Filed Pursuant to Rule 424B5
Registration File No. 333-108944
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS IS
AN OFFER TO SELL THESE SECURITIES NOR IS IT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT MAY BE AMENDED OR COMPLETED,
DATED AUGUST 2, 2004
PRELIMINARY PROSPECTUS SUPPLEMENT
(TO ACCOMPANY PROSPECTUS DATED JUNE 17, 2004)
$1,007,897,000 (APPROXIMATE)
(OFFERED CERTIFICATES)
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2004-C14
WACHOVIA COMMERCIAL MORTGAGE SECURITIES, INC.
(DEPOSITOR)
- -------------------------------- THE TRUST FUND:
YOU SHOULD CAREFULLY CONSIDER THE
RISK FACTORS BEGINNING ON PAGE S-43 o As of August 11, 2004, the mortgage
OF THIS PROSPECTUS SUPPLEMENT AND loans included in the trust fund will
ON PAGE 14 OF THE ACCOMPANYING have an aggregate principal balance
PROSPECTUS. of approximately $1,097,030,350.
Neither the offered certificates o The trust fund will consist of a pool
nor the underlying mort- gage loans of 81 fixed rate mortgage loans.
are insured or guaranteed by any
government agency or o The mortgage loans are secured by
instrumentality. first liens on commercial and
multifamily properties.
The offered certificates will
represent interests in the trust o All of the mortgage loans were
fund only. They will not represent originated or acquired by Wachovia
obligations of any other party. The Bank, National Association and
offered certificates will not be Artesia Mortgage Capital Corporation.
listed on any national securities
exchange or any automated quotation THE CERTIFICATES:
system of any registered securities
association. o The trust fund will issue 23 classes
of certificates.
This prospectus supplement may be
used to offer and sell the offered o Only the 5 classes of offered
certificates only if it is certificates described in the
accompanied by the prospectus dated following table are being offered by
August 2, 2004. this prospectus supple ment and the
- -------------------------------- accompanying prospectus.
- --------------------------------------------------------------------------------------------------------------------------
ORIGINAL PERCENTAGE OF PASS-THROUGH ASSUMED FINAL EXPECTED
CERTIFICATE CUT-OFF DATE RATE DISTRIBUTION S&P/MOODY'S
CLASS BALANCE(1) POOL BALANCE DESCRIPTION DATE(2) CUSIP NO. RATING(3)
- ------------------- --------------- --------------- -------------- ------------------ ----------- ------------
Class A-1 ......... $534,414,000 48.715% Fixed January 15, 2014 AAA/Aaa
Class A-2 ......... $413,146,000 37.660% Fixed(4) August 15, 2014 AAA/Aaa
Class B ........... $ 28,797,000 2.625% Fixed(4) August 15, 2014 AA/Aa2
Class C ........... $ 13,713,000 1.250% Fixed(4) August 15, 2014 AA-/Aa3
Class D ........... $ 17,827,000 1.625% Fixed(4) August 15, 2014 A/A2
- --------------------------------------------------------------------------------------------------------------------------
(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 is acting as sole lead manager for this offering.
Wachovia Capital Markets, LLC is acting as sole bookrunner with respect to all
classes of offered certificates. Goldman, Sachs & Co. and Greenwich Capital
Markets, Inc. are acting as co-managers for this offering. Wachovia Capital
Markets, LLC, Goldman, Sachs & Co. and Greenwich Capital Markets, Inc. 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 % of the initial certificate balance of the offered
certificates, plus accrued interest from August 1, 2004, before deducting
expenses.
We expect that delivery of the offered certificates will be made in book-entry
form on or about August 25, 2004.
WACHOVIA SECURITIES
GOLDMAN, SACHS & CO. RBS GREENWICH CAPITAL
AUGUST , 2004
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST
Commercial Mortgage Pass-Through Certificates, Series WBCMT 2004-C14
Geographic Overview of Mortgage Pool(1)
[MAP OMITTED]
OREGON
2 properties
$13,050,000
1.2% of total
NEVADA
3 properties
$21,536,119
2.0% of total
NORTHERN CALIFORNIA(2)
4 properties
$33,695,974
3.1% of total
CALIFORNIA
13 properties
$153,267,943
14.0% of total
SOUTHERN CALIFORNIA(2)
9 properties
$119,571,969
10.9% of total
ARIZONA
1 property
$149,846,169
13.7% of total
COLORADO
2 properties
$73,973,130
6.7% of total
NEW MEXICO
1 property
$940,105
0.1% of total
TEXAS
4 properties
$24,071,770
2.2% of total
OKLAHOMA
1 property
$2,997,546
0.3% of total
LOUISIANA
1 property
$10,000,000
0.9% of total
ARKANSAS
1 property
$15,000,000
1.4% of total
UTAH
2 properties
$24,492,674
2.2% of total
KANSAS
1 property
$8,000,000
0.7% of total
ILLINOIS
11 properties
$182,652,524
16.6% of total
WISCONSIN
3 properties
$20,150,000
1.8% of total
INDIANA
1 property
$1,600,000
0.1% of total
OHIO
1 property
$3,150,000
0.3% of total
NEW YORK
3 properties
$100,228,448
9.1% of total
CONNECTICUT
2 properties
$4,116,603
0.4% of total
NEW JERSEY
3 properties
$22,287,699
2.0% of total
DISTRICT OF COLUMBIA
2 properties
$38,494,137
3.5% of total
MARYLAND
1 property
$41,900,000
3.8% of total
VIRGINIA
5 properties
$18,483,993
1.7% of total
SOUTH CAROLINA
1 property
$2,465,000
0.2% of total
NORTH CAROLINA
6 properties
$64,750,000
5.9% of total
GEORGIA
3 properties
$55,090,934
5.0% of total
FLORIDA
9 properties
$44,485,559
4.1% of total
MORTGAGED PROPERTIES BY PROPERTY TYPE
[GRAPHIC OMITTED]
Retail 32.6%
Multifamily 27.2%
Self Storage 2.9%
Mobile Home Park 2.4%
Mixed Use 1.2%
Hospitality 0.9%
Land 0.1%
Office 32.7%
GEOGRAPHIC OVERVIEW OF MORTGAGED PROPERTIES
(1) Because this table presents information relating to the Mortgaged Properties
and not the Mortgage Loans, the information for Mortgage Loans secured by more
than one Mortgaged Property is based on allocated amounts (allocating the
Mortgage Loan principal balance to each of those properties by the appraised
values of the Mortgaged Properties or the allocated loan amount as detailed in
the related Mortgage Loan documents).
(2) For purposes of determining whether a Mortgaged Property is in Northern
California or Southern California, Mortgaged Properties north of San Luis Obispo
County, and San Bernardino County were included in Northern California and
Mortgaged Properties in or south of such counties were included in Southern
California.
(greater than) 10.0% of Initial Pool Balance
(greater than) 5.0 - 10.0% of Initial Pool Balance
(greater than) 1.0 - 5.0% of Initial Pool Balance
(less than or equal to) 1.0% of Initial Pool Balance
[Graphic Omitted] [Graphic Omitted]
Park Place Mall, Tucson, AZ
[Graphic Omitted] [Graphic Omitted]
BJB Portfolio, Chicago, IL
[Graphic Omitted] [Graphic Omitted]
11 Madison Avenue, New York, NY 444 North Michigan Avenue, Chicago, IL
[Graphic Omitted] [Graphic Omitted]
Independence Plaza, Denver, CO Barneys New York, Beverly Hills, CA
[Graphic Omitted] [Graphic Omitted]
FBI Field Office Baltimore, MD Aylesbury Farms Apartment Homes, Duluth, GA
[Graphic Omitted] [Graphic Omitted]
1750 H Street, Washington, DC Kennedy Ridge Apartments, Denver, CO
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-43 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-257 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 "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 August
2041. See "DESCRIPTION OF THE CERTIFICATES--Assumed Final Distribution
Date; Rated Final Distribution Date" and "RATINGS" in this prospectus
supplement.
(3) By each of Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. and Moody's Investors Service, Inc. See
"RATINGS" in this prospectus supplement.
(4) The pass-through rate applicable to the Class A-2, Class B, Class C and
Class D 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.
S-2
TABLE OF CONTENTS
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-29
RISK FACTORS ............................................................. S-43
DESCRIPTION OF THE MORTGAGE POOL ......................................... S-90
General ................................................................. S-90
Mortgage Loan History ................................................... S-91
Certain Terms and Conditions of the Mortgage Loans ...................... S-91
Assessments of Property Condition ....................................... S-95
Co-Lender Loans ......................................................... S-96
Additional Mortgage Loan Information .................................... S-105
Twenty Largest Mortgage Loans ........................................... S-120
The Mortgage Loan Sellers ............................................... S-178
Underwriting Standards .................................................. S-178
Assignment of the Mortgage Loans; Repurchases and Substitutions ......... S-179
Representations and Warranties; Repurchases and Substitutions ........... S-182
Repurchase or Substitution of Cross-Collateralized Mortgage Loans ....... S-185
Changes in Mortgage Pool Characteristics ................................ S-186
SERVICING OF THE MORTGAGE LOANS .......................................... S-186
General ................................................................. S-186
The Master Servicer and the Special Servicer ............................ S-188
Servicing of the 11 Madison Avenue Loan ................................. S-192
Servicing and Other Compensation and Payment of Expenses ................ S-192
Modifications, Waivers and Amendments ................................... S-195
The Controlling Class Representative .................................... S-197
Defaulted Mortgage Loans; REO Properties; Purchase Option ............... S-200
Inspections; Collection of Operating Information ........................ S-202
DESCRIPTION OF THE CERTIFICATES .......................................... S-203
General ................................................................. S-203
Registration and Denominations .......................................... S-203
Certificate Balances and Notional Amounts ............................... S-206
Pass-Through Rates ...................................................... S-208
Distributions ........................................................... S-211
Subordination; Allocation of Losses and Certain Expenses ................ S-227
P&I Advances ............................................................ S-230
Appraisal Reductions .................................................... S-234
Reports to Certificateholders; Available Information .................... S-236
Assumed Final Distribution Date; Rated Final Distribution Date .......... S-240
Voting Rights ........................................................... S-241
Termination ............................................................. S-241
The Trustee ............................................................. S-242
The Fiscal Agent ........................................................ S-243
YIELD AND MATURITY CONSIDERATIONS ........................................ S-244
Yield Considerations .................................................... S-244
Weighted Average Life ................................................... S-247
S-3
USE OF PROCEEDS .......................................................... S-250
MATERIAL FEDERAL INCOME TAX CONSEQUENCES ................................. S-250
General ................................................................. S-250
Taxation of the Offered Certificates .................................... S-250
ERISA CONSIDERATIONS ..................................................... S-251
LEGAL INVESTMENT ......................................................... S-254
METHOD OF DISTRIBUTION ................................................... S-255
LEGAL MATTERS ............................................................ S-256
RATINGS .................................................................. S-256
INDEX OF DEFINED TERMS ................................................... S-257
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 Monthly Debt Service Schedule for the FBI Field Office--
Baltimore, MD 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 AUGUST 1, 2004 WITH RESPECT TO 5
MORTGAGE LOANS, AUGUST 10, 2004 WITH RESPECT TO 1 MORTGAGE LOAN AND AUGUST
11, 2004 WITH RESPECT TO 75 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 ONE (1) MORTGAGE LOAN INCLUDED IN THE TRUST FUND, REFERRED TO AS THE 11
MADISON AVENUE MORTGAGE LOAN, IS PART OF A SPLIT LOAN STRUCTURE WHERE 3
COMPANION LOANS THAT ARE PART OF THE SPLIT LOAN STRUCTURE ARE PARI PASSU IN
RIGHT OF ENTITLEMENT TO PAYMENT WITH THE RELATED MORTGAGE LOAN AND THE
OTHER 3 COMPANION LOANS ARE JUNIOR TO THE 4 LOANS THAT ARE PARI PASSU IN
RIGHT OF ENTITLEMENT TO PAYMENT. THE 11 MADISON AVENUE MORTGAGE LOAN IS
FURTHER DIVIDED INTO A SENIOR POOLED COMPONENT AND A SUBORDINATE NON-POOLED
COMPONENT AND, UNLESS OTHERWISE STATED HEREIN, ALL REFERENCES TO THE
PRINCIPAL BALANCE OF THE MORTGAGE LOANS IN THE TRUST FUND AND RELATED
INFORMATION (INCLUDING LOAN BALANCE PER SQUARE FOOT AND DEBT SERVICE
COVERAGE AND LOAN-TO-VALUE RATIOS) ARE REFERENCES TO THE POOLED COMPONENT
ONLY OF THE 11 MADISON AVENUE MORTGAGE LOAN.
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 2004-C14, 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 PASS- INITIAL WEIGHTED CASH FLOW
BALANCE OR OF CUT-OFF THROUGH PASS- AVERAGE OR PRINCIPAL EXPECTED
NOTIONAL DATE POOL CREDIT RATE THROUGH LIFE WINDOW S&P/MOODY'S
CLASS AMOUNT(1) BALANCE SUPPORT DESCRIPTION RATE (YEARS)(2) (MON./YR.)(2) RATING(3)
- ---------------- --------------- ----------- ---------- ------------- ---------------- ------------ ------------------ ------------
Class A-1 ...... $ 534,414,000 48.715% 13.625% Fixed % 5.70 09/04 - 01/14 AAA/Aaa
Class A-2 ...... $ 413,146,000 37.660% 13.625% Fixed (4) % 9.81 01/14 - 08/14 AAA/Aaa
Class B ........ $ 28,797,000 2.625% 11.000% Fixed (4) % 9.97 08/14 - 08/14 AA/Aa2
Class C ........ $ 13,713,000 1.250% 9.750% Fixed (4) % 9.97 08/14 - 08/14 AA-/Aa3
Class D ........ $ 17,827,000 1.625% 8.125% Fixed (4) % 9.97 08/14 - 08/14 A/A2
Class E ........ $ 10,970,000 1.000% 7.125% WAC (5) % (6) (6) A-/A3
Class F ........ $ 12,342,000 1.125% 6.000% WAC (7) % (6) (6) BBB+/Baa1
Class G ........ $ 12,342,000 1.125% 4.875% WAC (7) % (6) (6) BBB/Baa2
Class H ........ $ 15,084,000 1.375% 3.500% WAC (7) % (6) (6) BBB-/Baa3
Class J ........ $ 2,743,000 0.250% 3.250% Fixed (4) % (6) (6) BB+/Ba1
Class K ........ $ 4,114,000 0.375% 2.875% Fixed (4) % (6) (6) BB/Ba2
Class L ........ $ 6,856,000 0.625% 2.250% Fixed (4) % (6) (6) BB-/Ba3
Class M ........ $ 2,743,000 0.250% 2.000% Fixed (4) % (6) (6) B+/B1
Class N ........ $ 2,743,000 0.250% 1.750% Fixed (4) % (6) (6) B/B2
Class O ........ $ 2,743,000 0.250% 1.500% Fixed (4) % (6) (6) B-/B3
Class P ........ $ 16,453,349 1.500% 0.000% Fixed (4) % (6) (6) NR/NR
Class X-P ...... $ 1,057,622,000 N/A N/A WAC-IO (8) % (8) (8) AAA/Aaa
Class X-C ...... $ 1,097,030,349 N/A N/A WAC-IO (8) % (8) (8) AAA/Aaa
Class MAD ...... $ 13,555,555 N/A N/A Variable %(9) (6) (6) BBB-/Baa2
Class PP ....... $ 39,958,978 N/A N/A Variable %(10) (6) (6) BBB-/Baa3
- ----------
(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 Moody's Investors Service, Inc. See
"RATINGS" in this prospectus supplement.
(4) The pass-through rates applicable to the Class A-2, Class B, Class C, Class
D, 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 E certificates for any
distribution date will be equal to the applicable weighted average net
mortgage rate for such date less % 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 rate applicable to the Class F, 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.
(9) Because the 11 Madison Avenue mortgage loan accrues interest on
"actual/360" basis but the Class MAD certificates accrue interest on a
"30/360" basis, the pass-through rate in certain months on such class may
be higher or lower than indicated.
(10) Because the Park Place Mall subordinate loan accrues interest on
"actual/360" basis but the Class PP certificates accrue interest on a
"30/360" basis, the pass-through rate in certain months on such class may
be higher or lower than indicated.
- ----------
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 August 1,
2004, by and among the depositor, the master
servicer, the special servicer, the trustee and
the fiscal 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, the
master servicer and special servicer of the 11
Madison Avenue loan 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 2004-C10, 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 and Artesia
Mortgage Capital Corporation. 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 64 of the mortgage loans to be
included in the trust fund, representing 90.6%
of the cut-off date pool balance of all the
mortgage loans to be included in the trust
fund. Artesia Mortgage Capital Corporation
originated 17 of the mortgage loans to be
included in the trust fund, representing 9.4%
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,
one of the mortgage loan
S-8
sellers, the master servicer and special
servicer of the 11 Madison Avenue loan 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 2004-C10 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
the companion loans which are not part of the
trust fund; provided, however, the 11 Madison
Avenue mortgage loan and the 11 Madison Avenue
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
2004-C10. The master servicer under the
2004-C10 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 11 Madison Avenue Loan" in
this prospectus supplement.
THE SPECIAL SERVICER.......... Initially, Allied Capital Corporation. The
special servicer will be responsible for
performing certain servicing functions with
respect to the mortgage loans included in the
trust fund (including the Park Place Mall
subordinate loan) and 1 companion loan which is
not part of the trust fund that, in general,
are in default or as to which default is
imminent; provided, however, the 11 Madison
Avenue mortgage loan and the 11 Madison Avenue
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 2004-C10. The special servicer under the
2004-C10 pooling and servicing agreement, with
respect to the 11 Madison Avenue mortgage loan,
is Wachovia Bank, National Association.
Some holders of certificates (initially the
holder of the Class P certificates with respect
to each mortgage loan other than the 11 Madison
Avenue mortgage loan and the Park Place Mall
mortgage loan) 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. With respect to
the 11 Madison Avenue mortgage loan, except
during the continuance of a control appraisal
period under the related intercreditor
agreement, the holder of the most subordinate
existing companion loan related to the 11
Madison Avenue mortgage loan may appoint or
remove the special servicer with respect to the
11 Madison Avenue mortgage loan and, with
respect to the Park
S-9
Place Mall mortgage loan, except during the
continuance of a control appraisal period under
the related intercreditor agreement, the holder
of the Class PP certificates may appoint or
remove the special servicer with respect to the
Park Place Mall mortgage loan. It is
anticipated that Allied Capital Corporation or
an affiliate of Allied Capital Corporation,
will purchase certain non-offered classes of
certificates (including the Class P
certificates).
THE TRUSTEE................... LaSalle Bank National Association. The trustee
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. See "DESCRIPTION OF THE
CERTIFICATES--The Trustee" in this prospectus
supplement.
THE FISCAL AGENT.............. ABN AMRO Bank N.V., a Netherlands banking
corporation and indirect corporate parent of
the trustee.
THE UNDERWRITERS.............. Wachovia Capital Markets, LLC, Goldman, Sachs &
Co. and Greenwich Capital Markets, Inc.
Wachovia Capital Markets, LLC is our affiliate
and is an affiliate of Wachovia Bank, National
Association, which is the master servicer, the
special servicer of the 11 Madison Avenue
mortgage loan under the 2004-C10 pooling and
servicing agreement and one of the mortgage
loan sellers. Wachovia Capital Markets, LLC is
acting as lead manager for this offering.
Wachovia Capital Markets, LLC is acting as sole
bookrunner with respect to all classes of
offered certificates. Goldman, Sachs & Co. and
Greenwich Capital Markets, Inc. are acting as
co-managers for this offering.
IMPORTANT DATES AND PERIODS
CLOSING DATE.................. On or about August 25, 2004.
CUT-OFF DATE.................. For 5 mortgage loans, representing 1.8% of the
mortgage pool, August 1, 2004, and for 1
mortgage loan, representing 0.9% of the
mortgage pool, August 10, 2004, and for 75
mortgage loans, representing 97.3% of the
mortgage pool, August 11, 2004. 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 as of the
related cut-off date.
DISTRIBUTION DATE............. The fourth business day following the related
determination date.
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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 September 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. 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 5 classes
of certificates of our Commercial Mortgage
Pass-Through Certificates, Series 2004-C14
pursuant to this prospectus supplement:
Class A-1
Class A-2
Class B
Class C
Class D
PRIORITY OF DISTRIBUTIONS..... On each distribution date, the owners of the
certificates (other than the Class MAD and
Class PP certificates) will be entitled to
distributions of payments or other collections
on the mortgage loans (other than payments or
other collections allocable to the 11 Madison
Avenue non-pooled component and the Park Place
Mall subordinate loan) that the master servicer
collected or advanced during or with respect to
the related collection period after deducting
certain fees and expenses.
The trustee 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 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.
----------------------------------------------
S-11
----------------------------------------------
Principal of the Class A-2 certificates, up to
the principal distribution amount, until their
certificate balance is reduced to zero.
----------------------------------------------
----------------------------------------------
Reimbursement to the Class A-1 and Class A-2
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.
----------------------------------------------
----------------------------------------------
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.
----------------------------------------------
If, on any distribution date, the certificate
balances of the Class B through Class P
certificates have been reduced to zero, but the
Class A-1 and Class A-2 certificates remain
outstanding, distributions of principal and
interest will be made, pro rata, to the
outstanding Class A-1 and Class A-2
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certificates. See "DESCRIPTION OF THE
CERTIFICATES--Distributions" in this prospectus
supplement.
On each Distribution Date amounts available in
respect of the 11 Madison Avenue non-pooled
component (net of administrative costs and
fees) will be distributed in respect of the
principal of, and interest on, the Class MAD
certificates. On each Distribution Date amounts
available in respect of the Park Place Mall
subordinate loan (net of administrative costs
and fees) will be distributed in respect of the
principal of, and interest on, the Class PP
certificates.
The 11 Madison Avenue non-pooled component will
support only the Class MAD certificates and
amounts allocated to such component will not be
part of funds available for distributions to
holders of the other certificates. The Park
Place Mall subordinate loan will support only
the Class PP certificates and amounts allocated
to such subordinate loan will not be part of
funds available for distributions to holders of
the other certificates. No other companion
loans will be part of the trust, and amounts
received with respect to such companion loans
will not be available for distributions to
holders of any certificates.
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;
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 (or, in
the case of the Class MAD certificates,
the 11 Madison Avenue non-pooled component
and in the case of the Class PP
certificates, the Park Place Mall
subordinate loan) 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 (or,
in the case of the Class MAD certificates,
the 11 Madison Avenue non-pooled component
and in the case of the Class PP
certificates, the Park Place Mall
subordinate
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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 Amounts" 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 February
2005, the sum of (a) the lesser of
$530,658,000 and the certificate balance
of the Class A-1 certificates and (b) the
aggregate certificate balances of the
Class A-2, Class B, Class C, Class D,
Class E, Class F, Class G, Class H and
Class J certificates;
(2) after the distribution date in February
2005 through and including the
distribution date in August 2005, the sum
of (a) the lesser of $525,727,000 and the
certificate balance of the Class A-1
certificates and (b) the aggregate
certificate balances of the Class A-2,
Class B, Class C, Class D, Class E, Class
F, Class G, Class H and Class J
certificates;
(3) after the distribution date in August 2005
through and including the distribution
date in February 2006, the sum of (a) the
lesser of $502,810,000 and the certificate
balance of the Class A-1 certificates and
(b) the aggregate certificate balances of
the Class A-2, Class B, Class C, Class D,
Class E, Class F, Class G, Class H and
Class J certificates;
(4) after the distribution date in February
2006 through and including the
distribution date in August 2006, the sum
of (a) the lesser of $476,779,000 and the
certificate balance of the Class A-1
certificates and (b) the aggregate
certificate balances of the Class A-2,
Class B, Class C, Class D, Class E, Class
F, Class G, Class H and Class J
certificates;
(5) after the distribution date in August 2006
through and including the distribution
date in February 2007, the sum of (a) the
lesser of $451,611,000 and the certificate
balance of the Class A-1 certificates and
(b) the aggregate certificate balances of
the Class A-2, Class B, Class C, Class D,
Class E, Class F, Class G, Class H and
Class J certificates;
S-14
(6) after the distribution date in February
2007 through and including the
distribution date in August 2007, the sum
of (a) the lesser of $426,847,000 and the
certificate balance of the Class A-1
certificates and (b) the aggregate
certificate balances of the Class A-2,
Class B, Class C, Class D, Class E, Class
F and Class G certificates and (c) the
lesser of $10,879,000 and the certificate
balance of the Class H certificates;
(7) after the distribution date in August 2007
through and including the distribution
date in February 2008, the sum of (a) the
lesser of $402,797,000 and the certificate
balance of the Class A-1 certificates and
(b) the aggregate certificate balances of
the Class A-2, Class B, Class C, Class D,
Class E, Class F and Class G certificates
and (c) the lesser of $695,000 and the
certificate balance of the Class H
certificates;
(8) after the distribution date in February
2008 through and including the
distribution date in August 2008, the sum
of (a) the lesser of $379,182,000 and the
certificate balance of the Class A-1
certificates and (b) the aggregate
certificate balances of the Class A-2,
Class B, Class C, Class D, Class E and
Class F certificates and (c) the lesser of
$3,216,000 and the certificate balance of
the Class G certificates;
(9) after the distribution date in August 2008
through and including the distribution
date in February 2009, the sum of (a) the
lesser of $356,428,000 and the certificate
balance of the Class A-1 certificates and
(b) the aggregate certificate balances of
the Class A-2, Class B, Class C, Class D
and Class E certificates and (c) the
lesser of $6,090,000 and the certificate
balance of the Class F certificates;
(10) after the distribution date in February
2009 through and including the
distribution date in August 2009, the sum
of (a) the lesser of $115,279,000 and the
certificate balance of the Class A-1
certificates and (b) the aggregate
certificate balances of the Class A-2,
Class B, Class C and Class D certificates
and (c) the lesser of $7,977,000 and the
certificate balance of the Class E
certificates;
(11) after the distribution date in August 2009
through and including the distribution
date in February 2010, the sum of (a) the
lesser of $96,999,000 and the certificate
balance of the Class A-1 certificates and
(b) the aggregate certificate balances of
the Class A-2, Class B, Class C and Class
D certificates and (c) the lesser of
$312,000 and the certificate balance of
the Class E certificates;
S-15
(12) after the distribution date in February
2010 through and including the
distribution date in August 2010, the sum
of (a) the lesser of $80,582,000 and the
certificate balance of the Class A-1
certificates and (b) the aggregate
certificate balances of the Class A-2,
Class B and Class C certificates and (c)
the lesser of $11,981,000 and the
certificate balance of the Class D
certificates;
(13) after the distribution date in August 2010
through and including the distribution
date in February 2011, the sum of (a) the
lesser of $65,490,000 and the certificate
balance of the Class A-1 certificates and
(b) the aggregate certificate balances of
the Class A-2, Class B and Class C
certificates and (c) the lesser of
$6,058,000 and the certificate balance of
the Class D certificates;
(14) after the distribution date in February
2011 through and including the
distribution date in August 2011, the sum
of (a) the lesser of $401,279,000 and the
certificate balance of the Class A-2
certificates and (b) the aggregate
certificate balances of the Class B and
Class C certificates and (c) the lesser of
$584,000 and the certificate balance of
the Class D certificates; and
(15) after the distribution date in August
2011, $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-11 above, on
each distribution date, the trustee 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 and Class A-2
certificates as described above under
"Priority of Distributions", and then to
each other class of offered certificates
in alphabetical order; and
o only to the extent funds remain after the
trustee 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.
S-16
Such distributions are in addition to the
distributions of principal and interest
described above. See "DESCRIPTION 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" in this prospectus supplement.
The pass-through rate applicable to the Class
X-C certificates for the initial distribution
date will equal approximately % 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
August 2011, 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;
S-17
(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 August 2011, 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 % 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
S-18
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 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
August 2011, 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 August 2011, 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
(excluding the interest rate and component
principal balance of the 11 Madison Avenue
non-pooled component and the interest rate and
principal balance of the Park Place Mall
subordinate loan) included in the trust fund as
of the beginning of the related collection
period, weighted on the basis of their
respective stated principal balances
(excluding, with respect to the 11 Madison
Avenue mortgage loan, the component principal
balance of the non-pooled component of the 11
Madison Avenue mortgage loan and the principal
balance of the Park Place Mall subordinate
loan) 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
S-19
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:
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 Amounts" 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;
S-20
o principal is only distributed on a class
of certificates to the extent funds remain
after the trustee makes all distributions
of principal and interest on each class of
certificates with an earlier alphabetical
and, if applicable, numerical designation;
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; and
o in no event will holders of the Class B,
Class C and Class D certificates or
classes of non-offered certificates be
entitled to receive any payments of
principal until the certificate balances
of the Class A-1 and Class A-2
certificates have both been reduced to
zero.
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, the trustee or
the fiscal agent reimburses itself out of
general collections on the mortgage pool for
any advance that it or the special servicer has
determined is not recoverable out of
collections on the related mortgage loan
(including with respect to the Park Place Mall
subordinate loan and the 11 Madison Avenue
non-pooled component), and certain advances
that are determined not to be reimbursed
currently in connection with the work-out of a
mortgage loan (including with respect to the
Park Place Mall subordinate loan and the 11
Madison Avenue non-pooled component), then such
advances (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 (with respect to
the 11 Madison Avenue mortgage loan and the
Park Place
S-21
Mall whole loan, first, out of principal
payments and collections distributable on the
Class MAD certificates and the Class PP
certificates, respectively, and then to the
extent not sufficient, out of principal
payments and collections distributable on the
principal balance certificates), prior to, in
the case of nonrecoverable advances only, being
deemed reimbursed out of payments and other
collections of interest otherwise distributable
on the certificates.
SUBORDINATION; ALLOCATION
OF LOSSES AND CERTAIN
EXPENSES.................... Credit support for any class of certificates
(other than the Class Z, Class R-I, Class R-II,
Class MAD and Class PP 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) and, (i) with respect
to the 11 Madison Avenue mortgage loan, the
Class MAD certificates and (ii) with respect to
the Park Place Mall mortgage loan, the Class PP
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 provided, that
losses and additional trust fund expenses on
the 11 Madison Avenue mortgage loan will first
be allocated to the non-pooled component of the
11 Madison Avenue mortgage loan (and therefore
to the Class MAD certificates) and losses and
additional trust fund expenses on the Park
Place Mall whole loan will first be allocated
to the Park Place Mall subordinate loan (and
therefore, to the Class PP certificates) in
accordance with the terms of the related
intercreditor agreement; provided, further,
that (i) losses and additional trust fund
expenses on the mortgage loans (other than
losses and trust fund expenses with respect to
the 11 Madison Avenue mortgage loan) will not
be allocated to the Class MAD certificates and
(ii) losses and additional trust fund expenses
on the mortgage loans (other than losses and
trust fund expenses with respect to the Park
Place Mall whole loan) will not be allocated to
the Class PP certificates.
S-22
ORDER OF
PERCENTAGE APPLICATION
ORIGINAL CUT-OFF OF LOSSES
CERTIFICATE DATE POOL AND
CLASS DESIGNATION BALANCE BALANCE EXPENSES
- ------------------------------------ --------------- ------------ ------------
Class A-1 ........................ $534,414,000 48.715% 5
Class A-2 ........................ $413,146,000 37.660% 5
Class B .......................... $ 28,797,000 2.625% 4
Class C .......................... $ 13,713,000 1.250% 3
Class D .......................... $ 17,827,000 1.625% 2
Other non-offered certificates
(excluding the Class X-C, the
Class X-P, Class MAD* and
Class PP * certificates) ....... $ 89,133,349 8.125% 1
----------
* The Class MAD and Class PP certificates
have been excluded for purposes of the
table; mortgage loan losses and additional
trust fund expenses on the mortgage loans
will not be allocated to the Class MAD or
Class PP certificates other than mortgage
loan losses and additional trust fund
expenses with respect to the 11 Madison
Avenue mortgage loan or the Park Place
Mall mortgage loan, as applicable.
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 B, Class C, Class D, Class E, Class
F, Class G, Class H and Class J 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
11 Madison Avenue mortgaged property will be
allocated in accordance with the terms of the
related intercreditor agreement and the pooling
and servicing agreement first, to the most
subordinate companion loan secured by the
related mortgaged property, second, to the
second most subordinate companion loan secured
by the related mortgaged property, third to the
third most subordinate companion loan secured
by the related mortgaged property and fourth,
pro rata, among the 4 pari passu mortgage loans
secured by the related mortgaged property. The
portion of any losses and expenses that is
allocated to the 11 Madison Avenue mortgage
loan will be allocated to the 11 Madison Avenue
non-pooled component (and therefore to the
Class MAD certificates) until the component
principal balance of the 11 Madison Avenue
non-pooled component has been reduced to zero
before being allocated among the Series
2004-C14 certificates in the manner described
above. Any losses and expenses that are
associated with either of the mortgage loans
secured by the Park Place Mall mortgaged
property will be allocated in accordance with
the terms of the related intercreditor
agreement first, to the subordinate loan
secured by the related mortgaged property (and
therefore to the Class PP certificates) and
second, to the senior mortgage loan secured by
the related mortgaged property. The portion of
those losses and expenses that is
S-23
allocated to the mortgage loans that are
included in the trust fund will be allocated
among the Series 2004-C14 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
(other than the Park Place Mall subordinate
loan) or, with respect to the 11 Madison Avenue
mortgage loan, the portion of such loan
allocated to the 11 Madison Avenue pooled
component, will be distributed to the holders
of each class of offered certificates and the
Class E, 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 E, 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:
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 to the holders of the Class X-C
certificates.
S-24
The "discount rate" applicable to any class of
offered certificates and the Class E, Class F,
Class G and Class H certificates will equal the
yield (when compounded monthly) on the US
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 US 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 US 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.
EXAMPLES OF ALLOCATION OF PREPAYMENT PREMIUMS OR
YIELD MAINTENANCE CHARGES
Mortgage interest rate ...................... 8%
Pass-through rate for applicable class ...... 6%
Discount rate ............................... 5%
ALLOCATION PERCENTAGE ALLOCATION PERCENTAGE
FOR APPLICABLE CLASS FOR CLASS X-C
---------------------- ----------------------
6% - 5%
---------- = 33 1/3% 100% - 33 1/3% = 66 2/3%
8% - 5%
Any yield maintenance charges allocable to the
non-pooled component of the 11 Madison Avenue
mortgage loan will be paid to the Class MAD
certificates.
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 in respect of a mortgage
loan in the trust (and solely amounts allocable
to the 11 Madison Avenue pooled component with
respect to the 11 Madison Avenue mortgage loan)
with an anticipated repayment date during the
related collection period will be distributed
to the holders of the Class Z certificates and,
in the case of amounts allocable to the
non-pooled component of the 11 Madison Avenue
mortgage loan, to the Class MAD certificates.
In each case, such interest 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
S-25
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. If the trustee fails to make a
required advance, the fiscal agent will be
required to make the advance. In addition, the
master servicer (or the trustee or the fiscal
agent, if applicable) will be required to make
interest advances, but not principal advances,
with respect to delinquent scheduled payments
on the Park Place Mall subordinate loan to the
extent the master servicer, the trustee or the
fiscal agent, if applicable, determines that
such scheduled interest will be ultimately
recoverable from the Park Place Mall whole
loan.
With respect to the 11 Madison Avenue mortgage
loan, in the event the master servicer under
the 2004-C10 pooling and servicing agreement
fails to receive one or more scheduled payments
of principal and interest (other than balloon
payments) on the 11 Madison Avenue 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 11 Madison Avenue mortgage loan, the master
servicer under the 2004-C10 pooling and
servicing agreement, or if it fails to do so,
the trustee under the 2004-C10 pooling and
servicing agreement, and 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, and if it fails to do so,
the fiscal agent under the pooling and
servicing agreement, is required to make a
principal or interest cash advance of such
scheduled payment of principal and interest to
the extent described in this prospectus
supplement.
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 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, the trustee or the fiscal
agent, as the case may be, on the amount of any
principal and interest cash advance (including
on interest advances, but not principal
advances, with respect to the Park Place Mall
subordinate loan) 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 or cure
period for the related scheduled payment) and
will reimburse the master servicer, the trustee
or the fiscal agent for any principal and
interest cash advances that are later
determined to be not recoverable. Neither the
master servicer, the trustee nor the fiscal
agent will be required to make an advance with
respect to any
S-26
companion loan (except interest advances on the
Park Place Mall subordinate loan). 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 (including the
non-pooled component of the 11 Madison Avenue
mortgage loan and also the Park Place Mall
subordinate loan) is less than 1.0% of the
aggregate principal balance of the pool of
mortgage loans (including the 11 Madison Avenue
non-pooled component and the Park Place Mall
subordinate loan) 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 B, Class C and
Class D certificates have been paid in full and
all of the remaining certificates, other than
the Class MAD certificates, the Class PP
certificates, the Class Z certificates and the
REMIC residual 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 B, Class C and Class D 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 elections will be made with respect to
most of the trust fund ("REMIC I" and "REMIC
II"). In addition, a separate REMIC election
will also be made with respect to the 11
Madison Avenue mortgage loan (the "11 Madison
Avenue Loan REMIC," and together with REMIC I
and REMIC II, each a "REMIC"). 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
certificates
S-27
will represent the residual interests in the 11
Madison Avenue Loan REMIC and REMIC I, and the
Class R-II certificates will represent the
residual interests in REMIC II. The Class Z and
Class MAD 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 Class 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 B
Class C
Class D
This is based on individual prohibited
transaction exemptions granted to each of
Wachovia Capital Markets, LLC, Goldman, Sachs &
Co. and Greenwich Capital Markets, Inc. 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 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
S-28
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
Moody's Investors Service, Inc.:
EXPECTED RATING
FROM
CLASS S&P/MOODY'S
--------------------- ----------------
Class A-1 ......... AAA/Aaa
Class A-2 ......... AAA/Aaa
Class B ........... AA/Aa2
Class C ........... AA-/Aa3
Class D ........... A/A2
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. In addition, ratings adjustments
may result from a change in the financial
position of the trustee or the fiscal agent as
back-up liquidity providers. 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 3
mortgage loans with subordinate companion loans
is calculated without regard to the related
subordinate companion loans. With respect to
loan number 2, unless otherwise specified, the
calculations of loan balance per square foot,
loan-to-value ratios and debt service coverage
ratios were based on the aggregate indebtedness
of this mortgage loan (excluding the 11 Madison
Avenue non-pooled component) and the related
pari passu companion 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.
S-29
The totals in the following tables may not add
up to 100% due to rounding.
ALL MORTGAGE
LOANS
------------------
Number of mortgage loans .................................... 81
Number of crossed loan pools ................................ 2
Number of mortgaged properties .............................. 83
Aggregate balance of all mortgage loans ..................... $1,097,030,350
Number of mortgage loans with balloon payments(1) ........... 36
Aggregate balance of mortgage loans with balloon
payments(1) ............................................... $ 467,252,528
Number of mortgage loans with anticipated repayment
dates ..................................................... 40
Aggregate balance of mortgage loans with anticipated
repayment dates ........................................... $ 506,983,684
Number of fully amortizing mortgage loans ................... 3
Aggregate balance of fully amortizing mortgage loans ........ $ 7,294,137
Number of non-amortizing mortgage loans ..................... 2
Aggregate balance of non-amortizing mortgage loans .......... $ 115,500,000
Average mortgage loan balance ............................... $ 13,543,585
Minimum mortgage loan balance ............................... $ 940,105
Maximum mortgage loan balance ............................... $ 149,846,169
Maximum balance for a group of cross-collateralized and
cross-defaulted loans(2) .................................. $ 111,152,524
Weighted average cut-off date loan-to-value ratio ........... 70.0%
Minimum cut-off date loan-to-value ratio .................... 38.6%
Maximum cut-off date loan-to-value ratio .................... 80.0%
Weighted average underwritten debt service coverage ratio ... 1.50x
Minimum underwritten debt service coverage ratio ............ 1.20x
Maximum underwritten debt service coverage ratio ............ 2.94x
Weighted average loan-to-value ratio at stated maturity or
anticipated repayment date ................................ 61.9%
Weighted average mortgage interest rate ..................... 5.612%
Minimum mortgage interest rate .............................. 4.990%
Maximum mortgage interest rate .............................. 8.700%
Weighted average remaining term to maturity or anticipated
repayment date (months) ................................... 101
Minimum remaining term to maturity or anticipated
repayment date (months) ................................... 58
Maximum remaining term to maturity or anticipated
repayment date (months) ................................... 240
Weighted average occupancy rate(3) .......................... 94.5%
----------
(1) Does not include mortgage loans with
anticipated repayment dates or mortgage
loans that are interest only for their
entire term.
(2) Consists of a group of 10 individual
mortgage loans (loan numbers 10, 11, 14,
21, 22, 51, 57, 75, 79 and 80).
(3) Excludes 2 mortgage loans secured by
hospitality properties, representing 0.9%
of the mortgage pool.
NON-POOLED COMPONENT AND
CLASS MAD CERTIFICATES...... The 11 Madison Avenue mortgage loan will be
deemed to be split into a senior pooled
component, with a principal balance of
$82,000,000, representing 7.5% of the mortgage
pool, that supports distributions on the
certificates (other than the Class MAD and
Class PP certificates) and a subordinate
non-pooled component, with a principal balance
of
S-30
$13,555,556, that supports distributions only
on the Class MAD certificates, which are not
being offered hereby. The 11 Madison Avenue
mortgage loan is part of a split loan structure
where 3 companion loans that are part of this
split loan structure are pari passu in right of
entitlement to payment with the 11 Madison
Avenue mortgage loan and the 3 other companion
loans are junior to the 4 loans that are pari
passu in right of entitlement to payment. The
aggregate principal balance of the 11 Madison
Avenue mortgage loan (including the component
that is not pooled with the other mortgage
loans) as of the cut-off date will be
$95,555,556. See "DESCRIPTION OF THE MORTGAGE
POOL-- Twenty Largest Mortgage Loans--11
Madison Avenue" in this prospectus supplement.
All principal and interest collections on the
11 Madison Avenue mortgage loan will be
distributed as described in this prospectus
supplement and as more particularly described
in the pooling and servicing agreement. See
"DESCRIPTION OF THE MORTGAGE POOL--Twenty
Largest Mortgage Loans--11 Madison Avenue" in
this prospectus supplement. For purposes of the
statistical information in this prospectus
supplement, unless otherwise noted, all numbers
and statistical information include only the
pooled component of the 11 Madison Avenue
mortgage loan. Generally, the subordination of
the non-pooled component of the 11 Madison
Avenue mortgage loan decreases the
loan-to-value ratio and increases the debt
service coverage ratio of the pooled component
of the 11 Madison Avenue mortgage loan included
as a "mortgage loan" herein because those
ratios are based only on the pooled component
of the 11 Madison Avenue mortgage loan. All
principal and interest collections on the 11
Madison Avenue mortgage loan will be allocated
between the pooled component and non-pooled
component as described in "DESCRIPTION OF THE
CERTIFICATES--Distributions--the Class MAD
Certificates and the 11 Madison Avenue
Non-Pooled Component" in this prospectus
supplement. Interest on the pooled component
and non-pooled component will accrue on the
balance of such component at a per annum rate
equal to the net mortgage rate in effect for
the 11 Madison Avenue mortgage loan as of the
beginning of the related collection period.
Although the non-pooled component of the 11
Madison Avenue mortgage loan will be part of
the trust, such component supports only the
Class MAD certificates, which certificates are
not being offered pursuant to this prospectus
supplement.
PARK PLACE MALL SUBORDINATE
LOAN AND CLASS PP
CERTIFICATES................ Although the Park Place Mall subordinate loan
will be part of the trust, for purposes of the
information contained in this prospectus
supplement (including the appendices), unless
otherwise indicated, the Park Place Mall
subordinate loan is
S-31
not reflected in this prospectus supplement and
the term "mortgage loan" does not include the
Park Place Mall subordinate loan. The Park
Place Mall subordinate loan supports only the
Class PP certificates, which are not being
offered pursuant to this prospectus supplement.
For purposes of the presentation of numbers and
statistical information set forth in this
prospectus supplement, unless otherwise noted,
all numbers and statistical information
regarding the mortgage loans exclude the Park
Place Mall subordinate loan.
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 or leasehold mortgages on
commercial properties, multifamily
properties or mobile home properties.
S-32
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 DATE CUT-OFF DATE
PROPERTY TYPE PROPERTIES BALANCE POOL BALANCE
- ----------------------------------- ------------ ---------------- --------------
Office .......................... 17 $ 358,910,710 32.7%
Retail .......................... 28 357,097,784 32.6
Retail--Anchored ............... 17 273,568,806 24.9
Retail--Shadow Anchored(1) ..... 5 60,185,146 5.5
Retail--Unanchored ............. 6 23,343,832 2.1
Multifamily ..................... 27 298,827,406 27.2
Self Storage .................... 4 31,944,610 2.9
Mobile Home Park ................ 3 25,920,000 2.4
Mixed Use ....................... 1 12,989,840 1.2
Hospitality ..................... 2 9,740,000 0.9
Land(2) ......................... 1 1,600,000 0.1
-- -------------- -----
83 $1,097,030,350 100.0%
== ============== =====
(1) A mortgaged property is classified as
shadow anchored if it is located in close
proximity to an achored retail property.
(2) Specifically, the fee interest in land
which the ground tenant has improved and
leased as an anchored retail building. The
retail 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.
Retail 32.6%
Office 32.7%
Land 0.1%
Hospitality 0.9%
Mixed Use 1.2%
Mobile Home Park 2.4%
Self Storage 2.9%
Multifamily 27.2%
S-33
GEOGRAPHIC CONCENTRATIONS..... The mortgaged properties are located throughout
25 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(1)
NUMBER OF AGGREGATE PERCENTAGE OF
MORTGAGED CUT-OFF DATE CUT-OFF DATE
STATE PROPERTIES BALANCE POOL BALANCE
- ------------------------ ------------ ----------------- --------------
IL ................... 11 $ 182,652,524 16.6%
CA ................... 13 153,267,943 14.0
Southern(2) ......... 9 119,571,969 10.9
Northern(2) ......... 4 33,695,974 3.1
AZ ................... 1 149,846,169 13.7
NY ................... 3 100,228,448 9.1
CO ................... 2 73,973,130 6.7
NC ................... 6 64,750,000 5.9
GA ................... 3 55,090,934 5.0
Other ................ 44 317,221,202 28.9
-- -------------- -----
83 $1,097,030,350 100.0%
== ============== =====
----------
(1) Because this table presents information
relating to the mortgaged properties and
not the mortgage loans, the information
for mortgage loans secured by more than
one mortgaged property is based on
allocated loan amounts (allocating the
mortgage loan principal balance to each of
those properties by the appraised values
of the mortgaged properties) or the
allocated loan amount as detailed in the
related mortgage loan documents.
(2) 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 11th day of
the month, except payments on 5 mortgage
loans, representing 1.8% of the mortgage
pool, are due on the 1st day of the month
and payments on 1 mortgage loan,
representing 0.9% of the mortgage pool,
are due on the 10th day of the month. No
mortgage loan has a grace period that
extends payment beyond the 11th day of any
calendar month.
o As of the cut-off date, 78 of the mortgage
loans, representing 91.7% of the mortgage
pool, accrue interest on an actual/360
basis, 2 of the mortgage loans,
representing 7.2% of the mortgage pool,
accrue interest on a 30/360 basis and 1 of
the mortgage loans representing 1.1% of
the mortgage pool accrues interest on a
30/360 basis
S-34
during its related interest-only period
and subsequently actual/360 during its
related amortization period. Nineteen (19)
of the mortgage loans, representing 31.8%
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, representing 10.5% of
the mortgage pool, provide that only
interest is due until maturity.
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
AGGREGATE PERCENTAGE OF
RANGE OF CUT-OFF DATE NUMBER CUT-OFF DATE CUT-OFF DATE
BALANCES ($) OF LOANS BALANCE POOL BALANCE
- ------------------------------------- ---------- ----------------- -------------
(less than) 2,000,000 .. ......... 7 $ 9,860,624 0.9%
2,000,001 -- 3,000,000 ............ 6 15,335,565 1.4
3,000,001 -- 4,000,000 ............ 9 30,573,200 2.8
4,000,001 -- 5,000,000 ............ 2 8,302,722 0.8
5,000,001 -- 6,000,000 ............ 8 45,162,691 4.1
6,000,001 -- 7,000,000 ............ 7 46,009,833 4.2
7,000,001 -- 8,000,000 ............ 3 22,308,484 2.0
8,000,001 -- 9,000,000 ............ 7 60,030,589 5.5
9,000,001 -- 10,000,000 ........... 2 19,850,000 1.8
10,000,001 -- 15,000,000 .......... 14 179,625,643 16.4
15,000,001 -- 20,000,000 .......... 5 85,249,982 7.8
20,000,001 -- 25,000,000 .......... 1 20,143,496 1.8
25,000,001 -- 30,000,000 .......... 2 59,931,351 5.5
30,000,001 -- 35,000,000 .......... 1 33,000,000 3.0
35,000,001 -- 40,000,000 .......... 2 72,400,000 6.6
40,000,001 -- 45,000,000 .......... 2 85,900,000 7.8
70,000,001 -- 75,000,000 .......... 1 71,500,000 6.5
80,000,001 -- 149,846,169 ......... 2 231,846,169 21.1
-- -------------- -----
81 $1,097,030,350 100.0%
== ============== =====
RANGE OF MORTGAGE RATES
AGGREGATE PERCENTAGE OF
RANGE OF MORTGAGE NUMBER CUT-OFF DATE CUT-OFF DATE
RATES (%) OF LOANS BALANCE POOL BALANCE
- -------------------------- ---------- ----------------- --------------
4.990 -- 5.249 ......... 11 $ 258,531,512 23.6%
5.250 -- 5.499 ......... 10 206,598,974 18.8
5.500 -- 5.749 ......... 15 256,498,429 23.4
5.750 -- 5.999 ......... 22 196,143,698 17.9
6.000 -- 6.249 ......... 12 129,442,436 11.8
6.250 -- 6.499 ......... 5 21,978,129 2.0
6.500 -- 6.749 ......... 3 20,202,007 1.8
7.000 -- 7.249 ......... 1 3,640,000 0.3
8.250 -- 8.499 ......... 1 3,055,058 0.3
8.500 -- 8.700 ......... 1 940,105 0.1
-- -------------- -----
81 $1,097,030,350 100.0%
== ============== =====
S-35
RANGE OF UNDERWRITTEN DSC RATIOS
AGGREGATE PERCENTAGE OF
NUMBER CUT-OFF DATE CUT-OFF DATE
RANGE OF DSCR (X) OF LOANS BALANCE POOL BALANCE
- ------------------------ ---------- ----------------- --------------
1.20 -- 1.24 ......... 14 $ 198,230,597 18.1%
1.25 -- 1.29 ......... 19 233,073,274 21.2
1.30 -- 1.34 ......... 10 82,053,657 7.5
1.35 -- 1.39 ......... 10 53,341,478 4.9
1.40 -- 1.44 ......... 6 66,304,582 6.0
1.45 -- 1.49 ......... 6 52,310,946 4.8
1.50 -- 1.54 ......... 1 3,094,137 0.3
1.55 -- 1.59 ......... 2 7,183,665 0.7
1.60 -- 1.64 ......... 4 172,988,014 15.8
1.65 -- 1.69 ......... 2 72,900,000 6.6
1.70 -- 1.74 ......... 1 9,850,000 0.9
1.75 -- 1.79 ......... 2 7,700,000 0.7
1.80 -- 1.84 ......... 2 92,300,000 8.4
2.30 -- 2.94 ......... 2 45,700,000 4.2
-- -------------- -----
81 $1,097,030,350 100.0%
== ============== =====
RANGE OF CUT-OFF DATE LTV RATIOS
AGGREGATE PERCENTAGE OF
RANGE OF CUT-OFF DATE NUMBER CUT-OFF DATE CUT-OFF DATE
LTV RATIOS (%) OF LOANS BALANCE POOL BALANCE
- -------------------------- ---------- ----------------- --------------
38.60 -- 40.00 ......... 1 $ 1,700,000 0.2%
50.01 -- 55.00 ......... 4 130,100,000 11.9
55.01 -- 60.00 ......... 4 29,344,137 2.7
60.01 -- 65.00 ......... 8 243,431,332 22.2
65.01 -- 70.00 ......... 11 71,936,973 6.6
70.01 -- 75.00 ......... 17 190,197,984 17.3
75.01 -- 80.00 ......... 36 430,319,924 39.2
-- -------------- -----
81 $1,097,030,350 100.0%
== ============== =====
RANGE OF REMAINING TERMS TO MATURITY DATE
OR ANTICIPATED REPAYMENT DATE*
AGGREGATE PERCENTAGE OF
RANGE OF REMAINING TERMS NUMBER CUT-OFF DATE CUT-OFF DATE
(MONTHS) OF LOANS BALANCE POOL BALANCE
- -------------------------- ---------- ----------------- --------------
0 -- 60 ................ 13 $ 151,122,354 13.8%
61 -- 84 ............... 9 251,941,560 23.0
85 -- 108 .............. 2 44,955,058 4.1
109 -- 120 ............. 52 631,283,716 57.5
169 -- 180 ............. 1 3,440,000 0.3
205 -- 216 ............. 1 1,700,000 0.2
229 -- 240 ............. 3 12,587,660 1.1
-- -------------- -----
81 $1,097,030,350 100.0%
== ============== =====
----------
* With respect to the mortgage loans with
anticipated repayment dates, the remaining
term to maturity was calculated as of the
related anticipated repayment date.
S-36
AMORTIZATION TYPES
AGGREGATE PERCENTAGE OF
NUMBER CUT-OFF DATE CUT-OFF DATE
AMORTIZATION TYPE OF LOANS BALANCE POOL BALANCE
- ----------------------------------- ---------- ----------------- --------------
Amortizing Balloon .............. 29 $ 358,162,528 32.6%
Amortizing ARD .................. 28 267,633,684 24.4
Interest-only, Amortizing ARD*... 12 239,350,000 21.8
Interest-only, Balloon .......... 2 115,500,000 10.5
Interest-only, Amortizing
Balloon* ...................... 7 109,090,000 9.9
Fully Amortizing ................ 3 7,294,137 0.7
-- -------------- -----
81 $1,097,030,350 100.0%
== ============== =====
----------
* These mortgage loans require payments of
interest-only for a period of 12 to 60
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 generally 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 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.
S-37
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
AGGREGATE PERCENTAGE OF
NUMBER CUT-OFF DATE CUT-OFF DATE
PREPAYMENT RESTRICTION TYPE OF LOANS BALANCE POOL 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* ......... 75 $1,054,133,580 96.1%
Prohibit prepayment until date
specified in related mortgage
note and then impose a yield
maintenance charge for most
of the remaining term* ......... 6 42,896,770 3.9
-- -------------- -----
81 $1,097,030,350 100.0%
== ============== =====
----------
* 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 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.................... Seventy-five (75) of the mortgage loans
included in the trust fund as of the cut-off
date, representing 96.1% 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. See "DESCRIPTION OF THE MORTGAGE
S-38
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 loan referred to as the 11
Madison Avenue mortgage loan in the immediately
following table, the loan balance per square
foot, the debt service coverage ratio and the
loan-to-value ratio set forth in such table, in
each case, are based on the aggregate combined
principal balance of the 11 Madison Avenue
mortgage loan (excluding the non-pooled
component of the 11 Madison Avenue mortgage
loan) and its related pari passu companion
loans (but not its related subordinate
companion loans). With respect to the loan
referred to as the Park Place Mall mortgage
loan in the immediately following table, such
balances and ratios are based on the principal
balance of the Park Place Mall mortgage loan
(but not its subordinate companion loan).
Except for the subordinate companion loan with
respect to the Park Place Mall mortgage loan,
none of the subordinate companion loans are
included in the trust fund.
S-39
NUMBER OF
MORTGAGE % OF
LOANS/ CUT-OFF
MORTGAGE NUMBER OF CUT-OFF DATE
LOAN MORTGAGED DATE POOL
LOAN NAME SELLER PROPERTIES BALANCE BALANCE
- ---------------------------- ---------- ------------ --------------- ---------
Park Place Mall ............ Wachovia 1/1 $149,846,169 13.7%
BJB Portfolio .............. Wachovia 10/10 111,152,524 10.1
11 Madison Avenue .......... Wachovia 1/1 82,000,000 7.5
444 North Michigan
Avenue .................... Wachovia 1/1 71,500,000 6.5
Independence Plaza ......... Wachovia 1/1 44,000,000 4.0
FBI Field Office --
Baltimore, MD ............. Artesia 1/1 41,900,000 3.8
Barneys New York --
Beverly Hills, CA ......... Wachovia 1/1 37,000,000 3.4
1750 H Street .............. Wachovia 1/1 35,400,000 3.2
Aylesbury Farms
Apartment Homes ........... Wachovia 1/1 33,000,000 3.0
Kennedy Ridge
Apartments ................ Wachovia 1/1 29,973,130 2.7
----- ------------ ----
SUBTOTAL/WTD. AVG. ........ 19/19 $635,771,823 58.0%
===== ============ ====
Bel Villaggio, Phases I
& II ...................... Wachovia 1/1 $ 17,985,042 1.6%
Cranbrook at Biltmore
Park ...................... Wachovia 1/1 17,800,000 1.6
Summer View at Sherman
Oaks Apartments ........... Wachovia 1/1 16,000,000 1.5
Valley Center Towers --
Phase I ................... Wachovia 1/1 16,000,000 1.5
The Harrington
Apartments ................ Wachovia 1/1 15,000,000 1.4
Hot Springs Mall ........... Wachovia 1/1 15,000,000 1.4
Carriage Club
Apartments ................ Wachovia 1/1 14,900,000 1.4
Glasshouse Square
Shopping Center ........... Wachovia 1/1 14,487,259 1.3
Weston Commercial
Center .................... Wachovia 1/1 12,989,840 1.2
Elmbrook Plaza Shopping
Center .................... Wachovia 1/1 12,850,000 1.2
----- ------------ ----
SUBTOTAL/WTD. AVG. ........ 10/10 $153,012,140 13.9%
===== ============ ====
TOTAL/WTD. AVG. ........... 29/29 $788,783,963 71.9%
===== ============ ====
LOAN CUT-OFF LTV RATIO
BALANCE PER DATE LTV AT MATURITY MORTGAGE
LOAN NAME PROPERTY TYPE SF/UNIT DSCR RATIO OR ARD RATE
- ---------------------------- -------------------- ------------- ---------- ---------- ------------- -----------
Park Place Mall ............ Retail -- Anchored $ 321 1.64x 63.8% 58.5% 5.150%
BJB Portfolio .............. Multifamily -- $115,303 1.23x 78.3% 70.0% 5.300%
Conventional
11 Madison Avenue .......... Office -- CBD $ 164 1.81x 54.7% 50.6% 5.304%
444 North Michigan Office -- CBD $ 140 1.69x 65.0% 65.0% 5.680%
Avenue ....................
Independence Plaza ......... Office -- CBD $ 78 2.94x 51.5% 51.5% 5.060%
FBI Field Office -- Office -- Suburban $ 269 1.42x 75.1% 66.6% 6.240%
Baltimore, MD .............
Barneys New York -- Retail -- Shadow $ 322 1.27x 74.0% 62.3% 5.780%
Beverly Hills, CA ......... Anchored
1750 H Street .............. Office -- CBD $ 318 1.26x 74.5% 58.5% 5.600%
Aylesbury Farms Multifamily -- $ 86,842 1.31x 80.0% 74.5% 5.660%
Apartment Homes ........... Conventional
Kennedy Ridge Multifamily -- $ 31,255 1.23x 76.1% 70.9% 5.700%
Apartments ................ Conventional
SUBTOTAL/WTD. AVG. ........ 1.59X 67.8% 61.9% 5.436%
Bel Villaggio, Phases I Retail -- Shadow $ 233 1.21x 76.5% 64.9% 5.990%
& II ...................... Anchored
Cranbrook at Biltmore Multifamily -- $ 64,493 1.24x 78.1% 68.7% 5.710%
Park ...................... Conventional
Summer View at Sherman Multifamily -- $ 94,675 1.23x 78.1% 70.4% 5.910%
Oaks Apartments ........... Conventional
Valley Center Towers -- Office -- Suburban $ 129 1.25x 73.3% 63.9% 6.200%
Phase I ...................
The Harrington Multifamily -- $ 52,083 1.28x 72.8% 68.5% 5.150%
Apartments ................ Conventional
Hot Springs Mall ........... Retail -- Anchored $ 47 1.49x 74.3% 63.2% 6.120%
Carriage Club Multifamily -- $ 55,597 1.29x 75.1% 70.6% 5.150%
Apartments ................ Conventional
Glasshouse Square Retail -- Anchored $ 142 1.46x 65.9% 55.5% 5.775%
Shopping Center ...........
Weston Commercial Mixed Use -- $ 116 1.29x 71.4% 61.0% 6.220%
Center .................... Office/Flex
Elmbrook Plaza Shopping Retail -- Anchored $ 58 1.36x 78.4% 74.0% 5.410%
Center ....................
SUBTOTAL/WTD. AVG. ........ 1.30X 74.5% 66.1% 5.770%
TOTAL/WTD. AVG. ........... 1.54X 69.1% 62.7% 5.500%
- ----------
* In the case of a concentration of cross-collateralized mortgage loans, the
aggregate principal balance.
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............... Three (3) mortgage loans to be included in the
trust that were originated or acquired by
Wachovia Bank, National Association,
representing approximately 21.8% 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, other than the Park Place Mall
subordinate loan, the related companion loan(s)
will not be part of the trust fund. One (1)
mortgage loan, loan number 2 (the 11 Madison
Avenue mortgage loan), is part of a split loan
structure where 3 companion loans that are part
of this split loan structure are pari passu in
right of entitlement to
S-40
payment with the 11 Madison Avenue mortgage
loan and the 3 other companion loans are junior
to the 4 loans that are pari passu in right of
entitlement to payment. The 11 Madison Avenue
mortgage loan is further divided into a pooled
component that is included as part of the
mortgage pool and available for payments on the
2004-C14 certificates to the extent described
in this prospectus supplement and a non-pooled
component that is also included as part of the
mortgage pool, but is available for payments on
the Class MAD certificates only. Two (2)
mortgage loans, loan numbers 1 and 42 (the Park
Place Mall mortgage loan and the Pointe West
Medical Office Building mortgage loan,
respectively) are each part of a split loan
structure in which the related companion loan
is subordinate 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 11 Madison
Avenue mortgage loan and the pooling and
servicing agreement generally allocate
collections in respect of such mortgage loan
first, to the mortgage loan and the related
pari passu companion loans, on a pro rata
basis, and second, to amounts due on the
subordinate companion loans; provided, that
amounts allocated to the 11 Madison Avenue
mortgage loan will be allocated between the
related pooled component and non-pooled
component as described in "DESCRIPTION OF THE
CERTIFICATES--Class MAD Certificates and the 11
Madison Avenue Non-Pooled Component" in this
prospectus supplement. The related
intercreditor agreement with respect to each of
the 2 mortgage loans with a subordinate
companion loan only, 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 subordinate companion loan
not included in the trust (except for the Park
Place Mall subordinate loan). The master
servicer and special servicer will service and
administer these mortgage loans and their
related companion loans (other than the 11
Madison Avenue 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 11 Madison Avenue 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 2004-C10. The master servicer and, with
respect to the 11 Madison Avenue mortgage loan,
the special servicer under the 2004-C10 pooling
and servicing agreement is Wachovia Bank,
National Association and the special servicer,
except with respect to the 11 Madison Avenue
mortgage loan, under the 2004-C10 pooling and
servicing agreement is Lennar Partners, Inc.
The terms of the 2004-C10
S-41
pooling and servicing agreement with respect to
the 11 Madison Avenue whole loan are generally
similar to the terms of the pooling and
servicing agreement for this transaction. See
"SERVICING OF THE MORTGAGE LOANS--Servicing of
the 11 Madison Avenue Loan" in this prospectus
supplement. With respect to 1 mortgage loan
(loan number 42), 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
(other than the Park Place Mall subordinate
loan) will not be assets of the trust fund, and
will be beneficially owned by the holder of
such companion loan. See "DESCRIPTION OF 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.
In addition to the mortgage loans described
above, certain of the mortgaged properties or
the equity interests in the related borrowers
are permitted to become subject to additional
debt. In certain cases, this additional debt is
secured by the related mortgaged properties.
See "RISK FACTORS--Additional Debt on Some
Mortgage Loans Creates Additional Risks" in
this prospectus supplement.
S-42
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
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mortgagee elects to apply casualty or
condemnation proceeds to the mortgage loan. 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-2, Class B, Class C,
Class D, Class E, Class F, Class G, Class H,
Class J, Class K, Class L, Class M, Class N,
Class O and Class P 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 equal to, based
upon or 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
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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
Terms 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 under
"DESCRIPTION OF THE CERTIFICATES--
Distributions" in this prospectus supplement,
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.
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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,
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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 AND
CERTAIN REIMBURSEMENTS TO
THE SERVICER WILL AFFECT
YOUR RIGHT TO RECEIVE
DISTRIBUTIONS.............. To the extent described in this prospectus
supplement, the master servicer, the trustee or
the fiscal agent, as applicable, will be
entitled to receive interest on unreimbursed
advances and unreimbursed servicing expenses.
The right of the master servicer, the trustee
or the fiscal agent to receive such payments of
interest is senior to the rights of
certificateholders to receive distributions on
the 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.
Amounts in respect of the non-pooled component
of the 11 Madison Avenue mortgage loan are not
available for distributions on the certificates
(other than the Class MAD certificates), nor
are they available for the reimbursement of
nonrecoverable advances of principal and
interest on the certificates (other than the
Class MAD certificates) to the extent such
amounts are unrelated to the 11 Madison Avenue
mortgage loan. Nevertheless, if an advance by
the 2004-C10 master servicer, the 2004-C10
trustee, the master servicer, trustee or the
fiscal agent, if applicable, on the non-pooled
component of the 11 Madison Avenue mortgage
loan becomes a nonrecoverable advance and such
party is unable to recover such amounts from
amounts available for distribution on the Class
MAD certificates, the 2004-C10 master servicer,
the 2004-C10 trustee, the master servicer,
trustee or the fiscal agent, if applicable,
will be permitted to recover a nonrecoverable
advance (including interest thereon) from the
assets of the trust available for distribution
on the certificates (other than the Class PP
certificates). This may result in shortfalls
which will be allocated to the certificates
(other than the Class PP certificates).
Amounts in respect of the Park Place Mall
subordinate loan are not available for
distributions on the certificates (other than
the Class PP certificates), nor are they
available for the reimbursement of
nonrecoverable advances of principal and
interest to the extent such amounts are
unrelated to the Park Place Mall whole loan on
the certificates (other than the
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Class PP certificates). Nevertheless, if an
advance by the master servicer (or trustee or
the fiscal agent, if applicable) on the Park
Place Mall subordinate loan becomes a
nonrecoverable advance, the master servicer (or
the trustee or the fiscal agent, if applicable)
will be permitted to recover a nonrecoverable
advance (including interest thereon) from the
assets of the trust available for distribution
on the certificates (other than the Class MAD
certificates). This may result in shortfalls
which will be allocated to the certificates
(other than the Class MAD certificates).
SUBORDINATION OF SUBORDINATE
OFFERED CERTIFICATES........ As described in this prospectus supplement,
unless your certificates are Class A-1, Class
A-2, 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
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 a
companion loan, mezzanine loan or 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,
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mezzanine loan or subordinate debt may be in
conflict with those of the certificateholders.
One (1) of the mortgage loans, the 11 Madison
Avenue mortgage loan (loan number 2),
representing 7.5% of the mortgage pool, is
evidenced by multiple promissory notes. For
such mortgage loan, certain of the related
promissory notes are pari passu in right of
payment. In addition, the mortgage loan has
promissory notes that are subordinate in right
of payment to the notes that are pari passu in
right of payment. Only one of the promissory
notes is included in the trust fund. One of the
related pari passu companion notes is owned by
the trust fund relating to the Wachovia Bank
Commercial Mortgage Trust, Commercial Mortgage
Pass-Through Certificates, Series 2004-C10,
another of the related pari passu companion
notes is owned by the trust fund relating to
the Wachovia Bank Commercial Mortgage Trust,
Commercial Mortgage Pass-Through Certificates,
Series 2004-C11 and another of the related pari
passu companion notes is owned by the trust
fund relating to the Wachovia Bank Commercial
Mortgage Trust, Commercial Mortgage
Pass-Through Certificates, Series 2004-C12. The
11 Madison Avenue mortgage loan, and its
related companion loans, will be serviced
pursuant to the 2004-C10 pooling and servicing
agreement. The 2004-C10 controlling class
representative may have certain control rights
with respect to each of these loans.
With respect to the 11 Madison Avenue mortgage
loan, the subordinate companion holder,
controlling class representative, 2004-C12
controlling class representative, 2004-C11
controlling class representative and/or the
2004-C10 controlling class representative will
have decision making authority regarding
consents and other determinations. The
interests of these parties may be in conflict
with those of the certificateholders. See
"SERVICING OF THE MORTGAGE LOANS--Servicing of
the Madison Avenue Loan" in this prospectus
supplement.
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" in this
prospectus supplement 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
S-49
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. Wachovia
Bank, National Association is also acting as
the initial special servicer for the 11 Madison
Avenue mortgage loan 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 2004-C10.
These affiliations could cause conflicts with
the master servicer's duties to the trust under
the pooling and servicing agreement. 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 or one of
its affiliates will be (i) the initial holder
of the Class PP certificates and may be able to
make certain determinations with respect to the
Park Place Mall whole loan, and (ii) the
initial holder of the Class MAD certificates
and may be able to make certain determinations
with respect to the 11 Madison Avenue Whole
Loan or the Class MAD certificates, as
applicable. These relationships 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 the Class
PP certificates or the Class MAD certificates,
as applicable.
In addition, SL Green Funding LLC will be
appointed by Wachovia Bank, National
Association as a sub-servicer with respect to
the 11 Madison Avenue mortgage loan 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
2004-C10. An affiliate of SL Green Funding LLC
owns the most subordinate companion loan in the
11 Madison Avenue mortgage loan. This could
cause a conflict between SL Green Funding LLC's
duty to the trust as a sub-servicer
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and its interest in the related 11 Madison
Avenue subordinate loan.
The special servicer will (and any related
sub-servicer may) 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, the Class PP
certificates and the Class Z certificates). The
special servicer or its affiliate 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.
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
S-51
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 AND
MILITARY CONFLICTS 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. In
addition, on August 1, 2004, the United States
Department of Homeland Security issued a threat
report warning of potential terrorist attacks
on the financial services industry noting
specific targets located in close proximity to
certain mortgage properties included in the
trust fund. 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 those mortgaged properties, or
(iii) impact leasing patterns or shopping
patterns which could adversely impact leasing
revenue and mall 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.
Terrorist attacks in the United States,
incidents of terrorism occurring outside the
United States and military conflict in Iraq and
elsewhere may significantly reduce air travel
throughout the United States, and, therefore,
continue to have a negative effect on revenues
in areas heavily dependent on tourism. Any
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 or domestic conflicts of any kind could
have an adverse effect on the mortgaged
properties.
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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.
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;
S-53
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. With
respect to 1 mortgage loan, the 11 Madison
Avenue mortgage loan, representing 7.5% of the
mortgage pool, the largest tenant, Credit
Suisse First Boston LLC, has the right to
terminate a portion of its leased space.
Although 74.3% of Credit Suisse First Boston
LLC's 1,921,459 square feet of net rentable
area is leased through April 2017, Credit
Suisse First Boston LLC does have the option to
terminate up to 528,730 square feet (27.5% of
Credit Suisse First Boston LLC's space and
23.4% of the mortgaged property's total space)
after April 2007 in its sole discretion,
provided that they meet certain notice
requirements and pay a termination fee. See
"DESCRIPTION OF THE MORTGAGE POOL--Twenty
Largest Mortgage Loans--11 Madison Avenue" in
this prospectus supplement. There can be no
assurance that the related borrower will be
able to relet the terminated space or that such
space could be relet at the same rate being
paid by Credit Suisse First Boston Corporation.
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 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
S-54
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 at any time for, among other reasons,
lack of appropriations.
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 (or convertible at all) due
to restrictive covenants related to such
mortgaged property, including, in the case of
mortgaged properties which are part of a
condominium regime, the use and other
restrictions imposed by the condominium
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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
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" 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 fiscal 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:
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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 17 of the mortgage
loans included in the trust fund as of the
cut-off date, representing 32.7% of the
mortgage pool.
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 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
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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, 1 of the mortgage loans secured by
a retail mortgaged property (loan number 1),
representing 13.7% of the mortgage pool, has a
movie theater as a tenant. This mortgaged
property is 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 27 of the mortgage loans included in the
trust fund as of the cut-off date, representing
32.6% 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.
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;
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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 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 26 of the
mortgage loans included in the trust fund as of
the cut-off date, representing 27.2% of the
mortgage pool.
SPECIAL RISKS ASSOCIATED WITH
SELF STORAGE FACILITIES..... The self storage facilities market contains low
barriers to entry. In addition, due to the
short-term nature of self-storage leases, self
storage properties also may be subject to more
volatility in terms of supply and demand than
loans secured by other types of properties.
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Because of the construction utilized in
connection with certain self storage
facilities, it might be difficult or costly to
convert such a facility to an alternative use.
Thus, liquidation value of self storage
properties may be substantially less than would
be the case if the same were readily adaptable
to other uses.
In addition, it is difficult to assess the
environmental risks posed by such facilities
due to tenant privacy, anonymity and
unsupervised access to such facilities.
Therefore, such facilities may pose additional
environmental risks to investors. The
environmental site assessments discussed in
this prospectus supplement did not include an
inspection of the contents of the self storage
units included in the self storage properties.
We therefore cannot provide assurance that all
of the units included in the self storage
properties are free from hazardous substances
or other pollutants or contaminants or will
remain so in the future. See "--Environmental
Laws May Adversely Affect the Value of and Cash
Flow from a Mortgaged Property" below.
Self storage properties secure 4 of the
mortgage loans included in the trust fund as of
the cut-off date, representing 2.9% 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
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
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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 3 of the
mortgage loans, representing 2.4% of the
mortgage pool.
SPECIAL RISKS ASSOCIATED WITH
HOSPITALITY PROPERTIES...... Hospitality properties are affected by various
factors, including:
o location;
o quality;
o management ability;
o amenities;
o franchise affiliation (or lack thereof);
o continuing expenditures for modernizing,
refurbishing and maintaining existing
facilities prior to the expiration of
their anticipated useful lives;
o a deterioration in the financial strength
or managerial capabilities of the owner
and operator of a hotel;
o changes in travel patterns caused by
changes in access, energy prices, strikes,
relocation of highways, the construction
of additional highways or other factors;
o adverse economic conditions, either local,
regional or national, which may limit the
amount that may be charged for a room and
may result in a reduction in occupancy
levels; and
o construction of competing hotels or
motels, which may also limit the amount
that may be charged for a room and may
result in a reduction in occupancy levels.
Because hotel rooms generally are rented for
short periods of time, hospitality properties
tend to be affected more quickly by adverse
economic conditions and competition than other
commercial properties. All of the mortgage
loans secured by hotel properties are
affiliated with a franchise or hotel management
company through a franchise or management
agreement. The performance of a hotel property
affiliated with a franchise or hotel management
company depends in part on:
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o the continued existence and financial
strength of the franchisor or hotel
management company;
o the public perception of the franchise or
hotel chain service mark; and
o the duration of the franchise licensing or
management agreements.
One (1) hospitality property included in the
trust fund as of the cut-off date, or
approximately 0.6% of the mortgage pool is
associated with the Hampton Inn & Suites
franchise or its affiliate franchises.
One (1) hospitality property included in the
trust fund as of the cut-off date, or
approximately 0.3% of the mortgage pool is
associated with the Suburban Lodge franchise or
its affiliate franchises.
Any provision in a franchise agreement or
management agreement providing for termination
because of a bankruptcy of a franchisor or
manager generally will not be enforceable.
Replacement franchises may require
significantly higher fees.
The transferability of franchise license
agreements is restricted. In the event of a
foreclosure, the lender or its agent would not
have the right to use the franchise license
without the franchisor's consent. Conversely,
in the case of certain mortgage loans, the
lender may be unable to remove a franchisor or
a hotel management company that it desires to
replace following a foreclosure.
Furthermore, the ability of a hotel to attract
customers, and some of such hotel's revenues,
may depend in large part on its having a liquor
license. Such a license may not be transferable
(for example, in connection with a
foreclosure).
Moreover, the hotel and lodging industry is
generally seasonal in nature; different seasons
affect different hotels depending on type and
location. This seasonality can be expected to
cause periodic fluctuations in a hospitality
property's room and restaurant revenues,
occupancy levels, room rates and operating
expenses.
Hospitality properties secure 2 of the mortgage
loans included in the trust fund as of the
cut-off date, representing 0.9% 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
with respect to a mortgaged property securing a
mortgage loan 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;
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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 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.
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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;
o an environmental insurance policy, having
the characteristics described below, was
obtained from a third-party insurer;
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;
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
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the condition of land or operations in the
vicinity of the properties, such as underground
storage tanks.
With respect to 1 mortgage loan representing
0.6% of the mortgage pool, the related borrower
provided a secured creditor impaired property
environmental insurance policy in lieu of
providing an environmental indemnity.
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.
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.................. Seventy-eight (78) of the mortgage loans,
representing 99.3% of the mortgage pool,
provide for scheduled payments of principal
and/or interest based 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.
Forty (40) of these mortgage loans included in
the trust fund as of the cut-off date,
representing 46.2% 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.
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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.
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.
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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
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.
The BJB Portfolio concentration consists of 10
mortgage loans (loan numbers 10, 11, 14, 21,
22, 51, 57, 75, 79 and 80), which collectively
represent 10.1% of the mortgage pool. Each of
these mortgages is cross-defaulted and
cross-collateralized. The sponsor of each
mortgage loan in the BJB Portfolio is Donal P.
Barry, Sr. and James W. Purcell.
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The Piggly Wiggly/Stoughton Plaza Shopping
Center concentration consists of 2 mortgage
loans (loan numbers 60 and 63) which
collectively represent 0.7% of the mortgage
pool. Each of these mortgages is
cross-defaulted and cross collateralized. The
sponsor of each mortgage loan in the Piggly
Wiggly/ Stoughton Plaza Shopping Center
concentration is J. Peter Jungbacker.
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 13.7% 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(1)
NUMBER OF AGGREGATE PERCENTAGE OF
MORTGAGED CUT-OFF DATE CUT-OFF DATE
STATE PROPERTIES BALANCE POOL BALANCE
- ----------------------- ------------ ----------------- --------------
IL .................. 11 $ 182,652,524 16.6%
CA .................. 13 153,267,943 14.0
Southern(2) ....... 9 119,571,969 10.9
Northern(2) ....... 4 33,695,974 3.1
AZ .................. 1 149,846,169 13.7
NY .................. 3 100,228,448 9.1
CO .................. 2 73,973,130 6.7
NC .................. 6 64,750,000 5.9
GA .................. 3 55,090,934 5.0
Other ............... 44 317,221,202 28.9
-- -------------- -----
83 $1,097,030,350 100.0%
== ============== =====
----------
(1) Because this table presents information
relating to the mortgaged properties and
not the mortgage loans, the information
for mortgage loans secured by more than
one mortgaged property is based on
allocated loan amounts (allocating the
mortgage loan principal balance to each of
those properties by the appraised values
of the mortgaged properties or the
allocated loan amount as detailed in the
related mortgage loan documents).
(2) 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
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where the mortgagors and the mortgaged
properties are located:
o economic conditions;
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.
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 13.7% 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 10.1% of the mortgage pool.
o The 5 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,
41.8% of the mortgage pool.
o The 10 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,
58.0% 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 office properties represent
as of the cut-off date 32.7% 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 retail properties represent
as of the cut-off date 32.6% 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 27.2% of
the mortgage pool;
o mortgage loans included in the trust fund
and secured by self-storage facilities
represent as of the cut-off date 2.9% of
the mortgage pool;
o mortgage loans included in the trust fund
and secured by mobile home properties
represent as of the cut-off date 2.4% of
the mortgage pool;
o mortgage loans included in the trust fund
and secured by mixed use properties
represent as of the cut-off date 1.2% of
the mortgage pool;
o mortgage loans included in the trust fund
and secured by hospitality properties
represent as of the cut-off date 0.9% of
the mortgage pool; and
o mortgage loans included in the trust fund
and secured by land represent as of the
cut-off date 0.1% 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
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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 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:
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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;
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 the 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
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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. On
June 18, 2004, the Secretary of the Treasury
announced its decision to extend this mandatory
participation 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 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 as described above. 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
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
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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.
In addition, with respect to certain mortgage
loans, the mortgagee may have waived the right
to require terrorism insurance or may have
limited the circumstances under which terrorism
insurance is required.
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 mortgagee'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.
Four (4) mortgage loans (loan numbers 16, 37,
38 and 49), representing 3.6% of the mortgage
pool, provide that under certain circumstances
the related borrower may encumber the related
mortgaged property with subordinate debt in the
future upon the consent of the mortgagee.
Two (2) mortgage loans (loan numbers 3 and 40),
representing 7.2% of the mortgage pool, have
existing unsecured debt. With respect to 14
mortgage loans (loan numbers 1, 3, 10, 11, 14,
21, 22, 23, 45, 51, 57, 75, 79 and 80),
representing 32.1% 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 mortgagee and the satisfaction of
certain financial conditions.
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One (1) mortgage loan (loan number 18),
representing 1.4% of the mortgage pool,
provides that under certain circumstances (a)
the related borrower may encumber the related
mortgaged property with subordinate debt in the
future and/or (b) the entities with a
controlling ownership interest in the related
borrower may pledge their interest 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 mortgagee.
Two (2) mortgage loans (loan numbers 29 and
81), representing 1.1% of the mortgage pool, do
not prohibit the related borrower from
incurring additional unsecured debt or an owner
of an interest in the related borrower from
pledging its ownership interest in the related
borrower as security for mezzanine debt because
the related borrower is not required by either
the mortgage loan documents or related
organizational documents to be a special
purpose entity. 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.
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 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
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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;
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.
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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
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 assets of the trust do not include
the companion loans (other than the Park Place
Mall subordinate loan) related to the mortgage
loans which have companion loans, the related
borrower is still obligated to make interest
and principal payments on those additional
obligations. 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 the subordinate
or pari passu 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
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loans contained in the loan pair upon the
maturity of the mortgage loans.
In addition, although 3 of the mortgage loans
have companion loans that are subordinate to
the related mortgage loan, the 11 Madison
Avenue mortgage loan, representing 7.5% of the
mortgage pool, also has companion loans that
are pari passu with such 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 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.
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In addition, with respect to 5 mortgage loans,
representing 2.9% of the mortgage pool, the
borrowers own the related mortgaged property as
tenants in common. As a result, the related
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 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.
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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 significantly
delayed, and the aggregate amount ultimately
collected may be substantially less than the
amount owed.
Certain of the mortgage loans may 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
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.
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THE MORTGAGED PROPERTIES MAY
NOT BE IN COMPLIANCE WITH
CURRENT ZONING LAWS......... The mortgaged properties securing the mortgage
loans included 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.
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.
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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 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 or transfer of a controlling
interest in the related borrower to
pre-approved transferees or pursuant to
pre-approved conditions set forth in the
related mortgage loan documents without the
lender's approval. In addition, certain of the
mortgage loans do not restrict the transfer of
limited partnership interests or non-managing
member interests in the related borrower. 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
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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
10, 11, 14, 21, 22, 51, 57, 75, 79 and 80 and
loan numbers 60 and 63), representing in the
aggregate 10.8% 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:
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 such 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
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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.
SINGLE TENANTS AND
CONCENTRATION OF TENANTS
SUBJECT THE TRUST FUND TO
INCREASED RISK.............. Thirteen (13) of the mortgaged properties
securing mortgage loans included in the trust
fund, representing 10.6% of the mortgage pool,
are leased wholly to a single tenant or are
wholly owner occupied. 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.
We cannot provide assurances that any major
tenant will continue to perform its obligations
under its lease (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.
With respect to the mortgaged property securing
the 11 Madison Avenue mortgage loan,
representing 7.5% of the mortgage pool, the
largest tenant, Credit Suisse First Boston LLC,
has the right to terminate a portion of its
leased space. Although 74.3% of Credit Suisse
First Boston LLC's 1,921,459 square feet of net
rentable area is leased through April 2017,
Credit Suisse First Boston LLC does have the
option to terminate up to 528,730 square feet
(27.5% of Credit Suisse First Boston LLC's
space and 23.4% of the mortgaged property's
total space) after April 2007 in its sole
discretion, provided that they meet certain
notice requirements and pay a termination fee.
See "DESCRIPTION OF THE MORTGAGE POOL--Twenty
Largest Mortgage Loans--11 Madison Avenue" in
this prospectus supplement. There can be no
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assurance that the related borrower will be
able to relet the terminated space or that such
space could be relet at the same rate being
paid by Credit Suisse First Boston LLC.
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 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 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
EFFECT 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.
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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.
The failure of a property manager that manages
a number of mortgaged properties as described
above to properly manage the related properties
or any financial difficulties with respect to
this property manager 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 "RISK FACTORS--Adverse
Consequences Associated with Borrower
Concentration, Borrowers Under Common Control
and Related 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.
THE STATUS OF A GROUND LEASE
MAY BE UNCERTAIN IN A
BANKRUPTCY PROCEEDING....... Four (4) mortgage loans included in the trust
fund, representing 5.5% of the mortgage pool,
are secured by the borrower's leasehold
interests. 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
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significant of these risks is that if the
related borrower's leasehold interest were to
be terminated upon a lease default, the lender
would lose its security in the loan. Generally,
each related ground lease requires the lessor
thereunder to give the lender notice of the
borrower's defaults under the ground lease and
an opportunity to cure them, permits the
leasehold interest to be assigned to the lender
or a purchaser at a foreclosure sale (in some
cases only upon the consent of the lessor) and
contains certain other protective provisions
typically included in a "mortgageable" ground
lease. In addition, pursuant to Section 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
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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.
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
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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
expense in foreclosing on mortgaged properties
located in states affected by one action rules.
See "CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
AND LEASES--Foreclosure" in the accompanying
prospectus.
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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 81 fixed rate mortgage
loans (the "Mortgage Loans"), with an aggregate principal balance (the "Cut-Off
Date Pool Balance") of $1,097,030,350. The "Cut-Off Date" for (i) 5 of the
Mortgage Loans is August 1, 2004, (ii) 1 of the Mortgage Loans is August 10,
2004, and (iii) 75 of the Mortgage Loans is August 11, 2004. 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 $940,105 to
$149,846,169. The Mortgage Loans in the Mortgage Pool have an average Cut-Off
Date Balance of $13,543,585. 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 Subordinate Companion Loan.
The 11 Madison Avenue Loan will be deemed to be split into two components
(the "11 Madison Avenue Pooled Component" and the "11 Madison Avenue Non-Pooled
Component"). The 11 Madison Avenue Pooled Component has a component principal
balance of $82,000,000 and will represent 7.5% of the Cut-Off Date Pool Balance.
The Certificates (other than the Class MAD Certificates) will be entitled to
distributions from the 11 Madison Avenue Pooled Component. Although the 11
Madison Avenue Non-Pooled Component is included in the trust, for the purpose of
numerical and statistical information presented herein (including the annexes)
such information includes the Pari Passu Companion Loans, but not the 11 Madison
Avenue Non-Pooled Component or the related Subordinate Companion Loans. The
component principal balance of the 11 Madison Avenue Non-Pooled Component as of
the Cut-Off Date will be $13,555,556.
The trust's assets will also include the Park Place Mall Subordinate Loan.
The Park Place Mall Subordinate Loan supports only the Class PP Certificates.
Although the Park Place Mall Subordinate Loan is an asset of the trust, for the
purpose of information contained in this prospectus supplement (including the
annexes and statistical information contained in this prospectus supplement),
unless otherwise specified, the Park Place Mall Subordinate Loan is not
reflected in this prospectus supplement and the term "Mortgage Loan" does not
include the Park Place Mall Subordinate Loan. The principal balance of the Park
Place Mall Subordinate Loan as of the Cut-Off Date will be $39,958,978.
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 4 Mortgage Loans, representing 5.5% of the
Cut-Off Date Pool Balance, on the related borrower's leasehold estate) in an
income-producing real property (each, a "Mortgaged Property"). In addition, the
security for the 11 Madison Avenue Loan consists of the borrower's interest in
the portion of the related Mortgaged Property leased to Credit Suisse First
Boston LLC (the "IDA Premises") under the IDA lease as well as the borrower's
fee interest in the remainder of the Mortgaged Property. The fee interest in the
IDA Premises is owned by the New York City Industrial Development Agency (the
"IDA") but will revert to the borrower upon the termination of the IDA lease.
See "DESCRIPTION OF THE MORTGAGE POOL--Twenty Largest Mortgage Loans--11 Madison
Avenue" in this prospectus supplement.
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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:
MORTGAGED PROPERTIES BY PROPERTY TYPE
PERCENTAGE OF
AGGREGATE CUT-OFF
NUMBER CUT-OFF DATE
OF MORTGAGED DATE POOL
PROPERTY TYPE PROPERTIES BALANCE BALANCE
- ------------------------------ -------------- ---------------- --------------
Office ....................... 17 $ 358,910,710 32.7%
Retail ....................... 28 357,097,784 32.6
Retail--Anchored ............ 17 273,568,806 24.9
Retail--Shadow Anchored(1) .. 5 60,185,146 5.5
Retail--Unanchored .......... 6 23,343,832 2.1
Multifamily .................. 27 298,827,406 27.2
Self Storage ................. 4 31,944,610 2.9
Mobile Home Park ............. 3 25,920,000 2.4
Mixed Use .................... 1 12,989,840 1.2
Hospitality .................. 2 9,740,000 0.9
Land(2) ...................... 1 1,600,000 0.1
-- -------------- -----
83 $1,097,030,350 100.0%
== ============== =====
- ----------
(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 anchored retail building. The retail 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.
Retail 32.6%
Office 32.7%
Land 0.1%
Hospitality 0.9%
Mixed Use 1.2%
Mobile Home Park 2.4%
Self Storage 2.9%
Multifamily 27.2%
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
64 of the Mortgage Loans to be included in the Trust Fund representing 90.6% of
the Cut-Off Date Pool Balance. Artesia Mortgage Capital Corporation ("Artesia")
originated 17 of the Mortgage Loans to be included in the Trust Fund
representing 9.4% of the Cut-Off Date Pool Balance. None of the Mortgage Loans
were 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).
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
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applicable Anticipated Repayment Date, the interest rate on the related ARD
Loans will increase as described in this prospectus supplement. See
"--Amortization" below. Seventy-eight (78) of the Mortgage Loans, representing
91.7% 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.
Two (2) of the Mortgage Loans, representing 7.2% 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. One (1) Mortgage Loan, representing 1.1% of
the Cut-Off Date Pool Balance, accrues interest during its interest-only term on
a 30/360 basis and an Actual/360 basis during its amortization term. Nineteen
(19) of the Mortgage Loans, representing 31.8% 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 10.5% 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 11th day of the month
(or in the case of 5 Mortgage Loans, the 1st day of the month or in the case of
1 Mortgage Loan, the 10th 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 10th and the 11th day of each
month do not provide for a grace period.
Amortization. Seventy-eight (78) 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 these Balloon Loans, representing
10.5% of the Cut-Off Date Pool Balance, provide for interest-only Periodic
Payments for the entire term and do not amortize. Three (3) 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.
Forty (40) of the Balloon Loans (the "ARD Loans"), representing 46.2% 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 (other than such amounts allocable to the 11 Madison Avenue
Non-Pooled Component and the Park Place Mall Subordinate Loan) will be
distributed to (i) the holders of the Class Z Certificates and (ii) with respect
to Additional Interest allocable to the 11 Madison Avenue Non-Pooled Component,
to the holders of the Class MAD 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.
Nineteen (19) of the Balloon Loans and ARD Loans, representing 31.8% of the
Cut-Off Date Pool Balance, provide for monthly payments of interest-only for the
first 12 to 60 months of their respective terms followed by payments which
amortize a portion of the principal balance of the Mortgage Loans by
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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 10.5% of the Cut-Off Date Pool Balance, provide for monthly
payments of interest-only until maturity and do 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 or
(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 (6 Mortgage Loans, or 3.9% 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 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.
Seventy-Five (75) of the Mortgage Loans, or 96.1% 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, 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 (including the portion related to
the Park Place Mall Subordinate Loan) due on such date or (i) in 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
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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
the REMIC status of any of the REMICs (accordingly, 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.
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. Four (4) mortgage
loans (loan numbers 16, 37, 38 and 49) representing 3.6% 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,
which in each case is subject to the terms of an intercreditor agreement and/or
standstill agreement in favor of the mortgagee.
With respect to 14 mortgage loans (loan numbers 1, 3, 10, 11, 14, 21, 22,
23, 45, 51, 57, 75, 79 and 80) representing 32.1% of the Cut-Off Date Pool
Balance, 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 mortgagee and the satisfaction of
certain financial conditions. One (1) Mortgage Loan (loan number 18),
representing 1.4% of the Cut-Off Date Pool Balance, provides that under certain
circumstances (a) the related borrower may encumber the related Mortgaged
Property with subordinate debt in the future and/or (b) the entities with a
controlling ownership interest in the related borrower may pledge their interest
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 mortgagee. 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. See "RISK FACTORS--Some Mortgaged Properties May Be
Encumbered by Subordinated Debt Which May Delay Foreclosure" in this prospectus
supplement. In addition, 2 Mortgage Loans included in the Trust Fund as of the
Cut-Off Date (loan numbers 29 and 81), representing 1.1% of the Cut-Off Pool
Balance, do not prohibit the related borrower from incurring additional
unsecured debt or an owner of an interest in the related borrower from pledging
its ownership interest in the related borrower as security for mezzanine debt
because the related borrower is not required by either the mortgage loan
documents or related organizational documents to be a special purpose entity.
With respect to 2 Mortgage Loans (loan numbers 3 and 40), representing 7.2% of
the Cut-Off Date Pool Balance, the related borrower has existing unsecured debt.
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. 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" in
this prospectus supplement.
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
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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 transfers of the related Mortgaged Property or the
transfer of a controlling interest in the related borrower to pre-approved
transferees or pursuant to pre-approved conditions without the approval of the
mortgagee and certain Mortgage Loans do not prohibit transfers of limited
partnership interests or non managing member interests in the related borrowers.
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 10, 11, 14, 21, 22, 51, 57, 75, 79 and 80 and loan numbers 60 and 63),
representing 10.8% 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.
Partial Releases. Certain of the Mortgage Loans permit a partial release of
a portion of the related Mortgaged Property not material to the underwriting of
the Mortgage Loan at the time of origination, without any prepayment or
defeasance of the Mortgage Loan.
One (1) of the Mortgage Loans (loan number 1), representing 13.7% of the
Cut-Off Date Pool Balance permits partial releases of certain unimproved,
non-income producing parcels.
One (1) of the Mortgage Loans (loan number 18), representing 1.4% of the
Cut-Off Date Pool Balance permits a partial release of a certain parcel
designated for development or expansion of an anchor tenant and/or shop tenant
space upon the satisfaction of certain conditions, including, without
limitation: (i) the payment of a release price (through partial defeasance)
equal to the amount set forth in the mortgage (approximately 100% of the value
of the anchor tenant parcel), (ii) delivery of rating agency confirmations that
the release will not result in a downgrade, withdrawal or qualification of the
then current rating assigned to the Certificates and (iii) no event of default
has occurred and is continuing with respect to such Mortgage Loan.
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.
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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.
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, 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 125% of the licensed engineer's estimated cost of the
recommended repairs, corrections or replacements to assure their completion;
provided, however, with respect to mortgage loans originated by Artesia Mortgage
Capital Corporation, such reserves are generally not required for repairs when
the estimated cost is less than $10,000.
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, 2 Mortgaged Properties securing 2 Mortgage Loans,
representing 4.2% of the Cut-Off Date Pool Balance 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.
Both of these Mortgaged Properties have earthquake insurance in place.
CO-LENDER LOANS
General. Three (3) Mortgage Loans (loan number 1, the "Park Place Mall
Loan" loan number 2, the "11 Madison Avenue Loan" and loan number 42, the
"Pointe West Medical Office Building Loan") originated by Wachovia Bank,
National Association 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 11 Madison
Avenue Loan will be deemed to be split into a pooled component (the "11 Madison
Avenue Pooled Component"), with a principal balance of $82,000,000, representing
7.5% of the Cut-Off Date Pool Balance, that supports distributions on the
Certificates (other than the Class MAD Certificates) and a non-pooled component
(the "11 Madison Avenue Non-Pooled Component"), with a component principal
balance of $13,555,556, that supports only the Class MAD Certificates, which are
not being offered hereby. The 11 Madison Avenue Loan was originated by Wachovia
Bank, National Association and is evidenced by one of seven notes each secured
by a single mortgage and a single assignment of leases and rents. The 11 Madison
Avenue Loan is part of a split loan structure where three (3) companion loans
that are part of this split loan structure are pari passu in right of
entitlement to payment with the 11 Madison Avenue Loan (the "11 Madison Avenue
Pari Passu Loans") and three companion loans that are part of this split loan
structure are subordinate in their right of entitlement to payment with the 11
Madison Avenue Loan and the 11 Madison Avenue Pari Passu Loans (the "11 Madison
Avenue Subordinate Loans" and, together
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with the 11 Madison Avenue Pari Passu Loans, the "11 Madison Avenue Companion
Loans"). The 11 Madison Avenue Loan and the 11 Madison Avenue Pari Passu Loans
are referred to collectively herein as the "11 Madison Avenue Senior Loans". The
11 Madison Avenue Companion Loans and the 11 Madison Avenue Loan are referred to
collectively herein as the "11 Madison Avenue Whole Loan". None of the 11
Madison Avenue Companion Loans are included in the trust.
The Park Place Mall Loan is part of a split loan structure in which the
companion loan is subordinate in its right of entitlement to payment to the Park
Place Mall Loan (the "Park Place Mall Subordinate Loan"). The Park Place Mall
Loan and the Park Place Mall Subordinate Loan are referred to collectively
herein as the "Park Place Mall Whole Loan". The Park Place Mall Loan has a
Cut-Off Date Balance of $149,846,169, representing 13.7% of the Cut-Off Date
Pool Balance. The Park Place Mall Subordinate Loan will be included in the trust
and has a Cut-Off Date Balance of $39,958,978, however, the Park Place Mall
Subordinate Loan will support only the Class PP Certificates. Amounts allocated
to the Park Place Mall Subordinate Loan will not be part of the funds available
for distributions to holders of the other Certificates as more fully described
herein. See " --Park Place Mall Loan" below.
The Pointe West Medical Office Building Loan is part of a split loan
structure in which the companion loan (the "Pointe West Medical Office Building
Subordinate Loan") is subordinate in its right of entitlement to payment of the
Pointe West Medical Office Building Loan. The Pointe West Medical Office
Building Subordinate Loan and the Pointe West Medical Office Building Loan are
referred to collectively herein as the "Pointe West Medical Office Building
Whole Loan". The Pointe West Medical Office Building Loan has a Cut-Off Date
Balance of $7,108,484, representing 0.6% of the Cut-Off Date Pool Balance. The
11 Madison Avenue Companion Loans, the Pointe West Medical Office Building
Subordinate Loan and the Park Place Mall Subordinate Loan are referred to
hereunder as the "Companion Loans". The 11 Madison Avenue Subordinate Loans, the
Pointe West Medical Office Building Subordinate Loan and the Park Place Mall
Subordinate Loan are collectively referred to herein as the "Subordinate
Companion Loans".
The trust created pursuant to the 2004-C10 Pooling and Servicing Agreement
is the holder of one of the 11 Madison Avenue Pari Passu Loans, the trust
created pursuant to the 2004-C11 Pooling and Servicing Agreement is the holder
of one of the 11 Madison Avenue Pari Passu Loans and the trust created pursuant
to the 2004-C12 Pooling and Servicing Agreement is also the holder of one of the
11 Madison Avenue Pari Passu Loans. The remaining Companion Loans are held by
entities unaffiliated with such trusts. 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 with respect to the 11 Madison Avenue Loan,
the 2004-C10 Master Servicer or the applicable 2004-C10 Special Servicer), 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 rating
assigned by the Rating Agency to any Class of Certificates then rated by the
Rating Agency, or, without such consent or confirmation, to certain
institutional lenders or other parties named in the related Intercreditor
Agreement.
With respect to the 11 Madison Avenue Loan, the terms of an intercreditor
agreement (the "11 Madison Avenue Intercreditor Agreement") provide that the 11
Madison Avenue Loan and the 11 Madison Avenue Pari Passu Loans are of equal
priority with each other and no portion of any of these loans will have priority
or preference over the other and that the 11 Madison Avenue Subordinate Loans
are subordinate in certain respects to the 11 Madison Avenue Loan and the 11
Madison Avenue Pari Passu Loans. With respect to the Park Place Mall Loan, the
terms of an intercreditor agreement (the "Park Place Mall Intercreditor
Agreement") provide that the Park Place Mall Subordinate Loan is subordinate in
certain respects to the Park Place Mall Loan. With respect to the Pointe West
Medical Office Building Loan, under the terms of an intercreditor and servicing
agreement among noteholders (the "Pointe West Intercreditor Agreement", and
together with the 11 Madison Avenue Intercreditor Agreement and the Park Place
Mall Intercreditor Agreement the "Intercreditor Agreements") the holder of the
Pointe West Medical Office Building Subordinate Loan has agreed to subordinate
its interest in certain respects to the Pointe West Medical Office Building
Loan. Except with respect to the 11 Madison Avenue Loan and its related
Companion Loans (which will be serviced under the 2004-C10 Pooling and Servicing
Agreement), the Master Servicer and the Special Servicer will undertake to
perform the obligations of the holder of the Co-Lender Loans under the related
Intercreditor Agreements.
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The following table presents certain information with respect to the
Co-Lender Loans:
CO-LENDER LOANS
CUT-OFF
DATE
PRINCIPAL WHOLE LOAN
BALANCE CUT-OFF DATE CUT-OFF DATE WHOLE LOAN CUT-OFF
OF MORTGAGE PRINCIPAL BALANCE PRINCIPAL BALANCE UNDERWRITTEN DATE
MORTGAGE LOAN LOAN OF SENIOR COMPONENTS OF WHOLE LOAN DSCR LTV
- ------------------------- --------------- ---------------------- ------------------- -------------- -----------
Park Place Mall ......... $149,846,169 $149,846,169 $189,805,147 1.29x 80.8%
11 Madison Avenue ....... $ 82,000,000 $430,000,000 $515,000,000 1.20x 76.3%
Pointe West Medical
Office Building ........ $ 7,108,484 $ 7,108,484 $ 7,553,425 1.22x 84.9%
11 Madison Avenue Loan
11 Madison Avenue Loan Components. The ownership interest in the 11 Madison
Avenue Loan will be split into a senior pooled interest (the "11 Madison Avenue
Pooled Component") and a subordinate interest (the "11 Madison Avenue Non-Pooled
Component"). The 11 Madison Avenue Pooled Component will represent approximately
7.5% of the Cut-Off Date Pool Balance. All distributions of principal and
interest with respect to the 11 Madison Avenue Loan will be distributed to the
Certificates as described herein. The holders of the Offered Certificates will
only be entitled to collections with respect to the 11 Madison Avenue Loan to
the extent allocated to the 11 Madison Avenue Pooled Component and the holders
of the Class MAD Certificates will only be entitled to distributions of
principal or interest allocable to the 11 Madison Avenue Loan to the extent
allocated to the 11 Madison Avenue Non-Pooled Component. See "DESCRIPTION OF THE
CERTIFICATES--Distributions" in this prospectus supplement. The Class MAD
Certificates are not being offered hereby.
The following table describes certain information regarding the 11 Madison
Avenue Mortgage Loan, the 11 Madison Avenue Pooled Component and the 11 Madison
Avenue Non-Pooled Component:
COMBINED POOLED NON-POOLED
CUT-OFF COMPONENT COMPONENT COMBINED COMBINED
LOAN DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE UNDERWRITTEN
MORTGAGE LOAN NO. BALANCE BALANCE BALANCE LTV DSCR
- --------------------------- ------ -------------- -------------- -------------- -------------- -------------
11 Madison Avenue ......... 2 $95,555,556 $82,000,000 $13,555,556 63.7% 1.55x
Servicing Provisions of the 11 Madison Avenue Intercreditor Agreement. The
11 Madison Avenue Loan and its related Companion Loans will be serviced under
the pooling and servicing agreement (the "2004-C10 Pooling and Servicing
Agreement") entered into in connection with the issuance of the Wachovia Bank
Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series
2004-C10. The master servicer under the 2004-C10 Pooling and Servicing Agreement
is Wachovia Bank, National Association (the "2004-C10 Master Servicer"), the
special servicer under the 2004-C10 Pooling and Servicing Agreement is Wachovia
Bank, National Association with respect to the 11 Madison Avenue mortgage loan,
and Lennar Partners, Inc. with respect to each other mortgage loan (together,
the "2004-C10 Special Servicer"), and the trustee under the 2004-C10 Pooling and
Servicing Agreement is Wells Fargo Bank, N.A. (the "2004-C10 Trustee"). The
terms of the 2004-C10 Pooling and Servicing Agreement provide for servicing
arrangements that are generally similar to those under the Pooling and Servicing
Agreement. Subject to the exceptions described herein under "SERVICING OF THE
MORTGAGE LOANS--The Controlling Class Representative", the Controlling Class
Representative will generally share among the controlling class representative
under the 2004-C10 Pooling and Servicing Agreement (the "2004-C10 Controlling
Class Representative"), the controlling class representative under the pooling
and servicing agreement (the "2004-C11 Pooling and Servicing Agreement") entered
into in connection with the issuance of the Wachovia Bank Commercial Mortgage
Trust, Commercial Mortgage Pass-Through Certificates, Series 2004-C11 (the
"2004-C11 Controlling Class Representative") and the controlling class
representative under the pooling and servicing agreement (the "2004-C12 Pooling
and Servicing Agreement") entered into in connection with the issuance of the
Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2004-C12 (the "2004-C12 Controlling Class Representative")
the rights given to the 2004-C10 Controlling Class Representative
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under the 2004-C10 Pooling and Servicing Agreement to direct the servicing of
the 11 Madison Avenue Loan. See "SERVICING OF THE MORTGAGE LOANS--The
Controlling Class Representative" and "--Servicing of the 11 Madison Avenue
Loan" in this prospectus supplement. The 11 Madison Avenue Intercreditor
Agreement provides that expenses, losses and shortfalls relating to the 11
Madison Avenue Whole Loan will be allocated first, to the holders of the 11
Madison Avenue Subordinate Loans and thereafter, pro rata and pari passu, to the
11 Madison Avenue Senior Loans; provided, that, pursuant to the Pooling and
Servicing Agreement, expenses, losses and shortfalls allocated to the 11 Madison
Avenue Loan will be allocated first to the 11 Madison Avenue Non-Pooled
Component and then to the 11 Madison Avenue Pooled Component.
With respect to the 11 Madison Avenue Loan, the 2004-C10 Master Servicer
and 2004-C10 Special Servicer will service and administer the 11 Madison Avenue
Loan and each of the 11 Madison Avenue Companion Loans pursuant to the 2004-C10
Pooling and Servicing Agreement and the 11 Madison Avenue Intercreditor
Agreement for so long as the 11 Madison Avenue Loan is part of the 2004-C10
Trust. If the principal amount of any 11 Madison Avenue Subordinate Loan, less
any existing related Appraisal Reduction Amount, is at least equal to 25% of the
original principal amount of such 11 Madison Avenue Subordinate Loan, the holder
of such 11 Madison Avenue Companion Loan, or an advisor on its behalf, will be
entitled to advise and direct the 2004-C10 Master Servicer and/or 2004-C10
Special Servicer with respect to certain matters, including, among other things,
foreclosure or material modifications of the 11 Madison Avenue Loan. However, no
advice or direction may require or cause the 2004-C10 Master Servicer or the
2004-C10 Special Servicer to violate any provision of the 2004-C10 Pooling and
Servicing Agreement, including the 2004-C10 Master Servicer's and the 2004-C10
Special Servicer's obligation to act in accordance with the Servicing Standard
(as set forth in the 2004-C10 Pooling and Servicing Agreement). See "SERVICING
OF THE MORTGAGE LOANS--The Controlling Class Representative" and "--Servicing of
the 11 Madison Avenue Loan" in this prospectus supplement.
In the event of certain defaults under the 11 Madison Avenue Loan or any of
the 11 Madison Avenue Companion Loans, the holders of the 11 Madison Avenue
Subordinate Loans will be entitled to (i) cure such default within five (5)
business days of receipt of notice from the 2004-C10 Master Servicer with
respect to monetary defaults and within twenty (20) days (which twenty-day
period may be extended by up to two (2) additional five-day periods) of receipt
of notice from the 2004-C10 Master Servicer with respect to non-monetary
defaults and/or (ii) purchase the 11 Madison Avenue Loan from the trust after
the expiration of the cure period subject to the conditions contained in the 11
Madison Avenue Intercreditor Agreement. Upon exercising its right to purchase
the 11 Madison Avenue Loan, such purchasing holder of an 11 Madison Avenue
Subordinate Loan will also be required to purchase all of the 11 Madison Avenue
Companion Loans senior to the 11 Madison Avenue Subordinate Loan held by such
holder. The purchase price will generally equal the unpaid aggregate principal
balance of the 11 Madison Avenue Companion Loans being purchased, 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 11 Madison Avenue Loan is responsible;
provided, however, that the purchase price shall not be reduced by any
outstanding P&I Advance, include any Prepayment Premium, late payment charge,
default interest or exit fees or include any Liquidation Fee or Workout Fee
payable to the 2004-C10 Special Servicer pursuant to the 2004-C10 Pooling and
Servicing Agreement but shall include, in the event the purchase price is being
calculated in connection with the purchase of an REO Property, any and all costs
and expenses incurred by the trust during the time it owned the Mortgaged
Property, net of all cash receipts from the Mortgaged Property actually received
by the trust during such period, and any and all costs and expenses incurred by
the trust in connection with the transfer of the Mortgaged Property to such
purchasing holder, including, without limitation, reasonable attorneys fees and
expenses, and any transfer or gains or similar taxes and fees paid in connection
with such transfer. No prepayment consideration will be payable in connection
with such a purchase of the 11 Madison Avenue Whole Loan.
Application of Payments. Pursuant to the 11 Madison Avenue Intercreditor
Agreement, to the extent described below: (a) the right of the holders of the 11
Madison Avenue Pari Passu Loans to receive payments with respect to the
applicable Companion Loans are pari passu to the rights of the trust to receive
payments with respect to the 11 Madison Avenue Loan; and (b) the right of the
holders of the
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11 Madison Avenue Subordinate Loans to receive payments with respect to the
applicable Companion Loans are subordinated to the rights of the trust to
receive payments with respect to the 11 Madison Avenue Loan. Prior to the
occurrence of an event of default with respect to the 11 Madison Avenue Loan or
prior to a servicing transfer event under the 2004-C10 Pooling and Servicing
Agreement related to the 11 Madison Avenue Loan, after payment or reimbursement
of any advances, advance interest or other costs, fees or expenses related to or
allocable to the 11 Madison Avenue Loan or the 11 Madison Avenue Companion Loans
(including payments or reimbursements to the 2004-C10 Master Servicer, the
2004-C10 Special Servicer and/or the 2004-C10 Trustee pursuant to the 2004-C10
Pooling and Servicing Agreement), all payments and proceeds (of whatever nature)
received with respect to the 11 Madison Avenue Loan and the 11 Madison Avenue
Companion Loans will be paid first, pro rata, among the trust and the holders of
the 11 Madison Avenue Pari Passu Loans, in an amount equal to interest due with
respect to the 11 Madison Avenue Loan and 11 Madison Avenue Pari Passu Loans;
second, pro rata, among the trust and the holders of the 11 Madison Avenue Pari
Passu Loans, in an amount equal to the principal payments received, if any, with
respect to the 11 Madison Avenue Loan and the 11 Madison Avenue Pari Passu
Loans; third, pro rata, among the trust and the holders of the 11 Madison Avenue
Pari Passu Loans, in an amount equal to any unreimbursed realized losses, if
any, with respect to the 11 Madison Avenue Loan and the 11 Madison Avenue Pari
Passu Loans; fourth, to the holders of the 11 Madison Avenue Subordinate Loans,
in order of seniority, in an amount equal to any unreimbursed cure payments
previously paid by the holder of such 11 Madison Avenue Subordinate Loan in
respect of the 11 Madison Avenue Senior Loans; fifth, to certain holders of the
11 Madison Avenue Subordinate Loans, in an amount equal to (i) interest due with
respect to such 11 Madison Avenue Subordinate Loan, (ii) the principal payments
received with respect to such 11 Madison Avenue Subordinate Loan, if any, and
(iii) any unreimbursed realized losses, if any, with respect to such 11 Madison
Avenue Subordinate Loan; sixth, to certain holders of the 11 Madison Avenue
Subordinate Loans, in order of seniority, in an amount equal to any unreimbursed
cure payments previously paid by the holder of such 11 Madison Avenue
Subordinate Loan in respect of certain other 11 Madison Avenue Subordinate
Loans; seventh, to certain holders of the 11 Madison Avenue Subordinate Loans
(other than the holders receiving payments pursuant to clause fifth above), in
an amount equal to (i) interest due with respect to such 11 Madison Avenue
Subordinate Loan (ii) the principal payments received with respect to such 11
Madison Avenue Subordinate Loan, if any, and (iii) any unreimbursed realized
losses, if any, with respect to such 11 Madison Avenue Subordinate Loan; eighth,
to certain holders of the 11 Madison Avenue Subordinate Loans, in an amount
equal to any unreimbursed cure payments previously paid by the holder of such 11
Madison Avenue Subordinate Loan in respect of certain other 11 Madison Avenue
Subordinate Loans; ninth, to certain holders of the 11 Madison Avenue
Subordinate Loans (other than the holders receiving payments pursuant to clauses
fifth and seventh above), in an amount equal to (i) interest due with respect to
such 11 Madison Avenue Subordinate Loan, (ii) the principal payments received
with respect to such 11 Madison Avenue Subordinate Loan, if any, and (iii) any
unreimbursed realized losses, if any, with respect to such 11 Madison Avenue
Subordinate Loan; tenth, pro rata, among the trust and the holders of the 11
Madison Avenue Pari Passu Loans, in an amount equal to default interest, if any,
with respect to the 11 Madison Avenue Loan and the 11 Madison Avenue Pari Passu
Loans; eleventh, to certain holders of the 11 Madison Avenue Subordinate Loans,
in order of seniority, in an amount equal to default interest, if any, with
respect to such 11 Madison Avenue Subordinate Loan; twelfth, pro rata, among the
trust, the holders of the 11 Madison Avenue Pari Passu Loans and the holders of
the 11 Madison Avenue Subordinate Loans, in an amount equal to any prepayment
premiums; thirteenth, to the holders of the 11 Madison Avenue Subordinate Loans,
in order of seniority, in an amount equal to unreimbursed costs and expenses, if
any, with respect to the 11 Madison Avenue Whole Loan; and fourteenth, pro rata,
among the trust, the holders of the 11 Madison Avenue Pari Passu Loans and the
holders of the 11 Madison Avenue Subordinate Loans, any excess.
Following the occurrence and during the continuance of an event of default
with respect to the 11 Madison Avenue Loan or such mortgage loan becoming a
specially serviced mortgage loan pursuant to the 11 Madison Avenue Intercreditor
Agreement, and subject to the right to purchase the 11 Madison Avenue Loan from
the trust by the holders of the 11 Madison Avenue Subordinate Loans, after
payment or reimbursement of any advances, advance interest or other costs, fees
or expenses related to or allocable to the 11 Madison Avenue Loan and each of
the 11 Madison Avenue Companion Loans (including
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payments or reimbursements to the 2004-C10 Master Servicer, the 2004-C10 Special
Servicer and/or the 2004-C10 Trustee pursuant to the 2004-C10 Pooling and
Servicing Agreement), all payments and proceeds (of whatever nature) on the 11
Madison Avenue Loan and the 11 Madison Avenue Companion Loans will be paid
first, pro rata, among the trust and the holders of the 11 Madison Avenue Pari
Passu Loans, in an amount equal to interest due with respect to the 11 Madison
Avenue Loan and 11 Madison Avenue Pari Passu Loans; second, pro rata, among the
trust and the holders of the 11 Madison Avenue Pari Passu Loans, in an amount
equal to the principal balance of such loans until paid in full; third, pro
rata, among the trust and the holders of the 11 Madison Avenue Pari Passu Loans,
in an amount equal to any unreimbursed realized losses, if any, with respect to
the 11 Madison Avenue Loan and the 11 Madison Avenue Pari Passu Loans; fourth,
to the holders of the 11 Madison Avenue Subordinate Loans, in order of
seniority, in an amount equal to any unreimbursed cure payments previously paid
by the holder of such 11 Madison Avenue Subordinate Loan; fifth, to certain
holders of the 11 Madison Avenue Subordinate Loans, in an amount equal to (i)
interest due with respect to such 11 Madison Avenue Subordinate Loan, (ii) the
principal balance until paid in full, and (iii) any unreimbursed realized
losses, if any, with respect to such 11 Madison Avenue Subordinate Loan; sixth,
to certain holders of the 11 Madison Avenue Subordinate Loans, in order of
seniority, in an amount equal to any unreimbursed cure payments previously paid
by the holder of such 11 Madison Avenue Subordinate Loan in respect of certain
other 11 Madison Avenue Subordinate Loans; seventh, to certain holders of the 11
Madison Avenue Subordinate Loans (other than the holders receiving payments
pursuant to clause fifth above), in an amount equal to (i) interest due with
respect to such 11 Madison Avenue Subordinate Loan, (ii) the principal balance
until paid in full, and (iii) any unreimbursed realized losses, if any, with
respect to such 11 Madison Avenue Subordinate Loan; eighth, to certain holders
of the 11 Madison Avenue Subordinate Loans, in an amount equal to any
unreimbursed cure payments previously paid by the holder of such 11 Madison
Avenue Subordinate Loan in respect of certain other 11 Madison Avenue
Subordinate Loans; ninth, to certain holders of the 11 Madison Avenue
Subordinate Loans (other than the holders receiving payments pursuant to clauses
fifth and seventh above), in an amount equal to (i) interest due with respect to
such 11 Madison Avenue Subordinate Loan, (ii) the principal balance until paid
in full, and (iii) any unreimbursed realized losses, if any, with respect to
such 11 Madison Avenue Subordinate Loan; tenth, pro rata, among the trust and
the holders of the 11 Madison Avenue Pari Passu Loans, in an amount equal to
default interest, if any, with respect to the 11 Madison Avenue Loan and the 11
Madison Avenue Pari Passu Loans; eleventh, to certain holders of the 11 Madison
Avenue Subordinate Loans, in order of seniority, in an amount equal to default
interest, if any, with respect to such 11 Madison Avenue Subordinate Loan;
twelfth, pro rata, among the trust and the holders of the 11 Madison Avenue Pari
Passu Loans in an amount equal to any prepayment premiums payable with respect
to the 11 Madison Avenue Senior Loans; thirteenth, to certain holders of the 11
Madison Avenue Subordinate Loans, in order of seniority, in an amount equal to
any prepayment premiums payable with respect to such 11 Madison Avenue
Subordinate Loans; fourteenth, to the holders of the 11 Madison Avenue
Subordinate Loans, in order of seniority, in an amount equal to unreimbursed
costs and expenses, if any, with respect to the 11 Madison Avenue Whole Loan;
and fifteenth, pro rata, among the trust, the holders of the 11 Madison Avenue
Pari Passu Loans and the holders of the 11 Madison Avenue Subordinate Loans, any
excess.
Amounts allocable to the 11 Madison Avenue Loan will be further allocated
between (i) the 11 Madison Avenue Pooled Component and available for
distributions on the Certificates, other than the Class MAD Certificates, and
(ii) the 11 Madison Avenue Non-Pooled Component and available for distributions
on the Class MAD Certificates, in accordance with the priority of payments
described in "DESCRIPTION OF THE CERTIFICATES--Distributions" in this prospectus
supplement.
Park Place Mall Loan
Servicing Provisions of the Park Place Mall Intercreditor Agreement.
Pursuant to the terms of the Park Place Mall Intercreditor Agreement, the Park
Place Mall Whole Loan will be serviced and administered pursuant to the terms of
the Pooling and Servicing Agreement by the Master Servicer and Special Servicer,
as applicable. The Park Place Mall Intercreditor Agreement provides that
expenses, losses and shortfalls relating to the Park Place Mall Whole Loan will
be allocated first, to the holder of the Park Place Mall Subordinate Loan and
thereafter, to the Park Place Mall Loan.
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Prior to a Park Place Mall Control Appraisal Period, the holder of the Park
Place Mall Subordinate Loan will have the right to consult with and advise the
Special Servicer with respect to the Park Place Mall Whole Loan; following the
occurrence and during the continuance of a Control Appraisal Period, the Trust
Fund as the holder of the Park Place Mall Loan, will have such rights as
provided in the Park Place Mall Intercreditor Agreement. The holders of the
Class PP Certificates will be entitled to exercise the rights and powers granted
to the holder of the Park Place Mall Subordinate Loan. See "SERVICING OF THE
MORTGAGE LOANS --The Controlling Class Representative" in this prospectus
supplement. A "Park Place Mall Control Appraisal Period" will exist if, and for
so long as, the initial principal balance of the Park Place Mall Subordinate
Loan (minus (i) the sum of any principal payments (whether as scheduled
amortization, principal prepayments or otherwise) allocated to, and received on,
the Park Place Mall Subordinate Loan after the Cut-Off Date, (ii) any Appraisal
Reduction Amount for the Park Place Mall Subordinate Loan and (iii) Realized
Losses with respect to the Park Place Mall Subordinate Loan) is less than 25% of
its initial principal balance.
In the event that the Park Place Mall Loan is in default, the majority
holder of the Class PP Certificates will have an option (the "Park Place Mall
Purchase Option") to purchase the Park Place Mall Whole Loan from the Trust Fund
at a price (the "Park Place Mall Loan Option Price") generally equal to the
unpaid principal balance of the Park Place Mall Whole Loan, plus accrued and
unpaid interest on such balance, all related unreimbursed Advances, together
with accrued and unpaid interest on all Advances and all accrued Special
Servicing Fees allocable to the Park Place Mall Whole Loan whether paid or
unpaid and any other expenses relating to the Park Place Mall Whole Loan. If the
majority holder of the Class PP Certificates fails to exercise this option
within the time period set forth in the Pooling and Servicing Agreement, certain
other parties may have the right to exercise the related Park Place Mall Loan
Purchase Option as described under "SERVICING OF THE MORTGAGE LOANS--Defaulted
Mortgage Loans; REO Properties; Purchase Option" in this prospectus supplement.
So long as no Park Place Mall Control Appraisal Period has occurred and is
continuing, and all of the holders of the Class PP Certificates unanimously
agree, the holders of the Class PP Certificates will be entitled to cure a
monetary event of default under the Park Place Mall Whole Loan within five (5)
business days of receipt of notice from the Master Servicer, subject to certain
limitations set forth in the Park Place Mall Intercreditor Agreement. In
connection with the exercise of a cure right, the holders of the Class PP
Certificates must pay or reimburse the Master Servicer, the Special Servicer,
the Trustee, the Fiscal Agent and any other appropriate person for all
unreimbursed Advances and unpaid fees with respect to the Park Place Mall Whole
Loan, together with interest thereon, and any other expenses incurred by the
Trust Fund in respect of the Park Place Mall Whole Loan.
Application of Payments. Under the terms of the Park Place Mall
Intercreditor Agreement, prior to the occurrence and continuance of a monetary
event of default or other material non-monetary event of default with respect to
the Park Place Mall Whole Loan (or, if such a default has occurred, but the
majority holder of the Class PP Certificates has cured such a default), after
payment of amounts payable or reimbursable under the Pooling and Servicing
Agreement, payments and proceeds received with respect to the Park Place Mall
Whole Loan will generally be paid in the following manner: first, the holder of
the Park Place Mall Loan will receive accrued and unpaid interest on its
outstanding principal at its interest rate; second, any scheduled principal
payments will be paid to the holder of the Park Place Mall Loan, pro rata, based
on the principal balance of the Park Place Mall Loan and the Park Place Mall
Subordinate Loan; third, the holder of the Park Place Mall Subordinate Loan will
receive accrued and unpaid interest on its outstanding principal balance at its
interest rate; fourth, any remaining scheduled principal payments will be paid
to the Park Place Mall Subordinate Loan, pro rata, based on the principal
balance of the Park Place Mall Loan and the Park Place Mall Subordinate Loan;
fifth, any unscheduled principal payments will be paid to the Park Place Mall
Loan and the Park Place Mall Subordinate Loan, pro rata, based on the principal
balance of each such loan, first to the Park Place Mall Loan and then to the
Park Place Mall Subordinate Loan; sixth, any prepayment premiums that are
allocable to the Park Place Mall Loan on the one hand, and the Park Place Mall
Subordinate Loan on the other hand, to the extent actually paid by the borrower,
will be paid first to the trust and the holder of the Park Place Mall Loan, and
then to the holder of the Park Place Mall Subordinate Loan, pro rata; seventh,
any default interest (in excess of the interest paid in accordance with clauses
first and third above) will be paid to each
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of the holders of the Park Place Mall Loan and the Park Place Mall Subordinate
Loan, on a pro rata basis in accordance with the respective principal balance of
each loan, first to the holder of the Park Place Mall Loan and then to the
holder of the Park Place Mall Subordinate Loan; eighth, the holder of the Park
Place Mall Subordinate Loan will receive the amount of any unreimbursed cure
payments made by such holder; and ninth, if any excess amount is paid by the
borrower, and not otherwise applied in accordance with the foregoing clauses
first through eighth above, such amount will be paid to each of the holders of
the Park Place Mall Loan and the Park Place Mall Subordinate Loan on a pro rata
basis in accordance with the respective initial principal balance of each loan,
first to the holder of the Park Place Mall Loan and then to the holder of the
Park Place Mall Subordinate Loan.
Following the occurrence and during the continuance of a monetary event of
default or other material non-monetary event of default with respect to the Park
Place Mall Whole Loan (unless the Park Place Mall Operating Advisor has cured
such a default), after payment of all amounts then payable or reimbursable under
the Pooling and Servicing Agreement, liquidation proceeds and other collections
with respect to the Park Place Mall Loan will generally be applied in the
following manner: first, the holder of the Park Place Mall Loan will receive
accrued and unpaid interest on its outstanding principal balance at its interest
rate, second, any scheduled principal payments will be paid to the holder of the
Park Place Mall Loan until the principal balance of such loan has been paid in
full; third, the holder of the Park Place Mall Subordinate Loan will receive
accrued and unpaid interest on its outstanding principal balance at its interest
rate; fourth, any remaining principal payments will be paid to the holder of the
Park Place Mall Loan until the principal balance of the related loan is reduced
to zero; fifth, the holder of the Park Place Mall Subordinate Loan will receive
an amount up to its principal balance, until such principal has been paid in
full; sixth, if the proceeds of any foreclosure sale or any liquidation of the
Park Place Mall Whole Loan or the Park Place Mall Mortgaged Property exceed the
amounts required to be applied in accordance with the foregoing clauses first
through fifth and, as a result of a workout, the principal balance of either the
Park Place Mall Loan on the one hand, and the Park Place Mall Subordinate Loan
on the other hand have been reduced, such excess amount will first be paid to
the trust in an amount up to the reduction, if any, of the respective principal
balance as a result of such workout, and then to the holder of the Park Place
Mall Subordinate Loan in an amount up to the reduction, if any, of its principal
balance as a result of such workout; seventh, any prepayment premiums that are
allocable to the Park Place Mall Loan, on the one hand, and the Park Place Mall
Subordinate Loan on the other hand, to the extent actually paid by the borrower,
will be paid first to the trust pro rata, and then to the holder of the Park
Place Mall Subordinate Loan, respectively; eighth, any default interest in
excess of the interest paid in accordance with clauses first and third above,
will be paid first to the holder of the Park Place Mall Loan, and then to the
holder of the Park Place Mall Subordinate Loan, based on the total amount of
default interest then owing to each such party; ninth, the holder of the Park
Place Mall Subordinate Loan will receive the amount of any unreimbursed cure
payments made by such holder; and tenth, if any excess amount is paid by the
borrower that is not otherwise applied in accordance with the foregoing clauses
first through ninth or the proceeds of any foreclosure sale or any liquidation
of the Park Place Mall Whole Loan or the Park Place Mall Mortgaged Property are
received in excess of the amounts required to be applied in accordance with the
foregoing clauses first through ninth, such amount will generally be paid, first
to the holder of the Park Place Mall Loan on the one hand, and then to the
holder of the Park Place Mall Subordinate Loan on the other hand, in accordance
with the respective initial principal balances of each loan.
Pointe West Medical Office Building Loan
Servicing Provisions of the Pointe West Intercreditor Agreement. With
respect to the Pointe West Medical Office Building Loan, the Master Servicer and
Special Servicer will service and administer such Mortgage Loan and the related
Subordinate Companion Loan 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. The Master Servicer and/or Special Servicer may not enter
into amendments, modifications or extensions of the Pointe West Medical Office
Building Loan or the Pointe West Medical Office Building Subordinate Loan,
without the consent of the holder of the related Subordinate Companion Loan if
the proposed amendment, modification or extension adversely affects the holder
of the related Subordinate Companion Loan in a material manner; provided,
however, that such consent right will expire when the
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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 Pointe
West Medical Office Building Loan or the Pointe West Medical Office Building
Subordinate Loan becomes 90 or more days delinquent, (ii) the principal balance
of such Pointe West Medical Office Building Loan or the Pointe West Medical
Office Building Subordinate Loan has been accelerated, (iii) the principal
balance of such Pointe West Medical Office Building Loan or the Pointe West
Medical Office Building Subordinate Loan is not paid at maturity, (iv) the
related borrower declares bankruptcy or (v) any other event where the cash flow
payment under the Pointe West Medical Office Building Subordinate Loan has been
interrupted and payments are made pursuant to the event of default waterfall,
the holder of the applicable Subordinate Companion Loan will be entitled to
purchase the related Mortgage 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 related Mortgage Loan, together with
all unpaid interest on the related Mortgage Loan (other than default interest)
at the related mortgage rate and any outstanding servicing expenses, advances
and interest on advances for which the borrower under the related Mortgage Loan
is responsible. Unless the related borrower or an affiliate is purchasing the
Pointe West Medical Office Building Loan no prepayment consideration will be
payable in connection with the purchase of the Pointe West Medical Office
Building Loan.
Application of Payments. Pursuant to the related Intercreditor Agreement
and prior to the occurrence of (i) the acceleration of the Pointe West Medical
Office Building Loan or the Pointe West Medical Office Building Subordinate
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 Subordinate Companion Loan. Any escrow and reserve payments required in
respect of the Pointe West Medical Office Building Loan or the Pointe West
Medical Office Building Subordinate Loan will be paid to the Master Servicer.
Following the occurrence and during the continuance of (i) the acceleration
of the Pointe West Medical Office Building Loan or the Pointe West Medical
Office Building Subordinate 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 Pointe West Medical Office Building
Subordinate Loan to purchase the Pointe West Medical Office Building Loan from
the trust, all payments and proceeds (of whatever nature) on the Pointe West
Medical Office Building Subordinate Loan will be subordinated to all payments
due on the related Mortgage Loan and the amounts with respect to such Loan Pair
will be paid first, to the Master Servicer, Special Servicer, Trustee or Fiscal
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 and other servicing compensation earned by such entity;
third, to the trust, in an amount equal to interest due with respect to the
Pointe West Medical Office Building Loan; fourth, to the trust, in an amount
equal to the principal balance of the Pointe West Medical Office Building 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 Pointe West Medical
Office Building Loan; sixth, to the holder of the Pointe West Medical Office
Building Subordinate Loan, up to the amount of any unreimbursed costs and
expenses paid by the holder of the such Subordinate Companion Loan; seventh, to
the holder of the Pointe West Medical Office Building Subordinate Loan, in an
amount equal to interest due with respect to such Subordinate Companion Loan;
eighth, to the holder of the Pointe West Medical Office Building Subordinate
Loan in an amount equal to the principal balance of such Subordinate Companion
Loan until paid in full; ninth, to the holder of the Pointe West Medical Office
Building Subordinate Loan in an amount equal to any prepayment premium, to the
extent actually paid, allocable to such Subordinate Companion Loan; tenth, to
the trust and the holder of the related Subordinate Companion Loan, in that
order, in an amount equal to any unpaid default interest accrued on the Pointe
West Medical Office Building Loan and the related Subordinate Companion Loan,
respectively; and eleventh, any excess, to the trust and to the holder of the
Pointe West Medical Office Building Subordinate Loan pro rata, based upon the
outstanding principal
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balances; provided that if the principal balance of the Subordinate Companion
Loan is equal to zero, then based upon the initial principal balances.
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, A-5 and A-6 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, A-5 and A-6, such
numerical and statistical information excludes the Pointe West Medical Office
Building Subordinate Loan relating to the Pointe West Medical Office Building
Loan, but such numerical and statistical information includes the Park Place
Mall Subordinate Loan relating to the Park Place Mall Loan. For purposes of the
calculation of DSC Ratios and LTV Ratios with respect to the 11 Madison Avenue
Loan, such information includes the Pari Passu Companion Loans, but not the 11
Madison Avenue Non-Pooled Component or the related Subordinate Companion Loans
and with respect to the Park Place Mall Loan, such information includes the Park
Place Mall Loan, but not the Park Place Mall Subordinate 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 accompanying prospectus.
In the schedule and tables set forth in Annexes A-1, A-2, A-3, A-4, A-5 and
A-6 to this prospectus supplement, cross-collateralized Mortgage Loans are not
grouped together; instead, references are made under the heading "Cross
Collateralized and Cross Defaulted Loan Flag" 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, A-5 and A-6:
(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 19 Mortgage Loans (loan numbers 2,
5, 7, 8, 13, 15, 16, 17, 19, 24, 25, 32, 35, 37, 50, 53, 54, 60 and 63),
representing 31.8% 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. Further, for purposes of calculating DSCR with
respect to 1 Mortgage Loan (loan number 5), representing 3.8% of the
Cut-Off Date Pool Balance, where the loan is structured with fixed monthly
payments of principal and interest for the first 12 months based upon a
20-year amortization schedule, interest only payments in months 13-36, and
fixed monthly payments of principal and interest based on a 30-year
amortization schedule thereafter, the related debt service coverage ratio
was calculated using the fixed monthly payments during the 30-year
amortization period of the loan term. In general, the Mortgage Loan Sellers
relied on either full-year operating statements, rolling 12-month operating
statements and/or applicable year-to-date
S-105
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.
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.
S-106
(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 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, 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, 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 (including, with respect to the 11 Madison Avenue Loan, the master
servicing fee rate for the 11 Madison Avenue Loan specified in the 2004-C10
Pooling and Servicing Agreement), and (b) 0.0021%, 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; provided
however, for purposes of calculating the Remaining Amortization Term with
respect to 1 Mortgage Loan (loan number 5), representing 3.8% of the
Cut-Off Date Pool Balance, where the loan is structured with fixed monthly
payments of principal and interest for the first 12 months based upon a
20-year amortization schedule, interest only payments in months 13-36, and
fixed monthly payments of principal and interest based on a 30-year
amortization schedule thereafter, the related Remaining Amortization Term
was calculated assuming a 30-year amortization schedule.
(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
S-107
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 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 is exclusive of hospitality properties,
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
MORTGAGED PROPERTIES BY PROPERTY TYPE FOR ALL MORTGAGE LOANS(1)
NUMBER OF AGGREGATE % OF AVERAGE HIGHEST
MORTGAGED CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
PROPERTY TYPE PROPERTIES BALANCE POOL BALANCE BALANCE BALANCE
- ---------------------- ------------ ----------------- -------------- -------------- --------------
Office ............... 17 $ 358,910,710 32.7% $21,112,395 $ 82,000,000
Retail ............... 28 357,097,784 32.6 $12,753,492 $149,846,169
Retail -- Anchored... 17 273,568,806 24.9 $16,092,283 $149,846,169
Retail -- Shadow
Anchored(4) ........ 5 60,185,146 5.5 $12,037,029 $ 37,000,000
Retail --
Unanchored ......... 6 23,343,832 2.1 $ 3,890,639 $ 5,850,000
Multifamily .......... 27 298,827,406 27.2 $11,067,682 $ 33,000,000
Self Storage ......... 4 31,944,610 2.9 $ 7,986,152 $ 11,168,982
Mobile Home Park ..... 3 25,920,000 2.4 $ 8,640,000 $ 10,650,000
Mixed Use ............ 1 12,989,840 1.2 $12,989,840 $ 12,989,840
Hospitality .......... 2 9,740,000 0.9 $ 4,870,000 $ 6,100,000
Land(5) .............. 1 1,600,000 0.1 $ 1,600,000 $ 1,600,000
- ---------------------- -- -------------- -----
83 $1,097,030,350 100.0% $13,217,233 $149,846,169
== ============== =====
WTD. AVG.
STATED
REMAINING WTD.
WTD. AVG. WTD. AVG. TERM TO WTD. MINIMUM WTD. AVG. AVG.
CUT-OFF DATE LTV RATIO AT MATURITY AVG. DSC DSC MAXIMUM OCCUPANCY MORTGAGE
PROPERTY TYPE LTV RATIO MATURITY(2) (MOS.)(2) RATIO RATIO DSC RATIO RATE(3) RATE
- ---------------------- -------------- -------------- ----------- ---------- --------- ----------- ----------- -----------
Office ............... 64.9% 58.1% 112 1.72x 1.20x 2.94x 94.1% 5.675%
Retail ............... 69.4% 60.9% 92 1.47x 1.20x 1.70x 95.1% 5.551%
Retail -- Anchored... 68.4% 61.2% 83 1.52x 1.20x 1.70x 95.0% 5.395%
Retail -- Shadow
Anchored(4) ........ 73.8% 60.6% 124 1.26x 1.21x 1.44x 94.3% 5.907%
Retail --
Unanchored ......... 69.4% 59.2% 115 1.44x 1.26x 1.62x 97.9% 6.471%
Multifamily .......... 77.0% 69.2% 93 1.26x 1.20x 1.69x 93.8% 5.521%
Self Storage ......... 64.0% 49.2% 124 1.72x 1.60x 2.44x 91.8% 5.826%
Mobile Home Park ..... 79.2% 66.4% 120 1.27x 1.22x 1.33x 99.5% 5.616%
Mixed Use ............ 71.4% 61.0% 119 1.29x 1.29x 1.29x 98.7% 6.220%
Hospitality .......... 60.6% 48.1% 107 1.68x 1.49x 1.79x N/A 6.732%
Land(5) .............. 53.3% 48.1% 84 1.77x 1.77x 1.77x 100.0% 5.920%
- -----------------------
70.0% 61.9% 101 1.50X 1.20X 2.94X 94.5% 5.612%
- -------
(1) Because this table presents information relating to the Mortgaged
Properties and not the Mortgage Loans, the information for Mortgage Loans
secured by more than one Mortgaged Property is based on allocated amounts
(allocating the Mortgage Loan principal balance to each of those properties
by the appraised values of the Mortgaged Properties or the allocated loan
amount as detailed in the related Mortgage Loan documents).
(2) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
(3) 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 but excludes
2 Mortgage Loans secured by hospitality properties, representing 0.9% of
the Cut-Off Date Pool Balance.
(4) A Mortgaged Property is considered "shadow anchored" if it is in close
proximity to the anchored property.
(5) Specifically, the fee interest in land, which the ground tenant has
improved and leased as an anchored retail building. The retail 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 FOR ALL MORTGAGE LOANS
AGGREGATE % OF
RANGE OF CUT-OFF NUMBER OF CUT-OFF DATE CUT-OFF DATE AVERAGE CUT-OFF
DATE BALANCES ($) LOANS BALANCE POOL BALANCE DATE BALANCE
- -------------------------------- ----------- ----------------- -------------- -----------------
(less than) 2,000,000 .. ...... 7 $ 9,860,624 0.9% $ 1,408,661
2,000,001 -- 3,000,000 ......... 6 15,335,565 1.4 $ 2,555,928
3,000,001 -- 4,000,000 ......... 9 30,573,200 2.8 $ 3,397,022
4,000,001 -- 5,000,000 ......... 2 8,302,722 0.8 $ 4,151,361
5,000,001 -- 6,000,000 ......... 8 45,162,691 4.1 $ 5,645,336
6,000,001 -- 7,000,000 ......... 7 46,009,833 4.2 $ 6,572,833
7,000,001 -- 8,000,000 ......... 3 22,308,484 2.0 $ 7,436,161
8,000,001 -- 9,000,000 ......... 7 60,030,589 5.5 $ 8,575,798
9,000,001 -- 10,000,000 ........ 2 19,850,000 1.8 $ 9,925,000
10,000,001 -- 15,000,000 ....... 14 179,625,643 16.4 $ 12,830,403
15,000,001 -- 20,000,000 ....... 5 85,249,982 7.8 $ 17,049,996
20,000,001 -- 25,000,000 ....... 1 20,143,496 1.8 $ 20,143,496
25,000,001 -- 30,000,000 ....... 2 59,931,351 5.5 $ 29,965,676
30,000,001 -- 35,000,000 ....... 1 33,000,000 3.0 $ 33,000,000
35,000,001 -- 40,000,000 ....... 2 72,400,000 6.6 $ 36,200,000
40,000,001 -- 45,000,000 ....... 2 85,900,000 7.8 $ 42,950,000
70,000,001 -- 75,000,000 ....... 1 71,500,000 6.5 $ 71,500,000
80,000,001 -- 149,846,169 ...... 2 231,846,169 21.1 $115,923,085
- -------------------------------- -- -------------- -----
81 $1,097,030,350 100.0% $ 13,543,585
== ============== =====
WTD. AVG.
STATED
REMAINING
WTD. AVG. WTD. AVG. TERM TO WTD. AVG.
RANGE OF CUT-OFF HIGHEST CUT-OFF CUT-OFF DATE LTV RATIO MATURITY WTD. AVG. MORTGAGE
DATE BALANCES ($) DATE BALANCE LTV RATIO AT MATURITY* (MOS.)* DSC RATIO RATE
- -------------------------------- ----------------- -------------- -------------- ---------- ----------- ----------
(less than) 2,000,000 .. ...... $ 1,746,078 64.4% 51.9% 100 1.62x 5.747%
2,000,001 -- 3,000,000 ......... $ 2,997,546 70.2% 52.4% 139 1.40x 6.047%
3,000,001 -- 4,000,000 ......... $ 3,856,000 69.4% 54.2% 116 1.41x 6.284%
4,000,001 -- 5,000,000 ......... $ 4,186,119 72.3% 60.5% 118 1.47x 5.531%
5,000,001 -- 6,000,000 ......... $ 6,000,000 74.7% 65.4% 112 1.31x 5.927%
6,000,001 -- 7,000,000 ......... $ 6,993,523 71.5% 56.2% 137 1.38x 5.997%
7,000,001 -- 8,000,000 ......... $ 8,000,000 73.3% 64.4% 98 1.41x 6.058%
8,000,001 -- 9,000,000 ......... $ 8,775,628 75.0% 63.4% 119 1.33x 5.783%
9,000,001 -- 10,000,000 ........ $ 10,000,000 67.3% 57.0% 90 1.50x 5.588%
10,000,001 -- 15,000,000 ....... $ 15,000,000 74.1% 64.8% 99 1.35x 5.586%
15,000,001 -- 20,000,000 ....... $ 17,985,042 77.2% 67.9% 111 1.24x 5.810%
20,000,001 -- 25,000,000 ....... $ 20,143,496 78.4% 70.0% 81 1.20x 5.280%
25,000,001 -- 30,000,000 ....... $ 29,973,130 77.0% 70.4% 70 1.22x 5.530%
30,000,001 -- 35,000,000 ....... $ 33,000,000 80.0% 74.5% 120 1.31x 5.660%
35,000,001 -- 40,000,000 ....... $ 37,000,000 74.3% 60.5% 120 1.27x 5.692%
40,000,001 -- 45,000,000 ....... $ 44,000,000 63.0% 58.9% 83 2.20x 5.636%
70,000,001 -- 75,000,000 ....... $ 71,500,000 65.0% 65.0% 119 1.69x 5.680%
80,000,001 -- 149,846,169 ...... $149,846,169 60.5% 55.7% 82 1.70x 5.205%
- --------------------------------
$149,846,169 70.0% 61.9% 101 1.50X 5.612%
- -------
* Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-110
MORTGAGED PROPERTIES BY STATE FOR ALL MORTGAGE LOANS
WTD. AVG.
STATED
% OF WTD. AVG. REMAINING
NUMBER OF AGGREGATE CUT-OFF AVERAGE HIGHEST CUT-OFF WTD. AVG. TERM TO WTD. AVG.
MORTGAGED CUT-OFF DATE POOL CUT-OFF CUT-OFF DATE LTV RATIO AT MATURITY WTD. AVG. MORTGAGE
STATE PROPERTIES DATE BALANCE BALANCE DATE BALANCE DATE BALANCE LTV RATIO MATURITY(1) (MOS.)(1) DSC RATIO RATE
- --------------- ---------- -------------- --------- ------------ ------------ --------- ------------ ---------- --------- --------
IL ............ 11 $ 182,652,524 16.6% $ 16,604,775 $ 71,500,000 73.1% 68.1% 96 1.41x 5.449%
CA ............ 13 153,267,943 14.0 $ 11,789,842 $ 37,000,000 71.1% 59.3% 121 1.38x 5.855%
Southern(2) . 9 119,571,969 10.9 $ 13,285,774 $ 37,000,000 72.0% 59.9% 121 1.34x 5.916%
Northern(2) . 4 33,695,974 3.1 $ 8,423,993 $ 10,300,000 68.1% 57.1% 119 1.51x 5.638%
AZ ............ 1 149,846,169 13.7 $149,846,169 $149,846,169 63.8% 58.5% 65 1.64x 5.150%
NY ............ 3 100,228,448 9.1 $ 33,409,483 $ 82,000,000 58.7% 53.8% 114 1.71x 5.423%
CO ............ 2 73,973,130 6.7 $ 36,986,565 $ 44,000,000 61.4% 59.4% 60 2.25x 5.319%
NC ............ 6 64,750,000 5.9 $ 10,791,667 $ 17,800,000 76.1% 68.8% 92 1.27x 5.531%
GA ............ 3 55,090,934 5.0 $ 18,363,645 $ 33,000,000 78.7% 70.3% 120 1.28x 5.562%
FL ............ 9 44,485,559 4.1 $ 4,942,840 $ 12,989,840 69.1% 57.5% 120 1.48x 6.287%
MD ............ 1 41,900,000 3.8 $ 41,900,000 $ 41,900,000 75.1% 66.6% 108 1.42x 6.240%
DC ............ 2 38,494,137 3.5 $ 19,247,068 $ 35,400,000 73.0% 53.9% 129 1.28x 5.663%
UT ............ 2 24,492,674 2.2 $ 12,246,337 $ 16,000,000 75.2% 64.8% 119 1.27x 6.079%
TX ............ 4 24,071,770 2.2 $ 6,017,942 $ 9,850,000 68.5% 61.2% 95 1.46x 5.536%
NJ ............ 3 22,287,699 2.0 $ 7,429,233 $ 8,400,000 75.1% 55.9% 157 1.30x 6.103%
NV ............ 3 21,536,119 2.0 $ 7,178,706 $ 10,650,000 78.1% 65.2% 119 1.30x 5.485%
WI ............ 3 20,150,000 1.8 $ 6,716,667 $ 12,850,000 77.1% 72.2% 58 1.37x 5.482%
VA ............ 5 18,483,993 1.7 $ 3,696,799 $ 5,545,974 78.7% 65.4% 131 1.29x 6.206%
AR ............ 1 15,000,000 1.4 $ 15,000,000 $ 15,000,000 74.3% 63.2% 120 1.49x 6.120%
OR ............ 2 13,050,000 1.2 $ 6,525,000 $ 7,200,000 62.5% 53.3% 120 1.47x 6.180%
LA ............ 1 10,000,000 0.9 $ 10,000,000 $ 10,000,000 75.6% 58.5% 120 1.31x 6.010%
KS ............ 1 8,000,000 0.7 $ 8,000,000 $ 8,000,000 76.2% 69.4% 60 1.41x 5.440%
CT ............ 2 4,116,603 0.4 $ 2,058,302 $ 2,232,734 69.8% 59.3% 119 1.36x 6.020%
OH ............ 1 3,150,000 0.3 $ 3,150,000 $ 3,150,000 75.0% 63.6% 120 1.27x 5.990%
OK ............ 1 2,997,546 0.3 $ 2,997,546 $ 2,997,546 74.9% 63.7% 119 1.56x 6.050%
SC ............ 1 2,465,000 0.2 $ 2,465,000 $ 2,465,000 78.5% 66.4% 120 1.37x 5.900%
IN ............ 1 1,600,000 0.1 $ 1,600,000 $ 1,600,000 53.3% 48.1% 84 1.77x 5.920%
NM ............ 1 940,105 0.1 $ 940,105 $ 940,105 62.7% 58.5% 73 1.38x 8.700%
- --------------- -- -------------- -----
83 $1,097,030,350 100.0% $ 13,217,233 $149,846,169 70.0% 61.9% 101 1.50X 5.612%
== ============== =====
- -------
(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 UNDERWRITTEN DSC RATIOS FOR ALL MORTGAGE LOANS
WTD. AVG.
STATED
WTD. AVG. REMAINING
AGGREGATE % OF AVERAGE HIGHEST CUT-OFF WTD. AVG. TERM TO WTD. AVG. WTD. AVG.
RANGE OF NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE DATE LTV RATIO MATURITY DSC MORTGAGE
DSC RATIOS (X) OF LOANS BALANCE POOL BALANCE BALANCE BALANCE LTV RATIO AT MATURITY* (MOS.)* RATIO RATE
- ---------------- -------- -------------- ------------ ------------ ------------ --------- ------------ --------- --------- ---------
1.20 -- 1.24 ... 14 $ 198,230,597 18.1% $14,159,328 $ 29,973,130 77.5% 68.6% 97 1.21x 5.641%
1.25 -- 1.29 ... 19 233,073,274 21.2 $12,267,014 $ 37,000,000 75.6% 65.0% 107 1.27x 5.647%
1.30 -- 1.34 ... 10 82,053,657 7.5 $ 8,205,366 $ 33,000,000 78.3% 68.8% 115 1.31x 5.736%
1.35 -- 1.39 ... 10 53,341,478 4.9 $ 5,334,148 $ 12,850,000 74.6% 66.6% 99 1.36x 5.915%
1.40 -- 1.44 ... 6 66,304,582 6.0 $11,050,764 $ 41,900,000 72.7% 60.2% 117 1.42x 6.243%
1.45 -- 1.49 ... 6 52,310,946 4.8 $ 8,718,491 $ 15,000,000 67.3% 56.8% 117 1.48x 6.007%
1.50 -- 1.54 ... 1 3,094,137 0.3 $ 3,094,137 $ 3,094,137 55.3% 1.5% 239 1.50x 6.380%
1.55 -- 1.59 ... 2 7,183,665 0.7 $ 3,591,832 $ 4,186,119 74.8% 62.6% 118 1.57x 5.467%
1.60 -- 1.64 ... 4 172,988,014 15.8 $43,247,003 $149,846,169 64.4% 57.8% 72 1.64x 5.250%
1.65 -- 1.69 ... 2 72,900,000 6.6 $36,450,000 $ 71,500,000 65.0% 64.7% 119 1.69x 5.685%
1.70 -- 1.74 ... 1 9,850,000 0.9 $ 9,850,000 $ 9,850,000 58.8% 55.4% 59 1.70x 5.160%
1.75 -- 1.79 ... 2 7,700,000 0.7 $ 3,850,000 $ 6,100,000 57.5% 46.6% 113 1.79x 6.427%
1.80 -- 1.84 ... 2 92,300,000 8.4 $46,150,000 $ 82,000,000 55.2% 50.6% 114 1.81x 5.351%
2.30 -- 2.94 ... 2 45,700,000 4.2 $22,850,000 $ 44,000,000 51.0% 49.5% 66 2.92x 5.076%
- ---------------- -- -------------- -----
81 $1,097,030,350 100.0% $13,543,585 $149,846,169 70.0% 61.9% 101 1.50X 5.612%
== ============== =====
- -------
* Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-112
RANGE OF LTV RATIOS FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
WTD. AVG.
STATED
WTD. AVG. REMAINING
RANGE OF AGGREGATE % OF AVERAGE HIGHEST CUT-OFF WTD. AVG. TERM TO WTD. AVG.
CUT-OFF DATE NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF CUT-OFF DATE LTV RATIO MATURITY WTD. AVG. MORTGAGE
LTV RATIOS (%) OF LOANS BALANCE POOL BALANCE DATE BALANCE DATE BALANCE LTV RATIO AT MATURITY* (MOS.)* DSC RATIO RATE
- ----------------- -------- -------------- ------------ ------------ ------------ --------- ------------ --------- --------- --------
38.60 -- 40.00 .. 1 $ 1,700,000 0.2% $ 1,700,000 $ 1,700,000 38.6% 0.0% 216 2.44x 5.490%
50.01 -- 55.00 .. 4 130,100,000 11.9 $32,525,000 $ 82,000,000 53.5% 49.9% 97 2.18x 5.246%
55.01 -- 60.00 .. 4 29,344,137 2.7 $ 7,336,034 $ 10,300,000 58.7% 45.9% 112 1.74x 5.776%
60.01 -- 65.00 .. 8 243,431,332 22.2 $30,428,917 $149,846,169 64.0% 59.9% 85 1.64x 5.447%
65.01 -- 70.00 .. 11 71,936,973 6.6 $ 6,539,725 $ 14,487,259 67.6% 53.3% 130 1.47x 5.874%
70.01 -- 75.00 .. 17 190,197,984 17.3 $11,188,117 $ 37,000,000 73.5% 62.4% 112 1.30x 5.746%
75.01 -- 80.00 .. 36 430,319,924 39.2 $11,953,331 $ 41,900,000 78.0% 69.2% 100 1.28x 5.702%
- ----------------- -- -------------- -----
81 $1,097,030,350 100.0% $13,543,585 $149,846,169 70.0% 61.9% 101 1.50X 5.612%
== ============= ======
- -------
* Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-113
RANGE OF LTV RATIOS FOR ALL MORTGAGE LOANS AS OF THE MATURITY DATE OR
ANTICIPATED REPAYMENT DATE
WTD. AVG.
STATED
RANGE OF MATURITY AVERAGE WTD. AVG. WTD. AVG. REMAINING
DATE OR ANTICIPATED AGGREGATE % OF CUT-OFF HIGHEST CUT-OFF LTV TERM TO WTD. AVG. WTD. AVG.
REPAYMENT DATE NUMBER CUT-OFF DATE CUT-OFF DATE DATE CUT-OFF DATE DATE RATIO AT MATURITY DSC MORTGAGE
LTV RATIOS (%) OF LOANS BALANCE POOL BALANCE BALANCE BALANCE LTV RATIO MATURITY* (MOS.)* RATIO RATE
- ------------------- -------- -------------- ------------ ----------- ------------ --------- --------- --------- --------- ---------
0.00 -- 5.00 ...... 3 $ 7,294,137 0.7% $ 2,431,379 $ 3,094,137 50.3% 0.6% 234 1.70x 6.107%
30.01 -- 40.00 .... 1 6,993,523 0.6 $ 6,993,523 $ 6,993,523 66.0% 31.7% 239 1.41x 6.650%
40.01 -- 50.00 .... 3 9,100,000 0.8 $ 3,033,333 $ 6,100,000 58.5% 47.0% 114 1.77x 6.354%
50.01 -- 55.00 .... 10 182,123,356 16.6 $18,212,336 $ 82,000,000 56.9% 51.4% 101 2.01x 5.483%
55.01 -- 60.00 .... 14 254,329,439 23.2 $18,166,389 $149,846,169 66.5% 58.2% 86 1.53x 5.386%
60.01 -- 65.00 .... 13 209,995,013 19.1 $16,153,463 $ 71,500,000 70.8% 63.5% 119 1.43x 5.810%
65.01 -- 70.00 .... 23 241,878,843 22.0 $10,516,471 $ 41,900,000 77.5% 67.9% 103 1.30x 5.772%
70.01 -- 74.50 .... 14 185,316,039 16.9 $13,236,860 $ 33,000,000 78.3% 71.9% 87 1.26x 5.522%
- ------------------- -- -------------- -----
81 $1,097,030,350 100.0% $13,543,585 $149,846,169 70.0% 61.9% 101 1.50X 5.612%
== ============== =====
- -------
* Calculated with respect to the Anticipated Repayment Date for ARD Loans.
RANGE OF MORTGAGE RATES FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
AGGREGATE % OF AVERAGE
RANGE OF MORTGAGE NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
RATES (%) OF LOANS BALANCE POOL BALANCE BALANCE
- -------------------------------- ---------- ----------------- -------------- --------------
4.990 -- 5.249 ................. 11 $ 258,531,512 23.6% $23,502,865
5.250 -- 5.499 ................. 10 206,598,974 18.8 $20,659,897
5.500 -- 5.749 ................. 15 256,498,429 23.4 $17,099,895
5.750 -- 5.999 ................. 22 196,143,698 17.9 $ 8,915,623
6.000 -- 6.249 ................. 12 129,442,436 11.8 $10,786,870
6.250 -- 6.499 ................. 5 21,978,129 2.0 $ 4,395,626
6.500 -- 6.749 ................. 3 20,202,007 1.8 $ 6,734,002
7.000 -- 7.249 ................. 1 3,640,000 0.3 $ 3,640,000
8.250 -- 8.499 ................. 1 3,055,058 0.3 $ 3,055,058
8.500 -- 8.700 ................. 1 940,105 0.1 $ 940,105
- -------------------------------- -- -------------- -----
81 $1,097,030,350 100.0% $13,543,585
== ============== =====
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 MORTGAGE RATES (%) BALANCE LTV RATIO AT MATURITY* (MOS.)* RATIO RATE
- -------------------------------- -------------- -------------- -------------- ---------- ----------- ----------
4.990 -- 5.249 ................. $149,846,169 63.9% 59.1% 66 1.79x 5.123%
5.250 -- 5.499 ................. $ 82,000,000 68.3% 61.7% 94 1.49x 5.318%
5.500 -- 5.749 ................. $ 71,500,000 72.4% 65.4% 111 1.41x 5.664%
5.750 -- 5.999 ................. $ 37,000,000 75.0% 63.7% 119 1.32x 5.870%
6.000 -- 6.249 ................. $ 41,900,000 73.0% 62.2% 118 1.37x 6.160%
6.250 -- 6.499 ................. $ 7,200,000 70.1% 52.2% 146 1.37x 6.362%
6.500 -- 6.749 ................. $ 7,108,484 68.7% 49.2% 160 1.51x 6.584%
7.000 -- 7.249 ................. $ 3,640,000 63.9% 51.2% 84 1.49x 7.020%
8.250 -- 8.499 ................. $ 3,055,058 61.2% 51.6% 89 1.44x 8.300%
8.500 -- 8.700 ................. $ 940,105 62.7% 58.5% 73 1.38x 8.700%
- ---------------------------------
$149,846,169 70.0% 61.9% 101 1.50X 5.612%
- -------
* Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-114
RANGE OF ORIGINAL TERMS TO MATURITY OR ANTICIPATED REPAYMENT DATE
FOR ALL MORTGAGE LOANS
RANGE OF ORIGINAL TERM 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 ................... 13 $ 151,122,354 13.8% $11,624,796
61 -- 84 .................. 8 251,001,456 22.9 $31,375,182
85 -- 108 ................. 1 41,900,000 3.8 $41,900,000
109 -- 120 ................ 53 632,223,821 57.6 $11,928,751
121 -- 156 ................ 1 3,055,058 0.3 $ 3,055,058
169 -- 180 ................ 1 3,440,000 0.3 $ 3,440,000
205 -- 216 ................ 1 1,700,000 0.2 $ 1,700,000
229 -- 240 ................ 3 12,587,660 1.1 $ 4,195,887
- --------------------------- -- -------------- -----
81 $1,097,030,350 100.0% $13,543,585
== ============== =====
WTD. AVG.
STATED
REMAINING
RANGE OF ORIGINAL TERM 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 ................... $ 44,000,000 67.7% 64.2% 59 1.80x 5.288%
61 -- 84 .................. $149,846,169 69.4% 62.8% 72 1.48x 5.241%
85 -- 108 ................. $ 41,900,000 75.1% 66.6% 108 1.42x 6.240%
109 -- 120 ................ $ 82,000,000 70.7% 61.8% 118 1.44x 5.761%
121 -- 156 ................ $ 3,055,058 61.2% 51.6% 89 1.44x 8.300%
169 -- 180 ................ $ 3,440,000 80.0% 59.1% 180 1.27x 6.260%
205 -- 216 ................ $ 1,700,000 38.6% 0.0% 216 2.44x 5.490%
229 -- 240 ................ $ 6,993,523 60.6% 18.0% 239 1.44x 6.492%
- ----------------------------
$149,846,169 70.0% 61.9% 101 1.50X 5.612%
- -------
* Calculated with respect to the Anticipated Repayment Date for ARD Loans.
RANGE OF REMAINING TERMS TO MATURITY OR ANTICIPATED REPAYMENT DATE
FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
RANGE OF REMAINING TERM 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 .................... 13 $ 151,122,354 13.8% $11,624,796
61 -- 84 ................... 9 251,941,560 23.0 $27,993,507
85 -- 108 .................. 2 44,955,058 4.1 $22,477,529
109 -- 120 ................. 52 631,283,716 57.5 $12,140,071
169 -- 180 ................. 1 3,440,000 0.3 $ 3,440,000
205 -- 216 ................. 1 1,700,000 0.2 $ 1,700,000
229 -- 240 ................. 3 12,587,660 1.1 $ 4,195,887
- ---------------------------- -- -------------- -----
81 $1,097,030,350 100.0% $13,543,585
== ============== =====
WTD. AVG.
STATED
REMAINING
RANGE OF REMAINING TERM 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 .................... $ 44,000,000 67.7% 64.2% 59 1.80x 5.288%
61 -- 84 ................... $149,846,169 69.4% 62.8% 72 1.48x 5.254%
85 -- 108 .................. $ 41,900,000 74.1% 65.6% 107 1.42x 6.380%
109 -- 120 ................. $ 82,000,000 70.7% 61.8% 118 1.44x 5.757%
169 -- 180 ................. $ 3,440,000 80.0% 59.1% 180 1.27x 6.260%
205 -- 216 ................. $ 1,700,000 38.6% 0.0% 216 2.44x 5.490%
229 -- 240 ................. $ 6,993,523 60.6% 18.0% 239 1.44x 6.492%
- -----------------------------
$149,846,169 70.0% 61.9% 101 1.50X 5.612%
- -------
* Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-115
RANGE OF REMAINING AMORTIZATION TERMS
FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
RANGE OF AGGREGATE % OF AVERAGE
REMAINING AMORTIZATION NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
TERMS (MONTHS)(1) OF LOANS BALANCE POOL BALANCE BALANCE
- --------------------------- ---------- ----------------- -------------- --------------
193 -- 228 ................ 1 $ 1,700,000 0.2% $ 1,700,000
229 -- 264 ................ 4 12,289,195 1.1 $ 3,072,299
265 -- 300 ................ 8 80,144,610 7.3 $10,018,076
301 -- 348 ................ 3 15,933,628 1.5 $ 5,311,209
349 -- 360 ................ 63 871,462,916 79.4 $13,832,745
Non-amortizing ............ 2 115,500,000 10.5 $57,750,000
-- -------------- -----
81 $1,097,030,350 100.0% $13,543,585
== ============== =====
WTD. AVG.
STATED
REMAINING
RANGE OF HIGHEST WTD. AVG. WTD. AVG. TERM TO WTD. AVG. WTD. AVG.
REMAINING 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
- --------------------------- -------------- -------------- ---------------- ----------- ----------- ----------
193 -- 228 ................ $ 1,700,000 38.6% 0.0% 216 2.44x 5.490%
229 -- 264 ................ $ 3,640,000 58.6% 28.4% 156 1.47x 7.008%
265 -- 300 ................ $ 35,400,000 71.8% 57.0% 113 1.41x 5.808%
301 -- 348 ................ $ 8,000,000 70.9% 52.2% 139 1.41x 6.163%
349 -- 360 ................ $149,846,169 71.4% 63.4% 98 1.42x 5.587%
Non-amortizing ............ $ 71,500,000 59.8% 59.8% 97 2.17x 5.444%
$149,846,169 70.0% 61.9% 101 1.50X 5.612%
The weighted average remaining amortization term for all Mortgage Loans
(excluding non-amortizing 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-116
AMORTIZATION TYPE FOR ALL MORTGAGE LOANS
AGGREGATE % OF AVERAGE
NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
AMORTIZATION TYPES OF LOANS BALANCE POOL BALANCE BALANCE
- ----------------------------- ---------- ----------------- -------------- --------------
Amortizing Balloon .......... 29 $ 358,162,528 32.6% $12,350,432
Amortizing ARD .............. 28 267,633,684 24.4 $ 9,558,346
Interest-only, Amortizing
ARD(2) ..................... 12 239,350,000 21.8 $19,945,833
Interest-only, Balloon ...... 2 115,500,000 10.5 $57,750,000
Interest-only, Amortizing
Balloon(2) ................. 7 109,090,000 9.9 $15,584,286
Fully Amortizing ............ 3 7,294,137 0.7 $ 2,431,379
-- -------------- -----
81 $1,097,030,350 100.0% $13,543,585
== ============== =====
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 TYPES BALANCE LTV RATIO AT MATURITY(1) (MOS.)(1) RATIO RATE
- ----------------------------- -------------- -------------- ---------------- ----------- ----------- ----------
Amortizing Balloon .......... $149,846,169 68.6% 59.0% 99 1.50x 5.618%
Amortizing ARD .............. $ 29,973,130 75.8% 66.3% 94 1.28x 5.622%
Interest-only, Amortizing
ARD(2) ..................... $ 82,000,000 68.2% 60.4% 110 1.48x 5.686%
Interest-only, Balloon ...... $ 71,500,000 59.8% 59.8% 97 2.17x 5.444%
Interest-only, Amortizing
Balloon(2) ................. $ 33,000,000 76.1% 70.2% 98 1.32x 5.552%
Fully Amortizing ............ $ 3,094,137 50.3% 0.6% 234 1.70x 6.107%
$149,846,169 70.0% 61.9% 101 1.50X 5.612%
- -------
(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 12
to 60 months from origination prior to the commencement of payments of
principal and interest.
S-117
RANGE OF OCCUPANCY RATES FOR ALL MORTGAGE LOANS(1)
AGGREGATE % OF AVERAGE
NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
RANGE OF OCCUPANCY RATES (%) OF LOANS BALANCE POOL BALANCE BALANCE
- --------------------------------- ---------- ----------------- -------------- --------------
80.00 -- 84.99 .................. 6 $ 94,808,171 8.6% $15,801,362
85.00 -- 89.99 .................. 4 127,500,000 11.6 $31,875,000
90.00 -- 94.99 .................. 14 195,313,968 17.8 $13,950,998
95.00 -- 99.99 .................. 20 407,664,722 37.2 $20,383,236
100.00 -- 100.00 ................ 35 262,003,489 23.9 $ 7,485,814
-- -------------- ----
79 $1,087,290,350 99.1% $13,763,169
== ============== ====
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
- --------------------------------- -------------- -------------- ---------------- ----------- ----------- ----------
80.00 -- 84.99 .................. $ 29,973,130 73.5% 65.5% 94 1.33x 5.877%
85.00 -- 89.99 .................. $ 71,500,000 59.5% 58.3% 100 2.14x 5.467%
90.00 -- 94.99 .................. $ 33,000,000 76.8% 68.3% 101 1.28x 5.516%
95.00 -- 99.99 .................. $149,846,169 66.5% 59.6% 91 1.53x 5.402%
100.00 -- 100.00 ................ $ 41,900,000 74.5% 61.6% 119 1.34x 5.943%
$149,846,169 70.1% 62.0% 101 1.49X 5.602%
- -------
(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, but
excludes 2 Mortgage Loans secured by hospitality properties, representing
0.9% of the Cut-off Date Pool Balance.
(2) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-118
PREPAYMENT PROVISION BASED ON OUTSTANDING LOAN BALANCE(1)(2)
DATE AUGUST--2004 AUGUST--2005 AUGUST--2006 AUGUST--2007 AUGUST--2008
- ------------------------------ -------------- --------------- --------------- --------------- ---------------
Locked Out ................... 100.0% 99.10% 41.01% 35.84% 1.40%
Defeasance ................... 0.00 0.00 56.52 61.70 96.15
Yield Maintenance ............ 0.00 0.90 2.47 2.46 2.45
Prepayment Premium ........... 0.00 0.00 0.00 0.00 0.00
Open ......................... 0.00 0.00 0.00 0.00 0.00
---------- ---------- ---------- ---------- ----------
Total ........................ 100.00% 100.00% 100.00% 100.00% 100.00%
- ------------------------------ ---------- ---------- ---------- ---------- ----------
Mortgage Pool Balance ........
Outstanding (in millions) .... $ 1,097.03 $ 1,087.48 $ 1,076.86 $ 1,065.14 $ 1,052.02
- ------------------------------ ----------- ---------- ---------- ---------- ----------
% of Initial Pool Balance..... 100.0% 99.13% 98.16% 97.09% 95.90%
============================== =========== ========== ========== ========== ==========
DATE AUGUST--2009 AUGUST--2010 AUGUST--2011 AUGUST--2012 AUGUST--2013 AUGUST--2014
- ------------------------------ -------------- -------------- -------------- -------------- -------------- -------------
Locked Out ................... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Defeasance ................... 81.08 95.85 95.00 95.42 89.73 92.77
Yield Maintenance ............ 3.42 4.03 4.59 4.58 4.85 7.23
Prepayment Premium ........... 0.00 0.00 0.00 0.00 0.00 0.00
Open ......................... 15.50 0.12 0.41 0.00 5.41 0.00
-------- -------- -------- -------- -------- -------
Total ........................ 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
- ------------------------------- -------- -------- -------- -------- -------- -------
Mortgage Pool Balance ........
Outstanding (in millions) .... $ 893.40 $ 743.06 $ 639.94 $ 626.19 $ 577.12 $ 13.34
- ------------------------------- -------- -------- -------- -------- -------- --------
% of Initial Pool Balance..... 81.44% 67.73% 58.33% 57.08% 52.61% 1.22%
=============================== ======== ======== ======== ======== ======== ========
(1) Prepayment provisions in effect as a percentage of outstanding loan
balances as of the indicated date assuming no prepayments on the Mortgage
Loans (and assuming that each ARD Loan will be repaid on its Anticipated
Repayment Date).
(2) Based on the assumptions set forth in footnote (1) above, after August
2014, the outstanding loan balances represent less than 1.22% of the
Cut-Off Date Pool Balance.
S-119
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
NUMBER OF CUT-OFF DATE
MORTGAGE MORTGAGED DATE POOL
LOAN NAME LOAN SELLER PROPERTIES BALANCE BALANCE
- --------------------------------- ------------- ------------ --------------- ---------
Park Place Mall ................. Wachovia 1/1 $149,846,169 13.7%
BJB Portfolio ................... Wachovia 10/10 111,152,524 10.1
11 Madison Avenue ............... Wachovia 1/1 82,000,000 7.5
444 North Michigan
Avenue ......................... Wachovia 1/1 71,500,000 6.5
Independence Plaza .............. Wachovia 1/1 44,000,000 4.0
FBI Field Office --
Baltimore, MD .................. Artesia 1/1 41,900,000 3.8
Barneys New York --
Beverly Hills, CA .............. Wachovia 1/1 37,000,000 3.4
1750 H Street ................... Wachovia 1/1 35,400,000 3.2
Aylesbury Farms Apartment
Homes .......................... Wachovia 1/1 33,000,000 3.0
Kennedy Ridge Apartments......... Wachovia 1/1 29,973,130 2.7
----- ------------ ----
SUBTOTAL/WTD. AVG. ............. 19/19 $635,771,823 58.0%
===== ============ ====
Bel Villaggio, Phases I & II..... Wachovia 1/1 $ 17,985,042 1.6%
Cranbrook at Biltmore
Park ........................... Wachovia 1/1 17,800,000 1.6
Summer View at Sherman
Oaks Apartments ................ Wachovia 1/1 16,000,000 1.5
Valley Center Towers --
Phase I ........................ Wachovia 1/1 16,000,000 1.5
The Harrington
Apartments ..................... Wachovia 1/1 15,000,000 1.4
Hot Springs Mall ................ Wachovia 1/1 15,000,000 1.4
Carriage Club Apartments ........ Wachovia 1/1 14,900,000 1.4
Glasshouse Square
Shopping Center ................ Wachovia 1/1 14,487,259 1.3
Weston Commercial Center......... Wachovia 1/1 12,989,840 1.2
Elmbrook Plaza Shopping
Center ......................... Wachovia 1/1 12,850,000 1.2
----- ------------ ----
SUBTOTAL/WTD. AVG. ............. 10/10 $153,012,140 13.9%
===== ============ ====
TOTAL/WTD. AVG. ................ 29/29 $788,783,963 71.9%
===== ============ ====
LOAN LTV
BALANCE CUT-OFF RATIO AT
PROPERTY PER SF/ DATE MATURITY MORTGAGE
LOAN NAME TYPE UNIT DSCR LTV RATIO OR ARD RATE
- --------------------------------- ---------------------------- ----------- ---------- ----------- ---------- -----------
Park Place Mall ................. Retail - Anchored $ 321 1.64x 63.8% 58.5% 5.150%
BJB Portfolio ................... Multifamily - Conventional $115,303 1.23x 78.3% 70.0% 5.300%
11 Madison Avenue ............... Office - CBD $ 164 1.81x 54.7% 50.6% 5.304%
444 North Michigan
Avenue ......................... Office - CBD $ 140 1.69x 65.0% 65.0% 5.680%
Independence Plaza .............. Office - CBD $ 78 2.94x 51.5% 51.5% 5.060%
FBI Field Office --
Baltimore, MD .................. Office - Suburban $ 269 1.42x 75.1% 66.6% 6.240%
Barneys New York --
Beverly Hills, CA .............. Retail - Shadow Anchored $ 322 1.27x 74.0% 62.3% 5.780%
1750 H Street ................... Office - CBD $ 318 1.26x 74.5% 58.5% 5.600%
Aylesbury Farms Apartment
Homes .......................... Multifamily - Conventional $ 86,842 1.31x 80.0% 74.5% 5.660%
Kennedy Ridge Apartments......... Multifamily - Conventional $ 31,255 1.23x 76.1% 70.9% 5.700%
SUBTOTAL/WTD. AVG. ............. 1.59X 67.8% 61.9% 5.436%
Bel Villaggio, Phases I & II..... Retail - Shadow Anchored $ 233 1.21x 76.5% 64.9% 5.990%
Cranbrook at Biltmore
Park ........................... Multifamily - Conventional $ 64,493 1.24x 78.1% 68.7% 5.710%
Summer View at Sherman
Oaks Apartments ................ Multifamily - Conventional $ 94,675 1.23x 78.1% 70.4% 5.910%
Valley Center Towers --
Phase I ........................ Office - Suburban $ 129 1.25x 73.3% 63.9% 6.200%
The Harrington
Apartments ..................... Multifamily - Conventional $ 52,083 1.28x 72.8% 68.5% 5.150%
Hot Springs Mall ................ Retail - Anchored $ 47 1.49x 74.3% 63.2% 6.120%
Carriage Club Apartments ........ Multifamily - Conventional $ 55,597 1.29x 75.1% 70.6% 5.150%
Glasshouse Square
Shopping Center ................ Retail - Anchored $ 142 1.46x 65.9% 55.5% 5.775%
Weston Commercial Center......... Mixed Use - Office/Flex $ 116 1.29x 71.4% 61.0% 6.220%
Elmbrook Plaza Shopping
Center ......................... Retail - Anchored $ 58 1.36x 78.4% 74.0% 5.410%
SUBTOTAL/WTD. AVG. ............. 1.30X 74.5% 66.1% 5.770%
TOTAL/WTD. AVG. ................ 1.54X 69.1% 62.7% 5.500%
S-120
Park Place Mall
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
MORTGAGE LOAN SELLER Wachovia
CUT-OFF DATE BALANCE $149,846,169
PERCENTAGE OF CUT-OFF DATE POOL BALANCE 13.7%
NUMBER OF MORTGAGE LOANS 1
LOAN PURPOSE Refinance
SPONSOR GGPLP L.L.C.
TYPE OF SECURITY Fee
MORTGAGE RATE 5.150%
MATURITY DATE January 11, 2010
AMORTIZATION TYPE Balloon
ORIGINAL TERM / AMORTIZATION 66 / 360
REMAINING TERM / AMORTIZATION 65 / 359
LOCKBOX Yes
SHADOW RATING (S&P/MOODY'S)(1) BBB-/Baa3
UP-FRONT RESERVES None
ONGOING MONTHLY RESERVES
TAX/INSURANCE(2) Springing
TI/LC/REPLACEMENT(3) Springing
ADDITIONAL FINANCING B Note $39,958,978(4)
WHOLE
A NOTE MORTGAGE LOAN
----------------- -------------
CUT-OFF DATE BALANCE $149,846,169 $189,805,147
CUT-OFF DATE BALANCE/SF $321 $406
CUT-OFF DATE LTV 63.8% 80.8%
MATURITY DATE LTV 58.5% 74.0%
UW DSCR ON NCF 1.64x 1.29x
- --------------------------------------------------------------------------------
(1) S&P and Moody's have confirmed that the Park Place Mall Loan has, in the
context of its inclusion in the trust, credit characteristics consistent
with an investment-grade obligation.
(2) Monthly reserves for taxes and insurance are required if (i) an event of
default occurs and is continuing or (ii) the debt service coverage ratio,
as computed by the mortgagee for any preceding 12-month period, is less
than 1.05x for the whole loan.
(3) Monthly reserves for tenant improvements, leasing commissions and
replacement reserves are required in the amount of $38,928.42 (as of the
Cut-Off Date) up to a maximum amount of $467,141 if (i) an event of default
occurs and is continuing or (ii) the debt service coverage ratio, as
computed by the mortgagee for any preceding 12-month period, is less than
1.05x for the whole loan.
(4) The B note payments are guaranteed by GGPLP L.L.C., however, the maximum
liability under the guaranty may be reduced pursuant to certain conditions
set forth in the related loan documents.
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 1
LOCATION Tucson, AZ
PROPERTY TYPE Retail -- Anchored
SIZE (SF) 467,141
OCCUPANCY AS OF JUNE 4, 2004 95.5%
YEAR BUILT / YEAR RENOVATED 1974 / 2001
APPRAISED VALUE $235,000,000
PROPERTY MANAGEMENT Self-managed
UW ECONOMIC OCCUPANCY 95.0%
UW REVENUES $21,716,349
UW TOTAL EXPENSES $5,206,577
UW NET OPERATING INCOME (NOI) $16,509,771
UW NET CASH FLOW (NCF) $16,085,495
- --------------------------------------------------------------------------------
S-121
- ------------------------------------------------------------------------------------------------------------------------------------
TENANT SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
NET
RATINGS* RENTABLE % OF NET ACTUAL % OF ACTUAL DATE OF LEASE
TENANT MOODY'S/S&P/FITCH AREA (SF) RENTABLE AREA RENT PSF ACTUAL RENT RENT EXPIRATION
- ------------------------------------------------------------------------------------------------------------------------------------
ANCHOR TENANTS - ANCHOR OWNED
Sears ............................ Baa1/BBB/BBB 221,457 ANCHOR OWNED - NOT PART OF COLLATERAL
Dillard's ........................ B2/BB/BB- 200,000 ANCHOR OWNED - NOT PART OF COLLATERAL
Macy's ........................... Baa1/BBB+/BBB+ 160,000 ANCHOR OWNED - NOT PART OF COLLATERAL
-------
TOTAL ANCHOR OWNED .............. 581,457
ANCHOR TENANTS - COLLATERAL
Century Theaters ................. NR/NR/NR 73,280 15.7% $0.00% Rent only 0.0% August 2021
TOTAL ANCHOR TENANTS ............ 73,280 15.7% $0.00 $0 0.0%
TOP 5 TENANTS
Borders Books & Music ............ NR/NR/NR 26,878 5.8% $19.00 $510,682 4.3% March 2020
Old Navy ......................... Ba2/BB+/BB+ 22,958 4.9 $19.00 436,202 3.7 January 2005
Gap/Gap Kids/Baby Gap/Gap Body ... Ba2/BB+/BB+ 18,142 3.9 $23.80 431,780 3.7 January 2005
Abercrombie & Fitch .............. NR/NR/NR 14,000 3.0 $19.00 266,000 2.3 January 2011
Lerner New York .................. Baa1/BBB+/NR 10,937 2.3 $17.50 191,398 1.6 January 2005
------- ----- ----------- -----
TOTAL TOP 5 TENANTS ............. 92,915 19.9% $19.76 $1,836,061 15.6%
Non-Major Tenants ................ 279,845 59.9 $35.45 9,919,218 84.4
------- ----- ----------- -----
OCCUPIED MALL TOTAL .............. 446,040 95.5% $26.35 $11,755,279 100.0%
Vacant space ..................... 21,101 4.5 =========== =====
------- -----
COLLATERAL TOTAL ................. 467,141 100.0%
=====
PROPERTY TOTAL ................... 1,048,598
=========
- ------------------------------------------------------------------------------------------------------------------------------------
* Certain ratings are those of the parent whether or not the parent guarantees
the lease.
- ------------------------------------------------------------------------------------------------------------------------------------
LEASE EXPIRATION SCHEDULE
- ------------------------------------------------------------------------------------------------------------------------------------
WA BASE % OF TOTAL CUMULATIVE % OF ACTUAL CUMULATIVE % OF
# OF LEASES RENT/SF TOTAL SF SF % OF SF RENT ACTUAL RENT
YEAR ROLLING ROLLING ROLLING ROLLING* ROLLING* ROLLING* ROLLING*
- ------------------------------------------------------------------------------------------------------------------------------------
2004 1 $0.00 1,200 0.3% 0.3% 0.0% 0.0%
2005 7 $21.58 63,052 13.5% 13.8% 11.6% 11.6%
2006 0 $0.00 0 0.0% 13.8% 0.0% 11.6%
2007 6 $41.75 12,044 2.6% 16.3% 4.3% 15.9%
2008 3 $500.00 180 0.0% 16.4% 0.8% 16.6%
2009 1 $18.52 9,000 1.9% 18.3% 1.4% 18.0%
2010 36 $43.66 70,142 15.0% 33.3% 26.0% 44.1%
2011 23 $25.45 90,821 19.4% 52.8% 19.7% 63.7%
2012 22 $51.69 34,731 7.4% 60.2% 15.3% 79.0%
2013 6 $35.01 15,813 3.4% 63.6% 4.7% 83.7%
2014 9 $31.48 31,754 6.8% 70.4% 8.5% 92.2%
Thereafter 4 $7.79 117,303 25.1% 95.5% 7.8% 100.0%
Vacant 0 N/A 21,101 4.5% 100.0% 0.0% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
* Calculated based on the approximate square footage occupied by each tenant.
S-122
THE LOAN. The Park Place Mall Loan (the "Park Place Mall Loan") represents
the senior interest in a $190,000,000 mortgage loan (the "Park Place Mall Whole
Loan"), which Park Place Mall Whole Loan is evidenced by two notes, an A note
(the "Park Place Mall Note") in the original principal amount of the Park Place
Mall Loan and a B note (the "Park Place Mall Subordinate Note") in the original
principal amount of $40,000,000, which Park Place Mall Subordinate Note
evidences a loan (the "Park Place Mall Subordinate Loan") which is subordinate
in payment priority to the Park Place Mall Loan. The Park Place Mall
Subordinate Loan will be an asset of the trust, however, the Park Place Mall
Loan and the Park Place Mall Subordinate Loan will be governed by an
intercreditor and servicing agreement, and will be serviced pursuant to the
terms of the pooling and servicing agreement as described in this prospectus
supplement under "DESCRIPTION OF THE MORTGAGE POOL--Co-Lender Loans".
The Park Place Mall Whole Loan is secured by a first priority mortgage
(the "Park Place Mall Mortgage") on the borrower's fee interest in the real
property known as Park Place Mall located in Tucson, Arizona. The Park Place
Mall Loan represents approximately 13.7% of the Cut-Off Date Pool Balance. The
Park Place Mall Whole Loan was originated on June 14, 2004. The Park Place Mall
Loan has an outstanding principal balance as of the Cut-Off Date of
$149,846,169, and the Park Place Mall Subordinate Loan has an outstanding
principal balance as of the Cut-Off Date of $39,958,978. The Park Place Mall
Note and the Park Place Mall Subordinate Note each bear interest at 5.150% per
annum.
The Park Place Mall Whole Loan has a remaining term of 65 months and
matures on January 11, 2010. The Park Place Mall Whole Loan may be prepaid on
or after July 11, 2009, and permits defeasance with United States government
obligations beginning two years after the Closing Date.
THE BORROWER. The borrower is Park 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 Park Place Mall Loan. The sponsor of the
borrower is GGPLP L.L.C. GGPLP L.L.C. is a wholly-owned subsidiary of General
Growth Properties, Inc. ("GGP"). GGP is the second largest owner and operator
of regional malls and the largest third-party property manager in the United
States.
THE PROPERTY. The Mortgaged Property is approximately 467,141 square feet
of an approximately 1,048,598 square foot regional mall situated on
approximately 40.8 acres. The Mortgaged Property was constructed in 1974, and
renovated in 2001. The Mortgaged Property is located in Tucson, Arizona. As of
June 4, 2004, the occupancy rate (which includes space subject to tenants that
have executed a lease but have not accepted the related space or leases out for
signature) for the Mortgaged Property securing the Park Place Loan was
approximately 95.5%.
The anchor tenants at the Mortgaged Property are Dillard's, Sears, Roebuck
& Co. and Macy's, each of which own their respective premises and land and are
not part of the collateral. The largest tenant which is part of the Mortgaged
Property is Century Theatres ("Century"), occupying approximately 73,280 square
feet, or approximately 15.7% of the net rentable area. Century Theatres is a
regional movie theater company, operating approximately 900 screens in 11
states. The Century lease expires in August 2021. The second largest tenant is
Borders Books & Music ("Borders"), occupying approximately 26,878 square feet,
or approximately 5.8% of the net rentable area. Borders is a major retailer of
books and music in the United States. The Borders lease expires in March 2020.
The third largest tenant is Old Navy ("Old Navy"), a subsidiary of The Gap,
Inc., occupying approximately 22,958 square feet, or approximately 4.9% of the
net rentable area. Old Navy is a national retailer of clothing and accessories.
As of July 23, 2004, The Gap, Inc. was rated "Ba2" (Moody's), "BB+" (S&P) and
"BB+" (Fitch). The Old Navy lease expires in January 2005.
GUARANTY. GGPLP L.L.C., the sole economic owner of the borrower, has
delivered a guaranty pursuant to which it guaranteed up to $40,000,000 of the
Park Place Mall Whole Loan. Provided no event of default exists, the guaranty
provides that the total liability of GGPLP L.L.C. will be reduced (i) on a
dollar for dollar basis as the principal amount of the Park Place Mall
Subordinate Note is reduced by payments on such note and (ii) to (a)
$32,000,000, if the net operating income for the Mortgaged Property is equal to
or greater than $17,000,000 but less than $17,500,000, (b) $24,000,000, if the
net operating income for the Mortgaged Property is equal to or greater than
$17,500,000 but less than $18,000,000, (c) $16,000,000, if the net operating
income for the Mortgaged Property is equal to or greater than $18,000,000 but
less than $18,500,000, (d) $8,000,000, if the net operating income for the
Mortgaged Property is equal to or greater than $18,500,000 but less than
$19,000,000, and (e) zero, if the net operating income for the Mortgaged
Property is equal to or greater than $19,000,000. The guaranty further provides
for the release of GGPLP L.L.C. from all liability upon defeasance of the Park
Place Mall Subordinate Loan.
INSURANCE. The borrower, at its sole cost and expense, is required to keep
the Mortgaged Property insured against loss or damage by fire and other risks
under a comprehensive all risk insurance policy, in each case: (1) in an amount
equal to at least 100% of the then "full replacement cost" of the Mortgaged
Property, with a waiver of depreciation, provided that the
S-123
amount shall not be less than the outstanding principal balance of the Park
Place Mall Whole Loan; (2) containing an agreed amount endorsement waiving all
co-insurance provisions; and (3) providing that such policy will contain an
"Ordinance or Law Coverage" or "Enforcement" endorsement if any of the
improvements or the use of the Mortgaged Property will at any time constitute
legal nonconforming structures or uses.
All policies of insurance are required to be issued by one or more
financially sound and responsible insurance companies meeting the Rating Agency
and financial requirements set forth in the loan documents.
CASUALTY AND CONDEMNATION. The Park Place Mall Loan documents provide that
if the Mortgaged Property is damaged or destroyed, in whole or in part, by fire
or other casualty, or if any portion of the Mortgaged Property is taken by any
governmental authority through eminent domain or otherwise, the borrower is
required to promptly proceed with the repair or rebuilding of the improvements
as nearly as possible substantially to the condition the Mortgaged Property was
in immediately prior to such fire, other casualty or taking (a "Park Place Mall
Restoration"). The insurance proceeds or condemnation award shall be disbursed
to the borrower to be used for the Park Place Mall Restoration provided certain
conditions are satisfied, including: (i) if the net insurance proceeds exceed
$9,500,000, less than 25% of the total floor area of the improvements have been
damaged or rendered unusable; (ii) if the net condemnation award exceeds
$9,500,000, the land which is taken is located along the perimeter or periphery
of the Mortgaged Property and no material portion of the improvements are
located on such land; (iii) if the net insurance proceeds or net condemnation
award, as applicable, exceeds $9,500,000, leases demising in the aggregate at
least 75% of the total rentable space in the Mortgaged Property as of the date
of such casualty or condemnation shall remain in full force and effect during
and after the Park Place Mall Restoration; and (iv) the borrower shall commence
the Park Place Mall Restoration no later than 60 days after the insurance
proceeds or condemnation award is received by mortgagee but in no event later
than 120 days after the casualty or taking. If any of the conditions under the
Park Place Mall Loan documents are not satisfied, insurance proceeds and any
condemnation award may be applied by the mortgagee to the repayment of the Park
Place Mall Whole Loan. To the extent not required to be disbursed by the
mortgagee for the restoration of the Mortgaged Property, any award or payment
may be applied to the repayment of the Park Place Mall Whole Loan whether or
not then due and payable.
The ability of the mortgagee to apply any condemnation award or insurance
proceeds to restoration of the Mortgaged Property or to a prepayment of the
Park Place Mall Loan may be subject to the provisions of any leases that are
not subordinate to the mortgage securing the Park Place Mall Loan, which may
also require any condemnation awards and insurance proceeds be applied to
restoration rather than to the prepayment of the Park Place Mall Loan.
TRANSFER OF THE PROPERTY AND INTERESTS IN THE BORROWER. The Park Place
Mall Loan documents provide that the borrower will not permit any sale,
assignment, conveyance, transfer or other disposition of, or any mortgage, lien
or other encumbrance on, all or any part of the Mortgaged Property or any
interest in such property or any interest in the borrower, without the consent
of the mortgagee. The borrower shall, however, be permitted to sell the
Mortgaged Property provided the borrower satisfies certain conditions,
including: (i) the transferee is a special purpose, bankruptcy remote entity
that satisfies the requirements of the Park Place Mall Loan documents, and the
organizational documents of such transferee are reasonably satisfactory to the
Rating Agencies (provided that such transferee shall not be required to satisfy
any greater obligations in meeting the requirements of a special purpose,
bankruptcy remote entity than those set forth in the Park Place Mall Loan
documents); (ii) not less than 50% of the direct equity interests in the
transferee are owned directly or indirectly by a Park Place Mall Permitted
Owner and the transferee is controlled by a Park Place Mall Permitted Owner;
(iii) the property manager following such sale or conveyance is required to be
a Park Place Mall Qualifying Manager; and (iv) the mortgagee has received a
nonconsolidation opinion in form reasonably satisfactory to the Rating Agencies
with respect to the sale or conveyance.
In addition, a transfer or sale (but not a pledge, hypothecation, security
interest or other encumbrance) of any direct or indirect interest in the
borrower is permitted provided certain conditions are satisfied, including: (i)
after such transfer or sale no less than 50% of the equity interests in the
borrower is owned, directly or indirectly, by a Park Place Mall Permitted Owner
and a Park Place Mall Permitted Owner controls the borrower; and (ii) if more
than 49% of the direct or indirect interests in the borrower shall have been
transferred to a person or entity not owning at least 49% of the direct or
indirect interests in the borrower on the date of closing of the Park Place
Mall Loan, the borrower shall deliver to the mortgagee a non-consolidation
opinion with respect to the proposed transfer or sale.
"Park Place Mall Permitted Owner" shall mean (i) a Park Place Mall
Qualified Transferee or an affiliate of a Park Place Mall Qualified Transferee;
(ii) a Park Place Mall Sponsor or an affiliate of a Park Place Mall Sponsor; or
(iii) any other person or entity for which the mortgagee shall have received
written confirmation by the Rating Agencies that the transfer to such person or
entity will not cause a downgrade, withdrawal or qualification of the then
current ratings of the Certificates. "Park
S-124
Place Mall Qualified Transferee" shall mean any one of the following (i) a
pension fund, pension trust or pension account that (a) has total real estate
assets of at least $1,000,000,000 and (b) is managed by a person or entity who
controls at least $1,000,000,000 of real estate equity assets; (ii) a pension
fund advisor who (a) immediately prior to such transfer, controls at least
$1,000,000,000 of real estate equity assets and (b) is acting on behalf of one
or more pension funds that, in the aggregate, satisfy the requirements of
clause (i) of this definition; (iii) an insurance company which is subject to
supervision by the insurance commissioner, or a similar official or agency, of
a state or territory of the United States (including the District of Columbia)
(a) with a net worth, as of a date no more than 6 months prior to the date of
the transfer of at least $500,000,000 and (b) who, immediately prior to such
transfer, controls real estate equity assets of at least $1,000,000,000; (iv) a
corporation organized under the banking laws of the United States or any state
or territory of the United States (including the District of Columbia) (a) with
a combined capital and surplus of at least $500,000,000 and (b) who,
immediately prior to such transfer, controls real estate equity assets of at
least $1,000,000,000; or (v) any person or entity (a) with a long-term
unsecured debt rating from the Rating Agencies of at least investment grade or
(b) who (1) owns or operates at least 12 regional shopping centers totaling at
least 6 million square feet of gross leasable area, (2) has a net worth, as of
a date no more than 6 months prior to the date of such transfer, of at least
$500,000,000 and (3) immediately prior to such transfer, controls real estate
equity assets of at least $1,000,000,000.
In addition, the Park Place Mall Loan documents do not restrict the right
of (i) any shareholder in GGP, any limited partner in GGP Limited Partnership
("GGPLP"), the holder of any equity interest in the New York State Common
Retirement Fund ("NYSCRF") or in any other shareholder of GGP/Homart, Inc.
(other than GGP and GGPLP), the holder of any equity interest in any member of
GGP/Homart II L.L.C. (other than GGP and GGPLP) or the holder of any equity
interest in Teachers Retirement System of Illinois ("TRS") to transfer its
interest in such entity or to cause or permit its interest in such entity to be
redeemed; or (ii) any shareholder in GGP/Homart, Inc. or any member in
GGP/Homart II L.L.C. to transfer its shares or membership interests, as
applicable, in such entity, or to cause its interest in such entity to be
redeemed, provided that, subsequent to any such transfer or redemption
described in this clause (ii), GGP/Homart, Inc. and/or GGP/Homart L.L.C., as
applicable, is controlled, directly or indirectly, by GGP, GGPLP and/or NYSCRF;
or (iii) any member of GGPLP L.L.C. to transfer its interest in GGPLP L.L.C. or
to cause its interest in GGPLP L.L.C. to be redeemed, provided that, subsequent
to any such transfer or redemption described in this clause (iii), GGPLP L.L.C.
is controlled, directly or indirectly, by GGP, and/or GGPLP; or (iv) any member
of GGP-TRS L.L.C. to transfer its interest in GGP-TRS L.L.C. or to cause its
interest in GGP-TRS L.L.C. to be redeemed, provided that, subsequent to any
such transfer or redemption described in this clause (iv), GGP-TRS L.L.C. is
controlled, directly or indirectly, by GGP, TRS and/or GGPLP; or (v) any
partner in Price Development Company, Limited Partnership ("Price") to transfer
its interest in Price or to cause or permit such interest to be redeemed,
provided that, subsequent to any such transfer or redemption described in this
clause (v), Price is controlled directly by GGP or GGPLP.
In addition, each of GGP, GGPLP, GGPLP L.L.C., GGP-TRS L.L.C., NYSCRF,
GGP/Homart II L.L.C., Price, GGP/Homart, Inc. GGP Holding, Inc. and/or GGP
Holding II, Inc. (the "Park Place Mall Sponsors") may pledge its respective
indirect interest in the borrower, if any, to each other. Each Park Place Mall
Sponsor may also pledge its respective indirect interests in Borrower to a Park
Place Mall Qualified Pledgee to secure direct obligations or debt of such
entity provided certain conditions are satisfied, including (i) after giving
effect to the exercise of any remedies available to the Park Place Mall
Qualified Pledgee under such pledge, one or more Park Place Mall Sponsors shall
own, directly or indirectly, unencumbered, in the aggregate not less than 51%
of the equity interests in the borrower and shall control the borrower; and
(ii) upon the request of the Rating Agencies, following the exercise of any
remedies available to the Park Place Mall Qualified Pledgee pursuant to the
pledge, the borrower shall deliver to the mortgagee a nonconsolidation opinion.
"Park Place Mall Qualified Pledgee" means one or more of the following: a real
estate investment trust, bank, saving and loan association, investment bank,
insurance company, trust company, commercial credit corporation, pension plan,
pension fund or pension advisory firm, mutual fund, government entity or plan
provided such entity (a) has total assets (in name or under management) in
excess of $650,000,000, and (except with respect to a pension advisory firm or
similar fiduciary) capital/statutory surplus or shareholder's equity of
$250,000,000; and (B) is regularly engaged in the business of making or owning
commercial real estate loans or commercial loans secured by a pledge of
interests in a mortgage borrower or owning and operating commercial mortgaged
properties.
RELEASE OF PARCEL. The borrower may obtain the release of certain
non-improved, non-income producing property upon the satisfaction of certain
conditions, including without limitation: (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 the surface
S-125
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
ratings assigned to the Certificates.
LOCK BOX ACCOUNT. All tenant payments due under the applicable tenant
leases are required to be deposited into a lock box account (the "Park Place
Mall Lockbox") maintained with LaSalle Bank National Association (the "Park
Place Mall Lockbox Bank") in the name of the borrower for the benefit of the
mortgagee. Other than during a Park Place Mall Lockbox Period, all funds on
deposit in the Park Place Mall Lockbox will be transferred on every business
day at the borrower's direction. At any time during the term of the Park Place
Mall Loan, (i) if the debt service coverage ratio, as computed by the
mortgagee, for any preceding 12-month period is less than 1.05x, or (ii) upon
the occurrence of an event of default under the loan documents (a "Park Place
Mall Lockbox Period"), the Park Place Mall Lockbox Bank shall transfer funds on
every business day to a cash collateral account (the "Park Place Mall Cash
Collateral Account") maintained by the Park Place Mall Lockbox Bank in the name
of the mortgagee for the benefit of the mortgagee. The Park Place Mall Lockbox
Bank shall apply such funds from the Park Place Mall Cash Collateral Account as
set forth in the loan documents to pay, in order, the following: a reserve for
taxes and insurance, monthly debt service payment, a reserve for replacement
costs, tenant improvements and leasing commissions, to the borrower for
operating expenses and capital expenditures and to the mortgagee for other
amounts due and payable under the loan documents, and any excess is retained
for future application until an event of default no longer exists, at which
time the excess funds shall be disbursed to the borrower.
ESCROWS. The loan documents provide that during any Park Place Mall
Lockbox Period the borrower is required to make monthly deposits of real estate
taxes and insurance premiums to a taxes and insurance reserve; however, the
requirement to make deposits for insurance premiums is waived as long as the
borrower pays the premiums for such insurance under blanket insurance policies.
In addition, during any Park Place Mall Lockbox Period, the borrower is
required to make monthly deposits in the amount of 1/12th of $1 per square foot
of the net rentable area into a reserve for replacement costs, tenant
improvements and leasing commissions until such time as the balance of such
reserve equals $467,141. In the event that the balance in the reserve for
replacement costs, tenant improvements and leasing commissions drops below the
target amount set forth above, the borrower will be required to resume making
monthly deposits until the applicable target level is achieved.
MEZZANINE DEBT. Although no mezzanine debt is currently outstanding, the
Park Place Mall Loan permits the incurrence of debt secured by pledges of the
indirect equity interests in the borrower.
ADDITIONAL DEBT. The loan documents prohibit the borrower from incurring
any additional debt, secured or unsecured, except for (1) trade and operational
debt not exceeding $9,500,000 incurred in the ordinary course of business, and
(2) capital expenditures, so long as the sum of all outstanding trade and
operational debt and outstanding capital expenditures does not exceed
$14,250,000.
MANAGEMENT. The Mortgaged Property is self-managed. The loan documents
permit the Mortgaged Property to be managed by (a) the borrower or General
Growth Management, Inc., (b) GGP, GGPLP, GGPLP L.L.C., GGP/Homart Inc., GGP
Homart II L.L.C., GGP-TRS L.L.C., or Price Development Company, or any of their
affiliates, or (c) a reputable and experienced management company approved by
the Rating Agencies.
INTERCREDITOR AGREEMENT. The holders of (a) the Park Place Mall Note and
(b) the Park Place Mall Subordinate Note are parties to an intercreditor and
servicing agreement dated as of June 14, 2004 which sets forth the priority of
payments and rights of such holders. See "DESCRIPTION OF THE MORTGAGE
POOL--Co-Lender Loans".
S-126
BJB Portfolio
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
MORTGAGE LOAN SELLER Wachovia
CUT-OFF DATE BALANCE $111,152,524
PERCENTAGE OF CUT-OFF DATE POOL BALANCE 10.1%
NUMBER OF MORTGAGE LOANS 10
LOAN PURPOSE Refinance
SPONSOR Donal P. Barry, Sr. and James W. Purcell
TYPE OF SECURITY Fee
WA MORTGAGE RATE 5.300%
MATURITY DATE Various
AMORTIZATION TYPE ARD
ORIGINAL TERM / AMORTIZATION Various / 360
REMAINING TERM / AMORTIZATION Various / Various
LOCKBOX Springing
UP-FRONT RESERVES
TAX/INSURANCE Yes
ENGINEERING $73,975
ENVIRONMENTAL* $5,000
ONGOING MONTHLY RESERVES
TAX/INSURANCE Yes
REPLACEMENT $18,281
ADDITIONAL FINANCING Future Mezzanine Debt Permitted
CUT-OFF DATE BALANCE $111,152,524
CUT-OFF DATE BALANCE/UNIT $115,303
CUT-OFF DATE LTV 78.3%
MATURITY DATE LTV 70.0%
WA UW DSCR ON NCF 1.23x
- --------------------------------------------------------------------------------
* Reserve established to mitigate costs associated with an O&M Program for the
21-27 East Delaware Place Property.
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 10
LOCATION Chicago, IL
PROPERTY TYPE Multifamily -- Conventional
SIZE (UNITS) 964
OCCUPANCY AS OF JUNE 15, 2004 AND
JULY 30, 2004 95.1%
YEAR BUILT / YEAR RENOVATED Various / Various
APPRAISED VALUE $141,900,000
PROPERTY MANAGEMENT Self-managed
UW ECONOMIC OCCUPANCY 94.9%
UW REVENUES $12,595,264
UW TOTAL EXPENSES $3,240,676
UW NET OPERATING INCOME (NOI) $9,354,589
UW NET CASH FLOW (NCF) $9,133,796
- --------------------------------------------------------------------------------
S-127
- ------------------------------------------------------------------------------------------------------------------------------------
BJB PORTFOLIO SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
CUT-OFF DATE
CUT-OFF DATE LOAN TERM YEAR BUILT / NUMBER OF BALANCE PER APPRAISED APPRAISED VALUE
PROPERTY NAME BALANCE (MOS) RENOVATED UNITS UNIT OCCUPANCY VALUE PER UNIT
- ------------------------------------------------------------------------------------------------------------------------------------
4100 North Marine Drive.. $29,958,221 84 1952 / 2002 190 $157,675 94.7% $38,400,000 $202,105
21-27 East Delaware
Place .................. 20,143,496 84 1926 / 2003 146 $137,969 95.2% 25,700,000 $176,027
451 West Wrightwood
Avenue ................. 17,464,941 84 1928 / 2004 177 $98,672 94.9% 21,900,000 $123,729
18 East Elm Street ...... 14,195,248 84 1920 / 2004 150 $94,635 94.7% 17,800,000 $118,667
443 West Wrightwood
Avenue ................. 14,153,380 84 1928 / 2004 176 $80,417 95.5% 18,100,000 $102,841
1213-1229 West Diversey
Parkway & 2751-2753
North Magnolia Street... 5,988,013 120 1928 / 2003 46 $130,174 95.7% 8,400,000 $182,609
1939 North Lincoln
Avenue ................. 5,028,704 60 1928 / 2003 57 $88,223 94.7% 6,300,000 $110,526
482-484 West Deming
Place .................. 1,746,078 60 1890 / 2002 6 $291,013 100.0% 2,200,000 $366,667
507-509 West Wrightwood
Avenue ................. 1,356,952 60 1890 / 2003 7 $193,850 100.0% 1,700,000 $242,857
734-742 West Oakdale
Avenue ................. 1,117,490 60 1930 / 2003 9 $124,166 100.0% 1,400,000 $155,556
------------ --- ------------
$111,152,524 964 $115,303 95.1% $141,900,000 $147,199
============ === ============
- ------------------------------------------------------------------------------------------------------------------------------------
BJB PORTFOLIO UNDERWRITING SUMMARY
U/W DSCR U/W DSCR ON
PROPERTY NAME U/W OCC % U/W REVENUES U/W EXPENSES U/W NOI U/W NCF ON NOI NCF
- -------------------------- ----------- -------------- -------------- ------------- ------------- ---------- ------------
4100 North Marine Drive... 95.0% $3,240,270 $776,402 $2,463,869 $2,421,119 1.22x 1.20x
21-27 East Delaware
Place ................... 95.0% 2,175,393 530,813 1,644,580 1,611,730 1.22x 1.20x
451 West Wrightwood
Avenue .................. 95.0% 2,070,871 564,735 1,506,136 1,466,311 1.29x 1.26x
18 East Elm Street ....... 95.0% 1,552,672 381,733 1,170,939 1,137,189 1.24x 1.20x
443 West Wrightwood
Avenue .................. 95.0% 1,795,644 557,263 1,238,381 1,198,781 1.31x 1.27x
1213-1229 West Diversey
Parkway & 2751-2753
North Magnolia Street.... 94.6% 680,107 139,117 540,990 529,490 1.31x 1.28x
1939 North Lincoln
Avenue .................. 94.9% 609,233 170,960 438,273 424,023 1.34x 1.30x
482-484 West Deming
Place ................... 85.7% 193,654 55,543 138,111 136,593 1.22x 1.20x
507-509 West Wrightwood
Avenue .................. 95.0% 144,238 29,459 114,779 112,756 1.30x 1.28x
734-742 West Oakdale
Avenue .................. 95.0% 133,182 34,651 98,531 95,804 1.36x 1.32x
------------ ----------- ----------- -----------
94.9% $12,595,264 $3,240,676 $9,354,589 $9,133,796 1.26X 1.23X
============ =========== =========== ===========
S-128
- ----------------------------------------------------------------------------------------------------
4100 NORTH MARINE DRIVE
- ----------------------------------------------------------------------------------------------------
NO. OF APPROXIMATE APPROXIMATE
UNIT MIX* UNITS UNIT SIZE (SF) NRA (SF) % OF NRA RENTAL RANGE
- ----------------------------------------------------------------------------------------------------
Studio ............ 17 585 9,945 4.5% $700-875
1-BR/1-BA ......... 52 1,125 58,510 26.2 $935-1,410
2-BR/1-BA ......... 85 1,215 103,275 46.3 $900-1,595
2-BR/2-BA ......... 19 1,378 26,180 11.7 $1,495-1,795
3-BR/2-BA ......... 17 1,470 24,990 11.2 $1,326-1,995
--- ------- -----
190 1,173 222,900 100.0% $1,263 / $1.08 / SF
=== ======= =====
- ----------------------------------------------------------------------------------------------------
* In addition to the multifamily units, the Mortgaged Property includes 1
commercial tenant totaling 305 square feet.
- ----------------------------------------------------------------------------------------------------
21-27 EAST DELAWARE PLACE
- ----------------------------------------------------------------------------------------------------
NO. OF APPROXIMATE APPROXIMATE
UNIT MIX* UNITS UNIT SIZE (SF) NRA (SF) % OF NRA RENTAL RANGE
- ----------------------------------------------------------------------------------------------------
Studio .............. 63 363 22,838 24.1% $650-870
1-BR/1-BA ........... 51 730 37,230 39.2 $900-1,310
2-BR/1-BA ........... 15 990 14,850 15.6 $1,345-1,850
2-BR/2-BA ........... 16 1,115 17,840 18.8 $1,450-2,395
3-BR/2.5-BA ......... 1 2,190 2,190 2.3 $2495
--- ------ -----
146 650 94,948 100.0% $1,106 / $1.70 / SF
=== ====== =====
- ----------------------------------------------------------------------------------------------------
* In addition to the multifamily units, the Mortgaged Property includes 3
commercial tenants totaling 4,500 square feet.
- ----------------------------------------------------------------------------------------------------
451 WEST WRIGHTWOOD AVENUE
- ----------------------------------------------------------------------------------------------------
NO. OF APPROXIMATE APPROXIMATE
UNIT MIX UNITS UNIT SIZE (SF) NRA (SF) % OF NRA RENTAL RANGE
- ----------------------------------------------------------------------------------------------------
Studio ............ 83 460 38,170 38.1% $650-1,030
1-BR/1-BA ......... 72 597 42,980 42.9 $900-1,130
2-BR/2-BA ......... 22 865 19,030 19.0 $1,029-1,610
-- ------ -----
177 566 100,180 100.0% $971 / $1.72 / SF
=== ======= =====
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
18 EAST ELM STREET
- ----------------------------------------------------------------------------------------------------
NO. OF APPROXIMATE APPROXIMATE
UNIT MIX UNITS UNIT SIZE (SF) NRA (SF) % OF NRA RENTAL RANGE
- ----------------------------------------------------------------------------------------------------
Studio ............ 94 435 40,900 54.5% $625-950
1-BR/1-BA ......... 53 593 31,425 41.9 $855-1,190
2-BR/1-BA ......... 1 755 755 1.0 $1,395
2-BR/2-BA ......... 2 1,000 2,000 2.7 $1,510
-- ------ -----
150 501 75,080 100.0% $844 / $1.77 / SF
=== ====== =====
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
443 WEST WRIGHTWOOD AVENUE
- ----------------------------------------------------------------------------------------------------
NO. OF APPROXIMATE APPROXIMATE
UNIT MIX UNITS UNIT SIZE (SF) NRA (SF) % OF NRA RENTAL RANGE
- ----------------------------------------------------------------------------------------------------
Studio ............ 113 422 47,700 59.6% $599-900
1-BR/1-BA ......... 63 514 32,385 40.4 $790-1,075
--- ------ -----
176 455 80,085 100.0% $815 / $1.79 / SF
=== ====== =====
- ----------------------------------------------------------------------------------------------------
S-129
- ----------------------------------------------------------------------------------------------------
1213-1229 WEST DIVERSEY PARKWAY & 2751-2753 NORTH MAGNOLIA STREET
- ----------------------------------------------------------------------------------------------------
NO. OF APPROXIMATE APPROXIMATE
UNIT MIX* UNITS UNIT SIZE (SF) NRA (SF) % OF NRA RENTAL RANGE
- ----------------------------------------------------------------------------------------------------
Studio ............ 6 425 2,550 9.9% $695-710
1-BR/1-BA ......... 39 573 22,350 87.0 $900-1,295
2-BR/1-BA ......... 1 800 800 3.1 $1,395
-- ------ -----
46 559 25,700 100.0% $1,052 / $1.88 / SF
== ====== =====
- ----------------------------------------------------------------------------------------------------
* In addition to the multifamily units, the Mortgaged Property includes 7
commercial tenants totaling 4,765 square feet.
- ----------------------------------------------------------------------------------------------------
1939 NORTH LINCOLN AVENUE
- ----------------------------------------------------------------------------------------------------
NO. OF APPROXIMATE APPROXIMATE
UNIT MIX* UNITS UNIT SIZE (SF) NRA (SF) % OF NRA RENTAL RANGE
- ----------------------------------------------------------------------------------------------------
Studio ............ 47 411 19,300 74.8% $649-950
1-BR/1-BA ......... 10 650 6,500 25.2 $975-1,095
-- ------ -----
57 453 25,800 100.0% $841 / $1.86 / SF
== ====== =====
- ----------------------------------------------------------------------------------------------------
* In addition to the multifamily units, the Mortgaged Property includes 2
commercial tenants totaling 3,200 square feet.
- ----------------------------------------------------------------------------------------------------
482-484 WEST DEMING PLACE
- ----------------------------------------------------------------------------------------------------
NO. OF APPROXIMATE APPROXIMATE
UNIT MIX* UNITS UNIT SIZE (SF) NRA (SF) % OF NRA RENTAL RANGE
- ----------------------------------------------------------------------------------------------------
3-BR/2-BA ......... 6 1,485 8,910 100.0% $1,995-2,195
-- ----- -----
6 1,485 8,910 100.0% $2,095 / $1.41 / SF
== ===== =====
- ----------------------------------------------------------------------------------------------------
* In addition to the multifamily units, the Mortgaged Property includes a 1,485
square foot commercial tenant.
- ----------------------------------------------------------------------------------------------------
507-509 WEST WRIGHTWOOD AVENUE
- ----------------------------------------------------------------------------------------------------
NO. OF APPROXIMATE APPROXIMATE
UNIT MIX UNITS UNIT SIZE (SF) NRA (SF) % OF NRA RENTAL RANGE
- ----------------------------------------------------------------------------------------------------
1-BR/1-BA ......... 2 968 1,935 22.3% $1,260-1,450
2-BR/1-BA ......... 2 1,090 2,180 25.1 $1,350-1,510
2-BR/2-BA ......... 2 998 1,995 23.0 $1,450-1,595
3-BR/3-BA ......... 1 2,575 2,575 29.6 $2,385
-- ----- -----
7 1,241 8,685 100.0% $1,571 / $1.27 / SF
== ===== =====
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
734-742 WEST OAKDALE AVENUE
- ----------------------------------------------------------------------------------------------------
NO. OF APPROXIMATE APPROXIMATE
UNIT MIX UNITS UNIT SIZE (SF) NRA (SF) % OF NRA RENTAL RANGE
- ----------------------------------------------------------------------------------------------------
2-BR/1-BA ......... 6 800 4,800 53.3% $1,100-1,795
3-BR/3-BA ......... 3 1,400 4,200 46.7 $1,100-1,225
-- ----- -----
9 1,000 9,000 100.0% $1,353 / $1.35 / SF
== ===== =====
- ----------------------------------------------------------------------------------------------------
S-130
THE LOAN. The 10 Mortgage Loans (the "BJB Portfolio Loan") are
collectively secured by first mortgages encumbering 10 multifamily properties
in Chicago, Illinois. Each of the mortgages are cross-collateralized and
cross-defaulted. The BJB Portfolio Loans represent approximately 10.1% of the
Cut-Off Date Pool Balance. The BJB Portfolio Loans were originated on May 7,
2004, and May 20, 2004, and have a principal balance as of the Cut-Off Date of
$111,152,524.
Five (5) of the BJB Portfolio Loans have a remaining term of 81 months to
their anticipated repayment date of May 11, 2011 and each of these 5 BJB
Portfolio Loans may be prepaid on or after March 11, 2011. Four (4) of the BJB
Portfolio Loans have a remaining term of 58 months to their anticipated
repayment date of June 11, 2009, and each of these 4 BJB Portfolio Loans may be
prepaid on or after April 11, 2009. One (1) of the BJB Portfolio Loans has a
remaining term of 118 months to its anticipated repayment date of June 11,
2014, and this BJB Portfolio Loan may be prepaid on or after April 11, 2014.
Each of the BJB Portfolio Loans permits defeasance with United States
government obligations beginning four years after its first payment date.
THE BORROWERS. The borrowers under the BJB Portfolio Loans are 4100
Marine, L.L.C., Delaware II, L.L.C., Wrightwood II, L.L.C., Elm II, L.L.C.,
Wrightwood III, L.L.C., Diversey II, L.L.C., Lincoln II, L.L.C., Deming I,
L.L.C., Wrightwood IV, L.L.C. and Oakdale I, L.L.C., each a special purpose
entity. The sponsors of each of the borrowers are Donal P. Barry, Sr. and James
W. Purcell, who are principals of BJB Partners, L.L.C. BJB Partners, L.L.C.
owns and manages approximately 4,000 apartment units throughout the Chicago,
Illinois metropolitan area.
THE PROPERTIES. The Mortgaged Properties consist of 10 multifamily
apartment buildings containing, in the aggregate, 964 multifamily units. Each
of the 10 Mortgaged Properties securing the BJB Portfolio Loans have been
extensively renovated during recent years to include modern amenities. As of
June 15, 2004 (or as of July 30, 2004 for 1 of the BJB Portfolio Loans), the
average occupancy rate for the Mortgaged Properties securing the BJB Portfolio
Loans was approximately 95.1%.
INSURANCE. Each borrower, at its sole cost and expense, is required to
keep its Mortgaged Property insured against loss or damage by fire and other
risks under a comprehensive all risk insurance policy, in each case: (1) in an
amount equal to at least 100% of the then "full replacement cost" of its
Mortgaged Property, with a waiver of depreciation, (2) containing an agreed
amount endorsement waiving all co-insurance provisions; and (3) providing that
such policy will contain an "Ordinance or Law Coverage" or "Enforcement"
endorsement if any of the improvements or the use of such Mortgaged Property
will at any time constitute legal nonconforming structures or uses.
All policies of insurance are required to be issued by one or more
financially sound and responsible insurance companies meeting the Rating Agency
and/or financial requirements set forth in the loan documents.
CASUALTY AND CONDEMNATION. The BJB Portfolio Loan documents provide that
if a Mortgaged Properties is damaged or destroyed, in whole or in part, by fire
or other casualty, or if any portion of a Mortgaged Property is taken by any
governmental authority through eminent domain or otherwise, the applicable
borrower may, subject to the conditions set forth below, proceed with the
repair or rebuilding of the improvements as nearly as possible substantially to
the condition the Mortgaged Property was in immediately prior to such fire,
other casualty or taking (a "BJB Portfolio Restoration").
To the extent that less than 40% of the improvements on the applicable
Mortgaged Property have been taken or condemned and that the applicable
borrower elects to proceed with such BJB Portfolio Restoration, the mortgagee
shall disburse the applicable proceeds or award to the applicable borrower to
be used for such BJB Portfolio Restoration upon the satisfaction of certain
conditions, including that: (i) no default has occurred and is continuing under
the BJB Portfolio Loan documents; (ii) such BJB Portfolio Restoration can be
completed within the earlier to occur of (A) 6 months after the receipt of such
proceeds or award and (B) 60 days prior to the stated maturity date of the
applicable note; (iii) all necessary government approvals in connection with
such BJB Portfolio Restoration have been received; (iv) there are sufficient
sums available to both complete the BJB Portfolio Restoration and continue
regular debt service payments on the applicable note; (v) the improvements
will, following the completion of such BJB Portfolio Restoration, produce
income sufficient to provide the same debt service coverage as immediately
prior to such casualty or condemnation; and (vi) if the net insurance proceeds
or net condemnation award, as applicable, exceeds the lesser of (A) 5% of the
then-outstanding principal balance of the applicable note and (B) $150,000, a
new appraisal has been delivered to mortgagee.
To the extent that 40% or more of the improvements on the applicable
Mortgaged Property have been taken or condemned or that the applicable borrower
elects not to proceed with a BJB Portfolio Restoration, the mortgagee may elect
to either (i) accelerate the applicable note and apply such proceeds or award
in repayment of such note, or (ii) require the applicable borrower to (A)
proceed with such BJB Portfolio Restoration upon such terms and conditions as
would be required by a prudent interim construction lender and (B) deposit with
the mortgagee a sum sufficient for any deficiency as determined in the
mortgagee's reasonable discretion.
S-131
TRANSFER OF THE PROPERTY AND INTERESTS IN THE BORROWER. The BJB Portfolio
Loan documents provide that the borrower will not permit any sale, assignment,
conveyance, transfer or other disposition of, or any mortgage, lien or other
encumbrance on, all or any part of the Mortgaged Property or any interest in
such property or any interest in the borrower, without the consent of the
mortgagee. The borrower shall, however, be permitted to sell the Mortgaged
Property provided the borrower satisfies certain conditions, including: (i) no
default has occurred and is continuing under the BJB Portfolio Loan documents;
(ii) the mortgagee determines that the proposed transferee's experience in
owning and operating facilities similar to the applicable Mortgaged Property is
adequate based on standards that the mortgagee considers to be commercially
reasonable in the mortgagee's sole discretion; (iii) the applicable borrower
pays a transfer fee equal to 1% of the then-outstanding principal balance of
the applicable note; (iv) such transferee assumes the obligations under the
applicable note; (v) the transferee is a special purpose, bankruptcy remote
entity that satisfies the requirements of the applicable BJB Portfolio Loan
documents, and the organizational documents of such transferee are reasonably
satisfactory to the mortgagee; (vi) the applicable borrower delivers a rating
agency confirmation that the applicable transfer will not result in a
downgrade, withdrawal or qualification of the then-current ratings assigned to
the Certificates; and (vi) the applicable transfer will not result in an
increase in property taxes that would cause the debt service coverage ratio for
the applicable Mortgaged Property to be less than 1.20x. No such sale of any of
the Mortgaged Properties shall result in a release of such Mortgaged Property
from the cross-collateralization and cross-default provisions of the BJB
Portfolio Loan documents.
LOCK BOX ACCOUNT. If the BJB Portfolio Loans are not repaid in full on or
prior to 2 months before their anticipated repayment dates, the borrowers 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.
ESCROWS. The loan documents provide that each borrower is required to make
monthly deposits of real estate taxes and insurance premiums to a taxes and
insurance reserve. In addition, the borrowers are required to make monthly
deposits in the aggregate amount of $18,281 into a reserve for replacement
costs.
MEZZANINE DEBT. Although no mezzanine debt is currently outstanding, the
BJB Portfolio Loan permits the incurrence of debt secured by pledges of the
indirect equity interests in the borrower subject to certain conditions,
including: (i) the applicable Mortgaged Property with such subordinate
financing maintains a minimum overall debt service coverage ratio of 1.10x, and
(ii) the subordinate lender executes a subordination and standstill agreement
acceptable to the mortgagee.
HYPER-AMORTIZATION. Commencing on the applicable anticipated repayment
date of June 11, 2009, May 11, 2011 or June 11, 2014, if the BJB Portfolio
Loans are not paid in full, the BJB Portfolio Loans enter into a
hyper-amortization period through May 11, 2034 or June 11, 2034. The interest
rate applicable to the BJB Portfolio Loans 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. Each Mortgaged Property is currently self-managed by the
applicable borrower.
S-132
11 Madison Avenue
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
MORTGAGE LOAN SELLER Wachovia
CUT-OFF DATE BALANCE(1) $82,000,000
PERCENTAGE OF CUT-OFF DATE POOL BALANCE 7.5%
NUMBER OF MORTGAGE LOANS 1
LOAN PURPOSE Acquisition
SPONSOR Tamir Sapir
TYPE OF SECURITY(2) Fee
MORTGAGE RATE 5.304%
MATURITY DATE January 11, 2014
AMORTIZATION TYPE ARD
INTEREST ONLY PERIOD 60
ORIGINAL TERM / AMORTIZATION 120 / 360
REMAINING TERM / AMORTIZATION 113 / 360
LOCKBOX Yes
SHADOW RATING (S&P/MOODY'S)(3) AAA/Aa3
UP-FRONT RESERVES
TAX/INSURANCE Yes
ONGOING MONTHLY RESERVES
TAX/INSURANCE Yes
TI/LC(4) Yes
REPLACEMENT $18,805
ADDITIONAL FINANCING A-4 Subordinate
Non-Pooled Component $13,555,556
Pari Passu $334,444,444
Subordinate Debt $85,000,000
A-4 POOLED PARI PASSU WHOLE
COMPONENT(1) NOTES MORTGAGE LOAN
----------- ------------ --------------
CUT-OFF DATE BALANCE $82,000,000 $430,000,000 $515,000,000
CUT-OFF DATE BALANCE/SF $164 $191 $228
CUT-OFF DATE LTV 54.7% 63.7% 76.3%
MATURITY DATE LTV 50.6% 59.0% 71.2%
UW DSCR ON NCF 1.81x 1.55x 1.20x
- --------------------------------------------------------------------------------
(1) Represents the pooled component of the A-4 note in a total senior note of
$430,000,000 and aggregate mortgage debt of $515,000,000. The A-1 note of
$143,333,333 and the A-2 and A-3 notes each of $95,555,556 are not included
in the trust, but are pari passu with the A-4 note that is in the trust;
however, while the non-pooled component of the A-4 note is included in the
trust, payments allocable to such non-pooled component are not available
for distributions to the Offered Certificates. In addition to the pari
passu notes there are three subordinate notes, aggregating to $85,000,000
which are also not included in the trust. All Balance/SF, LTV and DSC
ratios are based upon the aggregate indebtedness of A-4 note (excluding the
non-pooled component) and the other senior notes but exclude the
subordinate companion loans.
(2) For purposes of the table above and similar breakdowns by category
elsewhere in the preliminary prospectus supplement, the borrower's interest
in the Mortgaged Property has been classified as a fee interest. The
security for the 11 Madison Avenue Loan consists of the borrower's interest
in the IDA Premises under the IDA lease as well as the borrower's fee
interest in the remainder of the Mortgaged Property. The fee interest in
the IDA Premises is owned by the IDA but will revert to the borrower upon
the termination of the IDA lease.
(3) S&P and Moody's have confirmed that the 11 Madison Avenue Loan has, in the
context of its inclusion in the trust, the credit characteristics
consistent with that of an investment-grade rated obligation.
(4) For months 1-36 of the loan term, $47,011.50/month will be escrowed,
increasing to $141,034.50/ month during months 37-72 and decreasing to
$94,023/month for the remainder of the loan term.
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 1
LOCATION New York, NY
PROPERTY TYPE Office - CBD
SIZE (SF) 2,256,552
OCCUPANCY AS OF APRIL 1, 2004 98.6%
YEAR BUILT / YEAR RENOVATED 1932 / 1997
APPRAISED VALUE $675,000,000
PROPERTY MANAGEMENT Cushman & Wakefield, Inc.
UW ECONOMIC OCCUPANCY 98.0%
UW REVENUES $63,438,713
UW TOTAL EXPENSES $18,543,090
UW NET OPERATING INCOME (NOI) $44,895,623
UW NET CASH FLOW (NCF) $44,558,893
- --------------------------------------------------------------------------------
S-133
- ------------------------------------------------------------------------------------------------------------------------------------
TENANT SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
NET % OF NET % OF
RATINGS* RENTABLE AREA RENTABLE ACTUAL ACTUAL DATE OF LEASE
TENANT MOODY'S/S&P/FITCH (SF) AREA RENT PSF ACTUAL RENT RENT EXPIRATION
- ------------------------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston .. Aa3/A/AA- 1,921,459 85.2% $20.90 $40,154,365 83.1% Multiple Spaces
Aon (sublet to IBM) ......... Baa2/A-/A- 138,072 6.1 $28.75 3,969,570 8.2 April 2013
Omnicom Group, Inc. ......... Baa1/A-/A- 95,557 4.2 $28.25 2,699,485 5.6 September 2008
Gould Paper Corp. ........... NR/NR/NR 46,318 2.1 $21.50 995,837 2.1 October 2013
Eleven Madison Park ......... NR/NR/NR 11,500 0.5 $18.39 211,485 0.4 December 2017
Non-major tenants ........... 12,018 0.5 $22.01 264,567 0.5
Vacant ...................... 31,628 1.4 0 0.0
--------- ----- ------------ -----
TOTAL ....................... 2,256,552 100.0% $48,295,309 100.0%
========= ===== ============ =====
- ------------------------------------------------------------------------------------------------------------------------------------
* Certain ratings are those of the parent company whether or not the parent
company guarantees the lease.
- --------------------------------------------------------------------------------------------------------------------------
LEASE EXPIRATION SCHEDULE
- --------------------------------------------------------------------------------------------------------------------------
CUMULATIVE %
WA BASE CUMULATIVE % OF ACTUAL OF
# OF LEASES RENT/SF TOTAL SF % OF TOTAL % OF SF RENT ACTUAL RENT
YEAR ROLLING ROLLING ROLLING SF ROLLING* ROLLING* ROLLING* ROLLING*
- --------------------------------------------------------------------------------------------------------------------------
2004 0 $0.00 0 0.0% 0.0% 0.0% 0.0%
2005 0 $0.00 0 0.0% 0.0% 0.0% 0.0%
2006 0 $0.00 0 0.0% 0.0% 0.0% 0.0%
2007 3 $25.88 390,386 17.3% 17.3% 20.9% 20.9%
2008 1 $28.25 95,557 4.2% 21.5% 5.6% 26.5%
2009 0 $0.00 0 0.0% 21.5% 0.0% 26.5%
2010 1 $176.87 420 0.0% 21.6% 0.2% 26.7%
2011 0 $0.00 0 0.0% 21.6% 0.0% 26.7%
2012 0 $0.00 0 0.0% 21.6% 0.0% 26.7%
2013 4 $26.50 288,404 12.8% 34.3% 15.8% 42.5%
2014 0 $0.00 0 0.0% 34.3% 0.0% 42.5%
Thereafter 13 $19.15 1,450,157 64.3% 98.6% 57.5% 100.0%
Vacant 0 N/A 31,628 1.4% 100.0% 0.0% 100.0%
- --------------------------------------------------------------------------------------------------------------------------
* Calculated based on approximate square footage occupied by each tenant.
S-134
THE LOAN. The Mortgage Loan (the "11 Madison Avenue Loan") is split into a
pooled component (the "11 Madison Avenue Pooled Component"), with a principal
balance of $82,000,000, representing 7.5% of the Cut-Off Date Pool Balance that
supports distributions on the Certificates (other than the Class MAD
Certificates) and a non-pooled component (the "11 Madison Avenue Non-Pooled
Component"), with a principal balance of $13,555,556, that supports only the
Class MAD Certificates, which are not being offered hereby. The 11 Madison
Avenue Loan is secured by a first mortgage encumbering an office building
located in New York, New York. The 11 Madison Avenue Loan, which is evidenced by
a pari passu note dated December 23, 2003, is a portion of a whole loan with an
original principal balance of $515,000,000. The other loans related to the 11
Madison Avenue Loan are evidenced by six separate notes, each dated December 23,
2003, the "11 Madison Avenue Pari Passu I Loan" with an original principal
balance of $143,333,333, the "11 Madison Avenue Pari Passu II Loan", with an
original principal balance of $95,555,556, the "11 Madison Avenue Pari Passu III
Loan", with an original principal balance of $95,555,556, and 3 subordinate
notes (the "11 Madison Avenue Subordinate Loans") with an aggregate original
principal balance of $85,000,000. The 11 Madison Avenue Pari Passu I Loan, the
11 Madison Avenue Pari Passu II Loan, the 11 Madison Avenue Pari Passu III Loan
and the 11 Madison Avenue Subordinate Loans will not be assets of the trust. The
11 Madison Avenue Loan, the 11 Madison Avenue Pari Passu I Loan, the 11 Madison
Avenue Pari Passu II Loan, the 11 Madison Avenue Pari Passu III Loan and the 11
Madison Avenue Subordinate Loans will be governed by an intercreditor agreement
and will be serviced pursuant to the terms of 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
2004-C10, as described in this prospectus supplement under "DESCRIPTION OF THE
MORTGAGE POOL--Co-Lender Loans". The 11 Madison Avenue Loan provides for
interest-only payments for the first 60 months of its term, and thereafter,
fixed monthly payments of principal and interest.
The 11 Madison Avenue Loan has a remaining term of 113 months to its
anticipated repayment date of January 11, 2014. The 11 Madison Avenue Loan may
be prepaid on or after November 11, 2013, and permits defeasance with United
States government obligations beginning the earlier of four years after
origination or two years from the date of the last securitization of any portion
of the 11 Madison Avenue Loan and its related Companion Loans.
THE BORROWER. The borrower is 11 Madison Avenue LLC, a special purpose
entity. Legal counsel to the borrower delivered a non-consolidation opinion in
connection with the origination of the 11 Madison Avenue Loan. The sponsor is
Tamir Sapir. Through his various entities, Mr. Sapir owns and operates an
extensive citywide office property portfolio totaling approximately 7.25 million
square feet.
THE PROPERTY. The Mortgaged Property is an approximately 2,256,552 square
foot office building situated on approximately 1.9 acres. The Mortgaged Property
was constructed in 1932 and renovated in 1997. The Mortgaged Property is located
in New York, New York. As of April 1, 2004, the occupancy rate for the Mortgaged
Property securing the 11 Madison Avenue Loan was approximately 98.6%.
The largest tenant is Credit Suisse First Boston LLC ("CSFB"), occupying
1,921,459 square feet, or approximately 85.2% of the net rentable area. The
Mortgaged Property serves as the world headquarters of CSFB, a leading global
investment banking firm. As of July 23, 2004, CSFB was rated "Aa3" (Moody's),
"A" (S&P) and "AA-" (Fitch). The majority of the CSFB space expires in April
2017; however, there is a 389,344 square foot portion of one of the CSFB leases
that expires in April 2007. Notwithstanding the foregoing, although 74.3% of
CSFB's 1,921,459 square feet of net rentable area is leased through April 30,
2017, CSFB does have the option to terminate up to 528,730 square feet (27.5% of
CSFB's space and 23.4% of the Mortgaged Property total space) after April 30,
2007, in its sole discretion. However, CSFB must give at least 24 months notice
of such termination (such notice is irrevocable) and must pay a variable
termination fee which is adjusted depending upon the space as to which such
termination applies. Pursuant to the terms of the 11 Madison Avenue Loan
documents, the lease termination payments are required to be paid into a reserve
controlled by the mortgagee to be used for future tenant improvement and leasing
commission expenses and otherwise will be additional collateral for the 11
Madison Avenue Loan. In addition, the 11 Madison Avenue Loan documents require
that in the event CSFB exercises this termination option, the mortgagee will
trap 100% of cash flow generated by the Mortgaged Property until such space is
relet. The second largest tenant is Aon Corporation ("Aon"), occupying 138,072
square feet, or approximately 6.1% of the net rentable area. Aon is the second
largest insurance brokerage and consulting company in the world operating in
commercial brokerage, consulting services and consumer insurance underwriting.
As of July 23, 2004, Aon was rated "Baa2" (Moody's), "A-" (S&P) and "A-"
(Fitch). Aon subleases this entire space to International Business Machines
Corporation ("IBM"). IBM is one of the world's top manufacturers of computer
hardware, including desktop and notebook PCs, mainframes, servers, storage
systems and peripherals. As of July 23, 2004, IBM was rated "A1" (Moody's), "A+"
(S&P) and "AA-" (Fitch). The Aon lease expires in April 2013. The third largest
tenant is Omnicom Group, Inc., ("Omnicom"), occupying approximately 95,557
square feet, or approximately 4.2% of the net rentable area. Omnicom is one of
the world's largest advertising, marketing and corporate
S-135
communication companies. As of July 23, 2004, Omnicom was rated "Baa1"
(Moody's), "A-" (S&P) and "A-" (Fitch). The Omnicom lease expires in September
2008.
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 January
11, 2014, if the 11 Madison Avenue Loan is not repaid in full, the 11 Madison
Avenue Loan enters a hyper-amortization period through January 11, 2039. The
interest rate applicable to the 11 Madison Avenue Loan during such
hyper-amortization period will increase to the greater of 2.0% over the mortgage
rate or 2.0% over the treasury rate, as specified in the loan documents.
MANAGEMENT. Cushman & Wakefield, Inc. is the property manager for the
Mortgaged Property securing the 11 Madison Avenue Loan.
S-136
444 North Michigan Avenue
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
MORTGAGE LOAN SELLER Wachovia
CUT-OFF DATE BALANCE $71,500,000
PERCENTAGE OF CUT-OFF DATE POOL BALANCE 6.5%
NUMBER OF MORTGAGE LOANS 1
LOAN PURPOSE Refinance
SPONSOR(1) The Kan Am Group
TYPE OF SECURITY Fee
MORTGAGE RATE 5.680%
MATURITY DATE July 11, 2014
AMORTIZATION TYPE Interest Only
INTEREST ONLY PERIOD 120
ORIGINAL TERM / AMORTIZATION 120 / IO
REMAINING TERM / AMORTIZATION 119 / IO
LOCKBOX Yes
UP-FRONT RESERVES
TAX/INSURANCE Yes
TI/LC(2) $425,000
OCCUPANCY(3) $468,093
ONGOING MONTHLY RESERVES
TAX/INSURANCE Yes
REPLACEMENT $4,686
TI/LC $53,250
EXISTING UNSECURED DEBT $2,000,000
ADDITIONAL FINANCING Future Mezzanine Debt Permitted
CUT-OFF DATE BALANCE $71,500,000
CUT-OFF DATE BALANCE/SF $140
CUT-OFF DATE LTV 65.0%
MATURITY DATE LTV 65.0%
UW DSCR ON NCF 1.69x
- --------------------------------------------------------------------------------
(1) Specifically, Kan Am Grund Kapitalanlagegesellschaft mbH.
(2) Reserve established for amounts owed to 2 new retail tenants for tenant
improvement costs.
(3) Reserve established to mitigate certain tenants not yet in occupancy and
paying rent.
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 1
LOCATION Chicago, IL
PROPERTY TYPE Office -- CBD
SIZE (SF) 511,201
OCCUPANCY AS OF MAY 21, 2004 85.8%
YEAR BUILT / YEAR RENOVATED 1976 / 1991
APPRAISED VALUE $110,000,000
PROPERTY MANAGEMENT TAG Management, LLC
UW ECONOMIC OCCUPANCY 87.2%
UW REVENUES $15,581,084
UW TOTAL EXPENSES $8,045,998
UW NET OPERATING INCOME (NOI) $7,535,086
UW NET CASH FLOW (NCF) $6,851,264
- --------------------------------------------------------------------------------
S-137
- ------------------------------------------------------------------------------------------------------------------------------------
TENANT SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
NET % OF NET
RATINGS* RENTABLE RENTABLE ACTUAL % OF DATE OF LEASE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA RENT PSF ACTUAL RENT ACTUAL RENT EXPIRATION
- ------------------------------------------------------------------------------------------------------------------------------------
Shefsky & Froelich Ltd. ......... NR/NR/NR 43,612 8.5% $20.05 $874,622 10.2% May 2005
Gordon & Glickson L.L.C. ........ NR/NR/NR 30,999 6.1 $19.07 591,127 6.9 December 2007
TMP Worldwide, Inc. ............. NR/NR/NR 30,816 6.0 $19.98 615,704 7.2 September 2010
PR21 ............................ NR/NR/NR 22,451 4.4 $16.34 366,889 4.3 July 2008
National Cable Communication .... NR/NR/NR 21,888 4.3 $18.02 394,481 4.6 December 2009
Non-major tenants ............... 288,893 56.5 $19.78 5,714,358 66.8
Vacant .......................... 72,542 14.2 0 0.0
------- ----- ---------- -----
TOTAL ........................... 511,201 100.0% $8,557,181 100.0%
======= ===== ========== =====
- ------------------------------------------------------------------------------------------------------------------------------------
* Certain ratings are those of the parent whether or not the parent
guarantees the lease.
- ---------------------------------------------------------------------------------------------------------------------------
LEASE EXPIRATION SCHEDULE
- ---------------------------------------------------------------------------------------------------------------------------
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*
- ---------------------------------------------------------------------------------------------------------------------------
2004 3 $15.18 3,481 0.7% 0.7% 0.6% 0.6%
2005 16 $18.23 65,214 12.8% 13.4% 13.9% 14.5%
2006 7 $20.53 20,677 4.0% 17.5% 5.0% 19.5%
2007 21 $17.76 73,666 14.4% 31.9% 15.3% 34.8%
2008 21 $14.05 107,194 21.0% 52.9% 17.6% 52.4%
2009 8 $18.37 38,191 7.5% 60.3% 8.2% 60.6%
2010 6 $18.27 68,319 13.4% 73.7% 14.6% 75.1%
2011 3 $20.18 15,087 3.0% 76.6% 3.6% 78.7%
2012 4 $18.61 29,608 5.8% 82.4% 6.4% 85.1%
2013 0 $0.00 0 0.0% 82.4% 0.0% 85.1%
2014 3 $95.84 8,110 1.6% 84.0% 9.1% 94.2%
Thereafter 5 $54.20 9,112 1.8% 85.8% 5.8% 100.0%
Vacant 0 N/A 72,542 14.2% 100.0% 0.0% 100.0%
- ---------------------------------------------------------------------------------------------------------------------------
* Calculated based on the approximate square footage occupied by each tenant.
S-138
THE LOAN. The Mortgage Loan (the "444 North Michigan Avenue Loan") is
secured by a first mortgage encumbering an office building located in Chicago,
Illinois. The 444 North Michigan Avenue Loan represents approximately 6.5% of
the Cut-Off Date Pool Balance. The 444 North Michigan Avenue Loan was originated
on July 27, 2004, and has a principal balance as of the Cut-Off Date of
$71,500,000. The 444 North Michigan Avenue Loan provides for interest-only
payments for its entire term.
The 444 North Michigan Avenue Loan has a remaining term of 119 months and
matures on July 11, 2014. The 444 North Michigan Avenue Loan may be prepaid on
or after May 11, 2014, and permits defeasance with United States government
obligations beginning two years after the Closing Date.
THE BORROWER. The borrower is Kan Am 444 North Michigan Avenue, LP, a
special purpose entity. Legal counsel to the borrower delivered a
non-consolidation opinion in connection with the origination of the 444 North
Michigan Avenue Loan. The sponsor of the borrower is Kan Am Grund
Kapitalanlagegesellschaft mbH ("The Kan Am Group"). The Kan Am Group is one of
Germany's largest private syndicators and asset managers of real estate with
current investments of approximately 28 million square feet of commercial real
estate projects, approximately 86% of which are in the United States.
THE PROPERTY. The Mortgaged Property is an approximately 511,201 square
foot office building situated on approximately 0.5 acres. The Mortgaged property
was constructed in 1976 and renovated in 1991. The Mortgaged Property is located
in Chicago, Illinois. As of May 21, 2004, the occupancy rate for the Mortgaged
Property securing the 444 North Michigan Avenue Loan was approximately 85.8%.
The largest tenant is Shefsky & Froelich Ltd. ("Shefsky"), occupying
approximately 43,612 square feet, or approximately 8.5% of the net rentable
area. Shefsky is a mid-size full-service law firm representing many
Chicago-based companies, including several Fortune 500 companies. The Shefsky
lease expires in May 2005. The second largest tenant is Gordon & Glickson L.L.C.
("Gordon & Glickson"), occupying approximately 30,999 square feet, or
approximately 6.1% of the net rentable area. Gordon & Glickson is a law firm
that specializes in advising clients in technology-based sectors ranging from
information technology to life sciences. The Gordon & Glickson lease expires in
December 2007. The third largest tenant is Monster Worldwide, Inc., formerly TMP
Worldwide, Inc. ("Monster Worldwide"), occupying approximately 30,816 square
feet, or approximately 6.0% of the net rentable area. Monster Worldwide is an
online employment services company and the parent company of Monster, a leading
global careers website. The Monster Worldwide lease expires in September 2010.
LOCK BOX ACCOUNT. All tenant payments due under the applicable tenant
leases are deposited into a mortgagee-designated lock box account.
MANAGEMENT. TAG Management, LLC, an affiliate of one of the sponsors, is
the property manager for the Mortgaged Property securing the 444 North Michigan
Avenue Loan.
S-139
Independence Plaza
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
MORTGAGE LOAN SELLER Wachovia
CUT-OFF DATE BALANCE $44,000,000
PERCENTAGE OF CUT-OFF DATE POOL 4.0%
BALANCE
NUMBER OF MORTGAGE LOANS 1
LOAN PURPOSE Acquisition
SPONSOR Amstar Group and American Realty Advisors
TYPE OF SECURITY Fee
MORTGAGE RATE 5.060%
MATURITY DATE August 11, 2009
AMORTIZATION TYPE Interest Only
INTEREST ONLY PERIOD 60
ORIGINAL TERM / AMORTIZATION 60 / IO
REMAINING TERM / AMORTIZATION 60 / IO
LOCKBOX Springing
SHADOW RATING (S&P/MOODY'S)* A/Baa2
UP-FRONT RESERVES
TAX Yes
ENGINEERING $326,238
ONGOING MONTHLY RESERVES
TAX Yes
ADDITIONAL FINANCING None
CUT-OFF DATE BALANCE $44,000,000
CUT-OFF DATE BALANCE/SF $78
CUT-OFF DATE LTV 51.5%
MATURITY DATE LTV 51.5%
UW DSCR ON NCF 2.94x
- --------------------------------------------------------------------------------
* S&P and Moody's have confirmed that the Independence Plaza Loan has, in the
context of its inclusion in the trust, credit characteristics consistent
with an investment-grade obligation.
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 1
LOCATION Denver, CO
PROPERTY TYPE Office -- CBD
SIZE (SF) 561,957
OCCUPANCY AS OF JUNE 11, 2004 87.7%
YEAR BUILT / YEAR RENOVATED 1971 / 1995
APPRAISED VALUE $85,500,000
PROPERTY MANAGEMENT Transwestern/Mile High
Commercial Services, LLC
UW ECONOMIC OCCUPANCY 87.9%
UW REVENUES $12,441,154
UW TOTAL EXPENSES $5,102,305
UW NET OPERATING INCOME (NOI) $7,338,849
UW NET CASH FLOW (NCF) $6,547,188
- --------------------------------------------------------------------------------
S-140
- -------------------------------------------------------------------------------------------------------------------------------
TENANT SUMMARY
- -------------------------------------------------------------------------------------------------------------------------------
NET % OF NET % OF
RATINGS* RENTABLE RENTABLE ACTUAL ACTUAL DATE OF LEASE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA RENT PSF ACTUAL RENT RENT EXPIRATION
- -------------------------------------------------------------------------------------------------------------------------------
AT&T ......................... Baa2/BBB/BB+ 59,940 10.7% $17.63 $1,056,619 10.3% August 2008
Questar ...................... A2/A+/NR 38,333 6.8 $21.00 804,993 7.8 August 2007
Kennedy, Christopher, Childs &
Fogg ........................ NR/NR/NR 30,302 5.4 $22.19 672,401 6.6 February 2010
Boldtech Systems ............. NR/NR/NR 27,859 5.0 $26.31 733,101 7.1 August 2006
CQG, Inc. .................... NR/NR/NR 26,101 4.6 $23.49 613,113 6.0 October 2009
Non-major tenants ............ 310,156 55.2 $20.58 6,382,803 62.2
Vacant ....................... 69,266 12.3 0 0.0
------- ----- ------------ -----
TOTAL ........................ 561,957 100.0% $10,263,030 100.0%
======= ===== ============ =====
- -------------------------------------------------------------------------------------------------------------------------------
* Certain ratings are those of the parent whether or not the parent
guarantees the lease.
- ---------------------------------------------------------------------------------------------------------------------------
LEASE EXPIRATION SCHEDULE
- ---------------------------------------------------------------------------------------------------------------------------
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*
- ---------------------------------------------------------------------------------------------------------------------------
2004 3 $21.18 11,396 2.0% 2.0% 2.4% 2.4%
2005 9 $18.79 56,740 10.1% 12.1% 10.4% 12.7%
2006 14 $23.83 97,357 17.3% 29.4% 22.6% 35.3%
2007 7 $20.92 65,809 11.7% 41.2% 13.4% 48.8%
2008 9 $18.10 88,677 15.8% 56.9% 15.6% 64.4%
2009 9 $22.48 71,213 12.7% 69.6% 15.6% 80.0%
2010 2 $22.19 30,302 5.4% 75.0% 6.6% 86.5%
2011 5 $19.71 48,956 8.7% 83.7% 9.4% 96.0%
2012 2 $23.11 5,791 1.0% 84.7% 1.3% 97.3%
2013 1 $30.00 3,849 0.7% 85.4% 1.1% 98.4%
2014 2 $13.19 12,601 2.2% 87.7% 1.6% 100.0%
Thereafter 0 $0.00 0 0.0% 87.7% 0.0% 100.0%
Vacant 0 N/A 69,266 12.3% 100.0% 0.0% 100.0%
- ---------------------------------------------------------------------------------------------------------------------------
* Calculated based on the approximate square footage occupied by each tenant.
S-141
THE LOAN. The Mortgage Loan (the "Independence Plaza Loan") is secured by a
first mortgage encumbering an office building located in Denver, Colorado. The
Independence Plaza Loan represents approximately 4.0% of the Cut-Off Date Pool
Balance. The Independence Plaza Loan was originated on July 14, 2004, and has a
principal balance as of the Cut-Off Date of $44,000,000. The Independence Plaza
Loan provides for interest-only payments for its entire term.
The Independence Plaza Loan has a remaining term of 60 months and matures
on August 11, 2009. The Independence Plaza Loan may be prepaid on or after May
11, 2009, and permits defeasance with United States government obligations
beginning two years after the Closing Date.
THE BORROWER. The borrower is Amstar-ARA Denver, LLC, a special purpose
entity. Legal counsel to the borrower delivered a non-consolidation opinion in
connection with the origination of the Independence Plaza Loan. The sponsors of
the borrower are Amstar Group and American Realty Advisors. Amstar Group is
headquartered at the Mortgaged Property, and its portfolio includes
approximately 29 commercial properties, consisting mostly of hospitality,
multifamily and office properties. American Realty Advisors is based in
Glendale, California, and advises public and corporate pension funds,
endowments, foundations and trust funds.
THE PROPERTY. The Mortgaged Property is an approximately 561,957 square
foot office building situated on approximately 2.5 acres. The Mortgaged property
was constructed in 1971 and renovated in 1995. The Mortgaged Property is located
in Denver, Colorado. As of June 11, 2004, the occupancy rate for the Mortgaged
Property securing the Independence Plaza Loan was approximately 87.7%.
The largest tenant is AT&T, occupying approximately 59,940 square feet, or
approximately 10.7% of the net rentable area. AT&T is a market leader in local,
long distance and internet services, as well as transaction-based services such
as prepaid cards, collect calling and directory assistance. As of July 23, 2004,
AT&T was rated "Baa2" (Moody's), "BBB" (S&P) and "BB+" (Fitch). The AT&T lease
expires in August 2008. The second largest tenant is Questar, occupying
approximately 38,333 square feet, or approximately 6.8% of the net rentable area
under two separate leases. Questar is an energy holding company whose primary
utility subsidiary, Questar Gas, distributes natural gas to more than 770,000
customers in Utah, southwestern Wyoming and southeastern Idaho. As of July 23,
2004, Questar was rated "A2" (Moody's) and "A+" (S&P). Both Questar leases
expire in August 2007. The third largest tenant is Kennedy, Christopher, Childs
& Fogg, ("KCCF"), occupying approximately 30,302 square feet under two separate
leases, or approximately 5.4% of the net rentable area. Based in Denver, KCCF is
a litigation and problem management law firm. Both KCCF leases expire in
February 2010.
LOCK BOX ACCOUNT. At any time during the term of the Independence Plaza
Loan, (i) if the debt service coverage ratio, as computed by the mortgagee, is
less than 2.25x, 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 and 100% of excess cash flow will be
swept into an account controlled by the mortgagee.
MANAGEMENT. Transwestern/Mile High Commercial Services, LLC
("Transwestern") is the property manager for the Mortgaged Property securing the
Independence Plaza Loan. Formed in February 2004 from the merger of Transwestern
Commercial Services and Mile High Properties, Transwestern operates in 22 cities
across the United States and oversees the management and leasing of
approximately 500 properties representing approximately 150 million square feet.
S-142
FBI Field Office -- Baltimore, MD
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
MORTGAGE LOAN SELLER Artesia
CUT-OFF DATE BALANCE $41,900,000
PERCENTAGE OF CUT-OFF DATE POOL BALANCE 3.8%
NUMBER OF MORTGAGE LOANS 1
LOAN PURPOSE Refinance
SPONSOR Anthony Hai, Christopher Penrose,
and NGP Capital Partners III LLC
TYPE OF SECURITY Fee
MORTGAGE RATE 6.240%
MATURITY DATE August 11, 2013
AMORTIZATION TYPE ARD
INTEREST ONLY PERIOD(1) 24
ORIGINAL TERM / AMORTIZATION(1) 108 / 360
REMAINING TERM / AMORTIZATION(1) 108 / 360
LOCKBOX Yes
UP-FRONT RESERVES
TAX/INSURANCE Yes
RETENTION(2) $2,600,000
OCCUPANCY(3) $100,000
ONGOING MONTHLY RESERVES
TAX/INSURANCE Yes
REPLACEMENT $2,596
TI/LC(4) Springing
ADDITIONAL FINANCING None
CUT-OFF DATE BALANCE $41,900,000
CUT-OFF DATE BALANCE/SF $269
CUT-OFF DATE LTV 75.1%
MATURITY DATE LTV 66.6%
UW DSCR ON NCF(1)(5) 1.42x
- --------------------------------------------------------------------------------
(1) Fixed monthly payments of principal and interest for the first 12 months on
a 20-year amortization schedule, interest-only payments for months 13
through 36, and thereafter, fixed monthly payments of principal and
interest on a 30-year amortization schedule.
(2) Funds to be released upon satisfaction of the following conditions: (i)
evidence of the completion of the punchlist items, (ii) final,
unconditional lien waivers from the general contractor and all
subcontractors for the construction of the property, and (iii) an affidavit
from the seller of the Mortgaged Property that no notification has been
received regarding mechanic's or materialmen's liens. The Borrower may draw
up to 75% of the reserves on deposit to be applied against contractor
invoices with $650,000 remaining on deposit until all punchlist items are
completed and final lien waivers are received and an affidavit from the
seller of the Mortgaged Property has been received confirming that no
notification has been received regarding mechanic's or materialmen's liens.
(3) Funds to be released upon receipt of a final unconditional Certificate of
Occupancy with respect to the leased premises of the tenant.
(4) Unless and until the General Services Administration renews or extends its
lease at a minimum rent of $40.01 per square foot for its current space
(155,755 sf) with a term expiring no earlier than June 30, 2019 prior to
the stated dates, letters of credit or cash flow sweeps will be required as
follows: (i) a $2,000,000 letter of credit on August 11, 2011, or if a
letter of credit is not posted, a cash flow sweep will commence on that
date and continue until such time as the total sweep deposits equal at
least the amount of the required letter of credit; (ii) a $2,000,000 letter
of credit on August 11, 2012, or if a letter of credit is not posted, a
cash flow sweep will commence on that date and continue until such time as
the total sweep deposits equal at least the amount of the required letter
of credit; and (iii) a letter of credit in the amount of $3,000,000 to be
posted on the anticipated repayment date of August 11, 2013. The total
letters of credit or cash available on the anticipated repayment date will
be $7,000,000. The funds will be released if and when the release
conditions are met. On or after August 11, 2013, disbursements from the
reserve account may be made, at the mortgagee's sole option, to pay down
the unpaid balance of the Loan.
(5) Annual debt service based on a 30-year amortization.
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 1
LOCATION Baltimore, MD
PROPERTY TYPE Office -- Suburban
SIZE (SF) 155,755
OCCUPANCY AS OF JUNE 7, 2004 100.0%
YEAR BUILT / YEAR RENOVATED 2004 / N/A
APPRAISED VALUE $55,800,000
PROPERTY MANAGEMENT Real Assets Management Co., LLC
UW ECONOMIC OCCUPANCY 95.0%
UW REVENUES $5,919,756
UW TOTAL EXPENSES $1,332,459
UW NET OPERATING INCOME (NOI) $4,587,297
UW NET CASH FLOW (NCF) $4,405,554
- --------------------------------------------------------------------------------
S-143
- ---------------------------------------------------------------------------------------------------------------------------------
TENANT SUMMARY
- ---------------------------------------------------------------------------------------------------------------------------------
NET % OF NET % OF
RATINGS* RENTABLE RENTABLE ACTUAL ACTUAL DATE OF LEASE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA RENT PSF ACTUAL RENT RENT EXPIRATION
- ---------------------------------------------------------------------------------------------------------------------------------
United States Government ......... Aaa/AAA/AAA 155,755 100.0% $40.01 $6,231,322 100.0% June 2014
Vacant ........................... 0 0.0 0 0.0
------- ----- ---------- -----
TOTAL ............................ 155,755 100.0% $6,231,322 100.0%
======= ===== ========== =====
- ---------------------------------------------------------------------------------------------------------------------------------
* Certain ratings are those of the parent whether or not the parent
guarantees the lease.
- ---------------------------------------------------------------------------------------------------------------------
LEASE EXPIRATION SCHEDULE
- ---------------------------------------------------------------------------------------------------------------------
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 $40.01 155,755 100.0% 100.0% 100.0% 100.0%
- ---------------------------------------------------------------------------------------------------------------------
* Calculated based on approximate square footage occupied by each tenant.
S-144
THE LOAN. The Mortgage Loan (the "FBI Field Office -- Baltimore, MD Loan")
is secured by a first mortgage encumbering an office building located in
Baltimore, Maryland. The FBI Field Office -- Baltimore, MD Loan represents
approximately 3.8% of the Cut-Off Date Pool Balance. The FBI Field Office --
Baltimore, MD Loan was originated on June 24, 2004, and has a principal balance
as of the Cut-Off Date of $41,900,000. The FBI Field Office-Baltimore, MD Loan
provides for fixed monthly payments of principal and interest for the first 12
months of its term on a 20-year amortization schedule, interest-only payments
for the next 24 months, and, thereafter, fixed monthly payments of principal and
interest on a 30-year amortization schedule.
The FBI Field Office -- Baltimore, MD Loan has a remaining term of 108
months to its anticipated repayment date of August 11, 2013. The FBI Field
Office -- Baltimore, MD Loan may be prepaid on or after June 11, 2013, and
permits defeasance with United States government obligations beginning three
years after the first payment date.
THE BORROWER. The Borrower is Maryland Funding, LLC, a special purpose
entity. Legal counsel to the borrower delivered a non-consolidation opinion in
connection with the origination of the FBI Field Office -- Baltimore, MD Loan.
The sponsors of the borrower are Anthony Hai, Christopher Penrose and NGP
Capital Partners III LLC. NGP Capital, LLC, an affiliate of the sponsors, has an
option to purchase all of the shares of the borrower's sole member, Baltimore
Assets, LLC between the 12th and 18th months after completion of the
improvements. Upon completion of the transfer, Mr. Hai and Mr. Penrose will be
released from further liability under the FBI Field Office -- Baltimore, MD
Loan. Mr. Hai and Mr. Penrose have been partners in a nationwide development and
investment program of General Services Administration ("GSA") build-to-suit
properties. NGP Capital Partners III LLC specializes in the acquisition of
properties leased to GSA and other properties with leases to investment- grade
tenants.
THE PROPERTY. The Mortgaged Property is an approximately 155,755 square
foot office building situated on approximately 10.9 acres. The Mortgaged
Property was constructed in 2004. The Mortgaged Property is located in
Baltimore, Maryland. As of June 7, 2004, the occupancy rate for the Mortgaged
Property securing the FBI Field Office -- Baltimore, MD Loan was approximately
100.0%. The sole tenant is the United States Government, occupying approximately
155,755 square feet, or the entire net rentable area. The building was built
specifically for the United States Federal Bureau of Investigation as one of 56
field offices located in major cities throughout the United States and Puerto
Rico. The United States Government lease expires in June 2014.
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 August
11, 2013, if the FBI Field Office -- Baltimore, MD Loan is not paid in full, the
FBI Field Office -- Baltimore, MD Loan enters into a hyper-amortization period
through August 11, 2034. The interest rate applicable to the FBI Field Office --
Baltimore, MD Loan during such hyper-amortization period will increase to the
greater of 4% over the mortgage rate or 3.65% over the treasury rate, as
specified in the loan documents.
MANAGEMENT. Real Assets Management Co., LLC, an affiliate of the sponsors,
is the property manager for the Mortgaged Property securing the FBI Field Office
- -- Baltimore, MD Loan.
S-145
Barneys New York -- Beverly Hills, CA
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
MORTGAGE LOAN SELLER Wachovia
CUT-OFF DATE BALANCE $37,000,000
PERCENTAGE OF CUT-OFF DATE POOL BALANCE 3.4%
NUMBER OF MORTGAGE LOANS 1
LOAN PURPOSE Refinance
SPONSOR Stanley Cayre
TYPE OF SECURITY Leasehold
MORTGAGE RATE 5.780%
MATURITY DATE August 11, 2014
AMORTIZATION TYPE Balloon
ORIGINAL TERM / AMORTIZATION 120 / 360
REMAINING TERM / AMORTIZATION 120 / 360
LOCKBOX Yes
UP-FRONT RESERVES None
ONGOING MONTHLY RESERVES
TI/LC* Springing
ADDITIONAL FINANCING None
CUT-OFF DATE BALANCE $37,000,000
CUT-OFF DATE BALANCE/SF $322
CUT-OFF DATE LTV 74.0%
MATURITY DATE LTV 62.3%
UW DSCR ON NCF 1.27x
- --------------------------------------------------------------------------------
* In the event the net worth of Barneys New York falls to less than $80
million, monthly reserves for tenant improvements and leasing commissions
are required in the amount of $25,000, up to a maximum amount of
$1,000,000.
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 1
LOCATION Beverly Hills, CA
PROPERTY TYPE Retail -- Shadow Anchored
SIZE (SF) 114,978
OCCUPANCY AS OF JULY 12, 2004 100.0%
YEAR BUILT / YEAR RENOVATED 1993 / NA
APPRAISED VALUE $50,000,000
PROPERTY MANAGEMENT Jenel Management Corp.
UW ECONOMIC OCCUPANCY 98.0%
UW REVENUES $3,358,320
UW TOTAL EXPENSES $33,583
UW NET OPERATING INCOME (NOI) $3,324,737
UW NET CASH FLOW (NCF) $3,306,961
- --------------------------------------------------------------------------------
S-146
- -------------------------------------------------------------------------------------------------------------------------
TENANT SUMMARY
- -------------------------------------------------------------------------------------------------------------------------
NET % OF NET % OF
RATINGS* RENTABLE RENTABLE ACTUAL ACTUAL DATE OF LEASE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA RENT PSF ACTUAL RENT RENT EXPIRATION
- -------------------------------------------------------------------------------------------------------------------------
Barneys New York ......... NR/B/NR 114,978 100.0% $29.80 $3,426,857 100.0% January 2019
Vacant ................... 0 0.0 0 0.0
------- ----- ----------- -----
TOTAL .................... 114,978 100.0% $3,426,857 100.0%
======= ===== =========== =====
- -------------------------------------------------------------------------------------------------------------------------
* Certain ratings are those of the parent whether or not the parent
guarantees the lease.
- ---------------------------------------------------------------------------------------------------------------------
LEASE EXPIRATION SCHEDULE
- ---------------------------------------------------------------------------------------------------------------------
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*
- ---------------------------------------------------------------------------------------------------------------------
2019 1 $29.80 114,978 100.0% 100.0% 100.0% 100.0%
- ---------------------------------------------------------------------------------------------------------------------
* Calculated based on the approximate square footage occupied by each tenant.
S-147
THE LOAN. The Mortgage Loan (the "Barneys New York -- Beverly Hills, CA
Loan") is secured by a first mortgage encumbering a shadow anchored retail
building located in Beverly Hills, California. The Barneys New York -- Beverly
Hills, CA Loan represents approximately 3.4% of the Cut-Off Date Pool Balance.
The Barneys New York -- Beverly Hills, CA Loan was originated on July 12, 2004,
and has a principal balance as of the Cut-Off Date of $37,000,000.
The Barneys New York -- Beverly Hills, CA Loan has a remaining term of 120
months and matures on August 11, 2014. The Barneys New York -- Beverly Hills, CA
Loan may be prepaid on or after June 11, 2014, and permits defeasance with
United States government obligations beginning two years after the Closing Date.
THE BORROWER. The borrower is Flagship Partners II LLC, a special purpose
entity. Legal counsel to the borrower delivered a non-consolidation opinion in
connection with the origination of the Barneys New York -- Beverly, Hills, CA
Loan. The sponsor of the borrower is Stanley Cayre. Members of the Cayre family
are active investors in large real estate projects and have been equity
investors in several prominent New York properties.
THE PROPERTY. The Mortgaged Property is an approximately 114,978 square
foot single tenant shadow anchored retail building situated on approximately 0.8
acres. The Mortgaged Property was constructed in 1993. The Mortgaged Property is
located in Beverly Hills, California, within the Los Angeles-Long Beach-Santa
Ana, California metropolitan statistical area. As of July 12, 2004, the
occupancy rate for the Mortgaged Property securing the Barneys New York --
Beverly Hills, CA Loan was approximately 100.0%.
The sole tenant is Barneys New York, Inc. ("Barneys New York"), occupying
approximately 114,978 square feet, or the entire net rentable area. Barneys New
York features designer apparel for men, women, and children, shoes, accessories
and home furnishings. Barneys New York operates nine full-price stores including
flagship stores in New York City, New York, Beverly Hills, California and
Chicago, Illinois, as well as 12 outlets. As of July 23, 2004, Barneys New York
was rated "B" (S&P). The Barneys New York lease expires in January 2019.
LOCK BOX ACCOUNT. All tenant payments due under the applicable tenant
leases are deposited into a mortgagee-designated lock box account.
MANAGEMENT. Jenel Management Corp., an affiliate of the sponsor, is the
property manager for the Mortgaged Property securing the Barneys New York --
Beverly Hills, CA Loan.
S-148
1750 H Street
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
MORTGAGE LOAN SELLER Wachovia
CUT-OFF DATE BALANCE $35,400,000
PERCENTAGE OF CUT-OFF DATE POOL BALANCE 3.2%
NUMBER OF MORTGAGE LOANS 1
LOAN PURPOSE Refinance
SPONSOR National Treasury Employees Union
TYPE OF SECURITY Fee
MORTGAGE RATE 5.600%
MATURITY DATE July 11, 2014
AMORTIZATION TYPE ARD
INTEREST ONLY PERIOD 12
ORIGINAL TERM / AMORTIZATION 120 / 300
REMAINING TERM / AMORTIZATION 119 / 300
LOCKBOX Springing
UP-FRONT RESERVES
TAX/INSURANCE Yes
ONGOING MONTHLY RESERVES
TAX/INSURANCE Yes
REPLACEMENT $641
TI/LC* Springing
ADDITIONAL FINANCING None
CUT-OFF DATE BALANCE $35,400,000
CUT-OFF DATE BALANCE/SF $318
CUT-OFF DATE LTV 74.5%
MATURITY DATE LTV 58.5%
UW DSCR ON NCF 1.26x
- --------------------------------------------------------------------------------
* Beginning in January 2010, the borrower is required to deposit $8,000 per
month into a tenant improvements/leasing commissions reserve. Funds will be
released when space occupied by the Bank-Fund Staff Federal Credit Union
has been renewed for a five-year term, or if the tenant does not renew,
funds may be used to pay the costs associated with leasing this space to
new tenants with lease terms approved by the mortgagee.
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 1
LOCATION Washington, DC
PROPERTY TYPE Office -- CBD
SIZE (SF) 111,373
OCCUPANCY AS OF MAY 31, 2004 100.0%
YEAR BUILT / YEAR RENOVATED 2002 / NA
APPRAISED VALUE $47,500,000
PROPERTY MANAGEMENT CarrAmerica Real Estate Services, LLC
UW ECONOMIC OCCUPANCY 95.0%
UW REVENUES $5,274,073
UW TOTAL EXPENSES $1,865,242
UW NET OPERATING INCOME (NOI) $3,408,831
UW NET CASH FLOW (NCF) $3,317,365
- --------------------------------------------------------------------------------
S-149
- ------------------------------------------------------------------------------------------------------------------------------------
TENANT SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
NET % OF NET % OF
RATINGS* RENTABLE RENTABLE ACTUAL RENT ACTUAL DATE OF LEASE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA PSF ACTUAL RENT RENT EXPIRATION
- ------------------------------------------------------------------------------------------------------------------------------------
National Treasury Employees Union ..... NR/NR/NR 63,212 56.8% $32.99 $2,085,364 59.9% December 2017
Bank-Fund Staff Federal Credit Union .. NR/NR/NR 23,845 21.4 $28.77 686,021 19.7 September 2013
Wells Fargo ........................... Aa1/AA--/AA 13,807 12.4 $29.06 401,176 11.5 October 2012
The Oliver Carr Company ............... NR/NR/NR 6,794 6.1 $29.65 201,442 5.8 October 2012
Furman Group .......................... NR/NR/NR 2,394 2.1 $30.00 71,820 2.1 July 2010
Non-major tenants ..................... 1,321 1.2 $26.00 34,346 1.0 July 2013
Vacant ................................ 0 0.0 0 0.0
------ ----- ----------- -----
TOTAL ................................. 111,373 100.0% $3,480,169 100.0%
======= ===== =========== =====
- ------------------------------------------------------------------------------------------------------------------------------------
* Certain ratings are those of the parent whether or not the parent
guarantees the lease.
- -------------------------------------------------------------------------------------------------------------------------
LEASE EXPIRATION SCHEDULE
- -------------------------------------------------------------------------------------------------------------------------
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*
- -------------------------------------------------------------------------------------------------------------------------
2004 0 $0.00 0 0.0% 0.0% 0.0% 0.0%
2005 0 $0.00 0 0.0% 0.0% 0.0% 0.0%
2006 0 $0.00 0 0.0% 0.0% 0.0% 0.0%
2007 0 $0.00 0 0.0% 0.0% 0.0% 0.0%
2008 0 $0.00 0 0.0% 0.0% 0.0% 0.0%
2009 0 $0.00 0 0.0% 0.0% 0.0% 0.0%
2010 1 $30.00 2,394 2.1% 2.1% 2.1% 2.1%
2011 0 $0.00 0 0.0% 2.1% 0.0% 2.1%
2012 3 $29.25 20,601 18.5% 20.6% 17.3% 19.4%
2013 2 $28.62 25,166 22.6% 43.2% 20.7% 40.1%
2014 0 $0.00 0 0.0% 43.2% 0.0% 40.1%
Thereafter 1 $32.99 63,212 56.8% 100.0% 59.9% 100.0%
Vacant 0 N/A 0 0.0% 100.0% 0.0% 100.0%
- -------------------------------------------------------------------------------------------------------------------------
* Calculated based on the approximate square footage occupied by each tenant.
S-150
THE LOAN. The Mortgage Loan (the "1750 H Street Loan") is secured by a
first mortgage encumbering an office building located in Washington, DC. The
1750 H Street Loan represents approximately 3.2% of the Cut-Off Date Pool
Balance. The 1750 H Street Loan was originated on June 18, 2004, and has a
principal balance as of the Cut-Off Date of $35,400,000. The 1750 H Street Loan
provides for interest-only payments for the first 12 months of its term, and
thereafter, fixed monthly payments of principal and interest.
The 1750 H Street Loan has a remaining term of 119 months to its
anticipated repayment date of July 11, 2014. The 1750 H Street Loan may be
prepaid on or after January 11, 2014, and permits defeasance with United States
government obligations beginning two years after the Closing Date.
THE BORROWER. The borrower is NTEU 1750 H Street LLC, a special purpose
entity. Legal counsel to the borrower delivered a non-consolidation opinion in
connection with the origination of the 1750 H Street Loan. The sponsor of the
borrower is the National Treasury Employees Union ("NTEU"), which is the largest
tenant.
THE PROPERTY. The Mortgaged Property is an approximately 111,373 square
foot office building situated on approximately 0.3 acres. The Mortgaged Property
was constructed in 2002. The Mortgaged Property is located in Washington, DC. As
of May 31, 2004, the occupancy rate for the Mortgaged Property securing the 1750
H Street Loan was approximately 100.0%.
The largest tenant is NTEU (the sponsor of the borrower), occupying
approximately 63,212 square feet, or approximately 56.8% of the net rentable
area. NTEU is the largest independent, non-postal federal employee union,
representing approximately 150,000 non-supervisory federal employees in every
classification and pay level in approximately 29 government agencies. The NTEU
lease expires in December 2017. The second largest tenant is Bank-Fund Staff
Federal Credit Union ("Bank-Fund Staff FCU"), occupying approximately 23,845
square feet, or approximately 21.4% of the net rentable area. The Bank-Fund
Staff FCU is a full-service financial cooperative, primarily serving the staffs
of The World Bank Group and the International Monetary Fund. The Bank-Fund Staff
FCU lease expires in September 2013. The third largest tenant is Wells Fargo &
Company ("Wells Fargo"), occupying approximately 13,807 square feet, or
approximately 12.4% of the net rentable area. Wells Fargo is a diversified
financial services company providing banking, insurance, investments, mortgage
banking and consumer finance to consumers, businesses and institutions in all 50
states of the United States as well as in other countries. As of July 23, 2004,
Wells Fargo was rated "Aa1" (Moody's), "AA--" (S&P) and "AA" (Fitch). The Wells
Fargo lease expires in October 2012.
LOCK BOX ACCOUNT. If the 1750 H Street Loan is not repaid in full on or
prior to May 11, 2014, 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.
HYPER-AMORTIZATION. Commencing on the anticipated repayment date of July
11, 2014, if the 1750 H Street Loan is not paid in full, the 1750 H Street Loan
enters into a hyper-amortization period through July 1, 2029. The interest rate
applicable to the 1750 H Street 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. CarrAmerica Real Estate Services, LLC is the property manager
for the Mortgaged Property securing the 1750 H Street Loan. CarrAmerica Real
Estate Services, LLC is the leasing and/or managing agent for approximately 20
million square feet of office space.
S-151
Aylesbury Farms Apartment Homes
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
MORTGAGE LOAN SELLER Wachovia
CUT-OFF DATE BALANCE $33,000,000
PERCENTAGE OF CUT-OFF DATE POOL BALANCE 3.0%
NUMBER OF MORTGAGE LOANS 1
LOAN PURPOSE Acquisition
SPONSOR Steven M. Rayman
TYPE OF SECURITY Fee
MORTGAGE RATE 5.660%
MATURITY DATE August 11, 2014
AMORTIZATION TYPE Balloon
INTEREST ONLY PERIOD 60
ORIGINAL TERM / AMORTIZATION 120 / 360
REMAINING TERM / AMORTIZATION 120 / 360
LOCKBOX None
UP-FRONT RESERVES
TAX/INSURANCE Yes
W&D/FITNESS* $1,000,000
ONGOING MONTHLY RESERVES
TAX/INSURANCE Yes
REPLACEMENT $7,125
ADDITIONAL FINANCING None
CUT-OFF DATE BALANCE $33,000,000
CUT-OFF DATE BALANCE/UNIT $86,842
CUT-OFF DATE LTV 80.0%
MATURITY DATE LTV 74.5%
UW DSCR ON NCF 1.31x
- --------------------------------------------------------------------------------
* Reserve established for the costs of a fully equipped fitness facility as
well as the installation of washers & dryers in each unit.
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 1
LOCATION Duluth, GA
PROPERTY TYPE Multifamily -- Conventional
SIZE (UNITS) 380
OCCUPANCY AS OF JULY 6, 2004 92.1%
YEAR BUILT / YEAR RENOVATED 1996 / 2000
APPRAISED VALUE $41,250,000
PROPERTY MANAGEMENT Executive Affiliates, Inc.
UW ECONOMIC OCCUPANCY 86.0%
UW REVENUES $4,618,834
UW TOTAL EXPENSES $1,546,491
UW NET OPERATING INCOME (NOI) $3,072,343
UW NET CASH FLOW (NCF) $2,986,843
- --------------------------------------------------------------------------------
S-152
- ----------------------------------------------------------------------------------------------------------
UNIT MIX
- ----------------------------------------------------------------------------------------------------------
NO. OF APPROXIMATE APPROXIMATE
UNIT MIX UNITS UNIT SIZE (SF) NRA (SF) % OF NRA RENTAL RATE
- ----------------------------------------------------------------------------------------------------------
1 BR/1 BA ............. 106 960 101,760 20.4% $898
2 BR/2 BA ............. 206 1,415 291,490 58.5 $1,088
3 BR/2 BA ............. 68 1,543 104,924 21.1 $1,235
--- ------- -----
380 1,311 498,174 100.0% $1,061/$0.81/SF
=== ======= =====
- ----------------------------------------------------------------------------------------------------------
S-153
THE LOAN. The Mortgage Loan (the "Aylesbury Farms Apartment Homes Loan") is
secured by a first mortgage encumbering a 380-unit multifamily complex located
in Duluth, Georgia. The Aylesbury Farms Apartment Homes Loan represents
approximately 3.0% of the Cut-Off Date Pool Balance. The Aylesbury Farms
Apartment Homes Loan was originated on July 30, 2004, and has a principal
balance as of the Cut-Off Date of $33,000,000. The Aylesbury Farms Apartment
Homes Loan provides for interest only payments for the first 60 months of its
term, and thereafter, fixed monthly payments of principal and interest.
The Aylesbury Farms Apartment Homes Loan has a remaining term of 120 months
and matures on August 11, 2014. The Aylesbury Farms Apartment Homes Loan may be
prepaid on or after March 11, 2013, and permits defeasance with United States
government obligations beginning two years after the Closing Date.
THE BORROWER. The borrower is Aylesbury Farms, LLC, a special purpose
entity. Legal counsel to the borrower delivered a non-consolidation opinion in
connection with the origination of the Aylesbury Farms Apartment Homes Loan. The
sponsor of the borrower is Steven M. Rayman. Mr. Rayman is the founder of Big
Rock Group, which owns and/or manages upscale multifamily complexes and
full-service hotels throughout the United States.
THE PROPERTY. The Mortgaged Property is a 380-unit conventional apartment
complex consisting of 25 buildings situated on approximately 34.3 acres. The
Mortgaged Property was constructed in 1996 and renovated in 2000. The Mortgaged
Property is located in Duluth, Georgia, within the Atlanta-Sandy
Springs-Marietta, Georgia metropolitan statistical area. The Mortgaged Property
includes such amenities as a gated entrance, clubhouse, business center, 2
swimming pools, laundry facilities, car care center and garages. As of July 6,
2004, the occupancy rate for the Mortgaged Property securing the Aylesbury Farms
Apartment Homes Loan was approximately 92.1%.
LOCK BOX ACCOUNT. The loan documents do not require a lock box account.
PROPERTY MANAGEMENT. Executive Affiliates, Inc., an affiliate of the
sponsor, is the property manager for the Mortgaged Property securing the
Aylesbury Farms Apartment Homes Loan. Executive Affiliates, Inc. and its
affiliates currently manage over 7,500 multifamily units located in Arizona,
Florida, Georgia, Indiana, Kansas, Michigan, Minnesota, Nebraska, Nevada, Texas
and Utah.
S-154
Kennedy Ridge Apartments
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
MORTGAGE LOAN SELLER Wachovia
CUT-OFF DATE BALANCE $29,973,130
PERCENTAGE OF CUT-OFF DATE POOL BALANCE 2.7%
NUMBER OF MORTGAGE LOANS 1
LOAN PURPOSE Refinance
SPONSOR Roger H. Thompson and James R. Michie
TYPE OF SECURITY Fee
MORTGAGE RATE 5.700%
MATURITY DATE July 11, 2009
AMORTIZATION TYPE ARD
ORIGINAL TERM / AMORTIZATION 60 / 360
REMAINING TERM / AMORTIZATION 59 / 359
LOCKBOX Springing
UP-FRONT RESERVES
INSURANCE Yes
ENGINEERING $371,625
ONGOING MONTHLY RESERVES
TAX/INSURANCE Yes
REPLACEMENT $19,340
ADDITIONAL FINANCING None
CUT-OFF DATE BALANCE $29,973,130
CUT-OFF DATE BALANCE/UNIT $31,255
CUT-OFF DATE LTV 76.1%
MATURITY DATE LTV 70.9%
UW DSCR ON NCF 1.23x
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 1
LOCATION Denver, CO
PROPERTY TYPE Multifamily -- Conventional
SIZE (UNITS) 959
OCCUPANCY AS OF JUNE 1, 2004 83.9%
YEAR BUILT / YEAR RENOVATED 1972 / 2002
APPRAISED VALUE $39,400,000
PROPERTY MANAGEMENT Thompson Michie Associates Inc.
UW ECONOMIC OCCUPANCY 82.2%
UW REVENUES $5,866,932
UW TOTAL EXPENSES $3,056,455
UW NET OPERATING INCOME (NOI) $2,810,477
UW NET CASH FLOW (NCF) $2,578,399
- --------------------------------------------------------------------------------
S-155
- --------------------------------------------------------------------------------------------------
UNIT MIX
- --------------------------------------------------------------------------------------------------
NO. OF APPROXIMATE APPROXIMATE
UNIT MIX UNITS UNIT SIZE (SF) NRA (SF) % OF NRA RENT RATE
- --------------------------------------------------------------------------------------------------
Studio ............ 108 368 39,744 6.0% $450
1 BR/1 BA ......... 515 637 327,950 49.4 $541
2 BR/1 BA ......... 120 850 102,000 15.4 $645
2 BR/2 BA ......... 216 900 194,400 29.3 $710
--- ------- -----
959 692 664,094 100.0% $531/$0.77/SF
=== ======= =====
- --------------------------------------------------------------------------------------------------
S-156
THE LOAN. The Mortgage Loan (the "Kennedy Ridge Apartments Loan") is
secured by a first mortgage encumbering a 959-unit multifamily complex located
in Denver, Colorado. The Kennedy Ridge Apartments Loan represents approximately
2.7% of the Cut-Off Date Pool Balance. The Kennedy Ridge Apartments Loan was
originated on June 30, 2004, and has a principal balance as of the Cut-Off Date
of $29,973,130.
The Kennedy Ridge Apartments Loan has a remaining term of 59 months to its
anticipated repayment date of July 11, 2009. The Kennedy Ridge Apartments Loan
may be prepaid on or after May 11, 2009, and permits defeasance with United
States government obligations beginning four years after the first payment date.
THE BORROWER. The borrower is Fairways Apartments, LLC, a special purpose
entity. Legal counsel to the borrower delivered a non-consolidation opinion in
connection with the origination of the Kennedy Ridge Apartments Loan. The
sponsors of the borrower are James R. Michie and Roger H. Thompson, who are
principals in Thompson Michie Associates and have been in the real estate
business since 1973. Thompson Michie Associates has experience managing and
developing properties, including office buildings, industrial space, apartments
and condominiums, for its own account as well as for clients.
THE PROPERTY. The Mortgaged Property is a 959-unit garden-style apartment
complex consisting of 37 buildings situated on approximately 29.5 acres. The
Mortgaged Property was constructed in phases beginning in 1972 and renovated
between 1996 and 2002. The Mortgaged Property is located in Denver, Colorado.
The Mortgaged Property includes such amenities as 3 tennis courts, a basketball
court, 2 swimming pools, a hot tub, a playground, a combination leasing
office/clubhouse, a sauna and a fitness center. As of June 1, 2004, the
occupancy rate for the Mortgaged Property securing the Kennedy Ridge Apartments
Loan was approximately 83.9%.
LOCK BOX ACCOUNT. If the Kennedy Ridge Apartments Loan is not repaid in
full on or prior to May 11, 2009, 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.
HYPER-AMORTIZATION. Commencing on the anticipated repayment date of July
11, 2009, if the Kennedy Ridge Apartments Loan is not paid in full, the Kennedy
Ridge Apartments Loan enters into a hyper-amortization period through July 11,
2034. The interest rate applicable to the Kennedy Ridge Apartments 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.
PROPERTY MANAGEMENT. Thompson Michie Associates Inc. ("TMA"), an affiliate
of the sponsors, is the property manager for the Mortgaged Property securing the
Kennedy Ridge Apartments Loan. TMA is a full-service management and real estate
investment company, with a current real estate portfolio of over 5,000 apartment
units in Nevada, Utah, Arizona, Colorado and New Mexico.
S-157
Bel Villaggio, Phases I & II
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
MORTGAGE LOAN SELLER Wachovia
CUT-OFF DATE BALANCE $17,985,042
PERCENTAGE OF CUT-OFF DATE POOL 1.6%
BALANCE
NUMBER OF MORTGAGE 1
LOANS
LOAN PURPOSE Refinance
SPONSOR Rudi Bianchi
TYPE OF SECURITY Fee
MORTGAGE RATE 5.990%
MATURITY DATE July 11, 2014
AMORTIZATION TYPE ARD
ORIGINAL TERM / AMORTIZATION 120 / 360
REMAINING TERM / AMORTIZATION 119 / 359
LOCKBOX Springing
UP-FRONT RESERVES
TAX/INSURANCE Yes
TI/LC $90,000
OCCUPANCY* $2,500,000
ONGOING MONTHLY
RESERVES
TAX/INSURANCE Yes
REPLACEMENT $644
ADDITIONAL FINANCING None
CUT-OFF DATE BALANCE $17,985,042
CUT-OFF DATE $233
BALANCE/SF
CUT-OFF DATE LTV 76.5%
MATURITY DATE LTV 64.9%
UW DSCR ON NCF 1.21x
- --------------------------------------------------------------------------------
* To be released upon the property achieving certain occupancy levels, with
$1,250,000 released when the occupancy rate equals or exceeds 82.5%, and
the final $1,250,000 released when the occupancy rate equals or exceeds
87%.
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 1
LOCATION Temecula, CA
PROPERTY TYPE Retail -- Shadow
Anchored
SIZE (SF) 77,251
OCCUPANCY AS OF JUNE 9, 2004 80.9%
YEAR BUILT / YEAR RENOVATED 2002 / NA
APPRAISED VALUE $23,500,000
PROPERTY MANAGEMENT Grubb & Ellis
Management Services, Inc.
UW ECONOMIC OCCUPANCY 87.0%
UW REVENUES $2,312,376
UW TOTAL EXPENSES $688,989
UW NET OPERATING INCOME (NOI) $1,623,388
UW NET CASH FLOW (NCF) $1,561,181
- --------------------------------------------------------------------------------
S-158
- ------------------------------------------------------------------------------------------------------------------------------
TENANT SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------
NET % OF NET % OF
RATINGS* RENTABLE RENTABLE ACTUAL ACTUAL DATE OF LEASE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA RENT PSF ACTUAL RENT RENT EXPIRATION
- ------------------------------------------------------------------------------------------------------------------------------
Macaroni Grill ................. NR/NR/NR 6,876 8.9% $13.09 $90,000 5.8% April 2018
Stuffs Pizza ................... NR/NR/NR 4,326 5.6 $26.40 114,206 7.4 April 2023
USA Credit Union ............... NR/NR/NR 3,865 5.0 $27.00 104,355 6.7 February 2008
Original Pancake House ......... NR/NR/NR 3,729 4.8 $23.40 87,259 5.6 December 2013
Room 107 Furniture ............. NR/NR/NR 2,924 3.8 $22.20 64,913 4.2 October 2013
Non-major tenants .............. 40,741 52.7 $26.75 1,089,981 70.3
Vacant ......................... 14,790 19.1 0 0.0
------ ----- ----------- -----
TOTAL .......................... 77,251 100.0% $1,550,714 100.0%
====== ===== =========== =====
- ------------------------------------------------------------------------------------------------------------------------------
* Certain ratings are those of the parent whether or not the parent
guarantees the lease.
S-159
Cranbrook at Biltmore Park
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
MORTGAGE LOAN SELLER Wachovia
CUT-OFF DATE BALANCE $17,800,000
PERCENTAGE OF CUT-OFF DATE 1.6%
POOL BALANCE
NUMBER OF MORTGAGE LOANS 1
LOAN PURPOSE Refinance
SPONSOR Biltmore Farms, Inc.
TYPE OF SECURITY Fee
MORTGAGE RATE 5.710%
MATURITY DATE July 11, 2014
AMORTIZATION TYPE ARD
INTEREST ONLY PERIOD 24
ORIGINAL TERM / 120 / 360
AMORTIZATION
REMAINING TERM / 119 / 360
AMORTIZATION
LOCKBOX Springing
UP-FRONT RESERVES
TAX Yes
ONGOING MONTHLY RESERVES
TAX Yes
ADDITIONAL FINANCING None
CUT-OFF DATE BALANCE $17,800,000
CUT-OFF DATE BALANCE/UNIT $64,493
CUT-OFF DATE LTV 78.1%
MATURITY DATE LTV 68.7%
UW DSCR ON NCF 1.24x
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 1
LOCATION Arden, NC
PROPERTY TYPE Multifamily -- Conventional
SIZE (UNITS) 276
OCCUPANCY AS OF JUNE 16, 2004 93.5%
YEAR BUILT / YEAR RENOVATED 2002 / NA
APPRAISED VALUE $22,800,000
PROPERTY MANAGEMENT Crosland, Inc.
UW ECONOMIC OCCUPANCY 86.4%
UW REVENUES $2,581,589
UW TOTAL EXPENSES $971,461
UW NET OPERATING INCOME (NOI) $1,610,127
UW NET CASH FLOW (NCF) $1,541,127
- --------------------------------------------------------------------------------
S-160
- --------------------------------------------------------------------------------------------------
UNIT MIX
- --------------------------------------------------------------------------------------------------
NO. OF APPROXIMATE APPROXIMATE
UNIT MIX UNITS UNIT SIZE (SF) NRA (SF) % OF NRA RENTAL RATE
- --------------------------------------------------------------------------------------------------
1 BR/1 BA ......... 78 792 61,741 21.4% $707
2 BR/1 BA ......... 52 991 51,535 17.9 $787
2 BR/2 BA ......... 113 1,101 124,413 43.2 $830
3 BR/2 BA ......... 33 1,521 50,188 17.4 $1,217
--- ------- -----
276 1,043 287,877 100.0% $833/$0.80/SF
=== ======= =====
- --------------------------------------------------------------------------------------------------
S-161
Summer View at Sherman Oaks Apartments
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
MORTGAGE LOAN SELLER Wachovia
CUT-OFF DATE BALANCE $16,000,000
PERCENTAGE OF CUT-OFF DATE POOL BALANCE 1.5%
NUMBER OF MORTGAGE LOANS 1
LOAN PURPOSE Acquisition
SPONSOR Resource Real Estate Holdings, Inc.
TYPE OF SECURITY Fee
MORTGAGE RATE 5.910%
MATURITY DATE July 11, 2014
AMORTIZATION TYPE Balloon
INTEREST ONLY PERIOD 36
ORIGINAL TERM / AMORTIZATION 120 / 360
REMAINING TERM / AMORTIZATION 119 / 360
LOCKBOX None
UP-FRONT RESERVES
TAX/INSURANCE Yes
ENGINEERING $31,239
ONGOING MONTHLY RESERVES
TAX/INSURANCE Yes
REPLACEMENT $2,833
ADDITIONAL FINANCING None
CUT-OFF DATE BALANCE $16,000,000
CUT-OFF DATE BALANCE/UNIT $94,675
CUT-OFF DATE LTV 78.0%
MATURITY DATE LTV 70.4%
UW DSCR ON NCF 1.23x
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 1
LOCATION Sherman Oaks, CA
PROPERTY TYPE Multifamily -- Conventional
SIZE (UNITS) 169
OCCUPANCY AS OF JUNE 21, 2004 93.5%
YEAR BUILT / YEAR RENOVATED 1964 / 2003
APPRAISED VALUE $20,500,000
PROPERTY MANAGEMENT Resource Properties, Inc.
UW ECONOMIC OCCUPANCY 93.2%
UW REVENUES $2,182,470
UW TOTAL EXPENSES $750,073
UW NET OPERATING INCOME (NOI) $1,432,397
UW NET CASH FLOW (NCF) $1,398,597
- --------------------------------------------------------------------------------
S-162
- --------------------------------------------------------------------------------------
UNIT MIX
- --------------------------------------------------------------------------------------
APPROXIMATE
NO. OF UNIT SIZE APPROXIMATE
UNIT MIX UNITS (SF) NRA (SF) % OF NRA RENTAL RATE
- --------------------------------------------------------------------------------------
Studio ............ 2 500 1,000 1.0% $1,000
1 BR/1 BA ......... 158 588 92,904 92.5 $1,145
1 BR/1 BA ......... 8 682 5,456 5.4 $1,200
2 BR/2 BA ......... 1 1,100 1,100 1.1 $1,725
--- ------ -----
169 594 100,460 100.0% $1,149/$1.93/SF
=== ======= =====
- --------------------------------------------------------------------------------------
S-163
Valley Center Towers -- Phase I
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
MORTGAGE LOAN SELLER Wachovia
CUT-OFF DATE BALANCE $16,000,000
PERCENTAGE OF CUT-OFF DATE POOL 1.5%
BALANCE
NUMBER OF MORTGAGE LOANS 1
LOAN PURPOSE Refinance
SPONSOR A.L. Walburg and James L. Apple
TYPE OF SECURITY Fee
MORTGAGE RATE 6.200%
MATURITY DATE July 11, 2014
AMORTIZATION TYPE ARD
INTEREST ONLY PERIOD 12
ORIGINAL TERM / AMORTIZATION 120 / 360
REMAINING TERM / AMORTIZATION 119 / 360
LOCKBOX Springing
UP-FRONT RESERVES
TAX/INSURANCE Yes
OCCUPANCY(1) $2,404,000
ONGOING MONTHLY RESERVES
TAX/INSURANCE Yes
REPLACEMENT $726
TI/LC(2) $9,474
ADDITIONAL FINANCING None
CUT-OFF DATE BALANCE $16,000,000
CUT-OFF DATE BALANCE/SF $129
CUT-OFF DATE LTV 73.3%
MATURITY DATE LTV 63.9%
UW DSCR ON NCF 1.25x
- --------------------------------------------------------------------------------
(1) Borrower provided letters of credit with $2,259,000 to be released upon one
or more tenants having taken occupancy and paying unabated rent of not less
than $150,000 annually, and $145,000 to be released upon the expiration of
the FDIC free rent period in March 2005.
(2) Capped at $300,000.
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 1
LOCATION Murray, UT
PROPERTY TYPE Office -- Suburban
SIZE (SF) 124,462
OCCUPANCY AS OF JULY 23, 2004 82.0%
YEAR BUILT / YEAR RENOVATED 2003 / NA
APPRAISED VALUE $21,825,000
PROPERTY MANAGEMENT Walburg Realty & Investment
Corp.
UW ECONOMIC OCCUPANCY 81.6%
UW REVENUES $2,281,452
UW TOTAL EXPENSES $666,658
UW NET OPERATING INCOME (NOI) $1,614,794
UW NET CASH FLOW (NCF) $1,466,656
- --------------------------------------------------------------------------------
S-164
- ------------------------------------------------------------------------------------------------------------------------------------
TENANT SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
NET % OF NET % OF
RATINGS(1) RENTABLE RENTABLE ACTUAL ACTUAL DATE OF LEASE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA RENT PSF ACTUAL RENT RENT EXPIRATION
- ------------------------------------------------------------------------------------------------------------------------------------
University of Phoenix ............ NR/NR/NR 57,485 46.2% $23.00 $1,322,155 58.0% May 2013
Lincoln National Life Insurance
Company ......................... A3/A--/A 23,103 18.6 $23.00 531,369 23.3 Multiple Spaces(2)
FDIC ............................. Aaa/AAA/AAA 9,500 7.6 $19.34 183,730 8.1 March 2009
Axium Health Diabetes Group ...... NR/NR/NR 9,317 7.5 $21.00 195,657 8.6 July 2009
Kaleel Deli ...................... NR/NR/NR 1,642 1.3 $14.62 24,000 1.1 March 2009
Non-major tenants ................ 1,067 0.9 $23.00 24,541 1.1
Vacant ........................... 22,348 18.0 0 0.0
------ ----- ---------- -----
TOTAL ............................ 124,462 100.0% $2,281,452 100.0%
======= ===== ========== =====
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Certain ratings are those of the parent whether or not the parent
guarantees the lease.
(2) Under the terms of multiple leases, 2,828 square feet expire in August
2008, and 20,275 square feet expire in July 2010.
S-165
The Harrington Apartments
- --------------------------------------------------------------------------------
LOAN INFORMATION
MORTGAGE LOAN SELLER Wachovia
CUT-OFF DATE BALANCE $15,000,000
PERCENTAGE OF CUT-OFF DATE POOL BALANCE 1.4%
NUMBER OF MORTGAGE LOANS 1
LOAN PURPOSE Refinance
SPONSOR BNP Residential Properties, Inc.
TYPE OF SECURITY Fee
MORTGAGE RATE 5.150%
MATURITY DATE August 11, 2009
AMORTIZATION TYPE Balloon
INTEREST ONLY PERIOD 12
ORIGINAL TERM / AMORTIZATION 60 / 360
REMAINING TERM / AMORTIZATION 60 / 360
LOCKBOX None
UP-FRONT RESERVES
TAX/INSURANCE Yes
ONGOING MONTHLY RESERVES
TAX/INSURANCE Yes
ADDITIONAL FINANCING None
CUT-OFF DATE BALANCE $15,000,000
CUT-OFF DATE BALANCE/UNIT $52,083
CUT-OFF DATE LTV 72.8%
MATURITY DATE LTV 68.5%
UW DSCR ON NCF 1.28x
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 1
LOCATION Charlotte, NC
PROPERTY TYPE Multifamily -- Conventional
SIZE (UNITS) 288
OCCUPANCY AS OF JUNE 23, 2004 95.5%
YEAR BUILT / YEAR RENOVATED 1997 / NA
APPRAISED VALUE $20,600,000
PROPERTY MANAGEMENT BNP Residential Properties Limited
Partnership
UW ECONOMIC OCCUPANCY 88.2%
UW REVENUES $2,478,425
UW TOTAL EXPENSES $1,165,998
UW NET OPERATING INCOME (NOI) $1,312,427
UW NET CASH FLOW (NCF) $1,254,827
- --------------------------------------------------------------------------------
S-166
- ----------------------------------------------------------------------------------------------------
UNIT MIX
- ----------------------------------------------------------------------------------------------------
NO. OF APPROXIMATE APPROXIMATE
UNIT MIX UNITS UNIT SIZE (SF) NRA (SF) % OF NRA RENTAL RATE
- ----------------------------------------------------------------------------------------------------
1 BR/1 BA ........... 103 812 83,664 26.0% $642
2 BR/2 BA ........... 140 1,219 170,620 53.1 $823
3 BR/2 BA ........... 39 1,450 56,550 17.6 $922
3 BR/2.5 BA ......... 6 1,726 10,356 3.2 $1,355
--- ------- -----
288 1,115 321,190 100.0% $783/$0.70/SF
=== ======= =====
- ----------------------------------------------------------------------------------------------------
S-167
Hot Springs Mall
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
MORTGAGE LOAN SELLER Wachovia
CUT-OFF DATE BALANCE $15,000,000
PERCENTAGE OF CUT-OFF DATE POOL BALANCE 1.4%
NUMBER OF MORTGAGE LOANS 1
LOAN PURPOSE Refinance
SPONSOR Aronov Capital, Inc.
TYPE OF SECURITY Fee
MORTGAGE RATE 6.120%
MATURITY DATE August 11, 2014
AMORTIZATION TYPE Balloon
ORIGINAL TERM / AMORTIZATION 120 / 360
REMAINING TERM / AMORTIZATION 120 / 360
LOCKBOX None
UP-FRONT RESERVES
TAX/INSURANCE Yes
ENGINEERING $6,250
RENOVATION(1) $1,493,750
ONGOING MONTHLY RESERVES
TAX/INSURANCE Yes
REPLACEMENT $4,780
TI/LC(2) Springing
ADDITIONAL FINANCING Future Mezzanine Debt
and/or Future Secured Subordinate
Debt Permitted
CUT-OFF DATE BALANCE $15,000,000
CUT-OFF DATE BALANCE/SF $47
CUT-OFF DATE LTV 74.3%
MATURITY DATE LTV 63.2%
UW DSCR ON NCF 1.49x
- --------------------------------------------------------------------------------
(1) Established as a general reserve to address any potential future upfit,
tenant improvements, leasing commissions, lighting, flooring or general
improvements the borrower may construct at the Mortgaged Property.
(2) In the event either of the two anchor tenants which are part of the
collateral give notice that they are not renewing their leases within 12
months of the related lease expiration dates, the borrower will begin
escrowing $19,815.55 monthly for up to 12 months, capped at $237,787 for
the JC Penney space and $10,000 monthly for up to 12 months, capped at
$100,000 for the Sears space.
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 1
LOCATION Hot Springs, AR
PROPERTY TYPE Retail -- Anchored
SIZE (SF) 318,645
OCCUPANCY AS OF JUNE 25, 2004 80.0%
YEAR BUILT / YEAR RENOVATED 1981 / NA
APPRAISED VALUE $20,200,000
PROPERTY MANAGEMENT Aronov Realty Management, Inc.
UW ECONOMIC OCCUPANCY 82.4%
UW REVENUES $3,353,351
UW TOTAL EXPENSES $1,514,500
UW NET OPERATING INCOME (NOI) $1,838,851
UW NET CASH FLOW (NCF) $1,630,035
- --------------------------------------------------------------------------------
S-168
- ------------------------------------------------------------------------------------------------------------------------------------
TENANT SUMMARY
NET % OF NET % OF
RATINGS* RENTABLE RENTABLE ACTUAL ACTUAL DATE OF LEASE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA RENT PSF ACTUAL RENT RENT EXPIRATION
- ------------------------------------------------------------------------------------------------------------------------------------
ANCHOR TENANTS -- ANCHOR OWNED
Dillard's ......................... B2/BB/BB- 71,881 ANCHOR OWNED -- NOT PART OF COLLATERAL
------
TOTAL ANCHOR OWNED ............... 71,881
ANCHOR TENANTS -- COLLATERAL
Sears ............................. Baa1/BBB/BBB 70,480 22.1% $1.70 $119,816 5.8% March 2007
JC Penney ......................... Ba3/BB+/BB 67,553 21.2 $3.50 236,436 11.4 February 2007
------ -------- ----------- -----
TOTAL ANCHOR TENANTS ............. 138,033 43.3% $2.58 $356,252 17.3%
TOP 5 TENANTS
Fye Music & Movies ................ NR/NR/NR 12,716 4.0% $10.00 $127,160 6.2% January 2010
Trevors ........................... NR/NR/NR 10,384 3.3 $5.78 60,020 2.9 March 2005
The Shoe Dept ..................... NR/NR/NR 6,360 2.0 $10.00 63,600 3.1 January 2009
Coach House Gifts ................. NR/NR/NR 6,320 2.0 $11.00 69,520 3.4 January 2007
El Chico .......................... NR/NR/NR 5,734 1.8 $10.00 57,340 2.8 December 2006
------- -------- ----------- -----
Total Top 5 Tenants .............. 41,514 13.0% $9.10 $377,640 18.3%
Non-Major Tenants ................. 82,877 26.0 $16.06 1,331,182 64.5
------- -------- ----------- -----
OCCUPIED COLLATERAL TOTAL ......... 262,424 82.4% $7.87 $2,065,073 100.0%
=========== =====
Vacant space ...................... 56,221 17.6
------- --------
COLLATERAL TOTAL .................. 318,645 100.0%
========
PROPERTY TOTAL .................... 390,526
=======
- ------------------------------------------------------------------------------------------------------------------------------------
* Certain ratings are those of the parent whether or not the parent
guarantees the lease.
S-169
Carriage Club Apartments
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
MORTGAGE LOAN SELLER Wachovia
CUT-OFF DATE BALANCE $14,900,000
PERCENTAGE OF CUT-OFF DATE POOL BALANCE 1.4%
NUMBER OF MORTGAGE LOANS 1
LOAN PURPOSE Acquisition
SPONSOR BNP Residential Properties, Inc.
TYPE OF SECURITY Fee
MORTGAGE RATE 5.150%
MATURITY DATE July 11, 2009
AMORTIZATION TYPE Balloon
INTEREST ONLY PERIOD 12
ORIGINAL TERM / AMORTIZATION 60 / 360
REMAINING TERM / AMORTIZATION 59 / 360
LOCKBOX None
UP-FRONT RESERVES
TAX/INSURANCE Yes
ONGOING MONTHLY RESERVES
TAX/INSURANCE Yes
ADDITIONAL FINANCING None
CUT-OFF DATE BALANCE $14,900,000
CUT-OFF DATE BALANCE/UNIT $55,597
CUT-OFF DATE LTV 75.1%
MATURITY DATE LTV 70.6%
UW DSCR ON NCF 1.29x
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 1
LOCATION Mooresville, NC
PROPERTY TYPE Multifamily -- Conventional
SIZE (UNITS) 268
OCCUPANCY AS OF JUNE 23, 2004 93.7%
YEAR BUILT / YEAR RENOVATED 2000 / NA
APPRAISED VALUE $19,850,000
PROPERTY MANAGEMENT BNP Residential Properties, Inc.
UW ECONOMIC OCCUPANCY 81.4%
UW REVENUES $2,083,704
UW TOTAL EXPENSES $771,403
UW NET OPERATING INCOME (NOI) $1,312,301
UW NET CASH FLOW (NCF) $1,258,701
- --------------------------------------------------------------------------------
S-170
- ----------------------------------------------------------------------------------------------------
UNIT MIX
- ----------------------------------------------------------------------------------------------------
NO. OF APPROXIMATE APPROXIMATE
UNIT MIX UNITS UNIT SIZE (SF) NRA (SF) % OF NRA RENTAL RATE
- ----------------------------------------------------------------------------------------------------
1 BR / 1 BA ......... 110 766 84,246 33.3% $683
2 BR / 2 BA ......... 136 1,051 142,928 56.5 $825
3 BR / 2 BA ......... 22 1,179 25,940 10.2 $958
--- ------- -----
268 944 253,114 100.0% $777/$0.82/SF
=== ======= =====
- ----------------------------------------------------------------------------------------------------
S-171
Glasshouse Square Shopping Center
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
MORTGAGE LOAN SELLER Wachovia
CUT-OFF DATE BALANCE $14,487,259
PERCENTAGE OF CUT-OFF DATE POOL BALANCE 1.3%
NUMBER OF MORTGAGE LOANS 1
LOAN PURPOSE Refinance
SPONSOR Yoel Iny and Noam Schwartz
TYPE OF SECURITY Fee
MORTGAGE RATE 5.775%
MATURITY DATE July 11, 2014
AMORTIZATION TYPE ARD
ORIGINAL TERM / AMORTIZATION 120 / 360
REMAINING TERM / AMORTIZATION 119 / 359
LOCKBOX Springing
UP-FRONT RESERVES
TAX/INSURANCE Yes
ENGINEERING $22,846
TI/LC(1) $150,000
ONGOING MONTHLY RESERVES
TAX/INSURANCE Yes
TI/LC(1)(2) $4,167
REPLACEMENT $2,624
ADDITIONAL FINANCING None
CUT-OFF DATE BALANCE $14,487,259
CUT-OFF DATE BALANCE/SF $142
CUT-OFF DATE LTV 65.9%
MATURITY DATE LTV 55.5%
UW DSCR ON NCF 1.46x
- --------------------------------------------------------------------------------
(1) Reserve to be used in the event either Gold's Gym or Staples vacates their
respective space, and released upon Staples exercising its renewal option
to extend its lease beyond July 2014 or a replacement tenant taking
occupancy and commencing payments of full, unabated rent under the same
lease terms.
(2) Capped at $400,000.
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 1
LOCATION San Diego, CA
PROPERTY TYPE Retail -- Anchored
SIZE (SF) 101,893
OCCUPANCY AS OF JUNE 8, 2004 98.8%
YEAR BUILT / YEAR RENOVATED 1981 / 2004
APPRAISED VALUE $22,000,000
PROPERTY MANAGEMENT Great American Homes
UW ECONOMIC OCCUPANCY 93.0%
UW REVENUES $2,071,309
UW TOTAL EXPENSES $500,558
UW NET OPERATING INCOME (NOI) $1,570,751
UW NET CASH FLOW (NCF) $1,491,286
- --------------------------------------------------------------------------------
S-172
TENANT SUMMARY
- ----------------------------------------------------------------------------------------
RATINGS(1) NET RENTABLE % OF NET
TENANT MOODY'S/S&P/FITCH AREA (SF) RENTABLE AREA
- ----------------------------------- ------------------ -------------- ---------------
Sports Arena Fitness (Gold's Gym).. NR/NR/NR 33,966 33.3%
Staples ........................... Baa2/BBB-/BBB 27,848 27.3
CEC Entertainment, Inc. ........... NR/NR/BBB- 11,523 11.3
Sleep Train ....................... NR/NR/NR 8,300 8.1
Ultrazone ......................... NR/NR/NR 5,579 5.5
Non-major tenants ................. 13,477 13.2
Vacant ............................ 1,200 1.2
------ -----
TOTAL ............................. 101,893 100.0%
======= =====
ACTUAL % OF ACTUAL DATE OF LEASE
TENANT RENT PSF ACTUAL RENT RENT EXPIRATION
- ------------------------------------- ---------- ------------- ------------- -------------------
Sports Arena Fitness (Gold's Gym) ... $13.46 $457,320 25.8% Multiple Spaces(2)
Staples ............................. $14.30 398,232 22.4 August 2011
CEC Entertainment, Inc. ............. $15.40 177,456 10.0 April 2013
Sleep Train ......................... $22.20 184,260 10.4 August 2012
Ultrazone ........................... $19.34 107,880 6.1 August 2006
Non-major tenants ................... $33.32 449,064 25.3
Vacant .............................. 0 0.0
---------- -----
TOTAL ............................... $1,774,212 100.0%
========== =====
(1) Certain ratings are those of the parent whether or not the parent
guarantees the lease.
(2) Under the terms of multiple leases, 4,366 square feet expire in February
2010 and 29,600 square feet expire in February 2019.
S-173
Weston Commercial Center
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
MORTGAGE LOAN SELLER Wachovia
CUT-OFF DATE BALANCE $12,989,840
PERCENTAGE OF CUT-OFF DATE POOL BALANCE 1.2%
NUMBER OF MORTGAGE LOANS 1
LOAN PURPOSE Refinance
SPONSOR Kenneth Edelman
TYPE OF SECURITY Fee
MORTGAGE RATE 6.220%
MATURITY DATE July 11, 2014
AMORTIZATION TYPE ARD
ORIGINAL TERM / AMORTIZATION 120 / 360
REMAINING TERM / AMORTIZATION 119 / 359
LOCKBOX Springing
UP-FRONT RESERVES
TAX/INSURANCE Yes
ONGOING MONTHLY RESERVES
TAX/INSURANCE Yes
TI/LC* $6,250
REPLACEMENT $315
ADDITIONAL FINANCING Future Mezzanine Debt Permitted
CUT-OFF DATE BALANCE $12,989,840
CUT-OFF DATE BALANCE/SF $116
CUT-OFF DATE LTV 71.4%
MATURITY DATE LTV 61.0%
UW DSCR ON NCF 1.29x
- --------------------------------------------------------------------------------
* Capped at $300,000.
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 1
LOCATION Weston, FL
PROPERTY TYPE Mixed Use -- Office/Flex
SIZE (SF) 111,989
OCCUPANCY AS OF JUNE 1, 2004 98.7%
YEAR BUILT / YEAR RENOVATED 2001 / NA
APPRAISED VALUE $18,200,000
PROPERTY MANAGEMENT Self-managed
UW ECONOMIC OCCUPANCY 92.5%
UW REVENUES $2,286,979
UW TOTAL EXPENSES $875,098
UW NET OPERATING INCOME (NOI) $1,411,881
UW NET CASH FLOW (NCF) $1,236,750
- --------------------------------------------------------------------------------
S-174
TENANT SUMMARY
- -----------------------------------------------------------------------------------------
NET % OF
RATINGS RENTABLE NET RENTABLE
TENANT MOODY'S/S&P/FITCH AREA (SF) AREA
- ------------------------------------------ ------------------- ----------- --------------
Park Avenue Gymnastics at Weston ......... NR/NR/NR 12,000 10.7%
St. Katherine Drexel Catholic Church ..... NR/NR/NR 10,934 9.8
Chung's Tae Kwon Do Center ............... NR/NR/NR 6,045 5.4
Arvida/JMB Partners ...................... NR/NR/NR 5,937 5.3
Piazza Benvenuto ......................... NR/NR/NR 4,980 4.4
Non-major tenants ........................ 70,593 63.0
Vacant ................................... 1,500 1.3
------ -----
TOTAL .................................... 111,989 100.0%
======= =====
ACTUAL
RENT % OF DATE OF LEASE
TENANT PSF ACTUAL RENT ACTUAL RENT EXPIRATION
- ------------------------------------------ ----------- ------------- ------------- ---------------
Park Avenue Gymnastics at Weston ......... $10.13 $121,560 6.2% November 2010
St. Katherine Drexel Catholic Church ..... $10.82 118,306 6.0 March 2007
Chung's Tae Kwon Do Center ............... $11.00 66,495 3.4 April 2011
Arvida/JMB Partners ...................... $8.75 51,949 2.6 September 2004
Piazza Benvenuto ......................... $14.00 69,720 3.5 February 2009
Non-major tenants ........................ $21.80 1,539,027 78.2
Vacant ................................... 0 0.0
---------- -----
TOTAL .................................... $1,967,057 100.0%
========== =====
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Elmbrook Plaza Shopping Center
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
MORTGAGE LOAN SELLER Wachovia
CUT-OFF DATE BALANCE $12,850,000
PERCENTAGE OF CUT-OFF DATE POOL BALANCE 1.2%
NUMBER OF MORTGAGE LOANS 1
LOAN PURPOSE Refinance
SPONSOR J. Peter Jungbacker
TYPE OF SECURITY Fee
MORTGAGE RATE 5.410%
MATURITY DATE June 11, 2009
AMORTIZATION TYPE ARD
INTEREST ONLY PERIOD 12
ORIGINAL TERM / AMORTIZATION 60 / 360
REMAINING TERM / AMORTIZATION 58 / 360
LOCKBOX Springing
UP-FRONT RESERVES
INSURANCE Yes
ENGINEERING $5,000
ONGOING MONTHLY RESERVES
TAX/INSURANCE Yes
REPLACEMENT $756
ADDITIONAL FINANCING None
CUT-OFF DATE BALANCE $12,850,000
CUT-OFF DATE BALANCE/SF $58
CUT-OFF DATE LTV 78.4%
MATURITY DATE LTV 74.0%
UW DSCR ON NCF 1.36x
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
NUMBER OF MORTGAGED PROPERTIES 1
LOCATION Brookfield, WI
PROPERTY TYPE Retail -- Anchored
SIZE (SF) 219,665
OCCUPANCY AS OF MAY 13, 2004 97.9%
YEAR BUILT / YEAR RENOVATED 1958 / 2002
APPRAISED VALUE $16,400,000
PROPERTY MANAGEMENT Olympic Realty Corp.
UW ECONOMIC OCCUPANCY 95.0%
UW REVENUES $1,955,521
UW TOTAL EXPENSES $658,529
UW NET OPERATING INCOME (NOI) $1,296,992
UW NET CASH FLOW (NCF) $1,181,996
- --------------------------------------------------------------------------------
S-176
- ------------------------------------------------------------------------------------------------------------------------------------
TENANT SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
NET ACTUAL
RATINGS* RENTABLE % OF NET RENT % OF ACTUAL DATE OF LEASE
TENANT MOODY'S/S&P/FITCH AREA (SF) RENTABLE AREA PSF ACTUAL RENT RENT EXPIRATION
- ------------------------------------------------------------------------------------------------------------------------------------
Kohl's Dept Store ............. A3/A-/A 127,987 58.3% $3.01 $384,860 29.6% March 2013
G&R - 124 Street Foods, Inc.... NR/NR/NR 46,929 21.4 $6.75 316,771 24.3 April 2014
Occucenter .................... NR/NR/NR 11,000 5.0 $14.00 154,000 11.8 June 2009
G&K Dance Studio .............. NR/NR/NR 5,000 2.3 $14.00 70,000 5.4 January 2008
Bigsby's Sewing Center ........ NR/NR/NR 4,445 2.0 $13.50 60,008 4.6 November 2006
Non-major tenants ............. 19,784 9.0 $15.95 315,525 24.2
Vacant ........................ 4,520 2.1 0 0.0
------- ----- ---------- -----
TOTAL ......................... 219,665 100.0% $1,301,163 100.0%
======= ===== ========== =====
- ------------------------------------------------------------------------------------------------------------------------------------
* Certain ratings are those of the parent whether or not the parent
guarantees the lease.
S-177
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."
Sixty-four (64) of the Mortgage Loans (the "Wachovia Mortgage Loans"),
representing 90.6% 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, which as of March 31, 2004, had total assets
of approximately $410 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.
Seventeen (17) of the Mortgage Loans (the "Artesia Mortgage Loans"),
representing 9.4% of the Cut-Off Date Pool Balance were originated by Artesia
Mortgage Capital Corporation ("Artesia"). Artesia is a Delaware corporation
engaged in the business of originating and securitizing US commercial mortgage
loans. Its principal offices are located in the Seattle suburb of Issaquah,
Washington. Artesia is a wholly-owned subsidiary of Dexia Bank which is rated
"AA+" by Fitch, "AA" by S&P and "Aa2" by Moody's. Dexia Bank is part of Dexia
Group, a diversified financial services firm located in Brussels, Belgium with a
balance sheet of 350 billion EUR ($441 billion) and a stock market
capitalization of approximately 16 billion EUR ($20 billion) as of December
2003.
Wachovia has no obligation to repurchase or substitute any of the Artesia
Mortgage Loans and Artesia has no obligation to repurchase or substitute any of
the Wachovia 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 Artesia Mortgage Loans contained herein
or used in the preparation of this prospectus supplement is as underwritten by
Artesia Mortgage Capital Corporation.
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, operating budgets, 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
S-178
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. Three (3) Mortgage Loans (representing 1.4% of the
Cut-Off Date Pool Balance) sold to the Depositor by Wachovia, were originated by
CW Capital. 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.
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. Each Mortgage Loan Seller may waive this escrow requirement
under certain circumstances.
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. Each
Mortgage Loan Seller may waive this escrow requirement under certain
circumstances.
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
(including the Park Place Mall Subordinate Loan), 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
(including the Park Place Mall Subordinate
S-179
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 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, memorandum of 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; (xiv) copies of franchise
agreements and franchisor comfort letters, if any, for hospitality properties
and any applicable transfer or assignment documents; and (xv) a copy of any
letter of credit and related transfer documents related to such Mortgage Loan.
Notwithstanding the foregoing, with respect to the 11 Madison Avenue Loan, the
2004-C10 Trustee will hold the original documents related to the 11 Madison
Avenue Loan for the benefit of the trust fund formed by the 2004-C10 Pooling and
Servicing Agreement, the trust fund formed by the 2004-C11 Pooling and Servicing
Agreement, the trust formed by the 2004-C12 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
2004-C10 Pooling and Servicing Agreement, which will be held (i) in the case of
the Mortgage Note related to the 11 Madison Avenue Pari Passu Loan included in
the trust fund formed by the 2004-C11 Pooling and Servicing Agreement, by the
trustee under the 2004-C11 Pooling and Servicing Agreement (ii) in the case of
the Mortgage Note related to the 11 Madison Avenue Pari Passu Loan included in
the trust fund formed by the 2004-C12 Pooling and Servicing Agreement, by the
trustee under the 2004-C12 Pooling and Servicing Agreement, and (iii) in the
case of the Mortgage Note related to the 11 Madison Avenue 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
S-180
obligated pursuant to the applicable Mortgage Loan Purchase Agreement (the
relevant rights under which will be assigned by the Depositor to the Trustee) to
(1) repurchase the affected Mortgage Loan (including the Park Place Mall
Subordinate 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 (including with respect to the 11 Madison Avenue Loan, the 11 Madison
Avenue Non-Pooled Component, and with respect to the Park Place Mall Whole Loan,
the Park Place Mall Subordinate Loan), (ii) the unpaid accrued interest on such
Mortgage Loan (including the Park Place Mall Subordinate 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 or the Trustee plus any interest thereon and on any related P&I
Advances or (2) other than with respect to the 11 Madison Avenue Loan and the
Park Place Mall Loan, 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 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.
The Pooling and Servicing Agreement requires the Trustee promptly to 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
S-181
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 has 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 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 then
outstanding 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. Notwithstanding the foregoing, no substitutions will be permitted for
the 11 Madison Avenue Loan or the Park Place Mall Whole Loan.
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
S-182
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 the 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);
(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
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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
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 (other than with respect to the 11 Madison Avenue
Loan and the Park Place Mall Loan) 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
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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, 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 as 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 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.
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 the remaining Crossed Loans satisfy the
aforementioned criteria, the Mortgage Loan Seller may elect either to repurchase
or
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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 Collateral securing its respective
affected Crossed Loans, including, with respect to the Trustee, the Primary
Collateral securing Mortgage Loans still held by the Trustee, so long as such
exercise does not materially impair the ability of the other party to exercise
its remedies against its Primary Collateral. 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 11 Madison Avenue Loan) for the benefit of the Certificateholders, and
the Companion Loans (other than the 11 Madison Avenue 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
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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 11
Madison Avenue Loan) and its related Companion Loan (a "Loan Pair") are
involved, with a 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 Pointe West Medical
Office Building Subordinate Loan is subordinate to the Pointe West Medical
Office Building Loan to the extent set forth in the related Intercreditor
Agreement and the Park Place Mall Subordinate Loan is subordinate to the Park
Place Mall Loan to 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 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 the Special Servicer or any affiliate of either has
extended to any obligor or any affiliate thereof on a Mortgage Note (the
foregoing referred to as the "Servicing Standard"). See "--Servicing of the 11
Madison Avenue Loan" below for a description of the servicing of the 11 Madison
Avenue 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 11 Madison Avenue Loan). SL
Green Funding LLC will be appointed as sub-servicer for the 2004-C10 special
servicer with respect to the 11 Madison Avenue 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 the Companion Loans (but excluding the 11 Madison Avenue 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 the 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 accompanying 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 a
Subordinate 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 accompanying 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
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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 accompanying 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 11 Madison Avenue
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, is our affiliate, one of the Mortgage Loan Sellers and an
affiliate of one of the Underwriters. Wachovia Bank, National Association is
also acting as the master servicer and initial special servicer for the 11
Madison Avenue Loan under the 2004-C10 Pooling and Servicing Agreement. In
addition, it is anticipated that Wachovia Bank, National Association (or an
affiliated entity) will be the holder of one of the 11 Madison Avenue
Subordinate Loans, the Class MAD Certificates and the Class PP Certificates.
Wachovia Bank, National Association's principal servicing offices are located at
NC 1075, 8739 Research Drive URP4, Charlotte, North Carolina 28262.
As of June 30, 2004, Wachovia Bank, National Association and its affiliates
were responsible for master or primary servicing approximately 12,052 commercial
and multifamily loans, totaling approximately $111.4 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.
Allied Capital Corporation, a Maryland corporation ("Allied Capital") will
initially be appointed as special servicer of the Mortgage Loans (other than the
11 Madison Avenue Loan) (in such capacity, the "Special Servicer"). The Special
Servicer will, among other things, oversee the resolution of non-performing
Mortgage Loans and act as disposition manager of REO Properties. The following
information has been provided by the Special Servicer. None of the Depositor,
the Trustee, the Underwriters, or any of their respective affiliates takes any
responsibility therefor or makes any representation or warranty as to the
accuracy of completeness of the information.
The principal executive offices of Allied Capital are located at 1919
Pennsylvania Avenue N.W., Washington, D.C. 20006 and its telephone number is
(202) 331-1112. Allied Capital and several of its subsidiaries are involved in
the real estate investment, finance and management business. As of March 31,
2004, Allied Capital's CMBS portfolio included approximately 6,100 loans and REO
properties as underlying collateral in most states across the country with a
current face value of $42.3 billion, all of which are secured by commercial real
estate assets. Included in this managed portfolio are approximately $7.09
billion of commercial real estate assets representing approximately 1,200 loans
and REO properties within 9 securitization transactions, for which Allied
Capital acts as special servicer.
Allied Capital and its subsidiaries own and are in the business of
acquiring assets similar in type to the assets of the trust. Accordingly, the
assets of the special servicer 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 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,
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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 the Special Servicer and neither the Depositor nor any Underwriter
makes any representation or warranty as to the accuracy or completeness of such
information.
With respect to the Mortgage Loans (other than the 11 Madison Avenue Loan
and the Park Place Mall Loan), 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
who may advise the Special Servicer and whose approval is required for certain
actions by the Special Servicer under certain circumstances. With respect to the
11 Madison Avenue Loan, the Pooling and Servicing Agreement permits the
appointment of a representative to advise the 2004-C10 Special Servicer with
respect to certain actions related to the 11 Madison Avenue Whole Loan. Each
advisor referred to above is referred to herein as the "Controlling Class
Representative". With respect to the Park Place Mall Whole Loan, so long as a
Park Place Mall Control Appraisal Period has not occurred and is continuing, the
Park Place Mall Representative will have the ability to exercise the rights of
the Controlling Class and the Controlling Class Representative with respect to
the Park Place Mall Whole Loan, and the Park Place Mall Representative will be
selected by the holders of a majority of the Class PP Certificates. The
Controlling Class Representative with respect to the Mortgage Loans, other than
the 11 Madison Avenue Loan and the Park Place Mall Whole Loan, is selected by
holders of Certificates representing more than 50% of the Certificate Balance of
the Controlling Class. The Controlling Class Representative with respect to the
11 Madison Avenue Loan is appointed first by the holder of a majority of the
Class MAD Certificates until the Component Principal Balance of the 11 Madison
Avenue Non-Pooled Component minus the portion of any Appraisal Reduction Amount
allocable to the 11 Madison Avenue Non-Pooled Component is less than 25% of its
original Component Principal Balance, and then by the holders of Certificates
representing more than 50% of the Certificate Balance of the Controlling Class;
provided that the Controlling Class Representative with respect to the 11
Madison Avenue Loan may not be the related borrower or an affiliate of the
related borrower. 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, 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, (i) which bears the latest alphabetical Class designation and (ii)
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 (ii) above, the Controlling Class shall be the outstanding
Class of Certificates (other than the Class Z Certificates, the Class MAD
Certificates, the Class PP Certificates, the REMIC Residual Certificates or the
Class X Certificates) bearing the latest alphabetical Class designation. The
Class A-1 and Class A-2 Certificates will be treated as one Class for
determining the Controlling Class.
The 2004-C10 Pooling and Servicing Agreement permits, so long as no 11
Madison Avenue Control Appraisal Period exists, the holder of the most
subordinate 11 Madison Avenue Subordinate Loan for which no control appraisal
period exists, to replace the 2004-C10 Special Servicer with respect to the 11
Madison Avenue Whole Loan. Such holder will be required to pay all out-of-pocket
costs related to the transfer of servicing if the 2004-C10 Special Servicer is
replaced other than due to an event of default, including without limitation,
any costs relating to Rating Agency confirmation and legal fees associated with
the transfer. Following the occurrence and during the continuance of an 11
Madison Avenue Control Appraisal Period, the 2004-C10 Controlling Class
Representative shall have the power to replace the 2004-C10 Special Servicer
with respect to the 11 Madison Avenue Loan. See "--The Controlling Class
Representative" in this prospectus supplement. Any replacement of the 2004-C10
Special Servicer will be subject to, among other things, (i) the delivery of
notice of the proposed replacement to the Rating 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
2004-C10 special servicer to be bound by the
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terms and conditions of the 2004-C10 Pooling and Servicing Agreement. See
"DESCRIPTION OF THE CERTIFICATES--Voting Rights" in this prospectus supplement
and the accompanying prospectus.
The Pooling and Servicing Agreement permits, so long as a Park Place Mall
Control Appraisal Period has not occurred and is continuing, the holder (or
holders) of the majority of the Voting Rights allocated to the Class PP
Certificates to replace the Special Servicer with respect to the Park Place Mall
Whole Loan and to select a representative (the "Park Place Mall Representative")
who may advise the Special Servicer and whose approval is required for certain
actions by the Special Servicer with respect to the Park Place Mall Whole Loan
under certain circumstances. 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, including without limitation,
any costs relating to Rating Agency confirmation and legal fees associated with
the transfer. 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 11 Madison Avenue Loan) or Companion Loan (other
than the 11 Madison Avenue Companion Loans) as to which (a) the related
mortgagor has (i) failed to make when due any Balloon Payment unless the Master
Servicer has, on or prior to the due date of such Balloon Payment, received a
written commitment, which is reasonably acceptable to the Special Servicer and
for which the Controlling Class Representative has provided its consent, to
refinance such Mortgage Loan or Companion Loan within 120 days after the due
date of such Balloon Payment or if Borrower continues to make its Assumed
Scheduled Payment and diligently pursues refinancing, within 60 days after such
default, 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 and with respect to the
Park Place Whole Loan, the Park Place Mall 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 and with respect to
Park Place Mall Whole Loan, the Park Place Mall 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; or
(g) 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 (g) above, a "Servicing
Transfer Event").
In general, as long as the related Co-Lender Loan (other than the 11
Madison Avenue Loan) is owned by the trust, each Companion Loan (other than the
11 Madison Avenue Companion Loans) will be serviced and administered under the
Pooling and Servicing Agreement as if it were a Mortgage Loan and the holder of
the related promissory note were a Certificateholder. If a Companion Loan (other
than
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the 11 Madison Avenue Companion Loans) becomes specially serviced, then the
Co-Lender Loan will become a Specially Serviced Mortgage Loan. If a Co-Lender
Loan (other than the 11 Madison Avenue Loan) becomes a Specially Serviced
Mortgage Loan, then the related Companion Loan will become a Specially Serviced
Mortgage Loan. If the 11 Madison Avenue Pari Passu Loan becomes a specially
serviced mortgage loan under the 2004-C10 Pooling and Servicing Agreement, the
11 Madison Avenue Loan will become a specially serviced mortgage loan under the
2004-C10 Pooling and Servicing Agreement.
If any amounts due under a Co-Lender Loan or the related Subordinate
Companion Loans are accelerated after an event of default under the applicable
Mortgage Loan documents, the holder of the related Subordinate 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 11 Madison Avenue Loan) or a related Companion Loan, the Master
Servicer is in general required to transfer its servicing responsibilities with
respect to such Mortgage Loan (including the Park Place Mall Whole Loan) and
Companion Loan to the Special Servicer. Notwithstanding such transfer, the
Master Servicer will continue to receive payments on such Mortgage Loan and/or
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, as described in the
Pooling and Servicing Agreement) and prepare certain reports to the Trustee with
respect to such Mortgage Loan (including the Park Place Mall Whole 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 (including the Park Place Mall Subordinate Loan) 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 11 Madison Avenue Loan) or Companion Loan
(other than the 11 Madison Avenue Companion Loans but including the Park Place
Mall Whole 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 (h) 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.
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SERVICING OF THE 11 MADISON AVENUE LOAN
The 11 Madison Avenue Loan, and any related REO Property, is being serviced
under the 2004-C10 Pooling and Servicing Agreement and therefore the 2004-C10
Master Servicer and/or the 2004-C10 Trustee will generally make advances and
remit collections on the 11 Madison Avenue Loan to or on behalf of the Trust
Fund. The servicing arrangements under the 2004-C10 Pooling and Servicing
Agreement are generally similar to the servicing arrangements under the Pooling
and Servicing Agreement.
In that regard:
o Wachovia Bank, National Association is the 2004-C10 Master Servicer and,
with respect to the 11 Madison Avenue mortgage loan, the 2004-C10
Special Servicer and the 2004-C10 Special Servicer is Lennar Partners,
Inc., with respect to each mortgage loan other than the 11 Madison
Avenue mortgage loan.
o The 2004-C10 Trustee is Wells Fargo Bank, N.A., who will be the
mortgagee of record for the 11 Madison Avenue Loan.
o The Master Servicer, the Special Servicer, the Trustee or the Fiscal
Agent under the Pooling and Servicing Agreement will have no obligation
or authority to (a) supervise the 2004-C10 Master Servicer, the 2004-C10
Special Servicer or 2004-C10 Trustee or (b) make servicing advances with
respect to the 11 Madison Avenue Loan. The obligation of the Master
Servicer to provide information and collections to the Trustee and the
Certificateholders with respect to the 11 Madison Avenue Loan is
dependent on its receipt of the corresponding information and collection
from the 2004-C10 Master Servicer or the 2004-C10 Special Servicer.
o In accordance with the terms of the related Intercreditor Agreement and
the 2004-C10 Pooling and Servicing Agreement, after an 11 Madison Avenue
Control Appraisal Period has occurred and is continuing, subject to the
exceptions described herein under "SERVICING OF THE MORTGAGE LOANS--The
Controlling Class Representative", the Controlling Class Representative
will generally share among the 2004-C12 Controlling Class
Representative, the 2004-C11 Controlling Class Representative and the
2004-C10 Controlling Class Representative the rights given to the
2004-C10 Controlling Class Representative under the 2004-C10 Pooling and
Servicing Agreement to direct the servicing of the 11 Madison Avenue
Loan. Prior to the occurrence of an 11 Madison Avenue Control Appraisal
Period, the 2004-C10 Controlling Class Representative will not be
entitled to exercise any of the rights and powers described in the
2004-C10 Pooling and Servicing Agreement with respect to the 11 Madison
Avenue Loan, and, instead, the holders of the 11 Madison Avenue
Subordinate Companion Loans or their designees will have the right to
direct the servicing of the 11 Madison Avenue Loan. See "--The
Controlling Class Representative" below.
o Pursuant to the 2004-C10 Pooling and Servicing Agreement, the workout
fee and liquidation fee with respect to the 11 Madison Avenue 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 11 Madison Avenue Loan (but only the interest portion of P&I
Advances with respect to the 11 Madison Avenue Non-Pooled Component)
that the 2004-C10 Master Servicer and the 2004-C10 Trustee is required
but fails to make, unless the 2004-C10 Master Servicer or the Master
Servicer, after receiving the necessary information from the 2004-C10
Master Servicer, has determined that such advance would not be
recoverable from collections on the 11 Madison Avenue Loan.
o If the 2004-C10 Master Servicer determines that a servicing advance it
made with respect to the 11 Madison Avenue Loan or the related Mortgaged
Property is nonrecoverable, it will be entitled to be reimbursed from
general collections on all Mortgage Loans but not from collections on
the Park Place Mall Subordinate Loan.
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
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amounts received in respect of interest on each Mortgage Loan (including the
Park Place Mall Whole 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 (including the Park Place Mall Whole Loan) is computed. The
"Master Servicing Fee Rate" is a per annum rate ranging from 0.0400% to 0.1100%.
As of the Cut-Off Date the weighted average Master Servicing Fee Rate will be
approximately 0.0408% per annum. The Master Servicer will not be entitled to
receive a separate fee with respect to a Companion Loan (except as set forth
above with respect to the Park Place Mall Subordinate 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. In addition, with respect to the 11 Madison Avenue Loan, all
references in this section to "Mortgage Loans" include the 11 Madison Avenue
Non-Pooled Component.
The 11 Madison Avenue Loan will be serviced by the 2004-C10 Master
Servicer. Notwithstanding the foregoing, the Master Servicer shall receive a
Master Servicing Fee with respect to the 11 Madison Avenue 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 0.02% 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. 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. For purposes of this paragraph, the term
Mortgage Loan includes the Park Place Mall Subordinate Loan.
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 0.25% 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 (including, in either case, the Park
Place Mall
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Subordinate 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) (including, in either case, the
Park Place Mall Subordinate 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 1.00% 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 "--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 or in certain other limited
circumstances in connection with the purchase of the Park Place Mall Loan by the
controlling holder of the Class PP Certificates. The Special Servicer also is
entitled to a "Workout Fee" with respect to each Corrected Mortgage Loan, which
is generally equal to 1.00% 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 (including,
in either case, the Park Place Mall Subordinate Loan), 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.
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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,
the Trustee and the Fiscal Agent 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 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 11 Madison Avenue 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 or (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.
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Notwithstanding clause (b) of the preceding paragraph and, with respect to
the Co-Lender Loans (other than the 11 Madison Avenue 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 (other than Specially
Serviced 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 determined in
accordance with the Servicing Standard and (z) 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 (other than with respect to the 11 Madison
Avenue Loan and subject to certain rights of the holders of any related
Companion Loan) to notify the Trustee, the Master Servicer, the Controlling
Class Representative, the Rating Agencies and with respect to the Park Place
Mall Loan, the Park Place Mall Representative, 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 11 Madison Avenue 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, (iv) approving certain modifications in connection with a
defeasance permitted by the terms of the applicable mortgage loan documents and
(v) 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.
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THE CONTROLLING CLASS REPRESENTATIVE
Subject to the succeeding paragraphs, and other than with respect to the 11
Madison Avenue 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;
(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, or modification of, any applicable franchise
agreements related to a Mortgage Loan secured by a hotel;
(x) any termination of the related property manager for Mortgage Loans
having an outstanding principal balance of greater than $5,000,000;
(xi) any determination to allow a borrower not to maintain terrorism
insurance;
(xii) any determination to decrease the time period referenced in
clause (g) of the definition of Servicing Transfer Event;
(xiii) with respect to the Park Place Mall Whole Loan (but without
limiting the general applicability of the above requirements), any
acceptance of a discounted payoff;
(xiv) with respect to the Park Place Mall Whole Loan (but without
limiting the general applicability of the above requirements), any renewal
or replacement of the then existing insurance policies to the extent that
such renewal or replacement policy does not comply with the terms of the
mortgage loan documents on any waiver, modification or amendment of any
insurance requirements under the related mortgage loan documents;
(xv) with respect to the Park Place Mall Whole Loan (but without
limiting the general applicability of the above requirements), any approval
of a material capital expenditure; and
(xvii) with respect to the Park Place Mall Loan (but without limiting
the general applicability of the above requirements), any adoption or
approval of a plan in bankruptcy of the related borrower.
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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 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 will be the initial Controlling Class Representative with respect
to each Mortgage Loan other than the 11 Madison Avenue Loan and the Park Place
Mall Loan.
Notwithstanding the foregoing, the holders of the 11 Madison Avenue
Subordinate Loans will have the right to direct and/or consent to certain
actions of the 2004-C10 Master Servicer and the 2004-C10 Special Servicer with
respect to the 11 Madison Avenue Whole Loan and the Controlling Class and the
Controlling Class Representative will not have the consent and advice rights
described herein. Generally, the holder of the most subordinate 11 Madison
Avenue Subordinate Loan then outstanding will be entitled to such rights, but
only so long as the unpaid principal amount of such 11 Madison Avenue
Subordinate Loan, net of any existing related Appraisal Reduction Amount with
respect to (i) the 11 Madison Avenue Senior Loans; (ii) any 11 Madison Avenue
Subordinate Loans that are senior in right of payment to such 11 Madison Avenue
Subordinate Loan; and (iii) such 11 Madison Avenue Subordinate Loan (calculated
as if the loans were a single mortgage loan), is greater than 25% of the
original unpaid principal amount of such 11 Madison Avenue Subordinate Loan (an
"11 Madison Avenue Control Appraisal Period"). Such rights include (i) the
2004-C10 Special Servicer and/or the 2004-C10 Master Servicer will be required
to consult with the holder of the 11 Madison Avenue Subordinate Loan or its
designee in connection with (A) any adoption or implementation of a business
plan submitted by the borrower with respect to the Mortgaged Property; (B) the
execution or renewal of any lease; (C) the release of any escrow held in
conjunction with the 11 Madison Avenue Whole Loan to the borrower not expressly
required by the terms of the loan documents or under applicable law; (D)
alterations on the Mortgaged Property; (E) material changes in any ancillary
loan documents; or (F) the waiver of any notice provisions related to
prepayment; (ii) the 2004-C10 Special Servicer and/or the 2004-C10 Master
Servicer will be required to consult with the holder of such 11 Madison Avenue
Subordinate Loan or its designee (A) upon the occurrence of any event of default
under the 11 Madison Avenue Whole Loan and to consider alternative actions
recommended by the holder of such 11 Madison Avenue Subordinate Loan or its
designee, (B) with respect to any determination that a sweep period exists under
the related cash management agreement, and (C) at any time (whether or not an
event of default has occurred) with respect to proposals to take any significant
action with respect to the 11 Madison Avenue Whole Loan or the Mortgaged
Property and to consider alternative actions recommended by such 11 Madison
Avenue Subordinate Loan or its designee; and (iii) such holder of the 11 Madison
Avenue Subordinate Loan or its designee will be entitled to exercise rights and
powers with respect to the 11 Madison Avenue Whole Loan that are the same as or
similar to those of the Controlling Class Representative described above with
respect to the actions described in clauses (i) through (vii) above and the
following additional actions: (A) any modification or waiver of a monetary term
of the loan and any modification of, or waiver with respect to, the loan that
would result in the extension of the maturity date or extended maturity date
thereof, a reduction in the interest rate borne thereby or the monthly debt
service payment or extension fee payable thereon or a deferral or a forgiveness
of interest on or principal of the loan or a modification or waiver of any other
monetary term of the loan relating to the timing or amount of any payment of
principal or interest (other than default interest) or any other material sums
due and payable under the loan documents or a modification or waiver of any
provision of the loan which restricts the borrower or its equity owners from
incurring additional indebtedness, any consent to the placement of additional
liens encumbering the Mortgaged Property or the ownership interests in borrower
or to the incurring of additional indebtedness at any level or tier of
ownership, or any modification or waiver with respect to the obligation to
deposit or maintain reserves or escrows or to the amounts required to be
deposited therein or any establishment of additional material reserves not
expressly provided for in the loan documents,
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(B) any modification of, or waiver with respect to, the loan that would result
in a discounted pay-off of the loan, (C) commencement or termination of any
foreclosure upon or comparable conversion of the ownership of the Mortgaged
Property or any acquisition of the Mortgaged Property by deed-in-lieu of
foreclosure or otherwise, (D) any sale of the Mortgaged Property or any material
portion thereof (other than pursuant to a purchase option contained in the loan
documents or in the Pooling and Servicing Agreement) or, except, as specifically
permitted in the loan documents, the transfer of any direct or indirect interest
in borrower or any sale of the loan (other than pursuant to a purchase option
contained in the loan documents or in the 2004-C10 Pooling and Servicing
Agreement), (E) any action to bring the Mortgaged Property or REO Property into
compliance with any laws relating to hazardous materials, (F) any substitution
or release of collateral for the loan (other than in accordance with the terms
of, or upon satisfaction of, the loan), (G) any release of the borrower or any
guarantor from liability with respect to the loan, (H) any substitution of the
bank holding the central account, unless such bank agrees in writing (x) to
comply with certain terms related to reports of weekly reconciliation of the
central account and escrow accounts and (y) to provide to holders of the 11
Madison Avenue Subordinate Loans copies of the weekly reconciliation required to
be prepared as described in immediately preceding clause (x), (I) any
determination (x) not to enforce a "due-on-sale" or "due-on-encumbrance" clause
(unless such clause is not exercisable under applicable law or such exercise is
reasonably likely to result in successful legal action by the borrower) or (y)
to permit an assumption of the loan, (J) any material changes to or waivers of
any of the insurance requirements, (K) any release of funds from the curtailment
reserve escrow account or the designated lease reserve escrow account for the
application of same to the repayment of the debt; provided, however, that (x)
the operating advisor shall not have the right to consent to any such release
after the occurrence of an event of default (unless such co-lender is
continuously curing in accordance with Section 7 of the 11 Madison Avenue
Intercreditor Agreement) and during the continuance thereof, and (y) the
operating advisor shall be required to consent to the release of such funds and
the application of same to the repayment of the debt, if lead lender delivers to
the operating advisor a letter from any single Rating Agency stating that the
failure to release funds from the curtailment reserve sub-account and to apply
same to the repayment of the debt will result in the downgrading, withdrawal or
qualification of any Class of Certificates, (L) any determination to apply loss
proceeds to the payment of the debt and with respect to the approval of any
architects, contractors, plans and specifications or other material approvals
which lender may give or withhold, (M) any incurrence of additional debt by the
borrower or any mezzanine financing by any beneficial owner of the borrower, and
(N) the voting on any plan of reorganization, restructuring or similar plan in
the bankruptcy of the borrower. However, to the extent no 11 Madison Avenue
Subordinate Loan is greater than the threshold described above, the holders of a
majority (by then outstanding principal balance) of the 11 Madison Avenue Senior
Loans, will be entitled to exercise rights and powers of the Controlling Class
Representative and the Controlling Class with respect to the 11 Madison Avenue
Whole Loan. In the event that the Controlling Class Representative and the
holders of the 11 Madison Avenue Pari Passu Loans (including the 2004-C10
Controlling Class Representative) give conflicting consents or directions to the
2004-C10 Master Servicer or the 2004-C10 Special Servicer, as applicable, no
such consent or direction is agreed to by the holders of a majority (by then
outstanding principal balance) of the 11 Madison Avenue Senior Loans, and the
directions given by the 2004-C10 Controlling Class Representative satisfy the
Servicing Standard, the 2004-C10 Master Servicer or the 2004-C10 Special
Servicer, as applicable, will be required to follow the directions of the
2004-C10 Controlling Class Representative. See "DESCRIPTION OF THE MORTGAGE
POOL--Co-Lender Loans--11 Madison Avenue Loan--Servicing Provisions of the 11
Madison Avenue Intercreditor Agreement" in this prospectus supplement.
So long as a Park Place Mall Control Appraisal Period has not occurred and
is continuing, the holders of the Class PP Certificates and the Park Place Mall
Representative will have the ability to exercise the rights of the Controlling
Class and the Controlling Class Representative with respect to the Park Place
Mall Whole Loan. Upon the occurrence and continuance of a Park Place Mall
Control Appraisal Period, the holders of a majority (by then outstanding
principal balance) of the Park Place Mall Loans will be entitled to exercise
rights and powers of the Controlling Class Representative and the Controlling
Class with respect to the Park Place Mall Whole Loan. See "DESCRIPTION OF THE
MORTGAGE POOL-- Co-Lender Loans--Park Place Mall Loan--Servicing Provisions of
the Park Place Mall Intercreditor Agreement" in this prospectus supplement.
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Notwithstanding the foregoing, the holder of the Pointe West Medical Office
Building Subordinate Loan may exercise certain approval rights relating to a
modification of such Subordinate Companion Loan that materially and adversely
affects the holder of such Subordinate Companion Loan prior to the expiration of
the related repurchase period. Furthermore, the holder of the Pointe West
Medical Office Building Subordinate Loan may exercise certain approval rights
relating to a modification of the Pointe West Medical Office Building Loan or
the related Subordinate Companion Loan that materially and adversely affects the
holder of such Subordinate Companion Loan. See "DESCRIPTION OF THE MORTGAGE
POOL--Co-Lender Loans--Pointe West Medical Office Building Loan--Servicing
Provisions of the Pointe West Medical Office Building Intercreditor Agreement in
this prospectus supplement.
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 respective officers, directors,
employees, principals or agents as a result of such a special relationship or
conflict. The Park Place Mall Representative and the holder of an 11 Madison
Avenue Subordinate Loan or their respective designees, in connection with
exercising the rights and powers described above with respect to the Park Place
Mall Whole Loan and 11 Madison Avenue Whole Loan, respectively, will be entitled
to substantially the same limitations to which the Controlling Class
Representative is entitled.
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 11 Madison Avenue 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 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 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 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 or mezzanine lenders to purchase the related Mortgage Loan and in the
case of the Park Place Mall Loan, subject to the right of the controlling holder
of the Class PP Certificates to purchase the Park Place Mall 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
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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.
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.
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 and the Trustee 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,
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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 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 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, 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, 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 11 Madison Avenue 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 2005, with respect to each Mortgaged Property securing a Mortgage
Loan (other than the Mortgaged Property related to the 11 Madison Avenue 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 11 Madison Avenue 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 2004-C14 (the "Certificates") will be issued
pursuant to a Pooling and Servicing Agreement, dated as of August 1, 2004, among
the Depositor, the Master Servicer, the Special Servicer, the Trustee and the
Fiscal 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 such 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 and Class A-2 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"); (iv)
the Class R-I and Class R-II Certificates (collectively, the "REMIC Residual
Certificates"); (v) the Class MAD Certificates (the "Class MAD Certificates");
(vi) the Class PP Certificates (the "Class PP Certificates" and, collectively,
with the Sequential Pay Certificates, the Class X Certificates and the Class MAD
Certificates, the "REMIC Regular Certificates"); and (vii) the Class Z
Certificates. The Class MAD Certificates will be entitled to receive
distributions only from collections on the 11 Madison Avenue Subordinate
Non-Pooled Component in accordance with the Pooling and Servicing Agreement and
will not be supported by the 11 Madison Avenue Pooled Component or any other
Mortgage Loan. The Class PP Certificates will be entitled to receive
distributions only from collections on the Park Place Mall Subordinate Loan in
accordance with the Park Place Mall Intercreditor Agreement and the Pooling and
Servicing Agreement and will not be supported by any other Mortgage Loan.
Only the Class A-1, Class A-2, Class B, Class C and Class D Certificates
(collectively, the "Offered Certificates") are offered hereby. The Class E,
Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class O,
Class P, Class X-C, Class X-P, Class MAD and Class PP 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 B, Class C and Class D 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
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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 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 Trustee 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
Trustee 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
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respective holders of Offered Certificates. Accordingly, although the holders of
Offered Certificates will not possess the Offered Certificates, the Rules
provide a mechanism by which Participants will receive payments on Offered
Certificates and will be able to transfer their interest.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a holder of
Offered Certificates to pledge such Certificates to persons or entities that do
not participate in the DTC system, or to otherwise act with respect to such
Certificates, may be limited due to the lack of a physical certificate for such
Certificates.
DTC has advised the Depositor that it will take any action permitted to be
taken by a holder of an Offered Certificate under the Pooling and Servicing
Agreement only at the direction of one or more Participants to whose accounts
with DTC the Offered Certificates are credited. DTC may take conflicting actions
with respect to other undivided interests to the extent that such actions are
taken on behalf of Participants whose holdings include such undivided interests.
Except as required by law, none of the Depositor, the Underwriters, the
Master Servicer, the Trustee nor the Fiscal Agent 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.
S-205
CERTIFICATE BALANCES AND NOTIONAL AMOUNTS
Subject to a permitted variance of plus or minus 5.0%, the respective
Classes of Sequential Pay 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 ................................................... $534,414,000 48.715%
Class A-2 Certificates ................................................... $413,146,000 37.660%
Class B Certificates ..................................................... $ 28,797,000 2.625%
Class C Certificates ..................................................... $ 13,713,000 1.250%
Class D Certificates ..................................................... $ 17,827,000 1.625%
Non-Offered Certificates (other than Class X and Class PP Certificates) .. $ 89,133,349 8.125%
The "Certificate Balance" of any Class of Sequential Pay Certificates, the
Class MAD Certificates and the Class PP 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, the Class MAD Certificates and the Class PP
Certificates, in each case, will be reduced on each Distribution Date 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 date. The initial Notional Amount of the Class X-C
Certificates will equal approximately $1,097,030,349 (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 February 2005, the sum of (a) the
lesser of $530,658,000 and the Certificate Balance of the Class A-1
Certificates and (b) the aggregate Certificate Balances of the Class
A-2, Class B, Class C, Class D, Class E, Class F, Class G, Class H and
Class J Certificates;
(2) after the Distribution Date in February 2005 through and including the
Distribution Date in August 2005, the sum of (a) the lesser of
$525,727,000 and the Certificate Balance of the Class A-1 Certificates
and (b) the aggregate Certificate Balances of the Class A-2, Class B,
Class C, Class D, Class E, Class F, Class G, Class H and Class J
Certificates;
(3) after the Distribution Date in August 2005 through and including the
Distribution Date in February 2006, the sum of (a) the lesser of
$502,810,000 and the Certificate Balance of the Class A-1 Certificates
and (b) the aggregate Certificate Balances of the Class A-2, Class B,
Class C, Class D, Class E, Class F, Class G, Class H and Class J
Certificates;
(4) after the Distribution Date in February 2006 through and including the
Distribution Date in August 2006, the sum of (a) the lesser of
$476,779,000 and the Certificate Balance of the Class A-1 Certificates
and (b) the aggregate Certificate Balances of the Class A-2, Class B,
Class C, Class D, Class E, Class F, Class G, Class H and Class J
Certificates;
(5) after the Distribution Date in August 2006 through and including the
Distribution Date in February 2007, the sum of (a) the lesser of
$451,611,000 and the Certificate Balance of the Class A-1 Certificates
and (b) the aggregate Certificate Balances of the Class A-2, Class B,
Class C, Class D, Class E, Class F, Class G, Class H and Class J
Certificates;
(6) after the Distribution Date in February 2007 through and including the
Distribution Date in August 2007, the sum of (a) the lesser of
$426,847,000 and the Certificate Balance of the
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Class A-1 Certificates and (b) the aggregate Certificate Balances of
the Class A-2, Class B, Class C, Class D, Class E, Class F and Class G
Certificates and (c) the lesser of $10,879,000 and the Certificate
Balance of the Class H Certificates;
(7) after the Distribution Date in August 2007 through and including the
Distribution Date in February 2008, the sum of (a) the lesser of
$402,797,000 and the Certificate Balance of the Class A-1 Certificates
and (b) the aggregate Certificate Balances of the Class A-2, Class B,
Class C, Class D, Class E, Class F and Class G Certificates and (c)
the lesser of $695,000 and the Certificate Balance of the Class H
Certificates;
(8) after the Distribution Date in February 2008 through and including the
Distribution Date in August 2008, the sum of (a) the lesser of
$379,182,000 and the Certificate Balance of the Class A-1 Certificates
and (b) the aggregate Certificate Balances of the Class A-2, Class B,
Class C, Class D, Class E and Class F Certificates and (c) the lesser
of $3,216,000 and the Certificate Balance of the Class G Certificates;
(9) after the Distribution Date in August 2008 through and including the
Distribution Date in February 2009, the sum of (a) the lesser of
$356,428,000 and the Certificate Balance of the Class A-1 Certificates
and (b) the aggregate Certificate Balances of the Class A-2, Class B,
Class C, Class D and Class E Certificates and (c) the lesser of
$6,090,000 and the Certificate Balance of the Class F Certificates;
(10) after the Distribution Date in February 2009 through and including the
Distribution Date in August 2009, the sum of (a) the lesser of
$115,279,000 and the Certificate Balance of the Class A-1 Certificates
and (b) the aggregate Certificate Balances of the Class A-2, Class B,
Class C and Class D Certificates and (c) the lesser of $7,977,000 and
the Certificate Balance of the Class E Certificates;
(11) after the Distribution Date in August 2009 through and including the
Distribution Date in February 2010, the sum of (a) the lesser of
$96,999,000 and the Certificate Balance of the Class A-1 Certificates
and (b) the aggregate Certificate Balances of the Class A-2, Class B,
Class C and Class D Certificates and (c) the lesser of $312,000 and
the Certificate Balance of the Class E Certificates;
(12) after the Distribution Date in February 2010 through and including the
Distribution Date in August 2010, the sum of (a) the lesser of
$80,582,000 and the Certificate Balance of the Class A-1 Certificates
and (b) the aggregate Certificate Balances of the Class A-2, Class B
and Class C Certificates and (c) the lesser of $11,981,000 and the
Certificate Balance of the Class D Certificates;
(13) after the Distribution Date in August 2010 through and including the
Distribution Date in February 2011, the sum of (a) the lesser of
$65,490,000 and the Certificate Balance of the Class A-1 Certificates
and (b) the aggregate Certificate Balances of the Class A-2, Class B
and Class C Certificates and (c) the lesser of $6,058,000 and the
Certificate Balance of the Class D Certificates;
(14) after the Distribution Date in February 2011 through and including the
Distribution Date in August 2011, the sum of (a) the lesser of
$401,279,000 and the Certificate Balance of the Class A-2 Certificates
and (b) the aggregate Certificate Balances of the Class B and Class C
Certificates and (c) the lesser of $584,000 and the Certificate
Balance of the Class D Certificates; and
(15) after the Distribution Date in August 2011, $0.
The initial Notional Amount of the Class X-P Certificates will be
$1,057,622,000.
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
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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 and Class A-2
Certificates, which amounts shall be applied pro rata (based on remaining Class
Certificate Balances) to such Classes). Mortgage Deferred Interest with respect
to the 11 Madison Avenue Loan will be allocated first, to the 11 Madison Avenue
Non-Pooled Component and then, to the 11 Madison Avenue Pooled Component. Only
Certificate Deferred Interest relating to the 11 Madison Avenue Pooled Component
will be allocated to the Sequential Pay Certificates and Certificate Deferred
Interest on the Class MAD Certificates will be equal to the 11 Madison Avenue
Non-Pooled Component's share of Mortgage Deferred Interest on the 11 Madison
Avenue Loan. Certificate Deferred Interest on the Class PP Certificates will be
equal to the Park Place Mall Subordinate Loan's share of Mortgage Deferred
Interest on the Park Place Mall Whole Loan, allocated pursuant to the terms of
the Pooling and Servicing Agreement and the Park Place Mall Intercreditor
Agreement. 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 B, Class C, or Class D 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, the Class MAD Available
Distribution Amount and the Class PP Available Distribution Amount (each 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 with
respect to each Mortgage Loan other than amounts allocable in respect of the 11
Madison Avenue Non-Pooled Component.
For purposes of calculating the allocation of collections on the 11 Madison
Avenue Loan between the 11 Madison Avenue Pooled Component, on the one hand, and
the 11 Madison Avenue Non-Pooled Component on the other, the 11 Madison Avenue
Pooled Component and the 11 Madison Avenue Non-Pooled Component will each be
deemed to have a principal balance (a "Component Principal Balance") that is
initially equal to $82,000,000 in the case of the 11 Madison Avenue Pooled
Component, and $13,555,556 in the case of the 11 Madison Avenue Non-Pooled
Component, and each such component will accrue interest during each Interest
Accrual Period on the amount of the Component Principal Balance thereof
outstanding immediately prior to the related Distribution Date at a per annum
rate equal to the Net Mortgage Rate in effect for the 11 Madison Avenue Loan as
of the commencement of such Interest Accrual Period. The Component Principal
Balance of the 11 Madison Avenue Pooled Component will be reduced on each
Distribution Date by all distributions of principal made in respect thereof on
such Distribution Date and the Component Principal Balance of the 11 Madison
Avenue Non-Pooled Component will be reduced on each Distribution Date by all
distributions of principal made in respect thereof on such Distribution Date, in
each case as described under "DESCRIPTION OF THE CERTIFICATES--Distributions."
PASS-THROUGH RATES
The Pass-Through Rates applicable to the Class A-1, Class A-2, Class B,
Class C and Class D Certificates for each Distribution Date will equal the
respective fixed rates per 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.
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The Pass-Through Rate applicable to the Class X-C Certificates for the
initial Distribution Date will equal approximately % 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 Amounts" 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 August 2011,
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 August 2011, 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 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.
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The Pass-Through Rate applicable to the Class X-P Certificates for the
initial Distribution Date will equal approximately % 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 Amounts" 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 August 2011, "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 August 2011, 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 with
respect to the Mortgage Loans other than the 11 Madison Avenue Non-Pooled
Component.
The "Weighted Average Net Mortgage Rate" for each Distribution Date is the
weighted average of the Net Mortgage Rates for the Mortgage Loans (excluding the
Net Mortgage Rate and Component Principal Balance of the 11 Madison Avenue
Non-Pooled Component and the Park Place Mall Subordinate Loan) as of the
commencement of the related Collection Period, weighted on the basis of their
respective Stated Principal Balances (excluding, with respect to the 11 Madison
Avenue Loan, the Component Principal Balance of the 11 Madison Avenue Non-Pooled
Component and with respect to Park Place Mall Loan, the Park Place Mall
Subordinate Loan) 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 (excluding the Park Place Mall Subordinate Loan) and the 11
Madison Avenue Pooled Component and 11 Madison Avenue Non-Pooled Component will
generally equal (x) the Mortgage Rate in effect for such Mortgage Loan, or, with
respect to the components related to the 11 Madison Avenue Loan, such 11 Madison
Avenue 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 2 Mortgage Loans (loan numbers 4 and 7) and 1 Mortgage Loan
during its interest-only period (loan number 25), accrues 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
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calculating the Weighted Average Net Mortgage Rate for each Distribution Date,
the Mortgage Rate of each Mortgage Loan, other than 2 Mortgage Loans,
representing 7.2% of the Cut-Off Date Pool Balance, which accrue interest on a
30/360 basis and 1 Mortgage Loan, representing 1.1% of the Cut-Off Date Pool
Balance, which accrues interest on a 30/360 basis during its related
interest-only period, 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 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 Net Mortgage
Rate for the Park Place Mall Subordinate Loan will generally equal (x) the
Mortgage Rate in effect for such Mortgage Loan, minus (y) the applicable
Servicing Fee rate for such Mortgage Loan. 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 (with respect to the Park Place Mall Whole Loan, excluding the
Park Place Mall Subordinate 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 (with respect to the Park Place Mall
Whole Loan, excluding the Park Place Mall Subordinate 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 or Workout
Delayed Reimbursement Amount, and such amount has not been included as part of
the Principal Distribution Amount, such amount shall not reduce the Stated
Principal Balance (other than for purposes of computing the Weighted Average Net
Mortgage Rate). 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. 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 September 2004.
DISTRIBUTIONS
General. Except as described below with respect to the Class MAD and Class
PP Certificates, distributions on the Certificates are made by the Trustee, 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
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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 September 2004.
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 (with respect to the 11 Madison
Avenue Loan, to the extent allocable to the 11 Madison Avenue Pooled
Component) by the Master Servicer as of the close of business on the last
day of the related Collection Period 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);
(vi) if such Distribution Date occurs in 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;
(vii) any amounts distributable to the Class MAD Certificates in
respect of the 11 Madison Avenue Non-Pooled Component as described
below under "--Application of Class MAD Available Distribution
Amount"; and
(viii) any amounts distributable to the Class PP Certificates in
respect of the Park Place Mall Subordinate Loan as described below
under "--Application of Class PP Available Distribution Amount".
(b) all P&I Advances made by the Master Servicer, the Trustee or the
Fiscal Agent with respect to such Distribution Date (other than any P&I
Advance allocable to the 11 Madison Avenue Non-Pooled Component or made on
the Park Place Mall Subordinate Loan);
(c) any Compensating Interest Payment (with respect to the 11 Madison
Avenue Loan, to the extent allocable to the 11 Madison Avenue Pooled
Component) 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 (with respect to the 11 Madison Avenue Loan,
to the extent allocable to the 11 Madison Avenue Pooled Component) 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" and "--P&I Advances" in this prospectus supplement and
"DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS--Certificate Account" in
the accompanying prospectus.
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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" in this prospectus supplement.
All amounts received by the trust with respect to any Co-Lender Loan,
including the Park Place Mall Whole Loan, will be applied to amounts due and
owing under the related loan (including for principal and accrued and unpaid
interest) in accordance with the provisions of the related loan documents, the
related Intercreditor Agreement and the Pooling and Servicing Agreement.
The Class MAD Available Distribution Amount. The aggregate amount available
for distributions of interest and principal to the holders of the Class MAD
Certificates on each Distribution Date (the "Class MAD Available Distribution
Amount") will, in general, equal the sum of the following amounts:
(a) the total amount of all cash received in respect of the 11 Madison
Avenue Loan and any REO Property related to the 11 Madison Avenue Loan to
the extent allocable to the 11 Madison Avenue Non-Pooled Component in
accordance with the terms of the Pooling and Servicing Agreement and not
previously distributed with respect to the Class MAD 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 on the 11 Madison Avenue Loan allocable
to the 11 Madison Avenue Non-Pooled Component collected but due on a
Due Date after the related Collection Period;
(ii) all amounts in the Certificate Account that are payable or
reimbursable to any person other than the holders of the Class MAD
Certificates, including any Servicing Fees and Trustee Fees on the 11
Madison Avenue Non-Pooled Component; and
(iii) any amounts deposited in the Certificate Account in error.
(b) all P&I Advances of interest made by the Master Servicer, the
Trustee or the Fiscal Agent with respect to such Distribution Date made on
the 11 Madison Avenue Loan and allocable to the 11 Madison Avenue
Non-Pooled Component; and
(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 made on the 11 Madison Avenue Loan and
allocable to the 11 Madison Avenue Non-Pooled Component.
The Class PP Available Distribution Amount. The aggregate amount available
for distributions of interest and principal to the holders of the Class PP
Certificates on each Distribution Date (the "Class PP 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 Park
Place Mall Subordinate Loan by the Master Servicer as of the close of
business on the last day of the related Collection Period and payable to
the holder of the Park Place Mall Subordinate Loan in accordance with the
terms of the Park Place Mall Intercreditor Agreement and not previously
distributed with respect to the Class PP 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 on the Park Place Mall Subordinate Loan
collected but due on a Due Date after the related Collection Period;
(ii) all amounts in the Certificate Account that are payable or
reimbursable to any person other than the holders of the Class PP
Certificates, including any Servicing Fees and Trustee Fees on the
Park Place Mall Subordinate Loan; and
(iii) any amounts deposited in the Certificate Account in error.
(b) all P&I Advances of interest made by the Master Servicer, the
Trustee or the Fiscal Agent with respect to such Distribution Date made on
the Park Place Mall Subordinate Loan; and
(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 made on the Park Place Mall
Subordinate Loan.
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Interest Reserve Account. The Trustee 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 (not including the 11 Madison Avenue Non-Pooled Component and the
Park Place Mall Subordinate 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.
Distribution Account. The Trustee will establish and will maintain a
"Distribution Account" in the name 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 (and, with respect to the Class MAD or Class PP Certificates, to the
extent of the Class MAD Available Distribution Amount or the Class PP Available
Distribution Amount, as applicable), will be used to make distributions on the
Certificates.
Gain on Sale Reserve Account. The Trustee will establish and will maintain
a "Gain on Sale Reserve Account" in the name 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 Trustee will establish and will maintain
an "Additional Interest Account" in the name of the Trustee for the benefit of
the holders of the Class Z and Class MAD 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 Trustee will (except as otherwise described under "--Termination"
below) apply amounts on deposit in the Distribution Account (other than amounts
payable on such date in respect of the Class MAD and Class PP Certificates), 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 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) to distributions to the holders of the Class A-1 Certificates and
Class A-2 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
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reimbursement has previously been received, to reimburse such holders
for all such Realized Losses and Additional Trust Fund Expenses, if
any;
(5) 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;
(6) after the Class A-1 Certificates and Class A-2 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
and Class A-2 Certificates on such Distribution Date;
(7) 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;
(8) 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;
(9) 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;
(10) 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;
(11) 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;
(12) 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;
(13) 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;
(14) 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;
(15) 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 on
such Distribution Date;
(16) 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;
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(17) to distributions of interest to the holders of the Class F
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;
(18) 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;
(19) 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;
(20) 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;
(21) 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;
(22) 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;
(23) 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;
(24) 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;
(25) 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;
(26) 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;
(27) 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;
(28) 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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(29) 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;
(30) 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;
(31) 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;
(32) 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;
(33) 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;
(34) 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;
(35) 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;
(36) 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;
(37) 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;
(38) 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;
(39) 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;
(40) 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;
(41) 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;
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(42) 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;
(43) 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;
(44) 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;
(45) 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;
(46) 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
(47) 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 (46) 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 and the Class A-2 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.
Application of Class MAD Available Distribution Amount. The Class MAD
Certificates will only be entitled to distributions from amounts collected on
the 11 Madison Avenue Non-Pooled Component. On each Distribution Date, the
Trustee will apply amounts on deposit in the Distribution Account in the
following order of priority to the extent of the Class MAD Available
Distribution Amount:
(i) to distributions of interest to the holders of the Class MAD
Certificates in accordance with the amount of Distributable Certificate
Interest in respect of such Class, in an amount equal to all Distributable
Certificate Interest allocable to the Class MAD Certificates for such
Distribution Date and, to the extent not previously paid, for all prior
Distribution Dates;
(ii) to distributions of principal to the holders of the Class MAD
Certificates in an amount equal to the Class MAD Principal Distribution
Amount for such Distribution Date;
(iii) to distributions to the holders of the Class MAD 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
(iv) to distributions to the holders of the REMIC I Certificates in an
amount equal to the balance, if any, of the Class MAD Available
Distribution Amount remaining after the distributions to be made on such
Distribution Date as described in clauses (i) through (iii) above.
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Amounts payable on any Distribution Date which are part of the Class MAD
Available Distribution Amount will not be available to make distributions on
other Certificates (other than the REMIC Residual Certificates).
Application of Class PP Available Distribution Amount. The Class PP
Certificates will only be entitled to distributions from amounts collected on
the Park Place Mall Subordinate Loan. On each Distribution Date, the Trustee
will (except as otherwise described under " --Termination" below) apply amounts
on deposit in the Class PP Distribution Account in the following order of
priority to the extent of the Class PP Available Distribution Amount:
(i) to distributions of interest to the holders of the Class PP
Certificates in accordance with the amount of Class PP Distributable
Certificate Interest in respect of such Class, in an amount equal to all
Class PP Distributable Certificate Interest for such Distribution Date and,
to the extent not previously paid, for all prior Distribution Dates;
(ii) to distributions of principal to the holders of the Class PP
Certificates in an amount equal to the Class PP Principal Distribution
Amount for such Distribution Date;
(iii) to distributions to the holders of the Class PP 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
(iv) to distributions to the holders of the REMIC II Certificates in
an amount equal to the balance, if any, of the Class PP Available
Distribution Amount remaining after the distributions to be made on such
Distribution Date as described in clauses (i) through (iii) above.
Amounts payable on any Distribution Date which are part of the Class PP
Available Distribution Amount will not be available to make distributions on the
other Classes of Certificates (other than the REMIC Residual Certificates).
The Class MAD Certificates and the 11 Madison Avenue Non-Pooled Component.
The Class MAD Certificates will only be entitled to distributions from amounts
collected on the 11 Madison Avenue Loan allocable to the 11 Madison Avenue
Non-Pooled Component. Prior to the occurrence and continuance of a monetary
event of default, all collections of principal and interest in respect of the 11
Madison Avenue Loan received during any Collection Period (net of any portion
allocable to reimburse any outstanding P&I Advances, or pay any Servicing Fees,
Trustee Fees, Workout Fees, Liquidation Fees, interest on Advances and any other
Additional Trust Fund Expenses including amounts reimbursable under the 2004-C10
Pooling and Servicing Agreement, in respect of such Mortgage Loan) will be
applied on the related Distribution Date for the purposes and in the following
order of priority:
(i) to the Certificateholders (other than the Class MAD and Class PP
Certificates) as part of the Available Distribution Amount for such
Distribution Date, up to an amount equal to accrued and unpaid interest in
respect of the 11 Madison Avenue Pooled Component through the end of the
related Interest Accrual Period;
(ii) to the Certificateholders (other than the Class MAD and Class PP
Certificates) as part of the Available Distribution Amount for such
Distribution Date, up to an amount equal to its pro rata share of any
principal payments until the Component Principal Balance of the 11 Madison
Avenue Pooled Component is reduced to zero;
(iii) to the Certificateholders (other than the Class MAD and Class PP
Certificates) as part of the Available Distribution Amount for such
Distribution Date, to reimburse the 11 Madison Avenue Pooled Component for
all Realized Losses and Additional Trust Fund Expenses, if any, previously
allocated to the 11 Madison Avenue Pooled Component and for which no
reimbursement has previously been received;
(iv) to the holders of the Class MAD Certificates, as part of the
Class MAD Available Distribution Amount, up to an amount equal to all
accrued and unpaid interest in respect of the 11 Madison Avenue Non-Pooled
Component through the end of the related Interest Accrual Period;
(v) to the holders of the Class MAD Certificates, as part of the Class
MAD Available Amount, up to its pro rata share of any principal payments
until the Component Principal Balance of the 11 Madison Avenue Non-Pooled
Component is reduced to zero;
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(vi) to the holders of the Class MAD Certificates, as part of the
Class MAD Available Distribution Amount to reimburse the Class MAD
Certificates for all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the 11 Madison Avenue Non-Pooled Component and
for which no reimbursement has been previously received;
(vii) to the Certificateholders (other than the Class MAD and Class PP
Certificates) for allocation as described below in "--Allocation of
Prepayment Premiums and Yield Maintenance Charges", an amount equal to a
pro rata share, based on the outstanding Component Principal Balance, of
Yield Maintenance Charges received in respect of the 11 Madison Avenue Loan
and allocable to the 11 Madison Avenue Pooled Component;
(viii) to the holders of the Class MAD Certificates, for allocation as
described below in "--Allocation of Prepayment Premiums and Yield
Maintenance Charges", an amount equal to a pro rata share, based on the
outstanding Component Principal Balance, of Yield Maintenance Charges
received in respect of the 11 Madison Avenue Loan and allocable to the 11
Madison Avenue Non-Pooled Component;
(ix) to the Class Z Certificates allocated as described in
"--Distributions of Additional Interest" below, an amount equal to a pro
rata share, based on the outstanding Component Principal Balance, of
Additional Interest Amounts received in respect of the 11 Madison Avenue
Loan and allocable to the 11 Madison Avenue Pooled Component;
(x) to the holders of the Class MAD Certificates allocated as
described in "--Distributions of Additional Interest" below, an amount
equal to a pro rata share, based on the outstanding Component Principal
Balance, of Additional Interest Amounts received in respect of the 11
Madison Avenue Loan and allocable to the 11 Madison Avenue Non-Pooled
Component; and
(xi) to the Trust Fund, an amount equal to any Penalty Interest and
other amounts remaining that are received in respect of the 11 Madison
Avenue Loan.
The amounts to be applied pursuant to clauses (i), (ii) and (iii) above
will be included as part of the Available Distribution Amount for the subject
Distribution Date and will be applied as described above to make distributions
on the Certificates (other than the Class MAD and Class PP Certificates).
Under certain circumstances, the holders of the Certificates will be
entitled to certain Advances to the extent described in "--P&I Advances" below.
Amounts payable on any Distribution Date which are part of the Class MAD
Available Distribution Amount will not be available to make distributions on the
other Classes of Certificates.
Upon the occurrence and continuance of a monetary event of default in
respect of the 11 Madison Avenue Loan all collections of principal and interest
in respect of the 11 Madison Avenue Loan received during any Collection Period
(net of any portion allocated to reimburse any outstanding P&I Advances, or pay
any Servicing Fees, Trustee Fees, Workout Fees, Liquidation Fees, interest on
Advances and other Additional Trust Fund Expenses including amounts reimbursable
under the 2004-C10 Pooling and Servicing Agreement, in respect of such Mortgage
Loan) will be applied on the related Distribution Date for the purposes and in
the following order of priority:
(i) to the Certificateholders (other than the Class MAD and Class PP
Certificates) as part of the Available Distribution Amount for such
Distribution Date, up to an amount equal to accrued and unpaid interest in
respect of the 11 Madison Avenue Pooled Component through the end of the
related Interest Accrual Period;
(ii) to the Certificateholders (other than the Class MAD and Class PP
Certificates) as part of the Available Distribution Amount for such
Distribution Date, until the Component Principal Balance of the 11 Madison
Avenue Pooled Component is reduced to zero;
(iii) to the Certificateholders (other than the Class MAD and Class PP
Certificates) as part of the Available Distribution Amount for such
Distribution Date, to reimburse the 11 Madison Avenue Pooled Component for
all Realized Losses and Additional Trust Fund Expenses, if any, previously
allocated to the 11 Madison Avenue Pooled Component and for which no
reimbursement has previously been received;
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(iv) to the holders of the Class MAD Certificates, as part of the
Class MAD Available Distribution Amount, up to an amount equal to all
accrued and unpaid interest in respect of the 11 Madison Avenue Non-Pooled
Component through the end of the related Interest Accrual Period;
(v) to the holders of the Class MAD Certificates, as part of the Class
MAD Available Distribution Amount, until the Component Principal Balance of
the 11 Madison Avenue Non-Pooled Component is reduced to zero;
(vi) to the holders of the Class MAD Certificates, as part of the
Class MAD Available Distribution Amount, to reimburse the Class MAD
Certificates for all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the 11 Madison Avenue Non-Pooled Component and
for which no reimbursement has been previously received;
(vii) to the Certificateholders (other than the Class MAD and Class PP
Certificates) for allocation as described below in "--Allocation of
Prepayment Premiums and Yield Maintenance Charges", an amount equal to a
pro rata share, based on the outstanding Component Principal Balance, of
Yield Maintenance Charges received in respect of the 11 Madison Avenue Loan
and allocable to the 11 Madison Avenue Pooled Component;
(viii) to the holders of the Class MAD Certificates, for allocation as
described below in "--Allocation of Prepayment Premiums and Yield
Maintenance Charges", an amount equal to a pro rata share, based on the
outstanding Component Principal Balance, of Yield Maintenance Charges
received in respect of the 11 Madison Avenue Loan and allocable to the 11
Madison Avenue Non-Pooled Component;
(ix) to the Class Z Certificates allocated as described in
"--Distributions of Additional Interest" below, an amount equal to a pro
rata share, based on the outstanding Component Principal Balance, of
Additional Interest Amounts received in respect of the 11 Madison Avenue
Loan and allocable to the 11 Madison Avenue Pooled Component;
(x) to the holders of the Class MAD Certificates allocated as
described in "--Distributions of Additional Interest" below, an amount
equal to a pro rata share, based on the outstanding Component Principal
Balance, of Additional Interest Amounts received in respect of the 11
Madison Avenue Loan and allocable to the 11 Madison Avenue Non-Pooled
Component; and
(xi) to the Trust Fund, an amount equal to any Penalty Interest and
other amounts remaining that are received in respect of the 11 Madison
Avenue Loan.
The amounts to be applied pursuant to clause (i), (ii) and (iii) above will
be included as part of the Available Distribution Amount for the subject
Distribution Date and will be applied as described above to make distributions
on the Certificates (other than the Class MAD and Class PP Certificates).
Under certain circumstances, the holders of the Certificates will be
entitled to certain Advances to the extent described in "--P&I Advances" below.
Amounts payable on any Distribution Date which are part of the Class MAD
Available Distribution Amount will not be available to make distributions on the
other classes of Regular Certificates.
Distributable Certificate Interest. The "Distributable Certificate
Interest" in respect of each Class of REMIC Regular Certificates (other than the
Class PP 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 "Class PP Distributable
Certificate Interest" in respect of the Class PP Certificates for each
Distribution Date equals the Accrued Certificate Interest in respect of the
Class PP Certificates for such Distribution Date, reduced (to not less than
zero) by (i) the Class PP's
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allocable share (calculated as described below) of the aggregate of any
Prepayment Interest Shortfalls resulting from voluntary principal prepayments
made on the Park Place Mall Subordinate Loan during the related Collection
Period that are not covered by the Master Servicer's Compensating Interest
Payment for such Distribution Date and (ii) any Mortgage Deferred Interest
allocated to the Class PP Certificates in respect of the Park Place Mall
Subordinate Loan.
The "Accrued Certificate Interest" in respect of each Class of Sequential
Pay Certificates, the Class MAD Certificates and the Class PP 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 or
Component Principal Balance, as applicable, outstanding immediately prior to
such Distribution Date. The "Accrued Certificate 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, Class MAD and Class PP 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, the Class MAD Certificates and the Class PP Certificates)
for such Distribution Date.
Any such Prepayment Interest Shortfalls allocated to the 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 11 Madison Avenue Loan, prepayment interest shortfalls
will be allocated first to the promissory note related to the most subordinate
of the 11 Madison Avenue Subordinate Loans, second to the promissory note
related to the second most subordinate of the 11 Madison Avenue Subordinate
Loans, third to the promissory note related to the senior most of the 11 Madison
Avenue Subordinate Loans and fourth, pro rata, between the promissory notes
related to the 11 Madison Avenue Loan and the 11 Madison Avenue Pari Passu
Loans. The portion of such prepayment interest shortfall allocated to the 11
Madison Avenue Loan will be allocated between the 11 Madison Avenue Pooled
Component and the 11 Madison Avenue Non-Pooled Component pro rata, based on the
amount of interest each such component is otherwise entitled to receive on the
related Distribution Date (without giving effect to any capitalization of
interest). Compensating Interest Payments made by the Master Servicer with
respect to the 11 Madison Avenue Loan for any Distribution Date will be used
first, to cover the Prepayment Interest Shortfalls incurred during the related
Collection Period allocated to the 11 Madison Avenue Pooled Component, and
second, to cover any Prepayment Interest Shortfalls incurred during the related
Collection Period allocated to the 11 Madison Avenue Non-Pooled Component. Any
such Prepayment Interest Shortfalls allocated to the 11 Madison Avenue
Non-Pooled Component, to the extent not covered by the Master Servicer's
Compensating Interest Payment for such Distribution Date, will reduce the 11
Madison Avenue Non-Pooled Component's interest entitlement for the related
Distribution Date (without giving effect to any capitalization of interest). Any
such Prepayment Interest Shortfalls allocated to the 11 Madison Avenue Pooled
Component, to the extent not covered by the Master Servicer's Compensating
Interest Payment for such Distribution Date, will reduce its Distributable
Certificate Interest as described above.
With respect to the Pointe West Medical Office Building Loan and the Park
Place Mall Loan, Prepayment Interest Shortfalls will be allocated first to the
promissory note related to the Pointe West Medical Office Building Subordinate
Loan or the Park Place Mall Subordinate Loan, as applicable and second to the
promissory note related to Pointe West Medical Office Building Loan or the Park
Place Mall Loan, as applicable. The portion of such shortfall allocated to the
Pointe West Medical Office Building Loan or the Park Place Mall Loan, net of
amounts payable by the Master Servicer, will be included in the Net Aggregate
Prepayment Interest Shortfall. Because of this allocation, a Prepayment Interest
Shortfall
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with respect to the Park Place Mall Loan will be allocated first to the Class PP
Certificates and then any unallocated portion will be included in Net Aggregate
Prepayment Interest Shortfall.
Principal Distribution Amount. The "Principal Distribution Amount" for each
Distribution Date with respect to the Mortgage Pool 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, the Trustee, the Fiscal Agent, the 2004-C10 Master Servicer or the
2004-C10 Trustee, as applicable, but, in each case, exclusive of (i) amounts
allocable to principal of the 11 Madison Avenue Non-Pooled Component and (ii)
amounts payable to the Class PP Certificates in respect of principal of the Park
Place Mall Subordinate Loan:
(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 (with respect to the 11
Madison Avenue Loan, to the extent allocable to the 11 Madison Avenue
Pooled Component) 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 (with respect to the 11 Madison
Avenue Loan, to the extent allocable to the 11 Madison Avenue Pooled
Component and with respect to the Park Place Mall Whole Loan, to the extent
allocable to the Park Place Mall 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 (with respect to the 11 Madison Avenue Loan, to the
extent allocable to the 11 Madison Avenue Pooled Component) 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 (with respect to the 11 Madison Avenue Loan,
to the extent allocable to the 11 Madison Avenue Pooled Component and with
respect to the Park Place Mall Whole Loan, to the extent allocable to the
Park Place Mall Loan), and Substitution Shortfall Amounts to Mortgage Loans
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 (with respect to the 11 Madison Avenue Loan, to the extent allocable
to the 11 Madison Avenue Pooled Component and with respect to the Park
Place Mall Whole Loan, to the extent allocable to the Park Place Mall Loan)
during the related Collection Period 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 (i) 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 and (ii) Workout-Delayed
Reimbursement Amounts plus interest on such amounts that are paid or reimbursed
from principal collections on the mortgage loans in a period
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during which such principal collections would have otherwise been included in
the Principal Distribution Amount for such Distribution Date; provided, further,
that in the case of clauses (i) and (ii) above, 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.
Class MAD Principal Distribution Amount. The "Class MAD Principal
Distribution Amount" for each Distribution Date will generally equal the
aggregate of the following (without duplication) to the extent paid by the
borrower under the 11 Madison Avenue Loan or advanced by the Master Servicer,
Trustee or Fiscal Agent and allocable to the 11 Madison Avenue Non-Pooled
Component during the related Collection Period:
(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 11 Madison Avenue Non-Pooled Component
for its Due Date occurring during the related Collection Period, to the
extent not previously paid by the related borrower or advanced by the
Master Servicer, the Trustee or the Fiscal Agent, as applicable, prior to
such Collection Period;
(b) the aggregate of all principal prepayments received on or in
respect of the 11 Madison Avenue Non-Pooled Component during the related
Collection Period;
(c) if the stated maturity date of the 11 Madison Avenue Loan occurred
during or prior to the related Collection Period, any payment of principal
made by or on behalf of the 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 the 11 Madison Avenue Loan to
the extent allocable to the 11 Madison Avenue Non-Pooled Component 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, with respect to the 11 Madison Avenue Loan, to the extent
allocable to the 11 Madison Avenue Non-Pooled Component 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 the 11 Madison Avenue Loan,
to the extent allocable to the 11 Madison Avenue Non-Pooled Component
during the related Collection Period 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 11 Madison Avenue Loan, to the extent allocable to the 11 Madison
Avenue Non-Pooled Component, 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 Class MAD Principal
Distribution Amount for the immediately preceding Distribution Date, over
the aggregate distributions of principal made on the Class MAD Certificates
on such immediately preceding Distribution Date;
provided, that the Class MAD Principal Distribution Amount for any Distribution
Date shall be reduced by the amount of any reimbursements of (i) nonrecoverable
Advances plus interest on such nonrecoverable Advances that are paid or
reimbursed from principal collections allocable to the 11 Madison Avenue
Non-Pooled Component in a period during which such principal collections would
have otherwise been included in the Class MAD Principal Distribution Amount for
such Distribution Date and (ii) Workout-Delayed Reimbursement Amounts plus
interest on such amount that are paid or reimbursed from principal collections
allocable to the 11 Madison Avenue Non-Pooled Component in a period during which
such principal collection would have otherwise been included in the Class MAD
Principal Distribution Amount for such Distribution Date; provided, further, if
any of the amounts that were reimbursed from principal collections allocable to
the 11 Madison Avenue Non-Pooled Component are
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subsequently recovered, such recovery will increase the Class MAD Principal
Distribution Amount for the Distribution Date related to the period in which
such recovery occurs.
Class PP Principal Distribution Amount. The "Class PP Principal
Distribution Amount" for each Distribution Date will generally equal the
aggregate of the following (without duplication) to the extent paid by the
borrower under the Park Place Mall Subordinate Loan during the related
Collection Period:
(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 Park Place Mall Subordinate Loan for
its Due Date occurring during the related Collection Period, to the extent
not previously paid by the related borrower, prior to such Collection
Period;
(b) the aggregate of all principal prepayments received on the Park
Place Mall Subordinate Loan during the related Collection Period;
(c) if the stated maturity date of the Park Place Mall Subordinate
Loan occurred during or prior to the related Collection Period, any payment
of principal made by or on behalf of the 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 the Park
Place Mall Subordinate 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 the Park Place Mall Subordinate Loan 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 the Park Place Mall
Subordinate Loan during the related Collection Period 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 Park Place Mall Subordinate 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 Class PP Principal
Distribution Amount for the immediately preceding Distribution Date, over
the aggregate distributions of principal made on the Class PP Certificates
on such immediately preceding Distribution Date.
provided that the Class PP Principal Distribution Amount for any Distribution
Date shall be reduced by the amount of any reimbursements of (i) nonrecoverable
Advances plus interest on such nonrecoverable Advances that are paid or
reimbursed from principal collections on the Park Place Mall Subordinate Loan in
a period during which such principal collections would have otherwise been
included in the Class PP Principal Distribution Amount for such Distribution
Date and (ii) Workout-Delayed Reimbursement Amounts plus interest on such
amounts that are paid or reimbursed from principal collections to the allocable
to the Park Place Mall Subordinate Loan in a period during which such principal
collections would have otherwise been included in the Class PP Principal
Distribution Amount for such Distribution Date; provided, further, if any of the
amounts that were reimbursed from principal collections on the Park Place Mall
Subordinate Loan are subsequently recovered, such recovery will increase the
Class PP 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
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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 (or the Class MAD
Principal Distribution Amount or Class PP Principal Distribution Amount with
respect to the Class MAD or Class PP Certificates, as applicable) 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
(other than the 11 Madison Avenue Loan) 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, 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 (and, in the case of a
Co-Lender Loan, payable with respect to the related Mortgage Loan pursuant to
the related Intercreditor Agreement) payable will be distributed in respect of
the Offered Certificates and the Class E, 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 E, 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
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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 to the holders of the
Class X-C Certificates. Any Yield Maintenance Charges payable in respect of the
11 Madison Avenue Loan will be allocated on a pro rata basis between the 11
Madison Avenue Pooled Component and the 11 Madison Avenue Non-Pooled Component
and, with respect to such amounts allocable to the 11 Madison Avenue Non-Pooled
Component, will be distributed to the holders of the Class MAD Certificates. Any
Prepayment Premiums or Yield Maintenance Charges related to the Park Place Mall
Subordinate Loan will be distributed to the holders of the Class PP
Certificates.
The "Discount Rate" applicable to any Class of Offered Certificates and the
Class E, Class F, Class G and Class H Certificates will equal the yield (when
compounded monthly) on the US 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 US 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, other than Additional Interest
allocable to the 11 Madison Avenue Non-Pooled Component, (and, with respect to
any Co-Lender Loan, payable on the related Mortgage Loan pursuant to the terms
of the related Intercreditor Agreement) during the related Collection Period
will be distributed to the holders of the Class Z Certificates. Additional
Interest collected with respect to the 11 Madison Avenue Loan will be allocated
to the 11 Madison Avenue Pooled Component and the 11 Madison Avenue Non-Pooled
Component on a pro rata basis and, with respect to Additional Interest allocable
to the 11 Madison Avenue Non-Pooled Component, will be distributed to the Class
MAD Certificates. Additional Interest collected with respect to the Park Place
Mall Whole Loan will be allocated to the Park Place Mall Loan and the Park Place
Mall Subordinate Loan on a pro rata basis. Additional Interest collected with
respect to the Park Place Mall Subordinate Loan will be distributed to the Class
PP Certificates. There can be no assurance that any Additional Interest will be
collected on the ARD Loans.
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. The Class MAD Certificates will represent interests in, and will be
payable only out of payments, advances and other amounts allocable to the 11
Madison Avenue Non-Pooled Component. The rights of the holders of the Class MAD
Certificates to receive distributions of amounts collected or advanced in
respect of the 11 Madison Avenue Non-Pooled Component will be subordinated, to
the extent provided in the Pooling
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and Servicing Agreement, to the rights of the holder of the 11 Madison Avenue
Pooled Component, and therefore the holders of the Class A Certificates, Class X
Certificates and the Subordinate Certificates. The Class PP Certificates will
represent interests in, and will be payable only out of payment, advances and
other collections on, the Park Place Mall Subordinate Loan. The rights of the
holders of the Class PP Certificates to receive distributions of amounts
collected or advanced on the Park Place Mall Subordinate Loan will be
subordinated, to the extent provided in the Pooling and Servicing Agreement and
the Park Place Mall Intercreditor Agreement, to the rights of the holders of the
Class A Certificates, Class X Certificates and the Subordinate Certificates.
This subordination provided by the Subordinate Certificates and, to the extent
provided herein, the Class MAD and Class PP 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
and Class D 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 D
Certificates by means of the subordination of the Non-Offered Certificates
(other than the Class X Certificates), (b) to the holders of the Class C
Certificates by means of the subordination of the Class D and the Non-Offered
Certificates (other than the Class X Certificates), (c) to the holders of the
Class B Certificates by means of the subordination of the Class C, Class D and
the Non-Offered Certificates (other than the Class X Certificates) and (d) 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-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 and Class A-2
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 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 and Class A-2 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), 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 and Class A-2 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 and Class A-2 Certificates, the percentage interest in the Trust
Fund evidenced by such Class A-1 and Class A-2 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
and Class A-2 Certificates by the Subordinate Certificates.
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, and to the extent applicable,
the Class MAD and Class PP Certificates (in
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each case in reduction of their respective Certificate Balances) as follows, but
with respect to the Class of Sequential Pay Certificates in the aggregate only
to the extent 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 (excluding the 11 Madison Avenue Non-Pooled Component and the Park
Place Mall Subordinate Loan) 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 and
the Class A-2 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. Realized Losses and Additional
Trust Fund Expenses with respect to the Park Place Mall Whole Loan will first be
allocated to the Park Place Mall Subordinate Loan, and therefore the Class PP
Certificates, and then to the Park Place Mall Loan and therefore to the holders
of the Classes of Sequential Pay Certificates. See "DESCRIPTION OF THE MORTGAGE
POOL--Co-Lender Loans" in this prospectus supplement.
Any losses and expenses that are associated with each of the 11 Madison
Avenue Loan and the 11 Madison Avenue Companion Loans will be allocated in
accordance with the terms of the 11 Madison Avenue Intercreditor Agreement
first, to the most subordinate 11 Madison Avenue Subordinate Loan, second, to
the second most subordinate 11 Madison Avenue Subordinate Loan, third, to the
third most subordinate 11 Madison Avenue Subordinate Loan and fourth, pro rata,
between the 11 Madison Avenue Loan and the 11 Madison Avenue Pari Passu Loans.
After making the preceding allocations, such losses and expenses allocated to
the 11 Madison Avenue Loan will be allocated first, to the 11 Madison Avenue
Non-Pooled Component (and therefore, to the Class MAD Certificates) and second,
to the 11 Madison Avenue Pooled Component (and therefore, to the Classes of
Sequential Pay Certificates) in the manner described above.
Any losses and expenses that are associated with each of the Pointe West
Medical Office Building Loan and the Pointe West Medical Office Building
Subordinate Loan will be allocated in accordance with the terms of the
Intercreditor Agreement first, to the related Subordinate Companion Loan and
second, to the related Mortgage Loan. The portion of those losses and expenses
allocated to each of the related Mortgage Loans 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 (and with respect to the
Class PP Certificates, the Park Place Mall Subordinate 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
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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 (and with respect to the Class PP Certificates, the Park
Place Mall Subordinate 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 (and with respect to the Class PP
Certificates, the Park Place Mall Subordinate Loan) for which a Final Recovery
Determination has been made includes nonrecoverable Advances (in each case,
including interest thereon) to the extent amounts have been paid from the
applicable principal distribution amount (or the Class MAD Principal
Distribution Amount with respect to the Class MAD Certificates or the Class PP
Principal Distribution Amount with respect to the Class PP Certificates)
pursuant to the Pooling and Servicing Agreement.
"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, the Trustee and/or the Fiscal Agent 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
Trustee and/or the Fiscal Agent of the type described under "DESCRIPTION OF THE
POOLING AND SERVICING AGREEMENTS--Certain Matters Regarding the Trustee" in the
prospectus, 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 second succeeding
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) (including interest payments on the Park Place Mall
Subordinate Loan) and any Assumed Scheduled Payments, net of related Master
Servicing Fees, in respect of the Mortgage Loans (other than the 11 Madison
Avenue Loan, as provided below) and the Park Place Mall Subordinate Loan 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 (including on the Park Place Mall Subordinate
Loan), subject to the recoverability determination, will continue until
liquidation of such
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Mortgage Loan or disposition of any REO Property acquired in respect thereof.
However, if the Periodic Payment on any Mortgage Loan (or the Park Place Mall
Subordinate 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 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. Pursuant to the terms of the Pooling
and Servicing Agreement, if the Trustee fails to make a P&I Advance required to
be made, the Fiscal Agent shall then be required to make such P&I Advance,
subject to the recoverability standard described below. Neither the Master
Servicer, the Trustee nor the Fiscal Agent 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.
Neither the Master Servicer, the Trustee nor the Fiscal Agent will be
required to make any P&I Advances with respect to any Subordinate Companion Loan
(except for interest advances with respect to the Park Place Mall Subordinate
Loan) or any 11 Madison Avenue Companion Loan. In general, neither the Master
Servicer, the Trustee nor the Fiscal Agent will be required to make any P&I
Advances with respect to the 11 Madison Avenue Loan under the Pooling and
Servicing Agreement. Those advances will be made by the 2004-C10 Master Servicer
in accordance with the 2004-C10 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 11 Madison Avenue Loan may be reduced by an appraisal
reduction amount as calculated under the 2004-C10 Pooling and Servicing
Agreement, which amount will be calculated in a manner generally the same as an
Appraisal Reduction Amount. If the 2004-C10 Master Servicer and the 2004-C10
Trustee fails to make a required principal and interest advance on the 11
Madison Avenue Loan pursuant to the 2004-C10 Pooling and Servicing Agreement
(other than based on a determination that such advance will not be recoverable
out of collections on the 11 Madison Avenue Loan), the Master Servicer will be
required, subject to the nonrecoverability determination described in the next
paragraph, to make the P&I Advances (net of Master Servicing Fees and any master
servicing fee payable to the 2004-C10 Master Servicer) on the 11 Madison Avenue
Loan, 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. If the Trustee fails to make the required P&I Advance, the Fiscal
Agent 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. If any
principal and interest advances are made with respect to the 11 Madison Avenue
Loan under the 2004-C10 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 2004-C10 Pooling and
Servicing Agreement, or the Pooling and Servicing Agreement, as applicable,
including in the event that the 2004-C10 Master Servicer has made a principal
and interest advance or servicing advance on the 11 Madison Avenue Loan that it
or the Special Servicer subsequently determines is not recoverable from expected
collections on the 11 Madison Avenue Loan, from general collections on all
Mortgage Loans but not from collections on the Park Place Mall Subordinate Loan
in this trust. Notwithstanding anything to the contrary, amounts advanced in
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respect of the 11 Madison Avenue Non-Pooled Component will not be available for
distributions on the Certificates (except for the Class MAD Certificates).
The Master Servicer (or the Trustee or the Fiscal Agent) is entitled to
recover any P&I Advance made out of its own funds from any amounts collected in
respect of the Mortgage Loan (including, with respect to the 11 Madison Avenue
Loan, the 11 Madison Avenue Non-Pooled Component and also the Park Place Mall
Subordinate 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, the Trustee nor the Fiscal Agent is obligated to make any P&I Advance
that it or the Special Servicer determines, in accordance with the Servicing
Standard (in the case of the Master Servicer and Special Servicer) or its good
faith business judgment (in the case of the Trustee or the Fiscal Agent), would,
if made, not be recoverable from Related Proceeds (a "Nonrecoverable P&I
Advance"), and the Master Servicer (or the Trustee or the Fiscal Agent) is
entitled to recover, from general funds on deposit in the Certificate Account,
any P&I Advance made that it determines to be a Nonrecoverable P&I Advance plus
interest at the Reimbursement Rate. In addition, each of the Master Servicer,
the Trustee and the Fiscal Agent will be entitled to recover any Advance
(together with interest thereon) that is outstanding at the time that the
related Mortgage Loan and the Park Place Mall Subordinate Loan is modified in
connection with such Mortgage Loan and the Park Place Mall Subordinate Loan
becoming a Corrected Mortgage Loan and is not repaid in full in connection with
such modification but instead becomes an obligation of the borrower to pay such
amounts in the future (such Advance, a "Workout-Delayed Reimbursement Amount")
out of principal collections in the Certificate Account. Any amount that
constitutes all or a portion of any Workout-Delayed Reimbursement Amount may at
any time be determined to constitute a nonrecoverable Advance and thereafter
shall be recoverable as any other nonrecoverable Advance. A Workout-Delayed
Reimbursement Amount will constitute a nonrecoverable Advance when the person
making such determination, and taking into account factors such as all other
outstanding Advances, either (a) has determined in accordance with the Servicing
Standard (in the case of the Master Servicer or the Special Servicer) or its
good faith business judgment (in the case of the Trustee or the Fiscal Agent)
that such Workout-Delayed Reimbursement Amount would not ultimately be
recoverable from Related Proceeds, or (b) has determined in accordance with the
Servicing Standard (in the case of the Master Servicer or the Special Servicer)
or its good faith business judgment (in the case of the Trustee or the Fiscal
Agent) that such Workout-Delayed Reimbursement Amount, along with any other
Workout-Delayed Reimbursement Amounts and nonrecoverable Advances, would not
ultimately be recoverable out of principal collections in the Certificate
Account. In addition, any such person may update or change its recoverability
determinations (but not reverse any other person's determination that an Advance
is nonrecoverable) at any time and may obtain at the expense of the trust any
analysis, appraisals or market value estimates or other information for such
purposes. Absent bad faith, any such determination that an Advance is
nonrecoverable will be conclusive and binding on the Certificateholders, the
Master Servicer, the Trustee and the Fiscal Agent. Any requirement of the Master
Servicer, the Trustee or the Fiscal Agent to make an Advance in the Pooling and
Servicing Agreement is intended solely to provide liquidity for the benefit of
the Certificateholders and not as credit support or otherwise to impose on any
such person the risk of loss with respect to one or more Mortgage Loans. 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, the Trustee or the
Fiscal Agent of any P&I Advance made by it or the recovery by the Master
Servicer, the Trustee or the Fiscal Agent 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 expense, an "Advance"), the Master Servicer, the Trustee or the Fiscal Agent,
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
(including the Park Place Mall
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Subordinate Loan) in the Collection Period in which such reimbursement is made
and then from general collections on the Mortgage Loans (including the Park
Place Mall Subordinate Loan) 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 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, the Trustee or the Fiscal Agent, 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, the Trustee or the Fiscal
Agent, 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 or
contractual duty under the Pooling and Servicing Agreement and/or with respect
to the Trustee or the Fiscal Agent, constitute a violation of any fiduciary duty
to Certificateholders or contractual duty under the Pooling and Servicing
Agreement. In the event that the Master Servicer, the Trustee or the Fiscal
Agent, as applicable, elects not to recover such non-recoverable Advances over
time, the Master Servicer, the Trustee or the Fiscal Agent, as applicable, will
be required to give S&P and Moody's at least 15 days notice prior to any such
reimbursement, unless the Master Servicer, the Trustee or the Fiscal Agent, as
applicable, makes a determination not to give such notice in accordance with the
terms of the Pooling and Servicing Agreement.
If the Master Servicer, the Trustee, the Special Servicer or the Fiscal
Agent, as applicable, reimburses itself out of general collections on the
Mortgage Pool (including with respect to the 11 Madison Avenue Loan, the 11
Madison Avenue Pooled Component and with respect to the Park Place Mall Whole
Loan, the Park Place Mall Loan, if applicable, solely to the extent principal
and interest payments and collections on the 11 Madison Avenue Non-Pooled
Component with respect to the 11 Madison Avenue Loan and the Park Place Mall
Subordinate Loan with respect to the Park Place Mall Whole Loan, respectively,
are not sufficient) for any Advance that it has determined is not recoverable
out of collections on the related Mortgage Loan (including with respect to the
11 Madison Avenue Loan, the 11 Madison Avenue Non-Pooled Component, and with
respect to the Park Place Mall Loan, the Park Place Mall Subordinate Loan, if
applicable) or reimburses itself out of general collections, related to
principal only, on the Mortgage Pool (including with respect to the 11 Madison
Avenue Loan, the 11 Madison Avenue Pooled Component and with respect to the Park
Place Mall Whole Loan, the Park Place Mall Loan, if applicable, solely to the
extent principal payments and collections on the 11 Madison Avenue Non-Pooled
Component with respect to the 11 Madison Avenue Loan and the Park Place Mall
Subordinate Loan with respect to the Park Place Mall Whole Loan, respectively,
are not sufficient) for any Workout-Delayed Reimbursement Amount, then that
Advance or Workout-Delayed Reimbursement Amount (together, in each case, 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
applicable Certificates (prior to, in the case of non-recoverable Advances only,
being deemed reimbursed out of payments and other collections of interest on the
underlying Mortgage Loans otherwise distributable on the applicable
Certificates), thereby
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reducing the Principal Distribution Amount of such Certificates. To the extent
any Advance is determined to be nonrecoverable and to the extent of each
Workout-Delayed Reimbursement Amount, if the Advance or Workout-Delayed
Reimbursement Amount is reimbursed out of the Principal Distribution Amount as
described above and the item for which the Advance or Workout-Delayed
Reimbursement Amount 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.
Amounts in respect of the Park Place Mall Subordinate Loan are not available for
distribution on the Certificates (other than the Class PP Certificates), nor are
they available for the reimbursement of nonrecoverable Advances of principal and
interest on the Certificates (other than the Class PP Certificates) to the
extent unrelated to the Park Place Mall Whole Loan. If an Advance by the Master
Servicer (or the Trustee or the Fiscal Agent, if applicable) on the Park Place
Mall Subordinated Loan becomes a nonrecoverable Advance and such party is unable
to recover such amounts from amounts available for distribution on the Class PP
Certificates, the Master Servicer (or the Trustee or the Fiscal Agent, if
applicable) will be permitted to recover such nonrecoverable Advance (including
interest thereon) from the assets of the trust available for distribution on the
Certificates (other than the Class MAD Certificates). Amounts in respect of the
11 Madison Avenue Non-Pooled Component are not available for distributions on
the Certificates (other than the Class MAD Certificates), nor are they available
for the reimbursement of nonrecoverable Advances of principal and interest on
the Certificates (other than the Class MAD Certificates) to the extent unrelated
to the 11 Madison Avenue Loan. If an Advance by the 2004-C10 master servicer,
the 2004-C10 trustee, the Master Servicer, Trustee or the Fiscal Agent, if
applicable, on the 11 Madison Avenue Non-Pooled Component becomes a
nonrecoverable Advance and such party is unable to recover such amounts from
amounts available for distribution on the Class MAD Certificates, the 2004-C10
master servicer, the 2004-C10 trustee, the Master Servicer, Trustee or the
Fiscal Agent, if applicable, will be permitted to recover such nonrecoverable
Advance (including interest thereon) from the assets of the trust available for
distribution on the certificates (other than the Class PP Certificates). This
may result in shortfalls which will be allocated to the certificates.
APPRAISAL REDUCTIONS
Other than with respect to the 11 Madison Avenue Loan, upon the earliest of
the date (each such date, a "Required Appraisal Date") that (1) any Mortgage
Loan (including the Park Place Mall Whole 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 (including the Park Place Mall Whole
Loan), (3) any Mortgage Loan (including the Park Place Whole 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
(including the Park Place Mall Whole Loan), (5) a borrower with respect to any
Mortgage Loan (including the Park Place Mall Whole Loan) becomes subject to any
bankruptcy proceeding or (6) a Balloon Payment with respect to any Mortgage Loan
(including the Park Place Mall Whole 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 (including the Park Place Mall Whole
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 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
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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 (including, with respect to
the 11 Madison Avenue Loan, the 11 Madison Avenue Non-Pooled Component), (ii) to
the extent not previously advanced by or on behalf of the Master Servicer, the
Trustee or the Fiscal Agent, 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, the Trustee or the Fiscal Agent 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 (or in the case of 11 Madison Avenue Loan, such Mortgage
Loan's allocable portion of the appraised value 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 (including, with respect to
the 11 Madison Avenue Loan, the 11 Madison Avenue Non-Pooled Component), 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; provided that with respect to any
Appraisal Reduction Amount related to the 11 Madison Avenue Loan, such amounts
will be allocated first to the Class MAD Certificates prior to any application
of such amounts to the 11 Madison Avenue Pooled Component (and as a result to
the Offered Certificates). See "--P&I Advances" above. With respect to the 11
Madison Avenue Loan, the appraisal reduction amount will be calculated under the
2004-C 10 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 11 Madison Avenue 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. The Park Place Mall
Whole Loan will be treated as a single mortgage loan for purposes of calculating
an Appraisal Reduction Amount with respect to the mortgage loans that comprise
such whole loan. Any Appraisal Reduction calculated with respect to the Park
Place Mall Whole Loan will be applied first to the Park Place Mall Subordinate
Loan. Any Appraisal Reduction Amount in respect of the Park Place Mall Whole
Loan that exceeds the aggregate balance of the Park Place Mall Subordinate Loan
will be allocated to the Park Place Mall Loan.
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REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
Trustee 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 Trustee, the Trustee is
required to provide or make available either electronically (on the Trustee's
internet website initially located at "www.etrustee.net") or by first class mail
on each Distribution Date to each Certificateholder and the Park Place Mall
Representative:
(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, the Class MAD Available
Distribution Amount and the Class PP Available Distribution Amount for
such Distribution Date;
(vi)(a) the aggregate amount of P&I Advances (including any such
advances made on the 11 Madison Avenue Loan under the 2004-C10 Pooling
and Servicing Agreement 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
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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 (or the Class
PP Distributable Certificate Interest) in respect of each Class of
REMIC Regular Certificates and the Class PP Certificates after giving
effect to the distributions made on such Distribution Date;
(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 and the Class PP 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
(including any such advances made on the 11 Madison Avenue Loan under
the 2004-C10 Pooling and Servicing Agreement) paid to the Master
Servicer, the Trustee or the Fiscal Agent (or the 2004-C10 Master
Servicer or 2004-C10 Trustee, as applicable) during the related
Collection Period;
(xxiii) the aggregate amount of interest on servicing advances
paid to the Master Servicer, the Special Servicer, the Trustee and the
Fiscal Agent during the related 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 and the Class PP 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, Class PP
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.
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(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.
(d) A "CMSA Reconciliation of Funds Report" setting forth certain
information with respect to the Mortgage Loan and the Certificates.
The Master Servicer and/or the Special Servicer is required to deliver (in
electronic format acceptable to the Trustee and Master Servicer) to the Trustee
prior to each Distribution Date, and the Trustee is required to provide or make
available electronically or by first class mail to each Certificateholder, the
Depositor, the Underwriters and each Rating Agency on each Distribution Date,
the following reports:
(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) Monthly Additional Report on Recoveries and Reimbursements.
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 Trustee 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 Trustee prior to the related
Distribution Date. Absent manifest error, none of the Master Servicer, the
Special Servicer, the Trustee or the Fiscal 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 Trustee, 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
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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 Trustee reports be mailed directly to it by written request to
the Trustee (accompanied by evidence of such beneficial ownership) at the
Corporate Trust Office of the Trustee. 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 Fiscal 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 Trustee will make available to the general public via its internet
website initially located at "www.etrustee.net", (i) 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 the general public (and not in furtherance of
the distribution thereof under the securities laws), this prospectus supplement,
the accompanying 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 Trustee will make available via
its internet website, on a restricted basis, (i) the Restricted Servicer Reports
and (ii) the CMSA Property File. The Trustee shall provide access to such
restricted reports, upon receipt of a certification in the form attached to the
Pooling and Servicing Agreement, to any Privileged Person and to any other
person upon the direction of the Depositor.
The Trustee 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 Trustee and the Master Servicer may disclaim responsibility for
any information distributed by the Trustee 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 Trustee 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
Trustee 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
and the Park Place Mall Representative.
In connection with providing access to the Trustee's internet website or
the Master Servicer's internet website, the Trustee or the Master Servicer, as
applicable, may require registration and the acceptance of a disclaimer. Neither
the Trustee 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 Trustee 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
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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 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 ................................................. January 15, 2014
Class A-2 ................................................. August 15, 2014
Class B ................................................... August 15, 2014
Class C ................................................... August 15, 2014
Class D ................................................... August 15, 2014
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
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MATURITY CONSIDERATIONS" and "DESCRIPTION OF THE MORTGAGE POOL" in this
prospectus supplement and "YIELD CONSIDERATIONS" and "DESCRIPTION OF THE TRUST
FUNDS" in the accompanying prospectus.
The "Rated Final Distribution Date" with respect to each Class of Offered
Certificates is the Distribution Date in August 2041 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 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 , Class Z and Class MAD 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 and Class A-2 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
(including the Park Place Mall Subordinate Loan) subject thereto, and (ii) the
purchase of all of the Mortgage Loans (including the 11 Madison Avenue
Non-Pooled Component and the Park Place Mall Subordinate Loan) 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 Sequential Pay 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 Trustee 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
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(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 (including, the Park Place Mall Subordinate Loan
and with respect to the 11 Madison Avenue Loan, the 11 Madison Avenue Non-Pooled
Component) 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 Trustee 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.
An exchange by any Certificateholder of all of the then outstanding
Certificates (other than the Class MAD Certificates, the Class PP Certificates,
the Class Z Certificates and the REMIC Residual 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 (other than the Class MAD and the Class
PP Certificates) are held by a single Certificateholder, (ii) after the Class
A-1, Class A-2, Class B, Class C and Class D 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; provided, however, that with respect to the 11 Madison Avenue Loan,
contemporaneously with such exchange for the Mortgage Loans, the holder of the
Class MAD Certificates and such Certificateholder shall be required to enter
into a participation and servicing agreement that provides the holder of the
Class MAD Certificates substantially the same rights as provided to the 11
Madison Avenue Non-Pooled Component under the Pooling and Servicing Agreement in
consideration for the Class MAD Certificates; and provided, further, that with
respect to the Park Place Mall Whole Loan, contemporaneously with such exchange
for the Mortgage Loans, the holders of the Class PP Certificates shall receive
the note evidencing the Park Place Mall Subordinate Loan. 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 Certificate Registrar, the REMIC
Administrator and their respective agents under the Pooling and Servicing
Agreement.
For purposes of the foregoing provisions relating to termination of the
trust, with respect to the 11 Madison Avenue Loan, the term REO Property refers
to the trust's beneficial interest in the related REO Property under the
2004-C10 Pooling and Servicing Agreement.
THE TRUSTEE
LaSalle Bank National Association (the "Trustee") is acting as trustee
pursuant to the Pooling and Servicing Agreement. 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 accompanying prospectus. As compensation for its services, the Trustee will
be entitled to receive monthly, from general funds on deposit in the
Distribution 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
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Distribution Date (or, in the case of the initial Distribution Date, as of the
Closing Date). 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. The Trustee
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.
The Trustee 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 Trustee 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.
THE FISCAL AGENT
ABN AMRO Bank N.V. (the "Fiscal Agent"), a banking corporation organized
under the laws of The Netherlands, will act as Fiscal Agent pursuant to the
Pooling and Servicing Agreement. In the event that the Master Servicer and the
Trustee fail to make a required advance, the Fiscal Agent will be required to
make such advance; provided, that the Fiscal Agent will not be obligated to make
any advance that it determines to be nonrecoverable. The Fiscal Agent will be
entitled to rely conclusively on any determination by the Master Servicer or the
Trustee, as applicable, that an advance, if made, would be nonrecoverable. The
Fiscal Agent will be entitled to reimbursement for each advance made by it in
the same manner and to the same extent as, but prior to, the Trustee and the
Master Servicer. The Fiscal Agent will make no representation as to the validity
or sufficiency of the Pooling and Servicing Agreement, the Certificates, the
Mortgage Loans or related documents or the sufficiency of this prospectus
supplement. The duties and obligations of the Fiscal Agent will consist only of
making advances as described in "--P&I Advances" in this prospectus supplement.
The Fiscal Agent will not be liable except for the performance of such duties
and obligations.
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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 to the Class A-1 Certificates until the
Certificate Balance thereof is reduced to zero, then, to the Class A-2
Certificates until the Certificate Balance thereof is 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 and
then the Non-Offered Certificates (other than the Class X-C, Class X-P, Class
MAD and Class PP 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 or the Special Servicer 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, including the Park Place Mall Loan, 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 (or the Park Place Mall
Subordinate Loan with respect to the Class PP Certificates) 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 (or the Park Place Mall
Subordinate Loan with respect to the Class PP Certificates) 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 (or the Park Place Mall
Subordinate Loan with respect to the Class PP 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 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 11
Madison Avenue Non-Pooled Component, with respect to the 11 Madison Avenue Loan,
and with respect to all other Mortgage Loans and the 11 Madison Avenue Pooled
Component by 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 (and, with respect to the Park
Place Mall Whole Loan, first by the holders of the Class PP Certificates, and
then 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 11 Madison Avenue
Non-Pooled Component, with respect to the 11 Madison Avenue Loan, and with
respect to all other Mortgage Loans and the 11 Madison Avenue Pooled Component
by the respective Classes of Sequential Pay Certificates other than the Class
A-1 and Class A-2 Certificates (in reduction of the Certificate Balance of each
such Class), in reverse alphabetical order of their Class designations (and,
with respect to the Park Place Mall Loan, first by the holders of the Class PP
Certificates, and then by the holders of the respective Classes of Sequential
Pay Certificates, other than the Class A-1 and Class A-2 Certificates, to the
extent of amounts otherwise distributable in respect of such Certificates, 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 and Class A-2 Certificates Certificates (and the Class X
Certificates and with respect to
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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 and Class MAD Certificates) on a pro rata basis.
Pass-Through Rate. The yield on the Class A-2, Class B, Class C, Class D,
Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N,
Class O and Class P 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, based
upon, or equal to, 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 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.
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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 B, Class C and
Class D 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 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. 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 and the Class D 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 B, Class C and Class D 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
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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 and no party entitled thereto will exercise its
option to purchase any Mortgage Loan from the Trust Fund described in this
prospectus supplement, and the Park Place Mall Representative will not exercise
its option to purchase the Park Place Mall Loan, (xii) distributions on the
Certificates are made on the 15th day (each assumed to be a business day) of
each month, commencing in September 2004, and (xiii) the Closing Date for the
sale of the Offered Certificates is August 25, 2004.
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
15-Aug-05 ................................ 98 98 98 98 98
15-Aug-06 ................................ 96 96 96 96 96
15-Aug-07 ................................ 94 94 94 94 94
15-Aug-08 ................................ 92 92 92 92 92
15-Aug-09 ................................ 62 61 59 57 36
15-Aug-10 ................................ 34 34 34 34 34
15-Aug-11 ................................ 14 14 14 14 14
15-Aug-12 ................................ 12 12 12 12 12
15-Aug-13 ................................ 3 2 1 0 0
15-Aug-14 ................................ 0 0 0 0 0
Weighted average life (in years) ......... 5.70 5.68 5.66 5.63 5.45
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
15-Aug-05 ................................ 100 100 100 100 100
15-Aug-06 ................................ 100 100 100 100 100
15-Aug-07 ................................ 100 100 100 100 100
15-Aug-08 ................................ 100 100 100 100 100
15-Aug-09 ................................ 100 100 100 100 100
15-Aug-10 ................................ 100 100 100 100 100
15-Aug-11 ................................ 100 100 100 100 100
15-Aug-12 ................................ 100 100 100 100 100
15-Aug-13 ................................ 100 100 100 100 96
15-Aug-14 ................................ 0 0 0 0 0
Weighted average life (in years) ......... 9.81 9.78 9.75 9.71 9.53
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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
15-Aug-05 ................................ 100 100 100 100 100
15-Aug-06 ................................ 100 100 100 100 100
15-Aug-07 ................................ 100 100 100 100 100
15-Aug-08 ................................ 100 100 100 100 100
15-Aug-09 ................................ 100 100 100 100 100
15-Aug-10 ................................ 100 100 100 100 100
15-Aug-11 ................................ 100 100 100 100 100
15-Aug-12 ................................ 100 100 100 100 100
15-Aug-13 ................................ 100 100 100 100 100
15-Aug-14 ................................ 0 0 0 0 0
Weighted average life (in years) ......... 9.97 9.97 9.97 9.94 9.79
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
15-Aug-05 ................................ 100 100 100 100 100
15-Aug-06 ................................ 100 100 100 100 100
15-Aug-07 ................................ 100 100 100 100 100
15-Aug-08 ................................ 100 100 100 100 100
15-Aug-09 ................................ 100 100 100 100 100
15-Aug-10 ................................ 100 100 100 100 100
15-Aug-11 ................................ 100 100 100 100 100
15-Aug-12 ................................ 100 100 100 100 100
15-Aug-13 ................................ 100 100 100 100 100
15-Aug-14 ................................ 0 0 0 0 0
Weighted average life (in years) ......... 9.97 9.97 9.97 9.97 9.81
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
15-Aug-05 ................................ 100 100 100 100 100
15-Aug-06 ................................ 100 100 100 100 100
15-Aug-07 ................................ 100 100 100 100 100
15-Aug-08 ................................ 100 100 100 100 100
15-Aug-09 ................................ 100 100 100 100 100
15-Aug-10 ................................ 100 100 100 100 100
15-Aug-11 ................................ 100 100 100 100 100
15-Aug-12 ................................ 100 100 100 100 100
15-Aug-13 ................................ 100 100 100 100 100
15-Aug-14 ................................ 0 0 0 0 0
Weighted average life (in years) ......... 9.97 9.97 9.97 9.97 9.81
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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.
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 Dechert 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, two separate REMIC elections will be made
with respect to segregated asset pools that make up the trust, other than the 11
Madison Avenue Loan and any Additional Interest on the ARD Loans. In addition, a
separate REMIC election will be made with respect to the 11 Madison Avenue Loan
(other than any related Additional Interest). Upon the issuance of the Offered
Certificates, Dechert 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
2004-C10 Pooling and Servicing Agreement and 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 one of such REMICs and generally will be
treated as newly originated debt instruments of such REMIC. See "MATERIAL
FEDERAL INCOME TAX CONSEQUENCES--REMICs" in the accompanying 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 and Class MAD Certificates will represent undivided
beneficial interests in the related assets. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--REMICs" and "--Grantor Trust Funds" in the accompanying
prospectus.
TAXATION OF THE OFFERED CERTIFICATES
Based on expected issue prices, it is anticipated that the Class
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--REMICs" and "--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount" in the accompanying 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 permit the holder of a debt instrument to
recognize original issue discount under a method that differs
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from that used by the issuer. Accordingly, it is possible that the holder of an
Offered Certificate if such Offered Certificate were treated as issued with
original issue discount may be able to select a method for recognizing original
issue discount that differs from that used by the Trustee 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.
Whether any holder of a Class of Offered 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 29.6%
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 US 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 accompanying 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 to
ERISA or Section 4975 of the Code (a "Plan") should carefully review with its
legal advisors whether
S-251
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"), PTE 89-88
(October 17, 1989) to Goldman, Sachs & Co. ("Goldman, Sachs & Co.") and PTE
90-59 (September 6, 1990) to Greenwich Capital Markets, Inc. ("Greenwich
Capital") (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) Greenwich Capital, (c)
Goldman, Sachs & Co., (d) any person directly or indirectly, through one or
more intermediaries, controlling, controlled by or under common control with
Wachovia Securities, Goldman, Sachs & Co. or Greenwich Capital and (e) any
member of the underwriting syndicate or selling group of which Wachovia
Securities, Goldman, Sachs & Co., Greenwich Capital 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, 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 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.
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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
accompanying 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.
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
S-253
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 or the Teachers' Retirement System of the State of Illinois,
each of 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
accompanying prospectus.
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METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement") among the Depositor and Wachovia Securities,
Goldman, Sachs & Co. and Greenwich Capital (collectively, the "Underwriters"),
the Depositor has agreed to sell to each of Wachovia Securities, Goldman, Sachs
& Co. and Greenwich Capital, and each of Wachovia Securities, Goldman, Sachs &
Co. and Greenwich Capital 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%:
CLASS WACHOVIA SECURITIES GOLDMAN, SACHS & CO. GREENWICH CAPITAL
- -------------------- --------------------- ---------------------- ------------------
Class A-1 ..........
Class A-2 ..........
Class B ............
Class C ............
Class D ............
Wachovia Securities is acting as lead manager for this offering and
Goldman, Sachs & Co. and Greenwich Capital are acting as co-managers for this
offering. Wachovia Securities is acting as sole bookrunner with respect to all
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
$ 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 Securities 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, Goldman,
Sachs & Co. and Greenwich Capital 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 accompanying 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.
S-255
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.
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. In addition, it is expected that Wachovia
Securities or one of its affiliates will be the initial holder of the Class PP
Certificates and the Class MAD Certificates.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Dechert LLP,
Charlotte, North Carolina. Certain legal matters will be passed upon for the
Underwriters by Cadwalader, Wickersham & Taft LLP, Charlotte, North Carolina.
RATINGS
The Offered Certificates are required as a condition of their issuance to
have received the following ratings from Moody's and S&P (the "Rating
Agencies"):
EXPECTED
RATINGS FROM
CLASS S&P/MOODY'S
- --------------------------------------------------------------- -------------
Class A-1 ..................................................... AAA/Aaa
Class A-2 ..................................................... AAA/Aaa
Class B ....................................................... AA/Aa2
Class C ....................................................... AA-/Aa3
Class D ....................................................... A/A2
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 or the Fiscal Agent as back-up
liquidity providers. 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-256
INDEX OF DEFINED TERMS
PAGE
11 Madison Avenue Loan REMIC ...............................................S-27
11 Madison Avenue Loan ..............................................S-96, S-135
11 Madison Avenue Pari Passu I Loan .......................................S-135
11 Madison Avenue Pari Passu II Loan ......................................S-135
11 Madison Avenue Pari Passu III Loan .....................................S-135
11 Madison Avenue Subordinate Loans .......................................S-135
11 Madison Avenue Companion Loans ..........................................S-97
11 Madison Avenue Control Appraisal Period ................................S-198
11 Madison Avenue Intercreditor Agreement ..................................S-97
11 Madison Avenue Non-Pooled Component ..................S-90, S-96, S-98, S-135
11 Madison Avenue Pari Passu Loans .........................................S-96
11 Madison Avenue Pooled Component ......................S-90, S-96, S-98, S-135
11 Madison Avenue Senior Loans .............................................S-97
11 Madison Avenue Subordinate Loans ........................................S-96
11 Madison Avenue Whole Loan ...............................................S-97
1750 H Street Loan ........................................................S-151
1% ( ) ....................................................................S-108
2004-C10 Controlling Class Representative ..................................S-98
2004-C10 Master Servicer ...................................................S-98
2004-C10 Pooling and Servicing Agreement ...................................S-98
2004-C10 Special Servicer ..................................................S-98
2004-C10 Trustee ...........................................................S-98
2004-C11 Controlling Class Representative ..................................S-98
2004-C11 Pooling and Servicing Agreement ...................................S-98
2004-C12 Controlling Class Representative ..................................S-98
2004-C12 Pooling and Servicing Agreement ...................................S-98
2% ( ) ....................................................................S-108
30/360 basis .........................................................S-37, S-92
3%( ) .....................................................................S-108
444 North Michigan Avenue Loan ............................................S-139
Accrued Certificate Interest ..............................................S-222
actual/ 360 basis ..........................................................S-37
Actual/360 basis ...........................................................S-92
Additional Interest Account ...............................................S-214
Additional Interest ........................................................S-92
Additional Trust Fund Expenses ............................................S-230
Administrative Cost Rate ..................................................S-107
Advance ...................................................................S-232
Allied Capital ............................................................S-188
Anticipated Repayment Date .................................................S-92
Aon .......................................................................S-135
Appraisal Reduction Amount ................................................S-235
ARD Loans ..................................................................S-92
Artesia Mortgage Loans ....................................................S-178
Artesia .............................................................S-91, S-178
Assumed Final Distribution Date ...........................................S-240
Assumed Scheduled Payment .................................................S-225
Available Distribution Amount .............................................S-212
PAGE
Aylesbury Farms Apartment Homes Loan ......................................S-154
Balloon Loans ..............................................................S-92
Balloon Payment ............................................................S-92
Bank-Fund Staff FCU .......................................................S-151
Barneys New York -- Beverly Hills, CA Loan ................................S-148
Barneys New York ..........................................................S-148
BJB Portfolio Loan ........................................................S-131
BJB Portfolio Restoration .................................................S-131
Borders ...................................................................S-123
Breach ....................................................................S-185
Capital Imp. Reserve ......................................................S-108
Century ...................................................................S-123
Certificate Balance .......................................................S-206
Certificate Deferred Interest .............................................S-208
Certificateholders ........................................................S-211
Certificates ..............................................................S-203
Class .....................................................................S-203
Class A Certificates ......................................................S-203
Class MAD Available Distribution Amount ...................................S-213
Class MAD Certificates ....................................................S-203
Class MAD Principal Distribution Amount ...................................S-224
Class PP Available Distribution Amount ....................................S-213
Class PP Certificates .....................................................S-203
Class PP Distributable Certificate Interest ...............................S-221
Class PP Principal Distribution Amount ....................................S-225
Class X Certificates ......................................................S-203
Class X-C Components ......................................................S-209
Class X-C Strip Rate ......................................................S-209
Class X-P Components ......................................................S-210
Class X-P Strip Rate ......................................................S-210
Clearstream Participants ..................................................S-205
Clearstream ...............................................................S-203
CMSA Bond File ............................................................S-238
CMSA Collateral Summary File ..............................................S-238
CMSA Loan Periodic Update File ............................................S-238
CMSA Property File ........................................................S-238
CMSA Reconciliation of Funds Report .......................................S-238
CMSA ......................................................................S-238
Collection Period .........................................................S-211
Companion Loans ............................................................S-97
Compensating Interest Payment .............................................S-193
Component Principal Balance ...............................................S-208
Constant Prepayment Rate ..................................................S-247
Controlling Class Representative ..........................................S-189
Controlling Class .........................................................S-189
Core Material Documents ...................................................S-181
Corrected Mortgage Loan ...................................................S-191
CPR .......................................................................S-247
Crossed Group .............................................................S-185
S-257
PAGE
Crossed Loan ..............................................................S-185
CSFB ......................................................................S-135
Custodian .................................................................S-179
Cut-Off Date Balance .......................................................S-90
Cut-Off Date LTV Ratio ....................................................S-107
Cut-Off Date LTV ..........................................................S-107
Cut-Off Date Pool Balance ..................................................S-90
Cut-Off Date ...............................................................S-90
D ( ) .....................................................................S-108
Defaulted Mortgage Loan ...................................................S-200
Defeasance Collateral ......................................................S-93
Defeasance ................................................................S-108
Defect ....................................................................S-185
Depositaries ..............................................................S-204
Determination Date ........................................................S-211
Determination Party .......................................................S-185
Discount Rate .............................................................S-227
Distributable Certificate Interest ........................................S-221
Distribution Account ......................................................S-214
Distribution Date Statement ...............................................S-236
Distribution Date .........................................................S-211
DSC Ratio .................................................................S-105
DSCR ......................................................................S-105
DTC .......................................................................S-203
Due Date ...................................................................S-92
ERISA .....................................................................S-251
Euroclear Operator ........................................................S-203
Euroclear Participants ....................................................S-205
Euroclear System ..........................................................S-203
Excess Cash Flow ...........................................................S-92
Excluded Plan .............................................................S-253
Exemption .................................................................S-252
Exemptions ................................................................S-252
expense ...................................................................S-106
FBI Field Office -- Baltimore, MD Loan ....................................S-145
Final Recovery Determination ..............................................S-236
Fiscal Agent ..............................................................S-243
Fitch .....................................................................S-252
Form 8-K ..................................................................S-186
Fully Amortizing Loans .....................................................S-92
Gain on Sale Reserve Account ..............................................S-214
GGP .......................................................................S-123
GGPLP .....................................................................S-125
Goldman, Sachs & Co. ......................................................S-252
Gordon & Glickson .........................................................S-139
Greenwich Capital .........................................................S-252
IBM .......................................................................S-135
IDA Premises ...............................................................S-90
IDA ........................................................................S-90
Independence Plaza Loan ...................................................S-142
PAGE
Indirect Participants .....................................................S-204
Intercreditor Agreements ...................................................S-97
Interest Accrual Period ...................................................S-210
Interest Reserve Account ..................................................S-214
Interest Reserve Amount ...................................................S-214
Interest Reserve Loans ....................................................S-214
IRS .......................................................................S-250
KCCF ......................................................................S-142
Kennedy Ridge Apartments Loan .............................................S-157
L ( ) .....................................................................S-107
Liquidation Fee ...........................................................S-194
Loan Pair .................................................................S-187
Loan per Sq. Ft., Unit, Pad or Room .......................................S-107
Lockout Period ............................................................S-107
Lockout ...................................................................S-107
LTV at ARD or Maturity ....................................................S-107
Majority Subordinate Certificateholder ....................................S-241
Master Servicer ...........................................................S-188
Master Servicing Fee Rate .................................................S-193
Master Servicing Fee ......................................................S-192
Maturity Date LTV Ratio ...................................................S-107
Money Rates ...............................................................S-233
Monster Worldwide .........................................................S-139
Moody's ...................................................................S-252
Mortgage Deferred Interest ................................................S-207
Mortgage File .............................................................S-180
Mortgage Loan Purchase Agreement ..........................................S-178
Mortgage Loan Purchase Agreements .........................................S-178
Mortgage Loan ..............................................................S-90
Mortgage Loans ......................................................S-90, S-193
Mortgage Note ..............................................................S-90
Mortgage Pool ..............................................................S-90
Mortgage Rate ..............................................................S-91
Mortgage ...................................................................S-90
Mortgaged Property .........................................................S-90
NA ........................................................................S-108
NAV .......................................................................S-108
Net Aggregate Prepayment Interest Shortfall ...............................S-221
Net Cash Flow .............................................................S-105
net cash flow .............................................................S-106
Net Mortgage Rate .........................................................S-210
Non-Offered Certificates ..................................................S-203
Nonrecoverable P&I Advance ................................................S-232
Notional Amount ...........................................................S-206
NRSRO .....................................................................S-252
NTEU ......................................................................S-151
NYSCRF ....................................................................S-125
O ( ) .....................................................................S-108
Occupancy Percentage ......................................................S-108
Offered Certificates ......................................................S-203
S-258
PAGE
OID Regulations ...........................................................S-250
Old Navy ..................................................................S-123
Omnicom ...................................................................S-135
Open Period ...............................................................S-108
Option Price ..............................................................S-200
Original Term to Maturity .................................................S-108
P&I Advance ...............................................................S-230
Park Place Mall Cash Collateral Account ...................................S-126
Park Place Mall Control Appraisal Period ..................................S-102
Park Place Mall Intercreditor Agreement ....................................S-97
Park Place Mall Loan Option Price .........................................S-102
Park Place Mall Loan ................................................S-96, S-123
Park Place Mall Lockbox Bank ..............................................S-126
Park Place Mall Lockbox Period ............................................S-126
Park Place Mall Lockbox ...................................................S-126
Park Place Mall Mortgage ..................................................S-123
Park Place Mall Note ......................................................S-123
Park Place Mall Permitted Owner ...........................................S-124
Park Place Mall Purchase Option ...........................................S-102
Park Place Mall Qualified Pledgee .........................................S-125
Park Place Mall Qualified Transferee ......................................S-124
Park Place Mall Representative ............................................S-190
Park Place Mall Restoration ...............................................S-124
Park Place Mall Sponsors ..................................................S-125
Park Place Mall Subordinate Loan ....................................S-97, S-123
Park Place Mall Subordinate Note ..........................................S-123
Park Place Mall Whole Loan ..........................................S-97, S-123
Participants ..............................................................S-203
Party in Interest .........................................................S-253
Periodic Payments ..........................................................S-92
Plan ......................................................................S-251
Pointe West Intercreditor Agreement ........................................S-97
Pointe West Medical Office Building Loan ...................................S-96
Pointe West Medical Office Building Subordinate Loan .......................S-97
Pointe West Medical Office Building Whole Loan .............................S-97
Pooling and Servicing Agreement ...........................................S-203
Prepayment Interest Excess ................................................S-193
Prepayment Interest Shortfall .............................................S-193
Prepayment Premiums .......................................................S-226
Price .....................................................................S-125
Primary Collateral ........................................................S-186
Principal Distribution Amount .............................................S-223
Privileged Person .........................................................S-239
PTE .......................................................................S-252
Purchase Option ...........................................................S-200
Purchase Price ............................................................S-181
Qualified Appraiser .......................................................S-234
Qualified Substitute Mortgage Loan ........................................S-181
Rated Final Distribution Date .............................................S-241
PAGE
Rating Agencies ...........................................................S-256
Realized Losses ...........................................................S-229
Reimbursement Rate ........................................................S-233
REIT ......................................................................S-251
Related Proceeds ..........................................................S-232
Remaining Amortization Term ...............................................S-107
Remaining Term to Maturity ................................................S-107
remaining term .............................................................S-38
REMIC Administrator .......................................................S-243
REMIC I ....................................................................S-27
REMIC II ...................................................................S-27
REMIC Regular Certificates ................................................S-203
REMIC Regulations .........................................................S-250
REMIC Residual Certificates ...............................................S-203
REMIC ......................................................................S-27
Rental Property ...........................................................S-105
REO Extension .............................................................S-201
REO Mortgage Loan .........................................................S-226
REO Property ..............................................................S-191
Replacement Reserve .......................................................S-108
Required Appraisal Date ...................................................S-234
Required Appraisal Loan ...................................................S-234
Restricted Group ..........................................................S-252
Restricted Servicer Reports ...............................................S-238
revenue ...................................................................S-106
Rules .....................................................................S-204
S&P .......................................................................S-252
Scenario ..................................................................S-247
Scheduled Payment .........................................................S-225
Sequential Pay Certificates ...............................................S-203
Servicing Fees ............................................................S-193
Servicing Standard ........................................................S-187
Servicing Transfer Event ..................................................S-190
Shefsky ...................................................................S-139
Similar Law ...............................................................S-252
Special Servicer ..........................................................S-188
Special Servicing Fee Rate ................................................S-193
Special Servicing Fee .....................................................S-193
Specially Serviced Mortgage Loans .........................................S-191
Specially Serviced Trust Fund Assets ......................................S-191
Stated Principal Balance ..................................................S-211
Subordinate Certificates ..................................................S-203
Subordinate Companion Loans ................................................S-97
Substitution Shortfall Amount .............................................S-181
Table Assumptions .........................................................S-247
Terms and Conditions ......................................................S-205
The Kan Am Group ..........................................................S-139
TI/LC Reserve .............................................................S-108
TMA .......................................................................S-157
Transwestern ..............................................................S-142
S-259
PAGE
TRS .......................................................................S-125
Trust Fund ................................................................S-203
Trustee Fee ...............................................................S-242
Trustee ...................................................................S-242
Underwriter ...............................................................S-252
Underwriters ..............................................................S-255
Underwriting Agreement ....................................................S-255
Underwritten Replacement Reserves .........................................S-107
Unrestricted Servicer Reports .............................................S-238
Voting Rights .............................................................S-241
Wachovia Mortgage Loans ...................................................S-178
PAGE
Wachovia Securities .......................................................S-252
Wachovia ............................................................S-91, S-178
Weighted Average Net Mortgage Rate ........................................S-210
weighted averages .........................................................S-107
Wells Fargo ...............................................................S-151
Workout Fee ...............................................................S-194
Workout-Delayed Reimbursement Amount ......................................S-232
Year Built ................................................................S-107
Yield Maintenance Charges .................................................S-226
YM ( ) ....................................................................S-108
S-260
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST SERIES 2004-C14
ANNEX A-1
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
MORTGAGE
LOAN
NUMBER PROPERTY NAME ADDRESS
- ------------------------------------------------------------------------------------------------------------------------------------
1 Park Place Mall(1) 5870 East Broadway Boulevard
2 11 Madison Avenue(2) 11 Madison Avenue
3 444 North Michigan Avenue 444 North Michigan Avenue
4 Independence Plaza 1050 17th Street
5 FBI Field Office - Baltimore, MD 2600 Lord Baltimore Drive
6 Barneys New York - Beverly Hills, CA 9570-9584 Wilshire Boulevard
7 1750 H Street 1750 H Street, N.W.
8 Aylesbury Farms Apartment Homes 6115 Abbotts Bridge Road
9 Kennedy Ridge Apartments 10700 East Dartmouth Avenue
10 4100 North Marine Drive 4100 North Marine Drive
11 21-27 East Delaware Place 21-27 East Delaware Place
12 Bel Villaggio, Phases I & II 41233 - 42301 Margarita Road
13 Cranbrook at Biltmore Park 300 Cranbrook Drive
14 451 West Wrightwood Avenue 451 West Wrightwood Avenue
15 Summer View at Sherman Oaks Apartments 15353 Weddington Street
16 Valley Center Towers - Phase I 5373 South Green Street
17 The Harrington Apartments 2305 New England Street
18 Hot Springs Mall 4501 Central Avenue
19 Carriage Club Apartments 175 Carriage Club Drive
20 Glasshouse Square Shopping Center 3102-3146 Sports Arena Boulevard
21 18 East Elm Street 18 East Elm Street
22 443 West Wrightwood Avenue 443 West Wrightwood Avenue
23 Weston Commercial Center 2600-2900 Glades Circle
24 Elmbrook Plaza Shopping Center 2315 North 124th Street
25 Rocky Point Plaza Route 25A & Fairway Drive
26 Rockdale Square Shopping Center 1910 Highway 20 Southeast
27 Mini U Storage I - Newport Beach, CA 1177 Camelback Street
28 Donner Springs Mobile Home Park 4465 Boca Way
29 The Vineyards Shopping Center 2095 Highway 211
30 Shadelands Self Storage 1925 Oak Grove Road
31 East Jefferson Medical Office Building 4224 Houma Boulevard
32 Kingwood Shopping Center 1153-1387 Kingwood Drive
33 Mini U Storage II - Newport Beach, CA 1111 Camelback Street
34 Oakview Apartments 3135 Campus Drive
35 Villa del Sur Apartments 2701 West McFadden Avenue
36 Vallejo Mobile Estates 285 West Lincoln Road
37 Malibu Apartments 8600 North Lamar
38 Telegraph Marketplace Shopping Center 740 & 844 West Telegraph Street
39 Summit Gardens Apartments 30 Arcadia Road
40 FDA - Lenexa, KS 11510 & 11630 West 80th Street
41 Twin Oaks Business & Technology Center 1800-1815 Northwest 169th Place
42 Pointe West Medical Office Building(1) 6015 Pointe West Boulevard
43 Park 80 East 160 Pehle Avenue
44 The Sevilla 2801 John F. Kennedy Boulevard
45 Kroger Shops & 7339 Forest Hill Avenue Various
45.1 Kroger Shops 1500 West Broad Street; 618-800 Bowe Street
45.2 7339 Forest Hill Avenue 7339 Forest Hill Avenue
46 Sierra Royal Mobile Home Park 675 Parlanti Lane
47 587 Fifth Avenue 587 5th Avenue
48 Park Knoll Apartments 10680 Coloma Road
49 Hampton Inn & Suites - St. Petersburg, FL 80 Beach Drive Northeast
50 Three South Executive Park 6115 Park South Road
51 1213-1229 West Diversey Parkway & 1213-1229 West Diversey Parkway &
2751-2753 North Magnolia Street 2751-2753 North Magnolia Street
52 Martinazzi Square Retail Center 19221-19449 Southwest Martinazzi Avenue
53 The Crystal Village Apartments 2610-A Camellia Drive
54 WCI Prudential Building 8751 West Broward Boulevard
55 Eckerd - Fairfax, VA 8416 Lee Highway
56 Alamance Crossing 1040 Alamance Church Road
57 1939 North Lincoln Avenue 1939 North Lincoln Avenue
58 Great American Plaza Building A-1 8360 West Sahara Boulevard
59 Perry Hill Estates and Ridgeview Heights Portfolio Various
59.1 Perry Hill Estates 52 Perry Hill Road
59.2 Ridgeview Heights Apartments 456 Tolland Turnpike
60 Piggly Wiggly - Menasha, WI 1151 Midway Road
61 Walgreens - Cypress, TX 11803 Barker-Cypress Road
62 Suburban Lodge - Stuart, FL 1900 South Federal Highway
63 Stoughton Plaza Shopping Center 1750-1800 West Main Street
64 Manakin Trade Center 12820 West Creek Parkway
65 Eckerd - Jupiter, FL 4100 Military Trail
66 CVS - Columbus, OH 2100 East Dublin-Granville Road
67 1230 & 1246 Taylor Street 1230 & 1246 Taylor Street, N.W.
68 Good Guys - Stevenson Ranch, CA 24840 Pico Canyon Road
69 Renaissance Center 8283-8393 South Memorial Drive
70 Alban Retail Center 8081 & 8091 Alban Road
71 Walgreens - Oakland Park, FL 2104 West Oakland Park Boulevard
72 Mission Viejo Retail Building 25410 Marguerite Parkway
73 Broad Trace Apartments 1210, 1215, 1225 & 1235 Tryon Street
74 Walgreens - Beaumont, TX 3990 East Lucas Drive
75 482-484 West Deming Place 482-484 West Deming Place
76 Cape Coral Mini-Storage 8330 Littleton Road
77 Sears Hardware - Portage, IN 6169 US Highway 6
78 Embassy House Apartments 415 North Gadsden Street
79 507-509 West Wrightwood Avenue 507-509 West Wrightwood Avenue
80 734-742 West Oakdale Avenue 734-742 West Oakdale Avenue
81 Kinko's - Albuquerque, NM 10032 Coors Boulevard Northwest
MORTGAGE
LOAN CROSS COLLATERALIZED AND CROSS GENERAL PROPERTY
NUMBER CITY STATE ZIP CODE DEFAULTED LOAN FLAG LOAN ORIGINATOR TYPE
- ------------------------------------------------------------------------------------------------------------------------------------
1 Tucson AZ 85711 Wachovia Retail
2 New York NY 10010 Wachovia Office
3 Chicago IL 60611 Wachovia Office
4 Denver CO 80265 Wachovia Office
5 Baltimore MD 21244 Artesia Office
6 Beverly Hills CA 90212 Wachovia Retail
7 Washington DC 20006 Wachovia Office
8 Duluth GA 30097 Wachovia Multifamily
9 Denver CO 80014 Wachovia Multifamily
10 Chicago IL 60613 BJB Portfolio Wachovia Multifamily
11 Chicago IL 60611 BJB Portfolio Wachovia Multifamily
12 Temecula CA 92591 Wachovia Retail
13 Arden NC 28704 Wachovia Multifamily
14 Chicago IL 60614 BJB Portfolio Wachovia Multifamily
15 Sherman Oaks CA 91411 Wachovia Multifamily
16 Murray UT 84123 Wachovia Office
17 Charlotte NC 28269 Wachovia Multifamily
18 Hot Springs AR 71913 Wachovia Retail
19 Mooresville NC 28117 Wachovia Multifamily
20 San Diego CA 92110 Wachovia Retail
21 Chicago IL 60611 BJB Portfolio Wachovia Multifamily
22 Chicago IL 60614 BJB Portfolio Wachovia Multifamily
23 Weston FL 33327 Wachovia Mixed Use
24 Brookfield WI 53005 Wachovia Retail
25 Rocky Point NY 11778 Wachovia Retail
26 Conyers GA 30013 Wachovia Retail
27 Newport Beach CA 92660 Wachovia Self Storage
28 Reno NV 89502 Wachovia Mobile Home Park
29 Braselton GA 30517 Wachovia Retail
30 Walnut Creek CA 94598 Artesia Self Storage
31 Metairie LA 70006 Wachovia Office
32 Kingwood TX 77339 Wachovia Retail
33 Newport Beach CA 92660 Wachovia Self Storage
34 San Mateo CA 94403 Wachovia Multifamily
35 Santa Ana CA 92704 Wachovia Multifamily
36 Vallejo CA 94590 Wachovia Mobile Home Park
37 Austin TX 78753 Wachovia Multifamily
38 Washington UT 84780 Wachovia Retail
39 Hackensack NJ 07601 Wachovia Multifamily
40 Lenexa KS 66214 Artesia Office
41 Beaverton OR 97006 Wachovia Office
42 Bradenton FL 34209 Wachovia Office
43 Saddle Brook NJ 07663 Artesia Office
44 Jersey City NJ 07306 Wachovia Multifamily
45 Richmond VA Various Wachovia Retail
45.1 Richmond VA 23220 Retail
45.2 Richmond VA 23225 Retail
46 Sparks NV 89434 Wachovia Mobile Home Park
47 New York NY 10017 Wachovia Office
48 Rancho Cordova CA 95670 Artesia Multifamily
49 St. Petersburg FL 33701 Wachovia Hospitality
50 Charlotte NC 28210 Wachovia Office
51 Chicago IL 60614 BJB Portfolio Wachovia Multifamily
52 Tualatin OR 97062 Wachovia Retail
53 Durham NC 27705 Wachovia Multifamily
54 Plantation FL 33324 Wachovia Office
55 Fairfax VA 22031 Wachovia Retail
56 Greensboro NC 27406 Wachovia Retail
57 Chicago IL 60614 BJB Portfolio Wachovia Multifamily
58 Las Vegas NV 89117 Wachovia Office
59 Various CT Various Wachovia Multifamily
59.1 Ashford CT 06278 Multifamily
59.2 Willington CT 06279 Multifamily
60 Menasha WI 54952 Stoughton / Piggly Wiggly Wachovia Retail
61 Cypress TX 77433 Artesia Retail
62 Stuart FL 34994 Artesia Hospitality
63 Stoughton WI 53589 Stoughton / Piggly Wiggly Wachovia Retail
64 Richmond VA 23238 Wachovia Office
65 Jupiter FL 33458 Artesia Retail
66 Columbus OH 46229 Wachovia Retail
67 Washington DC 20011 Wachovia Office
68 Stevenson Ranch CA 91381 Artesia Retail
69 Tulsa OK 74133 Artesia Retail
70 Springfield VA 22150 Wachovia Retail
71 Oakland Park FL 33311 Artesia Retail
72 Mission Viejo CA 92692 Artesia Retail
73 Sumter SC 29150 Artesia Multifamily
74 Beaumont TX 77708 Artesia Retail
75 Chicago IL 60614 BJB Portfolio Wachovia Multifamily
76 Fort Myers FL 33903 Artesia Self Storage
77 Portage IN 46368 Wachovia Land
78 Tallahassee FL 32301 Artesia Multifamily
79 Chicago IL 60614 BJB Portfolio Wachovia Multifamily
80 Chicago IL 60657 BJB Portfolio Wachovia Multifamily
81 Albuquerque NM 87114 Artesia Retail
MORTGAGE CUT-OFF DATE % OF AGGREGATE
LOAN ORIGINAL LOAN LOAN BALANCE CUT-OFF DATE ORIGINATION FIRST PAY
NUMBER SPECIFIC PROPERTY TYPE BALANCE ($) ($) BALANCE DATE DATE
- ------------------------------------------------------------------------------------------------------------------------------------
1 Anchored 150,000,000.00 149,846,168.99 13.66% 06/14/04 08/11/04
2 CBD 82,000,000.00 82,000,000.00 7.47% 12/23/03 02/11/04
3 CBD 71,500,000.00 71,500,000.00 6.52% 07/27/04 08/11/04
4 CBD 44,000,000.00 44,000,000.00 4.01% 07/14/04 09/11/04
5 Suburban 41,900,000.00 41,900,000.00 3.82% 06/24/04 09/11/04
6 Shadow Anchored 37,000,000.00 37,000,000.00 3.37% 07/12/04 09/11/04
7 CBD 35,400,000.00 35,400,000.00 3.23% 06/18/04 08/11/04
8 Conventional 33,000,000.00 33,000,000.00 3.01% 07/30/04 09/11/04
9 Conventional 30,000,000.00 29,973,129.87 2.73% 06/30/04 08/11/04
10 Conventional 30,051,000.00 29,958,221.25 2.73% 05/07/04 06/11/04
11 Conventional 20,207,000.00 20,143,496.19 1.84% 05/07/04 06/11/04
12 Shadow Anchored 18,000,000.00 17,985,041.60 1.64% 07/08/04 08/11/04
13 Conventional 17,800,000.00 17,800,000.00 1.62% 06/30/04 08/11/04
14 Conventional 17,520,000.00 17,464,940.52 1.59% 05/07/04 06/11/04
15 Conventional 16,000,000.00 16,000,000.00 1.46% 06/24/04 08/11/04
16 Suburban 16,000,000.00 16,000,000.00 1.46% 07/02/04 08/11/04
17 Conventional 15,000,000.00 15,000,000.00 1.37% 07/13/04 09/11/04
18 Anchored 15,000,000.00 15,000,000.00 1.37% 07/26/04 09/11/04
19 Conventional 14,900,000.00 14,900,000.00 1.36% 06/29/04 08/11/04
20 Anchored 14,500,000.00 14,487,258.80 1.32% 06/17/04 08/11/04
21 Conventional 14,240,000.00 14,195,248.47 1.29% 05/07/04 06/11/04
22 Conventional 14,198,000.00 14,153,380.44 1.29% 05/07/04 06/11/04
23 Office/Flex 13,000,000.00 12,989,839.68 1.18% 06/23/04 08/11/04
24 Anchored 12,850,000.00 12,850,000.00 1.17% 05/21/04 07/11/04
25 Anchored 11,840,000.00 11,840,000.00 1.08% 07/26/04 09/11/04
26 Anchored 11,500,000.00 11,500,000.00 1.05% 07/14/04 09/11/04
27 Self Storage 11,200,000.00 11,168,981.59 1.02% 06/01/04 07/11/04
28 Mobile Home Park 10,650,000.00 10,650,000.00 0.97% 07/19/04 09/11/04
29 Anchored 10,600,000.00 10,590,934.45 0.97% 06/29/04 08/11/04
30 Self Storage 10,300,000.00 10,300,000.00 0.94% 07/28/04 09/11/04
31 Medical 10,000,000.00 10,000,000.00 0.91% 07/14/04 09/10/04
32 Anchored 9,850,000.00 9,850,000.00 0.90% 06/25/04 08/01/04
33 Self Storage 8,800,000.00 8,775,628.38 0.80% 06/01/04 07/11/04
34 Conventional 8,700,000.00 8,692,286.59 0.79% 06/15/04 08/11/04
35 Conventional 8,600,000.00 8,600,000.00 0.78% 08/05/04 09/11/04
36 Mobile Home Park 8,570,000.00 8,570,000.00 0.78% 08/04/04 09/11/04
37 Conventional 8,500,000.00 8,500,000.00 0.77% 07/14/04 09/11/04
38 Anchored 8,500,000.00 8,492,673.77 0.77% 06/18/04 08/11/04
39 Conventional 8,400,000.00 8,400,000.00 0.77% 07/28/04 09/11/04
40 Suburban 8,000,000.00 8,000,000.00 0.73% 07/28/04 09/11/04
41 Suburban 7,200,000.00 7,200,000.00 0.66% 08/04/04 09/11/04
42 Medical 7,120,000.00 7,108,484.08 0.65% 06/10/04 07/11/04
43 Suburban 7,000,000.00 6,993,523.39 0.64% 06/25/04 08/11/04
44 Conventional 6,900,000.00 6,894,175.11 0.63% 07/08/04 08/11/04
45 Various 6,800,000.00 6,800,000.00 0.62% 07/12/04 09/11/04
45.1 Anchored
45.2 Shadow Anchored
46 Mobile Home Park 6,700,000.00 6,700,000.00 0.61% 07/19/04 09/11/04
47 CBD 6,400,000.00 6,388,447.55 0.58% 06/03/04 07/11/04
48 Conventional 6,160,000.00 6,133,687.07 0.56% 03/22/04 05/11/04
49 Limited Service 6,100,000.00 6,100,000.00 0.56% 08/03/04 09/11/04
50 Suburban 6,000,000.00 6,000,000.00 0.55% 07/08/04 08/11/04
51 Conventional 6,000,000.00 5,988,012.78 0.55% 05/20/04 07/11/04
52 Unanchored 5,850,000.00 5,850,000.00 0.53% 08/04/04 09/11/04
53 Conventional 5,800,000.00 5,800,000.00 0.53% 06/28/04 08/11/04
54 Suburban 5,700,000.00 5,700,000.00 0.52% 06/01/04 07/11/04
55 Unanchored 5,550,000.00 5,545,973.51 0.51% 06/29/04 08/11/04
56 Anchored 5,250,000.00 5,250,000.00 0.48% 07/19/04 09/11/04
57 Conventional 5,040,000.00 5,028,704.44 0.46% 05/20/04 07/11/04
58 Suburban 4,200,000.00 4,186,118.68 0.38% 05/07/04 06/11/04
59 Conventional 4,120,000.00 4,116,603.14 0.38% 06/16/04 08/11/04
59.1 Conventional
59.2 Conventional
60 Anchored 3,856,000.00 3,856,000.00 0.35% 06/03/04 07/11/04
61 Anchored 3,700,000.00 3,696,769.58 0.34% 06/22/04 08/11/04
62 Limited Service Extended Stay 3,640,000.00 3,640,000.00 0.33% 07/27/04 09/11/04
63 Anchored 3,444,000.00 3,444,000.00 0.31% 06/03/04 07/11/04
64 Office/Flex 3,440,000.00 3,440,000.00 0.31% 08/04/04 09/11/04
65 Unanchored 3,200,000.00 3,197,234.75 0.29% 06/30/04 08/11/04
66 Anchored 3,150,000.00 3,150,000.00 0.29% 07/15/04 09/11/04
67 Suburban 3,100,000.00 3,094,136.78 0.28% 06/14/04 08/01/04
68 Unanchored 3,200,000.00 3,055,058.47 0.28% 12/22/00 02/01/01
69 Unanchored 3,000,000.00 2,997,546.10 0.27% 07/01/04 08/11/04
70 Unanchored 2,700,000.00 2,698,019.10 0.25% 06/22/04 08/01/04
71 Anchored 2,650,000.00 2,650,000.00 0.24% 07/12/04 09/11/04
72 Shadow Anchored 2,500,000.00 2,500,000.00 0.23% 07/27/04 09/11/04
73 Conventional 2,465,000.00 2,465,000.00 0.22% 07/15/04 09/11/04
74 Anchored 2,025,000.00 2,025,000.00 0.18% 07/15/04 09/11/04
75 Conventional 1,750,000.00 1,746,077.94 0.16% 05/20/04 07/11/04
76 Self Storage 1,700,000.00 1,700,000.00 0.15% 07/09/04 09/11/04
77 Anchored Retail 1,600,000.00 1,600,000.00 0.15% 08/02/04 09/11/04
78 Conventional 1,400,000.00 1,400,000.00 0.13% 07/15/04 09/11/04
79 Conventional 1,360,000.00 1,356,951.99 0.12% 05/20/04 07/11/04
80 Conventional 1,120,000.00 1,117,489.88 0.10% 05/20/04 07/11/04
81 Shadow Anchored 966,000.00 940,104.57 0.09% 08/18/00 10/01/00
LOAN INTEREST ORIGINAL REMAINING
MORTGAGE ADMINISTRATIVE INTEREST ACCRUAL TERM TO TERM TO REMAINING
LOAN MATURITY DATE MORTGAGE COST RATE ACCRUAL METHOD MATURITY OR MATURITY OR IO PERIOD
NUMBER OR ARD RATE (%) (%) METHOD DURING IO ARD (MOS.) ARD (MOS.) (MOS.)
- ------------------------------------------------------------------------------------------------------------------------------------
1 01/11/10 5.1500% 0.04210% Actual/360 66 65
2 01/11/14 5.3043% 0.04210% Actual/360 Actual/360 120 113 53
3 07/11/14 5.6800% 0.04210% Actual/360 Actual/360 120 119 119
4 08/11/09 5.0600% 0.04210% 30/360 30/360 60 60 60
5 08/11/13 6.2400% 0.04210% Actual/360 Actual/360 108 108 24
6 08/11/14 5.7800% 0.04210% Actual/360 120 120
7 07/11/14 5.6000% 0.04210% 30/360 30/360 120 119 11
8 08/11/14 5.6600% 0.04210% Actual/360 Actual/360 120 120 60
9 07/11/09 5.7000% 0.04210% Actual/360 60 59
10 05/11/11 5.3600% 0.04210% Actual/360 84 81
11 05/11/11 5.2800% 0.04210% Actual/360 84 81
12 07/11/14 5.9900% 0.04210% Actual/360 120 119
13 07/11/14 5.7100% 0.04210% Actual/360 Actual/360 120 119 23
14 05/11/11 5.2800% 0.04210% Actual/360 84 81
15 07/11/14 5.9100% 0.04210% Actual/360 Actual/360 120 119 35
16 07/11/14 6.2000% 0.04210% Actual/360 Actual/360 120 119 11
17 08/11/09 5.1500% 0.04210% Actual/360 Actual/360 60 60 12
18 08/11/14 6.1200% 0.04210% Actual/360 120 120
19 07/11/09 5.1500% 0.04210% Actual/360 Actual/360 60 59 11
20 07/11/14 5.7750% 0.04210% Actual/360 120 119
21 05/11/11 5.2800% 0.04210% Actual/360 84 81
22 05/11/11 5.2800% 0.04210% Actual/360 84 81
23 07/11/14 6.2200% 0.04210% Actual/360 120 119
24 06/11/09 5.4100% 0.04210% Actual/360 Actual/360 60 58 10
25 08/11/14 5.9000% 0.04210% Actual/360 30/360 120 120 36
26 08/11/14 4.9900% 0.04210% Actual/360 120 120
27 06/11/14 5.9100% 0.04210% Actual/360 120 118
28 08/11/14 5.5900% 0.04210% Actual/360 120 120
29 07/11/14 5.8800% 0.04210% Actual/360 120 119
30 08/11/14 5.7200% 0.04210% Actual/360 120 120
31 08/10/14 6.0100% 0.09210% Actual/360 120 120
32 07/01/09 5.1600% 0.04210% Actual/360 Actual/360 60 59 11
33 06/11/14 5.9100% 0.04210% Actual/360 120 118
34 07/11/14 5.7400% 0.04210% Actual/360 120 119
35 08/11/14 5.6800% 0.07210% Actual/360 Actual/360 120 120 24
36 08/11/14 5.6700% 0.04210% Actual/360 120 120
37 08/11/14 5.8400% 0.04210% Actual/360 Actual/360 120 120 24
38 07/11/14 5.8500% 0.04210% Actual/360 120 119
39 08/11/14 5.7900% 0.04210% Actual/360 120 120
40 08/11/09 5.4400% 0.04210% Actual/360 60 60
41 08/11/14 6.2700% 0.04210% Actual/360 120 120
42 06/11/14 6.5400% 0.04210% Actual/360 120 118
43 07/11/24 6.6500% 0.04210% Actual/360 240 239
44 07/11/14 5.9300% 0.04210% Actual/360 120 119
45 08/11/14 5.8500% 0.04210% Actual/360 120 120
45.1
45.2
46 08/11/14 5.5900% 0.04210% Actual/360 120 120
47 06/11/14 6.0600% 0.04210% Actual/360 120 118
48 04/11/14 5.3100% 0.04210% Actual/360 120 116
49 08/11/14 6.5600% 0.04210% Actual/360 120 120
50 07/11/14 6.1300% 0.04210% Actual/360 Actual/360 120 119 23
51 06/11/14 5.6000% 0.04210% Actual/360 120 118
52 08/11/14 6.0700% 0.04210% Actual/360 120 120
53 07/11/14 5.9700% 0.04210% Actual/360 Actual/360 120 119 11
54 06/11/14 6.0800% 0.04210% Actual/360 Actual/360 120 118 46
55 07/11/14 6.4900% 0.04210% Actual/360 120 119
56 08/11/14 5.9300% 0.04210% Actual/360 120 120
57 06/11/09 5.0600% 0.04210% Actual/360 60 58
58 05/11/14 5.0500% 0.04210% Actual/360 120 117
59 07/11/14 6.0200% 0.04210% Actual/360 120 119
59.1
59.2
60 06/11/09 5.6100% 0.04210% Actual/360 Actual/360 60 58 10
61 07/11/14 5.8000% 0.04210% Actual/360 120 119
62 08/11/11 7.0200% 0.04210% Actual/360 84 84
63 06/11/09 5.6100% 0.04210% Actual/360 Actual/360 60 58 10
64 08/11/19 6.2600% 0.04210% Actual/360 180 180
65 07/11/14 5.8400% 0.04210% Actual/360 120 119
66 08/11/14 5.9900% 0.04210% Actual/360 120 120
67 07/01/24 6.3800% 0.04210% Actual/360 240 239
68 01/01/12 8.3000% 0.04210% Actual/360 132 89
69 07/11/14 6.0500% 0.04210% Actual/360 120 119
70 07/01/14 6.4500% 0.04210% Actual/360 120 119
71 08/11/14 5.9700% 0.04210% Actual/360 120 120
72 08/11/24 6.1900% 0.04210% Actual/360 240 240
73 08/11/14 5.9000% 0.11210% Actual/360 120 120
74 08/11/14 5.6100% 0.04210% Actual/360 120 120
75 06/11/09 5.0600% 0.04210% Actual/360 60 58
76 08/11/22 5.4900% 0.04210% Actual/360 216 216
77 08/11/11 5.9200% 0.04210% Actual/360 84 84
78 08/11/14 5.9500% 0.04210% Actual/360 120 120
79 06/11/09 5.0600% 0.04210% Actual/360 60 58
80 06/11/09 5.0600% 0.04210% Actual/360 60 58
81 09/01/10 8.7000% 0.04210% Actual/360 120 73
MORTGAGE ORIGINAL REMAINING MATURITY DATE OR
LOAN AMORT TERM AMORT TERM MONTHLY P&I ARD BALLOON ARD
NUMBER (MOS.) (MOS.) PAYMENTS ($) BALANCE ($) LOAN PREPAYMENT PROVISIONS
- ------------------------------------------------------------------------------------------------------------------------------------
1 360 359 819,039.34 137,372,067.26 N L(25),D(34),O(7)
2 360 360 455,568.81 75,961,366.74 Y L(31),D(86),O(3)
3 IO IO IO 71,500,000.00 N L(25),D(92),O(3)
4 IO IO IO 44,000,000.00 N L(24),D(32),O(4)
5 360 360 Various(3) 37,169,286.00 Y L(36),D(69),O(3)
6 360 360 216,627.61 31,170,361.54 N L(24),D(93),O(3)
7 300 300 219,506.10 27,796,488.06 Y L(25),D(88),O(7)
8 360 360 190,696.47 30,727,002.87 N L(24),D(78),O(18)
9 360 359 174,120.13 27,949,873.71 Y L(48),D(9),O(3)
10 360 357 167,996.05 26,806,124.12 Y L(48),D(33),O(3)
11 360 357 111,959.57 17,994,771.81 Y L(48),D(33),O(3)
12 360 359 107,803.40 15,260,768.10 Y L(48),D(67),O(5)
13 360 360 103,424.10 15,672,021.07 Y L(48),D(69),O(3)
14 360 357 97,071.89 15,601,939.95 Y L(48),D(33),O(3)
15 360 360 95,004.25 14,435,711.70 N L(48),D(69),O(3)
16 360 360 97,995.04 13,956,269.16 Y L(48),D(67),O(5)
17 360 360 81,903.93 14,116,459.98 N L(24),D(32),O(4)
18 360 360 91,093.09 12,764,376.83 N L(24),D(89),O(7)
19 360 360 81,357.91 14,022,697.10 N L(25),D(31),O(4)
20 360 359 84,848.49 12,214,819.89 Y L(25),D(92),O(3)
21 360 357 78,898.61 12,681,029.20 Y L(48),D(33),O(3)
22 360 357 78,665.91 12,643,626.62 Y L(48),D(33),O(3)
23 360 359 79,789.76 11,095,778.79 Y L(48),D(69),O(3)
24 360 360 72,236.94 12,129,398.86 Y L(48),D(9),O(3)
25 360 360 70,227.36 10,679,661.03 N L(24),D(93),O(3)
26 360 360 61,664.22 9,450,822.38 N L(24),D(92),O(4)
27 300 298 71,546.84 8,645,983.52 N L(48),D(68),O(4)
28 360 360 61,072.27 8,920,311.75 Y L(23),YM2%(94),O(3)
29 360 359 62,736.88 8,957,623.30 N L(48),D(68),O(4)
30 360 360 59,911.85 8,661,441.75 N L(60),YM1%(57),O(3)
31 300 300 64,491.28 7,745,552.78 Y L(24),D(92),O(4)
32 360 360 53,844.29 9,271,122.39 N L(11),YM1%(48),O(1)
33 300 298 56,215.38 6,793,271.83 N L(48),D(68),O(4)
34 360 359 50,715.58 7,321,146.29 Y L(48),D(69),O(3)
35 360 360 49,805.49 7,566,013.73 Y L(48),D(69),O(3)
36 360 360 49,577.51 7,195,716.19 N L(48),D(69),O(3)
37 360 360 50,090.73 7,505,930.49 N L(48),D(69),O(3)
38 360 359 50,144.98 7,176,564.04 Y L(25),D(92),O(3)
39 360 360 49,233.78 7,078,643.96 N L(48),D(69),O(3)
40 324 324 47,158.79 7,285,440.43 Y L(24),D(33),O(3)
41 360 360 44,425.34 6,153,453.63 N L(24),D(93),O(3)
42 360 358 45,190.71 6,131,769.42 N L(48),D(69),O(3)
43 324 323 46,561.33 3,361,810.56 N L(25),D(212),O(3)
44 360 359 41,058.97 5,839,586.63 N L(48),D(69),O(3)
45 360 360 40,115.98 5,740,651.62 N L(48),D(69),O(3)
45.1
45.2
46 360 360 38,421.05 5,611,839.72 Y L(23),YM2%(94),O(3)
47 360 358 38,618.46 5,436,757.23 N L(48),D(68),O(4)
48 360 356 34,245.03 5,114,916.21 N L(36),D(81),O(3)
49 300 300 41,416.63 4,811,229.22 N L(48),D(69),O(3)
50 360 360 36,476.03 5,333,699.70 Y L(25),D(92),O(3)
51 360 358 34,444.74 5,027,182.82 Y L(48),D(69),O(3)
52 360 360 35,337.41 4,970,861.29 N L(24),D(93),O(3)
53 360 360 34,662.14 5,029,267.47 Y L(48),D(69),O(3)
54 360 360 34,468.10 5,250,689.02 Y L(26),D(91),O(3)
55 360 359 35,043.28 4,773,486.47 Y L(48),D(69),O(3)
56 360 360 31,240.52 4,442,687.94 N L(48),D(69),O(3)
57 360 358 27,240.93 4,652,287.82 Y L(48),D(9),O(3)
58 360 357 22,675.03 3,458,703.85 Y L(48),D(69),O(3)
59 360 359 24,754.48 3,496,107.76 Y L(48),D(69),O(3)
59.1
59.2
60 300 300 23,933.19 3,552,619.86 Y L(48),D(9),O(3)
61 360 359 21,709.86 3,119,233.67 N L(60),YM1%(57),O(3)
62 240 240 28,264.60 2,916,862.74 Y L(24),D(57),O(3)
63 300 300 21,376.01 3,173,035.12 Y L(48),D(9),O(3)
64 360 360 21,203.05 2,541,517.46 N L(48),D(129),O(3)
65 360 359 18,857.69 2,700,956.10 Y L(25),D(92),O(3)
66 360 360 18,865.59 2,670,343.99 Y L(48),D(69),O(3)
67 240 239 22,894.28 83,382.93 N L(25),D(211),O(4)
68 300 257 25,337.42 2,575,298.50 N L(67),D(59),O(6)
69 360 359 18,083.07 2,547,951.25 N L(36),D(81),O(3)
70 360 359 16,977.15 2,319,633.22 N L(25),D(92),O(3)
71 360 360 15,837.01 2,245,155.20 Y L(24),D(93),O(3)
72 240 240 18,316.56 0.00 N L(36),D(201),O(3)
73 360 360 14,620.81 2,084,091.37 N L(36),D(81),O(3)
74 360 360 11,637.87 1,697,157.06 Y L(24),D(93),O(3)
75 360 358 9,458.65 1,615,378.14 Y L(48),D(9),O(3)
76 216 216 12,480.68 0.00 N L(60),YM1%(153),O(3)
77 360 360 9,510.67 1,443,402.64 N L(24),D(57),O(3)
78 300 300 8,977.48 1,082,182.57 N L(24),D(93),O(3)
79 360 358 7,350.73 1,255,379.06 Y L(48),D(9),O(3)
80 360 358 6,053.54 1,033,841.74 Y L(48),D(9),O(3)
81 360 313 7,565.06 877,574.39 N L(71),D(45),O(4)
MORTGAGE LTV RATIO AT
LOAN APPRAISAL CUT-OFF DATE MATURITY OR YEAR
NUMBER APPRAISED VALUE ($) DATE DSCR (X) LTV RATIO ARD BUILT
- ---------------------------------------------------------------------------------------------------------------------
1 235,000,000 06/04/04 1.64 63.76% 58.46% 1974
2 675,000,000 12/02/03 1.81 54.67% 50.64% 1932
3 110,000,000 06/01/04 1.69 65.00% 65.00% 1976
4 85,500,000 04/20/04 2.94 51.46% 51.46% 1971
5 55,800,000 07/01/04 1.42 75.09% 66.61% 2004
6 50,000,000 07/01/04 1.27 74.00% 62.34% 1993
7 47,500,000 05/17/04 1.26 74.53% 58.52% 2002
8 41,250,000 07/19/04 1.31 80.00% 74.49% 1996
9 39,400,000 05/06/04 1.23 76.07% 70.94% 1972
10 38,400,000 11/26/03 1.20 78.02% 69.81% 1952
11 25,700,000 04/17/04 1.20 78.38% 70.02% 1926
12 23,500,000 04/18/04 1.21 76.53% 64.94% 2002
13 22,800,000 05/21/04 1.24 78.07% 68.74% 2002
14 21,900,000 11/02/03 1.26 79.75% 71.24% 1928
15 20,500,000 05/26/04 1.23 78.05% 70.42% 1964
16 21,825,000 05/03/04 1.25 73.31% 63.95% 2003
17 20,600,000 06/06/04 1.28 72.82% 68.53% 1997
18 20,200,000 04/28/04 1.49 74.26% 63.19% 1981
19 19,850,000 04/29/04 1.29 75.06% 70.64% 2000
20 22,000,000 05/20/04 1.46 65.85% 55.52% 1981
21 17,800,000 11/26/03 1.20 79.75% 71.24% 1920
22 18,100,000 11/02/03 1.27 78.20% 69.85% 1928
23 18,200,000 05/12/04 1.29 71.37% 60.97% 2001
24 16,400,000 07/01/04 1.36 78.35% 73.96% 1958
25 14,800,000 04/28/04 1.27 80.00% 72.16% 1987
26 15,600,000 06/02/04 1.29 73.72% 60.58% 1994
27 16,450,000 05/03/04 1.61 67.90% 52.56% 1995
28 13,500,000 05/12/04 1.22 78.89% 66.08% 1984
29 13,250,000 06/14/04 1.20 79.93% 67.60% 2003
30 17,300,000 07/01/04 1.81 59.54% 50.07% 1998
31 13,230,000 03/15/04 1.31 75.59% 58.55% 1987
32 16,750,000 06/05/04 1.70 58.81% 55.35% 1980
33 12,700,000 05/03/04 1.60 69.10% 53.49% 1998
34 12,800,000 05/13/04 1.35 67.91% 57.20% 1974
35 12,100,000 05/14/04 1.20 71.07% 62.53% 1969
36 10,715,000 05/14/04 1.33 79.98% 67.16% 1972
37 10,750,000 06/02/04 1.26 79.07% 69.82% 1974
38 10,800,000 06/01/04 1.32 78.64% 66.45% 2004
39 10,500,000 06/01/04 1.24 80.00% 67.42% 1950
40 10,500,000 05/04/04 1.41 76.19% 69.39% 1991
41 11,300,000 06/02/04 1.47 63.72% 54.46% 1984
42 8,900,000 05/21/04 1.36 79.87% 68.90% 1999
43 10,600,000 06/03/04 1.41 65.98% 31.72% 1968
44 8,800,000 04/22/04 1.25 78.34% 66.36% 1925
45 8,500,000 04/15/04 1.31 80.00% 67.54% Various
45.1 6,300,000 04/15/04 2003
45.2 2,200,000 04/15/04 2000
46 8,500,000 05/12/04 1.27 78.82% 66.02% 1978
47 9,000,000 05/12/04 1.20 70.98% 60.41% 1921
48 9,310,000 01/21/04 1.49 65.88% 54.94% 1976
49 10,400,000 06/15/04 1.79 58.65% 46.26% 2003
50 8,100,000 06/04/04 1.35 74.07% 65.85% 2002
51 8,400,000 04/16/04 1.28 71.29% 59.85% 1928
52 9,600,000 06/10/04 1.48 60.94% 51.78% 1986
53 7,300,000 04/01/04 1.20 79.45% 68.89% 1985
54 7,500,000 04/26/04 1.36 76.00% 70.01% 1972
55 7,100,000 05/28/04 1.26 78.11% 67.23% 2003
56 6,575,000 06/11/04 1.27 79.85% 67.57% 1995
57 6,300,000 04/16/04 1.30 79.82% 73.85% 1928
58 5,600,000 03/30/04 1.57 74.75% 61.76% 2004
59 5,900,000 04/29/04 1.36 69.77% 59.26% Various
59.1 3,200,000 04/29/04 1969
59.2 2,700,000 04/29/04 1970
60 5,150,000 05/02/04 1.43 74.87% 68.98% 2000
61 5,330,000 05/17/04 1.30 69.36% 58.52% 2004
62 5,700,000 05/04/04 1.49 63.86% 51.17% 1999
63 4,600,000 05/01/04 1.35 74.87% 68.98% 1988
64 4,300,000 03/25/04 1.27 80.00% 59.11% 2000
65 4,700,000 06/06/04 1.62 68.03% 57.47% 2003
66 4,200,000 06/15/04 1.27 75.00% 63.58% 1997
67 5,600,000 04/13/04 1.50 55.25% 1.49% 1923
68 4,990,000 09/12/02 1.44 61.22% 51.61% 1995
69 4,000,000 05/25/04 1.56 74.94% 63.70% 2003
70 3,600,000 06/01/04 1.34 74.94% 64.43% 2002
71 3,800,000 06/16/04 1.30 69.74% 59.08% 2000
72 4,800,000 05/28/04 1.44 52.08% 0.00% 1976
73 3,140,000 05/04/04 1.37 78.50% 66.37% 2003
74 2,900,000 05/05/04 1.39 69.83% 58.52% 1994
75 2,200,000 04/16/04 1.20 79.37% 73.43% 1890
76 4,400,000 04/22/04 2.44 38.64% 0.00% 1974
77 3,000,000 06/21/04 1.77 53.33% 48.11% 2001
78 2,200,000 06/23/04 1.69 63.64% 49.19% 1969
79 1,700,000 04/16/04 1.28 79.82% 73.85% 1890
80 1,400,000 04/16/04 1.32 79.82% 73.85% 1930
81 1,500,000 07/18/00 1.38 62.67% 58.50% 1999
MORTGAGE CUT-OFF DATE
LOAN YEAR NUMBER OF UNIT OF LOAN AMOUNT OCCUPANCY OCCUPANCY
NUMBER RENOVATED UNITS MEASURE PER (UNIT) ($) RATE (%) "AS OF" DATE MOST RECENT PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
1 2001 467,141 Sq. Ft. 321 95.48% 06/04/04 2004 GGP Budget
2 1997 2,256,552 Sq. Ft. 36 98.60% 04/01/04 TTM 11/15/03
3 1991 511,201 Sq. Ft. 140 85.81% 05/21/04 TTM 03/31/04
4 1995 561,957 Sq. Ft. 78 87.67% 06/11/04 TTM 02/29/04
5 155,755 Sq. Ft. 269 100.00% 06/07/04
6 114,978 Sq. Ft. 322 100.00% 07/12/04
7 111,373 Sq. Ft. 318 100.00% 05/31/04 YE 2003
8 2000 380 Units 86,842 92.11% 07/06/04 ECC Budget
9 2002 959 Units 31,255 83.94% 06/01/04 TTM 04/30/04
10 2002 190 Units 157,675 94.74% 06/15/04 T-3 02/04-05/04 Annualized
11 2003 146 Units 137,969 95.21% 06/15/04 T-3 02/04-05/04 Annualized
12 77,251 Sq. Ft. 233 80.85% 06/09/04 2004 Proforma
13 276 Units 64,493 93.48% 06/16/04 T-5 01/04-05/04 Annualized
14 2004 177 Units 98,672 94.92% 06/15/04 T-3 03/04-05/04 Annualized
15 2003 169 Units 94,675 93.49% 06/21/04
16 124,462 Sq. Ft. 129 82.04% 07/23/04
17 288 Units 52,083 95.49% 06/23/04 T-4 01/04-04/04 Annualized
18 318,645 Sq. Ft. 47 80.01% 06/25/04 TTM 05/31/04
19 268 Units 55,597 93.66% 06/23/04 T-4 01/04-04/04 Annualized
20 2004 101,893 Sq. Ft. 142 98.82% 06/08/04 2004 Budget
21 2004 150 Units 94,635 94.67% 06/15/04 T-3 02/04-05/04 Annualized
22 2004 176 Units 80,417 95.45% 06/15/04 T-3 02/04-05/04 Annualized
23 111,989 Sq. Ft. 116 98.66% 06/01/04 T-5 01/04-05/04 Annualized
24 2002 219,665 Sq. Ft. 58 97.94% 05/13/04 2004 Budget
25 2000 95,029 Sq. Ft. 125 100.00% 07/13/04 2004 Budget
26 102,707 Sq. Ft. 112 94.55% 06/30/04 YE 2003
27 915 Units 12,207 96.18% 05/23/04 YE 2003
28 218 Pads 48,853 100.00% 07/21/04 T-6 11/03-5/04 Annualized
29 79,047 Sq. Ft. 134 92.10% 06/28/04
30 1,195 Units 8,619 87.20% 07/19/04 T-5 01/04-05/04 Annualized
31 98,153 Sq. Ft. 102 100.00% 07/16/04 YE 2003
32 151,154 Sq. Ft. 65 82.54% 07/01/04 2005 Budget
33 755 Units 11,623 92.19% 05/23/04 YE 2003
34 96 Units 90,545 96.88% 05/06/04 YE 2003
35 2003 112 Units 76,786 97.32% 07/13/04 YE 2003
36 253 Pads 33,874 98.42% 06/18/04 YE 2003
37 2001 476 Units 17,857 96.64% 07/07/04 TTM 04/30/04
38 60,742 Sq. Ft. 140 97.70% 07/26/04
39 2003 135 Units 62,222 100.00% 07/01/04 TTM 05/31/04
40 2002 53,730 Sq. Ft. 149 100.00% 06/10/04 YE 2003
41 125,641 Sq. Ft. 57 100.00% 07/01/04 YE 2003
42 40,535 Sq. Ft. 175 100.00% 07/15/04 Borrower Proforma
43 2003 83,049 Sq. Ft. 84 100.00% 06/01/04 YE 2003
44 116 Units 59,433 98.28% 07/19/04 2004 Budget
45 77,086 Sq. Ft. 88 100.00% 07/22/04
45.1 71,021 Sq. Ft. 100.00% 07/22/04
45.2 6,065 Sq. Ft. 100.00% 07/22/04
46 151 Pads 44,371 100.00% 07/21/04 T-5 01/04-05/04 Annualized
47 2003 37,486 Sq. Ft. 170 95.13% 06/03/04 2003 Annualized
48 2001 160 Units 38,336 93.13% 05/31/04 T-4 01/04-04/04 Annualized
49 91 Rooms 67,033 70.80% 05/23/04 T-5 01/04-05/04 Annualized
50 54,353 Sq. Ft. 110 82.71% 05/01/04 2005 Budget
51 2003 46 Units 130,174 95.65% 06/15/04 Borrower Proforma
52 50,836 Sq. Ft. 115 91.68% 07/01/04 YE 2003
53 136 Units 42,647 95.59% 05/24/04 T-3 01/04-03/04 Annualized
54 61,317 Sq. Ft. 93 97.12% 05/06/04 2004 Budget
55 12,738 Sq. Ft. 435 100.00% 06/21/04
56 63,350 Sq. Ft. 83 100.00% 06/11/04 YE 2003
57 2003 57 Units 88,223 94.74% 06/15/04 T-1 05/30/04 Annualized
58 26,307 Sq. Ft. 159 100.00% 05/06/04 2004 Budget
59 96 Units 42,881 92.71% Various YE 2003
59.1 48 Units 93.75% 03/16/04
59.2 48 Units 91.67% 05/18/04
60 68,485 Sq. Ft. 56 100.00% 12/16/03
61 14,560 Sq. Ft. 254 100.00% 06/08/04
62 126 Rooms 28,889 82.70% 03/31/04 TTM 03/31/04
63 92,452 Sq. Ft. 37 100.00% 12/16/03 YE 2003
64 49,648 Sq. Ft. 69 100.00% 07/28/04
65 10,908 Sq. Ft. 293 100.00% 06/02/04 T-5 01/04-05/04 Annualized
66 11,348 Sq. Ft. 278 100.00% 06/21/04
67 2000 34,278 Sq. Ft. 90 100.00% 06/14/04 YE 2003
68 20,970 Sq. Ft. 146 100.00% 07/12/04 YE 2003
69 26,120 Sq. Ft. 115 100.00% 05/28/04
70 18,000 Sq. Ft. 150 100.00% 06/08/04 2004 Budget
71 13,905 Sq. Ft. 191 100.00% 07/22/04
72 2000 23,340 Sq. Ft. 107 100.00% 06/22/04 T-5 01/04-05/04 Annualized
73 48 Units 51,354 100.00% 06/01/04
74 13,500 Sq. Ft. 150 100.00% 06/01/04
75 2002 6 Units 291,013 100.00% 07/30/04 T-3 03/04-05/04 Annualized
76 1997 1,197 Units 1,420 88.64% 03/31/04 T-3 01/04-03/04 Annualized
77 55,344 Sq. Ft. 29 100.00% 07/22/04
78 48 Units 29,167 97.92% 05/18/04 TTM 04/30/04
79 2003 7 Units 193,850 100.00% 06/15/04 T-3 03/04-05/04 Annualized
80 2003 9 Units 124,166 100.00% 06/15/04 T-3 03/04-05/04 Annualized
81 6,580 Sq. Ft. 143 100.00% 03/31/04 YE 2003
MOST
MORTGAGE RECENT MOST UW NET
LOAN REVENUES MOST RECENT MOST RECENT RECENT UW UW OPERATING UW NET CASH
NUMBER ($) EXPENSES ($) NOI ($) NCF ($) REVENUES ($) EXPENSES ($) INCOME ($) FLOW ($)
- ------------------------------------------------------------------------------------------------------------------------------------
1 21,063,638 5,170,077 15,893,561 15,823,490 21,716,349 5,206,577 16,509,771 16,085,495
2 62,279,306 17,608,014 44,671,292 44,445,637 63,438,713 18,543,090 44,895,623 44,558,893
3 14,739,110 7,297,878 7,441,231 7,384,999 15,581,084 8,045,998 7,535,086 6,851,264
4 12,165,953 5,057,325 7,108,628 6,968,139 12,441,154 5,102,305 7,338,849 6,547,188
5 5,919,756 1,332,459 4,587,297 4,405,554
6 3,358,320 33,583 3,324,737 3,306,961
7 5,649,849 1,573,530 4,076,319 4,059,613 5,274,073 1,865,242 3,408,831 3,317,365
8 4,594,000 1,452,781 3,141,219 3,055,719 4,618,834 1,546,491 3,072,343 2,986,843
9 5,800,463 3,139,169 2,661,294 2,429,216 5,866,932 3,056,455 2,810,477 2,578,399
10 3,074,324 831,021 2,243,303 2,200,553 3,240,270 776,402 2,463,869 2,421,119
11 1,947,720 538,648 1,409,072 1,376,222 2,175,393 530,813 1,644,580 1,611,730
12 2,237,423 445,414 1,792,009 1,784,284 2,312,376 688,989 1,623,388 1,561,181
13 2,570,143 973,859 1,596,284 1,527,284 2,581,589 971,461 1,610,127 1,541,127
14 2,070,840 549,998 1,520,842 1,481,017 2,070,871 564,735 1,506,136 1,466,311
15 2,182,470 750,073 1,432,397 1,398,597
16 2,281,452 666,658 1,614,794 1,466,656
17 2,343,069 1,133,274 1,209,795 1,152,195 2,478,425 1,165,998 1,312,427 1,254,827
18 3,407,186 1,466,244 1,940,942 1,883,586 3,353,351 1,514,500 1,838,851 1,630,035
19 2,077,926 777,112 1,300,814 1,247,214 2,083,704 771,403 1,312,301 1,258,701
20 2,196,536 473,269 1,723,267 1,691,777 2,071,309 500,558 1,570,751 1,491,286
21 1,543,980 414,923 1,129,057 1,095,307 1,552,672 381,733 1,170,939 1,137,189
22 1,795,492 582,151 1,213,341 1,173,741 1,795,644 557,263 1,238,381 1,198,781
23 2,049,264 485,760 1,563,504 1,490,061 2,286,979 875,098 1,411,881 1,236,750
24 1,925,760 661,019 1,264,741 1,231,791 1,955,521 658,529 1,296,992 1,181,996
25 1,673,545 486,174 1,187,371 1,175,017 1,659,434 555,665 1,103,769 1,070,734
26 1,209,740 267,650 942,090 933,874 1,293,325 265,477 1,027,848 951,543
27 1,758,966 341,002 1,417,964 1,399,892 1,809,471 406,476 1,402,996 1,384,925
28 1,196,626 298,254 898,372 890,785 1,235,840 336,934 898,905 891,319
29 1,231,404 292,660 938,744 901,816
30 1,601,626 441,361 1,160,265 1,160,265 1,905,867 584,795 1,321,071 1,299,926
31 2,101,213 861,110 1,240,103 1,209,676 2,079,372 882,997 1,196,375 1,014,013
32 1,811,116 506,392 1,304,724 1,274,494 1,683,446 479,280 1,204,166 1,098,528
33 1,366,976 307,469 1,059,507 1,049,758 1,439,355 348,033 1,091,322 1,081,573
34 1,182,517 337,951 844,566 820,566 1,187,817 341,486 846,331 822,331
35 1,057,835 383,477 674,358 640,852 1,125,950 373,394 752,556 719,050
36 1,613,730 881,498 732,233 713,258 1,641,126 830,670 810,456 791,481
37 2,150,143 1,327,895 822,248 704,676 2,191,952 1,319,845 872,107 754,535
38 1,009,551 197,782 811,769 793,986
39 1,496,164 662,373 833,791 800,041 1,495,949 731,140 764,809 731,059
40 1,225,931 332,880 893,052 879,217 1,232,742 393,005 839,737 799,189
41 1,331,000 391,846 939,154 899,774 1,305,056 395,144 909,912 781,771
42 1,364,858 500,174 864,684 858,604 1,306,382 515,598 790,784 735,262
43 1,852,415 831,663 1,020,752 1,018,838 1,756,447 875,887 880,560 790,080
44 1,207,521 540,441 667,080 638,080 1,180,940 537,284 643,655 614,655
45 765,067 119,986 645,081 632,785
45.1
45.2
46 813,930 226,131 587,799 581,759 860,700 267,160 593,540 587,500
47 1,420,646 1,225,030 195,616 191,118 1,874,650 1,244,155 630,495 556,142
48 1,066,218 423,087 643,131 585,561 1,129,198 469,501 659,697 611,697
49 3,575,225 1,927,513 1,647,712 1,504,703 2,940,893 1,932,477 1,008,416 890,781
50 992,791 271,347 721,444 673,009 938,346 292,175 646,171 590,657
51 823,411 113,655 709,756 698,256 680,107 139,117 540,990 529,490
52 1,034,713 298,887 735,826 721,525 974,843 284,857 689,986 625,707
53 959,260 395,762 563,498 522,698 941,315 399,306 542,009 501,209
54 1,371,904 622,771 749,133 738,096 1,283,980 653,875 630,105 564,483
55 535,970 5,388 530,582 530,384
56 657,505 139,274 518,231 511,896 640,788 151,316 489,471 476,447
57 614,016 88,713 525,303 511,053 609,233 170,960 438,273 424,023
58 563,656 98,127 465,529 460,268 561,583 100,114 461,469 428,247
59 770,725 345,631 425,094 398,598 772,718 343,414 429,304 402,808
59.1
59.2
60 439,160 21,958 417,202 410,354
61 351,820 10,555 341,265 339,081
62 1,516,478 853,741 662,737 634,822 1,450,490 870,971 579,519 506,994
63 395,849 39,469 356,379 347,134 375,301 18,765 356,536 347,290
64 431,190 75,300 355,890 323,705
65 414,095 414,095 414,095 383,038 11,491 371,547 366,353
66 297,998 8,940 289,059 287,924
67 667,587 93,491 574,096 567,240 613,894 140,061 473,834 412,228
68 434,320 16,614 417,706 417,706 481,402 25,672 455,730 438,588
69 449,594 84,480 365,114 339,195
70 486,200 119,298 366,902 364,202 402,905 108,220 294,685 272,374
71 259,700 10,791 248,909 246,823
72 367,668 77,501 290,167 279,168 445,079 104,406 340,673 316,075
73 368,448 116,080 252,368 240,368
74 214,326 10,180 204,146 194,609
75 204,600 53,011 151,589 150,071 193,654 55,543 138,111 136,593
76 671,408 180,957 490,451 490,451 613,530 238,517 375,014 365,346
77 210,000 4,200 205,800 201,863
78 343,510 193,679 149,831 118,976 337,744 142,977 194,768 181,568
79 144,292 30,193 114,099 112,076 144,238 29,459 114,779 112,756
80 139,056 41,669 97,387 94,660 133,182 34,651 98,531 95,804
81 168,296 19,280 149,016 143,094 157,928 24,596 133,332 125,698
MORTGAGE LARGEST LARGEST
LOAN TENANT SQ. TENANT LARGEST TENANT
NUMBER LARGEST TENANT NAME FT. % OF NRA EXP. DATE
- ----------------------------------------------------------------------------------------------------------
1 Century Theaters 73,280 15.69% 08/10/21
2 Credit Suisse First Boston 1,921,459 85.15% Multiple Spaces
3 Shefsky & Froelich Limited 43,612 8.53% 05/30/05
4 AT&T 59,940 10.67% 08/31/08
5 United States Government 155,755 100.00% 06/30/14
6 Barneys New York, Inc. 114,978 100.00% 01/27/19
7 National Treasury Employees Union 63,212 56.76% 12/31/17
8
9
10
11
12 Macaroni Grill 6,876 8.90% 04/30/18
13
14
15
16 University of Phoenix 57,485 46.19% 05/31/13
17
18 Sears 70,480 22.12% 03/02/07
19
20 Sports Arena Fitness (Gold's Gym) 33,966 33.33% Multiple Spaces
21
22
23 Park Avenue Gymnastics at Weston 12,000 10.72% 11/24/10
24 Kohl's Dept Store 127,987 58.26% 03/31/13
25 APW Supermarkets, Inc. (Waldbaums) 56,711 59.68% 01/31/20
26 Publix 56,077 54.60% 05/24/14
27
28
29 Publix Supermarket 44,271 56.01% 01/31/23
30
31 Cardiovascular Specialties, Inc. 7,711 7.86% Multiple Spaces
32 Stein Mart 37,528 24.83% 10/31/05
33
34
35
36
37
38 Bed Bath and Beyond 22,054 36.31% 01/31/15
39
40 FDA-USA 53,730 100.00% Multiple Spaces
41 ESCO, LLC 15,850 12.62% 06/30/05
42 Neuro Spinal Associates 24,608 60.71% 06/30/14
43 Liberty Mutual 24,529 29.54% 10/31/07
44
45 Various Various Various Various
45.1 Kroger (Ground Lease) 56,346 79.34% 09/30/23
45.2 Wendy's 3,320 54.74% 08/30/19
46
47 Preferred Jewelbrokers 6,617 17.65% 02/01/13
48
49
50 Decision One Mortgage 18,544 34.12% 06/30/08
51
52 Head to Toes 5,472 10.76% 12/31/08
53
54 Prudential Florida Realty 13,614 22.20% 01/31/07
55 Eckerd 12,738 100.00% 11/18/33
56 Bi-Lo 42,680 67.37% 03/31/15
57
58 Orgill Singer Associates 20,000 76.03% 04/25/16
59
59.1
59.2
60 Fresh Brands (dba Piggly Wiggly) 68,485 100.00% 09/01/18
61 Walgreens 14,560 100.00% 03/31/79
62
63 Pic N Save 51,148 55.32% 12/31/08
64 Intellibot Robotics 14,592 29.39% 12/01/08
65 Eckerd 10,908 100.00% 08/20/23
66 CVS 11,348 100.00% 12/28/17
67 CSOSA 23,878 69.66% 08/31/15
68 The Good Guys, Inc. 20,970 100.00% 02/29/12
69 Savory Chef 4,080 15.62% 07/31/09
70 Elany Image Day Spa 3,000 16.67% 08/31/09
71 Walgreens 13,905 100.00% 09/30/60
72 Party America 12,500 53.56% 12/31/05
73
74 Walgreens 13,500 100.00% 09/30/44
75
76
77 Sears 55,344 100.00% 04/30/11
78
79
80
81 Kinko's 6,580 100.00% 06/02/09
2ND
MORTGAGE 2ND LARGEST LARGEST 2ND LARGEST
LOAN TENANT SQ. TENANT % TENANT EXP.
NUMBER 2ND LARGEST TENANT NAME FT. OF NRA (%) DATE
- ------------------------------------------------------------------------------------------------------------------------
1 Borders Books & Music 26,878 5.75% 03/31/20
2 Aon (sublet to IBM) 138,072 6.12% 04/30/13
3 Gordon & Glickson LLC 30,999 6.06% 12/31/07
4 Questar 38,333 6.82% 08/31/07
5
6
7 Bank-Fund Staff Federal Credit Union 23,845 21.41% 09/30/13
8
9
10
11
12 Stuffs Pizza 4,326 5.60% 04/30/23
13
14
15
16 Lincoln National Life Insurance Company 23,103 18.56% Multiple Spaces
17
18 JC Penney 67,553 21.20% 02/28/07
19
20 Staples 27,848 27.33% 08/31/11
21
22
23 St. Katherine Drexel Catholic Church 10,934 9.76% 03/19/07
24 G&R - 124 Street Foods, Inc. 46,929 21.36% 04/30/14
25 Maces Closeout City of Rocky Point, Inc. 11,000 11.58% 10/31/12
26 Cato 6,000 5.84% 01/31/07
27
28
29 Blockbuster Video 4,200 5.31% 03/31/10
30
31 East Jefferson Gen. Hospital 7,697 7.84% Multiple Spaces
32 Sears 21,371 14.14% 08/25/07
33
34
35
36
37
38 Best Buy 20,524 33.79% 01/31/15
39
40
41 Oregon Micro Systems Inc. 11,475 9.13% 10/31/07
42 Axcess Diagnostics 7,219 17.81% 06/30/14
43 Sealed Air Corporation 21,182 25.51% 08/31/08
44
45 Various Various Various Various
45.1 Downtown Locker Room 3,925 5.53% 04/30/09
45.2 Chubby's Convenience Store 2,745 45.26% 01/31/12
46
47 Premier Gem 6,000 16.01% 12/31/05
48
49
50 Loeffler Associates 13,555 24.94% 11/30/11
51
52 Prudential Northwest Properties 4,916 9.67% 02/28/05
53
54 Fenster & Faerber, P.A. 5,825 9.50% 09/30/07
55
56 CVS 10,720 16.92% 01/31/15
57
58 Huntington Development 2,442 9.28% 07/15/09
59
59.1
59.2
60
61
62
63 Wal-Mart 41,304 44.68% 04/30/08
64 Luck Stone Corporation 10,275 20.70% 03/01/08
65
66
67 High Road School 10,400 30.34% Multiple Spaces
68
69 Ihloff Salon/Spa 4,000 15.31% 04/30/13
70 Sally Beauty Supplies 2,800 15.56% 05/31/09
71
72 Trader Joe's 10,840 46.44% 04/30/13
73
74
75
76
77
78
79
80
81
3RD 3RD
MORTGAGE LARGEST LARGEST 3RD LARGEST
LOAN TENANT TENANT % TENANT EXP.
NUMBER 3RD LARGEST TENANT NAME SQ. FT OF NRA DATE
- ---------------------------------------------------------------------------------------------------------
1 Old Navy 22,958 4.91% 01/31/05
2 Omnicom 95,557 4.23% 09/30/08
3 TMP Worldwide Inc. 30,816 6.03% 09/30/10
4 Kennedy Christopher Childs & Fogg 30,302 5.39% 02/28/10
5
6
7 Wells Fargo 13,807 12.40% 10/31/12
8
9
10
11
12 USA Credit Union 3,865 5.00% 02/28/08
13
14
15
16 FDIC 9,500 7.63% 03/31/09
17
18 Fye Music & Movies 12,716 3.99% 01/31/10
19
20 CEC Entertainment, Inc. 11,523 11.31% 04/18/13
21
22
23 Chung's Tae Kwon Do Center 6,045 5.40% 04/18/11
24 Occucenter 11,000 5.01% 06/30/09
25 Pier 1 Imports 9,178 9.66% 02/29/12
26 Dollar Tree 4,730 4.61% 12/31/04
27
28
29 Chateau Animal Hospital 2,688 3.40% 01/31/09
30
31 Riley Sibley, MD 4,716 4.80% 10/31/09
32 On the Park, Inc. 5,000 3.31% 10/31/11
33
34
35
36
37
38 4 Ever Golf, LLC 3,560 5.86% 06/14/09
39
40
41 Direct Repair Laboratories 11,460 9.12% 11/30/04
42 Muscular Ambulatory Surgery Center 4,606 11.36% 06/30/14
43 GSA 18,844 22.69% 09/14/06
44
45 Various Various Various Various
45.1 Movie Gallery 2,750 3.87% 04/30/09
45.2
46
47 Jean & Alex 4,163 11.11% 03/31/14
48
49
50 Navigant International 5,335 9.82% 10/31/07
51
52 Wong's Chinese Restaurant 4,824 9.49% 12/31/07
53
54 Kindred Hospitals East, LLC 4,361 7.11% 10/21/04
55
56 Movie Gallery 4,000 6.31% 11/30/08
57
58 Dream Home Realty, LLC 1,940 7.37% 05/09/09
59
59.1
59.2
60
61
62
63
64 Delta Group of Virginia 9,885 19.91% 10/01/08
65
66
67
68
69 US Cellular 3,080 11.79% 11/30/08
70 Bozzelli's 2,800 15.56% 09/30/07
71
72
73
74
75
76
77
78
79
80
81
MORTGAGE
LOAN LARGEST AFFILIATED SPONSOR FLAG
NUMBER LOCKBOX (> THAN 4% OF POOL)
- -----------------------------------------------------------------------------------------------------------------------------------
1 Day 1 General Growth Properties, Inc.
2 Day 1 Tamir Sapir
3 Day 1 The Andalex Group
4 Springing Kevin J. Martin
5 Day 1
6 Day 1
7 Springing
8
9 Springing
10 Springing Barry, Donal P.; Barry, Margaret H.; Barry, Donal P. Jr.; Barry, Sean T.; Purcell, James W.
11 Springing Barry, Donal P.; Barry, Margaret H.; Barry, Donal P. Jr.; Barry, Sean T.; Purcell, James W.
12 Springing
13 Springing
14 Springing Barry, Donal P.; Barry, Margaret H.; Barry, Donal P. Jr.; Barry, Sean T.; Purcell, James W.
15
16 Springing
17
18
19
20 Springing
21 Springing Barry, Donal P.; Barry, Margaret H.; Barry, Donal P. Jr.; Barry, Sean T.; Purcell, James W.
22 Springing Barry, Donal P.; Barry, Margaret H.; Barry, Donal P. Jr.; Barry, Sean T.; Purcell, James W.
23 Springing
24 Springing
25 Day 1
26
27
28 Springing
29
30
31 Day 1
32
33
34 Springing
35 Springing
36
37
38 Springing
39
40 Springing
41
42
43
44
45
45.1
45.2
46 Springing
47
48 Day 1
49
50 Springing
51 Springing Barry, Donal P.; Barry, Margaret H.; Barry, Donal P. Jr.; Barry, Sean T.; Purcell, James W.
52
53 Springing
54 Springing
55 Springing
56
57 Springing Barry, Donal P.; Barry, Margaret H.; Barry, Donal P. Jr.; Barry, Sean T.; Purcell, James W.
58 Springing
59 Springing
59.1
59.2
60 Springing
61
62 Day 1
63 Springing
64
65 Springing
66 Springing
67 Day 1
68
69
70
71 Springing
72
73
74 Springing
75 Springing Barry, Donal P.; Barry, Margaret H.; Barry, Donal P. Jr.; Barry, Sean T.; Purcell, James W.
76
77
78
79 Springing Barry, Donal P.; Barry, Margaret H.; Barry, Donal P. Jr.; Barry, Sean T.; Purcell, James W.
80 Springing Barry, Donal P.; Barry, Margaret H.; Barry, Donal P. Jr.; Barry, Sean T.; Purcell, James W.
81
(1) This Mortgage Loan is part of a split loan structure. With respect to this
Mortgage Loan, unless otherwise specified, the calculations of LTV ratios
and DSC ratios exclude the related subordinate companion loan(s).
(2) This Mortgage Loan represents the senior component of a loan that is part of
a split loan structure, the related pari passu companion loans and
subordinate companion loans of which are not included in the trust fund.
With respect to this Mortgage Loan, unless otherwise specified, the
calculations of LTV ratios and DSC ratios were based upon the aggregate
indebtedness of this Mortgage Loan (excluding the non-pooled subordinate
component) and the related pari passu companion loans, but such calculations
exclude the related subordinate companion loans.
(3) Pursuant to Annex A-6, fixed monthly payments of principal and interest for
the first 12 months on a 20-year amortization schedule, interest-only
payments for months 13 through 36, and thereafter, fixed monthly payments of
principal and interest on a 30-year amortization schedule.
See "DESCRIPTION OF THE MORTGAGED POOL - Additional Mortgage Loan Information"
in the prospectus supplement.
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST SERIES 2004-C14
CERTAIN INFORMATION REGARDING MULTIFAMILY MORTGAGED PROPERTIES
ANNEX A-2
MORTGAGE
LOAN
NUMBER PROPERTY NAME PROPERTY ADDRESS
- ------------------------------------------------------------------------------------------------------------------------------------
8 Aylesbury Farms Apartment Homes 6115 Abbotts Bridge Road
9 Kennedy Ridge Apartments 10700 East Dartmouth Avenue
10 4100 North Marine Drive 4100 North Marine Drive
11 21-27 East Delaware Place 21-27 East Delaware Place
13 Cranbrook at Biltmore Park 300 Cranbrook Drive
14 451 West Wrightwood Avenue 451 West Wrightwood Avenue
15 Summer View at Sherman Oaks Apartments 15353 Weddington Street
17 The Harrington Apartments 2305 New England Street
19 Carriage Club Apartments 175 Carriage Club Drive
21 18 East Elm Street 18 East Elm Street
22 443 West Wrightwood Avenue 443 West Wrightwood Avenue
34 Oakview Apartments 3135 Campus Drive
35 Villa del Sur Apartments 2701 West McFadden Avenue
37 Malibu Apartments 8600 North Lamar
39 Summit Gardens Apartments 30 Arcadia Road
44 The Sevilla 2801 John F. Kennedy Boulevard
48 Park Knoll Apartments 10680 Coloma Road
51 1213-1229 West Diversey Parkway & 1213-1229 West Diversey Parkway &
2751-2753 North Magnolia Street 2751-2753 North Magnolia Street
53 The Crystal Village Apartments 2610-A Camellia Drive
57 1939 North Lincoln Avenue 1939 North Lincoln Avenue
59 Perry Hill Estates and Ridgeview Heights Portfolio Various
59.1 Perry Hill Estates 52 Perry Hill Road
59.2 Ridgeview Heights Apartments 456 Tolland Turnpike
73 Broad Trace Apartments 1210, 1215, 1225 & 1235 Tryon Street
75 482-484 West Deming Place 482-484 West Deming Place
78 Embassy House Apartments 415 North Gadsden Street
79 507-509 West Wrightwood Avenue 507-509 West Wrightwood Avenue
80 734-742 West Oakdale Avenue 734-742 West Oakdale Avenue
MORTGAGE GENERAL UTILITIES
LOAN PROPERTY PROPERTY PROPERTY SPECIFIC PROPERTY ELEVATOR TENANT
NUMBER PROPERTY CITY STATE ZIP CODE COUNTY TYPE TYPE BUILDINGS PAYS
- ------------------------------------------------------------------------------------------------------------------------------------
8 Duluth GA 30097 Fulton Multifamily Conventional N E,W,P,C
9 Denver CO 80014 Denver Multifamily Conventional N E,G,W,S,T
10 Chicago IL 60613 Cook Multifamily Conventional Y E,G
11 Chicago IL 60611 Cook Multifamily Conventional Y E,G
13 Arden NC 28704 Buncombe Multifamily Conventional N E
14 Chicago IL 60614 Cook Multifamily Conventional Y E,G
15 Sherman Oaks CA 91411 Los Angeles Multifamily Conventional N E,W,S,T
17 Charlotte NC 28269 Mecklenburg Multifamily Conventional N E,W,S
19 Mooresville NC 28117 Iredell Multifamily Conventional N E,W,S
21 Chicago IL 60611 Cook Multifamily Conventional Y E,G
22 Chicago IL 60614 Cook Multifamily Conventional Y E,G
34 San Mateo CA 94403 San Mateo Multifamily Conventional Y E
35 Santa Ana CA 92704 Orange Multifamily Conventional N E
37 Austin TX 78753 Travis Multifamily Conventional N E,W,S
39 Hackensack NJ 07601 Bergen Multifamily Conventional N E,G
44 Jersey City NJ 07306 Hudson Multifamily Conventional Y E,G
48 Rancho Cordova CA 95670 Sacramento Multifamily Conventional N E
51 Chicago IL 60614 Cook Multifamily Conventional N E,G
53 Durham NC 27705 Durham Multifamily Conventional N E,W,S
57 Chicago IL 60614 Cook Multifamily Conventional Y E,G
59 Various CT Various Various Multifamily Conventional N E,W,S,P,C
59.1 Ashford CT 06278 Windham Multifamily Conventional N E,W,S,P,C
59.2 Willington CT 06279 Tolland Multifamily Conventional N E,W,S,P,C
73 Sumter SC 29150 Sumter Multifamily Conventional N W,E
75 Chicago IL 60614 Cook Multifamily Conventional N E,G
78 Tallahassee FL 32301 Leon Multifamily Conventional N E
79 Chicago IL 60614 Cook Multifamily Conventional N E,G
80 Chicago IL 60657 Cook Multifamily Conventional N E,G
MORTGAGE NUMBER NUMBER NUMBER NUMBER NUMBER
LOAN OF STUDIO OF 1 BR OF 2 BR OF 3 BR OF 4+ BR
NUMBER UNITS UNITS UNITS UNITS UNITS
- ---------------------------------------------------------------------------
8 106 206 68
9 108 515 336
10 17 52 104 17
11 63 51 31 1
13 78 165 33
14 83 72 22
15 2 166 1
17 103 140 45
19 110 136 22
21 94 53 3
22 113 63
34 35 55 6
35 84 1 27
37 388 88
39 65 70
44 35 76 5
48 8 74 76 2
51 6 39 1
53 48 88
57 47 10
59 Various Various
59.1 48
59.2 24 24
73 48
75 6
78 24 24
79 2 4 1
80 6 3
MORTGAGE AVERAGE RENT; AVERAGE RENT; AVERAGE RENT; AVERAGE RENT; AVERAGE RENT;
LOAN RENT RANGES - RENT RANGES - RENT RANGES - RENT RANGES - RENT RANGES -
NUMBER STUDIO UNITS 1 BR UNITS 2 BR UNITS 3 BR UNITS 4+ BR UNITS
- ------------------------------------------------------------------------------------------------------------------
8 898;883-913 1088;1068-1107 1235;1215-1255
9 450;450-450 541;510-550 687;645-710
10 788;700-875 1173;935-1410 1320;900-1795 1661;1326-1995
11 760;650-870 1105;900-1310 1765;1345-2395 2495;2495-2495
13 707;695-770 816;780-840 1217;1010-1295
14 840;650-1030 1015;900-1130 1320;1029-1610
15 1000;1000-1000 1148;1145-1200 1725;1725-1725
17 627;540-791 823;780-915 976;914-1300
19 683;683-683 825;785-875 958;958-958
21 788;625-950 1023;855-1190 1472;1395-1510
22 750;599-900 933;790-1075
34 975;950-1000 1145;1095-1195 1495;1495-1495
35 788;725-850 850;850-850 1068;1000-1135
37 369;340-440 560;560-560
39 877;624-987 1031;745-1135
44 559;360-719 714;428-902 996;722-1402
48 500;500-500 599;575-600 700;700-700 787;775-800
51 703;695-710 1098;900-1295 1395;1395-1395
53 550;550-550 650;650-650
57 800;649-950 1035;975-1095
59 Various Various
59.1 751;655-820
59.2 608;570-640 720;675-765
73 650;650-650
75 2095;1995-2195
78 548;545-560 675;655-710
79 1355;1260-1450 1476;1350-1595 2385;2385-2385
80 1448;1100-1795 1163;1100-1225
[THIS PAGE INTENTIONALLY LEFT BLANK.]
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST SERIES 2004-C14
RESERVE ACCOUNT INFORMATION
ANNEX A-3
MORTGAGE
LOAN
NUMBER PROPERTY NAME GENERAL PROPERTY TYPE SPECIFIC PROPERTY TYPE
- ------------------------------------------------------------------------------------------------------------------------------------
1 Park Place Mall Retail Anchored
2 11 Madison Avenue Office CBD
3 444 North Michigan Avenue Office CBD
4 Independence Plaza Office CBD
5 FBI Field Office - Baltimore, MD Office Suburban
6 Barneys New York - Beverly Hills, CA Retail Shadow Anchored
7 1750 H Street Office CBD
8 Aylesbury Farms Apartment Homes Multifamily Conventional
9 Kennedy Ridge Apartments Multifamily Conventional
10 4100 North Marine Drive Multifamily Conventional
11 21-27 East Delaware Place Multifamily Conventional
12 Bel Villaggio, Phases I & II Retail Shadow Anchored
13 Cranbrook at Biltmore Park Multifamily Conventional
14 451 West Wrightwood Avenue Multifamily Conventional
15 Summer View at Sherman Oaks Apartments Multifamily Conventional
16 Valley Center Towers - Phase I Office Suburban
17 The Harrington Apartments Multifamily Conventional
18 Hot Springs Mall Retail Anchored
19 Carriage Club Apartments Multifamily Conventional
20 Glasshouse Square Shopping Center Retail Anchored
21 18 East Elm Street Multifamily Conventional
22 443 West Wrightwood Avenue Multifamily Conventional
23 Weston Commercial Center Mixed Use Office/Flex
24 Elmbrook Plaza Shopping Center Retail Anchored
25 Rocky Point Plaza Retail Anchored
26 Rockdale Square Shopping Center Retail Anchored
27 Mini U Storage I - Newport Beach, CA Self Storage Self Storage
28 Donner Springs Mobile Home Park Mobile Home Park Mobile Home Park
29 The Vineyards Shopping Center Retail Anchored
30 Shadelands Self Storage Self Storage Self Storage
31 East Jefferson Medical Office Building Office Medical
32 Kingwood Shopping Center Retail Anchored
33 Mini U Storage II - Newport Beach, CA Self Storage Self Storage
34 Oakview Apartments Multifamily Conventional
35 Villa del Sur Apartments Multifamily Conventional
36 Vallejo Mobile Estates Mobile Home Park Mobile Home Park
37 Malibu Apartments Multifamily Conventional
38 Telegraph Marketplace Shopping Center Retail Anchored
39 Summit Gardens Apartments Multifamily Conventional
40 FDA - Lenexa, KS Office Suburban
41 Twin Oaks Business & Technology Center Office Suburban
42 Pointe West Medical Office Building Office Medical
43 Park 80 East Office Suburban
44 The Sevilla Multifamily Conventional
45 Kroger Shops & 7339 Forest Hill Avenue Retail Various
45.1 Kroger Shops Retail Anchored
45.2 7339 Forest Hill Avenue Retail Shadow Anchored
46 Sierra Royal Mobile Home Park Mobile Home Park Mobile Home Park
47 587 Fifth Avenue Office CBD
48 Park Knoll Apartments Multifamily Conventional
49 Hampton Inn & Suites - St. Petersburg, FL Hospitality Limited Service
50 Three South Executive Park Office Suburban
51 1213-1229 West Diversey Parkway & 2751-2753 North Magnolia Street Multifamily Conventional
MORTGAGE
LOAN
NUMBER PROPERTY NAME GENERAL PROPERTY TYPE SPECIFIC PROPERTY TYPE
- ------------------------------------------------------------------------------------------------------------------------------------
52 Martinazzi Square Retail Center Retail Unanchored
53 The Crystal Village Apartments Multifamily Conventional
54 WCI Prudential Building Office Suburban
55 Eckerd - Fairfax, VA Retail Unanchored
56 Alamance Crossing Retail Anchored
57 1939 North Lincoln Avenue Multifamily Conventional
58 Great American Plaza Building A-1 Office Suburban
59 Perry Hill Estates and Ridgeview Heights Portfolio Multifamily Conventional
59.1 Perry Hill Estates Multifamily Conventional
59.2 Ridgeview Heights Apartments Multifamily Conventional
60 Piggly Wiggly - Menasha, WI Retail Anchored
61 Walgreens - Cypress, TX Retail Anchored
62 Suburban Lodge - Stuart, FL Hospitality Limited Service Extended Stay
63 Stoughton Plaza Shopping Center Retail Anchored
64 Manakin Trade Center Office Office/Flex
65 Eckerd - Jupiter, FL Retail Unanchored
66 CVS - Columbus, OH Retail Anchored
67 1230 & 1246 Taylor Street Office Suburban
68 Good Guys - Stevenson Ranch, CA Retail Unanchored
69 Renaissance Center Retail Unanchored
70 Alban Retail Center Retail Unanchored
71 Walgreens - Oakland Park, FL Retail Anchored
72 Mission Viejo Retail Building Retail Shadow Anchored
73 Broad Trace Apartments Multifamily Conventional
74 Walgreens - Beaumont, TX Retail Anchored
75 482-484 West Deming Place Multifamily Conventional
76 Cape Coral Mini-Storage Self Storage Self Storage
77 Sears Hardware - Portage, IN Land Anchored Retail
78 Embassy House Apartments Multifamily Conventional
79 507-509 West Wrightwood Avenue Multifamily Conventional
80 734-742 West Oakdale Avenue Multifamily Conventional
81 Kinko's - Albuquerque, NM Retail Shadow Anchored
INITIAL DEPOSIT TO
MORTGAGE MONTHLY ANNUAL DEPOSIT CAPITAL
LOAN MONTHLY TAX INSURANCE TO REPLACEMENT IMPROVEMENTS INITIAL TI/LC ONGOING TI/LC
NUMBER ESCROW ESCROW RESERVES RESERVE ESCROW FOOTNOTE
- ------------------------------------------------------------------------------------------------------------------------------------
1
2 222,900 108,333 225,655 (1)
3 305,500 18,837 56,232 425,000 (1)
4 79,639 326,238
5 33,333 3,537 31,151
6
7 61,770 5,680 7,687 (1)
8 32,053 6,001 85,500
9 21,597 35,083 232,078 371,625
10 32,483 5,166 42,750 23,000
11 16,798 2,955 32,850
12 6,878 2,144 7,725 90,000 (1)
13 9,958
14 21,146 3,389 39,825 15,000
15 16,823 6,496 34,000 31,239
16 10,084 1,277 8,712 (1)
17 17,405 3,072
18 13,300 6,667 57,356 6,250
19 10,910 2,595
20 13,901 4,192 31,488 22,846 150,000 (1)
21 10,910 2,855 33,750 6,250
22 19,763 3,419 39,600 11,031
23 16,996 9,459 3,782 (1)
24 26,327 2,850 9,073 5,000
25 25,614 2,083 9,503 (1)
26 11,326 8,217 8,123
27 5,214
28 10,821 819 3,750
29 5,129
30 6,250 1,833
31 13,329 4,057 26,496 76,766
32 22,435 200,000
33 4,244
34 3,850 3,298 23,608
35 6,342 2,806 33,504 2,675
36 6,571 12,191 12,188
37 22,295 4,440 117,572 143,231
38 3,945 1,166 2,426 432,400 (1)
39 14,948 3,272 32,001 4,375
40 10,746
41 12,276
42 8,801 1,553 6,080 2,563 (1)
43 16,130 17,440 350,000 (1)
44 14,644 3,925 28,500 40,938
45 3,400 769 1,917
45.1
45.2
46 5,541 648 11,112
47 31,545 3,726 4,498 4,500 400,000
48 1,700 3,042 48,000 47,375
49 13,333 117,636
50 3,714 637 (1)
INITIAL DEPOSIT TO
MORTGAGE MONTHLY ANNUAL DEPOSIT CAPITAL
LOAN MONTHLY TAX INSURANCE TO REPLACEMENT IMPROVEMENTS INITIAL TI/LC ONGOING TI/LC
NUMBER ESCROW ESCROW RESERVES RESERVE ESCROW FOOTNOTE
- ------------------------------------------------------------------------------------------------------------------------------------
51 4,099 1,007 11,500 2,250
52 8,302 2,888
53 6,043 2,728 40,800 62,750
54 12,472 11,037 50,000 (1)
55
56 4,411 1,313 6,335 19,375
57 6,570 1,209 12,825 2,625
58 2,263 429 2,844 (1)
59 5,777 2,778 26,496 59,715
59.1
59.2
60
61 2,184
62 5,943 1,368 53,439
63 9,245 2,875 (1)
64 2,148 4,965
65
66
67 6,864 3,000 (1)
68 742 3,146 150,000 (1)
69 2,128 1,039 3,918 (1)
70 2,808 343 2,700 225 1,250 (1)
71
72 4,044 789 5,858 (1)
73 3,049 767 10,800
74 2,025
75 2,906 225 1,518
76 2,814 895 9,668
77
78 2,119 1,047 13,200 18,750
79 960 302 2,023 3,625
80 1,465 312 2,727 10,194
81 1,614 987 (1)
(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.
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST SERIES 2004-C14
ANNEX A-4
COMMERCIAL TENANT SCHEDULE
MORTGAGE CUT-OFF NUMBER
LOAN GENERAL SPECIFIC DATE LOAN OF UNITS UNIT OF
NUMBER PROPERTY NAME PROPERTY TYPE PROPERTY TYPE BALANCE ($) (UNITS) MEASURE
- ------------------------------------------------------------------------------------------------------------------------------------
1 Park Place Mall Retail Anchored 149,846,168.99 467,141 Sq. Ft.
2 11 Madison Avenue Office CBD 82,000,000.00 2,256,552 Sq. Ft.
3 444 North Michigan Avenue Office CBD 71,500,000.00 511,201 Sq. Ft.
4 Independence Plaza Office CBD 44,000,000.00 561,957 Sq. Ft.
5 FBI Field Office - Baltimore, MD Office Suburban 41,900,000.00 155,755 Sq. Ft.
6 Barneys New York - Beverly Hills, CA Retail Shadow Anchored 37,000,000.00 114,978 Sq. Ft.
7 1750 H Street Office CBD 35,400,000.00 111,373 Sq. Ft.
12 Bel Villaggio, Phases I & II Retail Shadow Anchored 17,985,041.60 77,251 Sq. Ft.
16 Valley Center Towers - Phase I Office Suburban 16,000,000.00 124,462 Sq. Ft.
18 Hot Springs Mall Retail Anchored 15,000,000.00 318,645 Sq. Ft.
20 Glasshouse Square Shopping Center Retail Anchored 14,487,258.80 101,893 Sq. Ft.
23 Weston Commercial Center Mixed Use Office/Flex 12,989,839.68 111,989 Sq. Ft.
24 Elmbrook Plaza Shopping Center Retail Anchored 12,850,000.00 219,665 Sq. Ft.
25 Rocky Point Plaza Retail Anchored 11,840,000.00 95,029 Sq. Ft.
26 Rockdale Square Shopping Center Retail Anchored 11,500,000.00 102,707 Sq. Ft.
29 The Vineyards Shopping Center Retail Anchored 10,590,934.45 79,047 Sq. Ft.
31 East Jefferson Medical Office Building Office Medical 10,000,000.00 98,153 Sq. Ft.
32 Kingwood Shopping Center Retail Anchored 9,850,000.00 151,154 Sq. Ft.
38 Telegraph Marketplace Shopping Center Retail Anchored 8,492,673.77 60,742 Sq. Ft.
40 FDA - Lenexa, KS Office Suburban 8,000,000.00 53,730 Sq. Ft.
41 Twin Oaks Business & Technology Center Office Suburban 7,200,000.00 125,641 Sq. Ft.
42 Pointe West Medical Office Building Office Medical 7,108,484.08 40,535 Sq. Ft.
43 Park 80 East Office Suburban 6,993,523.39 83,049 Sq. Ft.
45 Kroger Shops & 7339 Forest Hill Avenue Retail Various 6,800,000.00 77,086 Sq. Ft.
45.1 Kroger Shops Retail Anchored 71,021 Sq. Ft.
45.2 7339 Forest Hill Avenue Retail Shadow Anchored 6,065 Sq. Ft.
47 587 Fifth Avenue Office CBD 6,388,447.55 37,486 Sq. Ft.
50 Three South Executive Park Office Suburban 6,000,000.00 54,353 Sq. Ft.
52 Martinazzi Square Retail Center Retail Unanchored 5,850,000.00 50,836 Sq. Ft.
54 WCI Prudential Building Office Suburban 5,700,000.00 61,317 Sq. Ft.
55 Eckerd - Fairfax, VA Retail Unanchored 5,545,973.51 12,738 Sq. Ft.
56 Alamance Crossing Retail Anchored 5,250,000.00 63,350 Sq. Ft.
58 Great American Plaza Building A-1 Office Suburban 4,186,118.68 26,307 Sq. Ft.
60 Piggly Wiggly - Menasha, WI Retail Anchored 3,856,000.00 68,485 Sq. Ft.
61 Walgreens - Cypress, TX Retail Anchored 3,696,769.58 14,560 Sq. Ft.
63 Stoughton Plaza Shopping Center Retail Anchored 3,444,000.00 92,452 Sq. Ft.
64 Manakin Trade Center Office Office/Flex 3,440,000.00 49,648 Sq. Ft.
65 Eckerd - Jupiter, FL Retail Unanchored 3,197,234.75 10,908 Sq. Ft.
66 CVS - Columbus, OH Retail Anchored 3,150,000.00 11,348 Sq. Ft.
67 1230 & 1246 Taylor Street Office Suburban 3,094,136.78 34,278 Sq. Ft.
68 Good Guys - Stevenson Ranch, CA Retail Unanchored 3,055,058.47 20,970 Sq. Ft.
69 Renaissance Center Retail Unanchored 2,997,546.10 26,120 Sq. Ft.
70 Alban Retail Center Retail Unanchored 2,698,019.10 18,000 Sq. Ft.
71 Walgreens - Oakland Park, FL Retail Anchored 2,650,000.00 13,905 Sq. Ft.
72 Mission Viejo Retail Building Retail Shadow Anchored 2,500,000.00 23,340 Sq. Ft.
74 Walgreens - Beaumont, TX Retail Anchored 2,025,000.00 13,500 Sq. Ft.
77 Sears Hardware - Portage, IN Land Anchored Retail 1,600,000.00 55,344 Sq. Ft.
81 Kinko's - Albuquerque, NM Retail Shadow Anchored 940,104.57 6,580 Sq. Ft.
MORTGAGE LARGEST LARGEST
LOAN TENANT TENANT
NUMBER LARGEST TENANT % OF NRA EXP. DATE
- -------------------------------------------------------------------------------------------------
1 Century Theaters 15.69% 08/10/21
2 Credit Suisse First Boston 85.15% Multiple Spaces
3 Shefsky & Froelich Limited 8.53% 05/30/05
4 AT&T 10.67% 08/31/08
5 United States Government 100.00% 06/30/14
6 Barneys New York, Inc. 100.00% 01/27/19
7 National Treasury Employees Union 56.76% 12/31/17
12 Macaroni Grill 8.90% 04/30/18
16 University of Phoenix 46.19% 05/31/13
18 Sears 22.12% 03/02/07
20 Sports Arena Fitness (Gold's Gym) 33.33% Multiple Spaces
23 Park Avenue Gymnastics at Weston 10.72% 11/24/10
24 Kohl's Dept Store 58.26% 03/31/13
25 APW Supermarkets, Inc. (Waldbaums) 59.68% 01/31/20
26 Publix 54.60% 05/24/14
29 Publix Supermarket 56.01% 01/31/23
31 Cardiovascular Specialties, Inc. 7.86% Multiple Spaces
32 Stein Mart 24.83% 10/31/05
38 Bed Bath and Beyond 36.31% 01/31/15
40 FDA-USA 100.00% Multiple Spaces
41 ESCO, LLC 12.62% 06/30/05
42 Neuro Spinal Associates 60.71% 06/30/14
43 Liberty Mutual 29.54% 10/31/07
45 Various Various Various
45.1 Kroger (Ground Lease) 79.34% 09/30/23
45.2 Wendy's 54.74% 08/30/19
47 Preferred Jewelbrokers 17.65% 02/01/13
50 Decision One Mortgage 34.12% 06/30/08
52 Head to Toes 10.76% 12/31/08
54 Prudential Florida Realty 22.20% 01/31/07
55 Eckerd 100.00% 11/18/33
56 Bi-Lo 67.37% 03/31/15
58 Orgill Singer Associates 76.03% 04/25/16
60 Fresh Brands (dba Piggly Wiggly) 100.00% 09/01/18
61 Walgreens 100.00% 03/31/79
63 Pic N Save 55.32% 12/31/08
64 Intellibot Robotics 29.39% 12/01/08
65 Eckerd 100.00% 08/20/23
66 CVS 100.00% 12/28/17
67 CSOSA 69.66% 08/31/15
68 The Good Guys, Inc. 100.00% 02/29/12
69 Savory Chef 15.62% 07/31/09
70 Elany Image Day Spa 16.67% 08/31/09
71 Walgreens 100.00% 09/30/60
72 Party America 53.56% 12/31/05
74 Walgreens 100.00% 09/30/44
77 Sears 100.00% 04/30/11
81 Kinko's 100.00% 06/02/09
MORTGAGE 2ND LARGEST 2ND LARGEST
LOAN TENANT % TENANT EXP.
NUMBER 2ND LARGEST TENANT NAME OF NRA (%) DATE
- ------------------------------------------------------------------------------------------------------
1 Borders Books & Music 5.75% 03/31/20
2 Aon (sublet to IBM) 6.12% 04/30/13
3 Gordon & Glickson LLC 6.06% 12/31/07
4 Questar 6.82% 08/31/07
5
6
7 Bank-Fund Staff Federal Credit Union 21.41% 09/30/13
12 Stuffs Pizza 5.60% 04/30/23
16 Lincoln National Life Insurance Company 18.56% Multiple Spaces
18 JC Penney 21.20% 02/28/07
20 Staples 27.33% 08/31/11
23 St. Katherine Drexel Catholic Church 9.76% 03/19/07
24 G&R - 124 Street Foods, Inc. 21.36% 04/30/14
25 Maces Closeout City of Rocky Point, Inc. 11.58% 10/31/12
26 Cato 5.84% 01/31/07
29 Blockbuster Video 5.31% 03/31/10
31 East Jefferson Gen. Hospital 7.84% Multiple Spaces
32 Sears 14.14% 08/25/07
38 Best Buy 33.79% 01/31/15
40
41 Oregon Micro Systems Inc. 9.13% 10/31/07
42 Axcess Diagnostics 17.81% 06/30/14
43 Sealed Air Corporation 25.51% 08/31/08
45 Various Various Various
45.1 Downtown Locker Room 5.53% 04/30/09
45.2 Chubby's Convenience Store 45.26% 01/31/12
47 Premier Gem 16.01% 12/31/05
50 Loeffler Associates 24.94% 11/30/11
52 Prudential Northwest Properties 9.67% 02/28/05
54 Fenster & Faerber, P.A. 9.50% 09/30/07
55
56 CVS 16.92% 01/31/15
58 Huntington Development 9.28% 07/15/09
60
61
63 Wal-Mart 44.68% 04/30/08
64 Luck Stone Corporation 20.70% 03/01/08
65
66
67 High Road School 30.34% Multiple Spaces
68
69 Ihloff Salon/Spa 15.31% 04/30/13
70 Sally Beauty Supplies 15.56% 05/31/09
71
72 Trader Joe's 46.44% 04/30/13
74
77
81
MORTGAGE 3RD LARGEST 3RD LARGEST
LOAN TENANT % TENANT EXP.
NUMBER 3RD LARGEST TENANT NAME OF NRA DATE
- -------------------------------------------------------------------------------------------------
1 Old Navy 4.91% 01/31/05
2 Omnicom 4.23% 09/30/08
3 TMP Worldwide Inc. 6.03% 09/30/10
4 Kennedy Christopher Childs & Fogg 5.39% 02/28/10
5
6
7 Wells Fargo 12.40% 10/31/12
12 USA Credit Union 5.00% 02/28/08
16 FDIC 7.63% 03/31/09
18 Fye Music & Movies 3.99% 01/31/10
20 CEC Entertainment, Inc. 11.31% 04/18/13
23 Chung's Tae Kwon Do Center 5.40% 04/18/11
24 Occucenter 5.01% 06/30/09
25 Pier 1 Imports 9.66% 02/29/12
26 Dollar Tree 4.61% 12/31/04
29 Chateau Animal Hospital 3.40% 01/31/09
31 Riley Sibley, MD 4.80% 10/31/09
32 On the Park, Inc. 3.31% 10/31/11
38 4 Ever Golf, LLC 5.86% 06/14/09
40
41 Direct Repair Laboratories 9.12% 11/30/04
42 Muscular Ambulatory Surgery Center 11.36% 06/30/14
43 GSA 22.69% 09/14/06
45 Various Various Various
45.1 Movie Gallery 3.87% 04/30/09
45.2
47 Jean & Alex 11.11% 03/31/14
50 Navigant International 9.82% 10/31/07
52 Wong's Chinese Restaurant 9.49% 12/31/07
54 Kindred Hospitals East, LLC 7.11% 10/21/04
55
56 Movie Gallery 6.31% 11/30/08
58 Dream Home Realty, LLC 7.37% 05/09/09
60
61
63
64 Delta Group of Virginia 19.91% 10/01/08
65
66
67
68
69 US Cellular 11.79% 11/30/08
70 Bozzelli's 15.56% 09/30/07
71
72
74
77
81
[THIS PAGE INTENTIONALLY LEFT BLANK.]
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST SERIES 2004-C14
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
(CROSSED & PORTFOLIOS)
ANNEX A-5
MORTGAGE
LOAN
NUMBER PROPERTY NAME CITY STATE
- --------------------------------------------------------------------------------------------------
Various BJB Portfolio Chicago IL
- --------------------------------------------------------------------------------------------------
10 4100 North Marine Drive Chicago IL
11 21-27 East Delaware Place Chicago IL
14 451 West Wrightwood Avenue Chicago IL
21 18 East Elm Street Chicago IL
22 443 West Wrightwood Avenue Chicago IL
51 1213-1229 West Diversey Parkway & 2751-2753 North Magnolia Street Chicago IL
57 1939 North Lincoln Avenue Chicago IL
75 482-484 West Deming Place Chicago IL
79 507-509 West Wrightwood Avenue Chicago IL
80 734-742 West Oakdale Avenue Chicago IL
Various Stoughton / Piggly Wiggly Portfolio Various WI
- --------------------------------------------------------------------------------------------------
60 Piggly Wiggly - Menasha, WI Menasha WI
63 Stoughton Plaza Shopping Center Stoughton WI
45 Kroger Shops & 7339 Forest Hill Avenue Richmond VA
- --------------------------------------------------------------------------------------------------
45.1 Kroger Shops Richmond VA
45.2 7339 Forest Hill Avenue Richmond VA
59 Perry Hill Estates and Ridgeview Heights Portfolio Various CT
- --------------------------------------------------------------------------------------------------
59.1 Perry Hill Estates Ashford CT
59.2 Ridgeview Heights Apartments Willington CT
% OF
MORTGAGE CUT-OFF AGGREGATE
LOAN CROSS COLLATERALIZED AND CROSS ORIGINAL LOAN DATE LOAN CUT-OFF DATE
NUMBER DEFAULTED LOAN FLAG BALANCE ($) BALANCE ($) BALANCE
- ---------------------------------------------------------------------------------------------------------------------------------
Various BJB Portfolio 111,486,000.00 111,152,523.90 10.13%
- ---------------------------------------------------------------------------------------------------------------------------------
10 BJB Portfolio 30,051,000.00 29,958,221.25 2.73%
11 BJB Portfolio 20,207,000.00 20,143,496.19 1.84%
14 BJB Portfolio 17,520,000.00 17,464,940.52 1.59%
21 BJB Portfolio 14,240,000.00 14,195,248.47 1.29%
22 BJB Portfolio 14,198,000.00 14,153,380.44 1.29%
51 BJB Portfolio 6,000,000.00 5,988,012.78 0.55%
57 BJB Portfolio 5,040,000.00 5,028,704.44 0.46%
75 BJB Portfolio 1,750,000.00 1,746,077.94 0.16%
79 BJB Portfolio 1,360,000.00 1,356,951.99 0.12%
80 BJB Portfolio 1,120,000.00 1,117,489.88 0.10%
Various Stoughton / Piggly Wiggly Portfolio 7,300,000.00 7,300,000.00 0.67%
- ---------------------------------------------------------------------------------------------------------------------------------
60 Stoughton / Piggly Wiggly Portfolio 3,856,000.00 3,856,000.00 0.35%
63 Stoughton / Piggly Wiggly Portfolio 3,444,000.00 3,444,000.00 0.31%
45 6,800,000.00 6,800,000.00 0.62%
- ---------------------------------------------------------------------------------------------------------------------------------
45.1
45.2
59 4,120,000.00 4,116,603.14 0.38%
- ---------------------------------------------------------------------------------------------------------------------------------
59.1
59.2
REMAINING ORIGINAL MONTHLY
MORTGAGE ORIGINAL TERM TERM TO REMAINING AMORT REMAINING P&I MATURITY DATE
LOAN TO MATURITY OR MATURITY OR IO PERIOD TERM AMORT TERM PAYMENTS OR ARD BALLOON
NUMBER ARD (MOS.) ARD (MOS.) (MOS.) (MOS.) (MOS.) ($) BALANCE ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Various Various Various 360 Various 619,140.62 99,311,561.28
- ------------------------------------------------------------------------------------------------------------------------------------
10 84 81 360 357 167,996.05 26,806,124.12
11 84 81 360 357 111,959.57 17,994,771.81
14 84 81 360 357 97,071.89 15,601,939.95
21 84 81 360 357 78,898.61 12,681,029.20
22 84 81 360 357 78,665.91 12,643,626.62
51 120 118 360 358 34,444.74 5,027,182.82
57 60 58 360 358 27,240.93 4,652,287.82
75 60 58 360 358 9,458.65 1,615,378.14
79 60 58 360 358 7,350.73 1,255,379.06
80 60 58 360 358 6,053.54 1,033,841.74
Various 60 58 10 300 300 45,309.20 6,725,654.98
- ------------------------------------------------------------------------------------------------------------------------------------
60 60 58 10 300 300 23,933.19 3,552,619.86
63 60 58 10 300 300 21,376.01 3,173,035.12
45 120 120 360 360 40,115.98 5,740,651.62
- ------------------------------------------------------------------------------------------------------------------------------------
45.1
45.2
59 120 119 360 359 24,754.48 3,496,107.76
- ------------------------------------------------------------------------------------------------------------------------------------
59.1
59.2
CUT-OFF
DATE
LOAN
MORTGAGE CUT-OFF LTV RATIO NUMBER AMOUNT UW NET
LOAN APPRAISED DATE LTV AT MATURITY OF UNITS UNIT OF PER (UNIT) CASH FLOW
NUMBER VALUE ($) DSCR (X) RATIO OR ARD (UNITS) MEASURE ($) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Various 141,900,000.00 1.23 78.33% 69.99% 964 Units 115,303.45 9,133,794.62
- ------------------------------------------------------------------------------------------------------------------------------------
10 38,400,000.00 1.20 78.02% 69.81% 190 Units 157,674.85 2,421,118.54
11 25,700,000.00 1.20 78.38% 70.02% 146 Units 137,969.15 1,611,730.28
14 21,900,000.00 1.26 79.75% 71.24% 177 Units 98,671.98 1,466,311.40
21 17,800,000.00 1.20 79.75% 71.24% 150 Units 94,634.99 1,137,188.78
22 18,100,000.00 1.27 78.20% 69.85% 176 Units 80,416.93 1,198,780.76
51 8,400,000.00 1.28 71.29% 59.85% 46 Units 130,174.19 529,489.72
57 6,300,000.00 1.30 79.82% 73.85% 57 Units 88,222.88 424,022.68
75 2,200,000.00 1.20 79.37% 73.43% 6 Units 291,012.99 136,592.76
79 1,700,000.00 1.28 79.82% 73.85% 7 Units 193,850.28 112,755.80
80 1,400,000.00 1.32 79.82% 73.85% 9 Units 124,165.54 95,803.90
Various 9,750,000.00 1.39 74.87% 68.98% 160,937 Sq. Ft. 45.36 757,644.05
- ------------------------------------------------------------------------------------------------------------------------------------
60 5,150,000.00 1.43 74.87% 68.98% 68,485 Sq. Ft. 56.30 410,353.56
63 4,600,000.00 1.35 74.87% 68.98% 92,452 Sq. Ft. 37.25 347,290.49
45 8,500,000.00 1.31 80.00% 67.54% 77,086 Sq. Ft. 88.21 632,785.25
- ------------------------------------------------------------------------------------------------------------------------------------
45.1 6,300,000.00 71,021 Sq. Ft.
45.2 2,200,000.00 6,065 Sq. Ft.
59 5,900,000.00 1.36 69.77% 59.26% 96 Units 42,881.28 402,807.67
- ------------------------------------------------------------------------------------------------------------------------------------
59.1 3,200,000.00 48 Units
59.2 2,700,000.00 48 Units
[THIS PAGE INTENTIONALLY LEFT BLANK.]
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST SERIES 2004-C14
ANNEX A-6 DEBT SERVICE PAYMENT SCHEDULE FOR FBI FIELD OFFICE - BALTIMORE, MD
LOAN PAY PERIOD DEBT SERVICE ($) LOAN PAY PERIOD DEBT SERVICE ($)
- --------------- -------------------- --------------- -----------------
1 306,014.75 55 257,713.06
2 306,014.75 56 257,713.06
3 306,014.75 57 257,713.06
4 306,014.75 58 257,713.06
5 306,014.75 59 257,713.06
6 306,014.75 60 257,713.06
7 306,014.75 61 257,713.06
8 306,014.75 62 257,713.06
9 306,014.75 63 257,713.06
10 306,014.75 64 257,713.06
11 306,014.75 65 257,713.06
12 306,014.75 66 257,713.06
13 219,493.33 67 257,713.06
14 212,412.90 68 257,713.06
15 219,493.33 69 257,713.06
16 212,412.90 70 257,713.06
17 219,493.33 71 257,713.06
18 219,493.33 72 257,713.06
19 198,252.04 73 257,713.06
20 219,493.33 74 257,713.06
21 212,412.90 75 257,713.06
22 219,493.33 76 257,713.06
23 212,412.90 77 257,713.06
24 219,493.33 78 257,713.06
25 219,493.33 79 257,713.06
26 212,412.90 80 257,713.06
27 219,493.33 81 257,713.06
28 212,412.90 82 257,713.06
29 219,493.33 83 257,713.06
30 219,493.33 84 257,713.06
31 198,252.04 85 257,713.06
32 219,493.33 86 257,713.06
33 212,412.90 87 257,713.06
34 219,493.33 88 257,713.06
35 212,412.90 89 257,713.06
36 219,493.33 90 257,713.06
37 257,713.06 91 257,713.06
38 257,713.06 92 257,713.06
39 257,713.06 93 257,713.06
40 257,713.06 94 257,713.06
41 257,713.06 95 257,713.06
42 257,713.06 96 257,713.06
43 257,713.06 97 257,713.06
44 257,713.06 98 257,713.06
45 257,713.06 99 257,713.06
46 257,713.06 100 257,713.06
47 257,713.06 101 257,713.06
48 257,713.06 102 257,713.06
49 257,713.06 103 257,713.06
50 257,713.06 104 257,713.06
51 257,713.06 105 257,713.06
52 257,713.06 106 257,713.06
53 257,713.06 107 257,713.06
54 257,713.06 108 37,426,999.37
[THIS PAGE INTENTIONALLY LEFT BLANK.]
ANNEX B
[LASALLE BANK LOGO OMITTED] WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 09/17/2004
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 09/17/2004
SERIES 2004-C14 Prior Payment: N/A
Next Payment: 10/15/2004
Record Date: 08/31/2004
ABN AMRO ACCT: XXXXXX
Administrator: Analyst:
REPORTING PACKAGE TABLE OF CONTENTS
=============================================== =========================================== ========================================
Page(s)
-------
Issue Id: WBCM4C14 REMIC Certificate Report Closing Date: 08/20/2004
Monthly Data File Name: WBCM4C14_YYYYMM_3.ZIP Bond Interest Reconciliation First Payment Date: 09/17/2004
Cash Reconciliation Summary Assumed Final Payment Date: 09/17/2034
=============================================== 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
MASTER SERVICER: Wachovia Bank, National Association
SPECIAL SERVICER: Allied Capital Corporation
RATING AGENCY: Moody's Investor Service, Inc./Standard & Poor's Ratings Services
=====================================================================================================
========================================================================
INFORMATION IS AVAILABLE FOR THIS ISSUE FROM THE FOLLOWING SOURCES
------------------------------------------------------------------------
LaSalle Web Site www.etrustee.net
Servicer Website
LaSalle Factor Line (800) 246-5761
========================================================================
07/30/2004 - 10:16 (MXXX-MXXX) (c) 2000 LaSalle Bank, N.A.
B-1
[LASALLE BANK LOGO OMITTED] WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 09/17/2004
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 09/17/2004
SERIES 2004-C14 Prior Payment: N/A
WAC: Next Payment: 10/15/2004
WA Life Term: Record Date: 08/31/2004
WA Amort Term: ABN AMRO ACCT: XXXXXX
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 Per 1,000
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
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
07/30/2004 - 10:16 (MXXX-MXXX) (c) 2000 LaSalle Bank, N.A.
B-2
[LASALLE BANK LOGO OMITTED] WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 09/17/2004
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 09/17/2004
SERIES 2004-C14 Prior Payment: N/A
Next Payment: 10/15/2004
Record Date: 08/31/2004
ABN AMRO ACCT: XXXXXX
BOND INTEREST RECONCILIATION
====================================================================================================================================
Deductions Additions
----------------------------------- --------------------------------------------------
Accrual Accrued Deferred & Prior Int. Accrual Other
-------------- Pass Thru Certificate Allocable Accretion Interest Int. Short- on prior Prepayment Interest
Class Method Days Rate Interest PPIS Interest Loss/Exp falls Due Shortfall(3) Penalties Proceeds(1)
- ------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
0.00 0.00 0.00 0.00 0.00 0.00 0.00
====================================================================================================================================
======================== =======================================================================================
Remaining
Distributable Interest Current Period Outstanding Credit Support
Certificate Payment (Shortfall)/ Interest ------------------------------
Class Interest(2) Amount Recovery Shortfalls Original Current(4)
- ------------------------ ---------------------------------------------------------------------------------------
------------------------------------------------------------------
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).
07/30/2004 - 10:16 (MXXX-MXXX) (c) 2000 LaSalle Bank, N.A.
B-3
[LASALLE BANK LOGO OMITTED] WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 09/17/2004
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 09/17/2004
SERIES 2004-C14 Prior Payment: N/A
Next Payment: 10/15/2004
Record Date: 08/31/2004
ABN AMRO ACCT: XXXXXX
CASH RECONCILIATION SUMMARY
- -------------------------------------------- --------------------------------------- ---------------------------------------------
INTEREST SUMMARY PRINCIPAL SUMMARY SERVICING FEE SUMMARY
- -------------------------------------------- --------------------------------------- ---------------------------------------------
Current Scheduled Interest SCHEDULED PRINCIPAL: Current Servicing Fees
Less Deferred Interest -------------------- Plus Fees Advanced for PPIS
Less PPIS Reducing Scheduled Int Current Scheduled Principal Less Reducation for PPIS
Plus Gross Advance Interest Advanced Scheduled Principal Plus Delinquent Servicing Fees
Less ASER Interest Adv Reduction --------------------------------------- ---------------------------------------------
Less Other Interest Not Advanced Scheduled Principal Total Servicing Fees
Less Other Adjustment --------------------------------------- ---------------------------------------------
- -------------------------------------------- UNSCHEDULED PRINCIPAL:
Total ----------------------
- -------------------------------------------- Curtailments
UNSCHEDULED INTEREST: Advanced Scheduled Principal
- -------------------------------------------- Liquidation Proceeds
Prepayment Penalties Repurchase Proceeds
Yield Maintenance Penalties Other Principal Proceeds
Other Interest Proceeds ---------------------------------------
- -------------------------------------------- Total Unscheduled Principal
Total ---------------------------------------
- -------------------------------------------- Remittance Principal
Less Fees Paid to Servicer ---------------------------------------
Less Fee Strips Paid by Servicer Remittance P&I Due Trust
- -------------------------------------------- ---------------------------------------
LESS FEES & EXPENSES PAID BY/TO SERVICER Remittance P&I Due Certs ---------------------------------------------
- -------------------------------------------- --------------------------------------- PPIS SUMMARY
Special Servicing Fees ---------------------------------------------
Workout Fees --------------------------------------- Gross PPIS
Liquidation Fees POOL BALANCE SUMMARY Reduced by PPIE
Interest Due Serv on Advances --------------------------------------- Reduced by Shortfalls in Fees
Non Recoverable Advances BALANCE COUNT Reduced by Other Amounts
Misc. Fees & Expenses --------------------------------------- ---------------------------------------------
- -------------------------------------------- Beginning Pool PPIS Reducing Scheduled Interest
Plus Trustee Fees Paid by Servicer Scheduled Principal ---------------------------------------------
- -------------------------------------------- Unscheduled Principal PPIS Reducing Servicing Fee
Total Unscheduled Fees & Expenses Deferred Interest ---------------------------------------------
- -------------------------------------------- Liquidations PPIS Due Certificate
Total Interest Due Trust Repurchases ---------------------------------------------
- -------------------------------------------- ---------------------------------------
LESS FEES & EXPENSES PAID BY/TO TRUST Ending Pool ---------------------------------------------
- -------------------------------------------- --------------------------------------- ADVANCE SUMMARY (ADVANCE MADE BY SERVICER)
Trustee Fee ---------------------------------------------
Fee Strips Principal Interest
Misc. Fees ---------------------------------------------
Interest Reserve Withholding Prior Outstanding
Plus Interest Reserve Deposit Plus Current Period
- -------------------------------------------- Less Recovered
Total Less Non Recovered
- -------------------------------------------- ---------------------------------------------
Total Interest Due Certs Ending Outstanding
- -------------------------------------------- ---------------------------------------------
07/30/2004 - 10:16 (MXXX-MXXX) (c) 2000 LaSalle Bank, N.A.
B-4
[LASALLE BANK LOGO OMITTED] WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 09/17/2004
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 09/17/2004
SERIES 2004-C14 Prior Payment: N/A
Next Payment: 10/15/2004
Record Date: 08/31/2004
ABN AMRO ACCT: XXXXXX
ASSET BACKED FACTS - 15 MONTH HISTORICAL LOAN STATUS SUMMARY
============ ======================================================================= ==============================================
Deliquency Aging Categories Special Event Categories(1)
----------------------------------------------------------------------- ---------------------------------------------
Delinq 1 Month Delinq 2 Months Delinq 3 Months Foreclosure REO Modifications Specially Serviced Bankruptcy
Distribution -------------- --------------- --------------- ----------- --------- ------------- ------------------ ----------
Date # Balance # Balance # Balance # Balance # Balance # Balance # Balance # Balance
============ ======================================================================= =============================================
09/17/04
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
============ ======================================================================= =============================================
(1) Modifications, Specially Serviced & Bankruptcy Totals are Included in the
Appropriate Delinquency Aging Category.
07/30/2004 - 10:16 (MXXX-MXXX) (c) 2000 LaSalle Bank, N.A.
B-5
[LASALLE BANK LOGO OMITTED] WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 09/17/2004
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 09/17/2004
SERIES 2004-C14 Prior Payment: N/A
Next Payment: 10/15/2004
Record Date: 08/31/2004
ABN AMRO ACCT: XXXXXX
ASSET BACKED FACTS - 15 MONTH HISTORICAL PAYOFF/LOSS SUMMARY
============ ================================================================================= ===================================
Appraisal Realized
Ending Pool(1) Payoffs(2) Penalties Reduct.(2) Liquidations(2) Losses(2) Remaining Term Curr Weighted Avg.
Distribution -------------- ---------- --------- ---------- --------------- ----------- -------------- ------------------
Date # Balance # Balance # Amount # Balance # Balance # Amount Life Amort. Coupon Remit
============ ================================================================================= ===================================
09/17/04
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
- ------------ ----------------------------------------------------------------------- ---------------------------------------------
============ ======================================================================= =============================================
(1) Percentage based on pool as of cutoff.
(2) Percentage based on pool as of beginning of period.
07/30/2004 - 10:16 (MXXX-MXXX) (c) 2000 LaSalle Bank, N.A.
B-6
[LASALLE BANK LOGO OMITTED] WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 09/17/2004
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 09/17/2004
SERIES 2004-C14 Prior Payment: N/A
Next Payment: 10/15/2004
Record Date: 08/31/2004
ABN AMRO ACCT: XXXXXX
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
========================
07/30/2004 - 10:16 (MXXX-MXXX) (c) 2000 LaSalle Bank, N.A.
B-7
[LASALLE BANK LOGO OMITTED] WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 09/17/2004
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 09/17/2004
SERIES 2004-C14 Prior Payment: N/A
Next Payment: 10/15/2004
Record Date: 08/31/2004
ABN AMRO ACCT: XXXXXX
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 1. P&I Advance - Loan delinquent 1 month 4. Matured Balloon/Assumed Scheduled
B. P&I Advance - Late Payment but 2. P&I Advance - Loan delinquent 2 months 7. P&I Advance (Foreclosure)
(less than) 1 month delinq 3. P&I Advance - Loan delinquent 3 months or More 9. P&I Advance (REO)
====================================================================================================================================
** Oustanding P&I Advances include the current period P&I Advance
07/30/2004 - 10:16 (MXXX-MXXX) (c) 2000 LaSalle Bank, N.A.
B-8
[LASALLE BANK LOGO OMITTED] WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 09/17/2004
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 09/17/2004
SERIES 2004-C14 Prior Payment: N/A
Next Payment: 10/15/2004
Record Date: 08/31/2004
ABN AMRO ACCT: XXXXXX
MORTGAGE LOAN CHARACTERISTICS
DISTRIBUTION OF PRINCIPAL BALANCES DISTRIBUTION OF MORTGAGE INTEREST RATES
=============================================================== ===================================================================
Current Weighted Average Current Mortgage Weighted Average
Scheduled # of Scheduled % of -------------------- Interest # of Scheduled % of --------------------
Balances Loans Balance Balance Term Coupon DSCR 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%
=============================================================== DISTRIBUTION OF REMAINING TERM (BALLOON)
Average Scheduled Balance ===================================================================
Maximum Scheduled Balance Balloon Weighted Average
Minimum Scheduled Balance Mortgage # of Scheduled % of --------------------
Loans Loans Balance Balance Term Coupon DSCR
===================================================================
DISTRIBUTION OF REMAINING TERM (FULLY AMORTIZING)
=============================================================== 0 to 60
Fully Weighted Average 61 to 120
Amortizing # of Scheduled % of -------------------- 121 to 180
Mortgage Loans Loans Balance Balance Term Coupon DSCR 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
07/30/2004 - 10:16 (MXXX-MXXX) (c) 2000 LaSalle Bank, N.A.
B-9
[LASALLE BANK LOGO OMITTED] WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 09/17/2004
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 09/17/2004
SERIES 2004-C14 Prior Payment: N/A
Next Payment: 10/15/2004
Record Date: 08/31/2004
ABN AMRO ACCT: XXXXXX
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
07/30/2004 - 10:16 (MXXX-MXXX) (c) 2000 LaSalle Bank, N.A.
B-10
ABN AMRO WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 09/17/2004
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 09/17/2004
SERIES 2004-C14 Prior Payment: N/A
Next Payment: 10/15/2004
Record Date: 08/31/2004
ABN AMRO ACCT: XXXXXX
MORTGAGE LOAN CHARACTERISTICS
DISTRIBUTION OF PROPERTY TYPES
- -----------------------------------------------------------------------------------------------------------
# of Scheduled % of
Property Types Loans Balance Balance WAMM WAC DSCR
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
0 0 0.00%
- -----------------------------------------------------------------------------------------------------------
DISTRIBUTION OF LOAN SEASONING
- -----------------------------------------------------------------------------------------------------------
# of Scheduled % of
Number of Years Loans Balance Balance WAMM WAC DSCR
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
0 0 0.00%
- -----------------------------------------------------------------------------------------------------------
DISTRIBUTION OF AMORTIZATION TYPES
- -----------------------------------------------------------------------------------------------------------
# of Scheduled % of
Amortization Types Loans Balance Balance WAMM WAC DSCR
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
0 0 0.00%
- -----------------------------------------------------------------------------------------------------------
DISTRIBUTION OF YEAR LOANS MATURING
- -----------------------------------------------------------------------------------------------------------
# of Scheduled % of
Year Loans Balance Balance WAMM WAC DSCR
- -----------------------------------------------------------------------------------------------------------
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014 & Longer
- -----------------------------------------------------------------------------------------------------------
0 0 0.00%
- -----------------------------------------------------------------------------------------------------------
07/30/2004 - 10:16 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
B-11
LA SALLE BANK WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 09/17/2004
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 09/17/2004
SERIES 2004-C14 Prior Payment: N/A
Next Payment: 10/15/2004
Record Date: 08/31/2004
ABN AMRO ACCT: XXXXXX
LOAN LEVEL DETAIL
- ---------------------------------------------------------------------------------------------------------------------------------
Operating Ending
Disclosure Property Statement Maturity Principal
Control # Grp Type State DSCR NOI Date Date Balance
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
W/Avg 0.00 0 0
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Spec. Loan Prepayment
Note Scheduled Mod. Serv ASER Status --------------------------------------------
Rate P&I Flag Flag Flag Code(1) Amount Penalty Date
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
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 3. P&I Adv - delinquent 3+ months 7. Foreclosure 11. Modification
B. P&I Adv - < one month delinq 4. Mat. Balloon/Assumed P&I 8. Bankruptcy
1. P&I Adv - delinquent 1 month 5. Prepaid in Full 9. REO
2. P&I Adv - delinquent 2 months 6. Specially Serviced 10 DPO
- ------------------------------------------------------------------------------------------------------------------------------------
07/30/2004 - 10:16 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
B-12
LA SALLE BANK WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 09/17/2004
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 09/17/2004
SERIES 2004-C14 Prior Payment: N/A
Next Payment: 10/15/2004
Record Date: 08/31/2004
ABN AMRO ACCT: XXXXXX
SPECIALLY SERVICED (PART I) -- LOAN DETAIL
- ------------------------------------------------------------------------------------------------------------------------------
Balance Remaining Term
Disclosure Transfer Loan Status -------------------- Note Maturity --------------------------
Control # Date Code (1) Scheduled Actual Rate Date Life Amort.
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------
Property NOI
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
- ------------------------------------------------------------------------------------------------------------------------------------
07/30/2004 - 10:16 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
B-13
LA SALLE BANK WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 09/17/2004
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 09/17/2004
SERIES 2004-C14 Prior Payment: N/A
Next Payment: 10/15/2004
Record Date: 08/31/2004
ABN AMRO ACCT: XXXXXX
SPECIALLY SERVICED LOAN DETAIL (PART II) -- SERVICER COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
Disclosure Resolution
Control # Strategy Comments
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
07/30/2004 - 10:16 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
B-14
LA SALLE BANK WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 09/17/2004
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 09/17/2004
SERIES 2004-C14 Prior Payment: N/A
Next Payment: 10/15/2004
Record Date: 08/31/2004
ABN AMRO ACCT: XXXXXX
MODIFIED LOAN DETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Cutoff Modified
Disclosure Modification Maturity Maturity Modification
Control # Date Date Date Description
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
07/30/2004 - 10:16 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
B-15
LA SALLE BANK WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 09/17/2004
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 09/17/2004
SERIES 2004-C14 Prior Payment: N/A
Next Payment: 10/15/2004
Record Date: 08/31/2004
ABN AMRO ACCT: XXXXXX
REALIZED LOSS DETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning Gross Proceeds Aggregate
Disclosure Appraisal Appraisal Scheduled Gross as a % of Liquidation
Period Control # Date Value Balance Proceeds Sched Principal Expenses*
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT TOTAL 0.00 0.00 0.00
CUMULATIVE 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------
Net Net Proceeds
Liquidation as a % of Realized
Period Proceeds Sched. Balance Loss
- -----------------------------------------------------------
- -----------------------------------------------------------
CURRENT TOTAL 0.00 0.00
CUMULATIVE 0.00 0.00
- -----------------------------------------------------------
* Aggregate liquidation expenses also include outstanding P&I advances and
unpaid servicing fees, unpaid trustee fees, etc.
07/30/2004 - 10:16 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
B-16
LA SALLE BANK WACHOVIA BANK COMMERCIAL MORTGAGE TRUST Statement Date: 09/17/2004
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 09/17/2004
SERIES 2004-C14 Prior Payment: N/A
Next Payment: 10/15/2004
Record Date: 08/31/2004
ABN AMRO ACCT: XXXXXX
APPRAISAL REDUCTION DETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Remaining Term
Disclosure Appraisal Scheduled ARA Current P&I Note Maturity --------------------
Control # Red. Date Balance Amount Advance ASER Rate Date Life Amort.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------
Appraisal
Property ----------------------
Type State DSCR Value Date
- -------------------------------------------------------------------------
- ------------------------------------------------------------------------
07/30/2004 - 10:16 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
B-17
[THIS PAGE INTENTIONALLY LEFT BLANK]
ANNEX C
CLASS X-P REFERENCE RATE SCHEDULE
INTEREST CLASS X-P INTEREST CLASS X-P
ACCRUAL PERIOD DISTRIBUTION DATE REFERENCE RATE ACCRUAL PERIOD DISTRIBUTION DATE REFERENCE RATE
- ---------------- ------------------- ---------------- ---------------- ------------------- ---------------
1 9/15/2004 5.74125% 43 3/15/2008 5.56848%
2 10/15/2004 5.56905% 44 4/15/2008 5.74236%
3 11/15/2004 5.74112% 45 5/15/2008 5.56823%
4 12/15/2004 5.56894% 46 6/15/2008 5.74228%
5 1/15/2005 5.56889% 47 7/15/2008 5.56815%
6 2/15/2005 5.56884% 48 8/15/2008 5.74220%
7 3/15/2005 5.56917% 49 9/15/2008 5.74216%
8 4/15/2005 5.74078% 50 10/15/2008 5.56804%
9 5/15/2005 5.56867% 51 11/15/2008 5.74207%
10 6/15/2005 5.74065% 52 12/15/2008 5.56795%
11 7/15/2005 5.56856% 53 1/15/2009 5.56790%
12 8/15/2005 5.74052% 54 2/15/2009 5.56786%
13 9/15/2005 5.74047% 55 3/15/2009 5.56843%
14 10/15/2005 5.56846% 56 4/15/2009 5.74187%
15 11/15/2005 5.74048% 57 5/15/2009 5.56780%
16 12/15/2005 5.56848% 58 6/15/2009 5.74182%
17 1/15/2006 5.56848% 59 7/15/2009 5.57480%
18 2/15/2006 5.56849% 60 8/15/2009 5.75709%
19 3/15/2006 5.56889% 61 9/15/2009 5.80246%
20 4/15/2006 5.74049% 62 10/15/2009 5.62046%
21 5/15/2006 5.56851% 63 11/15/2009 5.80248%
22 6/15/2006 5.74050% 64 12/15/2009 5.62046%
23 7/15/2006 5.56852% 65 1/15/2010 5.62047%
24 8/15/2006 5.74051% 66 2/15/2010 5.71433%
25 9/15/2006 5.74051% 67 3/15/2010 5.71498%
26 10/15/2006 5.56853% 68 4/15/2010 5.89822%
27 11/15/2006 5.74051% 69 5/15/2010 5.71425%
28 12/15/2006 5.56853% 70 6/15/2010 5.89818%
29 1/15/2007 5.56853% 71 7/15/2010 5.71072%
30 2/15/2007 5.56853% 72 8/15/2010 5.89454%
31 3/15/2007 5.56898% 73 9/15/2010 5.89452%
32 4/15/2007 5.74048% 74 10/15/2010 5.71064%
33 5/15/2007 5.56852% 75 11/15/2010 5.89448%
34 6/15/2007 5.74047% 76 12/15/2010 5.71059%
35 7/15/2007 5.56852% 77 1/15/2011 5.71056%
36 8/15/2007 5.74046% 78 2/15/2011 5.71053%
37 9/15/2007 5.74264% 79 3/15/2011 5.71122%
38 10/15/2007 5.56848% 80 4/15/2011 5.89436%
39 11/15/2007 5.74256% 81 5/15/2011 5.71043%
40 12/15/2007 5.56841% 82 6/15/2011 5.95454%
41 1/15/2008 5.74249% 83 7/15/2011 5.76386%
42 2/15/2008 5.56834% 84 8/15/2011 5.94843%
C-1
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[THIS PAGE INTENTIONALLY LEFT BLANK.]
[THIS PAGE INTENTIONALLY LEFT BLANK.]
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.
June 17, 2004
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
Servicemembers Civil Relief Act .......................................... 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;
o all mortgage loans will have been originated
by persons
8
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 in the offered
certificates. You should consult your own legal
advisors for assistance in determining the
suitability of and consequences to you of the
purchase, ownership and sale of the offered
certificates. See "Legal Investment" 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 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
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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 notifies DTC of its intent to terminate the book-entry system
through DTC with respect to such certificates and, upon receipt of notice of
such intent from DTC, the participants holding beneficial interests in the
certificates agree to initiate such termination. 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
56
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;"
57
(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
58
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 Servicemembers Civil Relief Act) 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
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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.
SERVICEMEMBERS CIVIL RELIEF ACT
Under the terms of the Servicemembers Civil Relief Act (the "Relief Act"),
a borrower who enters military service after the origination of such borrower's
mortgage loan (including a borrower who was in reserve status and is called to
active duty after origination of the mortgage loan), upon notification by such
borrower, 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. In
addition to adjusting the interest, the lender must forgive any such interest in
excess of 6%, unless a court or administrative agency orders otherwise upon
application of the lender. The Relief Act applies to individuals who are members
of the Army, Navy, Air Force, Marines, National Guard, Reserves, Coast Guard and
officers of the U.S. Public Health Service or the National Oceanic and
Atmospheric Administration assigned to duty with the military. Because the
Relief Act applies to individuals who enter military service (including
reservists who are called to active duty) after origination of the related
mortgage loan, no information can be provided as to the number of loans with
individuals as borrowers that may be affected by the Relief Act. Application of
the Relief Act would adversely affect, for an indeterminate period of time, the
ability of 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").
86
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.
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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
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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--
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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
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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;
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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, 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
must be satisfied in one of two alternative ways for the transferor to have a
"safe harbor" against ignoring the transfer. Either:
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(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 May 11, 2004 the Internal Revenue Service published final Treasury
regulations (the "Inducement Fee Regulations") under Sections 446(b), 860C, and
863(a) of the 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. These regulations 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
May 11, 2004.
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 reflects the after-tax costs and
benefits of holding that noneconomic residual interest."
Under the Inducement Fee 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 noneconomic REMIC residual
interests constitutes a method of accounting for purposes of Internal
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Revenue Code sections 446 and 481. Thus, under the Inducement Fee 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 section 446(e) of the Code and the Treasury
Regulations and other procedures thereunder.
The Inducement Fee 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 Inducement Fee
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 Inducement Fee Regulations also provide that upon a sale or other
disposition of a noneconomic REMIC residual interest (other than in a
transaction to which section 381(c)(4) of the Code 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 other miscellaneous itemized deductions of the REMIC, even though an amount
equal to the amount of
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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 or any similar interest in a
"taxable mortgage pool" during the period beginning six months before, and
96
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 agent.
However, a transferor of a REMIC Residual Certificate would in no event be
liable for such tax
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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. REMIC Residual Certificateholders will
generally be required to report such REMIC items consistently
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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
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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
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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 were proposed to be effective beginning January 1, 2004, but such
date has passed and the regulations have not been finalized. It is unclear when,
or if, these regulations will become final.
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, Farmer 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
110
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. 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
The file "WBCMT 2004-C14 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 Trustee will make
available through its internet website an electronic file in CMSA format
updating and supplementing the information contained in the "WBCMT 2004-C14
Prospectus Annexes A1-6.xls" file.
To open the file, insert the diskette into your floppy drive. Copy the file
"WBCMT 2004-C14 Prospectus Annexes A1-6.xls" to your hard drive or network
drive. Copy the file "WBCMT 2004-C14 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 FBI Payment Schedule",
respectively.
* Microsoft Excel is a registered trademark of Microsoft Corporation.
================================================================================
UNTIL NOVEMBER , 2004, ALL DEALERS THAT EFFECT TRANSACTIONS IN THE
OFFERED CERTIFICATES, 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.
TABLE OF CONTENTS
PAGE
------
PROSPECTUS SUPPLEMENT
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-29
RISK FACTORS ............................................................. S-43
DESCRIPTION OF THE MORTGAGE POOL ......................................... S-90
SERVICING OF THE MORTGAGE LOANS .......................................... S-186
DESCRIPTION OF THE CERTIFICATES .......................................... S-203
YIELD AND MATURITY CONSIDERATIONS ........................................ S-244
USE OF PROCEEDS .......................................................... S-250
MATERIAL FEDERAL INCOME TAX CONSEQUENCES ................................. S-250
ERISA CONSIDERATIONS ..................................................... S-251
LEGAL INVESTMENT ......................................................... S-254
METHOD OF DISTRIBUTION ................................................... S-255
LEGAL MATTERS ............................................................ S-256
RATINGS .................................................................. S-256
INDEX OF DEFINED TERMS ................................................... S-257
ANNEX A-1 ................................................................ A-1
ANNEX A-2 ................................................................ A-2
ANNEX A-3 ................................................................ A-3
ANNEX A-4 ................................................................ A-4
ANNEX A-5 ................................................................ A-5
ANNEX A-6 ................................................................ A-6
ANNEX B .................................................................. B-1
ANNEX C .................................................................. C-1
PROSPECTUS
ADDITIONAL INFORMATION ................................................... 6
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE ........................ 6
SUMMARY OF PROSPECTUS .................................................... 7
RISK FACTORS ............................................................. 14
DESCRIPTION OF THE TRUST FUNDS ........................................... 34
YIELD CONSIDERATIONS ..................................................... 40
THE DEPOSITOR ............................................................ 45
USE OF PROCEEDS .......................................................... 45
DESCRIPTION OF THE CERTIFICATES .......................................... 46
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS ...................... 53
DESCRIPTION OF CREDIT SUPPORT ............................................ 67
CERTAIN LEGAL ASPECTS OF MORTGAGE 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
$1,007,897,000
(APPROXIMATE)
WACHOVIA COMMERCIAL
MORTGAGE SECURITIES, INC.
(DEPOSITOR)
WACHOVIA BANK COMMERCIAL
MORTGAGE TRUST
COMMERCIAL MORTGAGE
PASS-THROUGH
CERTIFICATES SERIES 2004-C14
---------------------
PROSPECTUS SUPPLEMENT
---------------------
WACHOVIA SECURITIES
GOLDMAN, SACHS & CO.
RBS GREENWICH CAPITAL
AUGUST , 2004
================================================================================