any losses on
investments of funds held in those accounts maintained by it, from its own funds
without any right of reimbursement, except in certain limited circumstances
described in the Pooling and Servicing Agreement.
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YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General. The yield on any Offered Certificate will depend on, among other
things, (a) the price at which such Certificate is purchased by an investor and
(b) the rate, timing and amount of distributions on such Certificate. The rate,
timing and amount of distributions on any Offered Certificate will in turn
depend on, among other things, (i) the Pass-Through Rate for such Certificate,
(ii) the rate and timing of principal payments (including principal prepayments)
and other principal collections on the Mortgage Loans and the extent to which
such amounts are to be applied in reduction of the Certificate Balance, (iii)
the rate, timing and severity of Realized Losses and Additional Trust Fund
Expenses and the extent to which such losses and expenses are allocable in
reduction of the Certificate Balance, and (iv) the timing and severity of any
Net Aggregate Prepayment Interest Shortfalls and the extent to which such
shortfalls allocable are in reduction of the Distributable Certificate Interest
payable on the related Class.
Rate and Timing of Principal Payment. The yield to holders of any Offered
Certificates purchased at a discount or premium will be affected by the rate and
timing of principal payments made in reduction of the Certificate Balance of any
Class of Sequential Pay Certificates. As described in this Prospectus
Supplement, the Principal Distribution Amount for each Distribution Date will
generally be distributable first in respect of the Class A-1 Certificates until
the Certificate Balance thereof is reduced to zero, then, in respect of the
Class A-2 Certificates until the Certificate Balance thereof is reduced to zero
then, in respect of the Class A-3 Certificates until the Certificate Balance
thereof has been reduced to zero and then to the Class A-4 Certificates, until
the Certificate Balance thereof has been reduced to zero. After those
distributions, the remaining Principal Distribution Amount with respect to the
Mortgage Pool will generally be distributable entirely in respect of the Class B
Certificates, the Class C Certificates, the Class D Certificates, the Class E
Certificates and then the Non-Offered Certificates (other than the Class X-C and
Class X-P Certificates), in that order, in each case until the Certificate
Balance of such Class of Certificates is reduced to zero. Consequently, the rate
and timing of principal payments that are distributed or otherwise result in
reduction of the Certificate Balance of any Class of Offered Certificates, will
be directly related to the rate and timing of principal payments on or in
respect of the Mortgage Loans, which will in turn be affected by the
amortization schedules thereof, the dates on which Balloon Payments are due, any
extension of maturity dates by the Master Servicer or the Special Servicer, and
the rate and timing of principal prepayments and other unscheduled collections
thereon (including for this purpose, collections made in connection with
liquidations of Mortgage Loans due to defaults, casualties or condemnations
affecting the Mortgaged Properties, or purchases of Mortgage Loans out of the
Trust Fund). In addition, although the borrowers under ARD Loans may have
certain incentives to repay ARD Loans on their Anticipated Repayment Dates,
there can be no assurance that the related borrowers will be able to repay the
ARD Loans on their Anticipated Repayment Date. The failure of a borrower to
repay the ARD Loans on their Anticipated Repayment Dates will not be an event of
default under the terms of the ARD 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 Additional Interest or principal in excess of the
principal component of the constant Periodic Payment, other than requests for
collection, until the scheduled maturity of the ARD Loans; provided, that the
Master Servicer or the Special Servicer, as the case may be, may take action to
enforce the Trust Fund's right to apply Excess Cash Flow to principal in
accordance with the terms of the ARD Loans' documents.
In addition, if the Master Servicer or the Trustee, as applicable,
reimburses itself out of general collections on the Mortgage Pool for any
Advance that it has determined is not recoverable out of collections on the
related Mortgage Loan, then that Advance (together with accrued interest
thereon) will be deemed, to the fullest extent permitted, to be reimbursed first
out of the Principal Distribution Amount otherwise distributable on the
Certificates (prior to being deemed reimbursed out of payments and other
collections of interest on the underlying Mortgage Loans otherwise distributable
on the Certificates), thereby reducing the Principal Distribution Amount of the
Offered Certificates. Any such reduction in the amount distributed as principal
of the Certificates may adversely affect the weighted average lives and yields
to maturity of one or more Classes of Certificates and, after a Final Recovery
Determination has been made, will create Realized Losses.
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Prepayments and, assuming the respective stated maturity dates therefor
have not occurred, liquidations and purchases of the Mortgage Loans, will result
in distributions on the 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 that are Sequential Pay Certificates)
while work-outs are negotiated or foreclosures are completed. See "SERVICING OF
THE MORTGAGE LOANS--Modifications, Waivers and Amendments" in this prospectus
supplement and "DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS--Realization
Upon Defaulted Mortgage Loans" and "CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND
LEASES--Foreclosure" in the prospectus.
The extent to which the yield to maturity of any Class of Offered
Certificates may vary from the anticipated yield will depend upon the degree to
which such Certificates are purchased at a discount or premium and when, and to
what degree, payments of principal on the Mortgage Loans in turn are distributed
or otherwise result in reduction of the Certificate Balance of such
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 could result in an actual yield
to such investor that is lower than the anticipated yield and, in the case of
any Offered Certificate purchased at a premium, the risk that a faster than
anticipated rate of principal payments could result in an actual yield to such
investor that is lower than the anticipated yield. In general, the earlier a
payment of principal on the Mortgage Loans is distributed to or otherwise
results in reduction of the principal balance of an Offered Certificate
purchased at a discount or premium, the greater will be the effect on an
investor's yield to maturity. As a result, the effect on an investor's yield of
principal payments on the Mortgage Loans 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 such
principal payments. Because the rate of principal payments on the Mortgage Loans
will depend on future events and a variety of factors (as described more fully
below), no assurance can be given as to such rate or the rate of principal
prepayments in particular. The Depositor is not aware of any relevant publicly
available or authoritative statistics with respect to the historical prepayment
experience of a large group of mortgage loans comparable to the Mortgage Loans.
Losses and Shortfalls. The yield to holders of the Offered Certificates
will also depend on the extent to which such holders are required to bear the
effects of any losses or shortfalls on the Mortgage Loans. Losses and other
shortfalls on the Mortgage Loans will, with the exception of any Net Aggregate
Prepayment Interest Shortfalls, generally be borne by the holders of the
respective Classes of Sequential Pay Certificates to the extent of amounts
otherwise distributable in respect of such Certificates, in reverse alphabetical
order of their Class designations. Realized Losses and Additional Trust Fund
Expenses will be allocated, as and to the extent described in this Prospectus
Supplement, to the holders of the respective Classes of Sequential Pay
Certificates other than the Class A-1, Class A-2, Class A--3 and Class A-4
Certificates (in reduction of the Certificate Balance of each such Class), in
reverse alphabetical order of their Class designations. In the event of a
reduction of the Certificate Balances of all such Classes of Certificates, such
losses and shortfalls will then be borne, pro rata, by the Class A-1
Certificates, Class A-2 Certificates, Class A--3 Certificates and Class A--4
Certificates (and the Class X Certificates with respect to shortfalls of
interest). As more fully described under "DESCRIPTION OF THE CERTIFICATES--
Distributions--Distributable Certificate Interest" in this prospectus
supplement, Net Aggregate Prepayment Interest Shortfalls will generally be borne
by the respective Classes of REMIC Regular Certificates (other than the Class X
Certificates) on a pro rata basis.
Pass-Through Rate. The yield on the Class A-4, Class B, Class C, Class D
and Class E 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.
Certain Relevant Factors. The rate and timing of principal payments and
defaults and the severity of losses on the Mortgage Loans may be affected by a
number of factors, including, without limitation, prevailing interest rates, the
terms of the Mortgage Loans (for example, due-on-sale clauses, Lockout Periods,
provisions requiring the payment of Prepayment Premiums, Yield Maintenance
Charges and
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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 units, hotel/motel guest rooms, health
care facility beds, mobile home park pads or comparable commercial space, as
applicable, in such areas, the quality of management of the Mortgaged
Properties, the servicing of the Mortgage Loans, possible changes in tax laws
and other opportunities for investment. See "RISK FACTORS--The Mortgage Loans"
and "DESCRIPTION OF THE MORTGAGE POOL" in this prospectus supplement and "YIELD
CONSIDERATIONS--Prepayment Considerations" in the accompanying prospectus.
The rate of prepayment on the Mortgage Pool is likely to be affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below a mortgage
interest rate, the related borrower may have an incentive to refinance its
mortgage loan. As of the Cut-Off Date, all of the Mortgage Loans may be prepaid
at any time after the expiration of any applicable Lockout Period, subject, in
some cases, to the payment of a Prepayment Premium or a Yield Maintenance
Charge. A requirement that a prepayment be accompanied by a Prepayment Premium
or Yield Maintenance Charge may not provide a sufficient economic disincentive
to deter a borrower from refinancing at a more favorable interest rate.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell or
refinance Mortgaged Properties in order to realize their equity therein, to meet
cash flow needs or to make other investments. In addition, some borrowers may be
motivated by federal and state tax laws (which are subject to change) to sell
Mortgaged Properties prior to the exhaustion of tax depreciation benefits.
The Depositor makes no representation as to the particular factors that
will affect the rate and timing of prepayments and defaults on the Mortgage
Loans, as to the relative importance of such factors, as to the percentage of
the principal balance of the Mortgage Loans that will be prepaid or as to
whether 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 monthly distributions will not
be made to Certificateholders until a date that is scheduled to be up to 15 days
following the Due Dates for the Mortgage Loans during the related Collection
Period, the effective yield to the holders of the Offered Certificates will be
lower than the yield that would otherwise be produced by the applicable
Pass-Through Rates and purchase prices (assuming such prices did not account for
such delay).
Unpaid Distributable Certificate Interest. As described under "DESCRIPTION
OF THE CERTIFICATES--Distributions--Application of the Available Distribution
Amount" 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 such Class, the shortfall will be distributable to
holders of such Class of Certificates on subsequent Distribution Dates, to the
extent of available funds. Any such shortfall will not bear interest, however,
and will therefore negatively affect the yield to maturity of such Class of
Certificates for so long as it is outstanding.
Optional Termination. Any optional termination of the Trust Fund would have
an effect similar to a prepayment in full of the Mortgage Loans (without,
however, the payment of any Prepayment Premiums or Yield Maintenance Charges)
and, as a result, investors in any Certificates purchased at a premium might not
fully recoup their initial investment. See "DESCRIPTION OF THE
CERTIFICATES--Termination" in this prospectus supplement.
WEIGHTED AVERAGE LIFE
The weighted average life of any Class A-1, Class A-2, Class A-3, Class
A-4, Class B, Class C, Class D and Class E Certificate refers to the average
amount of time that will elapse from the assumed Closing Date until each dollar
allocable to principal of such Certificate is distributed to the investor. The
weighted average life of any such Offered Certificate will be influenced by,
among other things, the rate at which principal on the Mortgage Loans is paid or
otherwise collected or advanced and applied to pay principal
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of such Offered Certificate, which may be in the form of scheduled amortization,
voluntary prepayments, insurance and condemnation proceeds and liquidation
proceeds. As described in this Prospectus Supplement, the Principal Distribution
Amount for each Distribution Date will generally be distributable first in
respect of the Class A-1 Certificates until the Certificate Balance thereof is
reduced to zero, and then, to the Class A-2 Certificates until the Certificate
Balance thereof is reduced to zero, then to the Class A-3 Certificate until the
Certificate Balance thereof has been reduced to zero and then to the Class A-4
Certificates until the Certificate Balance thereof has been reduced to zero.
After those distributions, the remaining Principal Distribution Amount with
respect to the Mortgage Pool generally be distributable entirely in respect of
the Class B Certificates, the Class C Certificates, the Class D Certificates and
the Class E Certificates in that order, in each case until the Certificate
Balance of such Class of Certificates is reduced to zero.
The tables below indicate the percentage of the initial Certificate Balance
of each Class of Offered Certificates that would be outstanding after each of
the dates shown and the corresponding weighted average life of each such Class
of Offered Certificates. To the extent that the Mortgage Loans or the
Certificates have characteristics that differ from those assumed in preparing
the tables, the Class A-1, Class A-2, Class A-3, Class A-4, Class B, Class C,
Class D and Class E Certificates may mature earlier or later than indicated by
the tables. Accordingly, the Mortgage Loans will not prepay at any constant rate
nor will the Mortgage Loans prepay at the same rate, and it is highly unlikely
that the Mortgage Loans will prepay in a manner consistent with the assumptions
described above. In addition, variations in the actual prepayment experience and
in the balance of the Mortgage Loans that actually prepay may increase or
decrease the percentages of initial Certificate Balances (and shorten or extend
the weighted average lives) shown in the following tables. Investors are urged
to conduct their own analyses of the rates at which the Mortgage Loans may be
expected to prepay.
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 the tables
set forth below, the column headed "0% CPR" assumes that none of the Mortgage
Loans is prepaid in whole or in part before maturity or the Anticipated
Repayment Date, as the case may be. The columns headed "25% CPR", "50% CPR",
"75% CPR" and "100% CPR", respectively, assume that prepayments are made each
month at those levels of CPR on the Mortgage Loans that are eligible for
prepayment under the Table Assumptions set forth in the next paragraph (each
such scenario, a "Scenario"). There is no assurance, however, that prepayments
on the Mortgage Loans will conform to any level of CPR, and no representation is
made that the Mortgage Loans will prepay at the levels of CPR shown or at any
other prepayment rate.
The tables below were derived from calculations based on the following
assumptions (the "Table Assumptions"): (i) no Mortgage Loan prepays during any
applicable Lockout Period or any period during which Defeasance Collateral is
permitted or required to be pledged or any period during which a yield
maintenance charge or prepayment premium is required (otherwise, in the case of
each table, each Mortgage Loan is assumed to prepay at the indicated level of
CPR, with each prepayment being applied on the first day of the applicable month
in which it is assumed to be received), (ii) the Pass-Through Rates and initial
Certificate Balances of the respective Classes of Sequential Pay Certificates
are as described in this Prospectus Supplement, (iii) there are no delinquencies
or defaults with respect to, and no modifications, waivers or amendments of the
terms of, the Mortgage Loans, (iv) there are no Realized Losses, Additional
Trust Fund Expenses or Appraisal Reduction Amounts with respect to the Mortgage
Loans or the Trust Fund, (v) scheduled interest and principal payments on the
Mortgage Loans are timely received, (vi) ARD Loans pay in full on their
Anticipated Repayment Dates, (vii) all Mortgage Loans have Due Dates on the
first day of each month and accrue interest on the respective basis described in
this Prospectus Supplement (i.e., a 30/360 basis or an actual/360 basis), (viii)
all prepayments are accompanied by a full month's interest and there are no
Prepayment Interest Shortfalls, (ix) there are no breaches of the Mortgage Loan
Sellers' representations and warranties regarding its Mortgage Loans, (x) all
applicable Prepayment Premiums and Yield Maintenance Charges are collected, (xi)
no party entitled thereto exercises its right of optional termination of the
Trust Fund described in this Prospectus
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Supplement, (xii) distributions on the Certificates are made on the 15th day
(each assumed to be a business day) of each month, commencing in January 2004,
and (xiii) the Closing Date for the sale of the Offered Certificates is December
23, 2003.
The tables set forth below indicate the resulting weighted average lives of
each Class of Offered Certificates and set forth the percentages of the initial
Certificate Balance of such Class of Offered Certificates that would be
outstanding after each of the dates shown in each case assuming the indicated
level of CPR. For purposes of the following tables, the weighted average life of
an Offered Certificate is determined by (i) multiplying the amount of each
principal distribution thereon by the number of years from the assumed Closing
Date of such Certificate to the related Distribution Date, (ii) summing the
results and (iii) dividing the sum by the aggregate amount of the reductions in
the principal balance of such Certificate.
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS A-1
CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE
OTHERWISE AT INDICATED CPR
--------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ------------------------------------------ -------- --------- --------- --------- ---------
Initial Date ............................. 100 100 100 100 100
12/15/04 ................................. 89 89 89 89 89
12/15/05 ................................. 76 76 76 76 76
12/15/06 ................................. 61 61 61 61 61
12/15/07 ................................. 46 46 46 46 46
12/15/08 ................................. 0 0 0 0 0
Weighted average life (in years) ......... 3.30 3.29 3.28 3.26 3.22
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS A-2
CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE
OTHERWISE AT INDICATED CPR
--------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ------------------------------------------ -------- --------- --------- --------- ---------
Initial Date ............................. 100 100 100 100 100
12/15/04 ................................. 100 100 100 100 100
12/15/05 ................................. 100 100 100 100 100
12/15/06 ................................. 100 100 100 100 100
12/15/07 ................................. 100 100 100 100 100
12/15/08 ................................. 0 0 0 0 0
Weighted average life (in years) ......... 4.87 4.87 4.86 4.85 4.65
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS A-3
CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE
OTHERWISE AT INDICATED CPR
--------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ------------------------------------------ -------- --------- --------- --------- ---------
Initial Date ............................. 100 100 100 100 100
12/15/04 ................................. 100 100 100 100 100
12/15/05 ................................. 100 100 100 100 100
12/15/06 ................................. 100 100 100 100 100
12/15/07 ................................. 100 100 100 100 100
12/15/08 ................................. 97 97 97 97 97
12/15/09 ................................. 90 90 90 90 90
12/15/10 ................................. 33 33 33 33 33
12/15/11 ................................. 26 26 26 26 26
12/15/12 ................................. 3 3 3 3 3
12/15/13 ................................. 0 0 0 0 0
Weighted average life (in years) ......... 7.21 7.21 7.20 7.19 7.08
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PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS A-4
CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE
OTHERWISE AT INDICATED CPR
--------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ------------------------------------------ -------- --------- --------- --------- ---------
Initial Date ............................. 100 100 100 100 100
12/15/04 ................................. 100 100 100 100 100
12/15/05 ................................. 100 100 100 100 100
12/15/06 ................................. 100 100 100 100 100
12/15/07 ................................. 100 100 100 100 100
12/15/08 ................................. 100 100 100 100 100
12/15/09 ................................. 100 100 100 100 100
12/15/10 ................................. 100 100 100 100 100
12/15/11 ................................. 100 100 100 100 100
12/15/12 ................................. 100 100 100 100 100
12/15/13 ................................. 0 0 0 0 0
Weighted average life (in years) ......... 9.76 9.75 9.73 9.71 9.56
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS B CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE
OTHERWISE AT INDICATED CPR
--------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ------------------------------------------ -------- --------- --------- --------- ---------
Initial Date ............................. 100 100 100 100 100
12/15/04 ................................. 100 100 100 100 100
12/15/05 ................................. 100 100 100 100 100
12/15/06 ................................. 100 100 100 100 100
12/15/07 ................................. 100 100 100 100 100
12/15/08 ................................. 100 100 100 100 100
12/15/09 ................................. 100 100 100 100 100
12/15/10 ................................. 100 100 100 100 100
12/15/11 ................................. 100 100 100 100 100
12/15/12 ................................. 100 100 100 100 100
12/15/13 ................................. 0 0 0 0 0
Weighted average life (in years) ......... 9.89 9.89 9.89 9.89 9.73
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS C CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE
OTHERWISE AT INDICATED CPR
--------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ------------------------------------------ -------- --------- --------- --------- ---------
Initial Date ............................. 100 100 100 100 100
12/15/04 ................................. 100 100 100 100 100
12/15/05 ................................. 100 100 100 100 100
12/15/06 ................................. 100 100 100 100 100
12/15/07 ................................. 100 100 100 100 100
12/15/08 ................................. 100 100 100 100 100
12/15/09 ................................. 100 100 100 100 100
12/15/10 ................................. 100 100 100 100 100
12/15/11 ................................. 100 100 100 100 100
12/15/12 ................................. 100 100 100 100 100
12/15/13 ................................. 0 0 0 0 0
Weighted average life (in years) ......... 9.98 9.93 9.89 9.89 9.73
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PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS D CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE
OTHERWISE AT INDICATED CPR
--------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ------------------------------------------ -------- --------- --------- --------- ---------
Initial Date ............................. 100 100 100 100 100
12/15/04 ................................. 100 100 100 100 100
12/15/05 ................................. 100 100 100 100 100
12/15/06 ................................. 100 100 100 100 100
12/15/07 ................................. 100 100 100 100 100
12/15/08 ................................. 100 100 100 100 100
12/15/09 ................................. 100 100 100 100 100
12/15/10 ................................. 100 100 100 100 100
12/15/11 ................................. 100 100 100 100 100
12/15/12 ................................. 100 100 100 100 100
12/15/13 ................................. 0 0 0 0 0
Weighted average life (in years) ......... 9.98 9.98 9.97 9.92 9.76
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS E CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE
OTHERWISE AT INDICATED CPR
--------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ------------------------------------------ -------- --------- --------- --------- ---------
Initial Date ............................. 100 100 100 100 100
12/15/04 ................................. 100 100 100 100 100
12/15/05 ................................. 100 100 100 100 100
12/15/06 ................................. 100 100 100 100 100
12/15/07 ................................. 100 100 100 100 100
12/15/08 ................................. 100 100 100 100 100
12/15/09 ................................. 100 100 100 100 100
12/15/10 ................................. 100 100 100 100 100
12/15/11 ................................. 100 100 100 100 100
12/15/12 ................................. 100 100 100 100 100
12/15/13 ................................. 0 0 0 0 0
Weighted average life (in years) ......... 9.98 9.98 9.98 9.98 9.81
USE OF PROCEEDS
Substantially all of the proceeds from the sale of the Offered Certificates
will be used by the Depositor to purchase the Mortgage Loans and to pay certain
expenses in connection with the issuance of the Certificates.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following summary of the anticipated material federal income tax
consequences of the purchase, ownership and disposition of Offered Certificates
is based on the advice of Cadwalader, Wickersham & Taft LLP, counsel to the
Depositor. This summary is based on laws, regulations, including the REMIC
regulations promulgated by the Treasury Department (the "REMIC Regulations"),
rulings and decisions now in effect or (with respect to the regulations)
proposed, all of which are subject to change either prospectively or
retroactively. This summary does not address the federal income tax consequences
of an investment in Offered Certificates applicable to all categories of
investors, some of which (for example, banks and insurance companies) may be
subject to special rules. Prospective investors should consult their tax
advisors regarding the federal, state, local and other tax consequences to them
of the purchase, ownership and disposition of Offered Certificates.
For federal income tax purposes, four separate REMIC elections will be made
with respect to segregated asset pools that make up the trust, other than any
Additional Interest on the ARD Loans. Upon the issuance of the Offered
Certificates, Cadwalader, Wickersham & Taft LLP will deliver its opinion
generally to the effect that, assuming (1) the making of appropriate elections,
(2) compliance with all provisions of the Pooling and Servicing Agreement, (3)
compliance with the 2003-C8 Pooling and Servicing Agreement and other related
documents and any amendments thereto and the continued qualification of the
REMICs formed thereunder and (4) compliance with applicable changes in the Code,
for federal income tax purposes, each such REMIC will qualify as a REMIC under
the Code. For federal income tax purposes, the REMIC Regular Certificates will
represent ownership of the "regular interests" in REMIC II and generally will be
treated as newly originated debt instruments of such REMIC. Each Early
Defeasance Loan (and any related REO Property) will constitute the sole asset of
an Early Defeasance Loan REMIC. In addition, the Mortgage Loans (other than the
Early Defeasance Loans) and any related REO Property and the "regular interest"
in each Early Defeasance Loan REMIC (instead of the related Mortgage Loan and
any related REO Property) will be the assets of one such REMIC ("REMIC I") and
the uncertificated regular interests in REMIC I will be assets of another REMIC
("REMIC II"). The Class R-I Certificates will represent the sole class or
"residual interest" in each Early Defeasance Loan REMIC and REMIC I and the
Class R-II Certificates will represent the sole class or "residual interest" in
REMIC II. See "MATERIAL FEDERAL INCOME TAX CONSEQUENCES--REMICs" in the
prospectus. The portion of the Trust Fund consisting of Additional Interest and
the Additional Interest Account will be treated as a grantor trust for federal
income tax purposes, and the Class Z certificates will represent undivided
beneficial interests in the related assets. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--REMICs" and "--Grantor Trust Funds" in the prospectus.
TAXATION OF THE OFFERED CERTIFICATES
Based on expected issue prices, it is anticipated that the Offered
Certificates will be treated as having been issued at a premium for federal
income tax reporting purposes. The prepayment assumption that will be used in
determining the rate of accrual of original issue discount, if any, or
amortization of issue premium for federal income tax purposes will be based on
the assumption that subsequent to the date of any determination the Mortgage
Loans will pay at a rate equal to a CPR of 0%, except that it is assumed that
the ARD Loans will pay their respective outstanding principal balances on their
related Anticipated Repayment Dates. No representation is made that the Mortgage
Loans will pay at that rate or at any other rate. See "MATERIAL FEDERAL INCOME
TAX CONSEQUENCES--Taxation of Owners of REMIC Regular Certificates--Original
Issue Discount" in the prospectus.
The Internal Revenue Service (the "IRS") has issued regulations (the "OID
Regulations") under Sections 1271 to 1275 of the Code generally addressing the
treatment of debt instruments issued with original issue discount. Purchasers of
the Offered Certificates should be aware that the OID Regulations and Section
1272(a)(6) of the Code do not adequately address certain issues relevant to, or
are not applicable to, securities such as the Offered Certificates. The OID
Regulations in some circumstances
S-210
permit the holder of a debt instrument to recognize original issue discount
under a method that differs from that used by the issuer. Accordingly, it is
possible that the holder of an Offered Certificate issued with original issue
discount may be able to select a method for recognizing original issue discount
that differs from that used by the Paying Agent in preparing reports to the
Certificateholders and the IRS. Prospective purchasers of Offered Certificates
are advised to consult their tax advisors concerning the tax treatment of such
Certificates.
As described above, based on their anticipated issue prices (including
accrued interest), the Offered Certificates will be treated for federal income
tax purposes as having been issued at a premium. Whether any holder of such a
Class of Certificates will be treated as holding a Certificate with amortizable
bond premium will depend on such Certificateholder's purchase price and the
distributions remaining to be made on such Certificate at the time of its
acquisition by such Certificateholder. Holders of each such Class of
Certificates should consult their own tax advisors regarding the possibility of
making an election to amortize such premium. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of Owners of REMIC Regular Certificates--Premium" in the
accompanying prospectus.
The Offered Certificates will be treated as "real estate assets" within the
meaning of Section 856(c)(5)(B) of the Code for a "real estate investment trust"
("REIT"). In addition, interest (including original issue discount) on the
Offered Certificates will be interest described in Section 856(c)(3)(B) of the
Code for a REIT. However, the Offered Certificates will generally only be
considered assets described in Section 7701(a)(19)(C) of the Code for a domestic
building and loan association to the extent that the Mortgage Loans are secured
by multifamily and mobile home park properties (approximately 31.0% by initial
Cut-off Date Pool Balance) and, accordingly, investment in the Offered
Certificates may not be suitable for certain thrift institutions. The Offered
Certificates will not qualify under the foregoing sections to the extent of any
Mortgage Loan that has been defeased with U.S. government obligations.
Prepayment Premiums and Yield Maintenance Charges actually collected will
be distributed to the holders of the Offered Certificates as described in this
Prospectus Supplement. It is not entirely clear under the Code when the amount
of a Yield Maintenance Charge or Prepayment Premium 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 or Prepayment Premiums will
be treated as giving rise to any income to the holders of the Offered
Certificates prior to the Master Servicer's actual receipt of a Yield
Maintenance Charge or Prepayment Premium, as the case may be. It is not entirely
clear whether Yield Maintenance Charges or Prepayment Premiums give rise to
ordinary income or capital gains and Certificateholders should consult their own
tax advisors concerning this character issue and the treatment of Yield
Maintenance Charges and Prepayment Premiums in general.
The Treasury Department has issued final regulations that make certain
modifications to the withholding, backup withholding, and information reporting
rules. Prospective non-United States investors are urged to consult their tax
advisors regarding these regulations.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--REMICs" in the prospectus.
ERISA CONSIDERATIONS
The following description is general in nature, is not intended to be
all-inclusive, is based on the law and practice in force at the date of this
document and is subject to any subsequent changes therein. In view of the
individual nature of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Code consequences, each potential investor that is a Plan
(as described below) is advised to consult its own legal advisor with respect to
the specific ERISA and Code consequences of investing in the Offered
Certificates and to make its own independent decision. The following is merely a
summary and should not be construed as legal advice.
A fiduciary of any employee benefit plan or other retirement plan or
arrangement, including individual retirement accounts and annuities, Keogh plans
and collective investment funds, separate accounts and general accounts in which
such plans, accounts or arrangements are invested, that is subject
S-211
to ERISA or Section 4975 of the Code (a "Plan") should carefully 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 or Section 4975 of the Code or whether there exists any
statutory or administrative exemption applicable thereto. Other employee benefit
plans, including governmental plans (as defined in Section 3(32) of ERISA) and
church plans (as defined in Section 3(33) of ERISA and provided no election has
been made under Section 410(d) of the Code), while not subject to the foregoing
provisions of ERISA or the Code, may be subject to materially similar provisions
of applicable federal, state or local law ("Similar Law").
The U.S. Department of Labor has issued individual exemptions to each of
the Underwriters (Prohibited Transaction Exemption ("PTE") 96-22 (April 3, 1996)
to Wachovia Corporation, and its subsidiaries and its affiliates, which include
Wachovia Capital Markets, LLC ("Wachovia Securities"), Final Authorization
Number 98-08E (April 27, 1998) to ABN AMRO Incorporated ("ABN AMRO"), PTE 89-89
(October 17, 1989) to Citigroup Global Markets Inc. ("Citigroup Securities") and
PTE 89-88 (October 17, 1989) to Goldman, Sachs & Co. (each, as amended, an
"Exemption" and collectively, the "Exemptions"), each of which generally exempts
from the application of the prohibited transaction provisions of Sections 406(a)
and (b) and 407(a) of ERISA, and the excise taxes imposed on such prohibited
transactions pursuant to Sections 4975(a) and (b) of the Code, the purchase,
sale and holding of mortgage pass-through certificates underwritten by an
Underwriter, as hereinafter defined, provided that certain conditions set forth
in the Exemptions are satisfied. For purposes of this discussion, the term
"Underwriter" shall include (a) Wachovia Securities, (b) ABN AMRO, (c) Citigroup
Securities, (d) Goldman, Sachs & Co., (e) any person directly or indirectly,
through one or more intermediaries, controlling, controlled by or under common
control with Wachovia Securities, ABN AMRO, Citigroup Securities or Goldman,
Sachs & Co. and (f) any member of the underwriting syndicate or selling group of
which Wachovia Securities, ABN AMRO, Citigroup Securities, Goldman, Sachs & Co.
or a person described in (e) is a manager or co-manager with respect to the
Offered Certificates.
The obligations covered by the Exemptions include mortgage loans such as
the Mortgage Loans. The Exemptions would apply to the acquisition, holding and
resale of the Offered Certificates by a Plan only if specific conditions
(certain of which are described below) are met. It is not clear whether the
Exemptions apply to participant directed Plans as described in Section 404(c) of
ERISA or Plans that are subject to Section 4975 of the Code but that are not
subject to Title I of ERISA, such as certain Keogh plans and certain individual
retirement accounts. The Exemptions would not apply to governmental plans,
certain church plans and other employee benefit plans that are not subject to
the prohibited transaction provisions of ERISA or the Code but that may be
subject to Similar Law.
The Exemptions set forth five general conditions that, among others, must
be satisfied for a transaction involving the purchase, sale and holding of the
Offered Certificates by a Plan to be eligible for exemptive relief thereunder.
First, the acquisition of the Offered Certificates by a Plan must be on terms,
including the price paid for the Certificates, that are at least as favorable to
the Plan as they would be in an arm's-length transaction with an unrelated
party. Second, the Offered Certificates at the time of acquisition by the Plan
must be rated in one of the four highest generic rating categories by Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P"),
Moody's Investors Service, Inc. ("Moody's") or Fitch, Inc. ("Fitch") or any
successor thereto (each, an "NRSRO"). Third, the Trustee cannot be an affiliate
of any other member of the Restricted Group, other than an Underwriter; the
"Restricted Group" consists of each of the Underwriters, the Depositor, the
Master Servicer, the Special Servicer, the Trustee, the Paying Agent, any
sub-servicer and any obligor with respect to Mortgage Loans constituting more
than 5.0% of the aggregate unamortized principal balance of the Mortgage Loans
as of the date of initial issuance of the Offered Certificates, and any of their
affiliates. Fourth, the sum of all payments made to and retained by any
Underwriter in connection with the distribution or placement of the Offered
Certificates must represent not more than reasonable compensation for
underwriting such 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 such obligations; and the
sum of all payments made to and retained by the Master Servicer, the Special
Servicer or any sub-servicer must represent not more than reasonable
compensation for such person's services under the Pooling and Servicing
Agreement and reimbursement
S-212
of such 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.
A fiduciary of a Plan contemplating purchasing any Class of the Offered
Certificates must make its own determination that, at the time of such purchase,
such Certificates satisfy the general conditions set forth above.
The Exemptions also require that the Trust Fund meet the following
requirements: (i) the Trust Fund must consist solely of assets of the type that
have been included in other investment pools; (ii) certificates in such other
investment pools must have been rated in one of the four highest generic rating
categories by S&P, Moody's or Fitch for at least one year prior to the Plan's
acquisition of the Offered Certificates; and (iii) certificates in such other
investment pools must have been purchased by investors other than Plans for at
least one year prior to any Plan's acquisition of the Offered Certificates.
If the general conditions of the Exemptions are satisfied, the Exemptions
may provide an exemption from the restrictions imposed by Sections 406(a) and
407(a) of ERISA (as well as the excise taxes imposed by Sections 4975(a) and (b)
of the Code by reason of Sections 4975(c)(1)(A) through (D) of the Code) in
connection with (i) the direct or indirect sale, exchange or transfer of the
Offered Certificates in the initial issuance of Certificates between the
Depositor or an Underwriter and a Plan when the Depositor, an Underwriter, the
Trustee, the Master Servicer, the Special Servicer, a sub-servicer or an obligor
with respect to Mortgage Loans is a "Party in Interest," as defined in the
Prospectus, with respect to the investing Plan, (ii) the direct or indirect
acquisition or disposition in the secondary market of the Offered Certificates
by a Plan and (iii) 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 the Offered Certificate on
behalf of an "Excluded Plan" by any person who has discretionary authority or
renders investment advice with respect to the assets of such Excluded Plan. For
purposes hereof, an Excluded Plan is a Plan sponsored by any member of the
Restricted Group.
If certain specific conditions of the Exemptions are also satisfied, each
such Exemption may provide relief from the restrictions imposed by reason of
Sections 406(b)(1) and (b)(2) of ERISA and the taxes imposed by Section
4975(c)(1)(E) of the Code to an obligor with respect to Mortgage Loans acting as
a fiduciary with respect to the investment of a Plan's assets in the Offered
Certificates (or such obligor's affiliate) only if, among other requirements (i)
such obligor is an obligor with respect to 5% or less of the fair market value
of the obligations or receivables contained in the Trust, (ii) the investing
Plan is not an Excluded Plan, (iii) a Plan's investment in each Class of the
Offered Certificates does not exceed 25% of all of the Certificates of that
Class outstanding at the time of the acquisition, (iv) immediately after the
acquisition, no more than 25% of the assets of the Plan are invested in
certificates representing an interest in trusts (including the Trust Fund)
containing assets sold or serviced by the Depositor or the Master Servicer and
(v) in the case of the acquisition of the Offered Certificates in connection
with their initial issuance, at least 50% of each Class of Offered Certificates
in which Plans have invested and at least 50% of the aggregate interest in the
Trust Fund is acquired by persons independent of the Restricted Group.
The Exemptions also apply to transactions in connection with the servicing,
management and operation of the Trust Fund, provided that, in addition to the
general requirements described above, (a) such transactions are carried out in
accordance with the terms of a binding pooling and servicing agreement, (b) the
pooling and servicing agreement is provided to, or described in all material
respects in the prospectus or private placement memorandum provided to,
investing Plans before their purchase of Certificates issued by the Trust Fund
and (c) the terms and conditions for the defeasance of a mortgage obligation and
substitution of a new mortgage obligation, as so described, have been approved
by an NRSRO and do not result in any Offered Certificates receiving a lower
credit rating from the NRSRO than the current rating. The Pooling and Servicing
Agreement is a pooling and servicing agreement as defined in the Exemptions. The
Pooling and Servicing Agreement provides that all transactions relating to the
servicing, management and operations of the Trust Fund must be carried out in
accordance with the Pooling and Servicing Agreement.
S-213
Before purchasing any Class of Offered Certificate, a fiduciary of a Plan
should itself confirm that the specific and general conditions of the Exemptions
and the other requirements set forth in the Exemptions would be satisfied.
Any Plan fiduciary considering the purchase of Offered Certificates should
consult with its counsel with respect to the applicability of the Exemptions and
other issues and determine on its own whether all conditions have been satisfied
and whether the Offered Certificates are an appropriate investment for a Plan
under ERISA and the Code (or, in the case of governmental plans and certain
church plans, under Similar Law) with regard to ERISA's general fiduciary
requirements, including investment prudence and diversification and the
exclusive benefit rule. Each purchaser of the Offered Certificates with the
assets of one or more Plans shall be deemed to represent that each such Plan
qualifies as an "accredited investor" as defined in Rule 501(a)(1) of Regulation
D under the Securities Act. No Plan may purchase or hold an interest in any
Class of Offered Certificates unless such Certificates are rated in one of the
top four generic rating categories by at least one NRSRO at the time of such
purchase, unless such Plan is an insurance company general account that
represents and warrants that it is eligible for, and meets all of the
requirements of, Sections I and III of Prohibited Transaction Class Exemption
95-60.
Persons who have an ongoing relationship with the New York State Common
Retirement Fund, which is a governmental plan, should note that this plan owns
certain equity interests in certain borrowers. Such persons should consult with
counsel regarding whether this relationship would affect their ability to
purchase and hold Certificates.
THE SALE OF OFFERED CERTIFICATES TO A PLAN IS IN NO RESPECT A
REPRESENTATION OR WARRANTY BY THE DEPOSITOR, THE UNDERWRITERS OR ANY OTHER
PERSON THAT THIS INVESTMENT MEETS ALL RELEVANT LEGAL REQUIREMENTS WITH RESPECT
TO INVESTMENTS BY PLANS GENERALLY OR ANY PARTICULAR PLAN, THAT THE EXEMPTIONS
WOULD APPLY TO THE ACQUISITION OF THIS INVESTMENT BY PLANS IN GENERAL OR ANY
PARTICULAR PLAN, OR THAT THIS INVESTMENT IS APPROPRIATE FOR PLANS GENERALLY OR
ANY PARTICULAR PLAN.
LEGAL INVESTMENT
The Offered Certificates will not constitute "mortgage related securities"
for the purposes of the Secondary Mortgage Market Enhancement Act of 1984, as
amended. The appropriate characterization of the Offered Certificates under
various legal investment restrictions, and thus the ability of investors subject
to these restrictions to purchase the Offered Certificates, is subject to
significant interpretive uncertainties. No representations are made as to the
proper characterization of the Offered Certificates for legal investment,
financial institution regulatory, or other purposes, or as to the ability of
particular investors to purchase the Offered Certificates under applicable legal
investment restrictions. The uncertainties described above (and any future
determinations concerning the legal investment or financial institution
regulatory characteristics of the Offered Certificates) may adversely affect the
liquidity of the Offered Certificates. Accordingly, all investors whose
investment activities are subject to legal investment laws and regulations,
regulatory capital requirements or review by regulatory authorities should
consult with their own legal advisors in determining whether and to what extent
the Offered Certificates constitute legal investments for them or are subject to
investment, capital or other restrictions. See "LEGAL INVESTMENT" in the
prospectus.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement") among the Depositor and Wachovia Securities, ABN
AMRO, Citigroup Securities and Goldman, Sachs & Co. (collectively, the
"Underwriters"), the Depositor has agreed to sell to each of Wachovia
Securities, ABN AMRO, Citigroup Securities and Goldman, Sachs & Co., and each of
Wachovia Securities, ABN AMRO, Citigroup Securities and Goldman, Sachs & Co. has
agreed to purchase, severally but not jointly, the respective Certificate
Balances as applicable, of each Class of the Offered Certificates as set forth
below, subject in each case to a variance of 5%:
S-214
CLASS WACHOVIA SECURITIES ABN AMRO CITIGROUP SECURITIES GOLDMAN, SACHS & CO.
- ------------------- --------------------- -------------- ---------------------- ----------------------
Class A-1 ......... $ 76,206,697 $19,519,440 $12,640,862
Class A-2 ......... $ 87,075,788 $22,303,429 $14,443,784
Class A-3 ......... $147,890,233 $37,880,326 $24,531,441
Class A-4 ......... $336,131,404 $91,588,462 $55,756,134 $25,000,000
Class B ........... $ 29,570,898 $ 4,905,102
Class C ........... $ 14,785,449 $ 2,452,551
Class D ........... $ 28,338,348 $ 4,700,652
Class E ........... $ 12,322,065 $ 2,043,935
Wachovia Capital Markets, LLC, ABN AMRO and Citigroup Global Markets Inc.
are acting as co-lead managers for this offering and Goldman, Sachs & Co. is
acting as a co-manager for this offering. Citigroup Global Markets Inc. is
acting as sole bookrunner with respect to 32.16% of the Class A-4 certificates.
Wachovia Capital Markets, LLC is acting as sole bookrunner with respect to the
remainder of the Class A-4 certificates and all other classes of offered
certificates.
Proceeds to the Depositor from the sale of the Offered Certificates, before
deducting expenses payable by the Depositor, will be approximately
$1,058,014,934, which includes accrued interest.
Distribution of the Offered Certificates will be made by each Underwriter
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. Wachovia Capital Markets, LLC or one of its
affiliates may purchase a portion of certain Classes of the Offered
Certificates, purchase certain Offered Certificates for its own account or sell
certain Offered Certificates to one of its affiliates. Sales of the Offered
Certificates may also occur on the Closing Date and other dates after the
Closing Date, as agreed upon in negotiated transactions with various purchasers.
Each Underwriter may effect such transactions by selling the Offered
Certificates to or through dealers, and such dealers may receive compensation in
the form of underwriting discounts, concessions or commissions from such
Underwriter. In connection with the purchase and sale of the Offered
Certificates, Wachovia Securities, ABN AMRO, Citigroup Securities and Goldman,
Sachs & Co. may be deemed to have received compensation from the Depositor in
the form of underwriting discounts. Each Underwriter and any dealers that
participate with any Underwriter in the distribution of the Offered Certificates
may be deemed to be underwriters and any profit on the resale of the Offered
Certificates positioned by them may be deemed to be underwriting discounts and
commissions under the Securities Act.
Purchasers of the Offered Certificates, including dealers, may, depending
on the facts and circumstances of such purchases, be deemed to be "underwriters"
within the meaning of the Securities Act in connection with reoffers and sales
by them of Offered Certificates. Certificateholders should consult with their
legal advisors in this regard prior to any such reoffer or sale.
The Depositor also has been advised by the Underwriters that each of them,
through one or more of its affiliates, currently intends to make a market in the
Offered Certificates; however, none of the Underwriters has any obligation to do
so, any market making may be discontinued at any time and there can be no
assurance that an active secondary market for the Offered Certificates will
develop. See "RISK FACTORS--Liquidity for Certificates May Be Limited" in this
prospectus supplement and "RISK FACTORS--Your Ability to Resell Certificates May
Be Limited Because of Their Characteristics" in the accompanying prospectus.
This Prospectus Supplement and the Prospectus may be used by the Depositor,
Wachovia Securities, an affiliate of the Depositor, and any other affiliate of
the Depositor when required under the federal securities laws in connection with
offers and sales of Offered Certificates in furtherance of market-making
activities in Offered Certificates. Wachovia Securities or any such other
affiliate may act as principal or agent in such transactions. Such sales will be
made at prices related to prevailing market prices at the time of sale or
otherwise.
The Depositor has agreed to indemnify each Underwriter and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the
Securities Act against, or make contributions to each Underwriter and each such
controlling person with respect to, certain liabilities, including liabilities
under the Securities Act.
S-215
Wachovia Securities, one of the Underwriters, is an affiliate of the
Depositor and Wachovia Bank, National Association, which is one of the Mortgage
Loan Sellers and the Master Servicer. Citigroup Securities, one of the
Underwriters, is an affiliate of Citigroup Global Markets Realty Corp., a
Mortgage Loan Seller. ABN AMRO, one of the Underwriters, is an affiliate of
LaSalle Bank National Association. LaSalle Bank National Association is a
Mortgage Loan Seller, the Paying Agent, Certificate Registrar and Authenticating
Agent, and is an affiliate of ABN AMRO Bank, a Mortgage Loan Seller.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Cadwalader,
Wickersham & Taft LLP, Charlotte, North Carolina. Certain legal matters will be
passed upon for the Underwriters by Cadwalader, Wickersham & Taft LLP, New York,
New York.
RATINGS
The Offered Certificates are required as a condition of their issuance to
have received the following ratings from Fitch and S&P (the "Rating Agencies"):
EXPECTED
RATINGS FROM
CLASS S&P/FITCH
----------------------------- -------------
Class A-1 ................. AAA/AAA
Class A-2 ................. AAA/AAA
Class A-3 ................. AAA/AAA
Class A-4 ................. AAA/AAA
Class B ................... AA/AA
Class C ................... AA-/AA-
Class D ................... A/A
Class E ................... A-/A-
The ratings on the Offered Certificates address the likelihood of timely
receipt by holders thereof of all distributions of interest to which they are
entitled and distributions of principal by the Rated Final Distribution Date set
forth on the cover page of this Prospectus Supplement. The ratings take into
consideration the credit quality of the Mortgage Pool, structural and legal
aspects associated with the Offered Certificates, and the extent to which the
payment stream from the Mortgage Pool is adequate to make payments required
under the Offered Certificates. In addition, rating adjustments may result from
a change in the financial position of the Trustee as back-up liquidity provider.
A security rating does not represent any assessment of the yield to maturity
that investors may experience. In addition, a rating does not address (i) the
likelihood or frequency of voluntary or mandatory prepayments of Mortgage Loans,
(ii) the degree to which such prepayments might differ from those originally
anticipated, (iii) payment of Additional Interest or net default interest, (iv)
whether and to what extent payments of Prepayment Premiums or Yield Maintenance
Charges will be received or the corresponding effect on yield to investors or
(v) whether and to what extent Net Aggregate Prepayment Interest Shortfalls will
be realized or allocated to Certificateholders.
There can be no assurance that any rating agency not requested to rate the
Offered Certificates will not nonetheless issue a rating to any or all Classes
thereof and, if so, what such rating or ratings 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 any
of the Rating Agencies.
The ratings on the Offered Certificates should be evaluated independently
from similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision or
withdrawal at any time by the assigning rating agency. See "RISK FACTORS--
Ratings Do Not Guarantee Payment and Do Not Address Prepayment Risks" in the
accompanying prospectus.
S-216
INDEX OF DEFINED TERMS
PAGE PAGE
1% ( ) ................................................ S-107 Certificates ......................................... S-172
2 Rector Street Loan .................................. S-130 Charlotte Russe ...................................... S-129
2003-C8 Controlling Class Representative .............. S-167 Chester Springs Shopping Center Loan ................. S-135
2003-C8 Master Servicer ............................... S-95 Christmas Tree Shops ................................. S-134
2003-C8 Pooling and Servicing Agreement ............... S-95 Chula Vista Center Loan .............................. S-126
2003-C8 Special Servicer .............................. S-95 Chula Vista Center Trigger Event ..................... S-128
2003-C8 Trustee S-95 Citigroup ............................................ S-87
2% ( ) ................................................ S-107 Citigroup Mortgage Loans ............................. S-148
30/360 basis .......................................... S-88 Citigroup Securities ................................. S-212
3% ( ) ................................................ S-107 Class ................................................ S-172
Aaron Brothers ........................................ S-137 Class A Certificates ................................. S-172
AB Companion Loans .................................... S-94 Class X Certificates ................................. S-172
AB Intercreditor Agreement ............................ S-94 Class X-C Components ................................. S-177
AB Mortgage Loans ..................................... S-94 Class X-C Strip Rate ................................. S-177
ABN AMRO .............................................. S-212 Class X-P Components ................................. S-178
ABN AMRO Bank .................................. S-87, S-148 Class X-P Strip Rate ................................. S-178
ABN AMRO Mortgage Loans ............................... S-148 Clearstream .......................................... S-172
ABN AMRO Sage ......................................... S-131 Clearstream Participants ............................. S-174
Accrued Certificate Interest .......................... S-185 CLF .................................................. S-94
Actual/360 basis ...................................... S-88 CMSA ................................................. S-197
Additional Interest ................................... S-88 CMSA Bond File ....................................... S-196
Additional Interest Account ........................... S-181 CMSA Collateral Summary File ......................... S-196
Additional Rights ..................................... S-104 CMSA Loan Periodic Update File ....................... S-196
Additional Trust Fund Expenses ........................ S-191 CMSA Property File ................................... S-196
Administrative Cost Rate .............................. S-107 CNL .................................................. S-121
Advance ............................................... S-192 Co-Lender Loans ...................................... S-94
AMC ................................................... S-123 Collection Period .................................... S-179
Anchor Blue ........................................... S-129 Columbia Corporate Center Loan ....................... S-94
Anticipated Repayment Date ............................ S-88 Companion Loans ...................................... S-94
Appraisal Reduction Amount ............................ S-194 Compensating Interest Payment ........................ S-163
Arbors of Pleasant Valley Apartments Loan ............. S-94 Condemnation Rights .................................. S-93
ARD Loans ............................................. S-88 Constant Prepayment Rate ............................. S-206
Assumed Final Distribution Date ....................... S-199 Controlling Class .................................... S-159
Assumed Scheduled Payment ............................. S-187 Controlling Class Representative ..................... S-159
Authenticating Agent .................................. S-201 Core Material Documents .............................. S-152
Available Distribution Amount ......................... S-180 Corrected Mortgage Loan .............................. S-161
Balloon Loans ......................................... S-88 CPR .................................................. S-206
Balloon Payment ....................................... S-88 Credit Lease Assignment .............................. S-104
Barry, McTiernan, & Moore ............................. S-131 Credit Lease Default ................................. S-103
Bed Bath & Beyond ..................................... S-134 Credit Lease Loan Table .............................. S-103
Bon-Ton ............................................... S-125 Credit Lease Loans ................................... S-102
Borders ............................................... S-123 Credit Leases ........................................ S-102
Breach ................................................ S-156 Crossed Group ........................................ S-156
Capital Imp. Reserve .................................. S-108 Crossed Loan ......................................... S-156
Casualty or Condemnation Rights ....................... S-103 Custodian ............................................ S-150
Certificate Balance ................................... S-174 Cut-Off Date ......................................... S-86
Certificate Deferred Interest ......................... S-176 Cut-Off Date Balance ................................. S-86
Certificate Registrar ................................. S-201 Cut-Off Date LTV ..................................... S-107
Certificateholders ................................... S-179
S-217
PAGE PAGE
Cut-Off Date LTV Ratio ................................ S-106 Interest Accrual Period .............................. S-178
Cut-Off Date Pool Balance ............................. S-86 Interest Reserve Account ............................. S-180
D ( ) ................................................. S-108 Interest Reserve Amount .............................. S-180
Defaulted Lease Claim ................................. S-95 Interest Reserve Loans ............................... S-180
Defaulted Mortgage Loan ............................... S-169 IRS .................................................. S-210
Defeasance ............................................ S-108 JCPenney ............................................. S-125
Defeasance Collateral ................................. S-89 Kohl's ............................................... S-125
Defect ................................................ S-156 L ( ) ................................................ S-107
Depositaries .......................................... S-172 LaSalle ......................................... S-87, S-148
Determination Date .................................... S-179 LaSalle Mortgage Loans ............................... S-148
Determination Party ................................... S-155 Liquidation Fee ...................................... S-163
Discount Rate ......................................... S-188 LNR .................................................. S-159
Distributable Certificate Interest .................... S-185 Loan Pair ............................................ S-157
Distribution Account .................................. S-181 Loan per Sq. Ft., Unit, Bed, Pad or Room ............. S-107
Distribution Date ..................................... S-179 Lockout .............................................. S-107
Distribution Date Statement ........................... S-195 Lockout Period ....................................... S-107
DLC ................................................... S-135 Loss of Rents ........................................ S-104
Double Net Leases ..................................... S-104 LTV at ARD or Maturity ............................... S-107
DSC Ratio ............................................. S-105 Maintenance Rights ................................... S-103
DSCR .................................................. S-105 Majority Subordinate Certificateholder ............... S-200
DTC ................................................... S-172 Master Servicer ...................................... S-158
Due Date .............................................. S-88 Master Servicing Fee ................................. S-162
Dunn-Edwards Paints ................................... S-137 Master Servicing Fee Rate ............................ S-162
Early Defeasance Loan REMIC ........................... S-90 Maturity Date LTV Ratio .............................. S-107
Early Defeasance Loan REMICs .......................... S-90 Meadows Mall Intercreditor Agreement ................. S-95
Early Defeasance Loans ................................ S-90 Meadows Mall Loan ............................... S-94, S-128
Enhancement Insurer .............................. S-93, S-104 Meadows Mall Pari Passu Loan .................... S-94, S-128
ERISA ................................................. S-211 Meadows Mall Whole Loan .............................. S-129
Euroclear Operator .................................... S-172 Meadows Trigger Event ................................ S-130
Euroclear Participants ................................ S-174 Michaels ............................................. S-137
Euroclear System ...................................... S-172 Money Rates .......................................... S-193
Eurohypo .............................................. S-87 Monthly Rental Payments .............................. S-102
Eurohypo Mortgage Loans ............................... S-148 Moody's .............................................. S-212
Excess Cash Flow ...................................... S-88 Mortgage ............................................. S-86
Excluded Plan ......................................... S-213 Mortgage Deferred Interest ........................... S-176
Exemption ............................................. S-212 Mortgage File ........................................ S-150
Exemptions ............................................ S-212 Mortgage Loan ........................................ S-86
expense ............................................... S-106 Mortgage Loan Purchase Agreement ..................... S-148
Express ............................................... S-129 Mortgage Loan Purchase Agreements .................... S-148
Final Recovery Determination .......................... S-195 Mortgage Loans S-86, S-162
Fitch ................................................. S-212 Mortgage Note ........................................ S-86
Form 8-K .............................................. S-157 Mortgage Pool ........................................ S-86
Fully Amortizing Loans ................................ S-88 Mortgage Rate ........................................ S-88
Gain on Sale Reserve Account .......................... S-181 Mortgaged Property ................................... S-86
General Growth .................... S-123, S-125, S-127, S-129 NA ................................................... S-108
GRE ................................................... S-137 NAV .................................................. S-108
Guarantor ............................................. S-102 Net Aggregate Prepayment Interest
Hill Companies ........................................ S-136 Shortfall ......................................... S-185
Indirect Participants ................................. S-173
Intercreditor Agreements .............................. S-95
S-218
PAGE PAGE
Net Cash Flow ........................................... S-105 Related Proceeds ............................. S-192
net cash flow ........................................... S-106 Remaining Amortization Term .................. S-107
Net Mortgage Rate ....................................... S-178 Remaining Term to Maturity ................... S-107
NN ...................................................... S-103 REMIC ........................................ S-25
Non-Offered Certificates ................................ S-172 REMIC Administrator .......................... S-201
Nonrecoverable P&I Advance .............................. S-192 REMIC I ...................................... S-210
Notional Amount ......................................... S-175 REMIC II ..................................... S-210
NRSRO ................................................... S-212 REMIC Regular Certificates ................... S-172
NYCDOT .................................................. S-131 REMIC Regulations ............................ S-210
NYSCRF ........................................... S-123, S-127 REMIC Residual Certificates .................. S-172
O ( ) ................................................... S-107 Rental Property .............................. S-105
Occupancy Percentage .................................... S-108 REO Extension ................................ S-170
Offered Certificates .................................... S-172 REO Mortgage Loan ............................ S-188
OID Regulations ......................................... S-210 REO Property ................................. S-161
Open Period ............................................. S-107 Replacement Reserve .......................... S-108
Option Price ............................................ S-169 Required Appraisal Date ...................... S-193
Original Term to Maturity ............................... S-108 Required Appraisal Loan ...................... S-193
Pari Passu Loans ........................................ S-94 Residual Value Insurance Policy .............. S-103
Park City Center AB Companion Loan ...................... S-94 Restricted Group ............................. S-212
Park City Center Companion Loans ........................ S-94 Restricted Servicer Reports .................. S-197
Park City Center Intercreditor Agreement ................ S-95 revenue ...................................... S-106
Park City Center Loan ............................. S-94, S-124 RPT .......................................... S-135
Park City Center Pari Passu Loan .................. S-94, S-124 Rules ........................................ S-173
Park City Center Subordinate Loan ....................... S-124 Sav-on - Norwalk AB Companion Loan ........... S-94
Park City Center Threshold Event ........................ S-167 Sav-on - Norwalk Intercreditor Agreement ..... S-96
Park City Center Trigger Event .......................... S-126 Sav-on - Norwalk Loan ........................ S-94
Participants ............................................ S-172 Scenario ..................................... S-206
Party in Interest ....................................... S-213 Scheduled Payment ............................ S-187
Paying Agent ............................................ S-201 Sequential Pay Certificates .................. S-172
Periodic Payments ....................................... S-88 Servicing Fees ............................... S-163
P&I Advance ............................................. S-191 Servicing Standard ........................... S-158
Plan .................................................... S-212 Servicing Transfer Event ..................... S-160
Pooling and Servicing Agreement ......................... S-172 Shop Rite .................................... S-134
Prepayment Interest Excess .............................. S-163 Similar Law .................................. S-212
Prepayment Interest Shortfall ........................... S-163 S&P .......................................... S-212
Prepayment Premiums ..................................... S-188 Spaulding & Slye ............................. S-122
Primary Collateral ...................................... S-157 Special Servicer ............................. S-159
Primary Term ............................................ S-102 Special Servicing Fee ........................ S-163
Principal Distribution Amount ........................... S-186 Special Servicing Fee Rate ................... S-163
Privileged Person ....................................... S-198 Specially Serviced Mortgage Loans ............ S-161
PTE ..................................................... S-212 Specially Serviced Trust Fund Assets ......... S-161
Purchase Option ......................................... S-169 Spring Valley Market Place Loan .............. S-133
Purchase Price .......................................... S-151 Staples ...................................... S-135
Qualified Appraiser ..................................... S-194 Stated Principal Balance ..................... S-179
Qualified Substitute Mortgage Loan ...................... S-152 Stellar ...................................... S-132
Rated Final Distribution Date ........................... S-199 Subordinate Certificates ..................... S-172
Rating Agencies ......................................... S-216 Substitution Shortfall Amount ................ S-151
Realized Losses ......................................... S-190 Table Assumptions ............................ S-206
Reimbursement Rate ...................................... S-193 Tenant ....................................... S-102
REIT .................................................... S-211 Terms and Conditions ......................... S-174
TI/LC Reserve ................................ S-108
T.J. Maxx .................................... S-136
S-219
PAGE PAGE
T.J. Maxx Plaza Loan .............................. S-136 Villas at Rancho Palos Verdes Loan .......... S-94, S-132
TJX ............................................... S-134 Voting Rights ..................................... S-199
Toys "R" Us ....................................... S-123 Wachovia .................................... S-87, S-148
Trust Fund ........................................ S-172 Wachovia Mortgage Loans ........................... S-148
Trustee ........................................... S-10 Wachovia Securities ............................... S-212
Trustee Fee ....................................... S-201 Weighted Average Net Mortgage Rate ................ S-178
TSA Office Building Loan .......................... S-121 weighted averages ................................. S-107
Underwriter ....................................... S-212 Wells Fargo ....................................... S-201
Underwriters ...................................... S-214 West Oaks Mall Loan ............................... S-122
Underwriting Agreement ............................ S-214 West Oaks Trigger Event ........................... S-124
Underwritten Replacement Reserves ................. S-107 Workout Fee ....................................... S-164
Unrestricted Servicer Reports ..................... S-197 Xercise, Inc. ..................................... S-135
USA ............................................... S-122 Year Built ........................................ S-107
Village Supermarket ............................... S-135 Yield Maintenance Charges ......................... S-188
Villas at Rancho Palos Verdes Companion YM ( ) ............................................ S-107
Loan ........................................... S-132
S-220
(This page has been left blank intentionally.)
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST SERIES 2003-C9
ANNEX A-1
---------
MORTGAGE
LOAN NUMBER PROPERTY NAME ADDRESS
- ------------------------------------------------------------------------------------------------------------------------------------
1 TSA Office Building (1) 601 & 701 South 12th Street
2 West Oaks Mall 9401 West Colonial Drive
3 Park City Center 142 Park City Center
4 Chula Vista Center 555 Broadway
5 Meadows Mall 4300 Meadows Lane
6 2 Rector Street 2 Rector Street
7 Villas at Rancho Palos Verdes 6600 Beachview Drive & 32622-64 Nantasket Drive
8 Spring Valley Market Place 14 Spring Valley Market Place
9 Chester Springs Shopping Center 147-237 Route 206
10 T.J. Maxx Plaza 1850 Douglas Boulevard
11 Bellamay Grand 2625 SW 75th Street
12 Bellair Plaza 2500 North Atlantic Avenue
13 Miller Place Shopping Center 385 Route 25A
14 Birkdale Commons 101 Augusta Plantation Drive
15 Atlantic Palms 2510 Atlantic Palms Lane
16 Pavilion Crossings I 1801 Willow Haven Lane
17 Adagio Apartments 17126 Southeast 269th Place
18 Autumn Brook Apartments 8600 Roberts Drive
19 Rolling Road Commerce Center & Mini-Storage 2707, 2709 & 2749 Rolling Road
20 Penn Station Studios 1630 Stewart Street
21 The Terraces at Park Place 9101 Pineville Matthews Road
22 Oakridge Terrace Apartments 43339 Gadsden Avenue
23 Coastal Carolina Campus Point 110 Chanticleer Village Drive
24 The Arbors of Pleasant Valley Apartments 2020 Hinson Loop
25 Woodcrest Apartments 1811 Sibley Road
26 Columbia Corporate Center 18 Columbia Turnpike
27 90 State Street 90 State Street
28 Magnolia Place 1880 Lombard Street and 3322 Buchanan Street
29 Market Square Shopping Center 9815 Rose Commons Drive
30 Lynwood Plaza 4351 East Imperial Highway &
10901-10927 Atlantic Avenue
31 Wal-Mart - Baldwin Hills, CA 4101 Crenshaw Boulevard
32 160 East Berkeley Street 160 East Berkeley Street
33 236-244 East 13th Street 236-244 East 13th Street
34 Clerbrook 20005 US Highway 27
35 Marketplace at Settlers Walk Shopping Center 740-774 North Main Street
36 Brookside Manor Apartments 1200 East Grand Avenue
37 Rolando Plaza Shopping Center 6411-6535 University Avenue
38 Evergreen Valley Center 2720-2780 Aborn Road
39 10 New King Street 10 New King Street
40 Longwood Village Apartments 208 Clark Street
41 Heartland Ridge - Student Housing 1300-1600 Trumbull Road
42 Festival Apartments 500 Festival Place
43 Southwest Commons Shopping Center 50 Southwest Cutoff
44 Summerfield Apartments 4581 South Kirkman Road
45 The Pines at Montclair Apartments 9550 Fremont Avenue
46 Campus Pointe Apartments 2230 Northeast Greenville Boulevard
47 Circuit City Center 2600-2790 Pearl Street
48 Citrus Plaza 49-908 Jefferson Street
49 City Self Storage of Van Nuys 7346 North Sepulveda Boulevard
50 Alafaya Trail Apartments 2501-2569 North Alafaya Trail
51 Cambridge Village - Tucson, AZ 2801 North Oracle Road
52 Expo Plaza 8120-8182 Miramar Road
53 Terrace at Butler Apartments 771 East Butler Road
54 Southridge Shopping Center 2430 South Interstate - 35 East
55 209 & 214 West 21st Street 209 & 214 West 21st Street
56 St. Helena Outlet Center 3111 North St. Helena Highway
57 1400 16th Street 1400 16th Street, NW
58 Grapevine Retail Center 1250 William D. Tate Avenue
59 Mason Knolls Centre 1630-1660 South Mason Road
60 Collins Park Apartments 5773 Dewsbury Lane
61 One Ethel Road One Ethel Road
62 Kilcullen Drive Quadraplexes 4604-4632 Kilcullen Drive, 4300-4317 Presley Court,
4704-4716 Hoyle Drive, 4404 and 4609 Brockton Drive
63 Forest Ridge Apartments 425 West 2nd Street
64 Hy-Vee Plaza 139 North Belt Highway
65 Gardens Shopping Center 825-1005 Gardens Boulevard
66 Sav-on - Norwalk, CA NE Corner of Alondra Boulevard and Studebaker Road
67 Swan Creek MHC 23379 Island Drive
68 Orlando Winter Garden 13905 West Colonial Drive
69 Walgreens - Bellflower, CA 15740 Woodruff Avenue
70 Aztec MHP/RV Park 4220 East Main Street
71 87 Hamilton Place 87 Hamilton Place
72 Frederick Street Parking Garage 34 Market Place and 15 South Frederick Street
73 Walgreens - Queens, NY 219-14 Merrick Boulevard
74 Logan Commons Shopping Center 12906 State Highway 664
75 Country Club Apartments 1155 North Courtenay Parkway
76 Walgreens - Reno, NV 750 North Virginia Street
77 Walgreens - Edgebrook, TX 390 Edgebrook Drive
78 Eckerd - Ironside, TX 10225 Wurzbach Road
79 San Miguel Court Apartments 2029 Calle Lorca
80 Walgreens - Meadows Place, TX 11675 West Airport Boulevard
81 Marshalls - Montrose, CA 2065 Verdugo Boulevard
82 Eckerd - Williamson, NY 4053-4071 Route 104, 6450-6458 Cole Street, &
6461 Lake Avenue
83 Eckerd - Baton Rouge, LA 11430 Florida Boulevard
84 Eckerd - New Bern, NC 710 DeGraffenreid Avenue
85 1120-26 E. 47th Street Apartments 1120-26 East 47th Street
86 Eckerd - Glendale, AZ 18591 North 59th Avenue
87 Eaton Pines Village MHC 458 Eaton Pines Boulevard
88 South Shades Crest Station 3421 and 3435 South Shades Crest Road
89 Eckerd - Alexandria, LA 4443 Jackson Street
90 LaSalle Bank - Norridge, IL 8422 West Lawrence Avenue
91 Walgreens - Norridge, IL 4820 Cumberland Avenue
92 Century Oaks Apts 337 - 341 Guilford College Road
93 Sunrise Terrace MHP 2182 North Pecos Road
94 Rite Aid - Chester, NY (2) 89 Brookside Avenue
95 Westwood Village MHP 3365 West Pasadena Avenue
96 Riverwood on the Neuse 321-489 Athletic Club Boulevard
97 Meridian MHP 351 North Meridian Road
98 Brownsville Station Apartments 104-114 and 210 Wood Street and
514 Washington Street
99 Baldwin Lake Estates MHC 6333 Hodgson Road
100 Eckerd - Kerrville, TX 112 Main Street
101 Community at Bridge Point 1500 Monument Street
102 Oak Forest MHC 20 Powell Street
103 CVS - Wilmington, NC 2607 Carolina Beach Road
104 Rite Aid - Mountaintop, PA (2) 2 Kirby Avenue
105 Brookside MHC 660 Manning Avenue
106 CVS - Charlotte, NC 5700 Albemarle Road
107 Sugartree Apartments II 1801 Sugar Tree Circle
108 Slate Run 450 Turney Road
109 Ridgewood II 2170 Fort Harrods Drive
110 Wiregrass Plaza Shopping Center North Side of Westgate Parkway & Montgomery Highway
111 Schenley House Apts 147 - 151 North Craig Street
112 Riverwood Apartments 4803 St. Johns Avenue
113 Parkwood Village II 6804 Parkway Drive
114 Graceland Farms 1984 Bonnie Drive
115 Connelly MHC 16962 Kenrick Avenue West
116 Mulberry Apartments 4070 Leap Road
117 St. Joseph MHC 301 & 517 1st Avenue NW
118 602 West 146th Street 602 West 146th Street
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
CROSS COLLATERALIZED
MORTGAGE AND CROSS GENERAL
LOAN NUMBER CITY STATE ZIP CODE DEFAULTED LOAN FLAG LOAN ORIGINATOR PROPERTY TYPE
- ------------------------------------------------------------------------------------------------------------------------------------
1 Arlington VA 22202 Wachovia Office
2 Ocoee FL 34761 ABN AMRO Retail
3 Lancaster PA 17601 EHY Retail
4 Chula Vista CA 91910 EHY Retail
5 Las Vegas NV 89107 ABN AMRO Retail
6 New York NY 10006 Wachovia Office
7 Rancho Palos Verdes CA 90275 Wachovia Multifamily
8 Spring Valley NY 10977 Wachovia Retail
9 Chester NJ 07930 CGM Retail
10 Sacramento CA 95661 Wachovia Retail
11 Gainesville FL 32607 LaSalle Multifamily
12 Daytona Beach FL 32118 CGM Retail
13 Miller Place NY 11764 CGM Retail
14 Myrtle Beach SC 29579 LaSalle Multifamily
15 North Charleston SC 29406 LaSalle Multifamily
16 Charlotte NC 28262 Wachovia Multifamily
17 Covington WA 98042 CGM Multifamily
18 Dunwoody GA 30350 Wachovia Multifamily
19 Baltimore MD 21244 Wachovia Mixed Use
20 Santa Monica CA 90404 CGM Office
21 Pineville NC 28134 LaSalle Retail
22 Lancaster CA 93534 Wachovia Multifamily
23 Myrtle Beach SC 29579 LaSalle Multifamily
24 Little Rock AR 72212 Wachovia Multifamily
25 Augusta GA 30909 LaSalle Multifamily
26 Florham Park NJ 07932 Wachovia Office
27 Albany NY 12207 Wachovia Office
28 San Francisco CA 94123 Wachovia Mixed Use
29 Huntersville NC 28078 Wachovia Retail
30 Lynwood CA 90262 Wachovia Retail
31 Los Angeles CA 90008 CGM Retail
32 Boston MA 02118 Wachovia Multifamily
33 New York NY 10003 Wachovia Multifamily
34 Clermont FL 34711 LaSalle Mobile Home Park
35 Springboro OH 45066 Wachovia Retail
36 Carbondale IL 62901 LaSalle Multifamily
37 San Diego CA 92115 Wachovia Retail
38 San Jose CA 95121 Wachovia Mixed Use
39 North Castle NY 10604 CGM Office
40 Farmville VA 23901 LaSalle Multifamily
41 Normal IL 61761 LaSalle Multifamily
42 Montgomery AL 36117 LaSalle Multifamily
43 Worcester MA 01604 CGM Retail
44 Orlando FL 32811 Wachovia Multifamily
45 Montclair CA 91763 Wachovia Multifamily
46 Greenville NC 27858 LaSalle Multifamily
47 Boulder CO 80302 CGM Retail
48 Indio CA 92201 CGM Retail
49 Van Nuys CA 91405 Wachovia Self Storage
50 Orlando FL 32826 LaSalle Multifamily
51 Tucson AZ 85705 LaSalle Multifamily
52 San Diego CA 92126 LaSalle Industrial
53 Mauldin SC 29662 LaSalle Multifamily
54 Denton TX 76205 LaSalle Retail
55 New York NY 10011 Wachovia Multifamily
56 St. Helena CA 94574 LaSalle Retail
57 Washington DC 20036 Wachovia Land
58 Grapevine TX 76051 LaSalle Retail
59 Katy TX 77450 LaSalle Retail
60 North Charleston SC 29418 LaSalle Multifamily
61 Edison NJ 08817 CGM Office
62 Raleigh NC 27604 LaSalle Multifamily
63 Rochester MI 48307 LaSalle Multifamily
64 St. Joseph MO 64501 CGM Retail
65 Charlottesville VA 22901 CGM Retail
66 Norwalk CA 90650 Wachovia Retail
67 New Boston MI 48164 LaSalle Mobile Home Park
68 Orlando FL 34769 LaSalle Mobile Home Park
69 Bellflower CA 90706 Wachovia Retail
70 Mesa AZ 85205 LaSalle Mobile Home Park
71 New York NY 10031 Wachovia Multifamily
72 Baltimore MD 21202 CGM Parking Garage
73 Springfield Gardens NY 11413 LaSalle Retail
74 Logan OH 43138 Wachovia Retail
75 Merritt Island FL 32953 LaSalle Multifamily
76 Reno NV 89501 CGM Retail
77 Houston TX 77034 LaSalle Retail
78 San Antonio TX 78230 Eckerd Portfolio CGM Retail
79 Santa Fe NM 87505 LaSalle Multifamily
80 Meadows Place TX 77477 LaSalle Retail
81 Glendale CA 91020 LaSalle Retail
82 Williamson NY 14589 LaSalle Retail
83 Baton Rouge LA 70815 Eckerd Portfolio CGM Retail
84 New Bern NC 28560 LaSalle Retail
85 Chicago IL 60653 LaSalle Multifamily
86 Glendale AZ 85308 LaSalle Retail
87 Eaton Rapids MI 48827 LaSalle Mobile Home Park
88 Hoover AL 35244 LaSalle Retail
89 Alexandria LA 71303 Eckerd Portfolio CGM Retail
90 Norridge IL 60706 Norridge Portfolio LaSalle Retail
91 Norridge IL 60706 Norridge Portfolio LaSalle Retail
92 Greensboro NC 27409 LaSalle Multifamily
93 Las Vegas NV 89115 LaSalle Mobile Home Park
94 Chester NY 10918 Wachovia Retail
95 Flint MI 48504 LaSalle Mobile Home Park
96 Clayton NC 27520 Wachovia Mixed Use
97 Apache Junction AZ 85219 LaSalle Mobile Home Park
98 Starkville MS 39759 LaSalle Multifamily
99 Lino Lakes MN 55014 LaSalle Mobile Home Park
100 Kerrville TX 78028 Eckerd Portfolio CGM Retail
101 Jacksonville FL 32225 LaSalle Multifamily
102 Emmett Township MI 49014 LaSalle Mobile Home Park
103 Wilmington NC 28412 LaSalle Retail
104 Mountaintop PA 18707 Wachovia Retail
105 Elon NC 27244 LaSalle Mobile Home Park
106 Charlotte NC 28212 Wachovia Retail
107 New Smyrna Beach FL 32168 LaSalle Multifamily
108 Bedford OH 44146 LaSalle Multifamily
109 Lexington KY 40513 LaSalle Multifamily
110 Dothan AL 36303 Wachovia Retail
111 Pittsburgh PA 15213 LaSalle Multifamily
112 Palatka FL 32177 LaSalle Multifamily
113 Douglasville GA 30135 LaSalle Multifamily
114 Memphis TN 38116 LaSalle Multifamily
115 Lakeville MN 55044 LaSalle Mobile Home Park
116 Hilliard OH 43026 LaSalle Multifamily
117 St. Joseph MN 56374 LaSalle Mobile Home Park
118 New York NY 10031 Wachovia Multifamily
% OF AGGREGATE
MORTGAGE SPECIFIC ORIGINAL LOAN CUT-OFF DATE CUT-OFF DATE ORIGINATION FIRST PAY
LOAN NUMBER PROPERTY TYPE BALANCE ($) LOAN BALANCE BALANCE DATE DATE
- --------------------------------------------------------------------------------------------------------------------------
1 Suburban 95,000,000.00 95,000,000.00 8.27% 5-Nov-2003 11-Dec-2003
2 Anchored 76,000,000.00 75,912,849.57 6.61% 24-Oct-2003 1-Dec-2003
3 Anchored 66,000,000.00 65,841,900.27 5.73% 12-Sep-2003 1-Nov-2003
4 Anchored 65,000,000.00 64,823,815.97 5.64% 12-Sep-2003 1-Nov-2003
5 Anchored 56,000,000.00 55,768,045.46 4.85% 31-Jul-2003 1-Sep-2003
6 CBD 43,200,000.00 43,200,000.00 3.76% 21-Nov-2003 11-Jan-2004
7 Conventional 36,000,000.00 36,000,000.00 3.13% 18-Nov-2003 11-Jan-2004
8 Anchored 32,000,000.00 31,966,716.59 2.78% 7-Nov-2003 11-Dec-2003
9 Anchored 25,000,000.00 24,949,093.60 2.17% 1-Oct-2003 1-Nov-2003
10 Anchored 24,600,000.00 24,600,000.00 2.14% 28-Oct-2003 11-Dec-2003
11 Conventional 21,800,000.00 21,800,000.00 1.90% 13-Nov-2003 1-Jan-2004
12 Anchored 21,871,000.00 21,779,381.49 1.90% 31-Jul-2003 1-Sep-2003
13 Anchored 20,240,000.00 20,219,344.76 1.76% 6-Oct-2003 1-Dec-2003
14 Conventional 18,200,000.00 18,179,356.50 1.58% 3-Oct-2003 1-Dec-2003
15 Conventional 18,000,000.00 18,000,000.00 1.57% 25-Nov-2003 1-Jan-2004
16 Conventional 16,250,000.00 16,250,000.00 1.41% 20-Jun-2003 11-Aug-2003
17 Conventional 14,995,000.00 14,976,882.59 1.30% 10-Oct-2003 1-Dec-2003
18 Conventional 13,500,000.00 13,450,629.42 1.17% 26-Aug-2003 11-Oct-2003
19 Flex/Self Storage 13,000,000.00 12,966,669.77 1.13% 30-Sep-2003 11-Nov-2003
20 Suburban 12,800,000.00 12,800,000.00 1.11% 9-Sep-2003 1-Nov-2003
21 Anchored 11,500,000.00 11,500,000.00 1.00% 14-Nov-2003 1-Jan-2004
22 Conventional 11,200,000.00 11,200,000.00 0.97% 18-Nov-2003 11-Jan-2004
23 Student Housing 10,950,000.00 10,950,000.00 0.95% 25-Nov-2003 1-Jan-2004
24 Conventional 10,000,000.00 10,000,000.00 0.87% 25-Nov-2003 11-Jan-2004
25 Conventional 10,000,000.00 9,988,863.64 0.87% 23-Oct-2003 1-Dec-2003
26 Suburban 10,000,000.00 9,960,842.16 0.87% 12-Sep-2003 1-Nov-2003
27 CBD 9,800,000.00 9,788,462.36 0.85% 27-Oct-2003 11-Dec-2003
28 Multifamily/Retail 9,630,000.00 9,602,649.43 0.84% 18-Aug-2003 11-Oct-2003
29 Anchored 9,400,000.00 9,390,588.43 0.82% 3-Nov-2003 11-Dec-2003
30 Anchored 9,100,000.00 9,100,000.00 0.79% 10-Nov-2003 11-Dec-2003
31 Anchored 9,125,000.00 9,099,519.51 0.79% 26-Aug-2003 1-Oct-2003
32 Conventional 8,900,000.00 8,900,000.00 0.77% 17-Nov-2003 11-Jan-2004
33 Conventional 8,750,000.00 8,739,290.58 0.76% 7-Nov-2003 11-Dec-2003
34 Mobile Home Park 8,500,000.00 8,466,075.40 0.74% 14-Aug-2003 1-Oct-2003
35 Anchored 8,500,000.00 8,459,322.89 0.74% 9-Sep-2003 11-Oct-2003
36 Conventional 8,475,000.00 8,451,346.82 0.74% 18-Sep-2003 1-Nov-2003
37 Unanchored 8,000,000.00 8,000,000.00 0.70% 20-Nov-2003 11-Jan-2004
38 Office/Retail 8,000,000.00 7,991,243.55 0.70% 5-Nov-2003 11-Dec-2003
39 Suburban 8,000,000.00 7,985,273.72 0.69% 23-Sep-2003 1-Nov-2003
40 Student Housing 7,900,000.00 7,891,891.75 0.69% 10-Oct-2003 1-Dec-2003
41 Student Housing 7,800,000.00 7,771,481.86 0.68% 18-Aug-2003 1-Oct-2003
42 Conventional 7,400,000.00 7,384,931.70 0.64% 1-Oct-2003 1-Nov-2003
43 Anchored 7,350,000.00 7,301,908.12 0.64% 24-Apr-2003 1-Jun-2003
44 Conventional 7,275,000.00 7,275,000.00 0.63% 24-Nov-2003 11-Jan-2004
45 Conventional 6,300,000.00 6,300,000.00 0.55% 18-Nov-2003 11-Jan-2004
46 Student Housing 6,300,000.00 6,287,797.63 0.55% 26-Sep-2003 1-Nov-2003
47 Anchored 6,300,000.00 6,273,948.92 0.55% 26-Aug-2003 1-Oct-2003
48 Anchored 6,100,000.00 6,089,530.53 0.53% 5-Sep-2003 1-Nov-2003
49 Self Storage 5,900,000.00 5,900,000.00 0.51% 24-Nov-2003 11-Jan-2004
50 Conventional 5,649,000.00 5,649,000.00 0.49% 1-Dec-2003 1-Jan-2004
51 Conventional 5,600,000.00 5,581,502.13 0.49% 21-Aug-2003 1-Oct-2003
52 Flex 5,550,000.00 5,534,874.48 0.48% 27-Aug-2003 1-Oct-2003
53 Conventional 5,450,000.00 5,439,281.06 0.47% 19-Sep-2003 1-Nov-2003
54 Shadow Anchored 5,160,000.00 5,141,680.37 0.45% 13-Aug-2003 1-Oct-2003
55 Conventional 5,125,000.00 5,118,727.34 0.45% 7-Nov-2003 11-Dec-2003
56 Unanchored 5,100,000.00 5,077,017.81 0.44% 2-Jun-2003 1-Aug-2003
57 Land 5,000,000.00 5,000,000.00 0.44% 19-Nov-2003 11-Jan-2004
58 Anchored 5,000,000.00 4,990,999.98 0.43% 11-Sep-2003 1-Nov-2003
59 Unanchored 4,900,000.00 4,900,000.00 0.43% 10-Nov-2003 1-Jan-2004
60 Conventional 4,500,000.00 4,491,899.98 0.39% 26-Sep-2003 1-Nov-2003
61 Suburban 4,500,000.00 4,487,434.26 0.39% 28-Aug-2003 1-Oct-2003
62 Conventional 4,472,000.00 4,463,932.26 0.39% 12-Sep-2003 1-Nov-2003
63 Conventional 4,425,000.00 4,414,552.45 0.38% 26-Sep-2003 1-Nov-2003
64 Shadow Anchored 4,400,000.00 4,392,008.52 0.38% 15-Sep-2003 1-Nov-2003
65 Anchored 4,400,000.00 4,388,328.87 0.38% 19-Aug-2003 1-Oct-2003
66 Anchored 4,350,000.00 4,350,000.00 0.38% 12-Nov-2003 11-Jan-2004
67 Mobile Home Park 4,350,000.00 4,350,000.00 0.38% 6-Nov-2003 1-Jan-2004
68 Mobile Home Park 4,240,000.00 4,223,077.61 0.37% 14-Aug-2003 1-Oct-2003
69 Anchored 4,155,000.00 4,147,687.93 0.36% 8-Oct-2003 11-Nov-2003
70 Mobile Home Park 4,000,000.00 4,000,000.00 0.35% 3-Nov-2003 1-Jan-2004
71 Conventional 4,000,000.00 3,995,104.26 0.35% 7-Nov-2003 11-Dec-2003
72 Parking Garage 4,000,000.00 3,994,183.39 0.35% 29-Oct-2003 1-Dec-2003
73 Anchored 3,999,815.01 3,992,059.34 0.35% 1-Oct-2003 1-Nov-2003
74 Shadow Anchored 4,000,000.00 3,989,366.98 0.35% 4-Sep-2003 11-Oct-2003
75 Conventional 3,900,000.00 3,889,630.69 0.34% 5-Sep-2003 1-Nov-2003
76 Anchored 3,828,000.00 3,804,008.70 0.33% 11-Apr-2003 1-Jun-2003
77 Anchored 3,600,000.00 3,596,335.93 0.31% 6-Oct-2003 1-Dec-2003
78 Anchored 3,350,000.00 3,309,023.52 0.29% 10-Feb-2003 1-Apr-2003
79 Conventional 3,300,000.00 3,300,000.00 0.29% 14-Nov-2003 1-Jan-2004
80 Anchored 3,282,000.00 3,270,347.86 0.28% 18-Aug-2003 1-Oct-2003
81 Anchored 3,275,000.00 3,252,156.01 0.28% 11-Aug-2003 1-Oct-2003
82 Anchored 3,015,000.00 3,007,627.98 0.26% 28-Aug-2003 1-Oct-2003
83 Anchored 3,000,000.00 2,963,304.72 0.26% 10-Feb-2003 1-Apr-2003
84 Anchored 2,948,000.00 2,929,805.10 0.25% 30-Jul-2003 1-Sep-2003
85 Conventional 2,900,000.00 2,886,043.69 0.25% 31-Jul-2003 1-Sep-2003
86 Anchored 2,850,000.00 2,847,216.65 0.25% 1-Oct-2003 1-Dec-2003
87 Mobile Home Park 2,840,000.00 2,840,000.00 0.25% 7-Nov-2003 1-Jan-2004
88 Shadow Anchored 2,800,000.00 2,797,322.70 0.24% 10-Oct-2003 1-Dec-2003
89 Anchored 2,800,000.00 2,765,751.06 0.24% 10-Feb-2003 1-Apr-2003
90 Anchored 2,664,000.00 2,664,000.00 0.23% 19-Nov-2003 1-Jan-2004
91 Anchored 2,526,000.00 2,526,000.00 0.22% 19-Nov-2003 1-Jan-2004
92 Conventional 2,525,000.00 2,525,000.00 0.22% 10-Nov-2003 1-Jan-2004
93 Mobile Home Park 2,500,000.00 2,496,804.18 0.22% 3-Oct-2003 1-Dec-2003
94 Unanchored 2,736,700.96 2,496,741.61 0.22% 23-Oct-1998 15-Dec-1998
95 Mobile Home Park 2,480,000.00 2,474,779.34 0.22% 29-Sep-2003 1-Nov-2003
96 Multifamily/Retail 2,400,000.00 2,383,694.36 0.21% 23-May-2003 11-Jul-2003
97 Mobile Home Park 2,300,000.00 2,297,624.06 0.20% 16-Oct-2003 1-Dec-2003
98 Student Housing 2,250,000.00 2,250,000.00 0.20% 6-Nov-2003 1-Jan-2004
99 Mobile Home Park 2,085,000.00 2,070,910.58 0.18% 24-Sep-2003 1-Nov-2003
100 Anchored 1,950,000.00 1,926,148.03 0.17% 10-Feb-2003 1-Apr-2003
101 Conventional 1,840,000.00 1,840,000.00 0.16% 14-Nov-2003 1-Jan-2004
102 Mobile Home Park 1,774,000.00 1,772,025.15 0.15% 10-Oct-2003 1-Dec-2003
103 Anchored 1,750,000.00 1,747,184.75 0.15% 30-Sep-2003 1-Nov-2003
104 Unanchored 1,874,549.54 1,620,965.17 0.14% 14-Dec-1998 15-Jan-1999
105 Mobile Home Park 1,600,000.00 1,585,974.63 0.14% 13-Feb-2003 1-Apr-2003
106 Anchored 1,590,000.00 1,576,853.48 0.14% 24-Jul-2003 11-Sep-2003
107 Conventional 1,464,000.00 1,464,000.00 0.13% 14-Nov-2003 1-Jan-2004
108 Conventional 1,440,000.00 1,440,000.00 0.13% 14-Nov-2003 1-Jan-2004
109 Conventional 1,360,000.00 1,360,000.00 0.12% 14-Nov-2003 1-Jan-2004
110 Anchored 1,350,000.00 1,346,766.64 0.12% 12-Sep-2003 11-Nov-2003
111 Mixed Use 1,350,000.00 1,341,383.12 0.12% 22-Oct-2003 1-Dec-2003
112 Conventional 1,304,000.00 1,304,000.00 0.11% 14-Nov-2003 1-Jan-2004
113 Conventional 1,275,000.00 1,275,000.00 0.11% 14-Nov-2003 1-Jan-2004
114 Conventional 1,200,000.00 1,185,270.76 0.10% 2-Sep-2003 1-Nov-2003
115 Mobile Home Park 1,125,000.00 1,117,397.79 0.10% 24-Sep-2003 1-Nov-2003
116 Conventional 1,100,000.00 1,100,000.00 0.10% 14-Nov-2003 1-Jan-2004
117 Mobile Home Park 1,000,000.00 993,354.95 0.09% 24-Sep-2003 1-Nov-2003
118 Conventional 925,000.00 923,867.86 0.08% 7-Nov-2003 11-Dec-2003
REMAINING
LOAN INTEREST INTEREST ORIGINAL TERM TERM TO
MORTGAGE MATURITY MORTGAGE ADMINISTRATIVE ACCRUAL ACCRUAL METHOD TO MATURITY MATURITY OR
LOAN NUMBER DATE OR ARD RATE (%) COST RATE (%) METHOD DURING IO OR ARD (MOS.) ARD (MOS.)
- -----------------------------------------------------------------------------------------------------------------------------------
1 11-Nov-2013 5.4200% 0.04210% Actual/360 Actual/360 120 119
2 1-Aug-2013 5.2515% 0.04210% Actual/360 117 116
3 1-Oct-2010 4.7364% 0.05210% Actual/360 84 82
4 1-Oct-2008 4.1200% 0.04210% Actual/360 60 58
5 1-Aug-2013 5.45282% 0.04210% Actual/360 120 116
6 11-Dec-2013 5.8500% 0.04210% Actual/360 120 120
7 11-Dec-2010 5.516611% 0.04210% Actual/360 Actual/360 84 84
8 11-Nov-2013 5.7700% 0.04210% Actual/360 120 119
9 1-Oct-2013 5.5100% 0.04210% Actual/360 120 118
10 11-Nov-2008 5.5300% 0.04210% Actual/360 Actual/360 60 59
11 1-Dec-2013 5.5850% 0.04210% Actual/360 Actual/360 120 120
12 1-Aug-2013 5.4000% 0.04210% Actual/360 120 116
13 1-Nov-2013 5.8700% 0.04210% Actual/360 120 119
14 1-Nov-2013 5.3100% 0.04210% Actual/360 120 119
15 1-Dec-2013 5.5600% 0.04210% Actual/360 Actual/360 120 120
16 11-Jul-2013 4.9000% 0.04210% Actual/360 Actual/360 120 115
17 1-Nov-2012 4.9700% 0.08210% Actual/360 108 107
18 11-Sep-2013 4.7500% 0.04210% Actual/360 120 117
19 11-Oct-2013 6.3500% 0.04210% Actual/360 120 118
20 1-Oct-2012 5.5700% 0.04210% Actual/360 Actual/360 108 106
21 1-Dec-2013 6.1000% 0.10210% Actual/360 120 120
22 11-Dec-2013 5.7600% 0.04210% Actual/360 Actual/360 120 120
23 1-Dec-2013 5.8100% 0.04210% Actual/360 120 120
24 11-Dec-2010 5.2100% 0.04210% Actual/360 84 84
25 1-Nov-2013 5.4080% 0.04210% Actual/360 120 119
26 1-Oct-2013 5.7300% 0.09210% 30/360 120 118
27 11-Nov-2008 5.1100% 0.04210% Actual/360 60 59
28 11-Sep-2013 5.9900% 0.04210% Actual/360 120 117
29 11-Nov-2013 5.9700% 0.04210% Actual/360 120 119
30 11-Nov-2013 5.8100% 0.04210% Actual/360 Actual/360 120 119
31 1-Sep-2013 6.0700% 0.04210% Actual/360 120 117
32 11-Dec-2013 5.5200% 0.04210% Actual/360 Actual/360 120 120
33 11-Nov-2008 4.9000% 0.04210% Actual/360 60 59
34 1-Sep-2008 4.3000% 0.04210% Actual/360 60 57
35 11-Sep-2013 6.1900% 0.04210% Actual/360 120 117
36 1-Oct-2013 5.8630% 0.04210% Actual/360 120 118
37 11-Dec-2008 5.7400% 0.04210% Actual/360 Actual/360 60 60
38 11-Nov-2013 5.5000% 0.04210% Actual/360 120 119
39 1-Oct-2013 5.9700% 0.04210% Actual/360 120 118
40 1-Nov-2013 5.8400% 0.04210% Actual/360 120 119
41 1-Sep-2013 4.7500% 0.04210% Actual/360 120 117
42 1-Oct-2008 5.5100% 0.04210% Actual/360 60 58
43 1-May-2013 5.9000% 0.04210% Actual/360 120 113
44 11-Dec-2013 5.7000% 0.04210% Actual/360 120 120
45 11-Dec-2013 5.9000% 0.08210% Actual/360 Actual/360 120 120
46 1-Oct-2013 5.7400% 0.04210% Actual/360 120 118
47 1-Sep-2013 6.0700% 0.04210% Actual/360 120 117
48 1-Oct-2013 6.2800% 0.10210% Actual/360 120 118
49 11-Dec-2013 5.8700% 0.04210% Actual/360 120 120
50 1-Dec-2013 5.8520% 0.04210% Actual/360 120 120
51 1-Sep-2008 5.2600% 0.04210% Actual/360 60 57
52 1-Sep-2013 6.1840% 0.04210% Actual/360 120 117
53 1-Oct-2013 5.6700% 0.10210% Actual/360 120 118
54 1-Sep-2013 4.9000% 0.08210% Actual/360 120 117
55 11-Nov-2008 4.9000% 0.04210% Actual/360 60 59
56 1-Jul-2013 6.0130% 0.04210% Actual/360 120 115
57 11-Dec-2013 5.7100% 0.04210% Actual/360 Actual/360 120 120
58 1-Oct-2013 6.0700% 0.04210% Actual/360 120 118
59 1-Dec-2013 6.0100% 0.04210% Actual/360 120 120
60 1-Oct-2013 6.0700% 0.04210% Actual/360 120 118
61 1-Sep-2013 6.0700% 0.04210% Actual/360 120 117
62 1-Oct-2013 6.0600% 0.10210% Actual/360 120 118
63 1-Oct-2008 4.8070% 0.04210% Actual/360 60 58
64 1-Oct-2013 6.0300% 0.08210% Actual/360 120 118
65 1-Sep-2013 6.3100% 0.04210% Actual/360 120 117
66 11-Dec-2013 6.3300% 0.04210% Actual/360 120 120
67 1-Dec-2013 5.7800% 0.04210% Actual/360 120 120
68 1-Sep-2008 4.3000% 0.04210% Actual/360 60 57
69 11-Oct-2013 6.1700% 0.04210% Actual/360 120 118
70 1-Dec-2008 5.3300% 0.04210% Actual/360 60 60
71 11-Nov-2008 4.9000% 0.04210% Actual/360 60 59
72 1-Nov-2013 5.9500% 0.04210% Actual/360 120 119
73 1-May-2013 5.8820% 0.04210% Actual/360 115 113
74 11-Sep-2013 6.3000% 0.04210% Actual/360 120 117
75 1-Oct-2013 6.1430% 0.10210% Actual/360 120 118
76 1-May-2013 6.0900% 0.04210% Actual/360 120 113
77 1-Nov-2013 5.8840% 0.04210% Actual/360 120 119
78 1-Mar-2012 6.0800% 0.07210% Actual/360 108 99
79 1-Dec-2013 5.4060% 0.04210% Actual/360 120 120
80 1-Sep-2013 4.9000% 0.04210% Actual/360 120 117
81 1-Sep-2013 5.2500% 0.04210% Actual/360 120 117
82 1-Sep-2013 6.6830% 0.04210% Actual/360 120 117
83 1-Mar-2012 6.0800% 0.07210% Actual/360 108 99
84 1-Aug-2013 5.2980% 0.04210% Actual/360 120 116
85 1-Aug-2013 4.7340% 0.04210% Actual/360 120 116
86 1-Nov-2013 6.1000% 0.04210% Actual/360 120 119
87 1-Dec-2013 5.7600% 0.04210% Actual/360 120 120
88 1-Nov-2013 6.2100% 0.10210% Actual/360 120 119
89 1-Mar-2012 6.0800% 0.07210% Actual/360 108 99
90 1-Dec-2013 5.9100% 0.04210% Actual/360 120 120
91 1-Dec-2013 5.9100% 0.04210% Actual/360 120 120
92 1-Dec-2013 5.9500% 0.04210% Actual/360 120 120
93 1-Nov-2008 4.6630% 0.04210% Actual/360 60 59
94 15-Aug-2018 7.4000% 0.04210% 30/360 237 176
95 1-Oct-2010 5.3550% 0.07210% Actual/360 84 82
96 11-Jun-2013 5.0500% 0.04210% Actual/360 120 114
97 1-Nov-2013 5.8060% 0.04210% Actual/360 120 119
98 1-Dec-2013 5.7280% 0.04210% Actual/360 120 120
99 1-Oct-2018 5.9500% 0.04210% Actual/360 180 178
100 1-Mar-2012 6.0800% 0.07210% Actual/360 108 99
101 1-Dec-2008 5.0930% 0.04210% Actual/360 60 60
102 1-Nov-2008 5.4100% 0.04210% Actual/360 60 59
103 1-Oct-2013 6.5600% 0.14710% Actual/360 120 118
104 15-Nov-2018 7.2500% 0.04210% 30/360 239 179
105 1-Mar-2013 5.7500% 0.04210% Actual/360 120 111
106 11-Aug-2013 6.1100% 0.04210% Actual/360 120 116
107 1-Dec-2008 5.0930% 0.04210% Actual/360 60 60
108 1-Dec-2008 5.0930% 0.04210% Actual/360 60 60
109 1-Dec-2008 5.0930% 0.04210% Actual/360 60 60
110 11-Oct-2018 5.8300% 0.04210% Actual/360 180 178
111 1-Nov-2013 5.1660% 0.04210% Actual/360 120 119
112 1-Dec-2008 5.0930% 0.04210% Actual/360 60 60
113 1-Dec-2008 4.8630% 0.04210% Actual/360 60 60
114 1-Oct-2013 5.7000% 0.10210% Actual/360 120 118
115 1-Oct-2018 5.9500% 0.04210% Actual/360 180 178
116 1-Dec-2008 5.0930% 0.04210% Actual/360 60 60
117 1-Oct-2018 6.1340% 0.04210% Actual/360 180 178
118 11-Nov-2008 4.9000% 0.04210% Actual/360 60 59
MATURITY DATE OR
MORTGAGE REMAINING IO ORIGINAL AMORT REMAINING AMORT MONTHLY P&I ARD BALLOON PREPAYMENT
LOAN NUMBER PERIOD (MOS.) TERM (MOS.) TERM (MOS.) PAYMENTS ($) BALANCE ($) ARD LOAN PROVISIONS
- --------------------------------------------------------------------------------------------------------------------------------
1 119 IO IO IO 95,000,000.00 Y L(48),D(69),O(3)
2 360 359 419,745.43 63,406,509.83 N L(25),D(88),O(4)
3 360 358 343,746.42 58,089,343.86 N L(26),D(54),O(4)
4 360 358 314,833.53 59,117,520.39 N L(26),D(30),O(4)
5 360 356 316,306.15 46,719,024.31 N L(28),D(88),O(4)
6 360 360 254,854.48 36,479,366.60 N L(24),D(92),O(4)
7 30 360 360 204,779.39 33,744,534.35 N L(48),D(33),O(3)
8 360 359 187,150.08 26,954,671.13 Y L(25),D(91),O(4)
9 360 358 142,104.14 20,893,463.13 N L(26),D(92),O(2)
10 23 360 360 140,139.48 23,617,816.35 Y L(48),D(9),O(3)
11 11 348 348 126622.37 18,429,679.06 N L(35),D(82),O(3)
12 360 356 122812.4 18,216,130.42 N L(28),D(90),O(2)
13 360 359 119,662.57 17,100,086.18 N L(25),D(93),O(2)
14 360 359 101,178.50 15,114,025.34 N L(35),D(82),O(3)
15 23 360 360 102,880.66 15,759,449.32 N L(35),D(82),O(3)
16 19 360 360 86,243.09 14,025,620.19 N L(48),D(69),O(3)
17 360 359 80,221.70 12,649,743.44 N L(25),D(80),O(3)
18 360 357 70,422.39 11,008,396.55 N L(48),D(65),O(7)
19 300 298 86,562.36 10,187,044.62 Y L(26),D(91),O(3)
20 22 360 360 73,240.15 11,468,591.73 N L(26),D(79),O(3)
21 360 360 69,689.40 9,782,976.85 N L(35),D(82),O(3)
22 12 360 360 65,431.33 9,656,483.65 Y L(48),D(69),O(3)
23 360 360 64,319.21 9,235,411.42 N L(35),D(82),O(3)
24 360 360 54,972.88 8,893,148.62 N L(48),D(33),O(3)
25 360 359 56,203.03 8,330,080.51 N L(35),D(82),O(3)
26 Variable Variable Steps (3) 6,646,415.41 N L(59),YM1%(59),O(2)
27 360 359 53,269.31 9,054,123.72 N L(36),D(17),O(7)
28 360 357 57,674.82 8,165,267.99 Y L(27),D(89),O(4)
29 360 359 56176.57 7,965,367.51 Y L(48),D(69),O(3)
30 23 360 360 53,452.49 8,029,203.05 Y L(25),D(92),O(3)
31 360 357 55,120.32 7,755,282.37 N L(27),D(89),O(4)
32 36 360 360 50,644.96 7,966,214.48 N L(36),D(77),O(7)
33 360 359 46,438.59 8,058,382.48 N L(25),D(32),O(3)
34 360 357 42,064.07 7,753,832.70 N L(35),D(22),O(3)
35 276 273 57,821.54 6,281,354.58 Y L(48),D(69),O(3)
36 300 298 53,897.01 6,533,704.59 N L(35),D(82),O(3)
37 12 360 360 46,635.02 7,578,779.84 Y L(36),D(21),O(3)
38 360 359 45,423.12 6,683,212.44 Y L(48),D(69),O(3)
39 360 358 47,809.85 6,779,762.28 N L(26),D(91),O(3)
40 360 359 46,554.92 6,668,454.39 N L(35),D(82),O(3)
41 360 357 40,686.14 6,360,768.63 N L(35),D(82),O(3)
42 360 358 42,062.83 6,877,011.94 N L(36),D(21),O(3)
43 360 353 43,595.53 6,216,887.50 N L(31),D(86),O(3)
44 360 360 42,224.13 6,115,474.28 N L(24),D(92),O(4)
45 24 360 360 37,367.60 5,570,514.68 Y L(48),D(69),O(3)
46 360 358 36,725.08 5,302,421.33 N L(35),D(82),O(3)
47 300 297 40,860.99 4,890,580.17 N L(27),D(90),O(3)
48 360 358 37,677.85 5,216,428.46 N L(26),D(90),O(4)
49 360 360 34,881.88 4,985,117.11 Y L(48),D(69),O(3)
50 360 360 33,332.98 4,770,469.47 N L(24),D(93),O(3)
51 360 357 30,958.10 5,185,318.44 N L(35),D(22),O(3)
52 360 357 33,934.43 4,732,571.64 N L(35),D(79),O(6)
53 360 358 31,528.29 4,577,260.22 N L(35),D(82),O(3)
54 360 357 27,385.50 4,228,710.79 N L(35),D(82),O(3)
55 360 359 27,199.74 4,719,910.11 N L(25),D(32),O(3)
56 360 355 30,618.07 4,328,423.91 N L(35),D(82),O(3)
57 120 IO IO IO 5,000,000.00 N L(24),D(92),O(4)
58 360 358 30,202.92 4,249,840.01 N L(35),D(82),O(3)
59 360 360 29,409.49 4,157,415.03 N L(35),D(82),O(3)
60 360 358 27,182.63 3,824,855.32 N L(35),D(82),O(3)
61 360 357 27,182.63 3,824,521.75 N YM(117),O(3)
62 360 358 26,984.65 3,799,943.78 N L(35),D(82),O(3)
63 360 358 23,235.17 4,069,514.83 N L(35),D(22),O(3)
64 360 358 26,465.15 3,735,472.84 N L(26),D(91),O(3)
65 360 357 27,263.49 3,765,546.43 N L(27),D(90),O(3)
66 360 360 27,010.44 3,725,134.76 Y L(24),D(95),O(1)
67 360 360 25,468.38 3,665,548.72 N L(35),D(82),O(3)
68 360 357 20,982.55 3,867,794.20 N L(35),D(22),O(3)
69 360 358 25,367.26 3,541,916.40 N L(48),D(69),O(3)
70 360 360 22,286.76 3,707,666.10 N L(35),D(22),O(3)
71 360 359 21,229.07 3,683,831.97 N L(25),D(32),O(3)
72 300 299 25,649.94 3,092,508.18 N L(25),D(92),O(3)
73 355 353 23,801.67 3,395,163.56 N L(35),D(77),O(3)
74 360 357 24,758.91 3,422,247.47 N L(48),D(69),O(3)
75 300 298 25,469.77 3,035,225.45 N L(35),D(82),O(3)
76 360 353 23,172.76 3,256,087.33 N L(31),D(86),O(3)
77 360 359 21,316.07 3,042,788.35 N L(35),D(82),O(3)
78 300 291 21,748.22 2,699,469.40 N L(33),D(72),O(3)
79 240 240 22,525.44 2,114,199.32 N L(35),D(82),O(3)
80 360 357 17,418.45 2,689,656.75 N L(35),D(82),O(3)
81 240 237 22,068.40 2,084,986.51 N L(35),D(82),O(3)
82 360 357 19,421.14 2,607,313.23 N L(35),D(82),O(3)
83 300 291 19,476.01 2,417,436.43 N L(33),D(72),O(3)
84 300 296 17,748.53 2,228,533.65 N L(35),D(82),O(3)
85 360 356 15,099.82 2,363,667.12 N L(35),D(82),O(3)
86 360 359 17,270.85 2,424,264.04 Y L(35),D(82),O(3)
87 360 360 16,591.51 2,391,695.42 N L(35),D(82),O(3)
88 360 359 17,167.30 2,389,339.08 N L(35),D(82),O(3)
89 300 291 18,177.61 2,256,273.90 N L(33),D(72),O(3)
90 360 360 15,818.21 2,253,593.83 N L(35),D(82),O(3)
91 360 360 14,998.80 2,136,853.32 N L(35),D(82),O(3)
92 360 360 15,057.58 2,138,546.92 N L(35),D(82),O(3)
93 360 359 12,910.41 2,293,922.01 N L(35),D(22),O(3)
94 297 236 20,128.46 1,000,000.00 N L(47),D(189),O(1)
95 360 358 13,856.38 2,212,297.64 N L(35),D(46),O(3)
96 360 354 12,957.16 1,976,724.47 N L(48),D(69),O(3)
97 360 359 13,504.11 1,939,468.83 N L(35),D(82),O(3)
98 360 360 13,098.96 1,892,993.30 N L(35),D(82),O(3)
99 180 178 17,538.14 28,835.39 N L(35),D(142),O(3)
100 300 291 12,659.41 1,571,333.17 N L(33),D(72),O(3)
101 360 360 9,982.36 1,699,569.08 N L(24),YM(30),O(6)
102 360 359 9,972.63 1,646,209.16 N L(35),D(22),O(3)
103 360 358 11,130.33 1,508,388.66 N L(35),D(82),O(3)
104 239 179 14,844.57 0.00 N L(47),D(191),O(1)
105 360 351 9,337.17 1,347,270.17 N L(35),D(82),O(3)
106 240 236 11,492.38 1,047,118.78 Y L(28),D(91),O(1)
107 360 360 7,942.49 1,352,265.29 N L(24),YM(30),O(6)
108 360 360 7,812.28 1,330,097.66 N L(24),YM(30),O(6)
109 360 360 7,378.27 1,256,202.96 N L(24),YM(30),O(6)
110 324 322 8,281.09 880,521.95 N L(26),D(147),O(7)
111 120 119 14,428.63 7,812.88 N L(35),D(82),O(3)
112 360 360 7,074.46 1,204,476.88 N L(24),YM(30),O(6)
113 360 360 6,738.12 1,173,581.75 N L(24),YM(30),O(6)
114 120 118 13,142.40 8,191.55 N L(35),D(82),O(3)
115 180 178 9,463.03 15,558.28 N L(35),D(142),O(3)
116 360 360 5,967.72 1,016,046.41 N L(24),YM(30),O(6)
117 180 178 8,511.13 14,583.41 N L(35),D(142),O(3)
118 360 359 4,909.22 851,886.31 N L(25),D(32),O(3)
MORTGAGE APPRAISED APPRAISAL CUT-OFF DATE LTV RATIO AT YEAR NUMBER OF
LOAN NUMBER VALUE ($) DATE DSCR (X) LTV RATIO MATURITY OR ARD YEAR BUILT RENOVATED UNITS
- ------------------------------------------------------------------------------------------------------------------------------------
1 173,500,000 1-Aug-2004 2.51 54.76% 54.76% 1982 491,126
2 122,500,000 11-Sep-2003 1.97 61.97% 51.76% 1996 429,318
3 218,000,000 29-Aug-2003 1.97 60.41% 53.29% 1970 1997 1,367,529
4 103,000,000 29-Aug-2003 2.05 62.94% 57.40% 1962 1994 418,079
5 173,800,000 18-Jul-2003 1.74 64.17% 53.76% 1978 2003 312,210
6 57,900,000 17-Oct-2003 1.58 74.61% 63.00% 1907 1983 415,434
7 51,300,000 19-Aug-2003 1.25 70.18% 65.78% 1968 2002 215
8 40,560,000 1-Nov-2003 1.31 78.81% 66.46% 1988 1999 206,013
9 32,600,000 1-Sep-2003 1.37 76.53% 64.09% 1978 1998 224,138
10 31,100,000 17-Sep-2003 1.25 79.10% 75.94% 1987 126,768
11 27,270,000 28-Oct-2003 1.32 79.94% 67.58% 2001 360
12 34,130,000 1-Jun-2003 1.33 63.81% 53.37% 1960 2002 345,995
13 25,200,000 1-Oct-2003 1.35 80.24% 67.86% 2002 95,665
14 23,000,000 1-Sep-2003 1.43 79.04% 65.71% 2002 312
15 22,510,000 3-Nov-2003 1.34 79.96% 70.01% 2001 312
16 20,600,000 5-May-2003 1.23 78.88% 68.09% 2001 288
17 18,900,000 9-Jun-2003 1.36 79.24% 66.93% 2003 200
18 19,100,000 3-Jun-2003 1.31 70.42% 57.64% 1984 302
19 20,200,000 15-Aug-2003 1.44 64.19% 50.43% 2001 230,350
20 19,300,000 1-Jul-2003 1.66 66.32% 59.42% 1973 1998 75,336
21 14,750,000 23-Sep-2003 1.33 77.97% 66.33% 1982 2001 82,396
22 14,000,000 21-Jul-2003 1.22 80.00% 68.97% 1989 216
23 14,680,000 1-Jan-2004 1.31 74.59% 62.91% 2002 432
24 12,500,000 23-Sep-2003 1.37 80.00% 71.15% 1999 184
25 12,500,000 18-Aug-2003 1.41 79.91% 66.64% 1982 2001 248
26 30,500,000 1-Jul-2003 2.65 32.66% 21.79% 2000 135,000
27 13,200,000 12-Aug-2003 1.31 74.16% 68.59% 1930 2003 178,511
28 12,900,000 18-Jul-2003 1.32 74.44% 63.30% 2001 35,735
29 11,750,000 29-Aug-2003 1.27 79.92% 67.79% 2000 75,374
30 11,400,000 23-Sep-2003 1.22 79.82% 70.43% 2003 39,215
31 12,000,000 15-Jun-2003 1.29 75.83% 64.63% 1947 2002 150,000
32 11,400,000 16-Sep-2003 1.40 78.07% 69.88% 2003 39
33 11,800,000 9-Oct-2003 1.43 74.06% 68.29% 1890 2003 86
34 10,670,000 18-Jun-2003 1.63 79.34% 72.67% 1983 1,252
35 10,630,000 1-Jun-2003 1.22 79.58% 59.09% 2001 70,435
36 12,120,000 7-Aug-2003 1.26 69.73% 53.91% 1972 2003 240
37 11,200,000 26-Sep-2003 1.29 71.43% 67.67% 1970 2002 72,626
38 11,360,000 28-Jul-2003 2.15 70.35% 58.83% 1981 40,991
39 10,200,000 25-May-2003 1.25 78.29% 66.47% 1986 50,621
40 10,172,000 20-Jun-2003 1.50 77.58% 65.56% 2002 96
41 11,150,000 15-Aug-2003 1.73 69.70% 57.05% 2001 352
42 9,250,000 25-Aug-2003 1.36 79.84% 74.35% 1996 184
43 10,150,000 1-Feb-2003 1.56 71.94% 61.25% 1991 1998 94,983
44 9,900,000 25-Aug-2003 1.46 73.48% 61.77% 1973 224
45 9,300,000 2-Sep-2003 1.23 67.74% 59.90% 1963 2003 116
46 8,675,000 1-Aug-2003 1.57 72.48% 61.12% 2003 216
47 8,400,000 25-Jun-2003 1.21 74.69% 58.22% 1999 44,218
48 8,400,000 24-Jun-2003 1.32 72.49% 62.10% 2003 37,699
49 7,940,000 3-Sep-2003 1.23 74.31% 62.78% 2002 755
50 7,600,000 1-Mar-2003 1.43 74.33% 62.77% 1973 2002 136
51 8,000,000 12-May-2003 1.52 69.77% 64.82% 1983 246
52 7,800,000 1-Jul-2003 1.27 70.96% 60.67% 1975 49,601
53 7,640,000 10-Apr-2003 1.34 71.19% 59.91% 1998 132
54 6,500,000 1-Jul-2003 1.59 79.10% 65.06% 1984 53,968
55 6,950,000 9-Oct-2003 1.42 73.65% 67.91% 1901 2003 53
56 7,800,000 16-Apr-2003 1.34 65.09% 55.49% 1992 23,069
57 17,900,000 22-Sep-2003 3.73 27.93% 27.93% NA-Land 33,804
58 6,850,000 28-Jul-2003 1.42 72.86% 62.04% 1980 1995 86,940
59 6,550,000 1-Sep-2003 1.50 74.81% 63.47% 2002 40,461
60 5,700,000 6-Jun-2003 1.38 78.81% 67.10% 1985 104
61 6,100,000 13-Aug-2003 1.36 73.56% 62.70% 1988 57,519
62 5,590,000 24-Jul-2003 1.30 79.86% 67.98% 1983 75
63 5,600,000 31-Jul-2003 1.50 78.83% 72.67% 1966 1998 166
64 5,560,000 22-Apr-2003 1.32 78.99% 67.18% 2000 45,650
65 5,750,000 1-Jun-2003 1.29 76.32% 65.49% 1989 2002 48,748
66 6,200,000 11-Oct-2003 1.33 70.16% 60.08% 2003 14,696
67 6,300,000 8-Oct-2003 1.36 69.05% 58.18% 1993 2003 201
68 5,440,000 19-Jun-2003 1.63 77.63% 71.10% 1969 350
69 5,400,000 1-Oct-2003 1.20 76.81% 65.59% 2003 13,650
70 5,000,000 24-Sep-2003 1.39 80.00% 74.15% 1975 328
71 5,050,000 3-Oct-2003 1.35 79.11% 72.95% 1920 1980 97
72 6,100,000 22-Apr-2003 1.46 65.48% 50.70% 1985 2002 101,066
73 5,350,000 24-Feb-2003 1.44 74.62% 63.46% 2000 13,905
74 5,000,000 1-Jul-2003 1.31 79.79% 68.44% 2001 44,480
75 5,100,000 2-Jul-2003 1.38 76.27% 59.51% 1964 240
76 5,350,000 8-Nov-2002 1.36 71.10% 60.86% 2002 15,067
77 4,740,000 18-Jun-2003 1.37 75.87% 64.19% 2001 14,490
78 4,240,000 10-Jan-2003 1.31 78.04% 63.67% 1999 10,908
79 4,700,000 15-May-2003 1.40 70.21% 44.98% 1974 2002 96
80 4,690,000 5-Jul-2003 1.58 69.73% 57.35% 2002 14,490
81 8,000,000 13-Jun-2003 2.04 40.65% 26.06% 1956 1995 30,466
82 4,525,000 1-Sep-2003 1.38 66.47% 57.62% 2003 14,228
83 3,810,000 10-Jan-2003 1.31 77.78% 63.45% 2000 11,200
84 4,100,000 14-Jul-2003 1.40 71.46% 54.35% 1999 12,738
85 3,700,000 1-Jul-2003 1.45 78.00% 63.88% 1916 2002 68
86 4,230,000 18-Jul-2003 1.40 67.31% 57.31% 2003 13,813
87 3,550,000 14-Aug-2003 1.39 80.00% 67.37% 1994 1997 148
88 3,800,000 15-Jul-2003 1.44 73.61% 62.88% 2002 25,500
89 3,590,000 10-Jan-2003 1.32 77.04% 62.85% 2000 12,544
90 3,330,000 30-Oct-2003 1.53 80.00% 67.68% 2001 6,837
91 3,150,000 8-Jul-2003 1.24 80.19% 67.84% 2001 14,300
92 3,175,000 6-Oct-2003 1.47 79.53% 67.36% 2003 60
93 4,000,000 21-Jul-2003 1.73 62.42% 57.35% 1965 1999 118
94 3,015,000 27-Aug-1998 1.01 82.81% 33.17% 1998 11,180
95 3,100,000 3-Sep-2003 1.54 79.83% 71.36% 1972 152
96 3,200,000 1-Apr-2003 1.63 74.49% 61.77% 2002 44,115
97 5,010,000 12-Aug-2003 2.33 45.86% 38.71% 1973 192
98 2,900,000 1-Aug-2003 1.50 77.59% 65.28% 1999 56
99 3,130,000 18-Jul-2003 1.20 66.16% 0.92% 1950 1998 108
100 2,470,000 10-Jan-2003 1.30 77.98% 63.62% 1999 10,908
101 2,400,000 17-Sep-2003 1.73 76.67% 70.82% 1985 71
102 2,250,000 4-Sep-2003 1.48 78.76% 73.16% 1974 2003 103
103 2,330,000 31-May-2003 1.35 74.99% 64.74% 1999 10,125
104 2,000,000 1-Oct-1998 1.02 81.05% 0.00% 1998 11,219
105 2,150,000 18-Nov-2002 1.74 73.77% 62.66% 1970 100
106 2,300,000 23-Jun-2003 1.27 68.56% 45.53% 1998 10,125
107 1,830,000 18-Sep-2003 1.78 80.00% 73.89% 1985 2002 60
108 2,025,000 19-Sep-2003 1.80 71.11% 65.68% 1984 62
109 1,730,000 17-Sep-2003 1.62 78.61% 72.61% 1984 51
110 2,600,000 13-May-2003 2.03 51.80% 33.87% 1986 60,300
111 5,450,000 10-Sep-2003 2.54 24.61% 0.14% 1948 1968 118
112 1,630,000 18-Sep-2003 1.53 80.00% 73.89% 1982 2003 68
113 2,700,000 15-Sep-2003 2.76 47.22% 43.47% 1987 66
114 3,375,000 28-Jul-2003 2.02 35.12% 0.24% 1968 192
115 1,700,000 18-Jul-2003 1.21 65.73% 0.92% 1968 2000 61
116 1,600,000 18-Sep-2003 1.66 68.75% 63.50% 1984 60
117 1,420,000 1-Sep-2003 1.24 69.95% 1.03% 1968 58
118 1,200,000 3-Oct-2003 1.42 76.99% 70.99% 1905 1989 26
CUT-OFF DATE
MORTGAGE UNIT OF LOAN AMOUNT OCCUPANCY OCCUPANCY MOST RECENT
LOAN NUMBER MEASURE PER (UNIT) ($) RATE (%) "AS OF" DATE MOST RECENT PERIOD REVENUES ($)
- ------------------------------------------------------------------------------------------------------------------------------------
1 Sq. Ft. 193 100.00% 31-Oct-2003
2 Sq. Ft. 177 96.39% 1-Oct-2003 TTM 06/30/03 15,262,319
3 Sq. Ft. 96 96.36% 13-Oct-2003 Trailing 12 - June 30, 2003 25,286,997
4 Sq. Ft. 155 88.40% 14-Oct-2003 Trailing 12 - June 30, 2003 11,770,826
5 Sq. Ft. 357 96.55% 31-Aug-2003 TTM 5/31/2003 19,400,581
6 Sq. Ft. 104 93.93% 22-Oct-2003 Calendar Year 2002 10,976,364
7 Units 167,442 93.02% 6-Nov-2003 Jul03 - Sep03 4,522,067
8 Sq. Ft. 155 98.79% 16-Sep-2003 2003 Estimate 4,532,675
9 Sq. Ft. 111 100.00% 1-Sep-2003 Annualized 6mo. ended 6/30/03 3,953,295
10 Sq. Ft. 194 97.89% 31-Oct-2003 1/03-9/03 Ann'l 2,503,212
11 Units 60,556 95.28% 27-Oct-2003 TTM 10/31/2003 2,799,042
12 Sq. Ft. 63 71.30% 28-Oct-2003 Annualized 9mo. ended 9/30/03 2,624,136
13 Sq. Ft. 211 90.70% 18-Sep-2003 Annualized 5mo. ended 7/31/03 1,514,623
14 Units 58,267 95.19% 22-Sep-2003 Annualized 6/30/2003 1,239,651
15 Units 57,692 90.71% 24-Sep-2003 TTM 9/30/2003 2,497,349
16 Units 56,424 88.54% 31-Oct-2003 T-12 Ending 9/2003 2,238,417
17 Units 74,884 92.50% 3-Oct-2003 Annualized 9mo. ended 9/30/03 1,125,899
18 Units 44,539 88.41% 26-Sep-2003 July 2002 - June 2003 2,332,816
19 Sq. Ft. 56 97.39% 21-Oct-2003 Thru 6/03 ann 2,680,090
20 Sq. Ft. 170 89.53% 8-Sep-2003 Annualized 5mo. ended 5/31/03 2,059,694
21 Sq. Ft. 140 97.37% 31-Oct-2003 TTM 8/31/2003 932,513
22 Units 51,852 95.83% 1-Oct-2003 T-3 thru 10/03 1,747,900
23 Beds 25,347 85.65% 23-Oct-2003 TTM 9/30/2003 1,506,255
24 Units 54,348 96.74% 23-Sep-2003 TTM 1,618,891
25 Units 40,278 97.18% 27-Aug-2003 TTM 8/31/2003 1,639,862
26 Sq. Ft. 74 100.00% 20-Nov-2003 Year 2003 Proforma 4,098,959
27 Sq. Ft. 55 96.33% 3-Nov-2003 2004 Budget 2,845,540
28 Sq. Ft. 269 97.86% 28-Oct-2003 4/2002 - 3/2003 1,249,293
29 Sq. Ft. 125 96.02% 22-Oct-2003 July 03 - Annual 1,115,241
30 Sq. Ft. 232 94.59% 9-Sep-2003 2004 Borrower Budget 1,085,796
31 Sq. Ft. 61 100.00% 25-Jul-2003 Annualized 3mo. ended 6/30/03 1,110,000
32 Units 228,205 92.31% 5-Nov-2003 Borrower's Pro-Forma 1,155,073
33 Units 101,620 98.84% 5-Nov-2003 TTM 10/02-9/03 1,088,207
34 Pads 6,762 36.02% 30-Jul-2003 TTM 4/30/2003 2,220,238
35 Sq. Ft. 120 94.86% 1-Oct-2003 Borrower Proforma 1,179,663
36 Units 35,214 95.42% 16-Aug-2003 Trailing 9 Months Annualized 7/31/2003 1,692,345
37 Sq. Ft. 110 91.52% 25-Sep-2003 Borrower Budget 1,292,111
38 Sq. Ft. 195 97.61% 8-Oct-2003 2002 1,546,795
39 Sq. Ft. 158 94.76% 1-Sep-2003 Trailing 12 mos. Ended 5/31/03 1,340,224
40 Units 82,207 79.86% 27-Aug-2003
41 Beds 22,078 97.73% 1-Oct-2003 TTM 10/31/2003 1,146,022
42 Units 40,135 91.85% 31-Aug-2003 TTM 7/31/2003 1,260,266
43 Sq. Ft. 77 100.00% 30-Jun-2003 Annualized 6mo. ended 6/30/03 1,705,585
44 Units 32,478 90.18% 28-Oct-2003 T 12 1,524,050
45 Units 54,310 98.28% 28-Oct-2003 T-6 May-Oct 2003 1,110,302
46 Beds 29,110 99.07% 29-Sep-2003
47 Sq. Ft. 142 100.00% 22-Aug-2003 Annualized 5mo. ended 5/31/03 1,166,518
48 Sq. Ft. 162 100.00% 25-Aug-2003 Annualized 6mo. ended 6/30/03 168,197
49 Units 7,815 78.81% 18-Nov-2003 T3 Aug-Oct 2003 839,329
50 Units 41,537 93.38% 30-Sep-2003 TTM 8/31/2003 1,001,130
51 Units 22,689 79.27% 28-Jul-2003 TTM 4/30/2003 1,264,141
52 Sq. Ft. 112 90.32% 31-Jul-2003 TTM 6/30/2003 437,669
53 Units 41,207 93.18% 29-Jul-2003 TTM 7/31/2003 861,489
54 Sq. Ft. 95 95.93% 1-Oct-2003 TTM 5/31/2003 846,522
55 Units 96,580 94.34% 5-Nov-2003 TTM 10/02-9/03 618,549
56 Sq. Ft. 220 100.00% 09/31/03 TTM 12/31/2002 916,204
57 Sq. Ft. 148 100.00% 15-Aug-2003
58 Sq. Ft. 57 100.00% 1-Aug-2003
59 Sq. Ft. 121 95.67% 4-Nov-2003 TTM 8/31/2003 495,957
60 Units 43,191 100.00% 31-Jul-2003 TTM 6/30/2003 811,546
61 Sq. Ft. 78 81.74% 15-Aug-2003 Annualized 6mo. ended 6/30/03 899,178
62 Units 59,519 100.00% 1-Aug-2003 TTM 7/31/2003 642,552
63 Units 26,594 93.37% 31-Jul-2003 TTM 8/31/2003 1,194,835
64 Sq. Ft. 96 96.50% 22-Oct-2003 Trailing 12 mos. Ended 3/31/03 496,962
65 Sq. Ft. 90 100.00% 30-Sep-2003 Annualized 7mo. ended 7/31/03 663,623
66 Sq. Ft. 296 100.00% 27-Oct-2003
67 Pads 21,642 94.53% 1-Oct-2003 TTM 09/30/2003 828,228
68 Pads 12,066 68.29% 31-Jul-2003 TTM 4/30/2003 921,137
69 Sq. Ft. 304 100.00% 24-Sep-2003
70 Pads 12,195 71.00% 15-Oct-2003 TTM 8/31/2003 677,993
71 Units 41,187 96.91% 5-Nov-2003 TTM 10/02 - 9/03 773,788
72 Sq. Ft. 40 100.00% 29-Oct-2003 Annualized 8mo. ended 8/31/03 585,000
73 Sq. Ft. 287 100.00% 1-Dec-2003 TTM 12/31/2002 428,000
74 Sq. Ft. 90 96.40% 24-Nov-2003
75 Units 16,207 92.50% 24-Jul-2003 T-8 6/30/2003 Annualized 1,232,775
76 Sq. Ft. 252 100.00% 21-Aug-2003 Annualized 3mo. ended 6/30/03 457,000
77 Sq. Ft. 248 100.00% 1-Dec-2003 TTM 6/30/2003 365,000
78 Sq. Ft. 303 100.00% 30-Jun-2003 Annualized 5mo. ended 6/30/03 381,902
79 Units 34,375 93.75% 1-Jun-2003 TTM 3/31/2003 825,019
80 Sq. Ft. 226 100.00% 1-Dec-2003 TTM 7/31/2003 344,000
81 Sq. Ft. 107 100.00% 25-Jun-2003 TTM 5/31/2003 695,385
82 Sq. Ft. 211 100.00% 1-Dec-2003
83 Sq. Ft. 265 100.00% 30-Jun-2003 Annualized 5mo. ended 6/30/03 343,602
84 Sq. Ft. 230 100.00% 1-Dec-2003
85 Units 42,442 95.59% 23-Jul-2003
86 Sq. Ft. 206 100.00% 1-Dec-2003
87 Pads 19,189 95.27% 1-Oct-2003 TTM 06/30/2003 494,792
88 Sq. Ft. 110 89.40% 16-Jul-2003 Annualized 07/31/2003 280,083
89 Sq. Ft. 220 100.00% 30-Jun-2003 Annualized 5mo. ended 6/30/03 323,686
90 Sq. Ft. 390 100.00% 1-Dec-2003
91 Sq. Ft. 177 100.00% 1-Dec-2003
92 Units 42,083 95.00% 1-Nov-2003 TTM 08/31/2003 271,096
93 Pads 21,159 99.15% 31-Aug-2003 TTM 07/31/2003 502,288
94 Sq. Ft. 223 100.00% 17-Nov-2003
95 Pads 16,281 94.08% 30-Jun-2003 TTM 12/31/2002 413,206
96 Sq. Ft. 54 95.04% 30-Sep-2003 2003 6-mo. Annualized 340,049
97 Pads 11,967 96.35% 9-Sep-2003 TTM 05/31/2003 602,348
98 Beds 40,179 100.00% 17-Oct-2003 07/31/2003 (annualized) 352,223
99 Pads 19,175 100.00% 16-Sep-2003 TTM 08/31/2003 397,154
100 Sq. Ft. 177 100.00% 30-Jun-2003 Annualized 5mo. ended 6/30/03 223,001
101 Units 25,915 87.32% 1-Nov-2003 TTM 08/31/2003 447,300
102 Pads 17,204 90.29% 29-Sep-2003 TTM 07/31/2003 304,603
103 Sq. Ft. 173 100.00% 1-Dec-2003 TTM 12/31/2002 249,365
104 Sq. Ft. 144 100.00% 18-Nov-2003
105 Pads 15,860 85.00% 1-Sep-2003 TTM 9/30/2003 249,318
106 Sq. Ft. 156 100.00% 24-Jun-2003
107 Units 24,400 90.00% 1-Nov-2003 TTM 08/31/2003 342,558
108 Units 23,226 91.94% 1-Nov-2003 TTM 08/31/2003 394,994
109 Units 26,667 92.16% 1-Nov-2003 TTM 08/31/2003 301,966
110 Sq. Ft. 22 100.00% 31-Oct-2003 10/31/2003 Annualized 350,399
111 Units 11,368 92.44% 25-Sep-2003 TTM 08/31/2003 1,245,824
112 Units 19,176 92.65% 1-Sep-2003 TTM 08/31/2003 373,871
113 Units 19,318 86.36% 1-Nov-2003 TTM 08/31/2003 414,020
114 Units 6,173 94.80% 1-May-2003 TTM 06/30/2003 883,056
115 Pads 18,318 100.00% 16-Sep-2003 TTM 08/31/2003 212,196
116 Units 18,333 91.67% 1-Nov-2003 TTM 08/31/2003 355,715
117 Pads 17,127 96.55% 16-Sep-2003 TTM 08/31/2003 180,906
118 Units 35,533 100.00% 5-Nov-2003 TTM 10/02-9/03 175,426
UW NET
MORTGAGE MOST RECENT MOST RECENT MOST RECENT OPERATING UW NET CASH
LOAN NUMBER EXPENSES ($) NOI ($) NCF ($) UW REVENUES ($) UW EXPENSES ($) INCOME ($) FLOW ($)
- -----------------------------------------------------------------------------------------------------------------------------------
1 18,498,137 4,896,956 13,601,181 12,935,281
2 4,876,738 10,385,581 10,385,581 15,777,582 5,445,508 10,332,073 9,926,573
3 8,085,741 17,201,256 17,201,256 25,995,457 8,909,797 17,085,660 16,270,753
4 3,371,924 8,398,902 8,398,902 11,915,170 3,804,099 8,111,070 7,746,137
5 6,306,100 13,094,481 13,094,481 19,566,611 6,024,574 13,542,037 13,202,871
6 5,406,248 5,570,116 5,487,029 11,230,134 5,875,264 5,354,870 4,827,916
7 1,643,836 2,878,231 2,821,901 4,685,041 1,547,457 3,137,584 3,081,254
8 1,299,442 3,233,233 3,177,609 4,879,946 1,715,295 3,164,651 2,935,969
9 1,237,426 2,715,870 2,715,870 3,732,921 1,236,926 2,495,995 2,343,581
10 703,404 1,799,808 1,780,463 3,026,709 802,228 2,224,481 2,096,782
11 1,229,560 1,569,482 1,569,482 3,229,747 1,138,609 2,091,138 2,001,138
12 461,165 2,162,971 1,977,953 3,096,798 994,641 2,102,156 1,958,402
13 1,514,623 1,514,623 2,582,009 608,223 1,973,786 1,942,520
14 789,269 450,383 450,383 2,710,893 893,044 1,817,849 1,739,849
15 807,409 1,689,940 1,689,940 2,728,708 998,665 1,730,043 1,652,043
16 909,576 1,328,841 1,256,841 2,301,984 959,616 1,342,368 1,270,368
17 573,413 552,487 552,487 2,196,548 836,736 1,359,812 1,309,812
18 1,255,488 1,077,328 1,001,828 2,419,679 1,238,290 1,181,389 1,105,889
19 839,513 1,840,578 1,817,543 2,503,042 911,303 1,591,739 1,500,131
20 290,033 1,769,661 1,769,661 2,104,764 462,771 1,641,993 1,459,924
21 204,152 728,361 728,361 1,441,471 278,317 1,163,154 1,110,430
22 588,056 1,159,844 1,100,660 1,735,827 715,813 1,020,014 960,830
23 882,500 623,756 623,756 1,779,065 720,945 1,058,120 1,007,720
24 652,180 966,711 920,711 1,612,955 664,298 948,657 902,657
25 619,601 1,020,261 1,020,261 1,638,084 625,057 1,013,027 951,027
26 1,398,399 2,700,560 2,687,060 3,563,237 1,376,970 2,186,267 2,145,300
27 1,553,690 1,291,850 1,256,148 2,669,931 1,651,002 1,018,928 839,284
28 294,812 954,481 947,156 1,248,975 331,263 917,712 910,387
29 201,454 913,787 903,989 1,100,199 216,393 883,806 857,846
30 184,374 901,422 898,731 1,063,193 251,454 811,740 785,357
31 210,000 900,000 900,000 900,000 27,000 873,000 850,500
32 253,584 901,489 891,739 1,127,652 269,617 858,035 848,285
33 407,290 680,917 659,417 1,311,231 490,145 821,087 799,587
34 1,362,676 857,562 857,562 2,220,238 1,335,878 884,360 822,160
35 246,787 932,876 925,833 1,128,219 225,629 902,590 845,851
36 864,561 827,783 761,783 1,758,669 869,951 888,718 816,718
37 365,727 926,384 896,607 1,177,126 371,285 805,841 721,456
38 302,802 1,243,993 1,239,450 1,594,200 338,856 1,255,343 1,170,822
39 530,212 810,012 810,012 1,325,392 505,315 820,077 719,737
40 1,221,082 349,743 871,339 837,739
41 427,500 718,523 718,523 1,397,430 500,714 896,716 846,316
42 568,885 691,381 691,381 1,240,975 504,705 736,270 686,590
43 659,349 1,046,236 1,034,638 1,553,990 671,222 882,768 814,001
44 712,969 811,081 736,397 1,526,722 713,296 813,426 738,742
45 550,714 559,588 528,319 1,110,561 529,935 580,626 549,357
46 1,016,133 295,744 720,389 690,989
47 431,782 734,736 734,736 1,178,387 533,315 645,072 591,762
48 145,774 22,423 22,423 859,505 223,696 635,809 597,251
49 235,643 603,687 596,499 816,764 294,357 522,407 515,219
50 424,036 577,093 577,093 1,051,008 430,410 620,599 572,999
51 714,332 549,808 549,808 1,278,587 653,475 625,113 563,613
52 133,369 304,300 304,300 671,800 129,091 542,709 515,637
53 348,409 513,080 513,080 883,070 344,452 538,619 505,619
54 236,720 609,802 609,802 823,548 248,118 575,430 522,835
55 210,432 408,117 392,963 709,665 231,425 478,241 463,087
56 307,586 608,618 608,618 854,679 320,738 533,941 494,123
57 1,098,000 32,940 1,065,060 1,065,060
58 897,993 327,527 570,466 514,180
59 120,517 375,440 375,440 762,376 202,138 560,238 529,263
60 194,560 616,986 616,986 742,481 262,171 480,310 451,326
61 317,332 581,846 581,846 847,584 327,816 519,768 443,991
62 162,362 480,190 480,190 599,382 160,303 439,079 420,079
63 777,134 417,702 417,702 1,164,866 704,985 459,881 418,381
64 125,722 371,240 368,860 582,719 123,088 459,631 419,683
65 183,407 480,216 480,216 587,897 119,327 468,569 423,024
66 447,185 13,416 433,769 432,299
67 361,774 466,454 466,454 785,820 355,719 430,101 414,901
68 521,388 399,749 399,749 907,651 478,726 428,925 411,425
69 378,000 11,340 366,660 365,295
70 337,570 340,424 340,424 694,299 305,595 388,634 372,234
71 329,456 444,332 414,427 714,867 340,313 374,554 344,649
72 90,419 494,581 494,581 555,750 91,616 464,135 448,975
73 428,000 428,000 428,000 14,040 413,960 411,874
74 534,101 99,222 434,879 387,763
75 818,231 414,544 414,544 1,264,765 782,966 481,799 421,799
76 31,000 426,000 426,000 457,000 76,485 380,515 379,008
77 365,000 365,000 365,000 12,150 352,850 350,677
78 381,902 381,902 362,807 12,257 350,550 341,657
79 479,482 345,537 345,537 845,424 444,062 401,362 377,362
80 344,000 344,000 344,000 11,520 332,480 330,307
81 61,061 634,323 634,323 634,749 89,037 545,712 541,142
82 340,160 10,205 329,955 320,976
83 343,602 343,602 326,422 11,202 315,219 306,896
84 311,202 9,336 301,866 297,378
85 473,939 193,019 280,920 263,170
86 309,372 9,281 300,091 291,092
87 223,163 271,629 271,629 491,047 206,795 284,251 276,951
88 70,119 209,964 209,964 414,779 94,282 320,498 296,775
89 323,686 323,686 307,502 10,804 296,698 288,544
90 550,000 257,700 292,300 291,129
91 506,000 280,380 225,620 223,447
92 151,222 119,873 119,873 417,811 137,798 280,013 265,013
93 208,821 293,467 293,467 483,671 210,167 273,503 267,603
94 252,444 6,311 246,133 243,338
95 146,286 266,920 266,920 417,210 153,135 264,075 256,475
96 94,588 245,461 241,049 387,079 117,600 269,479 253,225
97 267,869 334,480 334,480 596,396 208,784 387,612 378,012
98 85,110 267,113 267,113 355,629 100,106 255,523 235,923
99 136,403 260,752 260,752 401,878 140,885 260,993 252,893
100 223,001 223,001 211,851 7,729 204,122 197,032
101 194,210 253,090 253,090 429,739 204,241 225,498 207,180
102 128,107 176,496 176,496 311,956 130,149 181,807 176,707
103 47,779 201,585 201,585 218,568 35,889 182,679 180,692
104 187,021 4,676 182,345 181,223
105 52,808 196,510 196,510 261,941 62,516 199,424 194,424
106 181,035 5,431 175,604 174,591
107 153,415 189,143 189,143 336,512 151,966 184,546 169,546
108 215,052 179,942 179,942 401,616 215,359 186,257 168,897
109 122,271 179,695 179,695 279,062 121,314 157,748 143,570
110 127,721 222,678 203,985 323,219 78,689 244,531 201,838
111 571,189 674,635 674,635 1,217,582 747,886 469,696 440,196
112 217,861 156,010 156,010 367,679 220,287 147,392 130,052
113 153,542 260,478 260,478 394,760 153,157 241,603 222,991
114 530,230 352,826 352,826 861,003 487,704 373,299 318,870
115 62,311 149,885 149,885 207,238 67,312 139,926 136,876
116 208,820 146,895 146,895 343,140 208,429 134,711 119,231
117 58,876 122,030 122,030 190,482 60,705 129,777 126,839
118 87,167 88,259 81,759 176,266 86,279 89,987 83,487
MORTGAGE LARGEST TENANT LARGEST TENANT LARGEST TENANT
LOAN NUMBER LARGEST TENANT NAME SQ. FT. % OF NRA EXP. DATE
- -----------------------------------------------------------------------------------------------------------------------------------
1 United States of America (Transportation Security Administration) 491,126 100.00% 28-Feb-2014
2 AMC Theatres 57,274 13.34% 31-Mar-2017
3 JCPenney 243,478 17.80% 31-Jul-2005
4 JCPenney 80,000 19.14% 30-Nov-2008
5 Express, Inc. 8,342 2.67% 31-Jan-2007
6 The City of New York Department of Citywide Administrative Services 72,070 17.35% 31-Jul-2005
7
8 Shop Rite 60,828 29.53% 31-Dec-2007
9 Shop Rite 60,960 27.20% 30-Nov-2016
10 T.J. Maxx 25,200 19.88% 31-Jan-2008
11
12 Publix 44,270 12.79% 31-Jan-2022
13 Stop & Shop 67,715 70.78% 31-Mar-2023
14
15
16
17
18
19 General Services Administration (GSA) 48,632 21.11% 22-Dec-2012
20 Sony Computer Entertainment America, Inc. 19,268 25.58% 21-May-2009
21 Bi-Lo 45,074 54.70% 15-Nov-2016
22
23
24
25
26 Kushner Companies 55,483 41.10% 31-Jan-2023
27 NYS Office of State Comptroller 47,150 26.41% Multiple Spaces
28 Hill & Company Real Estate 5,999 16.79% 25-Jun-2011
29 Bi-Lo 46,624 61.86% 30-Jun-2020
30 Walgreens 14,490 36.95% 31-Mar-2063
31 Wal-Mart 150,000 100.00% 30-Nov-2011
32
33
34
35 Dorothy Lane Market 40,134 56.98% 5-Mar-2022
36
37 Moran Foods dba Save-A-Lot Grocery 14,000 19.28% 31-Aug-2012
38 GSA/SSA 9,484 23.14% 30-May-2005
39 Resurgence Asset Management 11,576 22.87% 31-Dec-2006
40
41
42
43 Big Y Foods, Inc. 53,110 55.92% 30-Nov-2011
44
45
46
47 Circuit City 34,534 78.10% 31-Jan-2020
48 Longs Drugs 18,360 48.70% 30-Sep-2048
49
50
51
52 T&E Flooring 3,200 6.45% 31-Jul-2007
53
54 Kinko's 4,541 8.41% 31-May-2005
55
56 Donna Karan 6,390 27.70% 30-Nov-2004
57 Resources & Conservation Center Limited Partnership 33,804 100.00% 31-Dec-2084
58 Jo-Ann's Stores 47,507 54.64% 31-Jan-2011
59 Spec's Liquor 15,000 37.07% 31-Jul-2012
60
61 Medic Computer Systems, LLC 12,716 22.11% 31-May-2006
62
63
64 Deal$ 8,400 18.40% 31-Jul-2006
65 Carmike Cinema 20,500 42.05% 31-Dec-2011
66 Sav-on Drugs 14,696 100.00% 13-Nov-2028
67
68
69 Walgreens 13,650 100.00% 31-Oct-2078
70
71
72 Central Parking 101,066 100.00% 30-Nov-2017
73 Walgreens 13,905 100.00% 31-Oct-2021
74 Fashion Bug 6,000 13.49% 31-Oct-2006
75
76 Walgreens 15,067 100.00% 31-Dec-2064
77 Walgreens 14,490 100.00% 30-Sep-2021
78 Eckerd 10,908 100.00% 10-Oct-2019
79
80 Walgreens 14,490 100.00% 30-Apr-2027
81 Marshalls 30,466 100.00% 31-Jan-2011
82 Eckerd 14,228 100.00% 31-Mar-2023
83 Eckerd 11,200 100.00% 27-Jan-2020
84 Eckerd 12,738 100.00% 9-Feb-2019
85
86 Eckerd 13,813 100.00% 25-Jun-2023
87
88 Blockbuster Video 5,600 21.96% 31-Dec-2012
89 Eckerd 12,544 100.00% 18-Jan-2020
90 LaSalle Bank 6,837 100.00% 31-Dec-2021
91 Walgreens 14,300 100.00% 31-Dec-2021
92
93
94 Rite Aid 11,180 100.00% 31-Aug-2018
95
96 Fred Smith Company 6,564 14.88% Multiple Spaces
97
98
99
100 Eckerd 10,908 100.00% 12-Oct-2019
101
102
103 Revco Discount Drug Centers, Inc 10,125 100.00% 31-Jan-2020
104 Rite Aid 11,219 100.00% 29-Nov-2018
105
106 CVS 10,125 100.00% 31-Jan-2019
107
108
109
110 Winn Dixie 45,500 75.46% 28-Feb-2010
111
112
113
114
115
116
117
118
2ND LARGEST 2ND LARGEST
MORTGAGE 2ND LARGEST TENANT % TENANT EXP.
LOAN NUMBER 2ND LARGEST TENANT NAME TENANT SQ. FT. OF NRA (%) DATE
- --------------------------------------------------------------------------------------------------------------------
1
2 Toys "R" Us 30,347 7.07% 31-Jan-2013
3 Bon Ton 142,259 10.40% 30-Sep-2005
4 Ultrastar Theaters 34,037 8.14% 6-May-2013
5 Anchor Blue 7,823 2.51% 31-Oct-2010
6 ABN AMRO Sage Corporation 51,971 12.51% 31-Oct-2006
7
8 Christmas Tree Shops, Inc. 50,000 24.27% 31-May-2023
9 Staples 20,800 9.28% 31-Jan-2008
10 Dunn-Edwards Paints 9,200 7.26% 31-Oct-2008
11
12 Beall's Department Store 40,000 11.56% 30-Apr-2016
13 Ruby Tuesday 6,090 6.37% 20-Sep-2013
14
15
16
17
18
19 Carisam-Samuel Meisel & Co. Inc. (World Duty Free) 27,600 11.98% 30-Sep-2008
20 Summit Entertainment, LP 13,782 18.29% 31-Oct-2008
21 KB Homes 11,806 14.33% 31-Dec-2009
22
23
24
25
26 Ryan Beck Management Co., Inc. 48,802 36.15% 30-Nov-2018
27 Degraff, Foy, Holt-Harris 18,654 10.45% 30-Aug-2011
28 Hill & Company Property Management 4,001 11.20% 25-Jun-2011
29 Ci-Ci's Pizza 4,500 5.97% 13-Feb-2013
30 Eurostar 8,120 20.71% 31-Mar-2013
31
32
33
34
35 Hausfeld's Salon & Day Spa 6,825 9.69% 11-Dec-2012
36
37 Salvation Army 12,040 16.58% 31-Aug-2007
38 Golden Buddha 3,300 8.05% 31-Dec-2007
39 Haights Cross Commun 5,449 10.76% 13-Jun-2005
40
41
42
43 CEC Entertainment Inc. 12,090 12.73% 31-Aug-2007
44
45
46
47 Baja in the Rockies, LLC (dba Wahoo's Fish Taco) 2,469 5.58% 31-Dec-2009
48 California Empire Mortgage 3,939 10.45% 30-Sep-2007
49
50
51
52 Intermark-Contact Import-Export 3,200 6.45% 31-Dec-2007
53
54 Sally Beauty 4,160 7.71% 29-Feb-2004
55
56 Brooks Brothers 4,816 20.88% 1-Mar-2003
57
58 Winfree Charter Academy 20,000 23.00% 30-Jun-2012
59 Double Dave's Pizza Works 3,996 9.88% 30-Apr-2013
60
61 TT Edison Associates, Ltd.(d/b/a Tutor Time) 10,822 18.81% 31-Oct-2004
62
63
64 Fashion Bug 8,050 17.63% 31-Oct-2005
65 Pier 1 Imports 9,268 19.01% 31-Jul-2007
66
67
68
69
70
71
72
73
74 Dollar Tree 5,000 11.24% 31-Jan-2007
75
76
77
78
79
80
81
82
83
84
85
86
87
88 My Gym 2,800 10.98% 28-Feb-2008
89
90
91
92
93
94
95
96 The Market at Riverwood 2,236 5.07% 31-Jul-2013
97
98
99
100
101
102
103
104
105
106
107
108
109
110 Family Dollar 9,100 15.09% 31-Dec-2008
111
112
113
114
115
116
117
118
3RD LARGEST
MORTGAGE 3RD LARGEST TENANT %
LOAN NUMBER 3RD LARGEST TENANT NAME TENANT SQ. FT OF NRA
- -----------------------------------------------------------------------------------------------------------------------------------
1
2 Borders Books and Music 25,000 5.82%
3 Kohl's 92,472 6.76%
4 Sav-on Drugs 21,344 5.11%
5 Charlotte Russe 7,673 2.46%
6 Barry, McTiernan & Moore 17,830 4.29%
7
8 T.J. Maxx 36,011 17.48%
9 Excellence In Exercise 17,849 7.96%
10 Aaron Brothers 7,500 5.92%
11
12 Bellair Lanes 30,225 8.74%
13 Washington Mutual Bank 3,500 3.66%
14
15
16
17
18
19 DSI Distributing 16,200 7.03%
20 Steelcase, Inc. 12,377 16.43%
21 Duron 5,202 6.31%
22
23
24
25
26 CIBC World Markets 20,124 14.91%
27 Research Foundation of State University of New York on behalf of System Administration 12,018 6.73%
28
29 Party Land 4,250 5.64%
30 Radio Shack 2,610 6.66%
31
32
33
34
35 Cooks'Wares 5,236 7.43%
36
37 Gambro Health Care, Inc. 8,503 11.71%
38 Sylvan Learning 2,338 5.70%
39 Academic Studies Associates 4,098 8.10%
40
41
42
43 CVS 8,800 9.26%
44
45
46
47 Advanced Exercise Equipment, LLC 1,962 4.44%
48 Mike McCormick's Golf 3,067 8.14%
49
50
51
52 Phoneart.com 3,200 6.45%
53
54 J.T. Clothiers 4,024 7.46%
55
56 Jones New York 4,410 19.12%
57
58 PetCo 19,433 22.35%
59 Vina Dry Cleaner 3,000 7.41%
60
61 PSI Family Services, Inc. 6,352 11.04%
62
63
64 Shoe Carnival 8,000 17.52%
65 Legacy Group (ACAC) 5,726 11.75%
66
67
68
69
70
71
72
73
74 Dragon China Restaurant 4,800 10.79%
75
76
77
78
79
80
81
82
83
84
85
86
87
88 Frank & Stein/So. Maid Donuts 2,600 10.20%
89
90
91
92
93
94
95
96 Hair-N-Motion 2,236 5.07%
97
98
99
100
101
102
103
104
105
106
107
108
109
110 Things & Wings Restaurant, Inc. 2,500 4.15%
111
112
113
114
115
116
117
118
MORTGAGE LARGEST AFFILIATED SPONSOR FLAG
LOAN NUMBER 3RD LARGEST TENANT EXP. DATE LOCKBOX (> THAN 4% OF POOL)
- --------------------------------------------------------------------------------------------------------------
1 Day 1 Commercial Net Lease Realty, Inc.
2 31-Jan-2018 Day 1 General Growth Properties, Inc.
3 31-Jan-2017 Day 1 General Growth Properties, Inc.
4 31-Mar-2008 Day 1 General Growth Properties, Inc.
5 31-Jan-2006 Day 1 General Growth Properties, Inc.
6 30-Nov-2012 Day 1 Lawrence Gluck
7 Springing
8 30-Sep-2006 Day 1
9 30-Sep-2006
10 31-Oct-2007 Springing
11 Springing
12 31-Oct-2008
13 31-Mar-2013
14 Springing
15 Springing
16 Springing
17
18
19 31-May-2008 Springing
20 20-Jul-2008
21 31-Aug-2013 Springing
22 Springing
23 Springing
24
25 Springing
26 30-Apr-2012 Day 1
27 28-Feb-2005 Day 1
28 Springing
29 28-Feb-2009 Springing
30 30-Apr-2008 Springing
31 Springing
32 Springing
33 Lawrence Gluck
34 Springing
35 3-Aug-2007 Springing
36 Springing
37 5-Jul-2012 Day 1
38 31-Dec-2007 Springing
39 30-Oct-2005
40 Springing
41 Springing
42 Springing
43 31-Jan-2007 Springing
44
45 Springing
46 Springing
47 31-Dec-2008
48 28-Feb-2008
49 Springing
50 Springing
51 Springing
52 28-Feb-2004 Springing
53 Springing
54 30-Aug-2007 Springing
55 Lawrence Gluck
56 30-Jun-2011 Springing
57
58 31-Jan-2006 Springing
59 31-Dec-2012 Springing
60 Springing
61 31-Jan-2006
62 Springing
63 Springing
64 31-Jan-2011
65 31-Jul-2009
66 Day 1
67 Springing
68 Springing
69
70 Springing
71 Lawrence Gluck
72
73 Springing
74 31-Jan-2012
75 Springing
76
77 Springing
78 Day 1
79 Springing
80 Springing
81 Springing
82 Springing
83 Day 1
84 Springing
85 Springing
86 Springing
87 Springing
88 28-Feb-2008 Springing
89 Day 1
90 Springing
91 Springing
92 Springing
93 Springing
94 Day 1
95 Springing
96 31-Dec-2007
97 Springing
98 Springing
99 Springing
100 Day 1
101 Springing
102 Springing
103 Springing
104 Day 1
105 Springing
106 Day 1
107 Springing
108 Springing
109 Springing
110 31-Dec-2004
111 Springing
112 Springing
113 Springing
114 Springing
115 Springing
116 Springing
117 Springing
118 Lawrence Gluck
(1) Occupancy based on the signed lease in place.
(2) Credit Lease Loan.
(3) Refer to Annex A-6.
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST SERIES 2003-C9
ANNEX A-2
---------
MORTGAGE
LOAN
NUMBER PROPERTY NAME PROPERTY ADDRESS
- -------------------------------------------------------------------------------------------------------------------
7 Villas at Rancho Palos Verdes 6600 Beachview Drive & 32622-64 Nantasket Drive
11 Bellamay Grand 2625 SW 75th Street
14 Birkdale Commons 101 Augusta Plantation Drive
15 Atlantic Palms 2510 Atlantic Palms Lane
16 Pavilion Crossings I 1801 Willow Haven Lane
17 Adagio Apartments 17126 Southeast 269th Place
18 Autumn Brook Apartments 8600 Roberts Drive
22 Oakridge Terrace Apartments 43339 Gadsden Avenue
23 Coastal Carolina Campus Point 110 Chanticleer Village Drive
24 The Arbors of Pleasant Valley Apartments 2020 Hinson Loop
28 Magnolia Place 1880 Lombard Street and 3322 Buchanan Street
25 Woodcrest Apartments 1811 Sibley Road
32 160 East Berkeley Street 160 East Berkeley Street
33 236-244 East 13th Street 236-244 East 13th Street
36 Brookside Manor Apartments 1200 East Grand Avenue
40 Longwood Village Apartments 208 Clark Street
41 Heartland Ridge - Student Housing 1300-1600 Trumbull Road
42 Festival Apartments 500 Festival Place
44 Summerfield Apartments 4581 South Kirkman Road
45 The Pines at Montclair Apartments 9550 Fremont Avenue
46 Campus Pointe Apartments 2230 Northeast Greenville Boulevard
50 Alafaya Trail Apartments 2501-2569 North Alafaya Trail
51 Cambridge Village - Tucson, AZ 2801 North Oracle Road
53 Terrace at Butler Apartments 771 East Butler Road
55 209 & 214 West 21st Street 209 & 214 West 21st Street
60 Collins Park Apartments 5773 Dewsbury Lane
62 Kilcullen Drive Quadraplexes 4604-4632 Kilcullen Drive, 4300-4317 Presley Court,
4704-4716 Hoyle Drive, 4404 and 4609 Brockton Drive
63 Forest Ridge Apartments 425 West 2nd Street
71 87 Hamilton Place 87 Hamilton Place
75 Country Club Apartments 1155 North Courtenay Parkway
79 San Miguel Court Apartments 2029 Calle Lorca
85 1120-26 E. 47th Street Apartments 1120-26 East 47th Street
92 Century Oaks Apts 337 - 341 Guilford College Rd.
96 Riverwood on the Neuse 321-489 Athletic Club Boulevard
98 Brownsville Station Apartments 104-114 and 210 Wood Street and 514 Washington Street
101 Community at Bridge Point 1500 Monument Street
107 Sugartree Apartments II 1801 Sugar Tree Circle
108 Slate Run 450 Turney Road
109 Ridgewood II 2170 Fort Harrods Drive
111 Schenley House Apts 147 - 151 North Craig Street
112 Riverwood Apartments 4803 St. Johns Avenue
113 Parkwood Village II 6804 Parkway Drive
114 Graceland Farms 1984 Bonnie Drive
116 Mulberry Apartments 4070 Leap Road
118 602 West 146th Street 602 West 146th Street
CERTAIN INFORMATION REGARDING MULTIFAMILY MORTGAGED PROPERTIES
MORTGAGE GENERAL SPECIFIC
LOAN PROPERTY PROPERTY PROPERTY PROPERTY ELEVATOR
NUMBER PROPERTY CITY STATE ZIP CODE COUNTY TYPE TYPE BUILDINGS
- -------------------------------------------------------------------------------------------------------------------------------
7 Rancho Palos Verdes CA 90275 Los Angeles Multifamily Conventional Y
11 Gainesville FL 32607 Alachua Multifamily Conventional N
14 Myrtle Beach SC 29579 Horry Multifamily Conventional N
15 North Charleston SC 29406 Charleston Multifamily Conventional N
16 Charlotte NC 28262 Mecklenburg Multifamily Conventional N
17 Covington WA 98042 King Multifamily Conventional N
18 Dunwoody GA 30350 Fulton Multifamily Conventional N
22 Lancaster CA 93534 Los Angeles Multifamily Conventional N
23 Myrtle Beach SC 29579 Horry Multifamily Student Housing N
24 Little Rock AR 72212 Pulaski Multifamily Conventional N
28 San Francisco CA 94123 San Francisco Mixed Use Multifamily/Retail Y
25 Augusta GA 30909 Richmond Multifamily Conventional N
32 Boston MA 02118 Suffolk Multifamily Conventional Y
33 New York NY 10003 New York Multifamily Conventional N
36 Carbondale IL 62901 Jackson Multifamily Conventional N
40 Farmville VA 23901 Prince Edward Multifamily Student Housing N
41 Normal IL 61761 McLean Multifamily Student Housing N
42 Montgomery AL 36117 Montgomery Multifamily Conventional N
44 Orlando FL 32811 Orange Multifamily Conventional N
45 Montclair CA 91763 San Bernardino Multifamily Conventional N
46 Greenville NC 27858 Pitt Multifamily Student Housing N
50 Orlando FL 32826 Orange Multifamily Conventional N
51 Tucson AZ 85705 Pima Multifamily Conventional N
53 Mauldin SC 29662 Greenville Multifamily Conventional N
55 New York NY 10011 New York Multifamily Conventional N
60 North Charleston SC 29418 Charleston Multifamily Conventional N
62 Raleigh NC 27604 Wake Multifamily Conventional N
63 Rochester MI 48307 Oakland Multifamily Conventional N
71 New York NY 10031 New York Multifamily Conventional Y
75 Merritt Island FL 32953 Brevard Multifamily Conventional N
79 Santa Fe NM 87505 Santa Fe Multifamily Conventional N
85 Chicago IL 60653 Cook Multifamily Conventional N
92 Greensboro NC 27409 Guilford Multifamily Conventional N
96 Clayton NC 27520 Johnston Mixed Use Multifamily/Retail N
98 Starkville MS 39759 Oktibbeha Multifamily Student Housing N
101 Jacksonville FL 32225 Duval Multifamily Conventional N
107 New Smyrna Beach FL 32168 Volusia Multifamily Conventional N
108 Bedford OH 44146 Cuyahoga Multifamily Conventional N
109 Lexington KY 40513 Fayette Multifamily Conventional N
111 Pittsburgh PA 15213 Allegheny Multifamily Mixed Use Y
112 Palatka FL 32177 Putnam Multifamily Conventional N
113 Douglasville GA 30135 Douglas Multifamily Conventional N
114 Memphis TN 38116 Shelby Multifamily Conventional N
116 Hilliard OH 43026 Franklin Multifamily Conventional N
118 New York NY 10031 New York Multifamily Conventional N
MORTGAGE AVERAGE RENT;
LOAN UTILITIES NUMBER OF NUMBER OF NUMBER OF NUMBER OF NUMBER OF RENT RANGES- AVERAGE RENT; RENT
NUMBER TENANT PAYS STUDIO UNITS 1 BR UNITS 2 BR UNITS 3 BR UNITS 4+ BR UNITS STUDIO UNITS RANGES - 1 BR UNITS
- -----------------------------------------------------------------------------------------------------------------------------------
7 E,W,S 28 163 24 1550;1550-1550
11 E,W,S,P,C 72 252 36 705;705-705
14 E 84 156 72 680;680-680
15 E 78 162 72 670;670-670
16 E,P,C 132 132 24 670;645-675
17 E,W,P,C 68 84 48 787;750-900
18 E,G,P,C 100 202 810;810-810
22 E,G,P,C 48 168 637;637-637
23 432 400;400-400
24 E,W,S 70 70 44 673;650-695
28 E,G,P,C 13 14 1800;1800-1800
25 E,P,C 56 192 500;500-500
32 E,P,C 8 20 10 1769;1750-1900
33 E,P,C 20 51 15 1350;500-1500
36 84 92 64 600;600-600
40 E 96
41 E,W 32 64 192 64 510;495-525
42 E,P,C 120 64 606;500-655
44 E,P,C 88 120 16 599;599-599
45 E,P,C 12 80 24 735;735-735 865;865-865
46 E 72 144
50 E,W 136
51 E,G 68 152 26 390;390-390 474;445-575
53 E 12 120 595;525-605
55 E,P,C 18 5 4 26 1700;1700-1700 1850;1850-1850
60 E,W 31 73
62 E,G 75
63 E 140 26 650;650-650
71 E,P,C 21 69 7 612;293-909 657;402-1502
75 E 24 96 120 440;440-440 475;475-475
79 24 24 48 700;700-700
85 E 4 58 6 600;600-600 700;700-700
92 E 24 36 550;550-550
96 E,G,W,P,C 1 25 625;625-625
98 E,W,S,P,C 31 24 1 477;435-530
101 E,W,S 21 45 5 479;479-479 554;554-554
107 E 49 11 489;489-489
108 6 44 12 470;470-470 565;565-565
109 E,W,S,P,C 5 35 11 425;425-425 485;485-485
111 E 26 60 32 585;550-665 800;740-830
112 E,W,S 15 46 7 384;384-384 464;464-464
113 E,W,S,P,C 9 52 5 498;498-498 579;579-579
114 E 4 74 113 1 350;350-350 395;395-395
116 E,W,S 6 42 12 465;465-465 539;539-539
118 E,P,C 14 12
MORTGAGE AVERAGE RENT; AVERAGE RENT;
LOAN AVERAGE RENT; RENT RENT RANGES - 3 RENT RANGES - 4+
NUMBER RANGES - 2 BR UNITS BR UNITS BR UNITS
- -----------------------------------------------------------------------------------------------------------
7 1981;1725-2775 2550;2550-2550
11 796;740-830 1020;1020-1020
14 780;780-780 940;940-940
15 759;730-845 905;905-905
16 828;805-850 1058;1058-1058
17 984;950-1020 1174;1125-1225
18 875;875-875
22 834;827-840
23
24 822;750-875 950;910-1055
28 2485;2400-2600
25 621;585-635
32 2195;2100-2600 2660;2500-3100
33 2000;2000-2000 2406;2400-2500
36 755;755-755 930;930-930
40 1193;1155-1230
41 375;365-385 345;335-355 305;295-315
42 694;635-705
44 720;699-740 905;905-905
45 1065;1065-1065
46 427;405-485 402;385-462
50 730;730-730
51 675;675-675
53 661;545-790
55 2200;2200-2200 2400;2400-2400
60 630;606-655 655;655-655
62 733;525-800
63 740;740-740
71 679;500-951
75 557;540-575
79 800;800-800 910;910-910
85 825;825-825
92 650;650-650
96 810;795-825
98 628;625-635 1900;1900-1900
101 709;699-715
107 631;629-639
108 600;575-625
109 616;600-620
111 1138;1125-1175
112 629;629-629
113 703;698-707
114 455;455-455 475;475-475
116 643;640-650
118 617;339-1171 565;350-1016
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST SERIES 2003-C9
ANNEX A-3
---------
RESERVE ACCOUNT INFORMATION
MORTGAGE
LOAN SPECIFIC MONTHLY
NUMBER PROPERTY NAME GENERAL PROPERTY TYPE PROPERTY TYPE TAX ESCROW
- --------------------------------------------------------------------------------------------------------------------------------
1 TSA Office Building Office Suburban
2 West Oaks Mall (2) Retail Anchored
3 Park City Center (2) Retail Anchored
4 Chula Vista Center (2) Retail Anchored
5 Meadows Mall (2) Retail Anchored
6 2 Rector Street Office CBD 110,113
7 Villas at Rancho Palos Verdes Multifamily Conventional 47,144
8 Spring Valley Market Place Retail Anchored 68,413
9 Chester Springs Shopping Center Retail Anchored 47,855
10 T.J. Maxx Plaza Retail Anchored 22,282
11 Bellamay Grand Multifamily Conventional 27,128
12 Bellair Plaza Retail Anchored 21,209
13 Miller Place Shopping Center Retail Anchored 17,085
14 Birkdale Commons Multifamily Conventional 14,898
15 Atlantic Palms Multifamily Conventional 23,337
16 Pavilion Crossings I Multifamily Conventional 18,000
17 Adagio Apartments Multifamily Conventional 17,333
18 Autumn Brook Apartments Multifamily Conventional 16,128
19 Rolling Road Commerce Center & Mini-Storage Mixed Use Flex/Self Storage 10,152
20 Penn Station Studios Office Suburban
21 The Terraces at Park Place Retail Anchored 5,529
22 Oakridge Terrace Apartments Multifamily Conventional 8,283
23 Coastal Carolina Campus Point Multifamily Student Housing 8,882
24 The Arbors of Pleasant Valley Apartments Multifamily Conventional 10,727
25 Woodcrest Apartments Multifamily Conventional 6,741
26 Columbia Corporate Center Office Suburban
27 90 State Street Office CBD 37,406
28 Magnolia Place Mixed Use Multifamily/Retail 2,070
29 Market Square Shopping Center Retail Anchored 5,176
30 Lynwood Plaza Retail Anchored 6,222
31 Wal-Mart - Baldwin Hills, CA Retail Anchored
32 160 East Berkeley Street Multifamily Conventional 849
33 236-244 East 13th Street Multifamily Conventional 17,053
34 Clerbrook Mobile Home Park Mobile Home Park 18,059
35 Marketplace at Settlers Walk Shopping Center Retail Anchored 1,413
36 Brookside Manor Apartments Multifamily Conventional 6,833
37 Rolando Plaza Shopping Center Retail Unanchored 5,438
38 Evergreen Valley Center Mixed Use Office/Retail 7,016
39 10 New King Street Office Suburban 13,398
40 Longwood Village Apartments Multifamily Student Housing 4,251
41 Heartland Ridge - Student Housing Multifamily Student Housing 13,210
42 Festival Apartments Multifamily Conventional 5,268
43 Southwest Commons Shopping Center Retail Anchored 19,229
44 Summerfield Apartments Multifamily Conventional 10,200
45 The Pines at Montclair Apartments Multifamily Conventional 6,625
46 Campus Pointe Apartments Multifamily Student Housing 5,963
47 Circuit City Center Retail Anchored 2,413
48 Citrus Plaza Retail Anchored 1,965
49 City Self Storage of Van Nuys Self Storage Self Storage 5,252
50 Alafaya Trail Apartments Multifamily Conventional 5,098
51 Cambridge Village - Tucson, AZ Multifamily Conventional 6,582
52 Expo Plaza Industrial Flex 3,536
53 Terrace at Butler Apartments Multifamily Conventional 3,425
54 Southridge Shopping Center Retail Shadow Anchored 8,586
55 209 & 214 West 21st Street Multifamily Conventional 7,426
56 St. Helena Outlet Center Retail Unanchored 3,034
57 1400 16th Street Land Land
58 Grapevine Retail Center Retail Anchored 6,364
59 Mason Knolls Centre Retail Unanchored 7,447
60 Collins Park Apartments Multifamily Conventional 5,191
61 One Ethel Road Office Suburban 13,080
62 Kilcullen Drive Quadraplexes Multifamily Conventional 3,516
63 Forest Ridge Apartments Multifamily Conventional 10,275
64 Hy-Vee Plaza Retail Shadow Anchored 4,756
65 Gardens Shopping Center Retail Anchored 3,384
66 Sav-on - Norwalk, CA Retail Anchored
67 Swan Creek MHC Mobile Home Park Mobile Home Park 5,870
68 Orlando Winter Garden Mobile Home Park Mobile Home Park 6,511
69 Walgreens - Bellflower, CA Retail Anchored
70 Aztec MHP/RV Park Mobile Home Park Mobile Home Park 1,414
71 87 Hamilton Place Multifamily Conventional 6,119
72 Frederick Street Parking Garage Parking Garage Parking Garage 6,487
73 Walgreens - Queens, NY Retail Anchored
74 Logan Commons Shopping Center Retail Shadow Anchored 3,288
75 Country Club Apartments Multifamily Conventional 12,599
76 Walgreens - Reno, NV Retail Anchored
77 Walgreens - Edgebrook, TX Retail Anchored
78 Eckerd - Ironside, TX Retail Anchored
79 San Miguel Court Apartments Multifamily Conventional 1,583
80 Walgreens - Meadows Place, TX Retail Anchored
81 Marshalls - Montrose, CA Retail Anchored 3,286
82 Eckerd - Williamson, NY Retail Anchored
83 Eckerd - Baton Rouge, LA Retail Anchored
84 Eckerd - New Bern, NC Retail Anchored
85 1120-26 E. 47th Street Apartments Multifamily Conventional 2,972
86 Eckerd - Glendale, AZ Retail Anchored
87 Eaton Pines Village MHC Mobile Home Park Mobile Home Park 3,907
88 South Shades Crest Station Retail Shadow Anchored 420
89 Eckerd - Alexandria, LA Retail Anchored
90 LaSalle Bank - Norridge, IL Retail Anchored
91 Walgreens - Norridge, IL Retail Anchored
92 Century Oaks Apts Multifamily Conventional 2,235
93 Sunrise Terrace MHP Mobile Home Park Mobile Home Park 1,470
94 Rite Aid - Chester, NY (3) Retail Unanchored
95 Westwood Village MHP Mobile Home Park Mobile Home Park 2,617
96 Riverwood on the Neuse Mixed Use Multifamily/Retail 1,961
97 Meridian MHP Mobile Home Park Mobile Home Park 1,512
98 Brownsville Station Apartments Multifamily Student Housing 2,307
99 Baldwin Lake Estates MHC Mobile Home Park Mobile Home Park 2,799
100 Eckerd - Kerrville, TX Retail Anchored
101 Community at Bridge Point Multifamily Conventional 3,056
102 Oak Forest MHC Mobile Home Park Mobile Home Park 1,426
103 CVS - Wilmington, NC Retail Anchored 1,051
104 Rite Aid - Mountaintop, PA (3) Retail Unanchored
105 Brookside MHC Mobile Home Park Mobile Home Park 817
106 CVS - Charlotte, NC Retail Anchored
107 Sugartree Apartments II Multifamily Conventional 2,963
108 Slate Run Multifamily Conventional 4,310
109 Ridgewood II Multifamily Conventional 1,335
110 Wiregrass Plaza Shopping Center Retail Anchored 1,428
111 Schenley House Apts Multifamily Mixed Use 10,372
112 Riverwood Apartments Multifamily Conventional 2,345
113 Parkwood Village II Multifamily Conventional 2,010
114 Graceland Farms Multifamily Conventional 7,438
115 Connelly MHC Mobile Home Park Mobile Home Park 1,177
116 Mulberry Apartments Multifamily Conventional 3,150
117 St. Joseph MHC Mobile Home Park Mobile Home Park 868
118 602 West 146th Street Multifamily Conventional 1,404
INITIAL DEPOSIT
MORTGAGE MONTHLY ANNUAL DEPOSIT TO CAPITAL
LOAN INSURANCE TO REPLACEMENT IMPROVEMENTS INITIAL TI/LC ONGOING TI/LC
NUMBER ESCROW RESERVES RESERVE ESCROW FOOTNOTE
- -----------------------------------------------------------------------------------------------
1
2
3
4
5
6 10,714 83,087 1,000,000 (1)
7 5,364 56,330
8 7,048 55,623 7,063 414,869 (1)
9 4,323 40,345
10 4,832 19,383 12,188 490,000
11 4,092 90,000
12 14,274 51,900 (1)
13 9,700 5,748 (1)
14 11,055 78,000
15 10,007 78,000
16 3,629 72,000 4,475
17 3,479 50,000
18 9,993 34,428 3,438
19 1,367 6,825 (1)
20
21 1,734 12,216 2,500 (1)
22 6,252 59,184 23,950
23 7,676 50,400 188,125
24 5,143 46,000
25 3,229 62,004 9,375
26
27 3,000 35,702 260,750 (1)
28 3,631 6,750 (1)
29 1,175 9,799 17,000
30 1,040 2,688
31
32 1,924 9,750
33 21,500
34 4,825 62,250 50,000
35 600 7,044 (1)
36 3,578 72,000 20,313
37 1,641 29,700 (1)
38 1,771 4,543 22,500 300,000
39 10,124 5,000 (1)
40 3,807 33,600
41 2,600 50,400
42 4,424 49,704 26,250
43 3,669 14,247 16,250 (1)
44 3,514 67,200 36,750
45 2,319 31,269 9,563
46 1,110 29,400
47 240 6,633 (1)
48 976 3,770 (1)
49 564 4,710
50 867 47,604 24,144
51 3,488 61,500
52 613 7,440 (1)
53 1,569 33,000
54 1,832 9,792 (1)
55 15,154 11,719
56 2,199 4,440 (1)
57
58 1,581 13,212 13,750
59 808 6,072 (1)
60 4,622 29,016 1,250
61 2,067 11,504 50,000
62 1,208 19,008 6,250
63 3,155 41,496
64 1,226 7,761 1,875 (1)
65 624 8,776 2,250 (1)
66 15,872
67 673 15,204
68 826 17,508 10,625
69
70 861 16,404
71 31,447 5,625
72 15,160
73 947 2,100
74 4,448
75 3,596 60,000
76 1,507
77 386 2,172
78 1,636 (1)
79 3,518 24,000 11,406
80
81 698 0
82 587 2,076 (1)
83 1,680 (1)
84 1,911
85 2,318 17,760
86 2,076 (1)
87 426 7,308
88 490 3,828 (1)
89 1,882 (1)
90 1,176
91 2,172
92 725 15,000
93 379 5,904 1,888
94 2,795
95 338 7,608
96 686 4,341 (1)
97 498
98 1,647 19,608 8,500
99 187 8,100
100 1,636 (1)
101 18,312
102 425 5,100 4,375
103 236 2,004
104 2,236
105 185 5,000
106 1,013
107 15,000
108 17,364 26,375
109 14,172 32,187
110 1,183 18,693 50,000 (1)
111 3,987
112 17,340
113 18,612
114 4,286 54,432
115 121 3,060
116 15,480
117 136 2,904
118 6,500
(1) In addition to any such escrows funded at loan closing for potential TI/LC,
these Mortgage Loans require funds to be escrowed during some or all of the loan
term for TI/LC expenses, which may be incurred during the loan term. In certain
instances, escrowed funds may be released to the borrower upon satisfaction of
certain leasing conditions.
(2) Upon the satisfaction of certain tests, these Mortgage Loans have escrows
which may spring into effect.
(3) Credit Lease Loan.
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST SERIES 2003-C9
ANNEX A-4
---------
COMMERCIAL TENANT SCHEDULE
MORTGAGE
LOAN GENERAL SPECIFIC CUT-OFF DATE
NUMBER PROPERTY NAME PROPERTY TYPE PROPERTY TYPE LOAN BALANCE ($)
- -----------------------------------------------------------------------------------------------------------------------------
1 TSA Office Building Office Suburban 95,000,000.00
2 West Oaks Mall Retail Anchored 75,912,849.57
3 Park City Center Retail Anchored 65,841,900.27
4 Chula Vista Center Retail Anchored 64,823,815.97
5 Meadows Mall Retail Anchored 55,768,045.46
6 2 Rector Street Office CBD 43,200,000.00
8 Spring Valley Market Place Retail Anchored 31,966,716.59
9 Chester Springs Shopping Center Retail Anchored 24,949,093.60
10 T.J. Maxx Plaza Retail Anchored 24,600,000.00
12 Bellair Plaza Retail Anchored 21,779,381.49
13 Miller Place Shopping Center Retail Anchored 20,219,344.76
19 Rolling Road Commerce Center & Mini-Storage Mixed Use Flex/Self Storage 12,966,669.77
20 Penn Station Studios Office Suburban 12,800,000.00
21 The Terraces at Park Place Retail Anchored 11,500,000.00
26 Columbia Corporate Center Office Suburban 9,960,842.16
27 90 State Street Office CBD 9,788,462.36
28 Magnolia Place Mixed Use Multifamily/Retail 9,602,649.43
29 Market Square Shopping Center Retail Anchored 9,390,588.43
30 Lynwood Plaza Retail Anchored 9,100,000.00
31 Wal-Mart - Baldwin Hills, CA Retail Anchored 9,099,519.51
35 Marketplace at Settlers Walk Shopping Center Retail Anchored 8,459,322.89
37 Rolando Plaza Shopping Center Retail Unanchored 8,000,000.00
38 Evergreen Valley Center Mixed Use Office/Retail 7,991,243.55
39 10 New King Street Office Suburban 7,985,273.72
43 Southwest Commons Shopping Center Retail Anchored 7,301,908.12
47 Circuit City Center Retail Anchored 6,273,948.92
48 Citrus Plaza Retail Anchored 6,089,530.53
52 Expo Plaza Industrial Flex 5,534,874.48
54 Southridge Shopping Center Retail Shadow Anchored 5,141,680.37
56 St. Helena Outlet Center Retail Unanchored 5,077,017.81
57 1400 16th Street Land Land 5,000,000.00
58 Grapevine Retail Center Retail Anchored 4,990,999.98
59 Mason Knolls Centre Retail Unanchored 4,900,000.00
61 One Ethel Road Office Suburban 4,487,434.26
64 Hy-Vee Plaza Retail Shadow Anchored 4,392,008.52
65 Gardens Shopping Center Retail Anchored 4,388,328.87
66 Sav-on - Norwalk, CA Retail Anchored 4,350,000.00
69 Walgreens - Bellflower, CA Retail Anchored 4,147,687.93
72 Frederick Street Parking Garage Parking Garage Parking Garage 3,994,183.39
73 Walgreens - Queens, NY Retail Anchored 3,992,059.34
74 Logan Commons Shopping Center Retail Shadow Anchored 3,989,366.98
76 Walgreens - Reno, NV Retail Anchored 3,804,008.70
77 Walgreens - Edgebrook, TX Retail Anchored 3,596,335.93
78 Eckerd - Ironside, TX Retail Anchored 3,309,023.52
80 Walgreens - Meadows Place, TX Retail Anchored 3,270,347.86
81 Marshalls - Montrose, CA Retail Anchored 3,252,156.01
82 Eckerd - Williamson, NY Retail Anchored 3,007,627.98
83 Eckerd - Baton Rouge, LA Retail Anchored 2,963,304.72
84 Eckerd - New Bern, NC Retail Anchored 2,929,805.10
86 Eckerd - Glendale, AZ Retail Anchored 2,847,216.65
88 South Shades Crest Station Retail Shadow Anchored 2,797,322.70
89 Eckerd - Alexandria, LA Retail Anchored 2,765,751.06
90 LaSalle Bank - Norridge, IL Retail Anchored 2,664,000.00
91 Walgreens - Norridge, IL Retail Anchored 2,526,000.00
94 Rite Aid - Chester, NY (1) Retail Unanchored 2,496,741.61
96 Riverwood on the Neuse Mixed Use Multifamily/Retail 2,383,694.36
100 Eckerd - Kerrville, TX Retail Anchored 1,926,148.03
103 CVS - Wilmington, NC Retail Anchored 1,747,184.75
104 Rite Aid - Mountaintop, PA (1) Retail Unanchored 1,620,965.17
106 CVS - Charlotte, NC Retail Anchored 1,576,853.48
110 Wiregrass Plaza Shopping Center Retail Anchored 1,346,766.64
MORTGAGE
LOAN NUMBER OF UNIT OF LARGEST TENANT
NUMBER UNITS (UNITS) MEASURE LARGEST TENANT % OF NRA
- -------------------------------------------------------------------------------------------------------------------------------
1 491,126 Sq. Ft. United States of America (Transportation Security Administration) 100.00%
2 429,318 Sq. Ft. AMC Theatres 13.34%
3 1,367,529 Sq. Ft. JCPenney 17.80%
4 418,079 Sq. Ft. JCPenney 19.14%
5 312,210 Sq. Ft. Express, Inc. 2.67%
6 415,434 Sq. Ft. The City of New York Department of Citywide Administrative Services 17.35%
8 206,013 Sq. Ft. Shop Rite 29.53%
9 224,138 Sq. Ft. Shop Rite 27.20%
10 126,768 Sq. Ft. T.J. Maxx 19.88%
12 345,995 Sq. Ft. Publix 12.79%
13 95,665 Sq. Ft. Stop & Shop 70.78%
19 230,350 Sq. Ft. General Services Administration (GSA) 21.11%
20 75,336 Sq. Ft. Sony Computer Entertainment America, Inc. 25.58%
21 82,396 Sq. Ft. Bi-Lo 54.70%
26 135,000 Sq. Ft. Kushner Companies 41.10%
27 178,511 Sq. Ft. NYS Office of State Comptroller 26.41%
28 35,735 Sq. Ft. Hill & Company Real Estate 16.79%
29 75,374 Sq. Ft. Bi-Lo 61.86%
30 39,215 Sq. Ft. Walgreens 36.95%
31 150,000 Sq. Ft. Wal-Mart 100.00%
35 70,435 Sq. Ft. Dorothy Lane Market 56.98%
37 72,626 Sq. Ft. Moran Foods dba Save-A-Lot Grocery 19.28%
38 40,991 Sq. Ft. GSA/SSA 23.14%
39 50,621 Sq. Ft. Resurgence Asset Management 22.87%
43 94,983 Sq. Ft. Big Y Foods, Inc. 55.92%
47 44,218 Sq. Ft. Circuit City 78.10%
48 37,699 Sq. Ft. Longs Drugs 48.70%
52 49,601 Sq. Ft. T&E Flooring 6.45%
54 53,968 Sq. Ft. Kinko's 8.41%
56 23,069 Sq. Ft. Donna Karan 27.70%
57 33,804 Sq. Ft. Resources & Conservation Center Limited Partnership 100.00%
58 86,940 Sq. Ft. Jo-Ann's Stores 54.64%
59 40,461 Sq. Ft. Spec's Liquor 37.07%
61 57,519 Sq. Ft. Medic Computer Systems, LLC 22.11%
64 45,650 Sq. Ft. Deal$ 18.40%
65 48,748 Sq. Ft. Carmike Cinema 42.05%
66 14,696 Sq. Ft. Sav-on Drugs 100.00%
69 13,650 Sq. Ft. Walgreens 100.00%
72 101,066 Sq. Ft. Central Parking 100.00%
73 13,905 Sq. Ft. Walgreens 100.00%
74 44,480 Sq. Ft. Fashion Bug 13.49%
76 15,067 Sq. Ft. Walgreens 100.00%
77 14,490 Sq. Ft. Walgreens 100.00%
78 10,908 Sq. Ft. Eckerd 100.00%
80 14,490 Sq. Ft. Walgreens 100.00%
81 30,466 Sq. Ft. Marshalls 100.00%
82 14,228 Sq. Ft. Eckerd 100.00%
83 11,200 Sq. Ft. Eckerd 100.00%
84 12,738 Sq. Ft. Eckerd 100.00%
86 13,813 Sq. Ft. Eckerd 100.00%
88 25,500 Sq. Ft. Blockbuster Video 21.96%
89 12,544 Sq. Ft. Eckerd 100.00%
90 6,837 Sq. Ft. LaSalle Bank 100.00%
91 14,300 Sq. Ft. Walgreens 100.00%
94 11,180 Sq. Ft. Rite Aid 100.00%
96 44,115 Sq. Ft. Fred Smith Company 14.88%
100 10,908 Sq. Ft. Eckerd 100.00%
103 10,125 Sq. Ft. Revco Discount Drug Centers, Inc 100.00%
104 11,219 Sq. Ft. Rite Aid 100.00%
106 10,125 Sq. Ft. CVS 100.00%
110 60,300 Sq. Ft. Winn Dixie 75.46%
MORTGAGE 2ND LARGEST
LOAN LARGEST TENANT TENANT % OF 2ND LARGEST
NUMBER EXP. DATE 2ND LARGEST TENANT NAME NRA (%) TENANT EXP. DATE
- ----------------------------------------------------------------------------------------------------------------------------
1 28-Feb-2014
2 31-Mar-2017 Toys "R" Us 7.07% 31-Jan-2013
3 31-Jul-2005 Bon Ton 10.40% 30-Sep-2005
4 30-Nov-2008 Ultrastar Theaters 8.14% 6-May-2013
5 31-Jan-2007 Anchor Blue 2.51% 31-Oct-2010
6 31-Jul-2005 ABN AMRO Sage Corporation 12.51% 31-Oct-2006
8 31-Dec-2007 Christmas Tree Shops, Inc. 24.27% 31-May-2023
9 30-Nov-2016 Staples 9.28% 31-Jan-2008
10 31-Jan-2008 Dunn-Edwards Paints 7.26% 31-Oct-2008
12 31-Jan-2022 Beall's Department Store 11.56% 30-Apr-2016
13 31-Mar-2023 Ruby Tuesday 6.37% 20-Sep-2013
19 22-Dec-2012 Carisam-Samuel Meisel & Co. Inc. (World Duty Free) 11.98% 30-Sep-2008
20 21-May-2009 Summit Entertainment, LP 18.29% 31-Oct-2008
21 15-Nov-2016 KB Homes 14.33% 31-Dec-2009
26 31-Jan-2023 Ryan Beck Management Co., Inc. 36.15% 30-Nov-2018
27 Multiple Spaces Degraff, Foy, Holt-Harris 10.45% 30-Aug-2011
28 25-Jun-2011 Hill & Company Property Management 11.20% 25-Jun-2011
29 30-Jun-2020 Ci-Ci's Pizza 5.97% 13-Feb-2013
30 31-Mar-2063 Eurostar 20.71% 31-Mar-2013
31 30-Nov-2011
35 5-Mar-2022 Hausfeld's Salon & Day Spa 9.69% 11-Dec-2012
37 31-Aug-2012 Salvation Army 16.58% 31-Aug-2007
38 30-May-2005 Golden Buddha 8.05% 31-Dec-2007
39 31-Dec-2006 Haights Cross Commun 10.76% 13-Jun-2005
43 30-Nov-2011 CEC Entertainment Inc. 12.73% 31-Aug-2007
47 31-Jan-2020 Baja in the Rockies, LLC (dba Wahoo's Fish Taco) 5.58% 31-Dec-2009
48 30-Sep-2048 California Empire Mortgage 10.45% 30-Sep-2007
52 31-Jul-2007 Intermark-Contact Import-Export 6.45% 31-Dec-2007
54 31-May-2005 Sally Beauty 7.71% 29-Feb-2004
56 30-Nov-2004 Brooks Brothers 20.88% 1-Mar-2003
57 31-Dec-2084
58 31-Jan-2011 Winfree Charter Academy 23.00% 30-Jun-2012
59 31-Jul-2012 Double Dave's Pizza Works 9.88% 30-Apr-2013
61 31-May-2006 TT Edison Associates, Ltd.(d/b/a Tutor Time) 18.81% 31-Oct-2004
64 31-Jul-2006 Fashion Bug 17.63% 31-Oct-2005
65 31-Dec-2011 Pier 1 Imports 19.01% 31-Jul-2007
66 13-Nov-2028
69 31-Oct-2078
72 30-Nov-2017
73 31-Oct-2021
74 31-Oct-2006 Dollar Tree 11.24% 31-Jan-2007
76 31-Dec-2064
77 30-Sep-2021
78 10-Oct-2019
80 30-Apr-2027
81 31-Jan-2011
82 31-Mar-2023
83 27-Jan-2020
84 9-Feb-2019
86 25-Jun-2023
88 31-Dec-2012 My Gym 10.98% 28-Feb-2008
89 18-Jan-2020
90 31-Dec-2021
91 31-Dec-2021
94 31-Aug-2018
96 Multiple Spaces The Market at Riverwood 5.07% 31-Jul-2013
100 12-Oct-2019
103 31-Jan-2020
104 29-Nov-2018
106 31-Jan-2019
110 28-Feb-2010 Family Dollar 15.09% 31-Dec-2008
MORTGAGE 3RD LARGEST 3RD LARGEST
LOAN TENANT % TENANT
NUMBER 3RD LARGEST TENANT NAME OF NRA EXP. DATE
- ----------------------------------------------------------------------------------------------------------------------------------
1
2 Borders Books and Music 5.82% 31-Jan-2018
3 Kohl's 6.76% 31-Jan-2017
4 Sav-on Drugs 5.11% 31-Mar-2008
5 Charlotte Russe 2.46% 31-Jan-2006
6 Barry, McTiernan & Moore 4.29% 30-Nov-2012
8 T.J. Maxx 17.48% 30-Sep-2006
9 Excellence In Exercise 7.96% 30-Sep-2006
10 Aaron Brothers 5.92% 31-Oct-2007
12 Bellair Lanes 8.74% 31-Oct-2008
13 Washington Mutual Bank 3.66% 31-Mar-2013
19 DSI Distributing 7.03% 31-May-2008
20 Steelcase, Inc. 16.43% 20-Jul-2008
21 Duron 6.31% 31-Aug-2013
26 CIBC World Markets 14.91% 30-Apr-2012
27 Research Foundation of State University of New York on behalf of System Administration 6.73% 28-Feb-2005
28
29 Party Land 5.64% 28-Feb-2009
30 Radio Shack 6.66% 30-Apr-2008
31
35 Cooks'Wares 7.43% 3-Aug-2007
37 Gambro Health Care, Inc. 11.71% 5-Jul-2012
38 Sylvan Learning 5.70% 31-Dec-2007
39 Academic Studies Associates 8.10% 30-Oct-2005
43 CVS 9.26% 31-Jan-2007
47 Advanced Exercise Equipment, LLC 4.44% 31-Dec-2008
48 Mike McCormick's Golf 8.14% 28-Feb-2008
52 Phoneart.com 6.45% 28-Feb-2004
54 J.T. Clothiers 7.46% 30-Aug-2007
56 Jones New York 19.12% 30-Jun-2011
57
58 PetCo 22.35% 31-Jan-2006
59 Vina Dry Cleaner 7.41% 31-Dec-2012
61 PSI Family Services, Inc. 11.04% 31-Jan-2006
64 Shoe Carnival 17.52% 31-Jan-2011
65 Legacy Group (ACAC) 11.75% 31-Jul-2009
66
69
72
73
74 Dragon China Restaurant 10.79% 31-Jan-2012
76
77
78
80
81
82
83
84
86
88 Frank & Stein/So. Maid Donuts 10.20% 28-Feb-2008
89
90
91
94
96 Hair-N-Motion 5.07% 31-Dec-2007
100
103
104
106
110 Things & Wings Restaurant, Inc. 4.15% 31-Dec-2004
(1) Credit Lease Loan.
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST SERIES 2003-C9
ANNEX A-5
---------
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
(CROSSED & PORTFOLIOS)
MORTGAGE
LOAN CROSS COLLATERALIZED AND ORIGINAL LOAN CUT-OFF DATE
NUMBER PROPERTY NAME CITY STATE CROSS DEFAULTED LOAN FLAG BALANCE ($) LOAN BALANCE ($)
- -----------------------------------------------------------------------------------------------------------------------------------
Various Eckerd Portfolio Various Various Eckerd Portfolio 11,100,000.00 10,964,227.33
- -----------------------------------------------------------------------------------------------------------------------------------
78 Eckerd - Ironside, TX San Antonio TX Eckerd Portfolio 3,350,000.00 3,309,023.52
83 Eckerd - Baton Rouge, LA Baton Rouge LA Eckerd Portfolio 3,000,000.00 2,963,304.72
89 Eckerd - Alexandria, LA Alexandria LA Eckerd Portfolio 2,800,000.00 2,765,751.06
100 Eckerd - Kerrville, TX Kerrville TX Eckerd Portfolio 1,950,000.00 1,926,148.03
Various Norridge Portfolio Norridge IL Norridge Portfolio 5,190,000.00 5,190,000.00
- -----------------------------------------------------------------------------------------------------------------------------------
90 LaSalle Bank - Norridge, IL Norridge IL Norridge Portfolio 2,664,000.00 2,664,000.00
91 Walgreens - Norridge, IL Norridge IL Norridge Portfolio 2,526,000.00 2,526,000.00
MORTGAGE % OF AGGREGATE ORIGINAL TERM TO REMAINING TERM TO REMAINING
LOAN CUT-OFF DATE MATURITY OR ARD MATURITY OR ARD REMAINING IO ORIGINAL AMORT AMORT TERM MONTHLY P&I
NUMBER BALANCE (MOS.) (MOS.) PERIOD (MOS.) TERM (MOS.) (MOS.) PAYMENTS($)
- ---------------------------------------------------------------------------------------------------------------------------------
Various 0.95% 108 99 300 291 72,061.25
- ---------------------------------------------------------------------------------------------------------------------------------
78 0.29% 108 99 300 291 21,748.22
83 0.26% 108 99 300 291 19,476.01
89 0.24% 108 99 300 291 18,177.61
100 0.17% 108 99 300 291 12,659.41
Various 0.45% 120 120 360 360 30,817.01
- ---------------------------------------------------------------------------------------------------------------------------------
90 0.23% 120 120 360 360 15,818.21
91 0.22% 120 120 360 360 14,998.80
MORTGAGE MATURITY DATE LTV RATIO AT NUMBER OF CUT-OFF DATE
LOAN OR ARD BALLOON APPRAISED CUT-OFF DATE MATURITY OR UNITS UNIT OF LOAN AMOUNT UW NET CASH
NUMBER BALANCE($) VALUE($) DSCR(X) LTV RATIO ARD (UNITS) MEASURE PER (UNIT)($) FLOW($)
- ------------------------------------------------------------------------------------------------------------------------------------
Various 8,944,512.90 14,110,000.00 1.31 77.71% 63.39% 45,560 Sq. Ft. 240.65 1,134,129.52
- ------------------------------------------------------------------------------------------------------------------------------------
78 2,699,469.40 4,240,000.00 1.31 78.04% 63.67% 10,908 Sq. Ft. 303.36 341,657.32
83 2,417,436.43 3,810,000.00 1.31 77.78% 63.45% 11,200 Sq. Ft. 264.58 306,896.02
89 2,256,273.90 3,590,000.00 1.32 77.04% 62.85% 12,544 Sq. Ft. 220.48 288,544.03
100 1,571,333.17 2,470,000.00 1.30 77.98% 63.62% 10,908 Sq. Ft. 176.58 197,032.14
Various 4,390,447.15 6,480,000.00 1.39 80.09% 67.75% 21,137 Sq. Ft. 245.54 514,576.00
- ------------------------------------------------------------------------------------------------------------------------------------
90 2,253,593.83 3,330,000.00 1.53 80.00% 67.68% 6,837 Sq. Ft. 389.64 291,129.00
91 2,136,853.32 3,150,000.00 1.24 80.19% 67.84% 14,300 Sq. Ft. 176.64 223,447.00
(This page has been left blank intentionally.)
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST SERIES 2003-C9
ANNEX A-6 DEBT SERVICE PAYMENT SCHEDULE FOR COLUMBIA CORPORATE CENTER
---------
LOAN PAY PERIOD DEBT SERVICE ($) LOAN PAY PERIOD DEBT SERVICE ($)
- ------------------- -------------------- ------------------- -----------------
1 67,271.11 61 68,586.69
2 67,293.52 62 68,612.58
3 67,312.01 63 68,638.61
4 67,330.61 64 68,664.79
5 67,349.31 65 68,691.11
6 67,368.12 66 68,717.60
7 67,387.04 67 68,744.24
8 67,406.06 68 68,771.02
9 67,425.19 69 68,797.95
10 67,444.44 70 68,825.05
11 67,463.80 71 68,852.30
12 67,483.26 72 68,879.70
13 67,502.84 73 68,907.26
14 67,522.53 74 68,934.97
15 67,542.33 75 68,962.85
16 67,562.24 76 68,990.88
17 67,582.26 77 69,019.07
18 67,602.41 78 69,047.43
19 67,622.67 79 69,075.95
20 67,643.04 80 69,104.62
21 67,663.53 81 69,133.47
22 67,684.13 82 69,162.49
23 67,704.86 83 69,191.65
24 67,725.70 84 69,221.01
25 67,746.66 85 69,250.51
26 67,767.75 86 69,280.19
27 67,788.95 87 69,310.04
28 67,810.27 88 69,340.06
29 67,831.72 89 69,370.25
30 67,853.29 90 69,400.61
31 67,874.98 91 69,431.14
32 67,896.79 92 69,461.86
33 67,918.73 93 69,492.75
34 67,940.80 94 69,523.81
35 67,962.99 95 69,555.05
36 67,985.31 96 69,586.47
37 68,007.76 97 69,618.07
38 68,030.33 98 69,649.85
39 68,053.03 99 69,681.81
40 68,075.86 100 69,713.95
41 68,098.83 101 69,746.28
42 68,121.92 102 69,778.80
43 68,145.15 103 69,811.50
44 68,168.52 104 69,844.38
45 68,192.01 105 69,877.45
46 68,215.62 106 69,910.71
47 68,239.39 107 69,944.17
48 68,263.29 108 69,977.82
49 68,287.33 109 70,011.65
50 68,311.49 110 70,045.68
51 68,335.81 111 70,079.91
52 68,360.26 112 70,114.33
53 68,384.85 113 70,148.93
54 68,409.58 114 70,183.76
55 68,434.45 115 70,218.77
56 68,459.46 116 70,253.99
57 68,484.62 117 70,289.39
58 68,509.92 118 70,325.02
59 68,535.37 119 70,360.84
60 68,560.96 120 6,716,812.26
(This page has been left blank intentionally.)
ABN AMRO WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 1/16/2004
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 1/16/2004
135 S. LaSalle Street Suite 1625 SERIES 2003-C9 Prior Payment: N/A
Chicago, IL 60603 Next Payment: 2/17/2004
Record Date: 12/31/2003
ABN AMRO ACCT: XX-XXXX-XX-X
Administrator: Analyst:
REPORTING PACKAGE TABLE OF CONTENTS
====================================================================================================================================
=============================================== ========================================= ========================================
Issue Id: WBCM03C9 Page(s)
Monthly Data File Name: WBCM03C9_YYYYMM_3.zip -------
=============================================== REMIC Certificate Report Closing Date: 12/23/2003
Bond Interest Reconciliation First Payment Date: 1/16/2004
Cash Reconciliation Summary Assumed Final Payment Date: 1/16/2034
15 Month Historical
Loan Status Summary 15 ========================================
Month Historical
Payoff/Loss Summary
Historical Collateral
Level Prepayment Report
Delinquent Loan Detail
Mortgage Loan
Characteristics Loan
Level Detail Specially
Serviced Report
Modified Loan Detail
Realized Loss Detail
Appraisal Reduction
Detail
=========================================
================================================================================
PARTIES TO THE TRANSACTION
================================================================================
Depositor: Wachovia Commercial Mortgage Securities, Inc.
Underwriter: Wachovia Capital Markets, LLC/ABN AMRO Incorporated,
Citigroup Global Markets, Inc./ Goldman, Sachs & Co.
Master Servicer: Wachovia Bank, National Association
Special Servicer: Lennar Partner, Inc.
Rating Agency: Standard & Poor's Ratings Services/Fitch, Inc.
================================================================================
====================================================================
Information is available for this issue from the following sources
--------------------------------------------------------------------
LaSalle Web Site www.etrustee.net
Servicer Website
LaSalle Factor Line (800) 246-5761
====================================================================
====================================================================================================================================
B-1
ABN AMRO WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 1/16/2004
LASALLE BANK N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 1/16/2004
SERIES 2003-C9 Prior Payment: N/A
WAC: Next Payment: 2/17/2004
WA Life Term: Record Date: 12/31/2003
WA Amort Term: ABN AMRO ACCT: XX-XXXX-XX-X
Current Index:
Next Index: REMIC CERTIFICATE REPORT
====================================================================================================================================
ORIGINAL OPENING PRINCIPAL PRINCIPAL NEGATIVE CLOSING INTEREST INTEREST PASS-THROUGH
CLASS FACE VALUE (1) BALANCE PAYMENT ADJ. OR LOSS AMORTIZATION BALANCE PAYMENT (2) ADJUSTMENT RATE
CUSIP Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Next Rate (3)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
====================================================================================================================================
TOTAL P&I PAYMENT 0.00
========================
Notes: (1) N denotes notional balance not included in total (2) Accrued Interest plus/minus Interest Adjustment minus Deferred
Interest equals Interest Payment (3) Estimated
B-2
ABN AMRO WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 1/16/2004
LASALLE BANK N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 1/16/2004
SERIES 2003-C9 Prior Payment: N/A
Next Payment: 2/17/2004
ABN AMRO Acct: XX-XXXX-XX-X Record Date: 12/31/2003
BOND INTEREST RECONCILIATION
====================================================================================================================================
Deductions Additions
---------------------------------- --------------------------------------
Accrual Accrued Deferred & Prior Int Accrual Prepay-
-------------- Pass Thru Certificate Allocable Accretion Interest Int. Short- on prior ment
Class Method Days Rate Interest PPIS Interest Loss/Exp falls Due Shortfall (3) Penalties
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
0.00 0.00 0.00 0.00 0.00 0.00
====================================================================================================================================
===============================================================================================================
Additions
--------- Remaining
Other Distributable Interest Current Period Outstanding Credit Support
Interest Certificate Payment (Shortfall)/ Interest ------------------------
Proceeds (1) Interest (2) Amount Recovery Shortfalls Original Current (4)
===============================================================================================================
- ---------------------------------------------------------------------------------------------------------------
0.00 0.00 0.00 0.00
===============================================================================================================
(1) Other Interest Proceeds are additional interest amounts specifically allocated to the bond(s) and used in determining the
Distributable Interest of the bonds.
(2) Accrued - Deductions + Additional Interest.
(3) Where applicable.
(4) Determined as follows: (A) the ending balance of all the classes less (B) the sum of (i) the ending balance of the class and
(ii) the ending balance of all classes which are not subordinate to the class divided by (A).
B-3
ABN AMRO WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 1/16/2004
LASALLE BANK N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 1/16/2004
SERIES 2003-C9 Prior Payment: N/A
Next Payment: 2/17/2004
ABN AMRO Acct: XX-XXXX-XX-X Record Date: 12/31/2003
CASH RECONCILIATION SUMMARY
- ---------------------------------------- ----------------------------------------------- -------------------------------------------
INTEREST SUMMARY PRINCIPAL SUMMARY SERVICING FEE SUMMARY
- ---------------------------------------- ----------------------------------------------- -------------------------------------------
Current Scheduled Interest SCHEDULED PRINCIPAL: Current Servicing Fees
Less Deferred Interest Current Scheduled Principal Plus Fees Advanced for PPIS
Less PPIS Reducing Scheduled Int Advanced Scheduled Principal Less Reduction for PPIS
Plus Gross Advance Interest ----------------------------------------------- Plus Delinquent Servicing Fees
Less ASER Interest Adv Reduction Scheduled Principal -------------------------------------------
Less Other Interest Not Advanced ----------------------------------------------- Total Servicing Fees
Less Other Adjustment UNSCHEDULED PRINCIPAL: -------------------------------------------
- ---------------------------------------- Curtailments
Total Advanced Scheduled Principal
- ---------------------------------------- Liquidation Proceeds
UNSCHEDULED INTEREST: Repurchase Proceeds -------------------------------------------
- ---------------------------------------- Other Principal Proceeds PPIS SUMMARY
Prepayment Penalties ----------------------------------------------- -------------------------------------------
Yield Maintenance Penalties Total Unscheduled Principal Gross PPIS
Other Interest Proceeds ----------------------------------------------- Reduced by PPIE
- ---------------------------------------- Remittance Principal Reduced by Shortfalls in Fees
Total ----------------------------------------------- Reduced by Other Amounts
- ---------------------------------------- Remittance P&I Due Trust -------------------------------------------
Less Fees Paid to Servicer ----------------------------------------------- PPIS Reducing Scheduled Interest
Less Fee Strips Paid by Servicer Remittance P&I Due Certs -------------------------------------------
- ---------------------------------------- ----------------------------------------------- PPIS Reducing Servicing Fee
Less Fees & Expenses Paid By/To Servicer -------------------------------------------
- ---------------------------------------- ----------------------------------------------- PPIS Due Certificate
Special Servicing Fees POOL BALANCE SUMMARY -------------------------------------------
Workout Fees -----------------------------------------------
Liquidation Fees Balance Count
Interest Due Serv on Advances -----------------------------------------------
Non Recoverable Advances Beginning Pool
Misc. Fees & Expenses Scheduled Principal
- ---------------------------------------- Unscheduled Principal -------------------------------------------
Plus Trustee Fees Paid by Servicer Deferred Interest ADVANCE SUMMARY (ADVANCE MADE BY SERVICER)
- ---------------------------------------- Liquidations -------------------------------------------
Total Unscheduled Fees & Expenses Repurchases Principal Interest
- ---------------------------------------- ----------------------------------------------- -------------------------------------------
Total Interest Due Trust Ending Pool Prior Outstanding
- ---------------------------------------- ----------------------------------------------- Plus Current Period
LESS FEES & EXPENSES PAID BY/TO TRUST Less Recovered
- ---------------------------------------- Less Non Recovered
Trustee Fee -------------------------------------------
Fee Strips Ending Outstanding
Misc. Fees -------------------------------------------
Interest Reserve Withholding
Plus Interest Reserve Deposit
- ----------------------------------------
Total
- ----------------------------------------
Total Interest Due Certs
- ----------------------------------------
B-4
ABN AMRO WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 1/16/2004
LASALLE BANK N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 1/16/2004
SERIES 2003-C9 Prior Payment: N/A
Next Payment: 2/17/2004
ABN AMRO Acct: XX-XXXX-XX-X Record Date: 12/31/2003
ASSET BACKED FACTS ~15 MONTH HISTORICAL LOAN STATUS SUMMARY
============= ===================================================================== ==============================================
Delinquency Aging Categories Special Event Categories (1)
--------------------------------------------------------------------- ----------------------------------------------
Delinq 1 Delinq 2 Delinq 3+
Month Months Months Foreclosure REO Modifications Specially Serviced Bankruptcy
Distribution --------------------------------------------------------------------- ----------------------------------------------
Date # Balance # Balance # Balance # Balance # Balance # Balance # Balance # Balance
============= ===================================================================== ==============================================
01/16/04
============= ===================================================================== ==============================================
(1) Modification, Specially Serviced & Bankruptcy Totals are Included in the Appropriate Delinquency Aging Category.
B-5
ABN AMRO WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 1/16/2004
LASALLE BANK N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 1/16/2004
SERIES 2003-C9 Prior Payment: N/A
Next Payment: 2/17/2004
ABN AMRO Acct: XX-XXXX-XX-X Record Date: 12/31/2003
ASSET BACKED FACTS ~15 MONTH HISTORICAL PAYOFF/LOSS SUMMARY
====================================================================================================================================
Ending Pool (1) Payoffs (2) Penalties Appraisal Liquidations Realized Remaining
Reduct. (2) (2) Losses (2) Term Curr Weighted Avg.
Distribution ----------------------------------------------------------------------------- --------------------------------------
Date # Balance # Balance # Amount # Balance # Balance # Amount Life Amort. Coupon Remit
============= ============================================================================= ======================================
01/16/04
============= ============================================================================= ======================================
(1) Percentage based on pool as of cutoff.
(2) Percentage based on pool as of beginning of period.
B-6
ABN AMRO WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 1/16/2004
LASALLE BANK N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 1/16/2004
SERIES 2003-C9 Prior Payment: N/A
Next Payment: 2/17/2004
ABN AMRO Acct: XX-XXXX-XX-X Record Date: 12/31/2003
HISTORICAL COLLATERAL LEVEL PREPAYMENT REPORT
===================== ==================================================== =======================================================
Disclosure Payoff Initial Payoff Penalty Prepayment Maturity Property Geographic
Control # Period Balance Type Amount Amount Date Date Type Location
===================== ==================================================== =======================================================
===================== ==================================================== =======================================================
Current 0 0
Cumulative
====================================================
B-7
ABN AMRO WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 1/16/2004
LASALLE BANK N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 1/16/2004
SERIES 2003-C9 Prior Payment: N/A
Next Payment: 2/17/2004
ABN AMRO Acct: XX-XXXX-XX-X Record Date: 12/31/2003
DELINQUENT LOAN DETAIL
====================================================================================================================================
Paid Outstanding Out. Property Special
Disclosure Thru Current P&I P&I Protection Advance Servicer Foreclosure Bankruptcy REO
Control # Date Advance Advances** Advances Description (1) Transfer Date Date Date Date
====================================================================================================================================
====================================================================================================================================
A. P&I Advance - Loan in Grace Period
B. P&I Advance - Late Payment but < 1 month delinq
1. P&I Advance - Loan delinquent 1 month
2. P&I Advance - Loan delinquent 2 month
3. P&I Advance - Loan delinquent 3 months or More
4. Matured Balloon/Assumed Scheduled Payment
7. P&I Advance (Foreclosure)
9. P&I Advance (REO)
====================================================================================================================================
** Outstanding P&I Advances include the current period P&I Advance
B-8
ABN AMRO WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 1/16/2004
LASALLE BANK N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 1/16/2004
SERIES 2003-C9 Prior Payment: N/A
Next Payment: 2/17/2004
ABN AMRO Acct: XX-XXXX-XX-X Record Date: 12/31/2003
MORTGAGE LOAN CHARACTERISTICS
Distribution of Principal Balances Distribution of Mortgage Interest Rates
================================================================ ==================================================================
Current Weighted Average Current Weighted Average
Scheduled # of Scheduled % of ---------------------- Mortgage # of Scheduled % of ----------------------
Balances Loans Balance Balance Term Coupon DSCR Interest Rate Loans Balance Balance Term Coupon DSCR
================================================================ ==================================================================
==================================================================
0 0 0.00%
==================================================================
Minimum Mortgage Interest Rate 10.0000%
Maximum Mortgage Interest Rate 10.0000%
================================================================
0 0 0.00%
================================================================
Average Scheduled Balance
Maximum Scheduled Balance
Minimum Scheduled Balance
DISTRIBUTION OF REMAINING TERM (FULLY AMORTIZING) ==================================================================
================================================================ DISTRIBUTION OF REMAINING TERM (BALLOON)
Weighted Average Weighted Average
Fully Amortizing # of Scheduled % of ------------------- Balloon # of Scheduled % of -------------------
Mortgage Loans Loans Balance Balance Term Coupon DSCR Mortgage Loans Loans Balance Balance Term Coupon DSCR
================================================================ ==================================================================
0 to 60
61 to 120
121 to 180
181 to 240
241 to 360
================================================================ ===================================================================
0 0 0.00% 0 0 0.00%
================================================================ ===================================================================
Minimum Remaining Term Minimum Remaining Term 0
Maximum Remaining Term Maximum Remaining Term 0
B-9
ABN AMRO WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date:
LASALLE BANK N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date:
SERIES 2003-C9 Prior Payment:
Next Payment:
ABN AMRO Acct: XX-XXXX-XX-X Record Date:
MORTGAGE LOAN CHARACTERISTICS
DISTRIBUTION OF DSCR (CURRENT) GEOGRAPHIC DISTRIBUTION
================================================================ ===================================================================
Debt Service # of Scheduled % of Geographic # of Scheduled % of
Coverage Ratio Loans Balance Balance WAMM WAC DSCR Location Loans Balance Balance WAMM WAC DSCR
================================================================ ===================================================================
================================================================
0 0 0.00%
================================================================
Maximum DSCR 0.000
Minimum DSCR 0.000
DISTRIBUTION OF DSCR (CUTOFF)
================================================================
Debt Service # of Scheduled % of
Coverage Ratio Loans Balance Balance WAMM WAC DSCR
================================================================
================================================================ ===================================================================
0 0 0.00% 0 0 0.00%
================================================================ ===================================================================
Maximum DSCR 0.000
Minimum DSCR 0.000
B-10
ABN AMRO WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date:
LASALLE BANK N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date:
SERIES 2003-C9 Prior Payment:
Next Payment:
ABN AMRO Acct: XX-XXXX-XX-X Record Date:
MORTGAGE LOAN CHARACTERISTICS
DISTRIBUTION OF PROPERTY TYPES DISTRIBUTION OF LOAN SEASONING
================================================================= =================================================================
Property # of Scheduled % of Number # of Scheduled % of
Type Loans Balance Balance WAMM WAC DSCR of Years Loans Balance Balance WAMM WAC DSCR
================================================================= =================================================================
================================================================= =================================================================
0 0 0.00% 0 0 0.00%
================================================================= =================================================================
DISTRIBUTION OF AMORTIZATION TYPE DISTRIBUTION OF YEAR LOANS MATURING
================================================================= =================================================================
Amortization # of Scheduled % of # of Scheduled % of
Type Loans Balance Balance WAMM WAC DSCR Year Loans Balance Balance WAMM WAC DSCR
================================================================= =================================================================
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014 & Longer
================================================================= =================================================================
0 0 0.00%
================================================================= =================================================================
B-11
ABN AMRO WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 1/16/2004
LASALLE BANK N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 1/16/2004
SERIES 2003-C9 Prior Payment: N/A
Next Payment: 2/17/2004
ABN AMRO Acct: XX-XXXX-XX-X Record Date: 12/31/2003
LOAN LEVEL DETAIL
====================================================================================================================================
Operating Ending Spec. Loan Prepayment
Disclosure Property Statement Maturity Principal Note Scheduled Mod. Serv ASER Status --------------------
Control # Grp Type State DSCR NOI Date Date Balance Rate P&I Flag Flag Flag Code(1) Amount Penalty Date
====================================================================================================================================
====================================================================================================================================
W/Avg 0.00 0 0 0 0 0
====================================================================================================================================
* NOI and DSCR, if available and reportable under the terms of the Pooling and Servicing Agreement, are based on information
obtained from the related borrower, and no other party to the agreement shall be held liable for the accuracy or methodology used
to determine such figures.
(1) Legend:
A. P&I Adv in Grace - Period
1. P&I Adv - delinquent 1 month 3. P&I Adv - delinquent 3+ months 5. Prepaid in Full 7. Foreclosure 9. REO 11. Modification
B. P&I Adv - < one month delinq
2. P&I Adv - delinquent 2 months 4. Mat. Balloon/Assumed P&I 6. Specially Serviced 8. Bankruptcy 10. DPO
B-12
ABN AMRO WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 1/16/2004
LASALLE BANK N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 1/16/2004
SERIES 2003-C9 Prior Payment: N/A
Next Payment: 2/17/2004
ABN AMRO Acct: XX-XXXX-XX-X Record Date: 12/31/2003
SPECIALLY SERVICED (PART I) ~ LOAN DETAIL
====================================================================================================================================
Balance Remaining Term
Disclosure Transfer Loan Status ------------------ Note Maturity -------------- Property NOI
Control # Date Code (1) Scheduled Actual Rate Date Life Amort. Type State NOI DSCR Date
====================================================================================================================================
====================================================================================================================================
(1) Legend: A. P&I Adv - in Grace Period 1. P&I Adv - delinquent 1 month 3. P&I Adv - delinquent 3+ months 7. Foreclosure
B. P&I Adv - < 1 month delinq. 2. P&I Adv - delinquent 2 months 4. Mat. Balloon/Assumed P&I 9. REO
B-13
ABN AMRO WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 1/16/2004
LASALLE BANK N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 1/16/2004
SERIES 2003-C9 Prior Payment: N/A
Next Payment: 2/17/2004
ABN AMRO Acct: XX-XXXX-XX-X Record Date: 12/31/2003
SPECIALLY SERVICED LOAN DETAIL (PART II) ~ SERVICER COMMENTS
====================================================================================================================================
Disclosure Resolution
Control # Strategy Comments
====================================================================================================================================
====================================================================================================================================
B-14
ABN AMRO WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 1/16/2004
LASALLE BANK N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 1/16/2004
SERIES 2003-C9 Prior Payment: N/A
Next Payment: 2/17/2004
ABN AMRO Acct: XX-XXXX-XX-X Record Date: 12/31/2003
MODIFIED LOAN DETAIL
====================================================================================================================================
Cutoff Modified
Disclosure Modification Maturity Maturity Modification
Control # Date Date Date Description
====================================================================================================================================
====================================================================================================================================
B-15
ABN AMRO WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 1/16/2004
LASALLE BANK N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 1/16/2004
SERIES 2003-C9 Prior Payment: N/A
Next Payment: 2/17/2004
ABN AMRO Acct: XX-XXXX-XX-X Record Date: 12/31/2003
REALIZED LOSS DETAIL
====================================================================================================================================
Beginning Gross Proceeds Aggregate Net Net Proceeds
Disclosure Appraisal Appraisal Scheduled Gross as a % of Liquidation Liquidation as a % of Realized
Period Control # Date Value Balance Proceeds Sched Principal Expenses * Proceeds Sched. Balance Loss
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT TOTAL 0.00 0.00 0.00 0.00 0.00
CUMULATIVE 0.00 0.00 0.00 0.00 0.00
====================================================================================================================================
* Aggregate liquidation expenses also include outstanding P&I advances and unpaid servicing fees, unpaid trustee fees, etc.
B-16
ABN AMRO WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 1/16/2004
LASALLE BANK N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 1/16/2004
SERIES 2003-C9 Prior Payment: N/A
Next Payment: 2/17/2004
ABN AMRO Acct: XX-XXXX-XX-X Record Date: 12/31/2003
APPRAISAL REDUCTION DETAIL
====================================================================================================================================
Remaining Term
Disclosure Appraisal Scheduled ARA Current P&I Note Maturity -------------- Property
Control # Red. Date Balance Amount Advance ASER Rate Date Life Amort. Type State
====================================================================================================================================
====================================================================================================================================
======= ==========================
Appraisal
--------------------------
DSCR Value Date
======= ==========================
=================================
=================================
B-17
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ANNEX C
CLASS X-P REFERENCE RATE SCHEDULE
INTEREST CLASS X-P INTEREST CLASS X-P
ACCRUAL DISTRIBUTION REFERENCE ACCRUAL DISTRIBUTION REFERENCE
PERIOD DATE RATE PERIOD DATE RATE
- ---------- -------------- ------------- ---------- -------------- -------------
1 15-Jan-04 5.574430 43 15-Jul-07 5.397050
2 15-Feb-04 5.395590 44 15-Aug-07 5.576180
3 15-Mar-04 5.395780 45 15-Sep-07 5.576210
4 15-Apr-04 5.574580 46 15-Oct-07 5.397130
5 15-May-04 5.395720 47 15-Nov-07 5.576280
6 15-Jun-04 5.574680 48 15-Dec-07 5.397180
7 15-Jul-04 5.395810 49 15-Jan-08 5.576340
8 15-Aug-04 5.574770 50 15-Feb-08 5.397230
9 15-Sep-04 5.574830 51 15-Mar-08 5.397490
10 15-Oct-04 5.395950 52 15-Apr-08 5.576430
11 15-Nov-04 5.574920 53 15-May-08 5.397310
12 15-Dec-04 5.396030 54 15-Jun-08 5.576490
13 15-Jan-05 5.396070 55 15-Jul-08 5.397360
14 15-Feb-05 5.396110 56 15-Aug-08 5.576550
15 15-Mar-05 5.396620 57 15-Sep-08 5.576580
16 15-Apr-05 5.575130 58 15-Oct-08 5.410800
17 15-May-05 5.396210 59 15-Nov-08 5.674990
18 15-Jun-05 5.575210 60 15-Dec-08 5.511180
19 15-Jul-05 5.396280 61 15-Jan-09 5.515370
20 15-Aug-05 5.575290 62 15-Feb-09 5.515350
21 15-Sep-05 5.575340 63 15-Mar-09 5.516040
22 15-Oct-05 5.396400 64 15-Apr-09 5.698060
23 15-Nov-05 5.575440 65 15-May-09 5.515270
24 15-Dec-05 5.396490 66 15-Jun-09 5.698020
25 15-Jan-06 5.396520 67 15-Jul-09 5.515210
26 15-Feb-06 5.396560 68 15-Aug-09 5.697980
27 15-Mar-06 5.397150 69 15-Sep-09 5.697960
28 15-Apr-06 5.575640 70 15-Oct-09 5.515130
29 15-May-06 5.396650 71 15-Nov-09 5.697920
30 15-Jun-06 5.575710 72 15-Dec-09 5.515080
31 15-Jul-06 5.396710 73 15-Jan-10 5.515050
32 15-Aug-06 5.575780 74 15-Feb-10 5.515020
33 15-Sep-06 5.575820 75 15-Mar-10 5.515760
34 15-Oct-06 5.396800 76 15-Apr-10 5.697790
35 15-Nov-06 5.575890 77 15-May-10 5.514920
36 15-Dec-06 5.396860 78 15-Jun-10 5.697740
37 15-Jan-07 5.396890 79 15-Jul-10 5.514850
38 15-Feb-07 5.396920 80 15-Aug-10 5.697690
39 15-Mar-07 5.397570 81 15-Sep-10 5.697660
40 15-Apr-07 5.576050 82 15-Oct-10 5.514750
41 15-May-07 5.396990 83 15-Nov-10 5.758730
42 15-Jun-07 5.576110 84 15-Dec-10 5.574010
C-1
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PROSPECTUS
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
WACHOVIA COMMERCIAL MORTGAGE SECURITIES, INC.
DEPOSITOR
Wachovia Commercial Mortgage Securities, Inc. will periodically offer
certificates in one or more series. Each series of certificates will represent
the entire beneficial ownership interest in a trust fund. Distributions on the
certificates of any series will be made only from the assets of the related
trust fund.
Neither the certificates nor any assets in the related trust fund will be
obligations of, or be guaranteed by, the depositor, any servicer or any of
their respective affiliates. Neither the certificates nor any assets in the
related trust fund will be guaranteed or insured by any governmental agency or
instrumentality or by any person, unless otherwise provided in the prospectus
supplement.
The primary assets of the trust fund may include:
o multifamily and commercial mortgage loans, including participations
therein;
o mortgage-backed securities evidencing interests in or secured by
multifamily and commercial mortgage loans, including participations
therein, and other mortgage-backed securities;
o direct obligations of the United States or other government agencies; or
o a combination of the assets described above.
INVESTING IN THE OFFERED CERTIFICATES INVOLVES RISKS. YOU SHOULD REVIEW
THE INFORMATION APPEARING UNDER THE CAPTION "RISK FACTORS" ON PAGE 14 AND IN
THE PROSPECTUS SUPPLEMENT BEFORE PURCHASING ANY OFFERED CERTIFICATE.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE OFFERED CERTIFICATES OR
DETERMINED THAT THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUS SUPPLEMENT IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
November 14, 2003
TABLE OF CONTENTS
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT .............................................. 5
ADDITIONAL INFORMATION ................................................................... 6
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE ........................................ 6
SUMMARY OF PROSPECTUS .................................................................... 7
RISK FACTORS ............................................................................. 14
DESCRIPTION OF THE TRUST FUNDS ........................................................... 34
General ................................................................................. 34
Mortgage Loans--Leases .................................................................. 34
CMBS .................................................................................... 38
Certificate Accounts .................................................................... 38
Credit Support .......................................................................... 39
Cash Flow Agreements .................................................................... 39
Pre-Funding ............................................................................. 39
YIELD CONSIDERATIONS ..................................................................... 40
General ................................................................................. 40
Pass-Through Rate ....................................................................... 40
Payment Delays .......................................................................... 40
Shortfalls in Collections of Interest Resulting from Prepayments ........................ 40
Prepayment Considerations ............................................................... 40
Weighted Average Life and Maturity ...................................................... 42
Controlled Amortization Classes and Companion Classes ................................... 43
Other Factors Affecting Yield, Weighted Average Life and Maturity ....................... 43
THE DEPOSITOR ............................................................................ 45
USE OF PROCEEDS .......................................................................... 45
DESCRIPTION OF THE CERTIFICATES .......................................................... 46
General ................................................................................. 46
Distributions ........................................................................... 46
Distributions of Interest on the Certificates ........................................... 47
Distributions of Principal of the Certificates .......................................... 48
Components .............................................................................. 48
Distributions on the Certificates in Respect of Prepayment Premiums or in Respect of
Equity Participations ................................................................. 48
Allocation of Losses and Shortfalls ..................................................... 48
Advances in Respect of Delinquencies .................................................... 49
Reports to Certificateholders ........................................................... 49
Voting Rights ........................................................................... 51
Termination ............................................................................. 51
Book-Entry Registration and Definitive Certificates ..................................... 52
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS ...................................... 53
General ................................................................................. 53
Assignment of Mortgage Assets; Repurchases .............................................. 53
Representations and Warranties; Repurchases ............................................. 54
Certificate Account ..................................................................... 55
Collection and Other Servicing Procedures ............................................... 58
Realization upon Defaulted Mortgage Loans ............................................... 59
Hazard Insurance Policies ............................................................... 60
Due-on-Sale and Due-on-Encumbrance Provisions ........................................... 61
Servicing Compensation and Payment of Expenses .......................................... 61
2
Evidence as to Compliance ................................................ 62
Certain Matters Regarding the Master Servicer and the Depositor .......... 62
Events of Default ........................................................ 63
Rights upon Event of Default ............................................. 63
Amendment ................................................................ 64
List of Certificateholders ............................................... 65
The Trustee .............................................................. 65
Duties of the Trustee .................................................... 65
Certain Matters Regarding the Trustee .................................... 65
Resignation and Removal of the Trustee ................................... 65
DESCRIPTION OF CREDIT SUPPORT ............................................. 67
General .................................................................. 67
Subordinate Certificates ................................................. 67
Cross-Support Provisions ................................................. 67
Insurance or Guarantees with Respect to Mortgage Loans ................... 67
Letter of Credit ......................................................... 68
Certificate Insurance and Surety Bonds ................................... 68
Reserve Funds ............................................................ 68
Credit Support with Respect to CMBS ...................................... 68
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND LEASES ........................ 69
General .................................................................. 69
Types of Mortgage Instruments ............................................ 69
Leases and Rents ......................................................... 70
Personalty ............................................................... 70
Cooperative Loans ........................................................ 70
Junior Mortgages; Rights of Senior Lenders ............................... 71
Foreclosure .............................................................. 72
Bankruptcy Laws .......................................................... 76
Environmental Considerations ............................................. 78
Due-on-Sale and Due-on-Encumbrance ....................................... 80
Subordinate Financing .................................................... 80
Default Interest and Limitations on Prepayments .......................... 80
Certain Laws and Regulations; Types of Mortgaged Properties .............. 80
Applicability of Usury Laws .............................................. 81
Soldiers' and Sailors' Civil Relief Act of 1940 .......................... 81
Americans with Disabilities Act .......................................... 81
Forfeiture in Drug, RICO and Money Laundering Violations ................. 82
Federal Deposit Insurance Act; Commercial Mortgage Loan Servicing ........ 82
MATERIAL FEDERAL INCOME TAX CONSEQUENCES .................................. 84
General .................................................................. 84
REMICs ................................................................... 84
Taxation of Owners of REMIC Regular Certificates ......................... 86
Taxation of Owners of REMIC Residual Certificates ........................ 89
Grantor Trust Funds ...................................................... 100
Characterization of Investments in Grantor Trust Certificates ............ 101
Taxation of Owners of Grantor Trust Fractional Interest Certificates ..... 101
STATE AND OTHER TAX CONSEQUENCES .......................................... 108
ERISA CONSIDERATIONS ...................................................... 109
General .................................................................. 109
Prohibited Transaction Exemptions ........................................ 109
3
LEGAL INVESTMENT .......................................................... 112
METHOD OF DISTRIBUTION .................................................... 114
LEGAL MATTERS ............................................................. 115
FINANCIAL INFORMATION ..................................................... 115
RATINGS ................................................................... 115
INDEX OF PRINCIPAL DEFINITIONS ............................................ 116
4
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the offered certificates in two
separate documents that provide progressively more detail:
o this prospectus, which provides general information, some of which may
not apply to your series of certificates; and
o the accompanying prospectus supplement, which describes the specific
terms of your series of certificates.
If the description of your certificates in the accompanying prospectus
supplement differs from the related description in this prospectus, you should
rely on the information in that prospectus supplement.
This prospectus may not be used to consummate sales of the offered
certificates of any series unless accompanied by the prospectus supplement for
that series. This prospectus and the prospectus supplements also may be used by
us, Wachovia Capital Markets, LLC, our affiliate, and any other of our
affiliates when required under the federal securities laws in connection with
offers and sales of offered certificates in furtherance of market-making
activities in the offered certificates. Wachovia Capital Markets, LLC or any
such other affiliate may act as principal or agent in such transactions. Such
sales will be made at prices related to prevailing market prices at the time of
sale or otherwise.
Some capitalized terms used in this prospectus are defined under the
caption "Index of Principal Definitions" beginning on page 116 in this
prospectus.
In this prospectus, the terms "depositor", "we", "us" and "our" refer to
Wachovia Commercial Mortgage Securities, Inc.
---------------------
Until 90 days after the date of each prospectus supplement, all dealers
effecting transactions in the offered certificates covered by that prospectus
supplement, whether or not participating in the distribution thereof, may be
required to deliver such prospectus supplement and this prospectus. This is in
addition to the obligation of dealers to deliver a prospectus and prospectus
supplement when acting as underwriters and with respect to their unsold
allotments or subscriptions.
You should rely only on any information or representations contained or
incorporated by reference in this prospectus and the related prospectus
supplement. This prospectus and any prospectus supplement do not constitute an
offer to sell or a solicitation of an offer to buy any securities in any state
or other jurisdiction in which such offer would be unlawful.
5
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement (of which this prospectus forms a part) under the Securities Act of
1933, as amended, with respect to the offered certificates. This prospectus and
the prospectus supplement do not contain all of the information set forth in
the registration statement. For further information, you should refer to the
registration statement and the exhibits attached thereto. 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
The Woolworth Building, 233 Broadway, New York, New York 10279 and 175 W.
Jackson Boulevard, Suite 900, Chicago, Illinois 60604. 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 system.
We will file or cause to be filed with the Securities and Exchange
Commission such periodic reports with respect to each trust fund as are
required under the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Securities and Exchange Commission thereunder.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
We are incorporating in this prospectus by reference all documents and
reports filed by us with respect to a trust fund pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended. You may
obtain, without charge, a copy of any or all documents or reports incorporated
in this prospectus by reference, to the extent such documents or reports relate
to an offered certificate. Exhibits to those documents will be provided to you
only if such exhibits were specifically incorporated by reference in those
documents. Requests to the depositor should be directed in writing to Wachovia
Commercial Mortgage Securities, Inc., 301 South College Street, Charlotte,
North Carolina 28288-0166, Attention: Secretary, or by telephone at
704-374-6161.
6
SUMMARY OF PROSPECTUS
The following summary is a brief description of the main terms of the
offered certificates. For this reason, the summary does not contain all the
information that may be important to you. You will find a detailed description
of the terms of the offered certificates following this summary and in the
accompanying prospectus supplement.
The Trust Assets.............. Each series of certificates will represent
the entire beneficial ownership interest in a
trust fund consisting primarily of any of the
following:
o mortgage assets;
o certificate accounts;
o forms of credit support;
o cash flow agreements; and
o amounts on deposit in a pre-funding
account.
The Mortgage Assets........... The mortgage assets with respect to each
series of certificates may consist of any of
the following:
o multifamily and commercial mortgage loans,
including participations therein;
o commercial mortgage-backed securities,
including participations therein;
o direct obligations of the United States or
other government agencies; and
o a combination of the assets described above.
The mortgage loans will not be guaranteed or
insured by us or any of our affiliates or,
unless otherwise provided in the prospectus
supplement, by any governmental agency or
instrumentality or other person. The mortgage
loans will be primarily secured by first or
junior liens on, or security interests in fee
simple, leasehold or a similar interest in,
any of the following types of properties:
o residential properties consisting of five or
more rental or cooperatively owned dwelling
units;
o shopping centers;
o retail buildings or centers;
o hotels and motels;
o office buildings;
o nursing homes;
o hospitals or other health-care related
facilities;
o industrial properties;
o warehouse, mini-warehouse or self-storage
facilities;
o mobile home parks;
7
o mixed use properties; and
o other types of commercial properties.
Some or all of the mortgage loans may also be
secured by an assignment of one or more leases
of all or a portion of the related mortgaged
properties. A significant or the sole source
of payments on certain mortgage loans will be
the rental payments due under the related
leases.
A mortgage loan may have an interest rate that
has any of the following features:
o is fixed over its term;
o adjusts from time to time;
o is partially fixed and partially floating;
o is floating based on one or more formulae
or indices;
o may be converted from a floating to a fixed
interest rate;
o may be converted from a fixed to a floating
interest rate; or
o interest is not paid currently but is
accrued and added to the principal balance.
A mortgage loan may provide for any of the
following:
o scheduled payments to maturity;
o payments that adjust from time to time;
o negative amortization or accelerated
amortization;
o full amortization or require a balloon
payment due on its stated maturity date;
o prohibitions on prepayment;
o releases or substitutions of collateral,
including defeasance thereof with direct
obligations of the United States; and
o payment of a premium or a yield maintenance
penalty in connection with a principal
prepayment.
Unless otherwise described in the prospectus
supplement for a series of certificates:
o the mortgaged properties may be located in
any one of the 50 states, the District of
Columbia or the Commonwealth of Puerto Rico;
o all mortgage loans will have original terms
to maturity of not more than 40 years;
o all mortgage loans will have individual
principal balances at origination of not
less than $100,000;
8
o all mortgage loans will have been originated
by persons other than the depositor; and
o all mortgage assets will have been
purchased, either directly or indirectly, by
the depositor on or before the date of
initial issuance of the related series of
certificates.
Any commercial mortgage-backed securities
included in a trust fund will evidence
ownership interests in or be secured by
mortgage loans similar to those described
above and other mortgage-backed securities.
Some commercial mortgage-backed securities
included in a trust fund may be guaranteed or
insured by an affiliate of the depositor,
Freddie Mac, Fannie Mae, Ginnie Mae, Farmer
Mac or any other person specified in the
prospectus supplement.
Certificate Accounts.......... Each trust fund will include one or more
accounts established and maintained on behalf
of the certificateholders. All payments and
collections received or advanced with respect
to the mortgage assets and other assets in the
trust fund will be deposited into those
accounts. A certificate account may be
maintained as an interest bearing or a
non-interest bearing account, and funds may be
held as cash or reinvested.
Credit Support................ The following types of credit support may be
used to enhance the likelihood of distributions
on certain classes of certificates:
o subordination of junior certificates;
o over collateralization;
o letters of credit;
o issurance policies;
o guarantees;
o reserve funds; and/or
o other types of credit support described in
the prospectus supplement and a combination
of any of the above.
Cash Flow Agreements.......... Cash flow agreements are used to reduce the
effects of interest rate or currency exchange
rate fluctuations on the underlying mortgage
assets or on one or more classes of
certificates and increase the likelihood of
timely distributions on the certificates or
such classes of certificates, as the case may
be. The trust fund may include any of the
following types of cash flow agreements:
o guaranteed investment contracts;
o interest rate swap or exchange contracts;
o interest rate cap or floor agreements;
o currency exchange agreements;
o yield supplement agreements; or
9
o other types of similar agreements described
in the prospectus supplement.
Pre-Funding Account;
Capitalized Interest
Account....................... A trust fund may use monies deposited into a
pre-funding account to acquire additional
mortgage assets following a closing date for
the related series of certificates. The amount
on deposit in a pre-funding account will not
exceed 25% of the pool balance of the trust
fund as of the cut-off date on which the
ownership of the mortgage loans and rights to
payment thereon are deemed transferred to the
trust fund, as specified in the related
prospectus supplement. The depositor will
select any additional mortgage assets using
criteria that is substantially similar to the
criteria used to select the mortgage assets
included in the trust fund on the closing date.
If provided in the prospectus supplement, a
trust fund also may include amounts on deposit
in a separate capitalized interest account.
The depositor may use amounts on deposit in a
capitalized interest account to supplement
investment earnings, if any, of amounts on
deposit in the pre-funding account, supplement
interest collections of the trust fund, or
such other purpose as specified in the
prospectus supplement.
Amounts on deposit in any pre-funding account
or any capitalized interest account will be
held in cash or invested in short-term
investment grade obligations. Amounts
remaining on deposit in any pre-funding
account and any capitalized interest account
after the end of the related pre-funding
period will be distributed to
certificateholders as described in the
prospectus supplement.
Description of Certificates... Each series of certificates will include one
or more classes. Each series of certificates
will represent in the aggregate the entire
beneficial ownership interest in the related
trust fund. The offered certificates are the
classes of certificates being offered to you
pursuant to the prospectus supplement. The
non-offered certificates are the classes of
certificates not being offered to you pursuant
to the prospectus supplement. Information on
the non-offered certificates is being provided
solely to assist you in your understanding of
the offered certificates.
Distributions on
Certificates.................. The certificates may provide for different
methods of distributions to specific classes.
Any class of certificates may:
o provide for the accrual of interest thereon
based on fixed, variable or floating rates;
o be senior or subordinate to one or more
other classes of certificates with respect
to interest or principal distribution and
the allocation of losses on the assets of
the trust fund;
10
o be entitled to principal distributions, with
disproportionately low, nominal or no
interest distributions;
o be entitled to interest distributions, with
disproportionately low, nominal or no
principal distributions;
o provide for distributions of principal or
accrued interest only after the occurrence
of certain events, such as the retirement of
one or more other classes of certificates;
o provide for distributions of principal to be
made at a rate that is faster or slower than
the rate at which payments are received on
the mortgage assets in the related trust
fund;
o provide for distributions of principal
sequentially, based on specified payment
schedules or other methodologies; and
o provide for distributions based on a
combination of any of the above features.
Interest on each class of offered certificates
of each series will accrue at the applicable
pass-through rate on the outstanding
certificate balance or notional amount.
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 the prospectus supplement.
The certificate balance of a certificate
outstanding from time to time represents the
maximum amount that the holder thereof is then
entitled to receive in respect of principal
from future cash flow on the assets in the
related trust fund. Unless otherwise specified
in the prospectus supplement, distributions of
principal will be made on each distribution
date to the class or classes of certificates
entitled thereto until the certificate balance
of such certificates is reduced to zero.
Distributions of principal to any class of
certificates will be made on a pro rata basis
among all of the certificates of such class.
Advances...................... A servicer may be obligated as part of its
servicing responsibilities to make certain
advances with respect to delinquent scheduled
payments and property related expenses which it
deems recoverable. The trust fund may be
charged interest for any advance. We will not
have any responsibility to make such advances.
One of our affiliates may have the
responsibility to make such advances, but only
if that affiliate is acting as a servicer or
master servicer for the related series of
certificates.
Termination................... A series of certificates may be subject to
optional early termination through the
repurchase of the mortgage assets in the
related trust fund.
11
Registration of Certificates... One or more classes of the offered
certificates may be initially represented by
one or more certificates registered in the name
of Cede & Co. as the nominee of The Depository
Trust Company. If your offered certificates are
so registered, you will not be entitled to
receive a definitive certificate representing
your interest except in the event that physical
certificates are issued under the limited
circumstances described in this prospectus and
the prospectus supplement.
Tax Status of
the Certificates.............. The certificates of each series will constitute
either:
o "regular interests" or "ownership interests"
in a trust fund treated as a "real estate
mortgage investment conduit" under the
Internal Revenue Code of 1986, as amended;
o interests in a trust fund treated as a
grantor trust under applicable provisions of
the Internal Revenue Code of 1986, as
amended;
o "regular interests" or "residual interests"
in a trust fund treated as a "financial
assets securitization investment trust"
under the Internal Revenue Code of 1986, as
amended; or
o any combination of any of the above
features.
ERISA Considerations.......... If you are a fiduciary of an employee benefit
plan or other retirement plan or arrangement
that is subject to the Employee Retirement
Income Security Act of 1974, as amended, or
Section 4975 of the Internal Revenue Code of
1986, as amended, or any materially similar
federal, state or local law, or any person who
proposes to use "plan assets" of any of these
plans to acquire any offered certificates, you
should carefully review with your legal counsel
whether the purchase or holding of any offered
certificates could give rise to transactions
not permitted under these laws. The prospectus
supplement will specify if investment in some
certificates may require a representation that
the investor is not (or is not investing on
behalf of) a plan or similar arrangement or if
other restrictions apply.
Legal Investment.............. The 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 activities are subject to legal
investment laws and regulations, regulatory
capital requirements or review by regulatory
authorities, then you may be subject to
restrictions on investment n the offered
certificates. You should consult your own legal
advisors for assistance in determining the
suitability of and consequences to you of the
purchase, ownership and sale of the offered
certificates. See "Legal Investment" herein.
12
Rating........................ At the date of issuance, as to each series,
each class of offered certificates will not be
rated lower than investment grade by one or
more nationally recognized statistical rating
agencies. A security rating is not a
recommendation to buy, sell or hold securities
and may be subject to qualification, revision
or withdrawal at any time by the assigning
rating organization.
13
RISK FACTORS
You should consider the following risk factors, in addition to the risk
factors in the prospectus supplement, in deciding whether to purchase any of
the offered certificates. The risks and uncertainties described below, together
with those described in the prospectus supplement under "Risk Factors",
summarize the material risks relating to your certificates.
Your Ability to Resell
Certificates May Be Limited
Because of Their
Characteristics............... You may not be able to resell your certificates
and the value of your certificates may be less
than you anticipated for a variety of reasons
including:
o a secondary market for your certificates
may not develop;
o interest rate fluctuations;
o the absence of redemption rights; and
o the limited sources of information about
the certificates other than that provided
in this prospectus, the prospectus
supplement and the monthly report to
certificateholders.
The Assets of the Trust Fund
May Not Be Sufficient to Pay
Your Certificates.............. Unless otherwise specified in the prospectus
supplement, neither the offered certificates of
any series nor the mortgage assets in the
related trust fund will be guaranteed or
insured by us or any of our affiliates, by any
governmental agency or instrumentality or by
any other person. No offered certificate of any
series will represent a claim against or
security interest in the trust fund for any
other series. Accordingly, if the related trust
fund has insufficient assets to make payments
on the certificates, there will be no other
assets available for payment of the deficiency.
Additionally, the trustee, master servicer,
special servicer or other specified person may
under certain circumstances withdraw some
amounts on deposit in certain funds or
accounts constituting part of a trust fund,
including the certificate account and any
accounts maintained as credit support, as
described in the prospectus supplement. The
trustee, master servicer, special servicer or
other specified person may have the authority
to make these withdrawals for purposes other
than the payment of principal of or interest
on the related series of certificates.
The prospectus supplement for a series of
certificates may provide for one or more
classes of certificates that are subordinate
to one or more other classes of certificates
in entitlement to certain distributions on the
certificates. On any distribution date in
which the related trust fund has incurred
losses or shortfalls in collections on the
mortgage assets, the subordinate certificates
initially will bear the amount of such losses
or shortfalls and, thereafter, the remaining
classes of certificates will bear the
remaining amount of such losses or shortfalls.
The priority, manner and
14
limitations on the allocation of losses and
shortfalls will be specified in the prospectus
supplement.
Prepayments and Repurchases of
the Mortgage Assets Will
Affect the Timing of Your
Cash Flow and May Affect
Your Yield.................... Prepayments (including those caused by
defaults on the mortgage loans and repurchases
for breach of representation or warranty) on
the mortgage loans in a trust fund generally
will result in a faster rate of principal
payments on one or more classes of the related
certificates than if payments on such mortgage
assets were made as scheduled. Thus, the
prepayment experience on the mortgage assets
may affect the average life of each class of
related certificates. The rate of principal
payments on mortgage loans varies between pools
and from time to time is influenced by a
variety of economic, demographic, geographic,
social, tax, legal and other factors.
We cannot provide any assurance as to the rate
of prepayments on the mortgage loans in any
trust fund or that such rate 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 could occur significantly earlier
or later than you expected.
The rate of voluntary prepayments will also be
affected by:
o the voluntary prepayment terms of the
mortgage loan, including prepayment
lock-out periods and prepayment premiums;
o then-current interest rates being charged
on similar mortgage loans; and
o the availability of mortgage credit.
A series of certificates may include one or
more classes of certificates with entitlements
to payments prior to other classes of
certificates. As a result, yields on classes
of certificates with a lower priority of
payment, including classes of offered
certificates, of such series may be more
sensitive to prepayments on mortgage assets. A
series of certificates may include one or more
classes offered at a significant premium or
discount. Yields on such classes of
certificates will be sensitive, and in some
cases extremely sensitive, to prepayments on
mortgage assets and, where the amount of
interest payable with respect to a class is
disproportionately high, as compared to the
amount of principal, a holder might, in some
prepayment scenarios, fail to recoup its
original investment.
If a mortgage loan is in default, it may not
be possible to collect a prepayment premium.
No person will be required to pay any premium
if a mortgage loan is repurchased for a breach
of representation or warranty.
15
The yield on your certificates may be less
than anticipated because:
o the prepayment premium or yield maintenance
required under certain prepayment scenarios
may not be enforceable in some states or
under federal bankruptcy laws; and
o some courts may consider the prepayment
premium to be usurious.
Optional Early Termination of
the Trust Fund May Result in
an Adverse Impact on Your
Yield or May Result in a
Loss.......................... A series of certificates may be subject to
optional early termination by means of the
repurchase of the mortgage assets in the
related trust fund. We cannot assure you that
the proceeds from a sale of the mortgage assets
will be sufficient to distribute the
outstanding certificate balance plus accrued
interest and any undistributed shortfalls in
interest accrued on the certificates that are
subject to the termination. Accordingly, the
holders of such certificates may suffer an
adverse impact on the overall yield on their
certificates, may experience repayment of their
investment at an unpredictable and inopportune
time or may even incur a loss on their
investment.
Ratings Do Not Guarantee Payment
and Do Not Address Prepayment
Risks......................... Any rating assigned by a rating agency to a
class of offered certificates will reflect only
its assessment of the likelihood that holders
of certificates of such class will receive
payments to which such certificateholders are
entitled under the related pooling and
servicing agreement. Ratings do not address:
o the likelihood that principal prepayments
(including those caused by defaults) on the
related mortgage loans will be made;
o the degree to which the rate of prepayments
on the related mortgage loans might differ
from that originally anticipated;
o the likelihood of early optional
termination of the related trust fund;
o the possibility that prepayments on the
related mortgage loans at a higher or lower
rate than anticipated by an investor may
cause such investor to experience a lower
than anticipated yield; or
o the possibility that an investor that
purchases an offered certificate at a
significant premium might fail to recoup
its 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
16
agency rating classes of certificates of such
series. Those criteria are sometimes based
upon an actuarial analysis of the behavior of
mortgage loans in a larger group. However, we
cannot provide assurance that the historical
data supporting any such actuarial analysis
will accurately reflect future experience, or
that the data derived from a large pool of
mortgage loans will accurately predict the
delinquency, foreclosure or loss experience of
any particular pool of mortgage loans. In
other cases, a rating agency may base their
criteria upon determinations of the values of
the mortgaged properties that provide security
for the mortgage loans. However, we cannot
provide assurance that those values will not
decline in the future.
Unused Amounts in Pre-Funding
Accounts May Be Returned to
You as a Prepayment........... The prospectus supplement will disclose when
we are using a pre-funding account to purchase
additional mortgage assets in connection with
the issuance of certificates. Amounts on
deposit in a pre-funding account that are not
used to acquire additional mortgage assets by
the end of the pre-funding period for a series
of certificates may be distributed to holders
of those certificates as a prepayment of
principal, which may materially and adversely
affect the yield on those certificates.
Additional Mortgage Assets
Acquired in Connection with
the Use of a Pre-Funding
Account May Change the
Aggregate Characteristics
of a Trust Fund............... Any additional mortgage assets acquired by a
trust fund with funds in a pre-funding account
may possess substantially different
characteristics than the mortgage assets in the
trust fund on the closing date for a series of
certificates. Therefore, the aggregate
characteristics of a trust fund following the
pre-funding period may be substantially
different than the characteristics of a trust
fund on the closing date for that series of
certificates.
Net Operating Income Produced
by a Mortgaged Property May
Be Inadequate to Repay the
Mortgage Loans................ The value of a mortgage loan secured by a
multifamily or commercial property is directly
related to the net operating income derived
from that property because the ability of a
borrower to repay a loan secured by an
income-producing property typically depends
primarily upon the successful operation of that
property rather than upon the existence of
independent income or assets of the borrower.
The reduction in the net operating income of
the property may impair the borrower's ability
to repay the loan.
Many of the mortgage loans included in a trust
fund may be secured by liens on owner-occupied
mortgaged properties or
17
on mortgaged properties leased to a single
tenant. Accordingly, a decline in the
financial condition of the borrower or single
tenant may have a disproportionately greater
affect on the net operating income from such
mortgaged properties than would be the case
with respect to mortgaged properties with
multiple tenants.
Future Value of a Mortgaged
Property and its Net
Operating Income and Cash
Flow Is Not Predictable....... Commercial and multifamily property values and
cash flows and net operating income from such
mortgaged properties are volatile and may be
insufficient to cover debt service on the
related mortgage loan at any given time.
Property value, cash flow and net operating
income depend upon a number of factors,
including:
o changes in general or local economic
conditions and/or specific industry
segments;
o declines in real estate values;
o an oversupply of commercial or multifamily
properties in the relevant market;
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 perceptions by prospective tenants and, if
applicable, their customers, of the safety,
convenience, services and attractiveness of
the property;
o the age, construction quality and design of
a particular property;
o whether the mortgaged properties are
readily convertible to alternative uses;
o acts of God; and
o other factors beyond our control or the
control of a servicer.
Nonrecourse Loans Limit the
Remedies Available Following
a Mortgagor Default........... The mortgage loans will not be an obligation
of, or be insured or guaranteed by, any
governmental entity, by any private mortgage
insurer, or by the depositor, the originators,
the master servicer, the special servicer, the
trustee or any of their respective affiliates.
Each mortgage loan included in a trust fund
generally will be a nonrecourse loan. If there
is a default (other than a default resulting
from voluntary bankruptcy, fraud or willful
misconduct) there will generally only be
recourse against the specific mortgaged
properties and other assets that have been
pledged
18
to secure such mortgage loan. Even if a
mortgage loan provides for recourse to a
mortgagor or its affiliates, it is unlikely
the trust fund ultimately could recover any
amounts not covered by the mortgaged property.
Special Risks of Mortgage Loans
Secured by Multifamily
Properties.................... Mortgage loans secured by multifamily
properties may constitute a material
concentration of the mortgage loans in a trust
fund. Adverse economic conditions, either
local, regional or national, may limit the
amount of rent that a borrower may charge for
rental units, and may result in a reduction in
timely rent payments or a reduction in
occupancy levels. Occupancy and rent levels may
also be affected by:
o construction of additional housing units;
o local military base closings;
o developments at local colleges and
universities;
o national, regional and local politics,
including, in the case of multifamily
rental properties, current or future rent
stabilization and rent control laws and
agreements;
o the level of mortgage interest rates, which
may encourage tenants in multifamily rental
properties to purchase housing;
o tax credit and city, state and federal
housing subsidy or similar programs which
may impose rent limitations and may
adversely affect the ability of the
applicable borrowers to increase rents to
maintain the mortgaged properties in proper
condition during periods of rapid inflation
or declining market value of the mortgaged
properties;
o tax credit and city, state and federal
housing subsidy or similar programs which
may impose income restrictions on tenants
and which may reduce the number of eligible
tenants in such mortgaged properties and
result in a reduction in occupancy rates
applicable thereto; and
o the possibility that some eligible tenants
may not find any differences in rents
between subsidized or supported properties
and other multifamily rental properties in
the same area to be a sufficient economic
incentive to reside at a subsidized or
supported property, which may have fewer
amenities or otherwise be less attractive
as a residence.
All of these conditions and events may
increase the possibility that a borrower may
be unable to meet its obligations under its
mortgage loan.
The multifamily projects market is
characterized generally by low barriers to
entry. Thus, a particular apartment market
with historically low vacancies could
experience substantial new construction, and a
resultant oversupply of units, in a
19
relatively short period of time. Because
multifamily apartment units are typically
leased on a short-term basis, the tenants who
reside in a particular project within such a
market may easily move to alternative projects
with more desirable amenities or locations.
Special Risks of Mortgage Loans
Secured by Retail Properties.. Mortgage loans secured by retail properties may
constitute a material concentration of the
mortgage loans in a trust fund. Significant
factors determining the value of retail
properties are:
o the quality of the tenants; and
o the fundamental aspects of real estate such
as location and market demographics.
The correlation between the success of tenant
businesses and property value is more direct
with respect to retail properties than other
types of commercial property because a
significant component of the total rent paid
by retail tenants is often tied to a
percentage of gross sales. Significant tenants
at a retail property play an important part in
generating customer traffic and making a
retail property a desirable location for other
tenants at that property. Accordingly, retail
properties may be adversely affected if a
significant tenant ceases operations at those
locations, which may occur on account of a
voluntary decision not to renew a lease,
bankruptcy or insolvency of the tenant, the
tenant's general cessation of business
activities or for other reasons. In addition,
some tenants at retail properties may be
entitled to terminate their leases or pay
reduced rent if an anchor tenant ceases
operations at the property. In those cases, we
cannot provide assurance that any anchor
tenants will continue to occupy space in the
related shopping centers.
Shopping centers, in general, are affected by
the health of the retail industry. In
addition, a shopping center may be adversely
affected by the bankruptcy or decline in
drawing power of an anchor tenant, the risk
that an anchor tenant may vacate
notwithstanding that tenant's continuing
obligation to pay rent, a shift in consumer
demand due to demographic changes (for
example, population decreases or changes in
average age or income) and/or changes in
consumer preference (for example, to discount
retailers).
Unlike other income producing properties,
retail properties also face competition from
sources outside a given real estate market,
such as:
o catalogue retailers;
o home shopping networks;
o the internet;
o telemarketing; and
o outlet centers.
20
Continued growth of these alternative retail
outlets (which are often characterized by
lower operating costs) could adversely affect
the rents collectible at the retail properties
which secure mortgage loans in a trust fund.
Special Risks of Mortgage Loans
Secured by Hospitality
Properties..................... Mortgage loans secured by hospitality
properties (e.g., a hotel or motel) may
constitute a material concentration of the
mortgage loans in a trust fund. Various factors
affect the economic viability of a hospitality
property, including:
o location, quality and franchise affiliation
(or lack thereof);
o adverse economic conditions, either local,
regional or national, which may limit the
amount that a consumer is willing to pay
for a room and may result in a reduction in
occupancy levels;
o the construction of competing hospitality
properties, which may result in a reduction
in occupancy levels;
o the increased sensitivity of hospitality
properties (relative to other commercial
properties) to adverse economic conditions
and competition, as hotel rooms generally
are rented for short periods of time;
o the financial strength and capabilities of
the owner and operator of a hospitality
property, which may have a substantial
impact on the property's quality of service
and economic performance; and
o the generally seasonal nature of the
hospitality industry, which can be expected
to cause periodic fluctuations in room and
other revenues, occupancy levels, room
rates and operating expenses.
In addition, the successful operation of a
hospitality property with a franchise
affiliation may depend in part upon the
strength of the franchisor, the public
perception of the franchise service mark and
the continued existence of any franchise
license agreement. The transferability of a
franchise license agreement may be restricted,
and a lender or other person that acquires
title to a hospitality property as a result of
foreclosure may be unable to succeed to the
borrower's rights under the franchise license
agreement. Moreover, the transferability of a
hospitality property's operating, liquor and
other licenses upon a transfer of the
hospitality property, whether through purchase
or foreclosure, is subject to local law
requirements and may not be transferable.
Special Risks of Mortgage Loans
Secured by Office Buildings... Mortgage loans secured by office buildings
may constitute a material concentration of the
mortgage loans in a trust fund. Significant
factors determining the value of office
buildings include:
21
o the quality of the tenants in the building;
o the physical attributes of the building in
relation to competing buildings; and
o the strength and stability of the market
area as a desirable business location.
An economic decline in the business operated
by the tenants may adversely affect an office
building. That risk is increased if revenue is
dependent on a single tenant or if there is a
significant concentration of tenants in a
particular business or industry.
Office buildings are also subject to
competition with other office properties in
the same market. Competition is affected by a
property's:
o age;
o condition;
o design (e.g., floor sizes and layout);
o access to transportation; and
o ability or inability to offer certain
amenities to its tenants, including
sophisticated building systems (such as
fiber optic cables, satellite
communications or other base building
technological features).
The success of an office building also depends
on the local economy. A company's decision to
locate office headquarters in a given area,
for example, may be affected by such factors
as labor cost and quality, tax environment and
quality of life issues such as schools and
cultural amenities. A central business
district may have an economy which is markedly
different from that of a suburb. The local
economy and the financial condition of the
owner will impact on an office building's
ability to attract stable tenants on a
consistent basis. In addition, the cost of
refitting office space for a new tenant is
often more costly than for other property
types.
Special Risks of Mortgage Loans
Secured by Warehouse and Self
Storage Facilities............ Mortgage loans secured by warehouse and
storage facilities may constitute a material
concentration of the mortgage loans in a trust
fund. The storage facilities market contains
low barriers to entry.
Increased competition among self storage
facilities may reduce income available to
repay mortgage loans secured by a self storage
facility. Furthermore, the inability of a
borrower to police what is stored in a self
storage facility due to privacy considerations
may increase environmental risks.
22
Special Risks of Mortgage Loans
Secured by Healthcare-Related
Properties.................... The mortgaged properties may include health
care-related facilities, including senior
housing, assisted living facilities, skilled
nursing facilities and acute care facilities.
o Senior housing generally consists of
facilities with respect to which the
residents are ambulatory, handle their own
affairs and typically are couples whose
children have left the home and at which
the accommodations are usually apartment
style;
o Assisted living facilities are typically
single or double room occupancy,
dormitory-style housing facilities which
provide food service, cleaning and some
personal care and with respect to which the
tenants are able to medicate themselves but
may require assistance with certain daily
routines;
o Skilled nursing facilities provide services
to post trauma and frail residents with
limited mobility who require extensive
medical treatment; and
o Acute care facilities generally consist of
hospital and other facilities providing
short-term, acute medical care services.
Certain types of health care-related
properties, particularly acute care
facilities, skilled nursing facilities and
some assisted living facilities, typically
receive a substantial portion of their
revenues from government reimbursement
programs, primarily Medicaid and Medicare.
Medicaid and Medicare are subject to statutory
and regulatory changes, retroactive rate
adjustments, administrative rulings, policy
interpretations, delays by fiscal
intermediaries and government funding
restrictions. Moreover, governmental payors
have employed cost-containment measures that
limit payments to health care providers, and
there exist various proposals for national
health care reform that could further limit
those payments. Accordingly, we cannot provide
assurance that payments under government
reimbursement programs will, in the future, be
sufficient to fully reimburse the cost of
caring for program beneficiaries. If those
payments are insufficient, net operating
income of health care-related facilities that
receive revenues from those sources may
decline, which consequently could have an
adverse affect on the ability of the related
borrowers to meet their obligations under any
mortgage loans secured by health care-related
facilities.
Moreover, health care-related facilities are
generally subject to federal and state laws
that relate to the adequacy of medical care,
distribution of pharmaceuticals, rate setting,
equipment, personnel, operating policies and
additions to facilities and services. In
addition, facilities where such care or other
medical services are provided are subject to
periodic
23
inspection by governmental authorities to
determine compliance with various standards
necessary to continued licensing under state
law and continued participation in the
Medicaid and Medicare reimbursement programs.
Furthermore, under applicable federal and
state laws and regulations, Medicare and
Medicaid reimbursements are generally not
permitted to be made to any person other than
the provider who actually furnished the
related medical goods and services.
Accordingly, in the event of foreclosure, the
trustee, the master servicer, the special
servicer or a subsequent lessee or operator of
any health care-related facility securing a
defaulted mortgage loan generally would not be
entitled to obtain from federal or state
governments any outstanding reimbursement
payments relating to services furnished at
such property prior to foreclosure. Any of the
aforementioned events may adversely affect the
ability of the related borrowers to meet their
mortgage loan obligations.
Providers of assisted living services are also
subject to state licensing requirements in
certain states. The failure of an operator to
maintain or renew any required license or
regulatory approval could prevent it from
continuing operations at a health care-related
facility or, if applicable, bar it from
participation in government reimbursement
programs. In the event of foreclosure, we
cannot provide assurance that the trustee or
any other purchaser at a foreclosure sale
would be entitled to the rights under the
licenses, and the trustee or other purchaser
may have to apply in its own right for the
applicable license. We cannot provide
assurance that the trustee or other purchaser
could obtain the applicable license or that
the related mortgaged property would be
adaptable to other uses.
Government regulation applying specifically to
acute care facilities, skilled nursing
facilities and certain types of assisted
living facilities includes health planning
legislation, enacted by most states, intended,
at least in part, to regulate the supply of
nursing beds. The most common method of
control is the requirement that a state
authority first make a determination of need,
evidenced by its issuance of a certificate of
need, before a long-term care provider can
establish a new facility, add beds to an
existing facility or, in some states, take
certain other actions (for example, acquire
major medical equipment, make major capital
expenditures, add services, refinance
long-term debt, or transfer ownership of a
facility). States also regulate nursing bed
supply in other ways. For example, some states
have imposed moratoria on the licensing of new
beds, or on the certification of new Medicaid
beds, or have discouraged the construction of
new nursing facilities by limiting Medicaid
reimbursements allocable to the cost of new
construction and equipment. In general, a
certificate of need is site specific and
operator specific; it cannot be transferred
from one site to another, or to another
operator, without the approval of the
appropriate state agency. Accordingly, in the
case of foreclosure upon a mortgage loan
24
secured by a lien on a health care-related
mortgaged property, the purchaser at
foreclosure might be required to obtain a new
certificate of need or an appropriate
exemption. In addition, compliance by a
purchaser with applicable regulations may in
any case require the engagement of a new
operator and the issuance of a new operating
license. Upon a foreclosure, a state
regulatory agency may be willing to expedite
any necessary review and approval process to
avoid interruption of care to a facility's
residents, but we cannot provide assurance
that any state regulatory agency will do so or
that the state regulatory agency will issue
any necessary licenses or approvals.
Federal and state government "fraud and abuse"
laws also apply to health care-related
facilities. "Fraud and abuse" laws generally
prohibit payment or fee-splitting arrangements
between health care providers that are
designed to induce or encourage the referral
of patients to, or the recommendation of, a
particular provider for medical products or
services. Violation of these restrictions can
result in license revocation, civil and
criminal penalties, and exclusion from
participation in Medicare or Medicaid
programs. The state law restrictions in this
area vary considerably from state to state.
Moreover, the federal anti-kickback law
includes broad language that potentially could
be applied to a wide range of referral
arrangements, and regulations designed to
create "safe harbors" under the law provide
only limited guidance. Accordingly, we cannot
provide assurance that such laws will be
interpreted in a manner consistent with the
practices of the owners or operators of the
health care-related mortgaged properties that
are subject to those laws.
The operators of health care-related
facilities are likely to compete on a local
and regional basis with others that operate
similar facilities, some of which competitors
may be better capitalized, may offer services
not offered by such operators, or may be owned
by non-profit organizations or government
agencies supported by endowments, charitable
contributions, tax revenues and other sources
not available to such operators. The
successful operation of a health care-related
facility will generally depend upon:
o the number of competing facilities in the
local market;
o the facility's age and appearance;
o the reputation and management of the
facility;
o the types of services the facility
provides; and
o where applicable, the quality of care and
the cost of that care.
The inability of a health care-related
mortgaged property to flourish in a
competitive market may increase the likelihood
of foreclosure on the related mortgage loan,
possibly affecting the yield on one or more
classes of the related series of offered
certificates.
25
Special Risks of Mortgage Loans
Secured by Industrial and
Mixed-Use Facilities.......... Mortgage loans secured by industrial and
mixed-use facilities may constitute a material
concentration of the mortgage loans in a trust
fund. Significant factors determining the value
of industrial properties include:
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 tenant.
In addition, properties used for many
industrial purposes are more prone to
environmental concerns than other property
types.
Aspects of building site design and
adaptability affect the value of an industrial
property. Site characteristics which are
valuable to an industrial property include
clear heights, column spacing, zoning
restrictions, number of bays and bay depths,
divisibility, truck turning radius 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.
Industrial properties may be adversely
affected by reduced demand for industrial
space occasioned by a decline in a particular
industry segment (e.g. a decline in defense
spending), and a particular industrial
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.
Poor Property Management Will
Adversely Affect the
Performance of the Related
Mortgaged Property............ Each mortgaged property securing a mortgage
loan which has been sold into a trust fund is
managed by a property manager (which generally
is an affiliate of the borrower) or by the
borrower itself. The successful operation of a
real estate project is largely dependent on the
performance and viability of the management of
such project. The property manager is
responsible for:
o operating the property;
o providing building services;
o responding to changes in the local market;
and
o planning and implementing the rental
structure, including establishing levels of
rent payments and advising the borrowers so
that maintenance and capital improvements
can be carried out in a timely fashion.
26
We cannot provide assurance regarding the
performance of any operators, leasing agents
and/or property managers or persons who may
become operators and/or property managers upon
the expiration or termination of management
agreements or following any default or
foreclosure under a mortgage loan. In
addition, the property managers are usually
operating companies and unlike limited purpose
entities, may not be restricted from incurring
debt and other liabilities in the ordinary
course of business or otherwise. There can be
no assurance that the property managers will
at all times be in a financial condition to
continue to fulfill their management
responsibilities under the related management
agreements throughout the terms of those
agreements.
Balloon Payments on Mortgage
Loans Result in Heightened
Risk of Borrower Default...... Some of the mortgage loans included in a
trust fund may not be fully amortizing (or may
not amortize at all) 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 either:
o its ability to fully refinance the loan; or
o its ability to sell the related mortgaged
property at a price sufficient to permit
the borrower to make the balloon payment.
The ability of a borrower to accomplish either
of these goals will be affected by a number of
factors, including:
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;
o 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 commercial or multifamily, as
the case may be, real properties generally.
27
The Servicer Will Have
Discretion to Handle or Avoid
Obligor Defaults in a Manner
Which May Be Adverse to Your
Interests..................... If and to the extent specified in the
prospectus supplement defaulted mortgage loans
exist or are imminent, in order to maximize
recoveries on defaulted mortgage loans, the
related pooling and servicing agreement will
permit (within prescribed limits) the master
servicer or a special servicer to extend and
modify mortgage loans that are in default or as
to which a payment default is imminent. While
the related pooling and servicing agreement
generally will require a master servicer to
determine that any such extension or
modification is reasonably likely to produce a
greater recovery on a present value basis than
liquidation, we cannot provide assurance that
any such extension or modification will in fact
increase the present value of receipts from or
proceeds of the affected mortgage loans.
In addition, a master servicer or a special
servicer may receive a workout fee based on
receipts from or proceeds of such mortgage
loans that would otherwise be payable to the
certificateholders.
Proceeds Received upon
Foreclosure of Mortgage Loans
Secured Primarily by Junior
Mortgages May Result in
Losses........................ To the extent specified in the prospectus
supplement, some of the mortgage loans included
in a trust fund may be secured primarily by
junior mortgages. When liquidated, mortgage
loans secured by junior mortgages are entitled
to satisfaction from proceeds that remain from
the sale of the related mortgaged property
after the mortgage loans senior to such
mortgage loans have been satisfied. If there
are insufficient funds to satisfy both the
junior mortgage loans and senior mortgage
loans, the junior mortgage loans would suffer a
loss and, accordingly, one or more classes of
certificates would bear such loss. Therefore,
any risks of deficiencies associated with first
mortgage loans will be greater with respect to
junior mortgage loans.
Credit Support May Not Cover
Losses or Risks Which Could
Adversely Affect Payment on
Your Certificates............. The prospectus supplement for the offered
certificates of each series will describe any
credit support provided with respect to those
certificates. Use of credit support will be
subject to the conditions and limitations
described in this prospectus and in the related
prospectus supplement. Moreover, credit support
may not cover all potential losses or risks;
for example, credit support 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
(which may include offered certificates), if
so provided in the prospectus supplement.
Although subordination is intended to reduce
the risk to holders of
28
senior certificates of delinquent
distributions or ultimate losses, the amount
of subordination will be limited and may
decline under certain circumstances. 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 lower
priority classes of certificates of such
series has been fully repaid. As a result, the
impact of losses and shortfalls experienced
with respect to the mortgage assets may fall
primarily upon those classes of certificates
having a lower priority of payment. 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 such credit support will be
exhausted by the claims of the holders of
certificates of one or more other series.
Regardless of the form of credit enhancement
provided, the amount of coverage will be
limited in amount and in most cases will be
subject to periodic reduction in accordance
with a schedule or formula. The master
servicer will generally be permitted to
reduce, terminate or substitute all or a
portion of the credit enhancement for any
series of certificates if the applicable
rating agency indicates that the then-current
rating of those certificates will not be
adversely affected. The rating of any series
of certificates by any applicable rating
agency may be lowered following the initial
issuance of those certificates as a result of
the downgrading of the obligations of any
applicable credit support provider, or as a
result of losses on the related mortgage
assets substantially in excess of the levels
contemplated by that rating agency at the time
of its initial rating analysis. None of the
depositor, the master servicer or any of our
or the master servicer's affiliates will have
any obligation to replace or supplement any
credit enhancement, or to take any other
action to maintain any rating of any series of
certificates.
Mortgagors of Commercial
Mortgage Loans Are
Sophisticated and May Take
Actions Adverse to Your
Interests..................... Mortgage loans made to partnerships,
corporations or other entities may entail risks
of loss from delinquency and foreclosure that
are greater than those of mortgage loans made
to individuals. The mortgagor's sophistication
and form of organization may increase the
likelihood of protracted litigation or
bankruptcy in default situations.
Some Actions Allowed by the
Mortgage May Be Limited by
Law........................... Mortgages securing mortgage loans included in
a trust fund may contain a due-on-sale clause,
which permits the lender to accelerate the
maturity of the mortgage loan if the borrower
sells, transfers or conveys the related
mortgaged property or its interest in the
mortgaged property. Mortgages securing mortgage
loans included in a trust fund may also include
a
29
debt-acceleration clause, which permits the
lender to accelerate the debt upon a monetary
or non-monetary default of the borrower. Such
clauses are not always enforceable. The courts
of all states will enforce clauses providing
for acceleration in the event of a material
payment default. The equity courts of any
state, however, may refuse the foreclosure of
a mortgage or deed of trust when an
acceleration of the indebtedness would be
inequitable or unjust or the circumstances
would render the acceleration unconscionable.
Assignment of Leases and Rents
to Provide Further Security
for Mortgage Loans Poses
Special Risks................. The mortgage loans included in any trust fund
typically will be secured by an assignment of
leases and rents pursuant to which the borrower
assigns to the lender its right, title and
interest as landlord under the leases of the
related mortgaged property, and the income
derived therefrom, as further security for the
related mortgage loan, while retaining a
license to collect rents for so long as there
is no default. If the borrower defaults, the
license terminates and the lender is entitled
to collect rents. Some state laws may require
that the lender take possession of the
mortgaged property and obtain a judicial
appointment of a receiver before becoming
entitled to collect the rents. In addition,
bankruptcy or the commencement of similar
proceedings by or in respect of the borrower
may adversely affect the lender's ability to
collect the rents.
Inclusion in a Trust Fund of
Delinquent Mortgage Loans May
Adversely Affect the Rate of
Defaults and Prepayments on
the Mortgage Loans............ If so provided in the prospectus supplement,
the trust fund for a series of certificates may
include mortgage loans that are delinquent as
of the date they are deposited in the trust
fund. A mortgage loan will be considered
"delinquent" if it is 30 days or more past its
most recently contractual scheduled payment
date in payment of all amounts due according to
its terms. In any event, at the time of its
creation, the trust fund will not include
delinquent loans which by principal amount are
more than 20% of the aggregate principal amount
of all mortgage loans in the trust fund. If so
specified in the prospectus supplement, the
servicing of such mortgage loans will be
performed by a special servicer.
Credit support provided with respect to a
series of certificates may not cover all
losses related to delinquent mortgage loans,
and investors should consider the risk that
the inclusion of such mortgage loans in the
trust fund may adversely affect the rate of
defaults and prepayments on the mortgage loans
in the trust fund and the yield on the offered
certificates of such series.
30
Environmental Liability May
Affect the Lien on a Mortgaged
Property and Expose the Lender
to Costs...................... Under certain laws, contamination of real
property may give rise to a lien on the
property to assure the costs of cleanup. In
several states, that lien has priority over an
existing mortgage lien on a property. In
addition, under the laws of some states and
under the federal Comprehensive Environmental
Response, Compensation, and Liability Act of
1980, a lender may be liable, as an "owner" or
"operator," for costs of addressing releases or
threatened releases of hazardous substances at
a property, if agents or employees of the
lender have become sufficiently involved in the
operations of the borrower, regardless of
whether or not the environmental damage or
threat was caused by the borrower. A lender
also risks such liability on foreclosure of the
mortgage. In addition, liabilities imposed upon
a borrower by CERCLA or other environmental
laws may adversely affect a borrower's ability
to repay a loan. If a trust fund includes
mortgage loans and the prospectus supplement
does not otherwise specify, the related pooling
and servicing agreement will contain provisions
generally to the effect that the master
servicer, acting on behalf of the trust fund,
may not acquire title to a mortgaged property
or assume control of its operation unless the
master servicer, based upon a report prepared
by a person who regularly conducts
environmental site assessments, has made the
determination that it is appropriate to do so.
These provisions are designed to reduce
substantially the risk of liability for costs
associated with remediation of hazardous
substances, but we cannot provide assurance in
a given case that those risks can be eliminated
entirely. In addition, it is likely that any
recourse against the person preparing the
environmental report, and such person's ability
to satisfy a judgment, will be limited.
One Action Jurisdiction May
Limit the Ability of the
Special Servicer to Foreclose
on a Mortgaged Property....... 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. The special servicer may need
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.
In the case of a mortgage loan secured by
mortgaged properties located in multiple
states, the special servicer may be required
to foreclose first on properties located in
states where "one action" rules apply (and
where non-judicial foreclosure is permitted)
before foreclosing on properties located in
states where judicial foreclosure is the only
permitted method of foreclosure.
31
Rights Against Tenants May Be
Limited if Leases Are Not
Subordinate to the Mortgage
or Do Not Contain Attornment
Provisions.................... Some of the tenant leases contain provisions
that require the tenant to attorn to (that is,
recognize as landlord under the lease) a
successor owner of the property following
foreclosure. Some of the leases may be either
subordinate to the liens created by the
mortgage loans or else contain a provision that
requires the tenant to subordinate the lease if
the mortgagee agrees to enter into a
non-disturbance agreement.
In some states, if tenant leases are
subordinate to the liens created by the
mortgage loans and such leases do not contain
attornment provisions, such leases may
terminate upon the transfer of the property to
a foreclosing lender or purchaser at
foreclosure. Accordingly, in the case of the
foreclosure of a mortgaged property located in
such a state and leased to one or more
desirable tenants under leases that do not
contain attornment provisions, such mortgaged
property could experience a further decline in
value if such tenants' leases were terminated
(e.g., if such tenants were paying
above-market rents).
If a lease is senior to a mortgage, the lender
will not (unless it has otherwise agreed with
the tenant) possess the right to dispossess
the tenant upon foreclosure of the property,
and if the lease contains provisions
inconsistent with the mortgage (e.g.,
provisions relating to application of
insurance proceeds or condemnation awards),
the provisions of the lease will take
precedence over the provisions of the
mortgage.
If Mortgaged Properties Are Not
in Compliance With Current
Zoning Laws, You May Not Be
Able to Restore Compliance
Following a Casualty Loss..... Due to changes in applicable building and
zoning ordinances and codes which have come
into effect after the construction of
improvements on certain of the mortgaged
properties, some improvements may not comply
fully with current zoning laws (including
density, use, parking and set-back
requirements) but may qualify as permitted
non-confirming uses. Such changes may limit the
ability of the related mortgagor to rebuild the
premises "as is" in the event of a substantial
casualty loss. Such limitations may adversely
affect the ability of the mortgagor to meet its
mortgage loan obligations from cash flow.
Insurance proceeds may not be sufficient to pay
off such mortgage loan in full. In addition, if
the mortgaged property were to be repaired or
restored in conformity with then current law,
its value could be less than the remaining
balance on the mortgage loan and it may produce
less revenue than before such repair or
restoration.
Inspections of the Mortgaged
Properties Were Limited....... The mortgaged properties were inspected by
licensed engineers in connection with the
origination of the mortgage
32
loans to assess the structure, exterior walls,
roofing interior construction, mechanical and
electrical systems and general condition of
the site, buildings and other improvements
located on the mortgaged properties. We cannot
provide assurance that all conditions
requiring repair or replacement have been
identified in such inspections.
Litigation Concerns........... There may be legal proceedings pending and,
from time to time, threatened against the
mortgagors or their affiliates relating to the
business, or arising out of the ordinary course
of business, of the mortgagors and their
affiliates. We cannot provide assurance that
such litigation will not have a material
adverse effect on the distributions to you on
your certificates.
33
DESCRIPTION OF THE TRUST FUNDS
GENERAL
The primary assets of each trust fund will consist of mortgage assets
which include (i) one or more multifamily and/or commercial mortgage loans and
participations therein, (ii) CMBS, (iii) direct obligations of the United
States or other government agencies, or (iv) a combination of the assets
described in clauses (i), (ii) and (iii). Each trust fund will be established
by the depositor. Each mortgage asset will be selected by the depositor for
inclusion in a trust fund from among those purchased, either directly or
indirectly, from a prior holder thereof, which may or may not be the originator
of such mortgage loan or the issuer of such CMBS and may be an affiliate of the
depositor. The mortgage assets will not be guaranteed or insured by the
depositor or any of its affiliates or, unless otherwise provided in the
prospectus supplement, by any governmental agency or instrumentality or by any
other person. The discussion below under the heading "--Mortgage
Loans--Leases," unless otherwise noted, applies equally to mortgage loans
underlying any CMBS included in a particular trust fund.
MORTGAGE LOANS--LEASES
General. The mortgage loans will be evidenced by mortgage notes secured by
mortgages or deeds of trust or similar security instruments that create first
or junior liens on, or installment contracts for the sale of, mortgaged
properties consisting of (i) multifamily properties, which are 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 (ii) commercial properties, which include office buildings,
retail stores, hotels or motels, nursing homes, hospitals or other health
care-related facilities, mobile home parks, warehouse facilities,
mini-warehouse facilities, self-storage facilities, industrial plants, mixed
use or other types of income-producing properties or unimproved land. The
multifamily properties may include mixed commercial and residential structures
and may include apartment buildings owned by private cooperative housing
corporations. If so specified in the prospectus supplement, each mortgage will
create a first priority mortgage lien on a mortgaged property. A mortgage may
create a lien on a borrower's leasehold estate in a property; however, the term
of any such leasehold will exceed the term of the mortgage note by at least ten
years. Each mortgage loan will have been originated by a person other than the
depositor.
If so specified in the 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 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, mortgage assets may include mortgage loans that are delinquent as of
the date of issuance of a series of certificates. In that case, the prospectus
supplement will set forth, as to each such mortgage loan, available information
as to the period of such delinquency, 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.
Leases. To the extent specified in the prospectus supplement, the
commercial properties may be leased to lessees that occupy all or a portion of
such properties. Pursuant to a lease assignment, the borrower may assign its
right, title and interest as lessor under each lease and the income derived
therefrom to the mortgagee, while retaining a license to collect the rents for
so long as there is no default. If the borrower defaults, the license
terminates and the mortgagee or its agent is entitled to collect the rents from
the lessee for application to the monetary obligations of the borrower. State
law may limit or restrict the enforcement of the lease assignments by a
mortgagee until it takes possession of the mortgaged property and/or a receiver
is appointed. See "Certain Legal Aspects of the Mortgage Loans and
Leases--Leases and Rents." Alternatively, to the extent specified in the
prospectus supplement, the borrower and the mortgagee may agree that payments
under leases are to be made directly to a servicer.
To the extent described in the prospectus supplement, the leases, which
may include "bond-type" or "credit-type" leases, may require the lessees to pay
rent that is sufficient in the aggregate to cover all scheduled payments of
principal and interest on the mortgage loans and, in certain cases, their pro
rata
34
share of the operating expenses, insurance premiums and real estate taxes
associated with the mortgaged properties. A "bond-type" lease is a lease
between a lessor and a lessee for a specified period of time with specified
rent payments that are at least sufficient to repay the related note(s). A
bond-type lease requires the lessee to perform and pay for all obligations
related to the leased premises and provides that, no matter what occurs with
regard to the leased premises, the lessee is obligated to continue to pay its
rent. A "credit-type" lease is a lease between a lessor and a lessee for a
specified period of time with specified rent payments at least sufficient to
repay the related note(s). A credit-type lease requires the lessee to perform
and pay for most of the obligations related to the leased premises, excluding
only a few landlord duties which remain the responsibility of the
borrower/lessor. Leases (other than bond-type leases) may require the borrower
to bear costs associated with structural repairs and/or the maintenance of the
exterior or other portions of the mortgaged property or provide for certain
limits on the aggregate amount of operating expenses, insurance premiums, taxes
and other expenses that the lessees are required to pay.
If so specified in the prospectus supplement, under certain circumstances
the lessees may be permitted to set off their rental obligations against the
obligations of the borrowers under the leases. In those cases where payments
under the leases (net of any operating expenses payable by the borrowers) are
insufficient to pay all of the scheduled principal and interest on the mortgage
loans, the borrowers must rely on other income or sources generated by the
mortgaged property to make payments on the mortgage loan. To the extent
specified in the prospectus supplement, some commercial properties may be
leased entirely to one lessee. This is generally the case in bond-type leases
and credit-type leases. In such cases, absent the availability of other funds,
the borrower must rely entirely on rent paid by such lessee in order for the
borrower to pay all of the scheduled principal and interest on the related
commercial loan. To the extent specified in the prospectus supplement, some
leases (not including bond-type leases) may expire prior to the stated maturity
of the mortgage loan. In such cases, upon expiration of the leases the
borrowers will have to look to alternative sources of income, including rent
payment by any new lessees or proceeds from the sale or refinancing of the
mortgaged property, to cover the payments of principal and interest due on the
mortgage loans unless the lease is renewed. As specified in the prospectus
supplement, some leases may provide that upon the occurrence of a casualty
affecting a mortgaged property, the lessee will have the right to terminate its
lease, unless the borrower, as lessor, is able to cause the mortgaged property
to be restored within a specified period of time. Some leases may provide that
it is the lessor's responsibility to restore the mortgaged property to its
original condition after a casualty. Some leases may provide that it is the
lessee's responsibility to restore the mortgaged property to its original
condition after a casualty. Some leases may provide a right of termination to
the lessee if a taking of a material or specified percentage of the leased
space in the mortgage property occurs, or if the ingress or egress to the
leased space has been materially impaired.
Default and Loss Considerations with Respect to the Mortgage
Loans. Mortgage loans secured by liens on income-producing properties are
substantially different from loans which are secured by owner-occupied
single-family homes. The repayment of a loan secured by a lien on an income
producing property is typically dependent upon the successful operation of such
property (that is, its ability to generate income). Moreover, some or all of
the mortgage loans included in a 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 such other assets, if any, that the
borrower 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 measure of the risk of
default on such a loan. As more fully set forth in the prospectus supplement,
the Debt Service Coverage Ratio of a mortgage loan at any given time is the
ratio of (i) the Net Operating Income of the mortgaged property for a
twelve-month period to (ii) the annualized scheduled payments on the mortgage
loan and on any other loan that is secured by a lien on the mortgaged property
prior to the lien of the mortgage. As more fully set forth in the prospectus
supplement, Net Operating Income means, for any given period, the total
operating revenues derived from a mortgaged property, minus the total operating
expenses incurred in respect of the mortgaged property other than (i) non-cash
items such as depreciation and amortization, (ii) capital expenditures and
(iii) debt service on loans (including the mortgage loan) secured by liens on
the mortgaged property. The Net Operating Income of a mortgaged property will
fluctuate over time and may not be sufficient to cover
35
debt service on the mortgage loan at any given time. An insufficiency of Net
Operating Income can be compounded or solely caused by an adjustable rate
mortgage loan. As the primary source of the operating revenues of a non-owner
occupied income-producing property, the condition of the applicable real estate
market and/or area economy may effect rental income (and maintenance payments
from tenant-stockholders of a private cooperative housing corporation). In
addition, properties typically leased, occupied or used on a short-term basis,
such as certain health-care-related facilities, hotels and motels, and mini
warehouse and self-storage facilities, tend to be affected more rapidly by
changes in market or business conditions than do properties typically leased,
occupied or used for longer periods, such as warehouses, retail stores, office
buildings and industrial plants. Commercial loans may be secured by
owner-occupied mortgaged properties or mortgaged properties leased to a single
tenant. Accordingly, a decline in the financial condition of the mortgagor or
single tenant, as applicable, may have a disproportionately greater effect on
the Net Operating Income from such mortgaged properties than the case of
mortgaged properties with multiple tenants.
The Debt Service Coverage Ratio should not be relied upon as the sole
measure of the risk of default of any loan, however, since other factors may
outweigh a high Debt Service Coverage Ratio. With respect to a balloon mortgage
loan, for example, the risk of default as a result of the unavailability of a
source of funds to finance the related balloon payment at maturity on terms
comparable to or better than those of the balloon mortgage loans could be
significant even though the related Debt Service Coverage Ratio is high.
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 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 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. However,
the existence of such "net of expense" provisions will result in stable Net
Operating Income to the borrower/landlord only to the extent that the lessee is
able to absorb operating expense increases while continuing to make rent
payments. See "--Leases" above.
While the duration of leases and the existence of any "net of expense"
provisions are often viewed as the primary considerations in evaluating the
credit risk of mortgage loans secured by certain income-producing properties,
such risk may be affected equally or to a greater extent by changes in
government regulation of the operator of the property. Examples of the latter
include mortgage loans secured by health care-related facilities, the income
from which and the operating expenses of which are subject to state and/or
federal regulations, such as Medicare and Medicaid, and multifamily properties
and mobile home parks, which may be subject to state or local rent control
regulation and, in certain cases, restrictions on changes in use of the
property. Low- and moderate-income housing in particular may be subject to
legal limitations and regulations but, because of such regulations, may also be
less sensitive to fluctuations in market rents generally.
Lenders also look to the Loan-to-Value Ratio of a mortgage loan as a
measure of risk of loss if a property must be liquidated following a default.
The lower the Loan-to-Value Ratio, the greater the percentage of the borrower's
equity in a mortgaged property, and thus 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 fair market value of the mortgaged
property determined in an appraisal determined at loan origination, and will
likely continue to fluctuate from time to time based upon changes in economic
conditions and the real estate market. Moreover, even when current, an
appraisal is not necessarily a reliable estimate of value. Appraised values of
income-producing properties are generally based on the market comparison method
(recent resale value of comparable properties at the date of the appraisal),
the cost replacement method (the cost of replacing the property at such date),
the income capitalization method (a projection of value based upon the
property's projected net cash flow), or upon a selection from or interpolation
of the values derived from
36
such methods. Each of these appraisal methods can present analytical
difficulties. It is often difficult to find truly comparable properties that
have recently been sold; the replacement cost of a property may have little to
do with its current market value; and income capitalization is inherently based
on inexact projections of income and expense and the selection of an
appropriate capitalization rate. 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 the depositor believes that the foregoing considerations are
important factors that generally distinguish loans secured by liens on
income-producing real estate from single-family mortgage loans, there is no
assurance that all of such factors will in fact have been prudently considered
by the originators of the mortgage loans, or that, for a particular mortgage
loan, they are complete or relevant. See "Risk Factors--Net Operating Income
Produced by a Mortgaged Property May Be Inadequate to Repay the Mortgage Loans"
and "--Balloon Payments on Mortgage Loans Result in Heightened Risk of Borrower
Default."
Payment Provisions of the Mortgage Loans. Unless otherwise specified in
the prospectus supplement, all of the mortgage loans will have original terms
to maturity of not more than 40 years and will provide for scheduled payments
of principal, interest or both, to be made on specified dates that occur
monthly or quarterly or at such other interval as is specified in the
prospectus supplement. A mortgage loan (i) may provide for no accrual of
interest or for accrual of interest thereon 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, (ii) may provide for the formula, index
or other method by which the interest rate will be calculated, (iii) 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 or accelerated
amortization, (iv) may be fully amortizing over its term to maturity, or may
provide for little or no amortization over its term and thus require a balloon
payment on its stated maturity date, and (v) may contain a prohibition on
prepayment for a specified lockout period or require payment of a prepayment
premium or a yield maintenance penalty in connection with a prepayment, in each
case as described in the prospectus supplement. A mortgage loan may also
contain an equity participation provision that entitles the lender to a share
of profits realized from the operation or disposition of the mortgaged
property, as described in the prospectus supplement. If holders of any series
or class of offered certificates will be entitled to all or a portion of a
prepayment premium or an equity participation, the prospectus supplement will
describe the prepayment premium and/or equity participation and the method or
methods by which any such amounts will be allocated to holders.
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 include the following: (i) the
aggregate outstanding principal balance and the largest, smallest and average
outstanding principal balance of the mortgage loans as of the applicable
Cut-Off Date, (ii) the type or types of property that provide security for
repayment of the mortgage loans, (iii) the original and remaining terms to
maturity of the mortgage loans and the seasoning of the mortgage loans, (iv)
the earliest and latest origination date and maturity date and weighted average
original and remaining terms to maturity (or for ARD loans, the anticipated
repayment date) of the mortgage loans, (v) the original Loan-to-Value Ratios of
the mortgage loans, (vi) the mortgage interest rates or range of mortgage
interest rates and the weighted average mortgage interest rate carried by the
mortgage loans, (vii) the geographic distribution of the mortgaged properties
on a state-by-state basis, (viii) information with respect to the prepayment
provisions, if any, of the mortgage loans, (ix) with respect to adjustable rate
mortgage loans, the index or indices upon which such adjustments are based, the
adjustment dates, the range of gross margins and the weighted average gross
margin, and any limits on mortgage interest rate adjustments at the time of any
adjustment and over the life of the adjustable rate mortgage loans, (x) Debt
Service Coverage Ratios either at origination or as of a more recent date (or
both) and (xi) information regarding the payment characteristics of the
mortgage loans, including without limitation balloon payment and other
amortization provisions. In appropriate cases, the prospectus supplement will
also contain certain information available to the depositor that pertains to
the provisions of leases and the nature of tenants
37
of the mortgaged properties. If specific information regarding the mortgage
loans is not known to the depositor at the time the certificates are initially
offered, the depositor will provide more general information of the nature
described above in the prospectus supplement, and the depositor will set forth
specific information of the nature described above in a report which will be
available to purchasers of the related certificates at or before the initial
issuance thereof and will be filed as part of a Current Report on Form 8-K with
the Securities and Exchange Commission within 15 days following such issuance.
CMBS
CMBS may include (i) private (that is, not guaranteed or insured by the
United States or any agency or instrumentality thereof) mortgage
participations, mortgage pass-through certificates or other mortgage-backed
securities such as mortgage-backed securities that are similar to a series of
certificates or (ii) certificates insured or guaranteed by Freddie Mac, Fannie
Mae, Ginnie Mae or Farmer Mac, provided that each CMBS 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.
The CMBS may have been issued in one or more classes with characteristics
similar to the classes of certificates described in this prospectus.
Distributions in respect of the CMBS will be made by the CMBS servicer or the
CMBS trustee on the dates specified in the prospectus supplement. The CMBS
issuer or the CMBS servicer or another person specified in the prospectus
supplement may have the right or obligation to repurchase or substitute assets
underlying the CMBS after a certain date or under other circumstances specified
in the 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 CMBS. The type, characteristics and amount of
such credit support, if any, will be a function of the characteristics of the
underlying mortgage loans and other factors and generally will have been
established on the basis of the requirements of any rating agency that may have
assigned a rating to the CMBS, or by the initial purchasers of the CMBS.
The prospectus supplement for certificates that evidence interests in CMBS
will specify, to the extent available and deemed material, (i) the aggregate
approximate initial and outstanding principal amount and type of the CMBS to be
included in the trust fund, (ii) the original and remaining term to stated
maturity of the CMBS, if applicable, (iii) the pass-through or bond rate of the
CMBS or the formula for determining such rates, (iv) the payment
characteristics of the CMBS, (v) the CMBS issuer, CMBS servicer and CMBS
trustee, (vi) a description of the credit support, if any, (vii) the
circumstances under which the related underlying mortgage loans, or the CMBS
themselves, may be purchased prior to their maturity, (viii) the terms on which
mortgage loans may be substituted for those originally underlying the CMBS,
(ix) the servicing fees payable under the CMBS agreement, (x) the type of
information in respect of the underlying mortgage loans described under
"--Mortgage Loans--Leases--Mortgage Loan Information in Prospectus Supplements"
and (xi) the characteristics of any cash flow agreements that relate to the
CMBS.
To the extent required under the securities laws, CMBS included among the
assets of a trust fund will (i) either have been registered under the
Securities Act of 1933, as amended, or be eligible for resale under Rule 144(k)
under the Securities Act of 1933, as amended, and (ii) have been acquired in a
bona fide secondary market transaction and not from the issuer or an affiliate.
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 prospectus supplement will, to the extent described
in this prospectus and in the prospectus supplement, deposit all payments and
collections received or advanced with respect to the mortgage assets and other
assets in the trust fund. A certificate account may be maintained as an
interest bearing or a non-interest bearing account, and funds held therein may
be held as cash or invested in certain short-term, investment grade
obligations, in each case as described in the prospectus supplement.
38
CREDIT SUPPORT
If so provided in the prospectus supplement, partial or full protection
against certain defaults and losses on the mortgage assets in the trust fund
may be provided to one or more classes of certificates in the form of
subordination of one or more other classes of certificates or by one or more
other types of credit support, such as over collateralization, a letter of
credit, insurance policy, guarantee or reserve fund, or by a combination
thereof. The amount and types of credit support, the identity of the entity
providing it (if applicable) and related information with respect to each type
of credit support, if any, will be set forth in the prospectus supplement for
the certificates of each series. The prospectus supplement for any series of
certificates evidencing an interest in a trust fund that includes CMBS will
describe in the same fashion any similar forms of credit support that are
provided by or with respect to, or are included as part of the trust fund
evidenced by or providing security for, such CMBS to the extent information is
available and deemed material. The type, characteristic and amount of credit
support will be determined based on the characteristics of the mortgage assets
and other factors and will be established, in part, on the basis of
requirements of each rating agency rating a series of certificates. If so
specified in the prospectus supplement, any credit support may apply only in
the event of certain types of losses or delinquencies and the protection
against losses or delinquencies provided by such credit support will be
limited. See "Risk Factors--Credit Support May Not Cover Losses or Risks Which
Could Adversely Affect Payment on Your Certificates" and "Description of Credit
Support."
CASH FLOW AGREEMENTS
If so provided in the prospectus supplement, the 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, currency exchange agreements or similar
agreements 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 any guaranteed investment contract or
other agreement, and the identity of the obligor under any guaranteed
investment contract or other agreement, will be described in the prospectus
supplement.
PRE-FUNDING
If so provided in the prospectus supplement, a trust fund may include
amounts on deposit in a separate pre-funding account that may be used by the
trust fund to acquire additional mortgage assets. Amounts in a pre-funding
account will not exceed 25% of the pool balance of the trust fund as of the
Cut-Off Date. Additional mortgage assets will be selected using criteria that
are substantially similar to the criteria used to select the mortgage assets
included in the trust fund on the closing date. The trust fund may acquire such
additional mortgage assets for a period of time of not more than 120 days after
the closing date for the related series of certificates. Amounts on deposit in
the pre-funding account after the end of the pre-funding period will be
distributed to certificateholders or such other person as set forth in the
prospectus supplement.
In addition, a trust fund may include a separate capitalized interest
account. Amounts on deposit in the capitalized interest account may be used to
supplement investment earnings, if any, of amounts on deposit in the
pre-funding account, supplement interest collections of the trust fund, or such
other purpose as specified in the prospectus supplement. Amounts on deposit in
the capitalized interest account and pre-funding account generally will be held
in cash or invested in short-term investment grade obligations. Any amounts on
deposit in the capitalized interest account will be released after the end of
the pre-funding period as specified in the prospectus supplement. See "Risk
Factors--Unused Amounts in Pre-Funding Accounts May Be Returned to You as a
Prepayment."
39
YIELD CONSIDERATIONS
GENERAL
The yield on any offered certificate will depend on the price paid by the
certificateholder, the pass-through rate of the certificate and the amount and
timing of distributions on the certificate. See "Risk Factors--Prepayments and
Repurchases of the Mortgage Assets Will Affect the Timing of Your Cash Flow and
May Affect Your Yield." The following discussion contemplates a trust fund that
consists solely of mortgage loans. While you generally can expect the
characteristics and behavior of mortgage loans underlying CMBS 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 CMBS. If
a trust fund includes CMBS, the prospectus supplement will discuss the effect
that the CMBS payment characteristics may have on the yield to maturity and
weighted average lives of the offered certificates.
PASS-THROUGH RATE
The certificates of any class within a series may have a fixed, variable
or adjustable pass-through rate, which may or may not be based upon the
interest rates borne by the mortgage loans in the related trust fund. The
prospectus supplement will specify the pass-through rate for each class of
certificates or, in the case of a class of offered certificates with a variable
or adjustable pass-through rate, the method of determining the pass-through
rate; the effect, if any, of the prepayment of any mortgage loan on the
pass-through rate of one or more classes of offered certificates; and whether
the distributions of interest on the offered certificates of any class will be
dependent, in whole or in part, on the performance of any obligor under a cash
flow agreement.
PAYMENT DELAYS
A period of time will elapse between the date upon which payments on the
mortgage loans in the related trust fund are due and the distribution date on
which such payments are passed through to certificateholders. That delay will
effectively reduce the yield that would otherwise be produced if payments on
such mortgage loans were distributed to certificateholders on or near the date
they were due.
SHORTFALLS IN COLLECTIONS OF INTEREST RESULTING FROM PREPAYMENTS
When a borrower makes a principal prepayment on a mortgage loan in full or
in part, the borrower is generally charged interest only for the period from
the date on which the preceding scheduled payment was due up to the date of
such prepayment, instead of for the full accrual period, that is, the period
from the due date of the preceding scheduled payment up to the due date for the
next scheduled payment. However, interest accrued on any series of certificates
and distributable thereon on any distribution date will generally correspond to
interest accrued on the principal balance of mortgage loans for their
respective full accrual periods. Consequently, if a prepayment on any mortgage
loan is distributable to certificateholders on a particular distribution date,
but such prepayment is not accompanied by interest thereon for the full accrual
period, the interest charged to the borrower (net of servicing and
administrative fees) may be less than the corresponding amount of interest
accrued and otherwise payable on the certificates of the related series. If and
to the extent that any prepayment interest shortfall is allocated to a class of
offered certificates, the yield on the offered certificates will be adversely
affected. The prospectus supplement will describe the manner in which any
prepayment interest shortfalls will be allocated among the classes of
certificates. If so specified in the prospectus supplement, the master servicer
will be required to apply some or all of its servicing compensation for the
corresponding period to offset the amount of any prepayment interest
shortfalls. The prospectus supplement will also describe any other amounts
available to offset prepayment interest shortfalls. See "Description of the
Pooling and Servicing Agreements--Servicing Compensation and Payment of
Expenses."
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 those principal payments to reduce the principal
40
balance (or notional amount, if applicable) of the certificate. The rate of
principal payments on the mortgage loans will in turn be affected by the
amortization schedules of the mortgage loans (which, in the case of adjustable
rate mortgage loans, will 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 thereon (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 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 discussed more fully below), it is
impossible to predict with assurance a certificate's yield to maturity.
The extent to which the yield to maturity of a class of offered
certificates of any series may vary from the anticipated yield will depend upon
the degree to which they are purchased at a discount or premium and when, and
to what degree, payments of principal on the mortgage loans in the related
trust fund are in turn distributed on such certificates (or, in the case of a
class of Stripped Interest Certificates, result in the reduction of the
notional amount of the Stripped Interest Certificate). Further, 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 trust fund could result in an actual yield to such
investor that is lower than the anticipated yield and, in the case of any
offered certificate purchased at a premium, the risk that a faster than
anticipated rate of principal payments could result in an actual yield to such
investor that is lower than the anticipated yield. In general, the earlier a
prepayment of principal on the mortgage loans is distributed on an offered
certificate purchased at a discount or premium (or, if applicable, is allocated
in reduction of the notional amount thereof), the greater will be the effect on
the investor's yield to maturity. As a result, the effect on an investor's
yield of principal payments (to the extent distributable in reduction of the
principal balance or notional amount of the 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.
A class of certificates, including a class of offered certificates, may
provide that on any distribution date the holders of certificates are entitled
to a pro rata share of the prepayments (including prepayments occasioned by
defaults) 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 such prepayments, or to a disproportionately small share
(which, in some cases, may be none) of the prepayments. As and to the extent
described in the prospectus supplement, the entitlements of the various classes
of certificateholders of any series to receive payments (and, in particular,
prepayments) of principal of the mortgage loans in the related trust fund may
vary based on the occurrence of certain events (e.g., the retirement of one or
more classes of a series of certificates) or subject to certain contingencies
(e.g., prepayment and default rates with respect to the mortgage loans).
In general, the notional amount of a class of Stripped Interest
Certificates will either (i) be based on the principal balances of some or all
of the mortgage assets in the related trust fund or (ii) equal the certificate
balances of one or more of the other classes of certificates of the same
series. Accordingly, the yield on such Stripped Interest Certificates will be
directly related to the amortization of the mortgage assets or classes of
certificates, as the case may be. Thus, if a class of certificates of any
series consists of Stripped Interest Certificates or Stripped Principal
Certificates, a lower than anticipated rate of principal prepayments on the
mortgage loans in the related trust fund will negatively affect the yield to
investors in Stripped Principal Certificates, and a higher than anticipated
rate of principal prepayments on the mortgage loans will negatively affect the
yield to investors in Stripped Interest Certificates.
The depositor is not aware of any relevant publicly available or
authoritative statistics with respect to the historical prepayment experience
of a large group of 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 number of factors, including, without limitation, the
availability of mortgage credit, the relative economic vitality of the area in
which the mortgaged properties are located, the quality of management of the
mortgaged properties, the servicing of the mortgage loans, possible changes in
tax laws and other opportunities for investment. In addition, the rate of
principal payments on the mortgage loans in any
41
trust fund may be affected by the existence of lockout periods and requirements
that principal prepayments be accompanied by prepayment premiums, and by the
extent to which such 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
coupon, a borrower may have an increased incentive to refinance its mortgage
loan. In addition, as prevailing market interest rates decline, even borrowers
with adjustable rate mortgage loans that have experienced a corresponding
interest rate decline may have an increased incentive to refinance for purposes
of either (i) converting to a fixed rate loan and thereby "locking in" such
rate or (ii) taking advantage of the initial "teaser rate" (a mortgage interest
rate below what it would otherwise be if the applicable index and gross margin
were applied) 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 therein, to meet cash
flow needs or to make other investments. In addition, some borrowers may be
motivated by federal and state tax laws (which are subject to change) to sell
mortgaged properties prior to the exhaustion of tax depreciation benefits. The
depositor 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 such 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
a trust fund will affect the ultimate maturity and the weighted average life of
one or more classes of a series of certificates. Weighted average life refers
to the average amount of time that will elapse from the date of issuance of an
instrument until each dollar of the principal amount of such instrument is
repaid to the investor.
The weighted average life and maturity of a class of certificates of a
series will be influenced by the rate at which principal on the 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 trust fund), is paid to that
class of certificateholders. Prepayment rates on loans are commonly measured
relative to a prepayment standard or model, such as the CPR prepayment model or
the 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 loans in
the first month of the life of the loans and an additional 0.2% per annum in
each following month until the 30th month. Beginning in the 30th month, and in
each following month 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 for each series of certificates will contain
tables, if applicable, setting forth the projected weighted average life of
each class of offered certificates and the percentage of the initial
certificate balance of each class that would be outstanding on specified
distribution dates based on the assumptions stated in the prospectus
supplement, including assumptions that borrowers make prepayments on the
mortgage loans at rates corresponding to various percentages of CPR or SPA, or
at such other rates specified in the prospectus supplement. The tables and
assumptions will illustrate the
42
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 that are designed to provide increased protection against prepayment
risk by transferring that risk to one or more companion classes. Unless
otherwise specified in the prospectus supplement, each controlled amortization
class will either be a planned amortization class or a targeted amortization
class. In general, distributions of principal on a planned amortization class
of certificates are made in accordance with a specified amortization schedule
so long as prepayments on the underlying mortgage loans occur within a
specified range of constant prepayment rates and, as described below, so long
as one or more companion classes remain to absorb excess cash flows and make up
for shortfalls. For example, if the rate of prepayments is significantly higher
than expected, the excess prepayments will be applied to retire the companion
classes prior to reducing the principal balance of a planned amortization
class. If the rate of prepayments is significantly lower than expected, a
disproportionately large portion of prepayments may be applied to a planned
amortization class. Once the companion classes for a planned amortization class
are retired, the planned amortization class of certificates will have no
further prepayment protection. A targeted amortization class of certificates is
similar to a planned amortization class of certificates, but a targeted
amortization class structure generally does not draw on companion classes to
make up cash flow shortfalls, and will generally not provide protection to the
targeted amortization class against the risk that prepayments occur more slowly
than expected.
In general, the reduction of prepayment risk afforded to a controlled
amortization class comes at the expense of one or more companion classes of the
same series (any of which may also be a class of offered certificates) which
absorb a disproportionate share of the overall prepayment risk of a given
structure. As more particularly described in the prospectus supplement, the
holders of a companion class will receive a disproportionately large share of
prepayments when the rate of prepayment exceeds the rate assumed in structuring
the controlled amortization class, and (in the case of a companion class that
supports a planned amortization class of certificates) a disproportionately
small share of prepayments (or no prepayments) when the rate of prepayment
falls below that assumed rate. Thus, as and to the extent described in the
prospectus supplement, a companion class will absorb a disproportionate share
of the risk that a relatively fast rate of prepayments will result in the early
retirement of the investment, that is, "call risk," and, if applicable, the
risk that a relatively slow rate of prepayments will extend the average life of
the investment, that is, "extension risk", that would otherwise be allocated to
the related controlled amortization class. Accordingly, companion classes can
exhibit significant average life variability.
OTHER FACTORS AFFECTING YIELD, WEIGHTED AVERAGE LIFE AND MATURITY
Balloon Payments; Extensions of Maturity. Some or all of the mortgage
loans included in a 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
mortgaged property, there is a risk that mortgage loans that require balloon
payments may default at maturity, or that the maturity of such a mortgage loan
may be extended in connection with a workout. In the case of defaults, recovery
of proceeds may be delayed by, among other things, bankruptcy of the borrower
or adverse conditions in the market where the property is located. In order to
minimize losses on defaulted mortgage loans, the master servicer or a special
servicer, to the extent and under the circumstances set forth in this
prospectus and in the 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 the
certificates and, if the certificates were purchased at a discount, reduce the
yield thereon.
Negative Amortization. Mortgage loans that permit negative amortization
can affect the weighted average life of a class of certificates. In general,
mortgage loans that permit negative amortization by their
43
terms limit the amount by which scheduled payments may adjust in response to
changes in mortgage interest rates and/or provide that scheduled payment
amounts will adjust less frequently than the mortgage interest rates.
Accordingly, during a period of rising interest rates, the scheduled payment on
a mortgage loan that permits negative amortization may be less than the amount
necessary to amortize the loan fully over its remaining amortization schedule
and pay interest at the then applicable mortgage interest rate. In that case,
the mortgage loan balance would amortize more slowly than necessary to repay it
over its schedule and, if the amount of scheduled payment were less than the
amount necessary to pay current interest at the applicable mortgage interest
rate, the loan balance would negatively amortize to the extent of the amount of
the interest shortfall. Conversely, during a period of declining interest
rates, the scheduled payment on a mortgage loan that permits negative
amortization 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. In that case, the excess would be applied to principal,
thereby resulting in amortization at a rate faster than necessary to repay the
mortgage loan balance over its schedule.
A slower or negative rate of mortgage loan amortization would
correspondingly be reflected in a slower or negative rate of amortization for
one or more classes of certificates of the related series. Accordingly, the
weighted average lives of mortgage loans that permit negative amortization (and
that of the classes of certificates to which any such negative amortization
would be allocated or which would bear the effects of a slower rate of
amortization on the mortgage loans) may increase as a result of such feature. A
faster rate of mortgage loan amortization will shorten the weighted average
life of the mortgage loans and, correspondingly, the weighted average lives of
those classes of certificates then entitled to a portion of the principal
payments on those mortgage loans. The 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.
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 to holders of the
offered certificates of any series will directly depend on the extent to which
such holders are required to bear the effects of any losses or shortfalls in
collections arising out of defaults on the mortgage assets in the related trust
fund and the timing of such losses and shortfalls. In general, the earlier that
any such loss or shortfall occurs, the greater will be the negative effect on
yield for any class of certificates that is required to bear the effects of the
loss or 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 classes of certificates of the related series in the priority and manner,
and subject to the limitations, specified in the prospectus supplement. As
described in the prospectus supplement, such allocations may result in
reductions in the entitlements to interest and/or certificate balances of one
or more classes of certificates, or may be effected simply by a prioritization
of payments among the 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 assets in the related trust fund.
Additional Certificate Amortization. In addition to entitling
certificateholders to a specified portion (which may 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 a series, may provide for distributions of
principal from (i) amounts attributable to interest accrued but not currently
distributable on one or more classes of Accrual Certificates, (ii) excess funds
or (iii) any other amounts described in the prospectus supplement. As
specifically set forth in the prospectus supplement, "excess funds" generally
will represent that portion of the amounts distributable in respect
44
of the certificates of any series on any distribution date that represent (i)
interest received or advanced on the mortgage assets in the related trust fund
that is in excess of the interest currently distributable on that series of
certificates, as well as any interest accrued but not currently distributable
on any Accrual Certificates of that series or (ii) prepayment premiums,
payments from equity participations entitling the lender to a share of profits
realized from the operation or disposition of the mortgaged property, or any
other amounts received on the mortgage assets in the trust fund that do not
constitute interest thereon or principal thereof.
The amortization of any class of certificates out of the sources described
in the preceding paragraph would shorten the weighted average life of
certificates and, if those certificates were purchased at a premium, reduce the
yield on those certificates. The prospectus supplement will discuss the
relevant factors that you should consider in determining whether distributions
of principal of any class of certificates out of such sources would have any
material effect on the rate at which your certificates are amortized.
THE DEPOSITOR
Wachovia Commercial Mortgage Securities, Inc., the depositor, is a North
Carolina corporation organized on August 17, 1988 as a wholly-owned subsidiary
of Wachovia Bank, National Association (formerly known as First Union National
Bank), a national banking association with its main office located in
Charlotte, North Carolina. Wachovia Bank, National Association is a subsidiary
of Wachovia Corporation, a North Carolina corporation registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended.
Wachovia Corporation is a financial holding company under the
Gramm-Leach-Bliley Act. The depositor's principal business is to acquire, hold
and/or sell or otherwise dispose of cash flow assets, usually in connection
with the securitization of that asset. The depositor maintains its principal
office at 301 South College Street, Charlotte, North Carolina 28288-0166. Its
telephone number is 704-374-6161. There can be no assurance that the depositor
will have any significant assets.
USE OF PROCEEDS
The net proceeds to be received from the sale of certificates will be
applied by the depositor to the purchase of trust assets or will be used by the
depositor for general corporate purposes. The depositor expects to sell the
certificates from time to time, but the timing and amount of offerings of
certificates will depend on a number of factors, including the volume of
mortgage assets acquired by the depositor, prevailing interest rates,
availability of funds and general market conditions.
45
DESCRIPTION OF THE CERTIFICATES
GENERAL
In the aggregate, the certificates of each series of certificates will
represent the entire beneficial ownership interest in the trust fund created
pursuant to the related pooling and servicing agreement. Each series of
certificates may consist of one or more classes of certificates (including
classes of offered certificates), and such class or classes may (i) provide for
the accrual of interest thereon at a fixed, variable or adjustable rate; (ii)
be senior or subordinate to one or more other classes of certificates in
entitlement to certain distributions on the certificates; (iii) be entitled, as
Stripped Principal Certificates, to distributions of principal with
disproportionately small, nominal or no distributions of interest; (iv) be
entitled, as Stripped Interest Certificates, to distributions of interest with
disproportionately small, nominal or no distributions of principal; (v) provide
for distributions of principal and/or interest thereon that commence only after
the occurrence of certain events such as the retirement of one or more other
classes of certificates of such series; (vi) provide for distributions of
principal 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; (vii) provide for distributions of principal to be made, subject to
available funds, based on a specified principal payment schedule or other
methodology; and/or (viii) provide for distributions based on a combination of
two or more components thereof with one or more of the characteristics
described in this paragraph, including a Stripped Principal Certificate
component and a Stripped Interest Certificate component, to the extent of
available funds, in each case as described in the prospectus supplement. Any
such classes may include classes of offered certificates. With respect to
certificates with two or more components, references in this prospectus to
certificate balance, notional amount and pass-through rate refer to the
principal balance, if any, notional amount, if any, and the pass-through rate,
if any, for that component.
Each class of offered certificates of a series will be issued in minimum
denominations corresponding to the certificate balances or, in the case of
Stripped Interest Certificates or REMIC residual certificates, notional amounts
or percentage interests specified in the prospectus supplement. As provided in
the prospectus supplement, one or more classes of offered certificates of any
series may be issued in fully registered, definitive form or may be offered in
book-entry format through the facilities of DTC. The offered certificates of
each series (if issued as definitive certificates) may be transferred or
exchanged, subject to any restrictions on transfer described in the prospectus
supplement, at the location specified in the prospectus supplement, without the
payment of any service charge, 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--Your Ability to Resell
Certificates May Be Limited Because of Their Characteristics," and "--The
Assets of the Trust Fund May Not Be Sufficient to Pay Your Certificates."
DISTRIBUTIONS
Distributions on the certificates of each series will be made by or on
behalf of the trustee or master servicer on each distribution date as specified
in the prospectus supplement from the Available Distribution Amount for such
series and such distribution date.
Except as otherwise specified in the prospectus supplement, distributions
on the certificates of each series (other than the final distribution in
retirement of any certificate) will be made to the persons in whose names those
certificates are registered on the record date, which is the close of business
on the last business day of the month preceding the month in which the
applicable distribution date occurs, and the amount of each distribution will
be determined as of the close of business on the determination date that is
specified in the 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. The trustee will make
payments either by wire transfer in immediately available funds to the account
of a certificateholder at a bank or other entity having appropriate facilities
therefor, if such certificateholder has provided the trustee or other person
required to make such payments with wiring instructions (which may be provided
46
in the form of a standing order applicable to all subsequent distributions) no
later than the date specified in the prospectus supplement (and, if so provided
in the prospectus supplement, such certificateholder holds certificates in the
requisite amount or denomination specified in the prospectus supplement), or by
check mailed to the address of the certificateholder as it appears on the
certificate register; provided, however, that the trustee will make the final
distribution in retirement of any class of certificates (whether definitive
certificates or book-entry certificates) only upon presentation and surrender
of the certificates at the location specified in the notice to
certificateholders of such final distribution.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of certificates of each series (other than certain classes of
Stripped Principal Certificates and certain REMIC residual certificates that
have no pass-through rate) may have a different pass-through rate which may be
fixed, variable or adjustable. The prospectus supplement will specify the
pass-through rate or, in the case of a variable or adjustable pass-through
rate, the method for determining the pass-through rate, for each class. Unless
otherwise specified in the 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 the certificates of any class
(other than any class of Accrual Certificates that will be entitled to
distributions of accrued interest commencing only on the distribution date, or
under the circumstances, specified in the prospectus supplement, and other than
any class of Stripped Principal Certificates or REMIC residual certificates
that is not entitled to any distributions of interest) will be made on each
distribution date based on the Accrued Certificate Interest for such class and
such distribution date, subject to the sufficiency of the portion of the
Available Distribution Amount allocable to such class on such distribution
date. Prior to the time interest is distributable on any class of Accrual
Certificates, the amount of Accrued Certificate Interest otherwise
distributable on that class will be added to the certificate balance of that
class on each distribution date. With respect to each class of certificates
(other than some classes of Stripped Interest Certificates and REMIC residual
certificates), Accrued Certificate Interest for each distribution date will be
equal to interest at the applicable pass-through rate accrued for a specified
period (generally the period between distribution dates) on the outstanding
certificate balance thereof immediately prior to such distribution date. Unless
otherwise provided in the prospectus supplement, Accrued Certificate Interest
for each distribution date on Stripped Interest Certificates will be similarly
calculated except that it will accrue on a notional amount that is either (i)
based on the principal balances of some or all of the mortgage assets in the
related trust fund or (ii) equal to the certificate balances of one or more
other classes of certificates of the same series. Reference to a notional
amount with respect to a class of Stripped Interest Certificates is solely for
convenience in making certain calculations and does not represent the right to
receive any distributions of principal.
If so specified in the prospectus supplement, the amount of Accrued
Certificate Interest that is otherwise distributable on (or, in the case of
Accrual Certificates, that may otherwise be added to the certificate balance
of) one or more classes of the certificates of a series will be reduced to the
extent that any prepayment interest shortfalls, as described under "Yield
Considerations--Shortfalls in Collections of Interest Resulting from
Prepayments" exceed the amount of any sums (including, if and to the extent
specified in the prospectus supplement, the master servicer's servicing
compensation) that are applied to offset such shortfalls. The particular manner
in which prepayment interest shortfalls will be allocated among some or all of
the classes of certificates of that series will be specified in the prospectus
supplement. The prospectus supplement will also describe the extent to which
the amount of Accrued Certificate Interest that is otherwise distributable on
(or, in the case of Accrual Certificates, that may otherwise be added to the
certificate balance of) a class of offered certificates may be reduced as a
result of any other contingencies, including delinquencies, losses and deferred
interest on or in respect of the mortgage assets in the related trust fund.
Unless otherwise provided in the prospectus supplement, any reduction in the
amount of Accrued Certificate Interest otherwise distributable on a class of
certificates by reason of the allocation to such class of a portion of any
deferred interest on or in respect of the mortgage assets in the related trust
fund will result in a corresponding increase in the certificate balance of that
class. See "Risk Factors--Prepayment and Repurchases of the Mortgage Assets
Will Affect the Timing of Your Cash Flow and May Affect Your Yield" and "Yield
Considerations."
47
DISTRIBUTIONS OF PRINCIPAL OF THE CERTIFICATES
Each class of certificates of each series (other than certain classes of
Stripped Interest Certificates or REMIC residual certificates) will have a
certificate 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 certificate
balance of a class of certificates will be reduced by distributions of
principal made on those certificates from time to time and, if so provided in
the prospectus supplement, further by any losses incurred in respect of the
related mortgage assets allocated to those certificates from time to time. In
turn, the outstanding certificate balance of a class of certificates may be
increased as a result of any deferred interest on or in respect of the related
mortgage assets that is allocated to those certificates 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 those Accrual
Certificates are required to commence, by the amount of any Accrued Certificate
Interest in respect thereof (reduced as described above). Unless otherwise
provided in the prospectus supplement, the initial aggregate certificate
balance of all classes of a series of certificates will not be greater than the
aggregate outstanding principal balance of the related mortgage assets as of
the applicable Cut-Off Date, after application of scheduled payments due on or
before such date, whether or not received.
As and to the extent described in the prospectus supplement, distributions
of principal with respect to a series of certificates will be made on each
distribution date to the holders of the class or classes of certificates of
such series entitled to distributions until the certificate 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, may not commence until the occurrence of certain events,
such as the retirement of one or more other classes of certificates of the same
series, or may be made at a rate that is slower (and, in some cases,
substantially slower) than the rate at which payments or other collections of
principal are received on such mortgage assets. In addition, distributions of
principal with respect to one or more classes of controlled amortization
certificates may be made, subject to available funds, based on a specified
principal payment schedule and, with respect to one or more classes of
companion classes of certificates, may be contingent on the specified principal
payment schedule for a controlled amortization class of certificates 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 prospectus supplement, distributions of principal of any class
of certificates will be made on a pro rata basis among all of the certificates
belonging to that class.
COMPONENTS
To the extent specified in the prospectus supplement, distribution on a
class of certificates may be based on a combination of two or more different
components as described under "--General" above. To that extent, the
descriptions set forth under "--Distributions of Interest on the Certificates"
and "--Distributions of Principal of the Certificates" above also relate to
components of such a class of certificates. In such case, reference in those
sections to certificate balance and pass-through rate refer to the principal
balance, if any, of any of the components and the pass-through rate, if any, on
any component, respectively.
DISTRIBUTIONS ON THE CERTIFICATES IN RESPECT OF PREPAYMENT PREMIUMS OR IN
RESPECT OF EQUITY PARTICIPATIONS
If so provided in the prospectus supplement, prepayment premiums or
payments in respect of equity participations entitling the lender to a share of
profits realized from the operation or disposition of the mortgaged property
received on or in connection with the mortgage assets in any trust fund will be
distributed on each distribution date to the holders of the class of
certificates of the related series entitled thereto in accordance with the
provisions described in such prospectus supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
If so provided in the prospectus supplement for a series of certificates
consisting of one or more classes of subordinate certificates, on any
distribution date in respect of which losses or shortfalls in
48
collections on the mortgage assets have been incurred, the amount of such
losses or shortfalls will be borne first by a class of subordinate certificates
in the priority and manner and subject to the limitations specified in the
prospectus supplement. See "Description of Credit Support" for a description of
the types of protection that may be included in shortfalls on mortgage assets
comprising the trust fund.
ADVANCES IN RESPECT OF DELINQUENCIES
With respect to any series of certificates evidencing an interest in a
trust fund, unless otherwise provided in the prospectus supplement, a servicer
or another entity described therein will be required as part of its servicing
responsibilities to advance on or before each distribution date its own funds
or funds held in the related certificate account that are not included in the
Available Distribution Amount for such distribution date, in an amount equal to
the aggregate of payments of principal (other than any balloon payments) and
interest (net of related servicing fees) that were due on the mortgage loans in
the trust fund and were delinquent on the related determination date, subject
to the servicer's (or another entity's) good faith determination that such
advances will be reimbursable from the loan proceeds. In the case of a series
of certificates that includes one or more classes of subordinate certificates
and if so provided in the prospectus supplement, each servicer's (or another
entity's) advance obligation may be limited only to the portion of such
delinquencies necessary to make the required distributions on one or more
classes of senior certificates and/or may be subject to the servicer's (or
another entity's) good faith determination that such advances will be
reimbursable not only from the loan proceeds but also from collections on other
trust assets otherwise distributable on one or more classes of subordinate
certificates. See "Description of Credit Support".
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. Unless otherwise
provided in the prospectus supplement, advances of a servicer's (or another
entity's) funds will be reimbursable only out of recoveries on the mortgage
loans (including amounts received under any form of credit support) respecting
which advances were made and, if so provided in the prospectus supplement, out
of any amounts otherwise distributable on one or more classes of subordinate
certificates of such series; provided, however, that any advance will be
reimbursable from any amounts in the related certificate account prior to any
distributions being made on the certificates to the extent that a servicer (or
such other entity) shall determine in good faith that such advance is not
ultimately recoverable from related proceeds on the mortgage loans or, if
applicable, from collections on other trust assets otherwise distributable on
the subordinate certificates.
If advances have been made from excess funds in a certificate account, the
master servicer or other person that advanced such funds will be required to
replace such funds in the certificate account on any future distribution date
to the extent that funds then in the certificate account are insufficient to
permit full distributions to certificateholders on that date. If so specified
in the prospectus supplement, the obligation of a master servicer or other
specified person to make advances may be secured by a cash advance reserve fund
or a surety bond. If applicable, we will provide in the prospectus supplement
information regarding the characteristics of, and the identity of any obligor
on, any such surety bond.
If and to the extent so provided in the prospectus supplement, any entity
making advances will be entitled to receive interest on those advances for the
period that such advances are outstanding at the rate specified therein and
will be entitled to pay itself that interest periodically from general
collections on the mortgage assets prior to any payment to certificateholders
as described in the prospectus supplement.
The prospectus supplement for any series of certificates evidencing an
interest in a trust fund that includes CMBS will describe any comparable
advancing obligation of a party to the related pooling and servicing agreement
or of a party to the related CMBS agreement.
REPORTS TO CERTIFICATEHOLDERS
On each distribution date a master servicer or trustee will forward to the
holder of certificates of each class of a series a distribution date statement
accompanying the distribution of principal and/or interest to those holders. As
further provided in the prospectus supplement, the distribution date statement
for each class will set forth to the extent applicable and available:
49
(i) the amount of such distribution to holders of certificates of such
class applied to reduce the certificate balance thereof;
(ii) the amount of such distribution to holders of certificates of such
class allocable to Accrued Certificate Interest;
(iii) the amount, if any, of such distribution to holders of
certificates of such class allocable to prepayment premiums;
(iv) the amount of servicing compensation received by each servicer and
such other customary information as the master servicer or the trustee
deems necessary or desirable, or that a certificateholder reasonably
requests, to enable certificateholders to prepare their tax returns;
(v) the aggregate amount of advances included in such distribution and
the aggregate amount of unreimbursed advances at the close of business
on, or as of a specified date shortly prior to, such distribution date;
(vi) the aggregate principal balance of the related mortgage loans on,
or as of a specified date shortly prior to, such distribution date;
(vii) the number and aggregate principal balance of any mortgage loans
in respect of which (A) one scheduled payment is delinquent, (B) two
scheduled payments are delinquent, (C) three or more scheduled payments
are delinquent and (D) foreclosure proceedings have been commenced;
(viii) with respect to any mortgage loan liquidated during the related
prepayment period (as to the current distribution date, generally the
period extending from the prior distribution date to and including the
current distribution date) in connection with a default on that mortgage
loan or because the mortgage loan was purchased out of the trust fund
(other than a payment in full), (A) the loan number, (B) the aggregate
amount of liquidation proceeds received and (C) the amount of any loss
to certificateholders;
(ix) with respect to any REO Property sold during the related
collection period, (A) the loan number of the related mortgage loan, (B)
the aggregate amount of sales proceeds and (C) the amount of any loss to
certificateholders in respect of the related mortgage loan;
(x) the certificate balance or notional amount of each class of
certificates (including any class of certificates not offered hereby)
immediately before and immediately after such distribution date,
separately identifying any reduction in the certificate balance due to
the allocation of any losses in respect of the related mortgage loans;
(xi) the aggregate amount of principal prepayments made on the mortgage
loans during the related prepayment period;
(xii) the amount deposited in or withdrawn from any reserve fund on
such distribution date, and the amount remaining on deposit in the
reserve fund as of the close of business on such distribution date;
(xiii) the amount of any Accrued Certificate Interest due but not paid
on such class of offered certificates at the close of business on such
distribution date; and
(xiv) if such class of offered certificates has a variable pass-through
rate or an adjustable pass-through rate, the pass-through rate applicable
thereto for such distribution date.
In the case of information furnished pursuant to subclauses (i)-(iv)
above, the amounts will be expressed as a dollar amount per minimum
denomination of the relevant class of offered certificates or per a specified
portion of such minimum denomination. The prospectus supplement for each series
of offered certificates will describe any additional information to be included
in reports to the holders of such certificates.
Within a reasonable period of time after the end of each calendar year,
the related master servicer or trustee, as the case may be, will be required to
furnish to each person who at any time during the
50
calendar year was a holder of an offered certificate a statement containing the
information set forth in subclauses (i)-(iv) above, aggregated for such
calendar year or the applicable portion thereof during which such person was a
certificateholder. Such obligation will be deemed to have been satisfied to the
extent that substantially comparable information is provided pursuant to any
requirements of the Code as are from time to time in force. See, however,
"Description of the Certificates--Book-Entry Registration and Definitive
Certificates."
If the trust fund for a series of certificates includes CMBS, 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 such CMBS will depend on the reports received with respect to such
CMBS. In such cases, the 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 such series in the manner described
in the prospectus supplement.
Certificateholders will generally have a right to vote only with respect
to required consents to certain amendments to the related pooling and servicing
agreement and as otherwise specified in the prospectus supplement. See
"Description of the Pooling and Servicing Agreements--Amendment." The holders
of specified amounts of certificates of a particular series will have the
collective right to remove the related trustee and also to cause the removal of
the related master servicer in the case of an event of default under the
related pooling and servicing agreement on the part of the master servicer. See
"Description of the Pooling and Servicing Agreements--Events of Default,"
"--Rights upon Event of Default" and "--Resignation and Removal of the
Trustee."
TERMINATION
The obligations created by the pooling and servicing agreement for each
series of certificates will terminate upon the payment (or provision for
payment) to certificateholders of that series of all amounts held in the
related certificate account, or otherwise by the related master servicer or
trustee or by a special servicer, and required to be paid to such
certificateholders pursuant to such pooling and servicing agreement following
the earlier of (i) the final payment or other liquidation of the last mortgage
asset subject to the pooling and servicing agreement or the disposition of all
property acquired upon foreclosure of any mortgage loan subject to the pooling
and servicing agreement and (ii) the purchase of all of the assets of the
related trust fund by the party entitled to effect such termination, under the
circumstances and in the manner that will be described in the prospectus
supplement. Written notice of termination of a pooling and servicing agreement
will be given to each certificateholder of the related series, and the final
distribution will be made only upon presentation and surrender of the
certificates of such series at the location to be specified in the notice of
termination.
If so specified in the prospectus supplement, a series of certificates
will be subject to optional early termination through the repurchase of the
assets in the related trust fund by a party that will be specified in the
prospectus supplement, under the circumstances and in the manner set forth in
the prospectus supplement. If so provided in the prospectus supplement, upon
the reduction of the certificate balance of a specified class or classes of
certificates by a specified percentage or amount, a party identified in the
prospectus supplement will be authorized or required to solicit bids for the
purchase of all the assets of the related trust fund, or of a sufficient
portion of such assets to retire such class or classes, under the circumstances
and in the manner set forth in the prospectus supplement. In any event, unless
otherwise disclosed in the prospectus supplement, any such repurchase or
purchase shall be at a price or prices that are generally based upon the unpaid
principal balance of, plus accrued interest on, all mortgage loans (other than
mortgage loans secured by REO Properties) then included in a trust fund and the
fair market value of all REO Properties then included in the trust fund, which
may or may not result in full payment of the aggregate certificate balance plus
accrued interest and any undistributed shortfall in interest for the then
outstanding certificates. Any sale of trust fund assets will be without
recourse to the trust and/or
51
certificateholders, provided, however, that there can be no assurance that in
all events a court would accept such a contractual stipulation.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the prospectus supplement, one or more classes of the
offered certificates of any series will be offered in book-entry format through
the facilities of DTC, and each such class will be represented by one or more
global certificates registered in the name of 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 Securities Exchange
Act of 1934. DTC holds securities that its participating organizations deposit
with DTC. DTC also facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book entry changes in their accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
participants that 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 indirect participants in the DTC system
such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a direct participant in the
DTC system, either directly or indirectly. The rules applicable to DTC and its
participants are on file with the Securities and Exchange Commission.
Purchases of book-entry certificates under the DTC system must be made by
or through direct participants in the DTC system, which will receive a credit
for the book-entry certificates on DTC's records. A certificate owner's
ownership interest as an actual purchaser of a book-entry certificate will in
turn be recorded on the records of direct participants and indirect
participants. Certificate owners will not receive written confirmation from DTC
of their purchases, but certificate owners are expected to receive written
confirmations providing details of such transactions, as well as periodic
statements of their holdings, from the direct participant or indirect
participant through which each certificate owner entered into the transaction.
Transfers of ownership interest in the book-entry certificates will 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 will not know the identity of actual certificate owners of the
book-entry certificates; DTC's records reflect only the identity of the direct
participants in the DTC system to whose accounts such certificates are
credited. The participants will remain responsible for keeping account of their
holdings on behalf of their customers. Notices and other communications
conveyed by DTC to direct participants in the DTC system, 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 such date.
Disbursement of such 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 each such 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.
As may be provided in the prospectus supplement, the only
"certificateholder" (as such term is used in the related pooling and servicing
agreement) of a book-entry certificate will be the nominee of DTC,
52
and the certificate owners will not be recognized as certificateholders under
the pooling and servicing agreement. Certificate owners will be permitted to
exercise the rights of certificateholders under the related pooling and
servicing 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 a pooling and
servicing 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 direct participants in the DTC
system, 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 such interest.
As may be specified in the prospectus supplement, certificates initially
issued in book-entry form will be issued as definitive certificates to
certificate owners or their nominees, rather than to DTC or its nominee, only
if (i) the depositor advises the trustee in writing that DTC is no longer
willing or able to properly discharge its responsibilities as depository with
respect to such certificates and the depositor is unable to locate a qualified
successor or (ii) the depositor, at its option, elects to terminate the
book-entry system through DTC with respect to such certificates. Upon the
occurrence of either of the events described in the preceding sentence, DTC
will be required to notify all 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 or other designated party will be
required to issue to the certificate owners identified in such instructions the
definitive certificates to which they are entitled, and thereafter the holders
of such definitive certificates will be recognized as certificateholders under
the related pooling and servicing agreement.
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS
GENERAL
The certificates of each series will be issued pursuant to a pooling and
servicing agreement or other agreement specified in the prospectus supplement.
In general, the parties to a pooling and servicing agreement will include the
depositor, the trustee, the master servicer and, in some cases, a special
servicer appointed as of the date of the pooling and servicing agreement.
However, a pooling and servicing agreement that relates to a trust fund that
consists solely of CMBS may not include a master servicer or other servicer as
a party. All parties to each pooling and servicing agreement under which
certificates of a series are issued will be identified in the prospectus
supplement.
A form of a pooling and servicing agreement has been filed as an exhibit
to the registration statement of which this prospectus is a part. However, the
provisions of each pooling and servicing agreement will vary depending upon the
nature of the certificates to be issued thereunder and the nature of the
related trust fund. The following summaries describe certain provisions that
may appear in a pooling and servicing 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
and servicing agreement that materially differs from the description thereof
contained in this prospectus and, if the related trust fund includes CMBS, will
summarize all of the material provisions of the related pooling and servicing
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 and servicing agreement for each series of
certificates and the description of such provisions in the prospectus
supplement. As used in this prospectus with respect to any series, the term
"certificate" refers to all of the certificates of that series, whether or not
offered hereby and by the prospectus supplement, unless the context otherwise
requires.
ASSIGNMENT OF MORTGAGE ASSETS; REPURCHASES
As set forth in the prospectus supplement, generally at the time of
issuance of any series of certificates, the depositor will assign (or cause to
be assigned) to the designated trustee the mortgage loans
53
to be included in the related trust fund, together with, unless otherwise
specified in the prospectus supplement, all principal and interest to be
received on or with respect to such mortgage loans after the Cut-Off Date,
other than principal and interest due on or before the Cut-Off Date. The
trustee will, concurrently with such assignment, deliver the certificates to or
at the direction of the depositor in exchange for the mortgage loans and the
other assets to be included in the trust fund for such series. Each mortgage
loan will be identified in a schedule appearing as an exhibit to the related
pooling and servicing agreement. Such schedule generally will include detailed
information that pertains to each mortgage loan included in the related trust
fund, which information will typically include the address of the related
mortgaged property and type of such property; the mortgage 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; the original and outstanding principal balance; and the
Loan-to-Value Ratio and Debt Service Coverage Ratio as of the date indicated.
With respect to each mortgage loan to be included in a trust fund, the
depositor will deliver (or cause to be delivered) to the related trustee (or to
a custodian appointed by the trustee) certain loan documents which will include
the original mortgage note (or lost note affidavit) endorsed, without recourse,
to the order of the trustee, the original mortgage (or a certified copy
thereof) with evidence of recording indicated thereon and an assignment of the
mortgage to the trustee in recordable form. The related pooling and servicing
agreement will require that the depositor or other party thereto promptly cause
each such assignment of mortgage to be recorded in the appropriate public
office for real property records.
The related trustee (or the custodian appointed by the trustee) will be
required to review the mortgage loan documents within a specified period of
days after receipt thereof, and the trustee (or the custodian) will hold such
documents in trust for the benefit of the certificateholders of the related
series. Unless otherwise specified in the prospectus supplement, if any
document is found to be missing or defective, in either case such that
interests of the certificateholders are materially and adversely affected, the
trustee (or such custodian) will be required to notify the master servicer and
the depositor, and the master servicer will be required to notify the relevant
seller of the mortgage asset. In that case, and if the mortgage asset seller
cannot deliver the document or cure the defect within a specified number of
days after receipt of such notice, then unless otherwise specified in the
prospectus supplement, the mortgage asset seller will be obligated to replace
the related mortgage loan or repurchase it from the trustee at a price that
will be specified in the prospectus supplement.
If so provided in the prospectus supplement, the depositor will, as to
some or all of the mortgage loans, assign or cause to be assigned to the
trustee the related lease assignments. In certain cases, the trustee, or master
servicer, as applicable, may collect all moneys under the related leases and
distribute amounts, if any, required under the leases for the payment of
maintenance, insurance and taxes, to the extent specified in the related
leases. The trustee, or if so specified in the prospectus supplement, the
master servicer, as agent for the trustee, may hold the leases in trust for the
benefit of the certificateholders.
With respect to each CMBS in certificate form, the depositor will deliver
or cause to be delivered to the trustee (or the custodian) the original
certificate or other definitive evidence of such CMBS together with bond power
or other instruments, certifications or documents required to transfer fully
such CMBS to the trustee for the benefit of the certificateholders. With
respect to each CMBS in uncertificated or book-entry form or held through a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, the depositor and the trustee will cause such CMBS to be registered
directly or on the books of such clearing corporation or of a financial
intermediary in the name of the trustee for the benefit of the
certificateholders. Unless otherwise provided in the prospectus supplement, the
related pooling and servicing agreement will require that either the depositor
or the trustee promptly cause any CMBS in certificated form not registered in
the name of the trustee to be reregistered, with the applicable persons, in the
name of the trustee.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
The depositor will, with respect to each mortgage loan in the related
trust fund, make or assign certain representations and warranties made by the
warranting party, covering, by way of example: (i) the
54
accuracy of the information set forth for such mortgage loan on the schedule of
mortgage loans appearing as an exhibit to the related pooling and servicing
agreement; (ii) the enforceability of the related mortgage note and mortgage
and the existence of title insurance insuring the lien priority of the related
mortgage; (iii) the warranting party's title to the mortgage loan and the
authority of the warranting party to sell the mortgage loan; and (iv) the
payment status of the mortgage loan. Each warranting party will be identified
in the prospectus supplement.
Unless otherwise provided in the prospectus supplement, each pooling and
servicing 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 related
certificateholders. If such warranting party cannot cure such breach within a
specified period following the date on which it was notified of such breach,
then, unless otherwise provided in the prospectus supplement, it will be
obligated to repurchase such mortgage loan from the trustee within a specified
period at a price that will be specified in the 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 such series of
certificates, to replace such mortgage loan with one or more other mortgage
loans, in accordance with standards that will be described in the prospectus
supplement. This repurchase or substitution obligation may constitute the sole
remedy available to holders of certificates of any series for a breach of
representation and warranty by a warranting party. Moreover, neither the
depositor (unless it is the warranting party) nor any entity acting solely in
its capacity as the master servicer will be obligated to purchase or replace a
mortgage loan if a warranting party defaults on its obligation to do so.
The dates as of which representations and warranties have been made by a
warranting party will be specified in the prospectus supplement. In some cases,
such representations and warranties will have been made 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, the depositor will not include any mortgage loan in the trust
fund for any series of certificates if anything has come to the depositor's
attention that would cause it to believe that the representations and
warranties made in respect of such mortgage loan will not be accurate in all
material respects as of such date of issuance.
CERTIFICATE ACCOUNT
General. The master servicer and/or the trustee will, as to each trust
fund, establish and maintain or cause to be established and maintained
certificate accounts for the collection of payments on the related 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. As described in the prospectus supplement, a certificate
account may be maintained either as an interest-bearing or a
non-interest-bearing account, and the funds held therein may be held as cash or
invested in permitted investments, such as United States government securities
and other investment grade obligations specified in the related pooling and
servicing agreement. Any interest or other income earned on funds in the
certificate account will be paid to the related master servicer or trustee as
additional compensation. If permitted by such rating agency or agencies and so
specified in the 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 serviced by it on behalf of others.
Deposits. Unless otherwise provided in the related pooling and servicing
agreement and described in the prospectus supplement, the related master
servicer, trustee or special servicer will be required to deposit or cause to
be deposited in the certificate account for each trust fund within a certain
period following receipt (in the case of collections and payments), the
following payments and collections received, or advances 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):
55
(i) all payments on account of principal, including principal
prepayments, on the mortgage loans;
(ii) all payments on account of interest on the mortgage loans,
including any default interest collected, in each case net of any portion
thereof retained by the master servicer, any special servicer or
sub-servicer as its servicing compensation or as compensation to the
trustee;
(iii) all insurance proceeds received under any hazard, title or other
insurance policy that provides coverage with respect to a mortgaged
property or the related mortgage loan (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 and all other liquidation proceeds received and
retained in connection with the liquidation of defaulted mortgage loans
or property acquired in respect thereof, by foreclosure or otherwise,
together with the Net Operating Income (less reasonable reserves for
future expenses) derived from the operation of any mortgaged properties
acquired by the trust fund through foreclosure or otherwise;
(iv) any amounts paid under any instrument or drawn from any fund that
constitutes credit support for the related series of certificates as
described under "Description of Credit Support;"
(v) any advances made as described under "Description of the
Certificate--Advances in Respect of Delinquencies;"
(vi) any amounts paid under any cash flow agreement, as described under
"Description of the Trust Funds--Cash Flow Agreements;"
(vii) all liquidation proceeds resulting from the purchase of any
mortgage loan, or property acquired in respect thereof, by the depositor,
any mortgage asset seller or any other specified person as described
under "--Assignment of Mortgage Assets; Repurchases" and "--Representations
and Warranties; Repurchases," all liquidation proceeds resulting from the
purchase of any defaulted mortgage loan as described under "--Realization
Upon Defaulted Mortgage Loans," and all liquidation proceeds resulting
from any mortgage asset purchased as described under "Description of the
Certificates--Termination;"
(viii) 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;"
(ix) to the extent that any such 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 lenders' equity participations on the
mortgage loans;
(x) 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;"
(xi) 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
(xii) any other amounts required to be deposited in the certificate
account as provided in the related pooling and servicing agreement and
described in the prospectus supplement.
Withdrawals. Unless otherwise provided in the related pooling and
servicing agreement and described in the prospectus supplement, the master
servicer, trustee or special servicer may make withdrawals from the certificate
account for each trust fund for any of the following purposes:
(i) to make distributions to the certificateholders on each
distribution date;
(ii) to reimburse the master servicer or any other specified person for
unreimbursed amounts advanced by it as described under "Description of
the Certificates--Advances in Respect of Delinquencies," such
reimbursement to be made out of amounts received which were identified
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and applied by the master servicer as late collections of interest (net of
related servicing fees) 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 such mortgage loans;
(iii) to reimburse the master servicer 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 thereof, such reimbursement to be made out
of amounts that represent liquidation proceeds and insurance proceeds
collected on the particular mortgage loans and properties, and net income
collected on the particular properties, with respect to which such fees
were earned or such expenses were incurred or out of amounts drawn under
any form of credit support with respect to such mortgage loans and
properties;
(iv) to reimburse the master servicer or any other specified person for
any advances described in clause (ii) above made by it, any servicing
expenses referred to in clause (iii) above incurred by it and any
servicing fees earned by it, which, in the good faith judgment of the
master servicer or such other person, will not be recoverable from the
amounts described in clauses (ii) and (iii), respectively, such
reimbursement to be made from amounts collected on other mortgage loans
in the related trust fund or, if and to the extent so provided by the
related pooling and servicing agreement and described in the prospectus
supplement, only from that portion of amounts collected on such other
mortgage loans that is otherwise distributable on one or more classes of
subordinate certificates of the related series;
(v) if and to the extent described in the prospectus supplement, to pay
the master servicer, a special servicer or another specified entity
(including a provider of credit support) interest accrued on the advances
described in clause (ii) above made by it and the servicing expenses
described in clause (iii) above incurred by it while such remain
outstanding and unreimbursed;
(vi) to pay for costs and expenses incurred by the trust fund for
environmental site assessments performed with respect to mortgaged
properties that constitute security for defaulted mortgage loans, and for
any containment, clean-up or remediation of hazardous wastes and
materials present on such mortgaged properties, as described under
"--Realization Upon Defaulted Mortgage Loans;"
(vii) to reimburse the master 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 and to
the extent described under "--Certain Matters Regarding the Master
Servicer and the Depositor;"
(viii) if and to the extent described in the prospectus supplement, to
pay the fees of the trustee;
(ix) 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 and to the extent described under
"--Certain Matters Regarding the Trustee;"
(x) to pay the master servicer or the trustee, as additional
compensation, interest and investment income earned in respect of amounts
held in the certificate account and, to the extent described in the
prospectus supplement, prepayment interest excesses collected from
borrowers in connection with prepayments of mortgage loans and late
charges and default interest collected from borrowers;
(xi) 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;
(xii) if one or more elections have been made to treat the trust fund or
designated portions thereof as a REMIC, to pay any federal, state or local
taxes imposed on the trust fund or its assets or transactions, as and to
the extent described under "Material Federal Income Tax Consequences--
Taxation of Owners of REMIC Residual Certificates-- Prohibited
Transactions Tax and Other Taxes;"
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(xiii) 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 thereof in
connection with the liquidation of such mortgage loan or property;
(xiv) to pay for the cost of various opinions of counsel obtained
pursuant to the related pooling and servicing agreement for the benefit
of certificateholders;
(xv) to pay for the cost of recording the pooling and servicing
agreement if recorded in accordance with the pooling and servicing
agreement;
(xvi) to make any other withdrawals permitted by the related pooling
and servicing agreement and described in the prospectus supplement; and
(xvii) to clear and terminate the certificate account upon the
termination of the trust fund.
COLLECTION AND OTHER SERVICING PROCEDURES
Master Servicer. The master servicer for any mortgage pool, directly or
through sub-servicers, will be required to make reasonable efforts to collect
all scheduled mortgage loan payments and will be required to follow such
collection procedures as it would follow with respect to mortgage loans that
are comparable to such mortgage loans and held for its own account, provided
such procedures are consistent with (i) the terms of the related pooling and
servicing agreement and any related instrument of credit support included in
the related trust fund, (ii) applicable law and (iii) the servicing standard
specified in the pooling and servicing agreement.
The master servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining escrow or
impound accounts for payment of taxes, insurance premiums and similar items, or
otherwise monitoring the timely payment of those items; attempting to collect
delinquent payments; supervising foreclosures; conducting property inspections
on a periodic or other basis; managing REO Properties; and maintaining
servicing records relating to the mortgage loans. Generally, the master
servicer will be responsible for filing and settling claims in respect of
particular mortgage loans under any applicable instrument of credit support.
See "Description of Credit Support."
A master servicer may agree to modify, waive or amend any term of any
mortgage loan serviced by it in a manner consistent with the servicing standard
specified in the pooling and servicing agreement; provided that the
modification, waiver or amendment will not (i) affect the amount or timing of
any scheduled payments of principal or interest on the mortgage loan or (ii) 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
thereon. A master servicer also may agree to any other modification, waiver or
amendment if, in its judgment (x) a material default on the mortgage loan has
occurred or a payment default is imminent and (y) such modification, waiver or
amendment is reasonably likely to produce a greater recovery with respect to
the mortgage loan on a present value basis than would liquidation.
Sub-Servicers. A master servicer may delegate its servicing obligations in
respect of the mortgage loans serviced by it to one or more third-party
sub-servicers, but the master servicer will remain liable for such obligations
under the related pooling and servicing agreement unless otherwise provided in
the prospectus supplement. Unless otherwise provided in the prospectus
supplement, each sub-servicing agreement between a master servicer and a
sub-servicer must provide that, if for any reason the master servicer is no
longer acting in such capacity, the trustee or any successor master servicer
may assume the master servicer's rights and obligations under such
sub-servicing agreement.
Generally, the 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 and servicing agreement is
sufficient to pay such fees. Each sub-servicer will be reimbursed by the master
servicer for certain expenditures which it makes, generally to the same extent
the master servicer would be reimbursed under a pooling and servicing
agreement. See "--Certificate Account" and "--Servicing Compensation and
Payment of Expenses."
Special Servicers. If and to the extent specified in the prospectus
supplement, a special servicer may be a party to the related pooling and
servicing agreement or may be appointed by the master servicer or
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another specified party to perform certain specified duties (for example, the
servicing of defaulted mortgage loans) in respect of the servicing of the
related mortgage loans. The special servicer under a pooling and servicing
agreement may be an affiliate of the depositor and may have other normal
business relationships with the depositor or the depositor's affiliates. The
master servicer will be liable for the performance of a special servicer only
if, and to the extent, set forth in the prospectus supplement.
Each pooling and servicing agreement may provide that neither the special
servicer nor any director, officer, employee or agent of the special servicer
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 and
servicing agreement or for errors in judgment; provided, however, that neither
the special servicer nor any such person will be protected against any breach
of a representation, warranty or covenant made in such pooling and servicing
agreement, or against any expense or liability that such person is specifically
required to bear pursuant to the terms of such pooling and servicing agreement,
or against any liability that would otherwise be imposed by reason of
misfeasance, bad faith or negligence in the performance of obligations or
duties thereunder.
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 to otherwise maintain and insure the
related mortgaged property. In general, the related master servicer will be
required to monitor any mortgage loan that is in default, evaluate whether the
causes of the default can be corrected over a reasonable period without
significant impairment of the value of the related mortgaged property, initiate
corrective action in cooperation with the borrower if cure is likely, inspect
the related mortgaged property and take such other actions as are consistent
with the servicing standard specified in the pooling and servicing agreement. A
significant period of time may elapse before the master servicer is able to
assess the success of any such corrective action or the need for additional
initiatives.
The time within which the master 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 mortgaged property
for a considerable period of time. See "Certain Legal Aspects of Mortgage Loans
and Leases."
A pooling and servicing 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 certificates of the related series 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 thereon, will be specified in the prospectus supplement), any
mortgage loan as to which a specified number of scheduled payments are
delinquent. In addition, the prospectus supplement may specify other methods
for the sale or disposal of defaulted mortgage loans pursuant to the terms of
the related pooling and servicing agreement.
If a default on a mortgage loan has occurred, the master 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 such action is consistent with
the servicing standard specified in the pooling and servicing agreement. Unless
otherwise specified in the prospectus supplement, the master servicer may not,
however, acquire title to any mortgaged property or take any other action that
would cause the trustee, for the benefit of certificateholders of the related
series, or any other specified person to be considered to hold title to, to be
a "mortgagee-in-possession" of, or to be an "owner" or an "operator" of, such
mortgaged property within the meaning of certain federal environmental laws,
unless
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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:
(i) either the mortgaged property is in compliance with applicable
environmental laws and regulations or, if not, that taking such actions
as are necessary to bring the mortgaged property into compliance
therewith is reasonably likely to produce a greater recovery on a present
value basis than not taking such actions; and
(ii) either there are no circumstances or conditions present at the
mortgaged property relating to the use, management or disposal of
hazardous materials for which investigation, testing, monitoring,
containment, cleanup or remediation could be required under any
applicable environmental laws and regulations or, if such circumstances
or conditions are present for which any such action could reasonably be
expected to be required, taking such actions with respect to the
mortgaged property is reasonably likely to produce a greater recovery on
a present value basis than not taking such actions. See "Certain Legal
Aspects of Mortgage Loans and Leases--Environmental Considerations."
If title to any mortgaged property is acquired by a trust fund as to which
a REMIC election has been made, the master servicer, on behalf of the trust
fund, will be required to sell the mortgaged property by the end of the third
calendar year following the year of acquisition or unless (i) the Internal
Revenue Service grants an extension of time to sell such property or (ii) the
trustee receives an opinion of independent counsel to the effect that the
holding of the property by the trust fund for more than three years after the
end of the calendar year in which it was acquired will not result in the
imposition of a tax on the trust fund or cause the trust fund to fail to
qualify as a REMIC under the Code at any time that any certificate is
outstanding. Subject to the foregoing, the master servicer will generally be
required to solicit bids for any mortgaged property so acquired in such a
manner as will be reasonably likely to realize a fair price for such property.
If the trust fund acquires title to any mortgaged property, the master
servicer, on behalf of the trust fund, may retain an independent contractor to
manage and operate such property. The retention of an independent contractor,
however, will not relieve the master servicer of its obligation to manage such
mortgaged property in a manner consistent with the servicing standard specified
in the pooling and servicing agreement.
If liquidation proceeds collected with respect to a defaulted mortgage
loan are less than the outstanding principal balance of the defaulted mortgage
loan plus interest accrued thereon plus the aggregate amount of reimbursable
expenses incurred by the master servicer with respect to such mortgage loan,
the trust fund will realize a loss in the amount of such difference. The master
servicer will be entitled to reimburse itself from the liquidation proceeds
recovered on any defaulted mortgage loan (prior to the distribution of such
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.
HAZARD INSURANCE POLICIES
Each pooling and servicing agreement may require the related master
servicer to cause each mortgage loan borrower to maintain a hazard insurance
policy that provides for such coverage as is required under the related
mortgage or, if the mortgage permits the holder thereof to dictate to the
borrower the insurance coverage to be maintained on the related mortgaged
property, such coverage as is consistent with the requirements of the servicing
standard specified in the pooling and servicing agreement. Such coverage
generally will be in an amount equal to the lesser of the principal balance
owing on such mortgage loan and the replacement cost of the mortgaged property,
but in either case not less than the amount necessary to avoid the application
of any co-insurance clause contained in the hazard insurance policy. The
ability of the 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 the master servicer
under any such policy (except for amounts to be applied to the restoration or
repair of the
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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 and servicing agreement may provide that the
master servicer may satisfy its obligation to cause each borrower to maintain
such a hazard insurance policy by maintaining a blanket policy insuring against
hazard losses on all of the mortgage loans in the related trust fund. If such
blanket policy contains a deductible clause, the master servicer will be
required, in the event of a casualty covered by such blanket policy, to deposit
in the related certificate account all sums that would have been deposited
therein but for such deductible clause.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by fire,
lightning, explosion, smoke, windstorm and hail, riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies covering the mortgaged properties will be underwritten by
different insurers under different state laws in accordance with different
applicable state forms, and therefore will not contain identical terms and
conditions, most such policies typically do not cover any physical damage
resulting from war, revolution, governmental actions, terrorism, 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.
The hazard insurance policies covering the mortgaged properties will
typically contain co-insurance clauses that in effect require an insured at all
times to carry insurance of a specified percentage (generally 80% to 90%) of
the full replacement value of the improvements on the property in order to
recover the full amount of any partial loss. If the insured's coverage falls
below this specified percentage, such clauses generally provide that the
insurer's liability in the event of partial loss does not exceed the lesser of
(i) the replacement cost of the improvements less physical depreciation and
(ii) such proportion of the loss as the amount of insurance carried bears to
the specified percentage of the full replacement cost of such improvements.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the mortgage loans may contain a due-on-sale clause that
entitles the lender to accelerate payment of the mortgage loan upon any sale or
other transfer of the related mortgaged property made without the lender's
consent. Certain of the mortgage loans may also contain a due-on-encumbrance
clause that entitles the lender to accelerate the maturity of the mortgage loan
upon the creation of any other lien or encumbrance upon the mortgaged property.
The master servicer will determine whether to exercise any right the trustee
may have under any such provision in a manner consistent with the servicing
standard specified in the pooling and servicing agreement. Unless otherwise
specified in the 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 and Leases--Due-on-Sale and Due-on-Encumbrance."
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Generally, a master servicer's primary servicing compensation with respect
to a series of certificates will come from the periodic payment to it of a
portion of the interest payments on each mortgage loan in the related trust
fund. Since that compensation is generally based on a percentage of the
principal balance of each such 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 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
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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 prospectus supplement, interest on such expenses at the rate specified
therein, and the fees of the trustee and any special servicer, may be required
to be borne by the trust fund.
If and to the extent provided in the prospectus supplement, the 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 Considerations--Shortfalls in Collections of Interest Resulting
from Prepayments."
EVIDENCE AS TO COMPLIANCE
Each pooling and servicing agreement may require that, on or before a
specified date in each year, the master servicer cause a firm of independent
public accountants to furnish a statement to the trustee to the effect that,
based on an examination by such firm conducted substantially in compliance with
the Uniform Single Audit Program for Mortgage Bankers, 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 the related
pooling and servicing agreement) was conducted through the preceding calendar
year or other specified twelve-month period in compliance with the terms of
such agreements except for any significant exceptions or errors in records
that, in the opinion of such firm, paragraph 4 of the Uniform Single Audit
Program for Mortgage Bankers requires it to report. Each pooling and servicing
agreement will also provide for delivery to the trustee, on or before a
specified date in each year, of a statement signed by one or more officers of
the master servicer to the effect that the master servicer has fulfilled its
material obligations under the pooling and servicing agreement throughout the
preceding calendar year or other specified twelve-month period.
Copies of the annual accountants' statement and the statement of officers
of a master servicer will be made available to certificateholders upon written
request to the master servicer.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE DEPOSITOR
The master servicer under a pooling and servicing agreement may be an
affiliate of the depositor and may have other normal business relationships
with the depositor or the depositor's affiliates. The related pooling and
servicing agreement may permit the master servicer to resign from its
obligations thereunder upon a determination that such obligations are no longer
permissible under applicable law or are in material conflict by reason of
applicable law with any other activities carried on by it at the date of the
pooling and servicing agreement. Unless applicable law requires the master
servicer's resignation to be effective immediately, no such resignation will
become effective until the trustee or a successor servicer has assumed the
master servicer's obligations and duties under the pooling and servicing
agreement. The related pooling and servicing agreement may also provide that
the master servicer may resign at any other time provided that (i) a willing
successor master servicer has been found, (ii) each of the rating agencies that
has rated any one or more classes of certificates of the related series
confirms in writing that the successor's appointment will not result in a
withdrawal, qualification or downgrade of any rating or ratings assigned to any
such class of certificates, (iii) the resigning party pays all costs and
expenses in connection with such transfer, and (iv) the successor accepts
appointment prior to the effectiveness of such resignation. Unless otherwise
specified in the prospectus supplement, the master servicer will also be
required to maintain a fidelity bond and errors and omissions policy that
provides coverage against losses that may be sustained as a result of an
officer's or employee's misappropriation of funds, errors and omissions or
negligence, subject to certain limitations as to amount of coverage, deductible
amounts, conditions, exclusions and exceptions.
Each pooling and servicing agreement may further provide that none of the
master servicer, the depositor and 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 and servicing agreement or for errors in judgment; provided,
however, that none of the master servicer, the depositor and any such person
will be protected against any breach of a representation,
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warranty or covenant made in such pooling and servicing agreement, or against
any expense or liability that such person is specifically required to bear
pursuant to the terms of such pooling and servicing agreement, or against any
liability that would otherwise be imposed by reason of misfeasance, bad faith
or negligence in the performance of obligations or duties thereunder. Unless
otherwise specified in the prospectus supplement, each pooling and servicing
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 the pooling and servicing agreement or the
related series of certificates; provided, however, that such indemnification
will not extend to any loss, liability or expense (i) that such person is
specifically required to bear pursuant to the terms of such agreement, and is
not reimbursable pursuant to the pooling and servicing agreement; (ii) incurred
in connection with any breach of a representation, warranty or covenant made in
the pooling and servicing agreement; (iii) incurred by reason of misfeasance,
bad faith or negligence in the performance of obligations or duties under the
pooling and servicing agreement. In addition, each pooling and servicing
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
unless such action is related to its respective duties under the pooling and
servicing agreement and, unless it has received sufficient assurance as to the
reimbursement of the costs and liabilities of such legal action or, in its
opinion such legal action does not 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 such action that it may deem
necessary or desirable with respect to the enforcement and/or protection of the
rights and duties of the parties to the pooling and servicing agreement and the
interests of the certificateholders thereunder. In such event, the legal
expenses and costs of such action, and any liability resulting therefrom, will
be expenses, costs and liabilities of the certificateholders, and the master
servicer or the depositor, as the case may be, will be entitled to charge the
related certificate account therefor.
Subject, in certain circumstances, to the satisfaction of certain
conditions that may be required in the related pooling and servicing agreement,
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 and servicing agreement.
EVENTS OF DEFAULT
The events of default for a series of certificates under the related
pooling and servicing agreement generally will include (i) any failure by the
master servicer to distribute or cause to be distributed to certificateholders,
or to remit to the trustee for distribution to certificateholders in a timely
manner, any amount required to be so distributed or remitted, provided that
such failure is permitted so long as the failure is corrected by 10:00 a.m. on
the related distribution date, (ii) 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
continues unremedied for 30 days after written notice of such failure has been
given to the master servicer or the special servicer, as applicable, by any
party to the pooling and servicing agreement, or to the master servicer or the
special servicer, as applicable, by certificateholders entitled to not less
than 25% (or such other percentage specified in the prospectus supplement) of
the voting rights for such series (subject to certain extensions provided in
the related pooling and servicing agreement); and (iii) 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. Material variations to the foregoing events of default (other than
to add thereto or shorten cure periods or eliminate notice requirements) will
be specified in the prospectus supplement.
RIGHTS UPON EVENT OF DEFAULT
So long as an event of default under a pooling and servicing agreement
remains unremedied, the depositor or the trustee will be authorized, and at the
direction of certificateholders entitled to not less
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than 25% (or such other percentage specified in the prospectus supplement) of
the voting rights for such series, the trustee will be required, to terminate
all of the rights and obligations of the master servicer as master servicer
under the pooling and servicing agreement, whereupon the trustee will succeed
to all of the responsibilities, duties and liabilities of the master servicer
under the pooling and servicing agreement (except that if the master servicer
is required to make advances in respect of mortgage loan delinquencies, but the
trustee is prohibited by law from obligating itself to do so, or if the
prospectus supplement so specifies, the trustee will not be obligated to make
such advances) 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 at least 51% (or such other
percentage specified in the prospectus supplement) of the voting rights for
such series, it will be required to) appoint, or petition a court of competent
jurisdiction to appoint, a loan servicing institution that (unless otherwise
provided in the prospectus supplement) is acceptable to each rating agency that
assigned ratings to the offered certificates of such series to act as successor
to the master servicer under the pooling and servicing agreement. Pending such
appointment, the trustee will be obligated to act in such capacity.
No certificateholder will have the right under any pooling and servicing
agreement to institute any proceeding with respect thereto unless such holder
previously has given to the trustee written notice of default and unless
certificateholders entitled to at least 25% (or such other percentage specified
in the prospectus supplement) of the voting rights for the related series shall
have made written request upon the trustee to institute such proceeding in its
own name as trustee thereunder and shall have offered to the trustee reasonable
indemnity, and the trustee for 60 days (or such other period specified in the
prospectus supplement) shall have neglected or refused to institute any such
proceeding. The trustee, however, will be under no obligation to exercise any
of the trusts or powers vested in it by any pooling and servicing agreement or
to make any investigation of matters arising thereunder or to institute,
conduct or defend any litigation thereunder or in relation thereto at the
request, order or direction of any of the holders of certificates of the
related series, unless such certificateholders have offered to the trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby.
AMENDMENT
Each pooling and servicing agreement may be amended by the parties
thereto, without the consent of any of the holders of the related certificates,
(i) to cure any ambiguity, (ii) to correct, modify or supplement any provision
in the pooling and servicing agreement that may be inconsistent with any other
provision therein, (iii) to add any other provisions with respect to matters or
questions arising under the pooling and servicing agreement that are not
inconsistent with the provisions thereof, (iv) to comply with any requirements
imposed by the Code or (v) for any other purpose; provided that such amendment
(other than an amendment for the purpose specified in clause (iv) above) may
not (as evidenced by an opinion of counsel to such effect satisfactory to the
trustee) adversely affect in any material respect the interests of any such
holder. Each pooling and servicing agreement may also be amended for any
purpose by the parties, with the consent of certificateholders entitled to at
least 51% (or such other percentage specified in the prospectus supplement) of
the voting rights for the related series allocated to the affected classes;
provided, however, that no such amendment may (x) 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 such certificate, (y) 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 (x), without the consent of the
holders of all certificates of such class or (z) modify the provisions of the
pooling and servicing agreement described in this paragraph without the consent
of the holders of all certificates of the related series. However, unless
otherwise specified in the related pooling and servicing agreement, the trustee
will be prohibited from consenting to any amendment of a pooling and servicing
agreement pursuant to which a REMIC election is to be or has been made unless
the trustee shall first have received an opinion of counsel to the effect that
such amendment will not result in the imposition of a tax on the related trust
fund or cause the related trust fund to fail to qualify as a REMIC at any time
that the related certificates are outstanding.
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LIST OF CERTIFICATEHOLDERS
Upon written request of any certificateholder 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 and servicing agreement, the
trustee or other specified person will afford such certificateholder access,
during normal business hours, to the most recent list of certificateholders of
that series then maintained by such person.
THE TRUSTEE
The trustee under each pooling and servicing 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 and its affiliates.
DUTIES OF THE TRUSTEE
The trustee for a series of certificates will make no representation as to
the validity or sufficiency of the related pooling and servicing agreement, the
certificates or any mortgage loan or related document and will not be
accountable for the use or application by or on behalf of any master servicer
of any funds paid to the master servicer or any special servicer in respect of
the certificates or the mortgage loans, or any funds deposited into or
withdrawn from the certificate account or any other account by or on behalf of
the master servicer or any special servicer. If no event of default under a
related pooling and servicing agreement has occurred and is continuing, the
trustee will be required to perform only those duties specifically required
under the related pooling and servicing agreement. However, upon receipt of any
of the various certificates, reports or other instruments required to be
furnished to it pursuant to the pooling and servicing agreement, the trustee
will be required to examine such documents and to determine whether they
conform to the requirements of the pooling and servicing agreement.
CERTAIN MATTERS REGARDING THE TRUSTEE
The trustee for a series of certificates may be entitled to
indemnification, from amounts held in the related certificate account, 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
and servicing agreement; provided, however, that such indemnification will not
extend to any loss, liability or expense that constitutes a specific liability
imposed on the trustee pursuant to the pooling and servicing agreement, or to
any loss, liability or expense incurred by reason of willful misfeasance, bad
faith or negligence on the part of the trustee in the performance of its
obligations and duties thereunder, or by reason of its reckless disregard of
such obligations or duties, or as may arise from a breach of any
representation, warranty or covenant of the trustee made in the pooling and
servicing agreement. As and to the extent described in the 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.
RESIGNATION AND REMOVAL OF THE TRUSTEE
The trustee for a series of certificates will be permitted at any time to
resign from its obligations and duties under the related pooling and servicing
agreement by giving written notice thereof to the depositor. Upon receiving
such notice of resignation, the master servicer (or such other person as may be
specified in the prospectus supplement) will be required to use reasonable
efforts to promptly appoint a successor trustee. If no successor trustee shall
have accepted an appointment within a specified period after the giving of such
notice of resignation, the resigning trustee may petition any court of
competent jurisdiction to appoint a successor trustee.
Unless otherwise provided in the prospectus supplement, if at any time the
trustee ceases to be eligible to continue as such under the related pooling and
servicing 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
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appoint a successor trustee. In addition, unless otherwise provided in the
prospectus supplement, holders of the certificates of any series entitled to at
least 51% (or such other percentage specified in the prospectus supplement) of
the voting rights for such series may at any time (with or without cause)
remove the trustee and appoint a successor trustee.
Any resignation or removal of the 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 over-collateralization, a letter of
credit, the subordination of one or more classes of certificates, the use of a
pool insurance policy or guarantee insurance, the establishment of one or more
reserve funds or another method of credit support described in the prospectus
supplement, or any combination of the foregoing. If so provided in the
prospectus supplement, any form of credit support may provide credit
enhancement for more than one series of certificates to the extent described in
the prospectus supplement.
The credit support generally 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 and servicing agreement. If
losses or shortfalls occur that exceed the amount covered by the credit support
or that are not covered by the 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 such 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 such 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
prospectus supplement will include a description of (i) the nature and amount
of coverage under such credit support, (ii) any conditions to payment
thereunder not otherwise described in this prospectus, (iii) the conditions (if
any) under which the amount of coverage under such credit support may be
reduced and under which such credit support may be terminated or replaced and
(iv) the material provisions relating to such credit support. Additionally, the
prospectus supplement will set forth certain information with respect to the
obligor under any instrument of credit support, generally including (w) a brief
description of its principal business activities, (x) its principal place of
business, place of incorporation and the jurisdiction under which it is
chartered or licensed to do business, (y) if applicable, the identity of the
regulatory agencies that exercise primary jurisdiction over the conduct of its
business and (z) 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 May Not Cover
Losses or Risks Which Could Adversely Affect Payment on Your Certificates."
SUBORDINATE CERTIFICATES
If so specified in the prospectus supplement, one or more classes of
certificates of a series may be subordinate certificates which are subordinated
in right of payment to one or more other classes of senior certificates. If so
provided in the 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 prospectus supplement will set forth information concerning the
amount of subordination provided by a class or classes of subordinate
certificates in a series, the circumstances under which such subordination will
be available and the manner in which the amount of subordination will be made
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 a series, credit
support may be provided by cross-support provisions requiring that
distributions be made on senior certificates evidencing interests in one group
of mortgage assets prior to distributions on subordinate certificates
evidencing interests in a different group of mortgage assets within the trust
fund. The prospectus supplement for a series that includes a cross-support
provision will describe the manner and conditions for applying such provisions.
INSURANCE OR GUARANTEES WITH RESPECT TO MORTGAGE LOANS
If so provided in the prospectus supplement for a series of certificates,
mortgage loans included in the related trust fund will be covered for certain
default risks by insurance policies or guarantees. To the extent material, a
copy of each such instrument will accompany the Current Report on Form 8-K to
be filed with the Securities and Exchange Commission within 15 days of issuance
of the certificates of the related series.
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LETTER OF CREDIT
If so provided in the prospectus supplement for a series of certificates,
deficiencies in amounts otherwise payable on such certificates or certain
classes thereof will be covered by one or more letters of credit, issued by a
bank or financial institution specified in such prospectus supplement. Under a
letter of credit, the bank or financial institution providing the letter of
credit will be obligated to honor draws thereunder in an aggregate fixed dollar
amount, net of unreimbursed payments thereunder, generally equal to a
percentage specified in the prospectus supplement of the aggregate principal
balance of the mortgage assets on the related Cut-Off Date or of the initial
aggregate certificate balance of one or more classes of certificates. If so
specified in the prospectus supplement, the letter of credit may permit draws
only in the event of certain types of losses and shortfalls. The amount
available under the letter of credit will, in all cases, be reduced to the
extent of the unreimbursed payments thereunder and may otherwise be reduced as
described in the prospectus supplement. The obligations of the bank or
financial institution providing the letter of credit for each series of
certificates will expire at the earlier of the date specified in the prospectus
supplement or the termination of the trust fund. A copy of any such letter of
credit will accompany the Current Report on Form 8-K to be filed with the
Securities and Exchange Commission 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,
deficiencies in amounts otherwise payable on such certificates or certain
classes thereof will be covered by insurance policies and/or surety bonds
provided by one or more insurance companies or sureties. Such instruments may
cover, with respect to one or more classes of certificates of the related
series, timely distributions of interest 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 prospectus supplement. A copy of any
such instrument will accompany the Current Report on Form 8-K to be filed with
the Securities and Exchange Commission 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 such certificates or certain
classes thereof will be covered (to the extent of available funds) by one or
more reserve funds in which cash, a letter of credit, permitted investments, a
demand note or a combination thereof will be deposited, in the amounts
specified in such prospectus supplement. If so specified in the 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 thereon, if any, will be applied for the purposes, in the
manner, and to the extent specified in the prospectus supplement. If so
specified in the prospectus supplement, reserve funds may be established to
provide protection only against certain types of losses and shortfalls.
Following each distribution date, amounts in a reserve fund in excess of any
amount required to be maintained in the reserve fund may be released from the
reserve fund under the conditions and to the extent specified in the prospectus
supplement.
If so specified in the prospectus supplement, amounts deposited in any
reserve fund will be invested in permitted investments, such as United States
government securities and other investment grade obligations specified in the
related pooling and servicing agreement. Unless otherwise specified in the
prospectus supplement, any reinvestment income or other gain from such
investments will be credited to the related reserve fund for such series, and
any loss resulting from such investments will be charged to such reserve fund.
However, such income may be payable to any related master servicer or another
service provider as additional compensation for its services. The reserve fund,
if any, for a series will not be a part of the trust fund unless otherwise
specified in the prospectus supplement.
CREDIT SUPPORT WITH RESPECT TO CMBS
If so provided in the prospectus supplement for a series of certificates,
any CMBS included in the related trust fund and/or the related underlying
mortgage loans may be covered by one or more of the
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types of credit support described in this prospectus. The prospectus supplement
for any series of certificates evidencing an interest in a trust fund that
includes CMBS will describe to the extent information is available and deemed
material, any similar forms of credit support that are provided by or with
respect to, or are included as part of the trust fund evidenced by or providing
security for, such CMBS. The type, characteristic and amount of credit support
will be determined based on the characteristics of the mortgage assets and
other factors and will be established, in part, on the basis of requirements of
each rating agency rating the certificates of such series. If so specified in
the prospectus supplement, any such credit support may apply only in the event
of certain types of losses or delinquencies and the protection against losses
or delinquencies provided by such credit support will be limited.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND LEASES
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties.
Because such 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
CMBS) 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--Leases." For purposes of the following discussion,
"mortgage loan" includes a mortgage loan underlying a CMBS.
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 collectively
referred to as "mortgages" in this prospectus and, unless otherwise specified,
in any prospectus supplement. 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. Additionally, in some states,
mechanic's and materialman's liens have priority over mortgage liens.
The mortgagee's authority under a mortgage, the beneficiary'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 trustee's authority is
further limited by the directions of the beneficiary.
TYPES OF MORTGAGE INSTRUMENTS
There are two parties to a mortgage: a mortgagor (the borrower and usually
the owner of the subject property) and a mortgagee (the lender). In a mortgage,
the mortgagor grants a lien on the subject property in favor of the mortgagee.
A deed of trust is a three-party instrument, among a trustor (the equivalent of
a borrower), a trustee to whom the real property is conveyed, and a beneficiary
(the lender) for whose benefit the conveyance is made. Under a deed of trust,
the trustor grants the property to the trustee, in trust, irrevocably until the
debt is paid, and generally with a power of sale. A deed to secure debt
typically has two parties. The borrower, or grantor, conveys title to the real
property to the grantee, or lender, generally with a power of sale, until such
time as the debt is repaid. In a case where the borrower is a land trust, there
would be an additional party to a mortgage instrument because legal title to
the property is held by a land trustee under a land trust agreement for the
benefit of the borrower. At
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origination of a mortgage loan involving a land trust, the borrower generally
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 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. Lenders that actually take
possession of the property, however, may incur potentially substantial risks
attendant to being a mortgagee in possession. Such risks include liability for
environmental clean-up costs and other risks inherent in property ownership.
See "--Environmental Considerations." In most states, hotel and motel room
receipts/revenues are considered accounts receivable under the Uniform
Commercial Code; in cases where hotels or motels constitute loan security, the
receipts/revenues are generally pledged by the borrower as additional security
for the loan. In general, the lender must file financing statements in order to
perfect its security interest in the receipts/revenues and must file
continuation statements, generally every five years, to maintain perfection of
such security interest. Even if the lender's security interest in room
receipts/revenues is perfected under the Uniform Commercial Code, it will
generally be required to commence a foreclosure action or otherwise take
possession of the property in order to collect the room receipts/revenues
following a default. See "--Bankruptcy Laws."
PERSONALTY
In the case of certain types of mortgaged properties, such as hotels,
motels and nursing homes, personal property (to the extent owned by the
borrower and not previously pledged) may constitute a significant portion of
the property's value as security. The creation and enforcement of liens on
personal property are governed by the Uniform Commercial Code. Accordingly, if
a borrower pledges personal property as security for a mortgage loan, the
lender generally must file Uniform Commercial Code financing statements in
order to perfect its security interest therein, and must file continuation
statements, generally every five years, to maintain that perfection.
COOPERATIVE LOANS
If specified in the prospectus supplement, the mortgage loans may consist
of loans secured by "blanket mortgages" on the property owned by cooperative
housing corporations. If specified in the prospectus supplement, the mortgage
loans may consist of cooperative loans secured by security interests in shares
issued by private cooperative housing corporations and in the related
proprietary leases or occupancy agreements granting exclusive rights to occupy
specific dwelling units in the cooperatives' buildings. The security agreement
will create a lien upon, or grant a title interest in, the property which it
covers, the priority of which will depend on the terms of the particular
security agreement as well as the order of recordation of the agreement in the
appropriate recording office. Such a lien or title interest is not prior to the
lien for real estate taxes and assessments and other charges imposed under
governmental police powers.
A cooperative generally owns in fee or has a leasehold interest in land
and owns in fee or leases the building or buildings thereon and all separate
dwelling units in the buildings. The cooperative is owned by
tenant-stockholders who, through ownership of stock or shares in the
corporation, receive proprietary leases or occupancy agreements which confer
exclusive rights to occupy specific units. Generally, a tenant-stockholder of a
cooperative must make a monthly payment to the cooperative representing such
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tenant-stockholder's pro rata share of the cooperative's payments for its
blanket mortgage, real property taxes, maintenance expenses and other capital
or ordinary expenses. The cooperative is directly responsible for property
management and, in most cases, payment of real estate taxes, other governmental
impositions and hazard and liability insurance. If there is a blanket mortgage
or mortgages on the cooperative apartment building or underlying land, as is
generally the case, or an underlying lease of the land, as is the case in some
instances, the cooperative, as property mortgagor, or lessee, as the case may
be, is also responsible for meeting these mortgage or rental obligations. A
blanket mortgage is ordinarily incurred by the cooperative in connection with
either the construction or purchase of the cooperative's apartment building or
obtaining of capital by the cooperative. The interest of the occupant under
proprietary leases or occupancy agreements as to which that cooperative is the
landlord are generally subordinate to the interest of the holder of a blanket
mortgage and to the interest of the holder of a land lease. If the cooperative
is unable to meet the payment obligations (i) arising under a blanket mortgage,
the mortgagee holding a blanket mortgage could foreclose on that mortgage and
terminate all subordinate proprietary leases and occupancy agreements, or (ii)
arising under its land lease, the holder of the landlord's interest under the
land lease could terminate it and all subordinate proprietary leases and
occupancy agreements. Also, a blanket mortgage on a cooperative may provide
financing in the form of a mortgage that does not fully amortize, with a
significant portion of principal being due in one final payment at maturity.
The inability of the cooperative to refinance a mortgage and its consequent
inability to make such final payment could lead to foreclosure by the mortgagee
and termination of all proprietary leases and occupancy agreements. Similarly,
a land lease has an expiration date and the inability of the cooperative to
extend its term, or, in the alternative, to purchase the land, could lead to
termination of the cooperatives' interest in the property and termination of
all proprietary leases and occupancy agreements. Upon foreclosure of a blanket
mortgage on a cooperative, the lender would normally be required to take the
mortgaged property subject to state and local regulations that afford tenants
who are not shareholders various rent control and other protections. A
foreclosure by the holder of a blanket mortgage or the termination of the
underlying lease could eliminate or significantly diminish the value of any
collateral held by a party who financed the purchase of cooperative shares by
an individual tenant stockholder.
An ownership interest in a cooperative and accompanying occupancy rights
are financed through a cooperative share loan evidenced by a promissory note
and secured by an assignment of and a security interest in the occupancy
agreement or proprietary lease and a security interest in the related
cooperative shares. The lender generally takes possession of the share
certificate and a counterpart of the proprietary lease or occupancy agreement
and financing statements covering the proprietary lease or occupancy agreement
and the cooperative shares are filed in the appropriate state and local offices
to perfect the lender's interest in its collateral. Subject to the limitations
discussed below, upon default of the tenant-stockholder, the lender may sue for
judgment on the promissory note, dispose of the collateral at a public or
private sale or otherwise proceed against the collateral or tenant-stockholder
as an individual as provided in the security agreement covering the assignment
of the proprietary lease or occupancy agreement and the pledge of cooperative
shares. See "--Foreclosure--Cooperative Loans" below.
JUNIOR MORTGAGES; RIGHTS OF SENIOR LENDERS
Some of the mortgage loans included in a trust fund may be secured by
mortgage instruments that are subordinate to mortgage instruments held by other
lenders. The rights of the trust fund (and therefore the certificateholders),
as holder of a junior mortgage instrument, are subordinate to those of the
senior lender, including the prior rights of the senior lender to receive
rents, hazard insurance and condemnation proceeds and to cause the mortgaged
property to be sold upon borrower's default and thereby extinguish the trust
fund's junior lien unless the master servicer or special servicer satisfies the
defaulted senior loan, or, if permitted, asserts its subordinate interest in a
property in foreclosure litigation. As discussed more fully below, in many
states a junior lender may satisfy a defaulted senior loan in full, adding the
amounts expended to the balance due on the junior loan. Absent a provision in
the senior mortgage instrument, no notice of default is required to be given to
the junior lender.
The form of the mortgage instrument used by many institutional lenders
confers on the lender the right both to receive all proceeds collected under
any hazard insurance policy and all awards made in connection with any
condemnation proceedings, and (subject to any limits imposed by applicable
state
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law) to apply such proceeds and awards to any indebtedness secured by the
mortgage instrument in such order as the lender may determine. Thus, if
improvements on a property are damaged or destroyed by fire or other casualty,
or if the property is taken by condemnation, the holder of the senior mortgage
instrument will have the prior right to collect any insurance proceeds payable
under a hazard insurance policy and any award of damages in connection with the
condemnation and to apply the same to the senior indebtedness. Accordingly,
only the proceeds in excess of the amount of senior indebtedness will be
available to be applied to the indebtedness secured by a junior mortgage
instrument.
The form of mortgage instrument used by many institutional lenders
typically contains a "future advance" clause, which provides, in general, that
additional amounts advanced to or on behalf of the mortgagor or trustor by the
mortgagee or beneficiary are to be secured by the mortgage instrument. While
such a clause is valid under the laws of most states, the priority of any
advance made under the clause depends, in some states, on whether the advance
was an "obligatory" or an "optional" advance. If the lender is obligated to
advance the additional amounts, the advance may be entitled to receive the same
priority as the amounts advanced at origination, notwithstanding that
intervening junior liens may have been recorded between the date of recording
of the senior mortgage instrument and the date of the future advance, and
notwithstanding that the senior lender had actual knowledge of such intervening
junior liens at the time of the advance. Where the senior lender is not
obligated to advance the additional amounts and has actual knowledge of the
intervening junior liens, the advance may be subordinate to such intervening
junior liens. Priority of advances under a "future advance" clause rests, in
many other states, on state law giving priority to all advances made under the
loan agreement up to a "credit limit" amount stated in the recorded mortgage.
Another provision typically found in the form of mortgage instrument used
by many institutional lenders permits the lender to itself perform certain
obligations of the borrower (for example, the obligations to pay when due all
taxes and assessments on the property and, when due, all encumbrances, charges
and liens on the property that are senior to the lien of the mortgage
instrument, to maintain hazard insurance on the property, and to maintain and
repair the property) upon a failure of the borrower to do so, with all sums so
expended by the lender becoming part of the indebtedness secured by the
mortgage instrument.
The form of mortgage instrument used by many institutional lenders
typically requires the borrower to obtain the consent of the lender in respect
of actions affecting the mortgaged property, including the execution of new
leases and the termination or modification of existing leases, the performance
of alterations to buildings forming a part of the mortgaged property and the
execution of management and leasing agreements for the mortgaged property.
Tenants will often refuse to execute leases unless the lender executes a
written agreement with the tenant not to disturb the tenant's possession of its
premises in the event of a foreclosure. A senior lender may refuse to consent
to matters approved by a junior lender, with the result that the value of the
security for the junior mortgage instrument is diminished.
FORECLOSURE
General. Foreclosure is a legal procedure that allows the lender to seek
to recover its mortgage debt by enforcing its rights and available legal
remedies under the mortgage in respect of the mortgaged property. 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 usually 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 years to complete. Moreover, the filing by or against the
borrower-mortgagor of a bankruptcy petition would impose an automatic stay on
such proceedings and could further delay a foreclosure sale.
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
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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 proper
defendants. As stated above, if the lender's right to foreclose is contested by
any defendant, the legal proceedings may be time-consuming. In addition,
judicial foreclosure is a proceeding in equity and, therefore, equitable
defenses may be raised against the foreclosure. Upon successful completion of a
judicial foreclosure proceeding, the court generally issues a judgment of
foreclosure and appoints a referee or other officer to conduct a public sale of
the mortgaged property, the proceeds of which are used to satisfy the judgment.
Such sales are made in accordance with procedures that vary from state to
state.
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 or mortgage 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 such sale, the
trustee under the deed of trust must record a notice of default and notice of
sale and send a copy to the borrower and to any other party which 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 a 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. In
addition to such cure rights, in most jurisdictions, the borrower-mortgagor or
a subordinate lienholder can seek to enjoin the non-judicial foreclosure by
commencing a court proceeding. Generally, state law governs the procedure for
public sale, the parties entitled to notice, the method of giving notice and
the applicable time periods.
Both judicial and non-judicial foreclosures may result in the termination
of leases at the mortgaged property, which in turn could result in the
reduction in the income for such property. Some of the factors that will
determine whether or not a lease will be terminated by a foreclosure are: the
provisions of applicable state law, the priority of the mortgage vis-a-vis the
lease in question, the terms of the lease and the terms of any subordination,
non-disturbance and attornment agreement between the tenant under the lease and
the mortgagee.
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 such principles, a court may alter the
specific terms of a loan to the extent it considers necessary to prevent or
remedy an injustice, undue oppression or overreaching, or may require the
lender to undertake affirmative actions to determine the cause of the
borrower's default and the likelihood that the borrower will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's and have required that lenders reinstate loans or recast payment
schedules in order to accommodate borrowers who are suffering from a temporary
financial disability. In other cases, courts have limited the right of the
lender to foreclose in the case of a non-monetary default, such as a failure to
adequately maintain the mortgaged property or placing a subordinate mortgage or
other encumbrance upon the mortgaged property. Finally, some courts have
addressed the issue of whether federal or state constitutional provisions
reflecting due process concerns for adequate notice require that a borrower
receive notice in addition to statutorily prescribed minimum notice. For the
most part, these cases have upheld the reasonableness of the notice provisions
or have found that a public sale under a mortgage providing for a power of sale
does not involve sufficient state action to trigger constitutional protections.
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Public Sale. A third party may be unwilling to purchase a mortgaged
property at a public sale for a number of reasons, including the difficulty in
determining the exact status of title to the property (due to, among other
things, redemption rights that may exist) and because of the possibility that
physical deterioration of the property may have occurred during the foreclosure
proceedings. For these reasons, it is common for the lender to purchase the
mortgaged property for an amount equal to the secured indebtedness and accrued
and unpaid interest plus the expenses of foreclosure, in which event the
borrower's debt will be extinguished. Thereafter, subject to the borrower's
right in some states to remain in possession during a redemption period, the
lender will become the owner of the property and have both the benefits and
burdens of ownership, including the obligation to pay debt service on any
senior mortgages, to pay taxes, to obtain casualty insurance and to make such
repairs as are necessary to render the property suitable for sale. The costs
involved in a foreclosure process can often be quite expensive; such costs may
include, depending on the jurisdiction involved, legal fees, court
administration fees, referee fees and transfer taxes or fees. The costs of
operating and maintaining a commercial or multifamily residential property may
be significant and may be greater than the income derived from that property.
The lender also will commonly obtain the services of a real estate broker and
pay the broker's commission in connection with the sale or lease of the
property. Depending upon market conditions, the ultimate proceeds of the sale
of the property may not equal the lender's investment in the property.
Moreover, because of the expenses associated with acquiring, owning and selling
a mortgaged property, a lender could realize an overall loss on a mortgage loan
even if the mortgaged property is sold at foreclosure, or resold after it is
acquired through foreclosure, for an amount equal to the full outstanding
principal amount of the loan plus accrued interest.
The holder of a junior mortgage that forecloses on a mortgaged property
does so subject to senior mortgages and any other prior liens, and may be
obliged to keep senior mortgage loans current in order to avoid foreclosure of
its interest in the property. In addition, if the foreclosure of a junior
mortgage triggers the enforcement of a "due-on-sale" clause contained in a
senior mortgage, the junior mortgagee could be required to pay the full amount
of the senior mortgage indebtedness, including penalty fees and court costs, 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 such other assets, if any, that were pledged to
secure the mortgage loan. However, even if a mortgage loan by its terms
provides for recourse to the borrower's other assets, a lender's ability to
realize upon those assets may be limited by state law. For example, in some
states a lender cannot obtain a deficiency judgment against the borrower
following a non-judicial foreclosure. 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
74
property and the amount due to the lender. Other statutes may require the
lender to exhaust the security afforded under a mortgage before bringing a
personal action against the borrower. In certain other states, the lender has
the option of bringing a personal action against the borrower on the debt
without first exhausting such security; however, in some of those states, the
lender, following judgment on such personal action, may be deemed to have
elected a remedy and thus may be precluded from foreclosing upon the security.
Consequently, lenders in those states where such an election of remedy
provision exists will usually proceed first against the security. Finally,
other statutory provisions, designed to protect borrowers from exposure to
large deficiency judgments that might result from bidding at below-market
values at the foreclosure sale, limit any deficiency judgment to the excess of
the outstanding debt over the judicially determined 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 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 or the
bankruptcy of the lessee or the lessor, the leasehold mortgagee would lose its
security. This risk may be substantially lessened if the ground lease contains
provisions protective of the leasehold mortgagee, such as a provision that
requires the ground lessor to give the leasehold mortgagee notices of lessee
defaults and an opportunity to cure them, a provision that permits the
leasehold estate to be assigned to and by the leasehold mortgagee or the
purchaser at a foreclosure sale, a provision that gives the leasehold mortgagee
the right to enter into a new ground lease with the ground lessor on the same
terms and conditions as the old ground lease or a provision that prohibits the
ground lessee/borrower from treating the ground lease as terminated in the
event of the ground lessor's bankruptcy and rejection of the ground lease by
the trustee for the debtor/ground lessor. Certain mortgage loans, however, may
be secured by liens on ground leases that do not contain all or some of these
provisions.
Regulated Healthcare Facilities. A mortgage loan may be secured by a
mortgage on a nursing home or other regulated healthcare facility. In most
jurisdictions, a license (which is nontransferable and may not be assigned or
pledged) granted by the appropriate state regulatory authority is required to
operate a regulated healthcare facility. Accordingly, the ability of a person
acquiring this type of property upon a foreclosure sale to take possession of
and operate the same as a regulated healthcare facility may be prohibited by
applicable law. Notwithstanding the foregoing, however, in certain
jurisdictions the person acquiring this type of property at a foreclosure sale
may have the right to terminate the use of the same as a regulated health care
facility and convert it to another lawful purpose.
Cross-Collateralization. Certain of the mortgage loans may be secured by
more than one mortgage covering mortgaged properties located in more than one
state. Because of various state laws governing foreclosure or the exercise of a
power of sale and because, in general, foreclosure actions are brought in state
court and the courts of one state cannot exercise jurisdiction over property in
another state, it may be necessary upon a default under a cross-collateralized
mortgage loan to foreclose on the related mortgaged properties in a particular
order rather than simultaneously in order to ensure that the lien of the
mortgages is not impaired or released.
Cooperative Loans. The cooperative shares owned by the tenant-stockholder
and pledged to the lender are, in almost all cases, subject to restrictions on
transfer as set forth in the cooperative's certificate of incorporation and
by-laws, as well as the proprietary lease or occupancy agreement, and may be
cancelled by the cooperative for failure by the tenant-stockholder to pay rent
or other obligations or charges owed by such tenant-stockholder, including
mechanics' liens against the cooperative apartment building incurred by such
tenant-stockholder. The proprietary lease or occupancy agreement generally
permit the cooperative to terminate such lease or agreement in the event an
obligor fails to make payments or defaults in the performance of covenants
required thereunder. Typically, the lender and the cooperative enter into a
recognition agreement which establishes the rights and obligations of both
parties in the event of a default by the tenant-stockholder. A default under
the proprietary lease or occupancy agreement will usually constitute a default
under the security agreement between the lender and the tenant-stockholder.
The recognition agreement generally provides that, in the event that the
tenant-stockholder has defaulted under the proprietary lease or the occupancy
agreement is terminated, the cooperative will
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recognize the lender's lien against proceeds from the sale of the cooperative
apartment, subject, however, to the cooperative's right to sums due under such
proprietary lease or occupancy agreement. The total amount owed to the
cooperative by the tenant-stockholder, which the lender generally cannot
restrict and does not monitor, could reduce the value of the collateral below
the outstanding principal balance of the cooperative loan and accrued and
unpaid interest thereon.
Recognition agreements also provide that in the event of a foreclosure on
a cooperative loan, the lender must obtain the approval or consent of the
cooperative as required by the proprietary lease before transferring the
cooperative shares or assigning the proprietary lease. Generally, the lender is
not limited in any rights it may have to dispossess the tenant-stockholders.
In some states, foreclosure on the cooperative shares is accomplished by a
sale in accordance with the provisions of Article 9 of the Uniform Commercial
Code and the security agreement relating to those shares. Article 9 of the
Uniform Commercial Code requires that a sale be conducted in a "commercially
reasonable" manner. Whether a foreclosure sale has been conducted in a
"commercially reasonable" manner will depend on the facts in each case. In
determining commercial reasonableness, a court will look to the notice given
the debtor and the method, manner, time, place and terms of the foreclosure.
Generally, a sale conducted according to the usual practice of banks selling
similar collateral will be considered reasonably conducted.
Article 9 of the Uniform Commercial Code 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. The
recognition agreement, however, generally provides that the lender's right to
reimbursement is subject to the right of the cooperatives to receive sums due
under the proprietary lease or occupancy agreement. If there are proceeds
remaining, the lender must account to the tenant-stockholder for the surplus.
Conversely, if a portion of the indebtedness remains unpaid, the
tenant-stockholder is generally responsible for the deficiency.
BANKRUPTCY LAWS
Operation of 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) to
collect a debt are automatically stayed upon the filing of the bankruptcy
petition and, often, no interest or principal payments are made during the
course of the bankruptcy case. The delay and the consequences thereof caused by
the automatic stay can be significant. Also, under the Bankruptcy Code, the
filing of a petition in bankruptcy by or on behalf of a junior lienholder would
stay the senior lender from proceeding with any foreclosure action.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards protective of the lender's secured claim are met, the amount and
terms of a mortgage loan secured by a lien on property of the debtor may be
modified under certain circumstances. For example, if the loan is undersecured,
the outstanding amount of the loan which would remain secured 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, thus
leaving the lender a general unsecured creditor for the difference between such
value and the outstanding balance of the loan. Other modifications may include
the reduction in the amount of each scheduled payment by means of a reduction
in the rate of interest and/or an alteration of the repayment schedule (with or
without affecting the unpaid principal balance of the loan), and/or by an
extension (or shortening) of the term to maturity. Some bankruptcy courts have
approved plans, based on the particular facts of the reorganization case, that
effected the cure of a mortgage loan default by paying arrearages over a number
of years. Also under 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.
Federal bankruptcy law provides generally that rights and obligations
under an unexpired lease of the debtor/lessee may not be terminated or modified
at any time after the commencement of a case under the
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Bankruptcy Code solely on the basis of a provision in the lease to such effect
or because of certain other similar events. This prohibition could limit the
ability of the trustee for a series of certificates to exercise certain
contractual remedies with respect to the leases. 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. This may delay a
trustee's exercise of such remedies for a related series of certificates in the
event that a related lessee or a related mortgagor becomes the subject of a
proceeding under the Bankruptcy Code. For example, a mortgagee would be stayed
from enforcing a lease assignment by a mortgagor related to a mortgaged
property if the related mortgagor 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 a 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 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
thereof if the assignment is not fully perfected under state law prior to
commencement of the bankruptcy proceeding. See "--Leases and Rents."
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. Such 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, such 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 such
lease, such as the mortgagor, as lessor under a lease, would have only an
unsecured claim against the debtor for damages resulting from such 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%
of the remaining term of the lease, but not more than three years.
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 such lease as terminated by such rejection or, in the alternative,
the lessee may remain in possession of the leasehold for the balance of such
term, and for any renewal or extension of such 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 such a rejection of a lease, the
lessee may offset any damages occurring after such date caused by the
nonperformance of any obligation of the lessor under the lease after such date
against rents reserved under the lease. To the extent provided in the related
prospectus supplement, the lessee will agree under certain leases to pay all
amounts owing thereunder to the master servicer without offset. To the extent
that such a contractual obligation remains enforceable against the lessee, the
lessee would not be able to avail itself of the rights of offset generally
afforded to lessees of real property under the Bankruptcy Code.
In a bankruptcy or similar proceeding of a mortgagor, action may be taken
seeking the recovery, as a preferential transfer or on other grounds, of any
payments made by the mortgagor, 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 mortgagor
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
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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 mortgagors 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 mortgagors 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 agreement
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 partner to
agree within a specified time frame (often 60 days) after such 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 such partnerships triggers the dissolution of such
partnership, the winding up of its affairs and the distribution of its assets.
Such state laws, however, may not be enforceable or effective in a bankruptcy
case. The dissolution of a mortgagor, the winding up of its affairs and the
distribution of its assets could result in an acceleration of its payment
obligation under a related mortgage loan, which may reduce the yield on the
related series of certificates in the same manner as a principal prepayment.
In addition, the bankruptcy of the general partner of a mortgagor that is
a partnership may provide the opportunity for a trustee in bankruptcy for such
general partner, such general partner as a debtor-in-possession, or a creditor
of such general partner to obtain an order from a court consolidating the
assets and liabilities of the general partner with those of the mortgagor
pursuant to the doctrines of substantive consolidation or piercing the
corporate veil. In such a case, the mortgaged property could become property of
the estate of such bankrupt general partner. Not only would the mortgaged
property be available to satisfy the claims of creditors of such general
partner, but an automatic stay would apply to any attempt by the trustee to
exercise remedies with respect to such 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 in the mortgaged property.
ENVIRONMENTAL CONSIDERATIONS
General. A lender may be subject to environmental risks when taking a
security interest in real property. Of particular concern may be properties
that are or have been used for industrial, manufacturing, military, disposal or
certain commercial activities. Such environmental risks include the possible
diminution of the value of a contaminated property or, as discussed below,
potential liability for clean-up costs or other remedial actions and natural
resource damages that could exceed the value of the property or the amount of
the lender's loan. In certain circumstances, a lender may decide to abandon a
contaminated mortgaged property as collateral for its loan rather than
foreclose and risk liability for such costs.
Superlien Laws. Under certain federal and state laws, contamination on a
property may give rise to a lien on the property for clean-up costs. In several
states, such a lien has priority over all existing liens, including those of
existing mortgages. In these states, the lien of a mortgage may lose its
priority to such a "superlien."
CERCLA. The federal Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended ("CERCLA"), imposes strict liability on
present and past "owners" and "operators"
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of contaminated real property for the costs of clean-up. Excluded from CERCLA's
definition of "owner" or "operator," however, is a lender that, "without
participating in the management" of a facility holds indicia of ownership
primarily to protect his security interest in the facility. This secured
creditor exemption is intended to provide a lender certain protections from
liability under CERCLA as an owner or operator of contaminated property.
However, a secured lender may be liable as an "owner" or "operator" of a
contaminated mortgaged property if agents or employees of the lender are deemed
to have actually participated in the management of such mortgaged property or
the operations of the borrower. Such liability may exist even if the lender did
not cause or contribute to the contamination and regardless of whether the
lender has actually taken possession of a mortgaged property through
foreclosure, deed in lieu of foreclosure or otherwise. Moreover, such
liability, if incurred, would not be limited to, and could substantially
exceed, the original or unamortized principal balance of a loan or to the value
of the property securing a loan.
In addition, lenders may face potential liability for remediation of
releases of petroleum or hazardous wastes from underground storage tanks under
the federal Resource Conservation and Recovery Act ("RCRA"), if they are deemed
to be the "owners" or "operators" of facilities in which they have a security
interest or upon which they have foreclosed.
The federal Asset Conservation, Lender Liability and Deposit Insurance
Protection Act of 1996 (the "Lender Liability Act") seeks to clarify the
actions a lender may take without incurring liability as an "owner" or
"operator" of contaminated property or underground petroleum storage tanks. The
Lender Liability Act amends CERCLA and RCRA to provide guidance on actions that
do or do not constitute "participation in management." However, the protections
afforded by these amendments are subject to terms and conditions that have not
been clarified by the courts. Moreover, the Lender Liability Act does not,
among other things: (1) eliminate potential liability to lenders under CERCLA
or RCRA, (2) necessarily reduce credit risks associated with lending to
borrowers having significant environmental liabilities or potential
liabilities, (3) eliminate environmental risks associated with taking
possession of contaminated property or underground storage tanks or assuming
control of the operations thereof, or (4) necessarily affect liabilities or
potential liabilities under state environmental laws which may impose liability
on "owners or operators" but do not incorporate the secured creditor exemption.
Certain Other State Laws. Many states have statutes similar to CERCLA and
RCRA, and not all of those statutes provide for a secured creditor exemption.
In a few states, transfers of some types of properties are conditioned
upon cleanup of contamination. In these cases, a lender that becomes the owner
of a property through foreclosure, deed in lieu of foreclosure or otherwise,
may be required to enter into an agreement with the state providing for the
cleanup of the contamination before selling or otherwise transferring the
property.
Beyond statute-based environmental liability, there exist common law
causes of action (for example, actions based on nuisance or on toxic tort
resulting in death, personal injury, or damage to property) related to
hazardous environmental conditions on a property. While a party seeking to hold
a lender liable in such cases may face litigation difficulties, unanticipated
or uninsured liabilities of the borrower may jeopardize the borrower's ability
to meet its loan obligations.
Additional Considerations. The cost of remediating hazardous substance
contamination at a property can be substantial. If a lender becomes liable, it
can bring an action for contribution against other potentially liable parties,
but such parties may be bankrupt or otherwise judgment proof. Accordingly, it
is possible that such costs could become a liability of the trust fund and
occasion a loss to the certificateholders.
To reduce the likelihood of such a loss, unless otherwise specified in the
prospectus supplement, the pooling and servicing agreement will provide that
the master servicer, acting on behalf of the trustee, may not take possession
of a mortgaged property or take over its operation unless the master servicer,
based solely on a report (as to environmental matters) 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
and Servicing Agreements--Realization upon Defaulted Mortgage Loans."
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If a lender forecloses on a mortgage secured by a property, the operations
of which are subject to environmental laws and regulations, the lender may be
required to operate the property in accordance with those laws and regulations.
Such compliance may entail substantial expense, especially in the case of
industrial or manufacturing properties.
In addition, a lender may be obligated to disclose environmental
conditions on a property to government entities and/or to prospective buyers
(including prospective buyers at a foreclosure sale or following foreclosure).
Such disclosure may result in the imposition of certain investigation or
remediation requirements and/or decrease the amount that prospective buyers are
willing to pay for the affected property, sometimes substantially, and thereby
decrease the ability of the lender to recoup its investment in a loan upon
foreclosure.
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 such 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 and the regulations
promulgated thereunder), 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.
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.
CERTAIN LAWS AND REGULATIONS; TYPES OF MORTGAGED PROPERTIES
The mortgaged properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply (together
with an inability to remedy any such failure) could result in
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material diminution in the value of a mortgaged property which could, together
with the possibility of limited alternative uses for a particular mortgaged
property (e.g., a nursing or convalescent home or hospital), result in a
failure to realize the full principal amount of the related mortgage loan.
Mortgages on properties which are owned by the mortgagor 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 in that hotels and motels are
typically operated pursuant to franchise, management and operating agreements
which may be limited by the operator. In addition, the transferability of the
hotel's liquor and other licenses to an entity acquiring the hotel either
through purchases or foreclosure is subject to the vagaries of local law
requirements. In addition, mortgaged properties which are multifamily
residential properties may be subject to rent control laws, which could impact
the future cash flows of such properties.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980 ("Title V") provides that state usury limitations shall not apply
to certain types of residential (including multifamily) first mortgage loans
originated by certain lenders after March 31, 1980. Title V authorized any
state to reimpose interest rate limits by adopting, before April 1, 1983, a law
or constitutional provision that expressly rejects application of the federal
law.
In addition, even where Title V is not so rejected, any state is
authorized by the law to adopt a provision limiting discount points or other
charges on mortgage loans covered by Title V. Certain states have taken action
to reimpose interest rate limits and/or to limit discount points or other
charges.
No mortgage loan originated in any state in which application of Title V
has been expressly rejected or a provision limiting discount points or other
charges has been adopted will (if originated after that rejection or adoption)
be eligible for inclusion in a trust fund unless (i) such mortgage loan
provides for such interest rate, discount points and charges as are permitted
in such state or (ii) such mortgage loan provides that the terms thereof are to
be construed in accordance with the laws of another state under which such
interest rate, discount points and charges would not be usurious and the
borrower's counsel has rendered an opinion that such choice of law provision
would be given effect.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a borrower who enters military service after the
origination of such borrower's mortgage loan (including a borrower who was in
reserve status and is called to active duty after origination of the mortgage
loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such borrower's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies
to individuals who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to
individuals who enter military service (including reservists who are called to
active duty) after origination of the related mortgage loan, no information can
be provided as to the number of loans with individuals as borrowers that may be
affected by the Relief Act. Application of the Relief Act would adversely
affect, for an indeterminate period of time, the ability of 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 prospectus supplement, any form of credit
support provided in connection with such certificates. In addition, the Relief
Act imposes limitations that would impair the ability of the 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.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such
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as hotels, restaurants, shopping centers, hospitals, schools and social service
center establishments) must remove architectural and communication barriers
that are structural in nature from existing places of public accommodation to
the extent "readily achievable." In addition, under the ADA, alterations to a
place of public accommodation or a commercial facility are to be made so that,
to the maximum extent feasible, such altered portions are readily accessible to
and usable by disabled individuals. The "readily achievable" standard takes
into account, among other factors, the financial resources of the affected
site, owner, landlord or other applicable person. The requirements of the ADA
may also be imposed on a foreclosing lender who succeeds to the interest of the
borrower as owner or landlord. 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.
FORFEITURE IN DRUG, RICO AND MONEY LAUNDERING VIOLATIONS
Federal law provides that property purchased or improved with assets
derived from criminal activity or otherwise tainted, or used in the commission
of certain offenses, can be seized and ordered forfeited to the United States
of America. The offenses which can trigger such a seizure and forfeiture
include, among others, violations of the Racketeer Influenced and Corrupt
Organizations Act, the Bank Secrecy Act, the anti-money laundering laws and
regulations, including the USA Patriot Act of 2001 and the regulations issued
pursuant to that Act, as well as the narcotic drug laws. In many instances, the
United States may seize the property even before a conviction occurs.
In the event of a forfeiture proceeding, a lender may be able to establish
its interest in the property by proving that (1) its mortgage was executed and
recorded before the commission of the illegal conduct from which the assets
used to purchase or improve the property were derived or before the commission
of any other crime upon which the forfeiture is based, or (2) the lender, at
the time of the execution of the mortgage, "did not know or was reasonably
without cause to believe that the property was subject to forfeiture." However,
there is no assurance that such a defense will be successful.
FEDERAL DEPOSIT INSURANCE ACT; COMMERCIAL MORTGAGE LOAN SERVICING
Under the Federal Deposit Insurance Act, federal bank regulatory
authorities, including the Office of the Comptroller of the Currency (OCC),
have the power to determine if any activity or contractual obligation of a bank
constitutes an unsafe or unsound practice or violates a law, rule or regulation
applicable to such bank. If Wachovia Bank, National Association (Wachovia) or
another bank is a servicer and/or a mortgage loan seller for a series and the
OCC, which has primary regulatory authority over Wachovia and other banks, were
to find that any obligation of Wachovia or such other bank under the related
pooling and servicing agreement or other agreement or any activity of Wachovia
or such other bank constituted an unsafe or unsound practice or violated any
law, rule or regulation applicable to it, the OCC could order Wachovia or such
other bank, among other things, to rescind such contractual obligation or
terminate such activity.
In March 2003, the OCC issued a temporary cease and desist order against a
national bank (which was converted to a consent order in April 2003) asserting
that, contrary to safe and sound banking practices, the bank was receiving
inadequate servicing compensation in connection with several credit card
securitizations sponsored by its affiliates because of the size and
subordination of the contractual servicing fee, and ordered the bank, among
other things, to immediately resign as servicer, to cease all servicing
activity within 120 days and to immediately withhold funds from collections in
an amount sufficient to compensate it for its actual costs and expenses of
servicing (notwithstanding the priority of payments in the related
securitization agreements). Although, at the time the 2003 temporary cease and
desist order was issued, no conservator or receiver had been appointed with
respect to the national bank, the national bank was already under a consent
cease and desist order issued in May 2002 covering numerous matters, including
a directive that the bank develop and submit a plan of disposition providing
for the sale or liquidation of the bank, imposing general prohibitions on the
acceptance of new credit card accounts and deposits in general, and placing
significant restrictions on the bank's transactions with its affiliates.
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While the depositor does not believe that the OCC would consider, with
respect to any series, (i) provisions relating to Wachovia or another bank
acting as a servicer under the related pooling and servicing agreement, (ii)
the payment or amount of the servicing compensation payable to Wachovia or
another bank or (iii) any other obligation of Wachovia or another bank under
the related pooling and servicing agreement or other contractual agreement
under which the depositor may purchase mortgage loans from Wachovia or another
bank, to be unsafe or unsound or violative of any law, rule or regulation
applicable to it, there can be no assurance that the OCC in the future would
not conclude otherwise. If the OCC did reach such a conclusion, and ordered
Wachovia or another bank to rescind or amend any such agreement, payments on
certificates could be delayed or reduced.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of offered
certificates. This discussion is directed solely to certificateholders that
hold the certificates as capital assets within the meaning of section 1221 of
the Code and it does not purport to discuss all federal income tax consequences
that may be applicable to particular categories of investors, some of which
(e.g., banks, insurance companies and foreign investors) may be subject to
special rules. Further, the authorities on which this discussion, and the
opinion referred to below, are based are subject to change or differing
interpretations, which could apply retroactively. Taxpayers and preparers of
tax returns (including those filed by any REMIC or other issuer) should be
aware that under applicable Treasury regulations a provider of advice on
specific issues of law is not considered an income tax return preparer unless
the advice is given with respect to the consequences of contemplated actions
and is directly relevant to the determination of an entry on a tax return.
Accordingly, taxpayers should consult their own tax advisors and tax return
preparers regarding the preparation of any item on a tax return, even where the
anticipated tax treatment has been discussed herein. In addition to the federal
income tax consequences described herein, potential investors should consider
the state and local tax consequences, if any, of the purchase, ownership and
disposition of offered certificates. See "State and Other Tax Consequences."
Certificateholders are advised to consult their own tax advisors concerning the
federal, state, local or other tax consequences to them of the purchase,
ownership and disposition of offered certificates.
The following discussion addresses securities of two general types: (i)
REMIC Certificates representing interests in a trust, or a portion thereof,
that the master servicer or the trustee will elect to have treated as a real
estate mortgage investment conduit ("REMIC") under sections 860A through 860G
(the "REMIC Provisions") of the Code and (ii) grantor trust certificates
representing interests in a grantor trust fund as to which no such election
will be made. If no REMIC election is made, the trust fund may elect to be
treated as a financial assets securitization investment trust ("FASIT"). The
prospectus supplement relating to such an election will describe the
requirements for the classification of the trust as a FASIT and the
consequences to a holder of owning certificates in a FASIT. The prospectus
supplement for each series of certificates also will indicate whether a REMIC
election (or elections) will be made for the related trust or applicable
portion thereof and, if such an election is to be made, will identify all
"regular interests" and "residual interests" in each REMIC. For purposes of
this tax discussion, references to a "certificateholder" or a "holder" are to
the beneficial owner of a certificate.
The following discussion is limited in applicability to offered
certificates. Moreover, this discussion applies only to the extent that
mortgage assets held by a trust fund consist solely of mortgage loans. To the
extent that other mortgage assets, including REMIC Certificates and mortgage
pass-through certificates, are to be held by a trust, the tax consequences
associated with the inclusion of such assets will be disclosed in the related
prospectus supplement. In addition, if cash flow agreements, other than
guaranteed investment contracts, are included in a trust, the tax consequences
associated with any cash flow agreements also will be disclosed in the related
prospectus supplement. See "Description of the Trust Funds--Cash Flow
Agreements."
Furthermore, the following discussion is based in part upon the rules
governing original issue discount that are set forth in sections 1271-1273 and
1275 of the Code and in the Treasury regulations issued thereunder (the "OID
Regulations"), and in part upon the REMIC provisions and the Treasury
regulations issued thereunder (the "REMIC Regulations"). The OID regulations do
not adequately address certain issues relevant to, and in some instances
provide that they are not applicable to, securities such as the certificates.
REMICS
Classification of REMICs. It is the opinion of Cadwalader, Wickersham &
Taft LLP, counsel to the depositor, that upon the issuance of each series of
REMIC Certificates, assuming compliance with all provisions of the related
pooling and servicing agreement and based upon the law on the date thereof, for
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federal income tax purposes the related trust will qualify as one or more
REMICs and the REMIC Certificates offered will be considered to evidence
ownership of "regular interests" ("REMIC Regular Certificates") or "residual
interests" ("REMIC Residual Certificates") under the REMIC provisions.
If an entity electing to be treated as a REMIC fails to comply with one or
more of the ongoing requirements of the Code for such status during any taxable
year, the Code provides that the entity will not be treated as a REMIC for such
year and thereafter. In that event, such entity may be taxable as a corporation
under Treasury regulations, and the related REMIC Certificates may not be
accorded the status or given the tax treatment described below. Although the
Code authorizes the Treasury Department to issue regulations providing relief
in the event of an inadvertent termination of REMIC status, no such regulations
have been issued. Any such relief, moreover, may be accompanied by sanctions,
such as the imposition of a corporate tax on all or a portion of the trust
fund's income for the period during which the requirements for such status are
not satisfied. The pooling and servicing agreement with respect to each REMIC
will include provisions designed to maintain the trust status as a REMIC under
the REMIC provisions. It is not anticipated that the status of any trust as a
REMIC will be terminated.
Characterization of Investments in REMIC Certificates. In general, with
respect to each series of certificates for which a REMIC election is made,
certificates held by a real estate investment trust will constitute "real
estate assets" within the meaning of section 856(c)(5)(B) of the Code, and each
such series of certificates will constitute assets described in section
7701(a)(19)(C) of the Code in the same proportion that the assets of the REMIC
underlying such certificates would be so treated. However, to the extent that
the REMIC assets constitute mortgages on property not used for residential or
certain other prescribed purposes, the REMIC Certificates will not be treated
as assets qualifying under section 7701(a)(19)(C)(v) of the Code. Moreover, if
95% or more of the assets of the REMIC qualify for any of the foregoing
treatments at all times during a calendar year, the REMIC Certificates will
qualify for the corresponding status in their entirety for that calendar year.
Interest on the REMIC Regular Certificates and income allocated to the class of
REMIC Residual Certificates will be interest described in section 856(c)(3)(B)
of the Code to the extent that such certificates are treated as "real estate
assets" within the meaning of section 856(c)(5)(B) of the Code. In addition,
generally the REMIC Regular Certificates will be "qualified mortgages" within
the meaning of section 860G(a)(3) of the Code. The determination as to the
percentage of the REMIC's assets that constitute assets described in the
foregoing sections of the Code will be made with respect to each calendar
quarter based on the average adjusted basis of each category of the assets held
by the REMIC during such calendar quarter. The servicer or the trustee will
report those determinations to certificateholders in the manner and at the
times required by the applicable Treasury regulations.
The assets of the REMIC will include, in addition to mortgage loans,
payments on mortgage loans held pending distribution on the REMIC Certificates
and property acquired by foreclosure held pending sale, and may include amounts
in reserve accounts. It is unclear whether property acquired by foreclosure
held pending sale and amounts in reserve accounts would be considered to be
part of the mortgage loans, or whether such assets otherwise would receive the
same treatment as the mortgage loans for purposes of all of the foregoing
sections. The related prospectus supplement will describe whether any mortgage
loans included in the trust fund will not be treated as assets described in the
foregoing sections. The REMIC regulations do provide that payments on mortgage
loans held pending distribution are considered part of the mortgage.
Tiered REMIC Structures. For certain series of REMIC Certificates, two or
more separate elections may be made to treat designated portions of the related
trust fund as separate or tiered REMICs for federal income tax purposes. Upon
the issuance of any such series of REMIC Certificates, counsel to the depositor
will deliver its opinion generally to the effect that, assuming compliance with
all provisions of the related pooling and servicing agreement, the tiered
REMICs will ach qualify as a REMIC and the REMIC Certificates issued by the
tiered REMICs, respectively, will be considered to evidence ownership of REMIC
Regular Certificates or REMIC Residual Certificates in the related REMIC within
the meaning of the REMIC provisions.
For purposes of determining whether the REMIC Certificates are "real
estate assets" within the meaning of section 856(c)(5)(B) of the Code, "loans
secured by an interest in real property" under
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section 7701(a)(19)(C) of the Code, and whether the income generated by these
certificates is interest described in section 856(c)(3)(B) of the Code, the
tiered REMICs will be treated as one REMIC.
TAXATION OF OWNERS OF REMIC REGULAR CERTIFICATES
General. Except as otherwise stated in this discussion, REMIC Regular
Certificates will be treated for federal income tax purposes as debt
instruments issued by the REMIC and not as ownership interests in the REMIC or
its assets. Moreover, holders of REMIC Regular Certificates that otherwise
report income under a cash method of accounting will be required to report
income with respect to REMIC Regular Certificates under an accrual method.
Original Issue Discount. Certain REMIC Regular Certificates may be issued
with "original issue discount" within the meaning of section 1273(a) of the
Code. Any holders of REMIC Regular Certificates issued with original issue
discount generally will be required to include original issue discount in
income as it accrues, in accordance with the method described below, in advance
of the receipt of the cash attributable to such income. In addition, section
1272(a)(6) of the Code provides special rules applicable to REMIC Regular
Certificates and certain other debt instruments issued with original issue
discount. Regulations have not been issued under that section.
The Code requires that a prepayment assumption be used with respect to
mortgage loans held by a REMIC in computing the accrual of original issue
discount on REMIC Regular Certificates issued by that REMIC, and that
adjustments be made in the amount and rate of accrual of such discount to
reflect differences between the actual prepayment rate and the prepayment
assumption. The prepayment assumption is to be determined in a manner
prescribed in Treasury regulations; as noted above, those regulations have not
been issued. The conference committee report accompanying the Tax Reform Act of
1986 indicates that the regulations will provide that the prepayment assumption
used with respect to a REMIC Regular Certificate must be the same as that used
in pricing the initial offering. The prepayment assumption used in reporting
original issue discount for each series of REMIC Regular Certificates will be
consistent with this standard and will be disclosed in the related prospectus
supplement. However, neither the depositor nor any other person will make any
representation that the mortgage loans will in fact prepay at a rate conforming
to the prepayment assumption or at any other rate.
The original issue discount, if any, on a REMIC Regular Certificate will
be the excess of its stated redemption price at maturity over its issue price.
The issue price of a particular class of REMIC Regular Certificates will be the
first cash price at which a substantial amount of REMIC Regular Certificates of
that class is sold (excluding sales to bond houses, brokers and underwriters).
If less than a substantial amount of a particular class of REMIC Regular
Certificates is sold for cash on or prior to the date of their initial
issuance, the issue price will be the fair market value on the issuance date.
Under the OID regulations, the stated redemption price of a REMIC Regular
Certificate is equal to the total of all payments to be made on such
certificate other than "qualified stated interest." "Qualified stated interest"
includes interest payable unconditionally at least annually at a single fixed
rate, at a "qualified floating rate," or at an "objective rate," or a
combination of a single fixed rate and one or more "qualified floating rates,"
or one "qualified inverse floating rates," or a combination of "qualified
floating rates" that does not operate in a manner that accelerates or defers
interest payments on such REMIC Regular Certificates.
It is not entirely clear under the Code that interest paid to the REMIC
Regular Certificates that are subject to early termination through prepayments
and that have limited enforcement rights should be considered "qualified stated
interest". However, unless disclosed otherwise in the prospectus supplement,
the trust fund intends to treat stated interest as "qualified stated interest"
for determining if, and to what extent, the REMIC Regular Certificates have
been issued with original issue discount. Nevertheless, holders of the REMIC
Regular Certificates should consult their own tax advisors with respect to
whether interest in the REMIC Regular Certificates qualifies as "qualified
stated interest" under the Code.
In the case of REMIC Regular Certificates bearing adjustable interest
rates, the determination of the total amount of original issue discount and the
timing of the inclusion thereof will vary according to the characteristics of
such REMIC Regular Certificates. If the original issue discount rules apply to
such certificates, the related prospectus supplement will describe the manner
in which these rules will be applied in preparing information returns to the
certificateholders and the Internal Revenue Service (the "IRS").
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In addition, if the accrued interest to be paid on the first distribution
date is computed with respect to a period that begins prior to the issuance of
the certificates, a portion of the purchase price paid for a REMIC Regular
Certificate will reflect accrued interest. The OID regulations state that all
or some portion of such accrued interest may be treated as a separate asset the
cost of which is recovered entirely out of interest paid on the first
distribution date. It is unclear how an election to do so would be made under
the OID regulations and whether such an election could be made unilaterally by
a certificateholder.
Notwithstanding the general definition of original issue discount,
original issue discount on a REMIC Regular Certificate will be considered to be
de minimis if it is less than 0.25% of the stated redemption price of the REMIC
Regular Certificate multiplied by its weighted average life. For this purpose,
the weighted average life of the REMIC Regular Certificate is computed as the
sum of the amounts determined, as to each payment included in the stated
redemption price of such REMIC Regular Certificate, by multiplying the number
of complete years, rounding down for partial years, from the issue date until
any payment is expected to be made (taking into account the prepayment
assumption) by a fraction, the numerator of which is the amount of the payment,
and the denominator of which is the stated redemption price at maturity. Under
the OID Regulations, original issue discount of only a de minimis amount will
be included in income as each payment of stated principal is made, based on the
product of the total amount of such de minimis original issue discount and a
fraction, the numerator of which is the amount of such principal payment and
the denominator of which is the outstanding stated principal amount of the
REMIC Regular Certificate. The OID regulations also would permit a
certificateholder to elect to accrue de minimis original issue discount into
income currently based on a constant yield method. See "--Taxation of Owners of
REMIC Regular Certificates--Market Discount" for a description of such election
under the OID Regulations.
If original issue discount on a REMIC Regular Certificate is in excess of
a de minimis amount, the holder of such certificate must include in ordinary
gross income the sum of the "daily portions" of original issue discount for
each day during its taxable year on which it held such REMIC Regular
Certificate, including the purchase date but excluding the disposition date. In
the case of an original holder of a REMIC Regular Certificate, the daily
portions of original issue discount will be determined as follows.
As to each "accrual period," that is, each period that ends on a date that
corresponds to a distribution date and begins on the first day following the
immediately preceding accrual period, a calculation will be made of the portion
of the original issue discount that accrued during such accrual period. The
portion of original issue discount that accrues in any accrual period will
equal the excess, if any, of (i) the sum of (a) the present value, as of the
end of the accrual period, of all of the distributions remaining to be made on
the REMIC Regular Certificate, if any, in future periods and (b) the
distributions made on such REMIC Regular Certificate during the accrual period
of amounts included in the stated redemption price, over (ii) the adjusted
issue price of the REMIC Regular Certificate at the beginning of the accrual
period. The present value of the remaining distributions referred to in the
preceding sentence will be calculated assuming that distributions on the REMIC
Regular Certificate will be received in future periods based on the mortgage
loans being prepaid at a rate equal to the prepayment assumption and using a
discount rate equal to the original yield to maturity of the certificate. For
these purposes, the original yield to maturity of the certificate will be
calculated based on its issue price and assuming that distributions on the
certificate will be made in all accrual periods based on the mortgage loans
being prepaid at a rate equal to the prepayment assumption. The adjusted issue
price of a REMIC Regular Certificate at the beginning of any accrual period
will equal the issue price of such certificate, increased by the aggregate
amount of original issue discount that accrued with respect to such certificate
in prior accrual periods, and reduced by the amount of any distributions made
on such REMIC Regular Certificate in prior accrual periods of amounts included
in the stated redemption price. The original issue discount accruing during any
accrual period, computed as described above, will be allocated ratably to each
day during the accrual period to determine the daily portion of original issue
discount for such day.
A subsequent purchaser of a REMIC Regular Certificate that purchases such
certificate at a cost (excluding any portion of such cost attributable to
accrued qualified stated interest) less than its remaining stated redemption
price will also be required to include in gross income the daily portions of
any original issue discount with respect to such certificate. However, each
such daily portion will be reduced, if such cost is in excess of its "adjusted
issue price," in proportion to the ratio such excess bears to the aggregate
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original issue discount remaining to be accrued on such REMIC Regular
Certificate. The adjusted issue price of a REMIC Regular Certificate on any
given day equals the sum of (i) the adjusted issue price (or, in the case of
the first accrual period, the issue price) of the certificate at the beginning
of the accrual period, including the first day and (ii) the daily portions of
original issue discount for all days during the related accrual period up to
the day of determination.
Market Discount. A Certificateholder that purchases a REMIC Regular
Certificate at a market discount, that is, in the case of a REMIC Regular
Certificate issued without original issue discount, at a purchase price less
than its remaining stated principal amount, or in the case of a REMIC Regular
Certificate issued with original issue discount, at a purchase price less than
its adjusted issue price, will recognize gain upon receipt of each distribution
representing stated redemption price. In particular, under section 1276 of the
Code such a certificateholder generally will be required to allocate the
portion of each such distribution representing stated redemption price first to
accrued market discount not previously included in income, and to recognize
ordinary income to that extent. A certificateholder may elect to include market
discount in income currently as it accrues rather than including it on a
deferred basis in accordance with the foregoing. If the election is made, it
will apply to all market discount bonds acquired by such certificateholder on
or after the first day of the taxable year to which the election applies. In
addition, the OID regulations permit a certificateholder to elect to accrue all
interest, discount and premium in income as interest, based on a constant yield
method. If such an election were made with respect to a REMIC Regular
Certificate with market discount, the certificateholder would be deemed to have
made an election to currently include market discount in income with respect to
all other debt instruments having market discount that such certificateholder
acquires during the taxable year of the election or thereafter, and possibly
previously acquired instruments. Similarly, a certificateholder that made this
election for a certificate that is acquired at a premium would be deemed to
have made an election to amortize bond premium with respect to all debt
instruments having amortizable bond premium that such certificateholder owns or
acquires. See "--Taxation of Owners of REMIC Regular Certificates--Premium."
Each of these elections to accrue interest, discount and premium with respect
to a certificate on a constant yield method or as interest would be
irrevocable.
Market discount with respect to a REMIC Regular Certificate will be
considered to be de minimis for purposes of section 1276 of the Code if such
market discount is less than 0.25% of the remaining stated redemption price of
such REMIC Regular Certificate multiplied by the number of full years to
maturity remaining after the date of its purchase. In interpreting a similar
rule with respect to original issue discount on obligations payable in
installments, the OID Regulations refer to the weighted average maturity of
obligations, and it is likely that the same rule will be applied with respect
to market discount, presumably taking into account the prepayment assumption.
If market discount is treated as de minimis under this rule, it appears that
the actual discount would be treated in a manner similar to original issue
discount of a de minimis amount. See "--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount." Such treatment would result in discount
being included in income at a slower rate than discount would be required to be
included in income using the method described above.
Section 1276(b)(3) of the Code specifically authorizes the Treasury
Department to issue regulations providing for the method for accruing market
discount on debt instruments, the principal of which is payable in more than
one installment. Until regulations are issued, the rules described in the
committee report accompanying the Tax Reform Act of 1986 apply. That committee
report indicates that REMIC Regular Certificates should accrue market discount
either:
o on the basis of a constant yield method;
o in the case of a REMIC Regular Certificate issued without original issue
discount, in an amount that bears the same ratio to the total remaining
market discount as the stated interest paid during the accrual period
bears to the total amount of stated interest remaining to be paid as of
the beginning of the accrual period; or
o in the case of a REMIC Regular Certificate issued with original issue
discount, in an amount that bears the same ratio to the total remaining
market discount as the original issue discount accrued in the accrual
period bears to the total original issue discount remaining on the REMIC
Regular Certificate at the beginning of the accrual period.
88
Furthermore, the prepayment assumption used in calculating the accrual of
original issue discount is also used in calculating the accrual of market
discount. Because the regulations referred to in this paragraph have not been
issued, it is not possible to predict what effect such regulations might have
on the tax treatment of a REMIC Regular Certificate purchased at a discount in
the secondary market.
To the extent that REMIC Regular Certificates provide for monthly or other
periodic distributions throughout their term, the effect of these rules may be
to require market discount to be includible in income at a rate that is not
significantly slower than the rate at which such discount would accrue if it
were original issue discount. Moreover, in any event a holder of a REMIC
Regular Certificate generally will be required to treat a portion of any gain
on the sale or exchange of such 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.
Further, under section 1277 of the Code a holder of a REMIC Regular
Certificate may be required to defer a portion of its interest deductions for
the taxable year attributable to any indebtedness incurred or continued to
purchase or carry a REMIC Regular Certificate purchased with market discount.
For these purposes, the de minimis rule referred to above applies. Any such
deferred interest expense would not exceed the market discount that accrues
during such taxable year and is, in general, allowed as a deduction not later
than the year in which such market discount is includible in income. If such
holder elects to include market discount in income currently as it accrues on
all market discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
Premium. A REMIC Regular Certificate purchased at a cost (excluding
accrued qualified stated interest) greater than its remaining stated redemption
price will be considered to be purchased at a premium. The holder of such a
REMIC Regular Certificate may elect under section 171 of the Code to amortize
such premium against qualified stated interest under the constant yield method
over the life of the certificate. If made, such an election will apply to all
debt instruments having amortizable bond premium that the holder owns or
subsequently acquires. Amortizable premium will be treated as an offset to
interest income on the related debt instrument, rather than as a separate
interest deduction. The OID regulations also permit certificateholders to elect
to include all interest, discount and premium in income based on a constant
yield method, further treating the certificateholder as having made the
election to amortize premium generally. See "--Taxation of Owners of REMIC
Regular Certificates--Market Discount." The committee report accompanying the
Tax Reform Act of 1986 states that the same rules that apply to accrual of
market discount will also apply in amortizing bond premium under section 171 of
the Code.
Realized Losses. Under section 166 of the Code, both noncorporate holders
of the REMIC Regular Certificates that acquire such certificates in connection
with a trade or business and corporate holders of the REMIC Regular
Certificates should be allowed to deduct, as ordinary losses, any losses
sustained during a taxable year in which their certificates become wholly or
partially worthless as the result of one or more realized losses on the
residential loans. However, it appears that a noncorporate holder that does not
acquire a REMIC Regular Certificate in connection with a trade or business will
not be entitled to deduct a loss under section 166 of the Code until such
holder's certificate becomes wholly worthless and that the loss will be
characterized as a short-term capital loss. Losses sustained on the mortgage
loans may be "events which have occurred before the close of the accrued
period" that can be taken into account under Code section 1272(a)(6) for
purposes of determining the amount of OID that accrues on a certificate.
The holder of a REMIC Regular Certificate eventually will recognize a loss
or reduction in income attributable to previously accrued and included income
that as the result of a realized loss ultimately will not be realized, but the
law is unclear with respect to the timing and character of such loss or
reduction in income.
TAXATION OF OWNERS OF REMIC RESIDUAL CERTIFICATES
General. As residual interests, the REMIC Residual Certificates will be
subject to tax rules that differ significantly from those that would apply if
the REMIC Residual Certificates were treated for
89
federal income tax purposes as direct ownership interests in the mortgage loans
included in a trust fund or as debt instruments issued by the REMIC.
An original holder of a REMIC Residual Certificate generally will be
required to report its daily portion of the taxable income or, subject to the
limitations noted in this discussion, the net loss of the REMIC for each day
during a calendar quarter that such holder owned such REMIC Residual
Certificate. For this purpose, the taxable income or net loss of the REMIC will
be allocated to each day in the calendar quarter ratably using a "30 days per
month/90 days per quarter/360 days per year" convention unless the related
prospectus supplement states otherwise. The daily amounts so allocated will
then be allocated among the REMIC Residual Certificateholders in proportion to
their respective ownership interests on such day. Any amount included in the
gross income or allowed as a loss of any REMIC Residual Certificateholder by
virtue of this paragraph will be treated as ordinary income or loss. The
taxable income of the REMIC will be determined under the rules described below
in "--Taxable Income of the REMIC" and will be taxable to the REMIC Residual
Certificateholders without regard to the timing or amount of cash distributions
by the REMIC. Ordinary income derived from REMIC Residual Certificates will be
"portfolio income" for purposes of the taxation of taxpayers subject to
limitations under section 469 of the Code on the deductibility of "passive
losses."
A holder of a REMIC Residual Certificate that purchased such certificate
from a prior holder of such certificate also will be required to report on its
federal income tax return amounts representing its daily share of the taxable
income or loss of the REMIC for each day that it holds such REMIC Residual
Certificate. Those daily amounts generally will equal the amounts of taxable
income or net loss determined as described above. The Committee Report
indicates that certain modifications of the general rules may be made, by
regulations, legislation or otherwise, to reduce or increase the income of a
REMIC Residual Certificateholder that purchased such REMIC Residual Certificate
from a prior holder of such certificate at a price greater than (or less than)
the adjusted basis, such REMIC Residual Certificate would have had in the hands
of an original holder of such certificate. The REMIC Regulations, however, do
not provide for any such modifications.
It is uncertain how payments received by a holder of a REMIC Residual
interest in connection with the acquisition of such REMIC Residual Certificate
should be treated and holders of REMIC Residual Certificates should consult
their tax advisors concerning the treatment of such payments for income tax
purposes.
The amount of income REMIC Residual Certificateholders will be required to
report (or the tax liability associated with such income) may exceed the amount
of cash distributions received from the REMIC for the corresponding period.
Consequently, REMIC Residual Certificateholders should have other sources of
funds sufficient to pay any federal income taxes due as a result of their
ownership of REMIC Residual Certificates or unrelated deductions against which
income may be offset, subject to the rules relating to "excess inclusions,"
residual interests without "significant value" and "noneconomic" residual
interests discussed below. The fact that the tax liability associated with the
income allocated to REMIC Residual Certificateholders may exceed the cash
distributions received by such REMIC Residual Certificateholders for the
corresponding period may significantly adversely affect such REMIC Residual
Certificateholders' after-tax rate of return.
Taxable Income of the REMIC. The taxable income of the REMIC will equal
the income from the mortgage loans and other assets of the REMIC plus any
cancellation of indebtedness income due to the allocation of realized losses to
REMIC Regular Certificates, less the deductions allowed to the REMIC for
interest on the REMIC Regular Certificates, amortization of any premium on the
mortgage loans, bad debt losses with respect to the mortgage loans and, except
as described below, for servicing, administrative and other expenses.
For purposes of determining its taxable income, the REMIC will have an
initial aggregate basis in its assets equal to the sum of the issue prices of
all REMIC Certificates (or, if a class of REMIC Certificates is not sold
initially, fair market value). Such aggregate basis will be allocated among the
mortgage loans and the other assets of the REMIC in proportion to their
respective fair market values. The issue price of any REMIC Certificates
offered by this prospectus and the related prospectus supplement will be
determined in the manner described above under "--Taxation of Owners of REMIC
Regular Certificates--
90
Original Issue Discount." If one or more classes of REMIC Certificates are
retained initially rather than sold, the master servicer or the trustee may be
required to estimate the fair market value of the REMIC's interests in its
mortgage loans and other property in order to determine the basis to the REMIC
of the mortgage loans and other property held by such REMIC.
Subject to possible application of the de minimis rules, the method of
accrual by the REMIC of original issue discount income and market discount
income with respect to mortgage loans that it holds will be equivalent to the
method for accruing original issue discount income for holders of REMIC Regular
Certificates. However, a REMIC that acquires loans at a market discount must
include such market discount in income currently, as it accrues, on a constant
interest basis. See "--Taxation of Owners of REMIC Regular Certificates" above,
which describes a method for accruing such discount income that is analogous to
that required to be used by a REMIC as to mortgage loans with market discount
that it holds.
A mortgage loan will be deemed to have been acquired with discount (or
premium) if the REMIC's basis in that mortgage loan is less than (or greater
than) its stated redemption price. Any such discount will be includible in the
income of the REMIC as it accrues, under a method similar to the method
described above for accruing original issue discount on the REMIC Regular
Certificates. It is anticipated that each REMIC will elect under section 171 of
the Code to amortize any premium on the mortgage loans. Premium on any mortgage
loan to which such election applies may be amortized under a constant yield
method, presumably taking into account a prepayment assumption. However, this
election would not apply to any mortgage loan originated on or before September
27, 1985. Instead, premium on such a mortgage loan should be allocated among
the principal payments thereon and be deductible by the REMIC as those payments
become due or upon the prepayment of such mortgage loan.
A REMIC will be allowed deductions for interest on the REMIC Regular
Certificates equal to the deductions that would be allowed if the REMIC Regular
Certificates were indebtedness of the REMIC. Original issue discount will be
considered to accrue for this purpose as described above under "--Taxation of
Owners of REMIC Regular Certificate--Original Issue Discount," except that the
de minimis rule and the adjustments for subsequent holders of REMIC Regular
Certificates described therein will not apply.
If a class of REMIC Regular Certificates is issued at a price in excess of
the stated redemption price of such class, the net amount of interest
deductions that are allowed the REMIC in each taxable year with respect to the
REMIC Regular Certificates of such class will be reduced by an amount equal to
the portion of the premium that is considered to be amortized or repaid in that
year. Although the matter is not entirely certain, it is likely that Issue
Premium would be amortized under a constant yield method in a manner analogous
to the method of accruing original issue discount described above under
"--Taxation of Owners of REMIC Regular Certificates--Original Issue Discount."
As a general rule, the taxable income of a REMIC will be determined in the
same manner as if the REMIC were an individual having the calendar year as its
taxable year and using the accrual method of accounting. However, no item of
income, gain, loss or deduction allocable to a prohibited transaction will be
taken into account. See "--Prohibited Transactions Tax and Other Taxes" below.
The limitation on miscellaneous itemized deductions imposed on individuals by
section 67 of the Code will not be applied at the REMIC level so that the REMIC
will be allowed deductions for servicing, administrative and other non-interest
expenses in determining its taxable income. All such expenses will be allocated
as a separate item to the holders of REMIC Certificates, subject to the
limitation of section 67 of the Code. See "--Possible Pass-Through of
Miscellaneous Itemized Deductions." If the deductions allowed to the REMIC
exceed its gross income for a calendar quarter, such excess will be the net
loss for the REMIC for that calendar quarter.
Basis Rules, Net Losses and Distributions. The adjusted basis of a REMIC
Residual Certificate will be equal to the amount paid for such REMIC Residual
Certificate, increased by amounts included in the income of the REMIC Residual
Certificateholder and decreased (but not below zero) by distributions made, and
by net losses allocated, to such REMIC Residual Certificateholder.
A REMIC Residual Certificateholder is not allowed to take into account any
net loss for any calendar quarter to the extent such net loss exceeds such
REMIC Residual Certificateholder's adjusted
91
basis in its REMIC Residual Certificate as of the close of such calendar
quarter. Any loss that is not currently deductible by reason of this limitation
may be carried forward indefinitely to future calendar quarters and, subject to
the same limitation, may be used only to offset income from the REMIC Residual
Certificate. The ability of REMIC Residual Certificateholders to deduct net
losses may be subject to additional limitations under the Code, as to which
REMIC Residual Certificateholders should consult their tax advisors.
Any distribution on a REMIC Residual Certificate will be treated as a
nontaxable return of capital to the extent it does not exceed the holder's
adjusted basis in such REMIC Residual Certificate. To the extent a distribution
on a REMIC Residual Certificate exceeds such adjusted basis, it will be treated
as gain from the sale of such REMIC Residual Certificate. Holders of certain
REMIC Residual Certificates may be entitled to distributions early in the term
of the related REMIC under circumstances in which their bases in such REMIC
Residual Certificates will not be sufficiently large that such distributions
will be treated as nontaxable returns of capital. Their bases in such REMIC
Residual Certificates will initially equal the amount paid for such REMIC
Residual Certificates and will be increased by their allocable shares of
taxable income of the trust fund. However, such bases increases may not occur
until the end of the calendar quarter, or perhaps the end of the calendar year,
with respect to which such REMIC taxable income is allocated to the REMIC
Residual Certificateholders. To the extent such REMIC Residual
Certificateholders' initial bases are less than the distributions to such REMIC
Residual Certificateholders, and increases in such initial bases either occur
after such distributions or are less than the amount of such distributions,
gain will be recognized to such REMIC Residual Certificateholders on such
distributions and will be treated as gain from the sale of their REMIC Residual
Certificates.
The effect of these rules is that a REMIC Residual Certificateholder may
not amortize its basis in a REMIC Residual Certificate, but may only recover
its basis through distributions, through the deduction of any net losses of the
REMIC or upon the sale of its REMIC Residual Certificate. See "--Sales of REMIC
Certificates." For a discussion of possible modifications of these rules that
may require adjustments to income of a holder of a REMIC Residual Certificate
other than an original holder in order to reflect any difference between the
cost of such REMIC Residual Certificate to such REMIC Residual
Certificateholder and the adjusted basis such REMIC Residual Certificate would
have in the hands of an original holder, see "--Taxation of Owners of REMIC
Residual Certificates--General."
Excess Inclusions. Any "excess inclusions" with respect to a REMIC
Residual Certificate will be subject to federal income tax in all events.
In general, the "excess inclusions" with respect to a REMIC Residual
Certificate for any calendar quarter will be the excess, if any, of:
o the sum of the daily portions of REMIC taxable income allocable to such
REMIC Residual Certificate; over
o the sum of the "daily accruals" for each day during such quarter that
such REMIC Residual Certificate was held by such REMIC Residual
Certificateholder.
The daily accruals of a REMIC Residual Certificateholder will be
determined by allocating to each day during a calendar quarter its ratable
portion of the product of the "adjusted issue price" of the REMIC Residual
Certificate at the beginning of the calendar quarter and 120% of the "long-term
Federal rate" in effect on the date the certificates were issued. For this
purpose, the adjusted issue price of a REMIC Residual Certificate as of the
beginning of any calendar quarter will be equal to the issue price of the REMIC
Residual Certificate, increased by the sum of the daily accruals for all prior
quarters and decreased (but not below zero) by any distributions made with
respect to such REMIC Residual Certificate before the beginning of such
quarter. The issue price of a REMIC Residual Certificate is the initial
offering price to the public (excluding bond houses and brokers) at which a
substantial amount of the REMIC Residual Certificates were sold. The "long-term
Federal rate" is an average of current yields on Treasury securities with a
remaining term of greater than nine years, computed and published monthly by
the IRS.
For REMIC Residual Certificateholders, an excess inclusion:
o will not be permitted to be offset by deductions, losses or loss
carryovers from other activities;
92
o will be treated as "unrelated business taxable income" to an otherwise
tax-exempt organization; and
o will not be eligible for any rate reduction or exemption under any tax
treaty with respect to the 30% United States withholding tax imposed on
distributions to foreign investors. See, however, "--Foreign Investors
in REMIC Certificates" below.
In the case of any REMIC Residual Certificates held by a real estate
investment trust, the aggregate excess inclusions with respect to such REMIC
Residual Certificates, reduced (but not below zero) by the real estate
investment trust taxable income, excluding any net capital gain, will be
allocated among the shareholders of such trust in proportion to the dividends
received by such shareholders from such trust, and any amount so allocated will
be treated as an excess inclusion with respect to a REMIC Residual Certificate
as if held directly by such shareholder. The Treasury could issue regulations
which apply a similar rule to regulated investment companies, common trust
funds and certain cooperatives. The REMIC Regulations currently do not address
this subject.
In addition, there are three rules for determining the effect of excess
inclusions on the alternative minimum taxable income of a REMIC Residual
Certificateholder. First, alternative minimum taxable income for a REMIC
Residual Certificateholder is determined without regard to the special rule
discussed above, that taxable income cannot be less than excess inclusions.
Second, a REMIC Residual Certificateholder's alternative minimum taxable income
for a taxable year cannot be less than the excess inclusions for the year.
Third, the amount of any alternative minimum tax net operating loss deduction
must be computed without regard to any excess inclusions.
Noneconomic REMIC Residual Certificates. Under the REMIC regulations,
transfers of "noneconomic" REMIC Residual Certificates will be disregarded for
all federal income tax purposes if "a significant purpose of the transfer was
to enable the transferor to impede the assessment or collection of tax". If
such transfer is disregarded, the purported transferor will continue to remain
liable for any taxes due with respect to the income on such "noneconomic" REMIC
Residual Certificate. The REMIC regulations provide that a REMIC Residual
Certificate is noneconomic unless, based on the prepayment assumptions and on
any required or permitted cleanup calls, or required liquidation provisions,
the present value of the expected future distributions discounted at the
"applicable Federal rate" on the REMIC Residual Certificate equals at least the
present value of the expected tax on the anticipated excess inclusions and the
transferor reasonably expects that the transferee will receive distributions
with respect to the REMIC Residual Certificate at or after the time the taxes
accrue on the anticipated excess inclusions in an amount sufficient to satisfy
the accrued taxes. 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. Under the REMIC regulations, as amended July 19, 2002, 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 in the future, (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 and (3) the transferee
represents to the transferor that it will not cause income from the REMIC
Residual Certificate to be attributable to a foreign permanent establishment or
fixed base (within the meaning of an applicable income tax treaty) of the
transferee or any other United States person. Accordingly, all transfers of
REMIC Residual Certificates that may constitute noneconomic residual interests
will be subject to certain restrictions under the terms of the related pooling
and servicing agreement that are intended to reduce the possibility of any such
transfer being disregarded. Such restrictions will require each party to a
transfer to provide an affidavit to certify to the matters in the preceding
sentence.
In addition to the three conditions set forth above, a fourth condition
has been added that must be satisfied in one of two alternative ways for the
transferor to have a "safe harbor" against ignoring the transfer. Either:
93
(a) the present value of the anticipated tax liabilities associated with
holding the noneconomic residual interest not exceed the sum of:
(i) the present value of any consideration given 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 alternative, the transferee is
assumed to pay tax at the highest rate of tax specified in Section 11(b)(1) of
the Code (currently 35%) or, in certain circumstances, the alternative minimum
tax rate. Further, present values are generally computed using a discount rate
equal to the short-term Federal rate set forth in Section 1274(d) of the Code
for the month of the transfer and the compounding period used by the
transferee; or
(b) the following requirements are satisfied:
(i) the transferee is a domestic "C" corporation (other than a
corporation exempt from taxation of a regulated investment company or
real estate investment trust) that meets certain gross and net asset
tests (generally, $100 million of gross assets and $10 million of net
assets for the current year and the two preceding fiscal years);
(ii) the transferee agrees in writing that it will transfer the
residual interest only to a subsequent transferee that is an eligible
corporation and meets the requirements for a safe harbor transfer; and
(iii) the facts and circumstances known to the transferor on or
before the date of the transfer do not reasonably indicate that the
taxes associated with ownership of the residual interest will not be
paid by the transferee.
Prior to purchasing a REMIC Residual Certificate, prospective purchasers
should consider the possibility that a purported transfer of such REMIC
Residual Certificate by such a purchaser to another purchaser at some future
date may be disregarded in accordance with the above-described rules which
would result in the retention of tax liability by such purchaser. The related
prospectus supplement will disclose whether offered REMIC Residual Certificates
may be considered "noneconomic" residual interests under the REMIC Regulations;
provided, however, that any disclosure that a REMIC Residual Certificate will
not be considered "noneconomic" will be based upon certain assumptions, and the
depositor will make no representation that a REMIC Residual Certificate will
not be considered "noneconomic" for purposes of the above-described rules. See
"--Taxation of Owners of REMIC Residual Certificates--Foreign Investors in
REMIC Certificates" below for additional restrictions applicable to transfers
of certain REMIC Residual Certificates to foreign persons.
On July 18, 2003 the Internal Revenue Service issued proposed Treasury
regulations (the "Proposed Treasury Regulations") under Sections 446(b), 860C,
and 863(a) of the Internal Revenue Code relating to the proper method of
accounting for, and source of income from, fees ("inducement fees") received by
taxpayers to induce the acquisition of "noneconomic" REMIC residual interests.
The Proposed Treasury Regulations, if finalized as proposed, would apply to
taxpayers who receive inducement fees in connection with becoming the holder of
a noneconomic REMIC residual interest for taxable years ending on or after the
date such regulations are published in final form.
Proposed Treasury Regulation section 1.863-1(e) provides that an
inducement fee is treated as U.S. source income. Proposed Treasury Regulation
section 1.446-6(c) sets forth a general rule (the "General Rule") which
provides that a taxpayer must recognize in income an inducement fee received
for acquiring a noneconomic REMIC residual interest "over the remaining
expected life of the applicable REMIC in a manner that reasonably reflectsthe
after-tax costs and benefits of holding that noneconomic residual interest."
Under the Proposed Treasury Regulations, a taxpayer is generally permitted
to adopt an accounting method for the recognition of inducement fees that meets
the General Rule described above. The Proposed Treasury Regulations state,
however, that the treatment of inducement fees received on
94
noneconomic REMIC residual interests constitutes a method of accounting for
purposes of Internal Revenue Code sections 446 and 481. Thus, under the
Proposed Treasury Regulations, once an accounting method is adopted it must be
consistently applied to all inducement fees received by the taxpayer in respect
of noneconomic REMIC residual interests, and may not be changed without the
consent of the Commissioner, pursuant to Internal Revenue Code section 446(e)
and the Treasury Regulations and other procedures thereunder.
The Proposed Treasury Regulations set forth two alternative safe harbor
methods of accounting for meeting the General Rule described above. The
Commissioner is authorized to provide additional safe harbor methods by revenue
ruling or revenue procedure.
Under one safe harbor method of accounting set forth in the Proposed
Treasury Regulations (the "Book Method"), a taxpayer includes an inducement fee
in income in accordance with the same accounting method and time period used by
the taxpayer for financial reporting purposes, provided that the period over
which such inducement fee is included in income is not less than the period the
related REMIC is expected to generate taxable income.
Under the second safe harbor accounting method (the "Modified REMIC
Regulatory Method"), a taxpayer recognizes inducement fee income ratably over
the remaining anticipated weighted average life of the REMIC. For this purpose,
the REMIC's remaining anticipated weighted average life is determined as of the
date of acquisition of the noneconomic REMIC residual interest using the
methodology provided in current Treasury Regulation section 1.860E-1(a)(3)(iv).
The Proposed Treasury Regulations also provide that upon a sale or other
disposition of a noneconomic REMIC residual interest (other than in a
transaction to which Internal Revenue Code section 381(c)(4) applies) the
holder must include currently in income the balance of any previously
unrecognized inducement fee amounts attributable to such residual interest.
Mark-to-Market Rules. Section 475 provides a requirement that a securities
dealer mark-to-market securities held for sale to customers. Treasury
regulations provide that for purposes of this mark-to-market requirement, a
REMIC Residual Certificate is not treated as a security and thus cannot be
marked to market.
Possible Pass-Through of Miscellaneous Itemized Deductions. Fees and
expenses of a REMIC generally will be allocated to the holders of the related
REMIC Residual Certificates. The applicable Treasury regulations indicate,
however, that in the case of a REMIC that is similar to a single class grantor
trust, all or a portion of such fees and expenses should be allocated to the
holders of the related REMIC Regular Certificates. Unless otherwise stated in
the related prospectus supplement, such fees and expenses will be allocated to
holders of the related REMIC Residual Certificates in their entirety and not to
the holders of the related REMIC Regular Certificates.
With respect to REMIC Residual Certificates or REMIC Regular Certificates
which receive an allocation of fees and expenses in accordance with the
preceding discussion, if any holder thereof is an individual, estate or trust,
or a certain "pass-through entity," an amount equal to these fees and expenses
will be added to the certificateholder's gross income and the certificateholder
will treat such fees and expenses as a miscellaneous itemized deduction subject
to the limitation of section 67 of the Code to the extent they exceed in the
aggregate two percent of a taxpayer's adjusted gross income. In addition,
section 68 of the Code provides that the amount of itemized deductions
otherwise allowable for an individual whose adjusted gross income exceeds a
specified amount will be reduced by the lesser of:
o 3% of the excess of the individual's adjusted gross income over such
amount; and
o 80% of the amount of itemized deductions otherwise allowable for the
taxable year.
However the section 68 reduction of allowable itemized deductions will be
phased out beginning in 2006 and eliminated after 2009.
In determining the alternative minimum taxable income of such a holder of
a REMIC Certificate that is an individual, estate or trust, or a "pass-through
entity," beneficially owned by one or more individuals, estates or trusts, no
deduction will be allowed for such holder's allocable portion of servicing fees
and
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other miscellaneous itemized deductions of the REMIC, even though an amount
equal to the amount of such fees and other deductions will be included in such
holder's gross income. Accordingly, such REMIC Certificates may not be
appropriate investments for individuals, estates or trusts, or pass-through
entities beneficially owned by one or more individuals, estates or trusts. Such
prospective investors should carefully consult with their own tax advisors
prior to making an investment in such certificates.
Sales of REMIC Certificates. If a REMIC Certificate is sold, the selling
certificateholder will recognize gain or loss equal to the difference between
the amount realized on the sale and its adjusted basis in the REMIC
Certificate. The adjusted basis of a REMIC Regular Certificate generally will
equal the cost of such REMIC Regular Certificate to such certificateholder,
increased by income reported by such certificateholder with respect to such
REMIC Regular Certificate, including original issue discount and market
discount income, and reduced (but not below zero) by distributions on such
REMIC Regular Certificate received by such certificateholder and by any
amortized premium. The adjusted basis of a REMIC Residual Certificate will be
determined as described under "--Basis Rules, Net Losses and Distributions".
Except as provided in the following two paragraphs, any such gain or loss will
be capital gain or loss, provided such REMIC Certificate is held as a capital
asset within the meaning of section 1221 of the Code. Investors that recognize
a loss on a sale or exchange of the REMIC Regular Certificates for federal
income tax purposes in excess of certain threshold amounts should consult their
tax advisors as to the need to file IRS Form 8886 (disclosing certain potential
tax shelters) on their federal income tax returns.
Gain from the sale of a REMIC Regular Certificate that might otherwise be
capital gain will be treated as ordinary income to the extent such gain does
not exceed the excess, if any, of:
o the amount that would have been includible in the seller's income with
respect to such REMIC Regular Certificate assuming that income had
accrued thereon at a rate equal to 110% of the "applicable Federal rate"
determined as of the date of purchase of such REMIC Regular Certificate,
over
o the amount of ordinary income actually includible in the seller's income
prior to such sale.
In addition, gain recognized on the sale of a REMIC Regular Certificate by
a seller who purchased such REMIC Regular Certificate at a market discount will
be taxable as ordinary income in an amount not exceeding the portion of such
discount that accrued during the period such REMIC Certificate was held by such
holder, reduced by any market discount included in income under the rules
described above under "--Taxation of Owners of REMIC Regular
Certificates--Market Discount" and "--Premium."
REMIC Certificates will be "evidences of indebtedness" within the meaning
of section 582(c)(1) of the Code, so that gain or loss recognized from the sale
of a REMIC Certificate by a bank or thrift institution to which such section
applies will be ordinary income or loss.
A portion of any gain from the sale of a REMIC Regular Certificate that
might otherwise be capital gain may be treated as ordinary income to the extent
that such certificate is held as part of a "conversion transaction" within the
meaning of section 1258 of the Code. A conversion transaction generally is one
in which the taxpayer has taken two or more positions in the same or similar
property that reduce or eliminate market risk and substantially all of the
taxpayer's return is attributable to the time value of money. The amount of
gain so realized in a conversion transaction that is recharacterized as
ordinary income generally will not exceed the amount of interest that would
have accrued on the taxpayer's net investment at 120% of the appropriate
"applicable Federal rate" at the time the taxpayer enters into the conversion
transaction, subject to appropriate reduction for prior inclusion of interest
and other ordinary income items from the transaction.
Finally, a taxpayer may elect to have net capital gain taxed at ordinary
income rates rather than capital gains rates in order to include such net
capital gain in total net investment income for the taxable year, for purposes
of the rule that limits the deduction of interest on indebtedness incurred to
purchase or carry property held for investment to a taxpayer's net investment
income.
Except as may be provided in Treasury regulations yet to be issued, if the
seller of a REMIC Residual Certificate reacquires a REMIC Residual Certificate,
or acquires any other residual interest in a REMIC
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or any similar interest in a "taxable mortgage pool" during the period
beginning six months before, and ending six months after, the date of such
sale, such sale will be subject to the "wash sale" rules of section 1091 of the
Code. In that event, any loss realized by the REMIC Residual Certificateholder
on the sale will not be deductible, but instead will be added to such REMIC
Residual Certificateholder's adjusted basis in the newly acquired asset.
Prohibited Transactions Tax and Other Taxes. The Code imposes a tax on
REMICs equal to 100% of the net income derived from "prohibited transactions".
In general, subject to certain specified exceptions, a prohibited transaction
means:
o the disposition of a mortgage loan;
o the receipt of income from a source other than a mortgage loan or
certain other permitted investments;
o the receipt of compensation for services; or
o gain from the disposition of an asset purchased with the payments on the
mortgage loans for temporary investment pending distribution on the
REMIC Certificates.
It is not anticipated that the REMIC will engage in any prohibited
transactions in which it would recognize a material amount of net income.
In addition, certain contributions to a REMIC made after the day on which
the REMIC issues all of its interests could result in the imposition of a tax
on the REMIC equal to 100% of the value of the contributed property. The
pooling and servicing agreement will include provisions designed to prevent the
acceptance of any contributions that would be subject to such tax.
REMICs also are 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. "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. A REMIC may recognize "net income from foreclosure property" subject to
federal income tax if the Trustee or applicable servicer determines that the
recovery to certificateholders is likely to be greater on an after tax basis
than earning qualifying income that is not subject to tax.
Unless otherwise disclosed in the related prospectus supplement, it is not
anticipated that any material state or local income or franchise tax will be
imposed on any REMIC.
Unless otherwise stated in the related prospectus supplement, and to the
extent permitted by then applicable laws, any tax on prohibited transactions,
contributions, "net income from foreclosure property" or state or local tax
imposed on the REMIC will be borne by the related servicer or trustee in any
case out of its own funds, if such tax arose out of a breach of such person's
obligations under the related pooling and servicing agreement and in respect of
compliance with applicable laws and regulations. Any such tax not borne by a
servicer or trustee will be charged against the related trust fund resulting in
a reduction in amounts payable to holders of the related REMIC Certificates.
Tax and Restrictions on Transfers of REMIC Residual Certificates to
Certain Organizations. If a REMIC Residual Certificate is transferred to a
"disqualified organization," a tax would be imposed in an amount equal to the
product of:
o the present value discounted using the "applicable Federal rate" of the
total anticipated excess inclusions with respect to such REMIC Residual
Certificate for periods after the transfer; and
o the highest marginal federal income tax rate applicable to corporations.
The anticipated excess inclusions must be determined as of the date that
the REMIC Residual Certificate is transferred and must be based on events that
have occurred up to the time of such transfer, the prepayment assumption,
required or permitted cleanup calls, or required liquidation provisions. Such a
tax generally would be imposed on the transferor of the REMIC Residual
Certificate, except that where such transfer is through an agent for a
disqualified organization, the tax would instead be imposed on such
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agent. However, a transferor of a REMIC Residual Certificate would in no event
be liable for such tax with respect to a transfer if the transferee furnishes
to the transferor an affidavit that the transferee is not a disqualified
organization and, as of the time of the transfer, the transferor does not have
actual knowledge that such affidavit is false. Moreover, an entity will not
qualify as a REMIC unless there are reasonable arrangements designed to ensure
that residual interests are not held by disqualified organizations and
information necessary for the application of the tax are made available.
Restrictions on the transfer of REMIC Residual Certificates and certain other
provisions that are intended to meet this requirement will be included in each
pooling and servicing agreement, and will be discussed more fully in any
prospectus supplement relating to the offering of any REMIC Residual
Certificate.
In addition, if a "pass-through entity" includes in income excess
inclusions with respect to a REMIC Residual Certificate, and disqualified
organization is the record holder of an interest in such entity, then a tax
will be imposed on such entity equal to the product of the amount of excess
inclusions allocable to the interest in the pass-through entity held by such
disqualified organization and the highest marginal federal income tax rate
imposed on corporations. A pass-through entity will not be subject to this tax
for any period, however, if each record holder of an interest in such
pass-through entity furnishes to such pass-through entity such holder's social
security number and a statement under penalty of perjury that such social
security number is that of the recordholder or a statement under penalty of
perjury that such record holder is not a disqualified organization.
For these purposes, a "disqualified organization" generally means:
o the United States, any State or political subdivision thereof, any
foreign government, any international organization, or any agency or
instrumentality of the foregoing (but would exclude as instrumentalities
entities not treated as instrumentalities under section 168(h)(2)(D) of
the Code or the Freddie Mac), or any organization (other than a
cooperative described in section 521 of the Code);
o any organization that is exempt from federal income tax, unless it is
subject to the tax imposed by section 511 of the Code; or
o any organization described in section 1381(a)(2)(C) of the Code.
For these purposes, a "pass-through entity" means any regulated investment
company, real estate investment trust, trust, partnership or certain other
entities described in section 860E(e)(6) of the Code. In addition, a person
holding an interest in a pass-through entity as a nominee for another person
will, with respect to such interest, be treated as a pass-through entity.
Termination. A REMIC will terminate immediately after the distribution
date following receipt by the REMIC of the final payment in respect of the
mortgage loans or upon a sale of the REMIC's assets following the adoption by
the REMIC of a plan of complete liquidation. The last distribution on a REMIC
Regular Certificate will be treated as a payment in retirement of a debt
instrument. In the case of a REMIC Residual Certificate, if the last
distribution on such REMIC Residual Certificate is less than the REMIC Residual
Certificateholder's adjusted basis in such REMIC Residual Certificate, such
REMIC Residual Certificateholder should be treated as realizing a loss equal to
the amount of such difference. Such loss may be treated as a capital loss and
may be subject to the "wash sale" rules of section 1091 of the Code.
Reporting and Other Administrative Matters. Solely for purposes of the
administrative provisions of the Code, the REMIC will be treated as a
partnership and REMIC Residual Certificateholders will be treated as partners.
Unless otherwise stated in the related prospectus supplement, either the
trustee or the servicer generally will hold at least a nominal amount of REMIC
Residual Certificates, will file REMIC federal income tax returns on behalf of
the related REMIC, and will be designated as and will act as the "tax matters
person" with respect to the REMIC in all respects.
As the tax matters person, the trustee or the servicer, as the case may
be, will, subject to certain notice requirements and various restrictions and
limitations, generally have the authority to act on behalf of the REMIC and the
REMIC Residual Certificateholders in connection with the administrative and
judicial review of items of income, deduction, gain or loss of the REMIC, as
well as the REMIC's classification.
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REMIC Residual Certificateholders will generally be required to report such
REMIC items consistently with their treatment on the related REMIC's tax return
and may in some circumstances be bound by a settlement agreement between the
trustee or the servicer, as the case may be, as tax matters person, and the IRS
concerning any such REMIC item. Adjustments made to the REMIC tax return may
require a REMIC Residual Certificateholder to make corresponding adjustments on
its return, and an audit of the REMIC's tax return, or the adjustments
resulting from such an audit, could result in an audit of a REMIC Residual
Certificateholder's return. No REMIC will be registered as a tax shelter
pursuant to section 6111 of the Code because it is not anticipated that any
REMIC will have a net loss for any of the first five taxable years of its
existence. Any person that holds a REMIC Residual Certificate as a nominee for
another person may be required to furnish to the related REMIC, in a manner to
be provided in Treasury regulations, the name and address of such person and
other information.
Reporting of interest income, including any original issue discount, with
respect to REMIC Regular Certificates is required annually, and may be required
more frequently under Treasury regulations. These information reports generally
are required to be sent to individual holders of REMIC Regular Interests and
the IRS; holders of REMIC Regular Certificates that are corporations, trusts,
securities dealers and certain other non-individuals will be provided interest
and original issue discount income information and the information set forth in
the following paragraph upon request in accordance with the requirements of the
applicable regulations. The information must be provided by the later of 30
days after the end of the quarter for which the information was requested, or
two weeks after the receipt of the request. The REMIC must also comply with
rules requiring that information relating to be reported to the IRS. Reporting
with respect to the REMIC Residual Certificates, including income, excess,
inclusions, investment expenses and relevant information regarding
qualification of the REMIC's assets will be made as required under the Treasury
regulations, generally on a quarterly basis.
As applicable, the REMIC Regular Certificate information reports will
include a statement of the adjusted issue price of the REMIC Regular
Certificate at the beginning of each accrual period. In addition, the reports
will include information required by regulations with respect to computing the
accrual of any market discount. Because exact computation of the accrual of
market discount on a constant yield method would require information relating
to the holder's purchase price that the REMIC may not have, such regulations
only require that information pertaining to the appropriate proportionate
method of accruing market discount be provided. See "--Taxation of Owners of
REMIC Regular Certificates--Market Discount."
The responsibility for complying with the foregoing reporting rules will
be borne by either the trustee or the servicer, unless otherwise stated in the
related prospectus supplement.
Backup Withholding with Respect to REMIC Certificates. Payments of
interest and principal, and proceeds from the sale of REMIC Certificates, may
be subject to the "backup withholding tax" at a rate of 28% (increasing to 31%
after 2010) if recipients of such payments fail to furnish to the payor certain
information, including their taxpayer identification numbers, or otherwise fail
to establish an exemption from such tax. Any amounts deducted and withheld from
a distribution to a recipient would be allowed as a credit against such
recipient's federal income tax. Furthermore, certain penalties may be imposed
by the IRS on a recipient of payments that is required to supply information
but that does not do so in the proper manner.
Foreign Investors in REMIC Certificates. A REMIC Regular Certificateholder
that is not a "United States Person" and is not subject to federal income tax
as a result of any direct or indirect connection to the United States in
addition to its ownership of a REMIC Regular Certificate will not, unless
otherwise stated in the related prospectus supplement, be subject to United
States federal income or withholding tax in respect of a distribution on a
REMIC Regular Certificate, provided that the holder complies to the extent
necessary with certain identification requirements (including delivery of a
statement, signed under penalties of perjury, certifying that such
certificateholder is not a United States Person and providing the name and
address of such certificateholder. For these purposes, "United States Person"
means:
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o a citizen or resident of the United States;
o a corporation or partnership (or other entity treated as a corporation
or a partnership for United States Federal income tax purposes created
or organized in, or under the laws of, the United States, any State
thereof or the District of Columbia (unless, in the case of a
partnership, Treasury regulations are enacted that provide otherwise);
o an estate whose income is includible in gross income for United States
federal income tax purposes regardless of its source; and
o a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust, and one or more United
States persons have the authority to control all substantial decisions
of the trust.
It is possible that the IRS may assert that the foregoing tax exemption
should not apply with respect to interest distributed on a REMIC Regular
Certificate that is held by:
o a REMIC Residual Certificateholder that owns directly or indirectly a
10% or greater interest in the REMIC Residual Certificates; or
o to the extent of the amount of interest paid by the related mortgagor on
a particular mortgage loan, a REMIC Regular Certificateholder that owns
a 10% or greater ownership interest in such mortgage or a controlled
foreign corporation of which such mortgagor is a "United States
shareholder" within the meaning of section 951(b) of the Code.
If the holder does not qualify for exemption, distributions of interest,
including distributions in respect of accrued original issue discount, to such
holder may be subject to a tax rate of 30%, subject to reduction under any
applicable tax treaty. In addition, the foregoing rules will not apply to
exempt a United States shareholder of a controlled foreign corporation from
taxation on such United States shareholder's allocable portion of the interest
income received by such controlled foreign corporation. Further, it appears
that a REMIC Regular Certificate would not be included in the estate of a
nonresident alien individual and would not be subject to United States estate
taxes. However, certificateholders who are non-resident alien individuals
should consult their tax advisors concerning this question. Transfers of REMIC
Residual Certificates to investors that are not United States persons will be
prohibited under the related pooling and servicing agreement.
The Treasury Department issued final regulations which make certain
modifications to the withholding, backup withholding and information reporting
rules described above. Prospective investors are urged to consult their own tax
advisors regarding these regulations.
GRANTOR TRUST FUNDS
Classification of Grantor Trust Funds. With respect to each series of
grantor trust certificates, counsel to the depositor will deliver its opinion
to the effect that, assuming compliance with the pooling and servicing
agreement, the grantor trust fund will be classified as a grantor trust under
subpart E, part I of subchapter J of the Code and not as a partnership or an
association taxable as a corporation. Accordingly, each holder of a grantor
trust certificate generally will be treated as the owner of an interest in the
mortgage loans included in the grantor trust fund.
For purposes of the following discussion, a grantor trust certificate
represents an undivided equitable ownership interest in the principal of the
mortgage loans constituting the related grantor trust fund, together with
interest thereon at a pass-through rate, will be referred to as a "grantor
trust fractional interest certificate." A grantor trust certificate
representing ownership of all or a portion of the difference between interest
paid on the mortgage loans constituting the related grantor trust fund less
normal administration fees and any spread and interest paid to the holders of
grantor trust fractional interest certificates issued with respect to a grantor
trust fund will be referred to as a "grantor trust strip certificate." A
grantor trust strip certificate may also evidence a nominal ownership interest
in the principal of the mortgage loans constituting the related grantor trust
fund.
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CHARACTERIZATION OF INVESTMENTS IN GRANTOR TRUST CERTIFICATES
Grantor Trust Fractional Interest Certificates. Except as discussed in the
related prospectus supplement, in the case of grantor trust fractional interest
certificates, counsel to the depositor will deliver an opinion that, in
general, grantor trust fractional interest certificates will represent
interests in:
o assets described in section 7701(a)(19)(C) of the Code;
o "obligation[s] which...[are] principally secured by an interest in real
property" within the meaning of section 860G(a)(3)(A) of the Code; and
o "real estate assets" within the meaning of section 856(c)(5)(B) of the
Code.
In addition, counsel to the depositor will deliver an opinion that
interest on grantor trust fractional interest certificates will to the same
extent be considered "interest on obligations secured by mortgages on real
property or on interests in real property" within the meaning of section
856(c)(3)(B) of the Code.
Grantor Trust Strip Certificates. Even if grantor trust strip certificates
evidence an interest in a grantor trust fund consisting of mortgage loans that
are assets described in section 7701(a)(19)(C) of the Code, "real estate
assets" within the meaning of section 856(c)(5)(B) of the Code, and the
interest on which is "interest on obligations secured by mortgages on real
property" within the meaning of section 856(c)(3)(B) of the Code, it is unclear
whether the grantor trust strip certificates, and the income they produce, will
be so characterized. Although the policies underlying such sections may suggest
that such characterization is appropriate, counsel to the depositor will not
deliver any opinion on the characterization of these certificates. Prospective
purchasers of grantor trust strip certificates should consult their tax
advisors regarding whether the grantor trust strip certificates, and the income
they produce, will be so characterized.
The grantor trust strip certificates will be "obligation[s] (including any
participation or certificate of beneficial ownership therein) which[are]
principally secured by an interest in real property" within the meaning of
section 860G(a)(3)(A) of the Code.
TAXATION OF OWNERS OF GRANTOR TRUST FRACTIONAL INTEREST CERTIFICATES
General. Holders of a particular series of grantor trust fractional
interest certificates generally will be required to report on their federal
income tax returns their shares of the entire income from the mortgage loans
(including reasonable servicing fees and other expenses) and will be entitled
to deduct their shares of any such reasonable servicing fees and other
expenses. In some situations, the taxpayer's deduction may be subject to
itemized deduction limitations and be limited if the taxpayer is subject to the
corporate alternative minimum tax. For a more detailed discussion of these
limitations, see "--Taxation of Owners of REMIC Residual Certificates--Possible
Pass-Through of Miscellaneous Itemized Deductions".
Although it is not entirely clear, it appears that in transactions in
which multiple classes of grantor trust certificates are issued, such fees and
expenses should be allocated among the classes of grantor trust certificates
using a method that recognizes that each such class benefits from the related
services. In the absence of further guidance, it is intended to base
information returns or reports on a method that allocates such expenses among
classes of grantor trust certificates with respect to each period based on the
distributions made to each such class during that period.
The federal income tax treatment of grantor trust fractional interest
certificates of any series will depend on whether they are subject to the
"stripped bond" rules of section 1286 of the Code. Grantor trust fractional
interest certificates may be subject to those rules if a class of grantor trust
strip certificates is issued as part of the same series of Certificates or the
depositor or any of its affiliates retains a right to receive a specified
portion of the interest payable on a mortgage asset. Further, the IRS has ruled
that an unreasonably high servicing fee retained by a seller or servicer will
be treated as a retained ownership interest in mortgages that constitutes a
stripped coupon. For purposes of determining what constitutes reasonable
servicing fees for various types of mortgages the IRS has established certain
"safe harbors." The servicing fees paid with respect to the mortgage loans for
certain series of grantor trust certificates may be higher than the "safe
harbors" and, accordingly, may not constitute reasonable servicing
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compensation. The related prospectus supplement will include information
regarding servicing fees paid to a servicer or their respective affiliates
necessary to determine whether the preceding "safe harbor" rules apply.
If Stripped Bond Rules Apply. If the stripped bond rules apply, each
grantor trust fractional interest certificate will be treated as having been
issued with "original issue discount" within the meaning of section 1273(a) of
the Code, subject, however, to the discussion below regarding the treatment of
certain stripped bonds as market discount bonds and de minimis market discount
discussion below. See "--Taxation of Owners of Grantor Trust Fractional
Interest Certificates--Market Discount." Under the stripped bond rules, the
holder of a grantor trust fractional interest certificate will be required to
report "qualified stated interest" from its grantor trust fractional interest
certificate for each month, as such amounts are received or accrued (based on
the holder's method of accounting) and will be required to report an amount
equal to the original issue discount income that accrues on such certificate in
that month calculated under a constant yield method, in accordance with the
rules of the Code relating to original issue discount.
The original issue discount on a grantor trust fractional interest
certificate will be the excess of such certificate's stated redemption price
over its issue price. The issue price of a grantor trust fractional interest
certificate as to any purchaser will be equal to the price paid by such
purchaser for the grantor trust fractional interest certificate. The stated
redemption price of a grantor trust fractional interest certificate will be the
sum of all payments to be made on such certificate, other than "qualified
stated interest," and the certificate's share of reasonable servicing and other
expenses. See "--Taxation of Owners of Grantor Trust Fractional Interest
Certificates--If Stripped Bond Rules Do Not Apply" for a definition of
"qualified stated interest." In general, the amount of such income that accrues
in any month would equal the product of such holder's adjusted basis in such
grantor trust fractional interest certificate at the beginning of such month
(see "--Sales of Grantor Trust Certificates") and the yield of such grantor
trust fractional interest certificate to such holder. Such yield would be
computed at the rate that, if used to discount the holder's share of future
payments on the mortgage loans, would cause the present value of those future
payments to equal the price at which the holder purchased such certificate. In
computing yield under the stripped bond rules, a certificateholder's share of
future payments on the mortgage loans will not include any payments made in
respect of any spread or any other ownership interest in the mortgage loans
retained by the depositor, a servicer, or their respective affiliates, but will
include such certificateholder's share of any reasonable servicing fees and
other expenses.
With respect to certain categories of debt instruments, section 1272(a)(6)
of the Code requires the use of a reasonable prepayment assumption and conforms
to the prepayment assumption used in pricing the instrument. Regulations could
be adopted applying those provisions to the grantor trust fractional interest
certificates. It is unclear whether those provisions would be applicable to the
grantor trust fractional interest certificates or whether use of a reasonable
prepayment assumption may be required or permitted without reliance on these
rules. It is also uncertain, if a prepayment assumption is used, whether the
assumed prepayment rate would be determined based on conditions at the time of
the first sale of the grantor trust fractional interest certificate or, with
respect to any holder, at the time of purchase of the grantor trust fractional
interest certificate by that holder. Certificateholders are advised to consult
their own tax advisors concerning reporting original issue discount in general
and, in particular, whether a prepayment assumption should be used in reporting
original issue discount with respect to grantor trust fractional interest
certificates.
In the case of a grantor trust fractional interest certificate acquired at
a price equal to the principal amount of the mortgage loans allocable to such
certificate, the use of a prepayment assumption generally would not have any
significant effect on the yield used in calculating accruals of interest
income. In the case, however, of a grantor trust fractional interest
certificate acquired at a discount or premium, the use of a reasonable
prepayment assumption would increase or decrease such yield, and thus
accelerate or decelerate, respectively, the reporting of income.
If a prepayment assumption is not used, then when a mortgage loan prepays
in full, the holder of a grantor trust fractional interest certificate acquired
at a discount or a premium generally will recognize income or loss, which under
amendments to the Code adopted in 1997 would be capital except to the
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extent of any accrued market discount equal to the difference between the
portion of the prepaid principal amount of the mortgage loan that is allocable
to such certificate and the portion of the adjusted basis of such certificate
that is allocable to such certificateholder's interest in the mortgage loan. If
a prepayment assumption is used, although there is no guidance, logically that
no separate item of income or loss should be recognized upon a prepayment.
Instead, a prepayment should be treated as a partial payment of the stated
redemption price of the grantor trust fractional interest certificate and
accounted for under a method similar to that described for taking account of
original issue discount on REMIC Regular Certificates. See "--Taxation of
Owners of REMIC Regular Certificates--Original Issue Discount." It is unclear
whether any other adjustments would be required to reflect differences between
an assumed prepayment rate and the actual rate of prepayments.
In the absence of statutory or administrative clarification, it is
currently intended to base information reports or returns to the IRS and
certificateholders in transactions subject to the stripped bond rules on a
prepayment assumption that will be disclosed in the related prospectus
supplement and on a constant yield computed using a representative initial
offering price for each class of certificates. However, neither the depositor
nor any other person will make any representation that the mortgage loans will
in fact prepay at a rate conforming to such stripped bond prepayment assumption
or any other rate and certificateholders should bear in mind that the use of a
representative initial offering price will mean that such information returns
or reports, even if otherwise accepted as accurate by the IRS, will in any
event be accurate only as to the initial certificateholders of each series who
bought at that price.
Under Treasury regulation section 1.1286-1(b), certain stripped bonds are
to be treated as market discount bonds and, accordingly, any purchaser of such
a bond is to account for any discount on the bond as market discount rather
than original issue discount. This treatment only applies, however, if
immediately after the most recent disposition of the bond by a person stripping
one or more coupons from the bond and disposing of the bond or coupon, there is
less than a de minimis amount of original issue discount or the annual stated
rate of interest payable on the original bond is no more than one percentage
point lower than the gross interest rate payable on the original mortgage loan
before subtracting any servicing fee or any stripped coupon. Original issue
discount or market discount on a grantor trust fractional interest certificate
are de minimis if less than 0.25% of the stated redemption price multiplied by
the weighted average maturity of the mortgage loans. Original issue discount or
market discount of only a de minimis amount will be included in income in the
same manner as de minimis original issue discount and market discount described
in "--If Stripped Bond Rules Do Not Apply" and "--Market Discount."
If Stripped Bond Rules Do Not Apply. Subject to the discussion below on
original issue discount, if the stripped bond rules do not apply to a grantor
trust fractional interest certificate, the certificateholder will be required
to report its share of the interest income on the mortgage loans in accordance
with such certificateholder's normal method of accounting. The original issue
discount rules will apply to a grantor trust fractional interest certificate to
the extent it evidences an interest in mortgage loans issued with original
issue discount.
The original issue discount, if any, on the mortgage loans will equal the
difference between the stated redemption price of such mortgage loans and their
issue price. Under the OID regulations, the stated redemption price is equal to
the total of all payments to be made on such mortgage loan other than
"qualified stated interest." "Qualified stated interest" generally includes
interest that is unconditionally payable at least annually at a single fixed
rate, at a "qualified floating rate" or at an "objective rate." In general, the
issue price of a mortgage loan will be the amount received by the borrower from
the lender under the terms of the mortgage loan, less any "points" paid by the
borrower, and the stated redemption price of a mortgage loan will equal its
principal amount, unless the mortgage loan provides for an initial below-market
rate of interest or the acceleration or the deferral of interest payments.
In the case of mortgage loans bearing adjustable or variable interest
rates, the related prospectus supplement will describe the manner in which such
rules will be applied with respect to those mortgage loans in preparing
information returns to the certificateholders and the IRS.
Notwithstanding the general definition of original issue discount,
original issue discount will be considered to be de minimis if such original
issue discount is less than 0.25% of the stated redemption price
103
multiplied by the weighted average maturity of the mortgage loan. For this
purpose, the weighted average maturity of the mortgage loan will be computed by
multiplying the number of full years from the issue date until such payment is
expected to be made by a fraction, the numerator of which is the amount of the
payment and the denominator of which is the stated redemption price of the
mortgage loan. Under the OID regulations, original issue discount of only a de
minimis amount will generally be included in income as each payment of stated
principal price is made, based on the product of the total amount of such de
minimis original issue discount and a fraction, the numerator of which is the
amount of each such payment and the denominator of which is the outstanding
stated principal amount of the mortgage loan. The OID Regulations also permit a
certificateholder to elect to accrue de minimis original issue discount into
income currently based on a constant yield method. See "--Market Discount"
below.
If original issue discount is in excess of a de minimis amount, all
original issue discount with respect to a mortgage loan will be required to be
accrued and reported in income each month, based on a constant yield. The OID
regulations suggest that no prepayment assumption is appropriate in computing
the yield on prepayable obligations issued with original issue discount. In the
absence of statutory or administrative clarification, it currently is not
intended to base information reports or returns to the IRS and
certificateholders on the use of a prepayment assumption in transactions not
subject to the stripped bond rules. However, section 1272(a)(6) of the Code may
require that a prepayment assumption be made in computing yield with respect to
all mortgage-backed securities. Certificateholders are advised to consult their
own tax advisors concerning whether a prepayment assumption should be used in
reporting original issue discount with respect to grantor trust fractional
interest certificates. Certificateholders should refer to the related
prospectus supplement with respect to each series to determine whether and in
what manner the original issue discount rules will apply to mortgage loans in
such series.
A purchaser of a grantor trust fractional interest certificate that
purchases such grantor trust fractional interest certificate at a cost less
than such certificate's allocable portion of the aggregate remaining stated
redemption price of the mortgage loans held in the related trust fund will also
be required to include in gross income such certificate's daily portions of any
original issue discount with respect to such mortgage loans. However, each such
daily portion will be reduced, if the cost of such grantor trust fractional
interest certificate to such purchaser is in excess of such certificate's
allocable portion of the aggregate "adjusted issue prices" of the mortgage
loans held in the related trust fund, approximately in proportion to the ratio
such excess bears to such certificate's allocable portion of the aggregate
original issue discount remaining to be accrued on such mortgage loans. The
adjusted issue price of a mortgage loan on any given day equals the sum of the
adjusted issue price of such mortgage loan at the beginning of the accrual
period that includes such day plus the daily portions of original issue
discount for all days during such accrual period prior to such day. The
adjusted issue price of a mortgage loan at the beginning of any accrual period
will equal the issue price of such mortgage loan, increased by the aggregate
amount of original issue discount with respect to such mortgage loan that
accrued in prior accrual periods, and reduced by the amount of any payments
made on such mortgage loan in prior accrual periods of amounts included in its
stated redemption price.
The trustee or servicer, as applicable, will provide to any holder of a
grantor trust fractional interest certificate such information as such holder
may reasonably request from time to time with respect to original issue
discount accruing on grantor trust fractional interest certificates. See
"--Grantor Trust Reporting" below.
Market Discount. If the stripped bond rules do not apply to the grantor
trust fractional interest certificate, a certificateholder may be subject to
the market discount rules of sections 1276 through 1278 of the Code to the
extent an interest in a mortgage loan is considered to have been purchased at a
"market discount." If market discount is in excess of a de minimis amount, the
holder generally will be required to include in income in each month the amount
of such discount that has accrued through such month that has not previously
been included in income, but limited, in the case of the portion of such
discount that is allocable to any mortgage loan, to the payment of stated
redemption price on such mortgage loan that is received by or due to the trust
fund in that month. A certificateholder may elect to include market discount in
income currently as it accrues under a constant yield method rather than
including it on a deferred basis in accordance with the foregoing. If made,
such election will apply to all market discount bonds acquired by such
certificateholder during or after the first taxable year to which such election
104
applies. In addition, the OID regulations would permit a certificateholder to
elect to accrue all interest, discount and premium in income as interest, based
on a constant yield method. If such an election were made with respect to a
mortgage loan with market discount, the certificateholder would be deemed to
have made an election to currently include market discount in income with
respect to all other debt instruments having market discount that such
certificateholder acquires during the taxable year of the election and
thereafter and, possibly, previously acquired instruments. Similarly, a
certificateholder that made this election for a certificate acquired at a
premium would be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
certificateholder owns or acquires. See "--Taxation of Owners of REMIC Regular
Certificates-- Premium." Each of these elections to accrue interest, discount
and premium with respect to a certificate on a constant yield method or as
interest is irrevocable.
Section 1276(b)(3) of the Code authorized the Treasury Department to issue
regulations providing for the method for accruing market discount on debt
instruments where principal is payable in more than one installment. Until such
time as regulations are issued by the Treasury Department, certain rules
described in the Committee Report apply. For a more detailed discussion of the
treatment of market discount, see "Taxation of Owners of REMIC Regular
Certificates--Market Discount".
Because the mortgage loans will provide for periodic payments of stated
redemption price, such discount may be required to be included in income at a
rate that is not significantly lower than the rate at which such discount would
be included in income if it were original issue discount. Market discount with
respect to mortgage loans generally will be considered to be de minimis if it
is less than 0.25% of the stated redemption price of the mortgage loans
multiplied by the number of full years to maturity remaining after the date of
its purchase. In interpreting a similar rule with respect to original issue
discount on obligations payable in installments, the OID regulations refer to
the weighted average maturity of obligations, and it is likely that the same
rule will be applied with respect to market discount, presumably taking into
account the prepayment assumption used, if any. The effect of using a
prepayment assumption could be to accelerate the reporting of such discount
income. If market discount is treated as de minimis under the foregoing rule,
it appears that actual discount would be treated in a manner similar to
original issue discount of a de minimis amount. See "--If Stripped Bond Rules
Do Not Apply." Further, under the rules described in "--Taxation of Owners of
REMIC Regular Certificates--Market Discount," any discount that is not original
issue discount and exceeds a de minimis amount may require the deferral of
interest expense deductions attributable to accrued market discount not yet
includible in income, unless an election has been made to report market
discount currently as it accrues. This rule applies without regard to the
origination dates of the mortgage loans.
Premium. If a certificateholder is treated as acquiring the underlying
mortgage loans at a premium, that is, at a price in excess of their remaining
stated redemption price, such certificateholder may elect under section 171 of
the Code to amortize using a constant yield method. Amortizable premium is
treated as an offset to interest income on the related debt instrument, rather
than as a separate interest deduction.
It is unclear whether a prepayment assumption should be used in computing
amortization of premium allowable under section 171 of the Code. If premium is
not subject to amortization using a prepayment assumption and a mortgage loan
prepays in full, the holder of a grantor trust fractional interest certificate
acquired at a premium should recognize a loss, equal to the difference between
the portion of the prepaid principal amount of the mortgage loan that is
allocable to the certificate and the portion of the adjusted basis of the
certificate that is allocable to the mortgage loan. If a prepayment assumption
is used to amortize such premium, it appears that such a loss would be
unavailable. Instead, if a prepayment assumption is used, a prepayment should
be treated as a partial payment of the stated redemption price of the grantor
trust fractional interest certificate and accounted for under a method similar
to that described for taking account of original issue discount on REMIC
Regular Certificates. See "--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount." It is unclear whether any other
adjustments would be required to reflect differences between the prepayment
assumption used, if any, and the actual rate of prepayments.
Taxation of Owners of Grantor Trust Strip Certificates. The "stripped
coupon" rules of section 1286 of the Code will apply to the grantor trust strip
certificates. Except as described above in "--If Stripped
105
Bond Rules Apply," no regulations or published rulings under section 1286 of
the Code have been issued and some uncertainty exists as to how it will be
applied to securities such as the grantor trust strip certificates.
Accordingly, holders of grantor trust strip certificates should consult their
own tax advisors concerning the method to be used in reporting income or loss
with respect to such certificates.
The OID regulations insofar as they describe the application of the
constant yield method, do not apply to instruments to which section 1272(a)(6)
applies, which may include grantor trust strip certificates as well as grantor
trust fractional interest certificates, although they provide general guidance
as to how the original issue discount sections of the Code will be applied. In
addition, the discussion below is subject to the discussion under "--Possible
Application of Contingent Payment Rules" below and assumes that the holder of a
grantor trust strip certificate will not own any grantor trust fractional
interest certificates.
Under the stripped coupon rules, it appears that original issue discount
will be required to be accrued in each month on the grantor trust strip
certificates based on a constant yield method. In effect, each holder of
grantor trust strip certificates would include as interest income in each month
an amount equal to the product of such holder's adjusted basis in such grantor
trust strip certificate at the beginning of such month and the yield of such
grantor trust strip certificate to such holder. Such yield would be calculated
based on the price paid for that grantor trust strip certificate by its holder
and the payments remaining to be made thereon at the time of the purchase, plus
an allocable portion of the servicing fees and expenses to be paid with respect
to the mortgage loans. See "--If Stripped Bond Rules Apply" above.
As noted above, section 1272(a)(6) of the Code requires that a prepayment
assumption be used in computing the accrual of original issue discount with
respect to certain categories of debt instruments, and that adjustments be made
in the amount and rate of accrual of such discount when prepayments do not
conform to such prepayment assumption. Regulations could be adopted applying
those provisions to the grantor trust strip certificates. It is unclear whether
those provisions would be applicable to the grantor trust strip certificates or
whether use of a prepayment assumption may be required or permitted in the
absence of such regulations. It is also uncertain, if a prepayment assumption
is used, whether the assumed prepayment rate would be determined based on
conditions at the time of the first sale of the grantor trust strip certificate
or, with respect to any subsequent holder, at the time of purchase of the
grantor trust strip certificate by that holder.
The accrual of income on the grantor trust strip certificates will be
significantly slower if a prepayment assumption is permitted to be made than if
yield is computed assuming no prepayments. In the absence of statutory or
administrative guidance, it is intended to base information returns or reports
to the IRS and certificateholders on the stripped bond prepayment assumption
disclosed in the related prospectus supplement and on a constant yield computed
using a representative initial offering price for each class of certificates.
However, neither the depositor nor any other person will make any
representation that the mortgage loans will in fact prepay at a rate conforming
to the stripped bond prepayment assumption. Prospective purchasers of the
grantor trust strip certificates should consult their own tax advisors
regarding the use of the stripped bond prepayment assumption.
It is unclear under what circumstances, if any, the prepayment of a
mortgage loan will give rise to a loss to the holder of a grantor trust strip
certificate. If a grantor trust strip certificate is treated as a single
instrument and the effect of prepayments is taken into account in computing
yield with respect to such grantor trust strip certificate, it appears that no
loss may be available as a result of any particular prepayment unless
prepayments occur at a rate faster than the stripped bond prepayment
assumption. However, if a grantor trust strip certificate is treated as an
interest in discrete mortgage loans, or if the stripped bond prepayment
assumption is not used, then when a mortgage loan is prepaid, the holder of a
grantor trust strip certificate should be able to recognize a loss equal to the
portion of the adjusted issue price of the grantor trust strip certificate that
is allocable to such mortgage loan. In addition, any loss may be treated as a
capital loss.
Possible Application of Contingent Payment Rules. The coupon stripping
rules' general treatment of stripped coupons is to regard them as newly issued
debt instruments in the hands of each purchaser. To the extent that payments on
the grantor trust strip certificates would cease if the mortgage loans were
prepaid in full, the grantor trust strip certificates could be considered to be
debt instruments providing for contingent payments. Under the OID regulations,
debt instruments providing for contingent payments
106
are not subject to the same rules as debt instruments providing for
non-contingent payments. Final regulations have been promulgated with respect
to contingent payment debt instruments. However, these regulations do not
specifically address the grantor trust strip certificates or other securities
subject to the stripped bond rules of section 1286 of the Code.
Certificateholders should consult their tax advisors concerning the possible
application of the contingent payment rules to the grantor trust strip
certificates.
Sales of Grantor Trust Certificates. Any gain or loss, equal to the
difference between the amount realized on the sale or exchange of a grantor
trust certificate and its adjusted basis, recognized on such sale or exchange
of a grantor trust certificate by an investor who holds such grantor trust
certificate as a capital asset, will be capital gain or loss, except to the
extent of accrued and unrecognized market discount, which will be treated as
ordinary income. The adjusted basis of a grantor trust certificate generally
will equal its cost, increased by any income reported by the seller and reduced
(but not below zero) by any previously reported losses, any amortized premium
and by any distributions with respect to such grantor.
Gain or loss from the sale of a grantor trust certificate may be partially
or wholly ordinary and not capital in certain circumstances. Gain attributable
to accrued and unrecognized market discount will be treated as ordinary income,
as will gain or loss recognized by banks and other financial institutions
subject to section 582(c) of the Code. Furthermore, a portion of any gain that
might otherwise be capital gain may be treated as ordinary income to the extent
that the grantor trust certificate is held as part of a "conversion
transaction" within the meaning of section 1258 of the Code. A conversion
transaction generally is one in which the taxpayer has taken two or more
positions in the same or similar property that reduce or eliminate market risk
and the taxpayer's return is substantially attributable to the time value of
money. The amount of gain realized in a conversion transaction that is
recharacterized as ordinary income generally will not exceed the amount of
interest that would have accrued on the taxpayer's net investment at 120% of
the appropriate "applicable Federal rate" at the time the taxpayer enters into
the conversion transaction, subject to appropriate reduction for prior
inclusion of interest and other ordinary income items from the transaction.
Finally, a taxpayer may elect to have net capital gain taxed at ordinary income
rates rather than capital gains rates in order to include such net capital gain
in total net investment income for that taxable year, for purposes of the rule
that limits the deduction of interest on indebtedness incurred to purchase or
carry property held for investment to a taxpayer's net investment income.
Investors that recognize a loss on a sale or exchange of the grantor trust
certificates for federal income tax purposes in excess of certain threshold
amounts should consult their tax advisors as to the need to file IRS Form 8886
(disclosing certain potential tax shelters) on their federal income tax
returns.
Grantor Trust Reporting. As may be provided in the related prospectus
supplement, the trustee or servicer, as applicable, will furnish to each holder
of a grantor trust certificate, with each distribution, a statement setting
forth the amount of such distribution allocable to principal on the underlying
mortgage loans and to interest thereon at the related pass-through interest
rate. In addition, within a reasonable time after the end of each calendar
year, the trustee or servicer will furnish to each certificateholder during
such year such customary factual information as the depositor or the reporting
party deems necessary or desirable to enable holders of grantor trust
certificates to prepare their tax returns and will furnish comparable
information to the IRS as and when required by law to do so. Because the rules
for accruing discount and amortizing premium with respect to the grantor trust
certificates are uncertain in various respects, there is no assurance the IRS
will agree with the trustee's or servicer's information reports. Moreover, such
information reports, even if otherwise accepted as accurate by the IRS, will in
any event be accurate only as to the initial certificateholders that bought
their certificates at the representative initial offering price used in
preparing such reports.
Backup Withholding. In general, the rules described in "--Taxation of
Owners of REMIC Residual Certificates--Backup Withholding with Respect to REMIC
Certificates" will also apply to grantor trust certificates.
Foreign Investor. In general, the discussion with respect to REMIC Regular
Certificates in "--Taxation of Owners of REMIC Residual Certificates--Foreign
Investors in REMIC Certificates" applies to grantor trust certificates except
that grantor trust certificates will, unless otherwise disclosed in the related
prospectus supplement, be eligible for exemption from United States withholding
tax, subject to the conditions described in such discussion, only to the extent
the related mortgage loans were
107
originated after July 18, 1984. However, to the extent the grantor trust
certificate represents an interest in real property (e.g., because of
foreclosures), it would be treated as representing a United States real
property interest for United States federal income tax purposes. This could
result in withholding consequences to non-U.S. certificateholders and potential
U.S. taxation.
To the extent that interest on a grantor trust certificate would be exempt
under sections 871(h)(1) and 881(c) of the Code from United States withholding
tax, and the grantor trust certificate is not held in connection with a
certificateholder's trade or business in the United States, such grantor trust
certificate will not be subject to United States estate taxes in the estate of
a non-resident alien individual.
On June 20, 2002, the IRS published regulations which will, when
effective, and if finalized in their proposed form, establish a reporting
framework for interests in "widely held fixed investment trusts" that will
place the responsibility of reporting on the person in the ownership chain who
holds an interest for a beneficial owner. A widely-held fixed investment trust
is defined as an entity classified as a "trust" under Treasury Regulation
Section 301.7701-4(c), in which any interest is held by a middleman, which
includes, but is not limited to (i) a custodian of a person's account, (ii) a
nominee and (iii) a broker holding an interest for a customer in street name.
These regulations are proposed to be effective beginning January 1, 2004.
STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences described in "Material
Federal Income Tax Consequences," potential investors should consider the state
and local tax consequences of the acquisition, ownership and disposition of the
offered certificates. State tax law may differ substantially from the
corresponding federal tax law, and the discussion above does not purport to
describe any aspect of the tax laws of any state or other jurisdiction.
Therefore, prospective investors should consult their own tax advisors with
respect to the various tax consequences of investments in the offered
certificates.
108
ERISA CONSIDERATIONS
GENERAL
ERISA and the Code impose certain requirements on retirement plans and
other employee benefit plans or arrangements, including individual retirement
accounts, individual retirement annuities, medical savings accounts, Keogh
plans, collective investment funds and separate and general accounts in which
such 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 in this prospectus as "Plans"), and on persons who are
fiduciaries with respect to Plans, in connection with the investment of Plan
assets. Certain employee benefit plans, such as governmental plans (as defined
in ERISA Section 3(32)), and, if no election has been made under 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 may be subject to the
provisions of other applicable federal, state or local law (which may contain
restrictions substantially similar to those in ERISA and 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.
Plan Asset Regulations. A Plan's investment in offered certificates may
cause the trust assets to be deemed "plan assets" of a Plan. Section 2510.3-101
of the regulations of the United States Department of Labor (the "DOL")
provides that when a Plan acquires an equity interest in an entity, the Plan's
assets include both such equity interest and an undivided interest in each of
the underlying assets of the entity, unless certain exceptions not applicable
to this discussion apply, or unless the equity participation in the entity by
"benefit plan investors" (defined to include Plans and certain employee benefit
plans not subject to ERISA, including foreign and governmental plans) 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 (excluding for this calculation any person,
other than a benefit plan investor, who has discretionary authority or control,
or provides investment advice (direct or indirect) for a fee with respect to
the assets of the trust fund).
Any person who has discretionary authority or control respecting the
management or disposition of plan assets of a Plan, and any person who provides
investment advice with respect to such assets for a fee, will generally be 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 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.
PROHIBITED TRANSACTION EXEMPTIONS
Wachovia Corporation ("Wachovia") has received from the DOL an individual
prohibited transaction exemption (the "Exemption"), which generally exempts
from the application of the prohibited transaction provisions of sections
406(a) and (b) and 407(a) of ERISA, and the excise taxes imposed on such
prohibited transactions pursuant to Section 4975(a) and (b) of the Code,
certain transactions, among others, relating to the servicing and operation of
mortgage pools and the purchase, sale and holding of mortgage pass-through
certificates underwritten by an underwriter, provided that certain conditions
set forth in the Exemption application are satisfied. For purposes of this
Section, "ERISA Considerations,"
109
the term "underwriter" includes (i) Wachovia, (ii) any person directly or
indirectly, through one or more intermediaries, controlling, controlled by or
under common control with Wachovia, and (iii) any member of the underwriting
syndicate or selling group of which Wachovia or a person described in (ii) is a
manager or co-manager with respect to a class of certificates. See "Method of
Distribution."
The Exemption sets forth five general conditions which, among others, must
be satisfied for a transaction involving the purchase, sale and holding of
offered certificates by a Plan to be eligible for exemptive relief under the
Exemption:
First, the acquisition of 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 Rating Services, a division of The McGraw-Hill Companies, Inc.
("Standard & Poor's"), Moody's Investors Service, Inc. ("Moody's"), or Fitch,
Inc. ("Fitch").
Third, the trustee cannot be an affiliate of any other member of the
Restricted Group other than an underwriter. The "Restricted Group" consists of
any underwriter, the depositor, the trustee, the master servicer, the special
servicer, any sub-servicer, the provider of any credit support and any obligor
with respect to mortgage assets (including mortgage loans underlying a CMBS not
issued by Fannie Mae, Freddie Mac or Ginnie Mae) constituting more than 5% of
the aggregate unamortized principal balance of the mortgage assets in the
related trust fund as of the date of initial issuance of the certificates.
Fourth, the sum of all payments made to and retained by the underwriter(s)
in connection with the distribution or placement of certificates must represent
not more than reasonable compensation for underwriting or placing the
certificates; the sum of all payments made to and retained by the depositor
pursuant to the assignment of the mortgage assets to the related trust fund
must represent not more than the fair market value of such obligations; and the
sum of all payments made to and retained by the master servicer and any
sub-servicer must represent not more than reasonable compensation for such
person's services under the related pooling and servicing agreement and
reimbursement of such 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.
In the event the obligations used to fund the trust fund have not all been
transferred to the trust fund on the closing date, additional obligations
meeting certain requirements as specified in the Exemption may be transferred
to the trust fund in exchange for the amounts credited to the Pre-Funding
Account during a period required by the Exemption, commencing on the closing
date and ending no later than the earliest to occur of: (i) the date the amount
on deposit in the Pre-Funding Account (as defined in the Exemption) is less
than the minimum dollar amount specified in the pooling and servicing
agreement; (ii) the date on which an event of default occurs under the pooling
and servicing agreement; or (iii) the date which is the later of three months
or 90 days after the closing date. In addition, the amount in the Pre-Funding
Account may not exceed 25% of the aggregate principal amount of the offered
certificates. Certain other conditions of the Exemption relating to pre-funding
accounts must also be met, in order for the exemption to apply. The prospectus
supplement will discuss whether pre-funding accounts will be used.
The Exemption also requires that the trust fund meet the following
requirements: (i) the trust fund must consist solely of assets of the type that
have been included in other investment pools; (ii) certificates in such other
investment pools must have been rated in one of the four highest categories of
Standard & Poor's, Moody's, or Fitch for at least one year prior to the Plan's
acquisition of certificates; and (iii) certificates in such other investment
pools must have been purchased by investors other than Plans for at least one
year prior to any Plan's acquisition of certificates.
The Exemption generally applies to mortgage loans such as the mortgage
loans to be included in any trust fund. It is not clear whether the Exemption
applies to participant directed plans as described in Section 404(c) of ERISA
or plans that are subject to Section 4975 of the Code but that are not subject
110
to Title I of ERISA, such as certain Keogh plans and certain individual
retirement accounts. If mortgage loans are secured by leasehold interests, each
lease term must be at least 10 years longer than the term of the relevant
mortgage loan.
If the general conditions set forth in the Exemption are satisfied, the
Exemption may provide an exemption from the restrictions imposed by Sections
406(a) and 407(a) of ERISA (as well as the excise taxes imposed by Sections
4975(a) and (b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of
the Code) in connection with (i) the direct or indirect sale, exchange or
transfer of offered certificates acquired by a Plan upon issuance from the
depositor or underwriter when the depositor, underwriter, master servicer,
special servicer, sub-servicer, trustee, provider of credit support, or obligor
with respect to mortgage assets is a "Party in Interest" under ERISA with
respect to the investing Plan, (ii) the direct or indirect acquisition or
disposition in the secondary market of offered certificates by a Plan and (iii)
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 a certificate on behalf of an "Excluded
Plan" by any person who has discretionary authority or renders investment
advice with respect to the assets of such Excluded Plan. For this purpose, an
Excluded Plan is a Plan sponsored by any member of the Restricted Group.
If certain specific conditions set forth in the Exemption are also
satisfied, the Exemption may provide relief from the restrictions imposed by
Sections 406(b)(1) and (b)(2) of ERISA and the taxes imposed by Sections
4975(a) and (b) of the Code by reason of Section 4975(c)(1)(E) of the Code to
an obligor acting as a fiduciary with respect to the investment of a Plan's
assets in the certificates (or such obligor's affiliate) only if, among other
requirements (i) such obligor (or its affiliate) is an obligor with respect to
5% percent or less of the fair market value of the assets contained in the
trust fund and is otherwise not a member of the Restricted Group, (ii) a Plan's
investment in certificates does not exceed 25% of all of the certificates
outstanding at the time of the acquisition, (iii) immediately after the
acquisition, no more than 25% of the assets of the Plan are invested in
certificates representing an interest in trusts (including the trust fund)
containing assets sold or serviced by the depositor or a servicer and (iv) in
the case of the acquisition of the certificates in connection with their
initial issuance, at least 50% of the certificates are acquired by persons
independent of the Restricted Group and at least 50% of the aggregate interest
in the trust fund is acquired by persons independent of the Restricted Group.
The Exemption also applies to transactions in connection with the
servicing, management and operation of the trust fund, provided that, in
addition to the general requirements described above, (a) such transactions are
carried out in accordance with the terms of a binding pooling and servicing
agreement, (b) the pooling and servicing agreement is provided to, or described
in all material respects in the prospectus or private placement memorandum
provided to, investing Plans before their purchase of certificates issued by
the trust fund and (c) the terms and conditions for the defeasance of a
mortgage obligation and substitution of a new mortgage obligation, as so
directed, have been approved by an NRSRO and do not result in any certificates
receiving a lower credit rating from the NRSRO than the current rating. The
pooling and servicing agreements will each be a "Pooling and Servicing
Agreement" as defined in the Exemption. Each pooling and servicing agreement
will provide that all transactions relating to the servicing, management and
operations of the trust fund must be carried out in accordance with the pooling
and servicing agreement.
The DOL has issued a Prohibited Transaction Class Exemption 95-60 (the
"Class Exemption"), which provides relief 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 for transactions in connection with the
servicing, management and operation of a trust in which an insurance company
general account has an interest as a result of its acquisition of certificates
issued by such trust, provided that certain conditions are satisfied. Insurance
company general accounts meeting the specified conditions may generally
purchase, in reliance on the Class Exemption, classes of certificates that do
not meet the requirements of the Exemption solely because they have not
received a rating at the time of the acquisition in one of the four highest
rating categories from Standard & Poor's, Moody's, or Fitch. In addition to the
foregoing Class Exemption, relief may be available to certain insurance company
general accounts, which support
111
policies issued by any insurer on or before December 31, 1998 to or for the
benefit of employee benefit plans, under regulations published by the DOL under
Section 401(c) of ERISA, that became applicable on July 5, 2001.
Any Plan fiduciary considering the purchase of certificates should consult
with its counsel with respect to the applicability of the Exemption and other
issues and determine on its own whether all conditions have been satisfied and
whether the certificates are an appropriate investment for a Plan under ERISA
and the Code (or, in the case of governmental plans or church plans, under
applicable federal, state or local law). The prospectus supplement will specify
the representations required by purchasers of certificates, but generally, each
purchaser using the assets of one or more Plans to purchase a certificate shall
be deemed to represent that each such Plan qualifies as an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D under the Securities Act
of 1933, and no Plan will be permitted to purchase or hold such certificates
unless such certificates are rated in one of the top four rating categories by
at least one rating agency at the time of such purchase, unless such Plan is an
insurance company general account that represents and warrants that it is
eligible for, and meets all of the requirements of, Sections I and III of
Prohibited Transaction Class Exemption 95-60. Each purchaser of classes of
certificates that are not rated at the time of purchase in one of the top four
rating categories by at least one rating agency shall be deemed to represent
that it is eligible for, and meets all of the requirements of, Sections I and
III of Prohibited Transaction Class Exemption 95-60. The prospectus supplement
with respect to a series of certificates may contain additional information
regarding the application of the Exemption or any other exemption, with respect
to the certificates offered thereby.
LEGAL INVESTMENT
If so specified in the related prospectus supplement, certain classes of
the offered certificates will constitute "mortgage related securities" for
purposes of SMMEA. Generally, the only classes of offered certificates which
will qualify as "mortgage related securities" will be those that (1) are rated
in one of the two highest rating categories by at least one nationally
recognized statistical rating organization and (2) are part of a series
evidencing interests in a trust fund consisting of loans originated by certain
types of originators specified in SMMEA and secured by first liens on real
estate. The appropriate characterization of those offered certificates not
qualifying as "mortgage related securities" for purposes of SMMEA ("Non-SMMEA
Certificates") under various legal investment restrictions, and thus the
ability of investors subject to these restrictions to purchase such offered
certificates, may be subject to significant interpretive uncertainties.
Accordingly, investors whose investment activities are subject to 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 Non-SMMEA Certificates constitute legal investments for
them.
Those classes of offered certificates qualifying as "mortgage related
securities" 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 such entities.
Under SMMEA, a number of states enacted legislation, on or before the
October 3, 1991 cutoff for such 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
112
in such types of offered certificates. Accordingly, the investors affected by
any state legislation overriding the preemptive effect of SMMEA will be
authorized to invest in offered certificates qualifying as "mortgage related
securities" only to the extent provided in 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(m) to include certain "commercial mortgage-related securities" and
"residential mortgage-related securities." As so defined, "commercial
mortgage-related security" and "residential mortgage-related security" mean, in
relevant part, "mortgage related security" within the meaning of SMMEA,
provided that, in the case of a "commercial mortgage-related security," it
"represents ownership of a promissory note or certificate of interest or
participation that is directly secured by a first lien on one or more parcels
of real estate upon which one or more commercial structures are located and
that is fully secured by interests in a pool of loans to numerous obligors." In
the absence of any rule or administrative interpretation by the OCC defining
the term "numerous obligors," no representation is made as to whether any of
the 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," other than stripped mortgage related securities,
residual interests in mortgage related securities, and commercial mortgage
related securities, subject to compliance with general rules governing
investment policies and practices; however, credit unions approved for the
NCUA's "investment pilot program" under 12 C.F.R. Section 703.19 may be able
to invest in those prohibited forms of securities, while "RegFlex credit
unions" may invest in commercial mortgage related securities under certain
conditions pursuant to 12 C.F.R. Section 742.4(b)(2). The Office of Thrift
Supervision (the "OTS") has issued Thrift Bulletin 13a (December 1, 1998),
"Management of Interest Rate Risk, Investment Securities, and Derivatives
Activities" and Thrift Bulletin 73a (December 18, 2001) "Investing in Complex
Securities," 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 Federal
Deposit Insurance Corporation, the OCC 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.
Investors whose investment activities are subject to regulation by federal
and 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
113
to any offered certificates issued in book-entry form, provisions which may
restrict or prohibit investments in securities which are issued in book-entry
form.
Except as to the status of certain classes of offered certificates as
"mortgage related securities," no representations are made as to the proper
characterization of the offered certificates for legal investment purposes,
financial institution regulatory purposes, or other purposes, or as to the
ability of particular investors to purchase offered certificates under
applicable legal investment restrictions. The uncertainties described above
(and any unfavorable future determinations concerning legal investment or
financial institution regulatory characteristics of the offered certificates)
may adversely affect the liquidity of the offered certificates.
Accordingly, all investors whose investment activities are subject to
legal investment laws and regulations, regulatory capital requirements or
review by regulatory authorities should consult with their own legal advisors
in determining whether and to what extent the offered certificates constitute
legal investments or are subject to investment, capital or other restrictions
and, if applicable, whether SMMEA has been overridden in any jurisdiction
relevant to such investor.
METHOD OF DISTRIBUTION
The offered certificates offered by the prospectus and the related
prospectus supplements will be offered in series. The distribution of the
offered certificates may be effected from time to time in one or more
transactions, including negotiated transactions, at a fixed public offering
price or at varying prices to be determined at the time of sale or at the time
of commitment therefor. The prospectus supplement for the offered certificates
of each series will, as to each class of such certificates, set forth the
method of the offering, either the initial public offering price or the method
by which the price at which the certificates of such class will be sold to the
public can be determined, any class or classes of offered certificates, or
portions thereof, that will be sold to affiliates of the depositor, the amount
of any underwriting discounts, concessions and commissions to underwriters, any
discounts or commissions to be allowed to dealers and the proceeds of the
offering to the depositor. If so specified in the prospectus supplement, the
offered certificates of a series will be distributed in a firm commitment
underwriting, subject to the terms and conditions of the underwriting
agreement, by Wachovia Capital Markets, LLC, acting as underwriter with other
underwriters, if any, named in the prospectus supplement. Alternatively, the
prospectus supplement may specify that offered certificates will be distributed
by Wachovia Capital Markets, LLC acting as agent. If Wachovia Capital Markets,
LLC acts as agent in the sale of offered certificates, Wachovia Capital
Markets, LLC will receive a selling commission with respect to such offered
certificates, depending on market conditions, expressed as a percentage of the
aggregate certificate balance or notional amount of such offered certificates
as of the date of issuance. The exact percentage for each series of
certificates will be disclosed in the prospectus supplement. To the extent that
Wachovia Capital Markets, LLC elects to purchase offered certificates as
principal, Wachovia Capital Markets, LLC may realize losses or profits based
upon the difference between its purchase price and the sales price. The
prospectus supplement with respect to any series offered other than through
underwriters will contain information regarding the nature of such offering and
any agreements to be entered into between the depositor or any affiliate of the
depositor and purchasers of offered certificates of such series.
This prospectus and prospectus supplements also may be used by the
depositor, Wachovia Capital Markets, LLC, an affiliate of the depositor, and
any other affiliate of the depositor when required under the federal securities
laws in connection with offers and sales of offered certificates in furtherance
of market-making activities in offered certificates. Wachovia Capital Markets,
LLC or any such other affiliate may act as principal or agent in such
transactions. Such sales will be made at prices related to prevailing market
prices at the time of sale or otherwise.
If so specified in a prospectus supplement, all or a portion of one or
more classes of the offered certificates identified in the prospectus
supplement may be retained or sold by the depositor either directly or
indirectly through an underwriter, including Wachovia Capital Markets, LLC to
one or more affiliates of the depositor. This prospectus and prospectus
supplements may be used by any such affiliate to resell offered certificates
publicly or privately to affiliated or unaffiliated parties either directly or
indirectly through an underwriter, including Wachovia Capital Markets, LLC.
114
The depositor will agree to indemnify Wachovia Capital Markets, LLC and
any underwriters and their respective controlling persons against certain civil
liabilities, including liabilities under the Securities Act of 1933, as
amended, or will contribute to payments that any such person may be required to
make in respect thereof.
In the ordinary course of business, Wachovia Capital Markets, LLC and the
depositor may engage in various securities and financing transactions,
including repurchase agreements to provide interim financing of the depositor's
mortgage loans pending the sale of such mortgage loans or interests therein,
including the certificates.
The depositor anticipates that the offered certificates will be sold
primarily to institutional investors which may include affiliates of the
depositor. Purchasers of offered certificates, including dealers, may,
depending on the facts and circumstances of such purchases, be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended, in
connection with reoffers and sales by them of offered certificates.
Certificateholders should consult with their legal advisors in this regard
prior to any such 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 hereby.
Any class of certificates not offered by this prospectus may be initially
retained by the depositor, and may be sold by the depositor at any time to one
or more institutional investors.
Underwriters or agents and their associates may be customers of (including
borrowers from), engage in transactions with, and/or perform services for the
depositor, its affiliates, and the trustee in the ordinary course of business.
LEGAL MATTERS
Unless otherwise specified in the prospectus supplement, certain legal
matters in connection with the certificates of each series, including certain
federal income tax consequences, will be passed upon for the depositor by
Cadwalader, Wickersham & Taft LLP, Charlotte, North Carolina.
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 prospectus supplement.
RATINGS
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 commercial mortgage pass-through certificates address the
likelihood of receipt by the holders thereof of all collections on the
underlying mortgage assets to which such holders are entitled. These ratings
address the structural, legal and issuer-related aspects associated with such
certificates, the nature of the underlying mortgage assets and the credit
quality of the guarantor, if any. Ratings on commercial mortgage pass-through
certificates do not represent any assessment of the likelihood of principal
prepayments by borrowers or of the degree by which such prepayments might
differ from those originally anticipated. As a result, certificateholders might
suffer a lower than anticipated yield, and, in addition, holders of Stripped
Interest Certificates in extreme cases might fail to recoup their initial
investments.
There can be no assurance that any rating agency not requested to rate the
offered certificates will not nonetheless issue a rating to any or all classes
thereof and, if so, what such rating or ratings would be. A rating assigned to
any class of offered certificates by a rating agency that has not been
requested by the depositor to do so may be lower than the rating assigned to a
class of offered certificates by one or more of the rating agencies that has
been requested by the depositor to rate the offered certificates.
115
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to qualification, revision or withdrawal at any time by the
assigning rating organization. Each security rating should be evaluated
independently of another security rating.
INDEX OF PRINCIPAL DEFINITIONS
"Accrual Certificates" means certificates which provide for distributions
of accrued interest thereon commencing only following the occurrence of certain
events, such as the retirement of one or more other classes of certificates of
such series.
"Accrued Certificate Interest" means, with respect to each class of
certificates and each distribution date, other than certain classes of Stripped
Interest Certificates and REMIC Residual certificates, the amount equal to the
interest accrued for a specified period (generally the period between
distribution dates) on the outstanding certificate balance of those
certificates immediately prior to such distribution date, at the applicable
pass-through rate, as described under "Distributions of Interest on the
Certificates" in this prospectus.
"Available Distribution Amount" means, for any series of certificates and
any distribution date, the total of all payments or other collections (or
advances in lieu thereof) on, under or in respect of the mortgage assets and
any other assets included in the related trust fund that are available for
distribution to the certificateholders 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 prospectus
supplement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Constant Prepayment Rate" or "CPR" means a rate that represents an
assumed constant rate of prepayment each month (which is expressed on a per
annum basis) relative to the outstanding principal balance of a pool of
mortgage loans for the life of such mortgage loans.
"Cut-Off Date" means the date on which the ownership of the mortgage loans
of a related series of certificates and rights to payment thereon are deemed
transferred to the trust fund, as specified in the related prospectus
supplement.
"Debt Service Coverage Ratio" means, with respect to a mortgage loan at
any given time and as more fully set forth in the prospectus supplement, the
ratio of (i) the Net Operating Income of the mortgaged property for a
twelve-month period to (ii) the annualized scheduled payments on the mortgage
loan and on any other loan that is secured by a lien on the mortgaged property
prior to the lien of the mortgage.
"DTC" means The Depository Trust Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Farmer Mac" or "FAMC" means the Federal Agricultural Mortgage
Corporation.
"Loan-to-Value Ratio" means, as more fully set forth in the prospectus
supplement, the ratio (expressed as a percentage) of (i) the then outstanding
principal balance of the mortgage loan and the outstanding principal balance of
any loan secured by a lien on the mortgaged property prior to the lien of the
mortgage, to (ii) the value of the mortgaged property, which is generally its
fair market value determined in an appraisal obtained by the originator at the
origination of such loan.
"Net Operating Income" means, as more fully set forth in the prospectus
supplement and for any given period, the total operating revenues derived from
a mortgaged property, minus the total operating expenses incurred in respect of
the mortgaged property other than (i) non-cash items such as depreciation and
amortization, (ii) capital expenditures and (iii) debt service on loans
(including the mortgage loan) secured by liens on the mortgaged property.
"REMIC" means a "real estate mortgage investment conduit" under the Code.
"REMIC Certificate" means a certificate issued by a trust fund relating to
a series of certificate where an election is made to treat the trust fund as a
REMIC.
"REO Property" means any mortgaged property acquired on behalf of the
trust fund in respect of a defaulted mortgage loan through foreclosure, deed in
lieu of foreclosure or otherwise.
116
"SMMEA" means the Secondary Mortgage Market Enhancement Act of 1984, as
amended.
"Standard Prepayment Assumption" or "SPA" means a rate that represents an
assumed variable rate of prepayment each month (which is expressed on a per
annum basis) relative to the then outstanding principal balance of a pool of
loans, with different prepayment assumptions often expressed as percentages of
SPA.
"Stripped Interest Certificates" means certificates which are entitled to
interest distributions with disproportionately small, nominal or no principal
distributions.
"Stripped Principal Certificates" means certificates which are entitled to
principal distributions with disproportionately small, nominal or no interest
distributions.
117
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The file "WBCMT 2003-C9 Prospectus Annexes A1-6.xls", which is a Microsoft
Excel*, Version 5.0 spreadsheet, that provides in electronic format certain
information shown in Annexes A-1, A-2, A-3, A-4, A-5 and A-6. In addition, the
spreadsheet provides certain Mortgage Loan and Mortgaged Property information
contained in Annex A-1 and information detailing the changes in the amount of
monthly payments with regard to certain Mortgage Loans. As described under
"DESCRIPTION OF THE CERTIFICATES--Reports to Certificateholders; Available
Information" in the prospectus supplement, each month the Paying Agent will make
available through its internet website an electronic file in CMSA format
updating and supplementing the information contained in the "WBCMT 2003-C9
Prospectus Annexes A1-6.xls" file.
To open the file, insert the diskette into your floppy drive. Copy the file
"WBCMT 2003-C9 Prospectus Annexes A1-6.xls" to your hard drive or network drive.
Copy the file "WBCMT 2003-C9 Prospectus Annexes A1-6.xls" as you would normally
open any spreadsheet in Microsoft Excel. After the file is opened, a securities
law legend will be displayed. READ THE LEGEND CAREFULLY. To view the data, see
the worksheets labeled "Disclaimer", "A-1 Loan and Property Schedule" or "A-2
Multifamily Data" or "A-3 Reserve Accounts" or "A-4 Commercial Tenant Schedule"
or "A-5 Crossed Collateralized Pool" or "A-6 Columbia Payment Schedule",
respectively.
* Microsoft Excel is a registered trademark of Microsoft Corporation.
================================================================================================================
UNTIL MARCH 17, 2004, ALL DEALERS THAT $1,050,087,000
EFFECT TRANSACTIONS IN THE OFFERED CERTIFICATES, (APPROXIMATE)
WHETHER OR NOT PARTICIPATING IN THIS OFFERING,
MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS. THIS IS IN ADDITION
TO THE DEALERS' OBLIGATION TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
---------------------
WACHOVIA COMMERCIAL
MORTGAGE SECURITIES, INC.
TABLE OF CONTENTS (DEPOSITOR)
PAGE
----
PROSPECTUS SUPPLEMENT WACHOVIA BANK COMMERCIAL
SUMMARY OF PROSPECTUS SUPPLEMENT ... S-5 MORTGAGE TRUST
OVERVIEW OF THE CERTIFICATES ....... S-6
RISK FACTORS ....................... S-39
DESCRIPTION OF THE MORTGAGE POOL ... S-86
SERVICING OF THE MORTGAGE LOANS .... S-157
DESCRIPTION OF THE CERTIFICATES .... S-172
YIELD AND MATURITY CONSIDERATIONS .. S-203
USE OF PROCEEDS .................... S-209 COMMERCIAL MORTGAGE
MATERIAL FEDERAL INCOME TAX PASS-THROUGH
CONSEQUENCES ..................... S-210 CERTIFICATES SERIES 2003-C9
ERISA CONSIDERATIONS ............... S-211
LEGAL INVESTMENT ................... S-214
METHOD OF DISTRIBUTION ............. S-214
LEGAL MATTERS ...................... S-216
RATINGS ............................ S-216
INDEX OF DEFINED TERMS ............. S-217
ANNEX A-1 .......................... A-1-1 ---------------------
ANNEX A-2 .......................... A-2-1 PROSPECTUS SUPPLEMENT
ANNEX A-3 .......................... A-3-1 ---------------------
ANNEX A-4 .......................... A-4-1
ANNEX A-5 .......................... A-5-1
ANNEX A-6 .......................... A-6-1
ANNEX B ............................ B-1
ANNEX C ............................ C-1
PROSPECTUS
ADDITIONAL INFORMATION ............. 6
INCORPORATION OF CERTAIN WACHOVIA SECURITIES
INFORMATION BY REFERENCE ......... 6
SUMMARY OF PROSPECTUS .............. 7
RISK FACTORS ....................... 14 ABN AMRO INCORPORATED
DESCRIPTION OF THE TRUST FUNDS ..... 34
YIELD CONSIDERATIONS ............... 40
THE DEPOSITOR ...................... 45 CITIGROUP
USE OF PROCEEDS .................... 45
DESCRIPTION OF THE CERTIFICATES .... 46
DESCRIPTION OF THE POOLING AND GOLDMAN, SACHS & CO.
SERVICING AGREEMENTS ............. 53
DESCRIPTION OF CREDIT SUPPORT ...... 67
CERTAIN LEGAL ASPECTS OF MORTGAGE DECEMBER 11, 2003
LOANS AND LEASES ................. 69
MATERIAL FEDERAL INCOME TAX
CONSEQUENCES ..................... 84
STATE AND OTHER TAX CONSEQUENCES ... 108
ERISA CONSIDERATIONS ............... 109
LEGAL INVESTMENT ................... 112
METHOD OF DISTRIBUTION ............. 114
LEGAL MATTERS ...................... 115
FINANCIAL INFORMATION .............. 115
RATINGS ............................ 115
INDEX OF PRINCIPAL DEFINITIONS ..... 116
================================================================================================================