1
Filed Pursuant to Rule 424(b)(5)
Registration Statement No. 333-53266
PROSPECTUS SUPPLEMENT
(to accompanying prospectus dated May 15, 2001)
$868,835,000 (APPROXIMATE)
(Offered Certificates)
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST
Commercial Mortgage Pass-Through Certificates
Series 2001-C2
FIRST UNION COMMERCIAL MORTGAGE SECURITIES, INC.
(Depositor)
YOU SHOULD CAREFULLY CONSIDER THE RISK THE TRUST FUND:
FACTORS BEGINNING ON PAGE S-35 OF THIS
PROSPECTUS SUPPLEMENT AND ON PAGE 11 OF - As of June 10, 2001, the mortgage loans included in the trust fund will
THE ACCOMPANYING PROSPECTUS. have an aggregate principal balance of approximately $1,001,539,038.
Neither the offered certificates nor the - The trust fund will consist of a pool of 107 fixed rate mortgage loans.
underlying mortgage loans are insured or
guaranteed by any government agency or - The mortgage loans are secured by first liens on commercial and
instrumentality. multifamily properties.
The offered certificates will represent - All of the mortgage loans were originated or acquired by First Union
interests in the trust fund only. They National Bank, Merrill Lynch Mortgage Capital Inc. or Merrill Lynch
will not represent obligations of any Mortgage Lending, Inc.
other party.
THE CERTIFICATES:
The offered certificates will not be
listed on any national securities - The trust fund will issue twenty-three classes of certificates.
exchange or any automated quotation
system of any registered securities - Only the six classes of offered certificates described in the following
association. table are being offered by this prospectus supplement and the
accompanying prospectus.
This prospectus supplement may be used to
offer and sell the offered certificates
only if it is accompanied by the
prospectus dated May 15, 2001.
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF ASSUMED
ORIGINAL CUT-OFF DATE FINAL EXPECTED
CERTIFICATE POOL PASS-THROUGH DISTRIBUTION MOODY'S/S&P
CLASS BALANCE(1) BALANCE RATE DATE(2) CUSIP NO. RATING(3)
- -----------------------------------------------------------------------------------------------------------------------------------
Class A-1............ $190,553,000 19.03% 6.204% June 12, 2010 33736XBY4 Aaa/AAA
Class A-2............ $590,647,000 58.97% 6.663% February 12, 2011 33736XBZ1 Aaa/AAA
Class B.............. $42,565,000 4.25% 6.819% March 12, 2011 33736XCA5 Aa2/AA
Class C.............. $12,520,000 1.25% 6.922% March 12, 2011 33736XCB3 Aa3/AA-
Class D.............. $12,519,000 1.25% 6.951% March 12, 2011 33736XCC1 A1/A+
Class E.............. $20,031,000 2.00% 7.003%(4) April 12, 2011 33736XCD9 A2/A
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
(Footnotes explaining the table are on page S-3)
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.
Merrill Lynch, Pierce, Fenner & Smith Incorporated and First Union
Securities, Inc. are acting as co-lead managers and co-bookrunners for the
offering. Greenwich Capital Markets, Inc. is acting as a co-manager for the
offering. Merrill Lynch, Pierce, Fenner & Smith Incorporated, First Union
Securities, Inc., 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 100.39%
of the initial certificate balance of the offered certificates, plus accrued
interest from June 1, 2001, before deducting expenses.
We expect that delivery of the offered certificates will be made in
book-entry form on or about June 11, 2001.
MERRILL LYNCH & CO. FIRST UNION SECURITIES, INC.
GREENWICH CAPITAL MARKETS, INC.
MAY 31, 2001
2
First Union National Bank Commercial Mortgage Trust
- --------------------------------------------------------------------------------
Commercial Mortgage Pass-Through Certificates Series 2001-C2
Geographic Overview of Mortgage Pool
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE PURPOSE OF EDGAR
FILING.]
STATES NUMBER % OF
- ------ OF AGGREGATE CUT- INITIAL
MORTGAGED OFF DATE POOL
PROPERTIES BALANCE BALANCE
---------- -------------- -------
Alabama..................................................... 3 $ 11,536,115 1.2%
Florida..................................................... 14 $ 98,287,338 9.8%
California Southern (1)..................................... 16 $144,761,512 14.5%
California Northern (1)..................................... 10 $ 83,080,545 8.3%
North Carolina.............................................. 2 $ 27,336,992 2.7%
Georgia..................................................... 3 $ 18,326,957 1.8%
Arkansas.................................................... 1 $ 919,224 0.1%
Texas....................................................... 26 $122,113,363 12.2%
Virginia.................................................... 6 $ 40,656,112 4.1%
Nevada...................................................... 4 $ 48,827,531 4.9%
New York.................................................... 7 $ 81,717,771 8.2%
Maine....................................................... 1 $ 9,427,286 0.9%
Illinois.................................................... 2 $ 7,587,094 0.8%
Missouri.................................................... 1 $ 2,498,929 0.2%
Idaho....................................................... 1 $ 882,595 0.1%
New Mexico.................................................. 1 $ 1,693,842 0.2%
Arizona..................................................... 1 $ 1,573,176 0.2%
Maryland.................................................... 2 $ 24,600,856 2.5%
Connecticut................................................. 4 $ 12,942,038 1.3%
Pennsylvania................................................ 6 $ 83,840,441 8.4%
Oklahoma.................................................... 1 $ 7,241,000 0.7%
South Carolina.............................................. 1 $ 11,883,933 1.2%
Tennessee................................................... 4 $ 9,945,247 1.0%
Michigan.................................................... 3 $ 5,480,832 0.5%
Delaware.................................................... 2 $ 11,812,523 1.2%
New Jersey.................................................. 5 $ 34,404,087 3.4%
Hawaii...................................................... 1 $ 20,892,755 2.1%
Washington DC............................................... 1 $ 54,520,757 5.4%
Massachusetts............................................... 3 $ 7,441,121 0.7%
Indiana..................................................... 1 $ 12,400,000 1.2%
Wisconsin................................................... 1 $ 2,907,067 0.3%
- ---------------
(1) For purposes of determining whether a mortgaged property is in Northern
California or Southern California, mortgaged properties located north of
Bakersfield were included in Northern California and mortgaged
properties located in and south of Bakersfield were included in Southern
California.
MORTGAGE POOL BY PROPERTY TYPE [PIE CHART]
Multifamily.................................. 33.3%
Retail -- Anchored........................... 14.3%
Hospitality.................................. 6.2%
Retail -- Unanchored......................... 4.0%
Industrial................................... 5.0%
Office....................................... 29.4%
Mixed Use.................................... 3.7%
Retail -- Shadow Anchored.................... 0.5%
Mobile Home Park............................. 0.1%
Self Storage................................. 3.5%
3
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:
- Summary of Prospectus Supplement, commencing on page S-7 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
- Risk Factors, commencing on page S-35 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-162 in this prospectus supplement.
In this prospectus supplement, the terms "depositor," "we," "us" and "our"
refer to First Union Commercial Mortgage Securities, Inc.
WE DO NOT INTEND THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
TO BE AN OFFER OR SOLICITATION:
- if used in a jurisdiction in which such offer or solicitation is
not authorized;
- if the person making such offer or solicitation is not qualified
to do so; or
- 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, First Union Securities, Inc., 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. First Union Securities, Inc. 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.
(Footnotes to table on the front cover)
- ------------------
(1) Subject to a permitted variance of plus or minus 5.0%.
(2) The Assumed Final Distribution Date has been determined on the basis of the
assumptions set forth in the "DESCRIPTION OF THE CERTIFICATES--Assumed
Final Distribution Date; Rated Final Distribution Date" in this prospectus
supplement and a 0% CPR (as defined in "YIELD AND MATURITY
CONSIDERATIONS--Weighted Average Life" in this prospectus supplement). The
Rated Final Distribution Date is the distribution date to occur in January
2043. See "DESCRIPTION OF THE CERTIFICATES--Assumed Final Distribution
Date; Rated Final Distribution Date" and "RATINGS" in this prospectus
supplement.
(3) By each of Moody's Investors Service, Inc. and Standard and Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc. See "Ratings" in
this prospectus supplement.
(4) The pass-through rate applicable to the Class E certificates for any
distribution date will equal the lesser of the rate set forth on the front
cover of this prospectus supplement and the applicable weighted average net
mortgage rate for such date.
S-3
4
TABLE OF CONTENTS
PAGE
-----
SUMMARY OF PROSPECTUS SUPPLEMENT............................ S-7
Overview of the Certificates.............................. S-7
The Parties............................................... S-8
Important Dates and Periods............................... S-9
The Certificates.......................................... S-10
The Mortgage Loans........................................ S-21
RISK FACTORS................................................ S-35
The Offered Certificates.................................. S-35
The Mortgage Loans........................................ S-41
DESCRIPTION OF THE MORTGAGE POOL............................ S-72
General................................................... S-72
Mortgage Loan History..................................... S-73
Certain Terms and Conditions of the Mortgage Loans........ S-74
Assessments of Property Condition......................... S-77
Rite Aid-Palm Desert Mortgage Loan........................ S-78
Qwest and Rite Aid AB Mortgage Loans...................... S-78
Credit Lease Loans........................................ S-80
Additional Mortgage Loan Information...................... S-82
Ten Largest Mortgage Loans................................ S-101
The Mortgage Loan Sellers................................. S-106
Underwriting Standards.................................... S-107
Assignment of the Mortgage Loans; Repurchases and
Substitutions.......................................... S-108
Representations and Warranties; Repurchases and
Substitutions.......................................... S-110
Changes in Mortgage Pool Characteristics.................. S-113
SERVICING OF THE MORTGAGE LOANS............................. S-113
General................................................... S-113
The Master Servicer and the Special Servicer.............. S-114
Servicing and Other Compensation and Payment of
Expenses............................................... S-117
Modifications, Waivers and Amendments..................... S-119
The Controlling Class Representative...................... S-120
Defaulted Mortgage Loans; REO Properties; Sale of Mortgage
Loans.................................................. S-121
Inspections; Collection of Operating Information.......... S-124
DESCRIPTION OF THE CERTIFICATES............................. S-124
General................................................... S-124
Registration and Denominations............................ S-125
Certificate Balances and Notional Amount.................. S-127
Pass-Through Rates........................................ S-128
Distributions............................................. S-130
Subordination; Allocation of Losses and Certain
Expenses............................................... S-140
P&I Advances.............................................. S-143
Appraisal Reductions...................................... S-144
Reports to Certificateholders; Available Information...... S-145
Assumed Final Distribution Date; Rated Final Distribution
Date................................................... S-151
Voting Rights............................................. S-151
Termination............................................... S-152
The Trustee............................................... S-153
YIELD AND MATURITY CONSIDERATIONS........................... S-153
Yield Considerations...................................... S-153
Weighted Average Life..................................... S-156
S-4
5
PAGE
-----
USE OF PROCEEDS............................................. S-160
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.................... S-160
General................................................... S-160
Taxation of the Offered Certificates...................... S-161
ERISA CONSIDERATIONS........................................ S-162
LEGAL INVESTMENT............................................ S-164
METHOD OF DISTRIBUTION...................................... S-164
LEGAL MATTERS............................................... S-166
RATINGS..................................................... S-166
INDEX OF DEFINED TERMS...................................... S-167
S-5
6
PAGE
----
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 ACCOUNTS............................................ A-3
ANNEX A-4 -- COMMERCIAL TENANT SCHEDULE.................................. A-4
ANNEX A-5 -- CROSS-COLLATERALIZED/CROSS-DEFAULTED POOLS.................. A-5
ANNEX A-6 -- CREDIT TENANT LEASE PAYMENT SCHEDULES....................... A-6
ANNEX B -- FORM OF DISTRIBUTION DATE STATEMENT......................... B-1
ANNEX C -- FORM OF DELINQUENT LOAN STATUS REPORT....................... C-1
ANNEX D -- FORM OF HISTORICAL LOAN MODIFICATION REPORT................. D-1
ANNEX E -- FORM OF HISTORICAL LIQUIDATION REPORT....................... E-1
ANNEX F -- FORM OF REO STATUS REPORT................................... F-1
ANNEX G -- SERVICER WATCH LIST......................................... G-1
ANNEX H -- FORM OF OPERATING STATEMENT ANALYSIS REPORT................. H-1
ANNEX I -- FORM OF NOI ADJUSTMENT WORKSHEET FOR "YEAR"................. I-1
ANNEX J -- FORM OF COMPARATIVE FINANCIAL STATUS REPORT................. J-1
S-6
7
SUMMARY OF PROSPECTUS SUPPLEMENT
- 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.
- 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.
- 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.
- 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 ALL THE MORTGAGE LOANS INCLUDED IN THE
TRUST FUND AS OF THE CUT-OFF DATE, WHICH IS JUNE 1, 2001 (OR, WITH RESPECT
TO 1 MORTGAGE LOAN, JUNE 10, 2001). 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.
- WITH RESPECT TO ONE MORTGAGE LOAN INCLUDED IN THE TRUST FUND, REFERRED TO
AS THE RITE AID-PALM DESERT MORTGAGE LOAN, THAT IS DIVIDED INTO A SENIOR
COMPONENT AND A SUBORDINATE COMPONENT, UNLESS OTHERWISE STATED, ALL
REFERENCES TO THE PRINCIPAL BALANCE OF THE MORTGAGE LOANS AND RELATED
INFORMATION (INCLUDING DEBT SERVICE COVERAGE AND LOAN-TO-VALUE RATIOS) ARE
REFERENCES TO THE SENIOR COMPONENT ONLY OF SUCH MORTGAGE LOAN. REFERENCES TO
THE ORIGINAL PRINCIPAL BALANCE OF THE SENIOR COMPONENT OF THE RITE AID-PALM
DESERT MORTGAGE LOAN IS A REFERENCE TO THE PRINCIPAL BALANCE OF THAT
MORTGAGE LOAN (INCLUDING THE SUBORDINATE COMPONENT) AS OF THE ORIGINATION
DATE, LESS THE SUBORDINATE COMPONENT. THE AGGREGATE PRINCIPAL BALANCE OF THE
RITE AID-PALM DESERT MORTGAGE LOAN (INCLUDING THE SUBORDINATE COMPONENT) AS
OF THE CUT-OFF DATE IS APPROXIMATELY $3,812,383.
- ALL NUMERICAL INFORMATION CONCERNING THE MORTGAGE LOANS INCLUDED IN THE
TRUST FUND IS PROVIDED ON AN APPROXIMATE BASIS.
OVERVIEW OF THE CERTIFICATES
The table below lists certain summary information concerning the First Union
National Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2001-C2, 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-I, Class Z-II,
Class R-I, Class R-II and Class V certificates) 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 PERCENTAGE PASS- WEIGHTED
CERTIFICATE OF CUT-OFF THROUGH INITIAL AVERAGE
BALANCE OR DATE POOL CREDIT RATE PASS-THROUGH LIFE
CLASS NOTIONAL AMOUNT(1) BALANCE SUPPORT DESCRIPTION RATE (YEARS)(2)
- ----- ------------------ ---------- ------- ----------- ------------ ----------
Class A-1............ $ 190,553,000 19.03% 22.00% Fixed 6.204% 5.70
Class A-2............ $ 590,647,000 58.97% 22.00% Fixed 6.663% 9.54
Class B.............. $ 42,565,000 4.25% 17.75% Fixed 6.819% 9.68
Class C.............. $ 12,520,000 1.25% 16.50% Fixed 6.922% 9.75
Class D.............. $ 12,519,000 1.25% 15.25% Fixed 6.951% 9.75
Class E.............. $ 20,031,000 2.00% 13.25% Fixed(4) 7.003% 9.79
Class F.............. $ 10,015,000 1.00% 12.25% Fixed(4) 7.123% (6)
Class G.............. $ 15,023,000 1.50% 10.75% Fixed(4) 7.388% (6)
Class H.............. $ 17,527,000 1.75% 9.00% Fixed(4) 7.487% (6)
Class J.............. $ 12,519,000 1.25% 7.75% WAC(5) 7.605% (6)
Class K.............. $ 15,023,000 1.50% 6.25% Fixed 6.460% (6)
Class L.............. $ 20,031,000 2.00% 4.25% Fixed 6.460% (6)
Class M.............. $ 5,008,000 0.50% 3.75% Fixed 6.460% (6)
Class N.............. $ 6,048,000 0.60% 3.15% Fixed 6.460% (6)
Class O.............. $ 5,908,000 0.59% 2.56% Fixed 6.460% (6)
Class P.............. $ 3,939,000 0.39% 2.16% Fixed 6.460% (6)
Class Q.............. $ 21,663,038 2.16% -- Fixed 6.460% (6)
Class IO............. $1,001,539,038(7) N/A N/A WAC-IO(7) 0.983524%(7) (7)
CASH FLOW OR EXPECTED
PRINCIPAL MOODY'S/
WINDOW S&P
CLASS (MON./DAY/YR.)(2) RATING(3)
- ----- ------------------- -----------
Class A-1............ 7/12/01 - 6/12/10 Aaa/AAA
Class A-2............ 6/12/10 - 2/12/11 Aaa/AAA
Class B.............. 2/12/11 - 3/12/11 Aa2/AA
Class C.............. 3/12/11 - 3/12/11 Aa3/AA-
Class D.............. 3/12/11 - 3/12/11 A1/A+
Class E.............. 3/12/11 - 4/12/11 A2/A
Class F.............. (6) (6)
Class G.............. (6) (6)
Class H.............. (6) (6)
Class J.............. (6) (6)
Class K.............. (6) (6)
Class L.............. (6) (6)
Class M.............. (6) (6)
Class N.............. (6) (6)
Class O.............. (6) (6)
Class P.............. (6) (6)
Class Q.............. (6) (6)
Class IO............. (7) (7)
- ----------------------------
(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 Moody's Investors Service, Inc. and Standard and Poor's Ratings
Service, a division of the McGraw-Hill Companies, Inc. See "Ratings" in this
prospectus supplement.
(4) The pass-through rates applicable to the Class E, Class F, Class G and Class
H certificates for any distribution date will equal the lesser of the
applicable rate set forth above and the applicable weighted average net
mortgage rate for such date.
(5) The pass-through rate applicable to the Class J certificates for any
distribution date will be equal to the applicable weighted average net
mortgage rate for such date.
(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 Class IO 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 IO certificates will not have a certificate balance 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 IO certificates, as described in this prospectus supplement.
The interest rate applicable to the Class IO certificates for each
distribution date will be based upon the weighted average interest rates of
the components of the Class IO certificates for such distribution date. The
interest rate applicable to each component for any distribution date will
equal the excess, if any, of the weighted average net mortgage rate of the
mortgage loans for such distribution date over the pass-through rate
applicable to the corresponding class of sequential pay certificates. See
"DESCRIPTION OF THE CERTIFICATES--Pass-Through Rates" in this prospectus
supplement.
offered certificates
private certificates
S-7
8
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 June 10,
2001, by and among the depositor, the master
servicer, the special servicer and the
trustee.
THE DEPOSITOR................. First Union Commercial Mortgage Securities,
Inc. We are a wholly-owned subsidiary of First
Union National Bank, which is one of the
mortgage loan sellers, the master servicer and
an affiliate of one of the underwriters. Our
principal executive office is located at 201
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..... First Union National Bank, Merrill Lynch
Mortgage Capital Inc. and Merrill Lynch
Mortgage Lending, Inc. 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.
First Union National Bank originated or
acquired 77 of the mortgage loans to be
included in the trust fund representing 65.1%
of the cut-off date pool balance of all the
mortgage loans to be included in the trust
fund. Merrill Lynch Mortgage Capital Inc. and
Merrill Lynch Mortgage Lending, Inc.
originated or acquired 30 of the mortgage
loans to be included in the trust fund
representing 34.9% of the cut-off date pool
balance of all the mortgage loans to be
included in the trust fund.
THE MASTER SERVICER........... First Union National Bank. First Union
National Bank is our affiliate and is one of
the mortgage loan sellers. In addition, it is
anticipated that First Union National Bank
will be the holder of a portion of the Class V
certificates and the 5 companion loans
described herein. The master servicer will be
primarily responsible for collecting payments
and gathering information with respect to the
mortgage loans included in the trust fund
(including the subordinate component of the
Rite Aid-Palm Desert mortgage loan) and the 5
companion loans. See "SERVICING OF THE
MORTGAGE LOANS--The Master
S-8
9
Servicer and the Special Servicer" in this
prospectus supplement.
THE SPECIAL SERVICER.......... Lennar Partners, Inc. The special servicer
will be responsible for performing certain
servicing functions with respect to the
mortgage loans included in the trust fund
(including the subordinate component of the
Rite Aid-Palm Desert mortgage loan) that, in
general, are in default or as to which default
is imminent. Some holders of certificates
(initially the holder of the Class Q
certificates) will have the right to replace
the special servicer and to select a
representative who may advise and direct the
special servicer and whose approval is
required for certain actions by the special
servicer under certain circumstances. With
respect to the Rite Aid-Palm Desert mortgage
loan, the holder of a majority interest in the
Class V certificates may appoint a
representative who may advise the special
servicer in consultation with the
representative of the holder of the
certificates discussed in the previous
sentence. It is anticipated that Lennar
Partners, Inc. will purchase certain
non-offered classes of certificates (including
a portion of the Class V certificates) and an
economic interest in the 5 companion loans
described herein. See "SERVICING OF THE
MORTGAGE LOANS--The Master Servicer and
Special Servicer" in this prospectus
supplement.
THE TRUSTEE................... Wells Fargo Bank Minnesota, N.A. 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 UNDERWRITERS.............. Merrill Lynch, Pierce, Fenner & Smith
Incorporated, First Union Securities, Inc. and
Greenwich Capital Markets, Inc. Merrill Lynch,
Pierce, Fenner & Smith Incorporated is an
affiliate of Merrill Lynch Mortgage Capital
Inc. and Merrill Lynch Mortgage Lending, Inc.,
each a mortgage loan seller. First Union
Securities, Inc. is our affiliate and is an
affiliate of First Union National Bank, which
is the master servicer and one of the mortgage
loan sellers. Merrill Lynch, Pierce, Fenner &
Smith Incorporated and First Union Securities,
Inc. are acting as co-lead managers and co-
bookrunners for the offering. Greenwich
Capital Markets, Inc. is acting as a
co-manager for the offering.
IMPORTANT DATES AND PERIODS
CLOSING DATE.................. On or about June 11, 2001.
CUT-OFF DATE.................. For 106 of the mortgage loans to be included
in the trust fund, June 1, 2001, and for 1
mortgage loan, representing 2.4% of the
mortgage pool, June 10, 2001. 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 in (if any) on
S-9
10
each mortgage loan and no defaults,
delinquencies or prepayments on any mortgage
loan as of the related cut-off date.
DISTRIBUTION DATE............. The 12th day of each month or, if such day is
not a business day, the next succeeding
business day; provided, however, that the
distribution date will be no earlier than the
fourth business day following the
determination date in the month in which such
distribution date occurs. The first
distribution date on which investors in the
offered certificates may receive distributions
will occur in July 2001.
DETERMINATION DATE............ For each distribution date, the 8th day of
each month, or if such day is not a business
day, the immediately succeeding business day.
COLLECTION PERIOD............. For any distribution date, the period
beginning on the day after the determination
date in the immediately preceding month (or
the cut-off date in the case of the first
collection period) through and including the
related determination date.
THE CERTIFICATES
OFFERED CERTIFICATES.......... We are offering to you the following six
classes of certificates of our Commercial
Mortgage Pass-Through Certificates, Series
2001-C2 pursuant to this prospectus
supplement:
Class A-1
Class A-2
Class B
Class C
Class D
Class E
PRIORITY OF DISTRIBUTIONS..... On each distribution date, the owners of the
certificates will be entitled to distributions
of payments or other collections on the
mortgage loans that the master servicer
collected or advanced during or with respect
to the related collection period after
deducting certain fees and expenses. The
trustee will distribute such amounts to the
extent that the money is available, in the
following order of priority, to pay:
Interest, pro rata, on the Class IO, Class A-1
and Class A-2 certificates.
Principal of the Class A-1 certificates, up to
the principal distribution amount, until their
certificate balance is reduced to zero.
Principal of the Class A-2 certificates, up to
the principal distribution amount, until their
certificate balance is reduced to zero.
Reimbursement to the Class A-1 and Class A-2
certificates, pro rata, for any realized
losses and trust fund expenses borne by such
classes.
Interest on the Class B certificates.
S-10
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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.
Interest on the Class E certificates.
Principal of the Class E certificates, up to
the principal distribution amount, until their
certificate balance is reduced to zero.
Reimbursement to the Class E certificates for
any realized losses and trust fund expenses
borne by such class.
If, on any distribution date, the certificate
balances of the Class B through Class Q
certificates have been reduced to zero, but
the Class A-1 and Class A-2 certificates
remain outstanding, distributions of principal
will be made pro rata to the Class A-1 and
Class A-2 certificates. See "DESCRIPTION OF
THE CERTIFICATES--Distributions" in this
prospectus supplement.
INTEREST...................... On each distribution date each class of
certificates (other than the Class V, Class
Z-I, Class Z-II, Class R-I and Class R-II
certificates) will be entitled to receive:
- 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;
- plus any interest that such class of
certificates was entitled to receive on
all prior distribution dates to the
extent not received.
S-11
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- minus (other than in the case of the
Class IO certificates) such class' share
of any shortfalls in interest collections
due to prepayments on mortgage loans
included in the trust fund that are not
offset by certain payments made by the
master servicer; and
- minus (other than in the case of the
Class IO certificates) such class'
allocable share of any reduction in
interest accrued on any mortgage loan as
a result of a modification that reduces
the related mortgage rate and allows the
reduction in accrued interest to be added
to the stated principal balance of the
mortgage loan.
See "DESCRIPTION OF THE
CERTIFICATES--Certificate Balances and
Notional Amount" and "--Distributions" in this
prospectus supplement. The Class IO
certificates have seventeen interest-only
components, with one interest-only component
corresponding to each class of certificates
entitled to receive distributions of
principal. Each interest-only component will
correspond to the class of certificates that
has the same alphabetical, and if applicable,
numerical designation. On each distribution
date, the notional amount of the Class IO
certificates will be equal to the aggregate
outstanding component balances of the
components on such date. On each distribution
date, each interest-only component will have a
component balance equal to the certificate
balance of the class of certificates on such
date that corresponds to such interest-only
component.
The Class IO certificates will accrue interest
at a rate as described under "Pass-Through
Rates" below.
The certificates (other than the Class V,
Class Z-I, Class Z-II, 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 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-10 above,
on each distribution date, the trustee will
distribute interest to the holders of the
offered certificates and the Class IO
certificates:
- first, pro rata, to the Class IO
certificates, Class A-1 certificates and
Class A-2 certificates, and then to each
other class of offered certificates in
alphabetical order; and
- 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.
Such
S-12
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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 IO, Class
V, Class Z-I, Class Z-II, Class R-I and Class
R-II certificates) on each distribution date
is set forth above under "Overview of the
Certificates."
The pass-through rate applicable to the Class
IO certificates for the initial distribution
date will equal approximately 0.98352% per
annum.
The pass-through rate applicable to the Class
IO certificates for each distribution will, in
general, equal the weighted average of the
interest rates for the components for such
distribution date (weighted on the basis of
the respective component balances of such
components outstanding immediately prior to
such distribution date). The interest rate in
respect of any components for any distribution
date will, in general, equal the weighted
average net mortgage rate for such
distribution date, minus the pass-through rate
applicable to the corresponding class of
sequential pay certificates.
The weighted average net mortgage rate for
each distribution date is the weighted average
of the net mortgage rates for the mortgage
loans included in the trust fund as of the
beginning of the related collection period,
weighted on the basis of their respective
stated principal balances immediately
following the preceding distribution date;
provided that, for the purpose of determining
the weighted average net mortgage rate only,
if the mortgage rate for any mortgage loan
included in the trust fund has been modified
in connection with a bankruptcy or similar
proceeding involving the related borrower or a
modification, waiver or amendment granted or
agreed to by the special servicer, the
weighted average net mortgage rate for such
mortgage loan will be calculated without
regard to such event. The net mortgage rate
for each mortgage loan included in the trust
fund will generally equal:
- the mortgage interest rate in effect for
such mortgage loan as of the closing
date; minus
- 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.
S-13
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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:
- the portion of the principal distribution
amount for the related distribution date
that is attributable to such mortgage
loan; and
- 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 IO, Class
V, Class Z-I, Class Z-II, 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:
- distributions of principal; and
- allocations of realized losses and trust
fund expenses.
The certificate balance or notional amount of
a class of certificates may be increased in
certain circumstances by the allocation of any
increase in the stated principal balance of
any mortgage loan resulting from the reduction
of the related mortgage rate through
modification. See "DESCRIPTION OF THE
CERTIFICATES--Certificate Balances and
Notional Amount" in this prospectus
supplement.
The Class IO certificates do not have
principal balances and will not receive
distributions of principal.
As reflected in the chart under "Priority of
Distributions" above:
- Principal is distributed to each class of
certificates entitled to receive
distributions of principal in
alphabetical and, if applicable,
numerical order.
- 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.
- Generally, no class of certificates is
entitled to distributions of principal
until the certificate balance of each
class of certificates with an earlier
alphabetical and, if applicable,
numerical designation has been reduced to
zero.
S-14
15
The amount of principal to be distributed for
each distribution date generally will be an
amount equal to:
- 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;
- balloon payments actually received with
respect to mortgage loans included in the
trust fund during the related collection
period;
- prior to the reduction of the senior
component of the Rite Aid-Palm Desert
mortgage loan to zero, any interest due
on the subordinate portion of such loans;
- prepayments received with respect to the
mortgage loans included in the trust fund
during the related collection period; and
- all liquidation proceeds, insurance
proceeds, condemnation awards and
repurchase and substitution amounts
received during the related collection
period that are allocable to principal.
SUBORDINATION; ALLOCATION OF
LOSSES AND CERTAIN EXPENSES... Credit support for any class of certificates
(other than the Class V, Class Z-I, Class
Z-II, Class R-I and Class R-II certificates)
is provided by the subordination of payments
and allocation of any losses to such classes
of certificates which have a later
alphabetical class designation (other than the
Class IO certificates) and, with respect to
the Rite Aid-Palm Desert mortgage loan, the
subordinate component of the loan. The
certificate balance of a class of certificates
(other than the Class IO, Class Z-I, Class
Z-II, 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.
S-15
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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 IO, Class Z-I, Class
Z-II, 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 mortgage
loans (other than on the Rite Aid-Palm Desert
mortgage loan) are not allocated to the Class
V certificates. Losses that are realized on
the Rite Aid-Palm Desert mortgage loan and
additional trust fund expenses related to the
Rite Aid-Palm Desert mortgage loan will be
allocated to the Class V certificates to the
extent of the subordinate component in such
mortgage loan before being allocated to any
other class of certificate.
PERCENTAGE ORDER OF
ORIGINAL CUT-OFF DATE APPLICATION
CLASS CERTIFICATE POOL OF LOSSES AND
DESIGNATION BALANCE BALANCE EXPENSES
----------- ------------ ------------ -------------
Class A-1............ $190,553,000 19.03% 6
Class A-2............ $590,647,000 58.97% 6
Class B.............. $ 42,565,000 4.25% 5
Class C.............. $ 12,520,000 1.25% 4
Class D.............. $ 12,519,000 1.25% 3
Class E.............. $ 20,031,000 2.00% 2
Non-offered
certificates(1).... $132,704,038 13.25% 1
(1) Other than the Class V certificates.
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
certificates (other than the Class V
certificates) will result in a corresponding
reduction in the notional amount of the Class
IO certificates.
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 collected
during the related collection period on a
mortgage loan included in the trust fund will
be distributed to the holders of each class of
offered certificates and the Class F, Class G,
Class H and Class J certificates then entitled
to distributions as follows:
The holders of each class of offered
certificates and the Class F, Class G, Class H
and Class J Certificates then entitled to
distributions of principal on such
distribution date will be entitled to a
portion of prepayment premiums equal to the
product of:
- the amount of such prepayment premiums;
S-16
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- a fraction, the numerator of which is
equal to the amount of principal
distributable to such class of offered
certificates on such distribution date,
and the denominator of which is the
principal distribution amount for such
distribution date.
The holders of each class of offered
certificates and the Class F, Class G, Class H
and Class J certificates then entitled to
distributions of principal on such
distribution date will generally be entitled
to a portion of yield maintenance charges
equal to the product of:
- the amount of such yield maintenance
charges;
- 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
- 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 such
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 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 IO certificates.
The "discount rate" applicable to any class of
offered certificates and the Class F, Class G,
Class H and Class J certificates will be equal
to the discount rate stated in the related
mortgage loan documents used in calculating
the yield maintenance charge with respect to
such principal prepayment. To the extent a
discount rate is not stated therein, the
discount rate will equal the yield (when
compounded monthly) on the U.S. Treasury issue
with a maturity date closest to the maturity
date for the prepaid mortgage loan or mortgage
loan for which title to the related mortgaged
property was acquired by the trust fund.
- In the event that there are two or more
such U.S. Treasury issues with the same
coupon, the issue with the lowest yield
will be utilized; and
S-17
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- In the event that there are two or more
such U.S. Treasury issues with maturity
dates equally close to the maturity date
for the prepaid mortgage loan, the issue
with the earliest maturity date will be
utilized.
EXAMPLES OF ALLOCATION OF YIELD MAINTENANCE
CHARGES
Mortgage interest rate..................... 8%
Pass-through rate for applicable class..... 6%
Discount rate.............................. 5%
ALLOCATION PERCENTAGE ALLOCATION
FOR APPLICABLE CLASS PERCENTAGE FOR CLASS IO
--------------------- -----------------------
6% - 5% 100% - 33 1/3% = 66 2/3%
---------- = 33 1/3%
8% - 5%
See "DESCRIPTION OF THE CERTIFICATES--
Distributions--Allocation of Prepayment
Premiums and Yield Maintenance Charges" in
this prospectus supplement.
ALLOCATION OF ADDITIONAL
INTEREST...................... On each distribution date, any additional
interest collected on a mortgage loan with an
anticipated repayment date during the related
collection period will be distributed, in the
case of mortgage loans originated by First
Union National Bank, to the holders of the
Class Z-I certificates, and, in the case of
mortgage loans originated by Merrill Lynch
Mortgage Capital Inc. or Merrill Lynch
Mortgage Lending, Inc., to the holders of the
Class Z-II certificates.
SUBORDINATE COMPONENT AND
CLASS V CERTIFICATES.......... The trust fund will also issue a subordinate
component in the amount of $1,175,112, which
will represent the subordinate interest in a
mortgage loan (loan number 82) referred to in
this prospectus supplement as the Rite
Aid-Palm Desert mortgage loan. The aggregate
principal balance of the Rite Aid-Palm Desert
mortgage loan (including the subordinate
component) as of the cut-off date will be
approximately $3,812,383. The subordinate
component, represented by the Class V
certificates, is not being offered by this
prospectus supplement. Only the senior
component (with an outstanding principal
balance of $2,637,272) of this mortgage loan
will be represented by the other certificates
(other than the Class Z-I and Z-II
certificates). See "DESCRIPTION OF THE
MORTGAGE POOL--Rite Aid-Palm Desert Mortgage
Loan" 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 senior component of such
mortgage loan. Generally, the subordination of
the subordinate component of the Rite Aid-Palm
Desert mortgage loan decreases the
loan-to-value ratio and increases the debt
service coverage ratio of the senior component
of the Rite Aid-Palm Desert mortgage loan
included as a "mortgage loan" herein because
those ratios are based only on the senior
component of the Rite Aid-Palm Desert mortgage
loan.
All principal and interest collections on the
Rite Aid-Palm Desert mortgage loan will be
distributed on the certificates
S-18
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(other than the Class R-I, Class R-II, Class
Z-I and Class Z-II certificates) as described
above under "Priority of Distributions" until
the senior component of the Rite Aid-Palm
Desert mortgage loan has been reduced to zero.
Any subsequent principal collections on the
Rite Aid-Palm Desert mortgage loan will be
distributed to its subordinate component.
Interest on the senior component will accrue
on the balance of such senior component at a
per annum rate equal to the mortgage rate in
effect for the Rite Aid-Palm Desert mortgage
loan as of the beginning of the related
collection period, and will be distributed to
the certificates as described below under
"Priority of Distributions". See "DESCRIPTION
OF THE CERTIFICATES--Distributions" in this
prospectus supplement.
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 (including the
subordinate component of the Rite Aid-Palm
Desert mortgage loan) included in the trust
fund by the related determination date and the
master servicer determines that such scheduled
payment of principal and interest will be
ultimately recoverable from the related
mortgage loan, the master servicer, or if it
fails to do so, the trustee is required to
make a principal and interest cash advance of
such scheduled payment of principal and
interest. 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 or
the trustee, as the case may be, on the amount
of any principal and interest cash advance
calculated at the prime rate and will
reimburse the master servicer or the trustee
for any principal and interest cash advances
that are later determined to be not
recoverable; provided, however, that no
interest shall accrue on any such principal
and interest advance made with respect to a
mortgage loan if the related periodic payment
is received prior to the expiration of any
applicable grace period. 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 subordinate component of the Rite Aid-Palm
Desert mortgage loan) is less than 1% of the
aggregate principal balance of the mortgage
loans included in the trust fund (including
the subordinate component of the Rite Aid-Palm
Desert mortgage loan) as of the cut-off date.
See "DESCRIPTION OF THE
CERTIFICATES--Termination" in this prospectus
supplement and in the accompanying prospectus.
REGISTRATION AND
DENOMINATION.................. The offered certificates will be registered in
the name of Cede & Co., as nominee for The
Depository Trust Company in the
S-19
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United States, or in Europe through
Clearstream Luxembourg or 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, Class D and Class E
certificates will be offered in minimum
denominations of $10,000 actual principal
amount and in integral multiples of $1 in
excess of those amounts.
MATERIAL FEDERAL INCOME TAX
CONSEQUENCES................ Two separate real estate mortgage investment
conduit (each, a "REMIC") elections will be
made with respect to most of the trust fund.
The offered certificates will evidence regular
interests in a REMIC and generally will be
treated as debt instruments of such REMIC. The
Class R-I and Class R-II certificates will
represent the residual interests in such
REMICs. The Class Z-I and Class Z-II
certificateholders' entitlement to any
additional interest that has accrued on a
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 accompanying 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. Based on expected issue
prices, certain classes of certificates,
depending on their issue prices, may be
treated as having been issued with original
issue discount 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
Class E
S-20
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This is based on an individual prohibited
transaction exemption granted to each of
Merrill Lynch, Pierce, Fenner & Smith
Incorporated, First Union Securities, Inc.,
and Greenwich Capital Markets, Inc. by the
U.S. Department of Labor. See "ERISA
CONSIDERATIONS" in this prospectus supplement
and in the accompanying prospectus.
SMMEA ELIGIBILITY............. We expect that the following certificates will
constitute "mortgage related securities"
pursuant to the Secondary Mortgage Market
Enhancement Act of 1984, as amended:
Class A-1
Class A-2
Class B
Class C
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 Moody's Investors Service, Inc.
and Standard and Poor's Ratings Services, a
division of the McGraw-Hill Companies, Inc.:
EXPECTED
RATING FROM
CLASS MOODY'S/S&P
----- -----------
Class A-1................................ Aaa/AAA
Class A-2................................ Aaa/AAA
Class B.................................. Aa2/AA
Class C.................................. Aa3/AA-
Class D.................................. A1/A+
Class E.................................. A2/A
The ratings on the offered certificates
address the likelihood of timely receipt of
interest and ultimate receipt of principal by
the rated final distribution date by the
holders of offered certificates. They do not
address the likely actual rate of prepayments.
Such rate of prepayments, if different than
originally anticipated, could adversely affect
the yield realized by holders of the offered
certificates. See "RATINGS" in this prospectus
supplement and in the accompanying prospectus
for a discussion of the basis upon which
ratings are given, the limitations and
restrictions on the ratings, and conclusions
that should not be drawn from a rating.
THE MORTGAGE LOANS
GENERAL....................... It is expected that the mortgage loans to be
included in the trust fund will have the
following approximate characteristics as of
the cut-off date. All information presented
herein (including loan-to-value ratios and
debt service coverage ratios) with respect to
the 5 mortgage loans with companion loans is
calculated without regard to the related
companion loans. 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 include only the senior
component of the Rite
S-21
22
Aid-Palm Desert mortgage loan. All percentages
of the mortgage loans, or any specified group
of mortgage loans, referred to in this
prospectus supplement are approximate
percentages. The totals in the following
tables may not add up to 100% due to rounding.
Number of mortgage loans............... 107
Number of mortgaged properties......... 134
Aggregate balance of all mortgage loans
in the trust fund.................... $1,001,539,038
Minimum balance........................ $ 516,705
Maximum balance........................ $ 54,520,757
Average balance........................ $ 9,360,178
Maximum balance for a group of cross-
collateralized and cross-defaulted
loans(1)............................. $ 61,250,000
Weighted average loan-to-value
ratio(2)............................. 67.1%
Weighted average debt service coverage
ratio(2)............................. 1.40x
Weighted average loan-to-value ratio at
stated maturity or anticipated
repayment date....................... 56.9%
Range of mortgage interest rates....... 6.75%-8.87%
Weighted average mortgage interest
rate................................. 7.7%
Range of remaining term to maturity or
anticipated repayment date
(months)............................. 53-144
Weighted average remaining term to
maturity or anticipated repayment
date (months)........................ 114
Weighted average occupancy rate(3)..... 96.3%
---------------------------------------------------------
(1) Consists of 7 individual mortgage loans (loan numbers
21, 24, 32, 47, 48, 55, and 65).
(2) For purposes of determining the debt service coverage
ratio for 2 mortgage loans (loan numbers 4 and 14),
the debt service payments were reduced by amounts
available under letters of credit securing such
mortgage loans. In addition, the principal balances
of such mortgage loans were reduced by the amount of
such letters of credit for determining the
loan-to-value ratio of each such mortgage loan.
(3) The weighted average occupancy rate information shown
above excludes 3 mortgage loans secured by
hospitality properties, representing 6.2% of the
mortgage pool.
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.
- No mortgage loan included in the trust
fund is insured or guaranteed by any
government agency or private insurer.
- All of the mortgage loans included in the
trust fund are secured by first lien fee
mortgages or leasehold mortgages on
commercial or multifamily properties.
S-22
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PROPERTY TYPES................ The following table describes the mortgage
loans expected to be included in the trust
fund based upon property type as of the cut-
off date:
MORTGAGED PROPERTIES BY PROPERTY TYPE
AGGREGATE PERCENTAGE OF
NUMBER OF CUT-OFF CUT-OFF DATE
PROPERTY TYPE LOANS/PROPERTIES DATE BALANCE POOL BALANCE
------------- ---------------- -------------- -------------
Multifamily.......... 37/40 $ 333,815,394 33.3%
Office(1)............ 28/29 294,305,944 29.4
Retail............... 26/26 188,313,050 18.8
Retail - Anchored.. 11/11 142,989,834 14.3
Retail -
Unanchored...... 14/14 40,437,356 4.0
Retail - Shadow
Anchored........ 1/1 4,885,861 0.5
Hospitality.......... 3/8 61,739,565 6.2
Industrial........... 7/7 50,168,861 5.0
Mixed Use............ 3/3 36,816,493 3.7
Self Storage......... 2/20 35,482,283 3.5
Mobile Home Park..... 1/1 $ 897,447 0.1
------- -------------- ------
Total........... 107/134 $1,001,539,038 100.0%
======= ============== ======
------------------
(1) Includes one mortgaged property secured by a fee interest in the
related land and the borrower's interest as landlord under a ground
lease (and the ground lease is improved with an office building).
Pie Chart [The tabular information set forth above is a fair and accurate
description of the graphic material omitted for the purpose of EDGAR filing.]
S-23
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GEOGRAPHIC CONCENTRATIONS..... The mortgaged properties are located
throughout 29 states and the District of
Columbia. The following table lists 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
----- ---------- -------------- -------------
CA.................... 26 $ 227,842,057 22.7%
Southern(2)......... 16 144,761,512 14.5
Northern(2)......... 10 83,080,545 8.3
TX.................... 26 122,113,363 12.2
FL.................... 14 98,287,338 9.8
PA.................... 6 83,840,441 8.4
NY.................... 7 81,717,771 8.2
DC.................... 1 54,520,757 5.4
Other................. 54 333,217,312 33.3
--- -------------- ------
Total:........... 134 $1,001,539,038 100.0%
=== ============== ======
------------------
(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 mortgaged loan principal balance to each of
those properties by the appraised values of the mortgaged
properties).
(2) For purposes of determining whether a mortgaged property is in
Northern California or Southern California, mortgaged
properties located north of Bakersfield were included in
Northern California and mortgaged properties located in or
south of Bakersfield were included in Southern California.
PRINCIPAL AND INTEREST 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.
- Payments on the mortgage loans included
in the trust fund are due on the first
day of the month, except payments on 1
mortgage loan, representing 2.4% of the
mortgage pool are due on the tenth day of
the month. No mortgage loan has a grace
period that extends payment beyond the
10th day of any calendar month, and the
mortgage loan specified above does not
have a grace period.
- As of the cut-off date, 101 of the
mortgage loans, representing 96.6% of the
mortgage pool, accrue interest on an
actual/360 basis, and 6 of the mortgage
loans, representing 3.4% of the mortgage
pool, accrue interest on a 30/360 basis.
Eight (8) of the mortgage loans,
representing 16.5% of the mortgage pool,
have periods during which only interest
is due and periods in which principal and
interest are due. Seven (7) of the
mortgage loans, representing 6.1% of the
mortgage pool, are interest-only for
their entire term.
S-24
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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 NUMBER CUT-OFF CUT-OFF DATE
DATE BALANCES($) OF LOANS DATE BALANCE POOL BALANCE
---------------- -------- -------------- -------------
#2,000,000 18 $ 24,550,608 2.5%
2,000,001 - 4,000,000 19 53,616,185 5.4
4,000,001 - 6,000,000 22 110,320,675 11.0
6,000,001 - 8,000,000 10 70,405,345 7.0
8,000,001 - 10,000,000 8 73,860,362 7.4
10,000,001 - 15,000,000 10 130,040,065 13.0
15,000,001 - 20,000,000 6 102,858,480 10.3
20,000,001 - 25,000,000 6 134,670,540 13.4
25,000,001 - 30,000,000 2 54,952,554 5.5
30,000,001 - 35,000,000 3 97,743,466 9.8
40,000,001 - 45,000,000 1 44,000,000 4.4
45,000,001 - 50,000,000 1 50,000,000 5.0
50,000,001 - 55,000,000 1 54,520,757 5.4
--- -------------- -----
Total:............. 107 $1,001,539,038 100.0%
=== ============== =====
RANGE OF CUT-OFF DATE BALANCES
FOR CROSSED POOLS AND LOANS(1)
NUMBER OF AGGREGATE PERCENTAGE OF
RANGE OF CUT-OFF CROSSED POOLS CUT-OFF CUT-OFF DATE
DATE BALANCES($) AND LOANS DATE BALANCE POOL BALANCE
---------------- ------------- -------------- -------------
500,001 - 2,000,000 16 $ 21,189,596 2.1%
2,000,001 - 4,000,000 15 43,407,659 4.3
4,000,001 - 6,000,000 17 85,534,855 8.5
6,000,001 - 8,000,000 5 36,722,651 3.7
8,000,001 - 10,000,000 8 74,227,095 7.4
10,000,001 - 15,000,000 8 100,790,065 10.1
15,000,001 - 20,000,000 5 84,980,259 8.5
20,000,001 - 25,000,000 7 157,412,835 15.7
25,000,001 - 30,000,000 2 54,952,554 5.5
30,000,001 - 35,000,000 4 132,550,710 13.2
40,000,001 - 45,000,000 1 44,000,000 4.4
45,000,001 - 50,000,000 1 50,000,000 5.0
50,000,001 - 55,000,000 1 54,520,757 5.4
60,000,001 - 65,000,000 1 61,250,000 6.1
-- -------------- -----
Total:............ 91 $1,001,539,038 100.0%
== ============== =====
(1) This table presents certain information based on the assumption
that any mortgage loans included in the trust fund which are
cross-collateralized and cross-defaulted with other mortgage
loans included in the trust fund are a single mortgage loan. See
Annex A-5 to this prospectus supplement for more information
regarding cross-collateralized and cross-defaulted mortgage loans
included in the trust fund.
S-25
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RANGE OF
MORTGAGE RATES
AGGREGATE PERCENTAGE OF
NUMBER CUT-OFF CUT-OFF DATE
RANGE OF MORTGAGE RATES(%) OF LOANS DATE BALANCE POOL BALANCE
-------------------------- --------- -------------- -------------
6.750 - 6.999............ 6 $ 54,719,620 5.5%
7.000 - 7.249............ 14 140,953,421 14.1
7.250 - 7.499............ 22 228,443,507 22.8
7.500 - 7.749............ 14 123,543,739 12.3
7.750 - 7.999............ 18 194,059,813 19.4
8.000 - 8.249............ 15 133,573,568 13.3
8.250 - 8.499............ 8 45,665,313 4.6
8.500 - 8.749............ 8 64,071,563 6.4
8.750 - 8.999............ 2 16,508,493 1.6
--- -------------- -----
Total:................. 107 $1,001,539,038 100.0%
=== ============== =====
RANGE OF DSC RATIOS
AGGREGATE PERCENTAGE OF
NUMBER CUT-OFF CUT-OFF DATE
RANGE OF DSCRS (X) OF LOANS DATE BALANCE POOL BALANCE
------------------ --------- -------------- -------------
1.00 - 1.04.............. 4 $ 9,131,100 0.9%
1.10 - 1.14.............. 1 1,588,520 0.2
1.20 - 1.24.............. 28 270,340,646 27.0
1.25 - 1.29.............. 21 210,581,574 21.0
1.30 - 1.34.............. 20 184,944,923 18.5
1.35 - 1.39.............. 11 85,440,137 8.5
1.40 - 1.44.............. 5 31,644,214 3.2
1.45 - 1.49.............. 2 7,476,565 0.7
1.60 - 1.64.............. 1 2,000,000 0.2
1.65 - 1.69.............. 2 46,243,762 4.6
1.70 - 1.74.............. 3 15,408,511 1.5
1.75 - 1.79.............. 2 14,750,000 1.5
1.80 - 1.84.............. 2 38,750,000 3.9
1.90 - 1.94.............. 1 4,750,000 0.5
1.95 - 1.99.............. 2 20,500,000 2.0
2.00 - 2.50.............. 2 57,989,087 5.8
--- -------------- -----
Total:................. 107 $1,001,539,038 100.0%
=== ============== =====
RANGE OF CUT-OFF DATE LTV RATIOS(1)
PERCENTAGE OF
AGGREGATE CUT-OFF DATE
RANGE OF NUMBER CUT-OFF POOL
CUT-OFF DATE LTVS(%) OF LOANS DATE BALANCE BALANCE
-------------------- --------- -------------- -------------
15.01 - 20.00............ 1 $ 7,989,087 0.8%
35.01 - 40.00............ 1 23,750,000 2.4
40.01 - 45.00............ 3 18,895,361 1.9
45.01 - 50.00............ 7 25,375,797 2.5
50.01 - 55.00............ 3 55,742,711 5.6
55.01 - 60.00............ 7 103,200,223 10.3
60.01 - 65.00............ 16 115,692,753 11.6
65.01 - 70.00............ 14 96,115,294 9.6
70.01 - 75.00............ 26 276,196,366 27.6
75.01 - 80.00............ 29 278,581,446 27.8
--- -------------- -----
Total:................. 107 $1,001,539,038 100.0%
=== ============== =====
------------------
(1) For purposes of determining the loan-to-value ratios of 2
mortgage loans (identified as loan numbers 4 and 14), the
principal balances of the mortgage loans were reduced by the
amount of certain letters of credit securing such mortgage
loans. See "DESCRIPTION OF THE MORTGAGE POOL--Additional
Mortgage Loan Information" in this prospectus supplement.
S-26
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RANGE OF REMAINING TERMS TO MATURITY DATE OR
ANTICIPATED REPAYMENT DATE
RANGE OF AGGREGATE PERCENTAGE OF
REMAINING NUMBER CUT-OFF CUT-OFF DATE
TERMS (MOS.) OF LOANS DATE BALANCE POOL BALANCE
------------ --------- -------------- -------------
53 - 60............. 2 $ 4,184,073 0.4%
73 - 84............. 1 28,549,985 2.9
97 - 108............ 3 35,752,437 3.6
109 - 120............ 96 922,332,922 92.1
133 - 144............ 5 10,719,620 1.1
--- -------------- -----
Total:............. 107 $1,001,539,038 100.0%
=== ============== =====
AMORTIZATION TYPES
AGGREGATE PERCENTAGE OF
TYPE OF NUMBER CUT-OFF CUT-OFF DATE
AMORTIZATION OF LOANS DATE BALANCE POOL BALANCE
------------ --------- -------------- -------------
Amortizing Balloon.... 70 $ 545,486,111 54.5%
Amortizing ARD........ 9 184,186,406 18.4
Interest Only,
Amortizing
Balloon............. 6 97,339,657 9.7
Interest Only......... 7 61,250,000 6.1
Fully Amortizing...... 13 45,526,864 4.5
Interest Only,
Amortizing ARD...... 1 44,000,000 4.4
Interest Only, Fully
Amortizing.......... 1 23,750,000 2.4
--- -------------- -----
Total............... 107 $1,001,539,038 100.0%
=== ============== =====
Balloon loans have amortization schedules
significantly longer than their terms to
maturity and have substantial principal
payments due on their maturity dates, unless
prepaid earlier.
Mortgage loans providing for anticipated
repayment dates fully or substantially
amortize through their terms to maturity.
However, if such a mortgage loan is not
prepaid by a date specified in its mortgage
note, interest will accrue at a higher rate
and the borrower will be required to apply all
cash flow generated by the mortgaged property
in excess of its regular debt service payments
and certain other permitted expenses and
reserves to repay principal on the mortgage
loan.
In addition, because the fixed periodic
payment on the mortgage loans is determined
assuming interest is calculated on a "30/360
basis," but interest actually accrues and is
applied on the mortgage loans on an
"actual/360 basis," there will be less
amortization 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.
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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
PREPAYMENT NUMBER CUT-OFF CUT-OFF DATE
RESTRICTION TYPE OF LOANS DATE 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 remaining
term(1)............ 104 $ 932,905,934 93.1%
Prohibit prepayment
until date
specified in
related mortgage
note and then
impose either a
yield maintenance
charge or
prepayment premium
(but not both) for
most of remaining
term(1)............ 2 $ 14,112,347 1.4%
Prohibit prepayment
until date
specified in
related mortgage
note, then permit
defeasance until
date specified in
related mortgage
note, and then
impose either a
yield maintenance
charge or
prepayment premium
(but not both) for
most of the
remaining
term(1)............ 1 $ 54,520,757 5.4%
--- -------------- -----
Total:.......... 107 $1,001,539,038 100.0%
=== ============== =====
------------------
(1) 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
S-28
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a prepayment premium or yield maintenance
charge or limiting prepayments of defeasance
or the ability of the master servicer or
special servicer to collect any prepayment
premium or yield maintenance charge.
DEFEASANCE.................... One hundred and five (105) of the mortgage
loans included in the trust fund as of the
cut-off date, representing 98.6% 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 "RISK FACTORS--The Mortgage Loans--Risks
Associated with Commercial Lending May Be
Different Than For Residential Lending" and
"--Future Cash Flow and Property Values Are
Not Predictable" and "DESCRIPTION OF THE
MORTGAGE POOL" in this prospectus supplement.
TEN LARGEST MORTGAGE LOANS.... The following table describes certain
characteristics of the ten largest mortgage
loans or groups of cross-collateralized
mortgage loans, in the trust fund by aggregate
principal balance as of the cut-off date.
WEIGHTED WEIGHTED
AVERAGE AVERAGE
PERCENTAGE OF CUT-OFF LTV WEIGHTED
NUMBER CUT-OFF CUT-OFF DATE RATIO AT AVERAGE
OF LOANS/ DATE DATE POOL PROPERTY LTV MATURITY DSC
LOAN NAME MORTGAGED PROPERTIES BALANCE(1) BALANCE(1) TYPE(2) RATIO OR ARD RATIO
--------- -------------------- ------------ ------------- ------------- -------- -------- --------
Cornerstone
Portfolio............ 7/7 $ 61,250,000 6.1% Multifamily- 62.1% 62.1% 1.85x
Conventional
1330 Connecticut
Avenue, N.W.......... 1/1 54,520,757 5.4 Office-CBD 74.5% 60.9% 1.31x
Innkeepers Portfolio... 1/6 50,000,000 5.0 Hospitality-Suite 50.4% 45.7% 2.12x
One Franklin........... 1/1 44,000,000 4.4 Office-CBD 57.1% 49.7% 1.69x
HRT Portfolio.......... 8/8 34,807,244 3.5 Office-Medical 45.3% 0.0%(3) 1.22x
Office
Villa La Jolla
Apartments........... 1/1 34,092,026 3.4 Multifamily- 65.7% 57.8% 1.21x
Conventional
Gardiner Manor Mall.... 1/1 32,750,000 3.3 Retail-Anchored 76.2% 67.7% 1.26x
Campus Lodge
Apartments........... 1/1 30,901,440 3.1 Multifamily- 77.3% 67.9% 1.20x
Student
Housing
Wynnton Portfolio...... 1/4 28,549,985 2.9 Multifamily- 77.2% 72.4% 1.24x
Conventional
Stadium Crossing....... 1/1 26,402,569 2.6 Office-CBD 70.2% 64.2% 1.20x
----- ------------ ----
Total/Weighted
Average.............. 23/31 $397,274,021 39.7% 64.6% 54.5% 1.50x
===== ============ ====
WEIGHTED
AVERAGE
MORTGAGE
LOAN NAME RATE
--------- --------
Cornerstone
Portfolio............ 7.35 %
1330 Connecticut
Avenue, N.W.......... 7.58 %
Innkeepers Portfolio... 7.75 %
One Franklin........... 6.79 %
HRT Portfolio.......... 7.22 %
Villa La Jolla
Apartments........... 8.03 %
Gardiner Manor Mall.... 7.77 %
Campus Lodge
Apartments........... 7.21 %
Wynnton Portfolio...... 8.05 %
Stadium Crossing....... 8.70 %
Total/Weighted
Average.............. 7.58 %
- ---------------
(1) In the case of a concentration of cross-collateralized mortgage loans, the
aggregate principal balance.
(2) "CBD" refers to central business district.
(3) The HRT Portfolio loan is a "fully-amortizing" mortgage loan.
S-29
30
Cornerstone Portfolio.... The Cornerstone Portfolio is comprised of 7
mortgage loans which are collectively secured
by first lien deeds of trusts on 7 multifamily
properties located in Texas. Each Cornerstone
Portfolio loan is cross-collateralized and
cross-defaulted with each other Cornerstone
Portfolio loan. Each Cornerstone Portfolio
loan provides for interest-only payments
during the entire term of the related mortgage
loan.
As of November 2000, the average occupancy
rate for the mortgaged properties securing the
loans in the Cornerstone Portfolio was 94%.
The following table presents certain
information relating to the mortgaged
properties securing the mortgage loans which
constitute the Cornerstone Portfolio:
PROPERTY CUT-OFF DATE
PROPERTY NAME LOCATION BALANCE NUMBER OF UNITS
------------- ------------------ ------------ ---------------
The Arbors on Forest
Ridge Apartments... Bedford, Texas $ 6,250,000 210 units
Timberglen
Apartments......... Dallas, Texas $ 9,500,000 304 units
Toscana Apartments... Dallas, Texas $ 5,250,000 192 units
Eagle Crest
Apartments......... Irving, Texas $15,000,000 484 units
Remington Hills @ Las
Colinas............ Irving, Texas $14,250,000 362 units
Cutter's Point
Apartments......... Richardson, Texas $ 6,250,000 196 units
Sierra Ridge
Apartments......... San Antonio, Texas $ 4,750,000 232 units
The sponsor of the borrowers is Cornerstone
Realty Income Trust, Inc., a publicly traded
(NYSE) real estate investment trust with
ownership interests in approximately 87
properties encompassing over 20,500 units in 5
states.
1330 Connecticut
Avenue, N.W............. The 1330 Connecticut Avenue, N.W. loan is
secured by a first lien deed of trust on the
fee interest in a 10-story office building
located in the central business district of
N.W. Washington, D.C.
The mortgaged property is comprised of 252,136
square feet of net rentable area. As of
December 2000, the mortgaged property was 100%
occupied. The following table presents certain
information relating to the major tenants at
the mortgaged property:
NET RENTABLE % OF NET DATE OF LEASE
TENANT AREA (SF) RENTABLE AREA EXPIRATION
------ ------------ ------------- -------------
Steptoe & Johnson, LLP. 186,840 74.1% December 2013
Recording Industry 27,744 11.0% December 2006
Association of
America...............
The sponsor of the borrower is Steptoe &
Johnson, LLP, a Washington, D.C. law firm.
Innkeepers Portfolio...... The Innkeepers Portfolio is a single mortgage
loan secured by 6 first lien deeds of trusts
or mortgages (as applicable) on 6 extended
stay hospitality properties located in 5
states. The
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31
Innkeepers Portfolio loan provides for
interest-only payments for the first 48 months
of the term of the loan, and thereafter, fixed
monthly payments of principal and interest.
Each mortgaged property is improved with a
Residence Inn by Marriott International, Inc.,
a worldwide operator and franchiser of hotels
and related lodging facilities. Under certain
circumstances, the borrower may substitute
another property of like kind and quality for
a mortgaged property. See "DESCRIPTION OF THE
MORTGAGE POOL -- Ten Largest Mortgage Loans --
Innkeepers Portfolio" in this prospectus
supplement.
The following table presents certain
information relating to the mortgaged
properties:
CUT-OFF DATE NUMBER
ALLOCATED OF
FRANCHISE NAME PROPERTY LOCATION LOAN BALANCE ROOMS
-------------- -------------------------- ------------ ------
Residence Inn by Dallas, Texas $ 8,300,000 150
Marriott...........
Residence Inn by Altamonte Springs, Florida $ 5,300,000 128
Marriott...........
Residence Inn by Arlington, Texas $ 4,300,000 114
Marriott...........
Residence Inn by Atlanta, Georgia $ 7,500,000 160
Marriott...........
Residence Inn by San Mateo, California $15,600,000 159
Marriott...........
Residence Inn by Shelton, Connecticut $ 9,000,000 96
Marriott...........
The sponsor of the borrower is Innkeepers USA
Trust, a publicly traded (NYSE),
self-administered real estate investment trust
with ownership interests in approximately 67
extended-stay hotels, with an aggregate of
8,138 rooms/suites.
One Franklin............ The One Franklin loan is secured by a first
lien mortgage secured by a leasehold interest
on a 24-story office building located in the
Center City District of Philadelphia, PA. The
One Franklin loan provides for interest only
payments during the first three years of the
term of the mortgaged loan, and thereafter,
monthly payments of principal and interest.
The mortgaged property is comprised of
approximately 607,036 square feet of net
rentable area. As of September 2000, the
occupancy rate for the mortgaged property
securing the One Franklin loan was 100%. The
mortgaged property shares a common atrium
entrance and a two-level underground parking
garage with the adjacent Wyndham Franklin
Plaza Hotel. The office building on the
mortgaged property also has a fully enclosed
connecting bridge from the third floor to the
Two Franklin Plaza office building. The
following table presents certain information
relating to the major tenants at the mortgaged
property:
NET % OF NET DATE OF
RENTABLE RENTABLE LEASE
TENANT AREA (SF) AREA EXPIRATION
------ --------- -------- -------------
SmithKline Beecham Corp.......... 596,128 98.2% March 2013
Associated Press................. 9,012 1.5% November 2002
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The sponsor of the borrower is HRPT Properties
Trust, a publicly traded (NYSE) real estate
investment trust, with ownership interests in
191 office properties.
HRT Portfolio........... The HRT Portfolio is comprised of 8 mortgage
loans which are collectively secured by first
lien deeds of trust or mortgages (as
applicable) on 8 medical office properties
located in 3 states. Each HRT loan is
cross-collateralized and cross-defaulted with
each other HRT loan. The HRT Loan is a 10 year
self amortizing loan.
As of April 2001, 7 of the mortgaged
properties were 100% master leased by an
adjacent hospital, and the occupancy rate for
the other mortgaged property was 98%. All 8 of
the mortgaged properties are located near
major hospitals in their respective
submarkets. Most of the medical office
buildings located on the mortgaged properties
are physically connected to the adjacent
hospitals via enclosed corridors or covered
walkways.
The following table presents certain
information relating to the mortgaged
properties:
NET
CUT-OFF DATE RENTABLE
PROPERTY CITY/STATE LOAN BALANCE AREA (SF)
-------- --------------- ------------ ---------
American Sports Medicine
Institute................. Birmingham, AL $2,100,000 27,800
Birmingham Medical Building
I......................... Birmingham, AL $3,000,000 42,500
Birmingham Medical Building
II........................ Birmingham, AL $6,500,000 81,800
Bellaire Plaza.............. Houston, TX $3,000,000 56,031
Kelsey-Siebold West......... Houston, TX $7,300,000 80,740
Chippenham Medical-Janke &
Hioks..................... Richmond, VA $4,200,000 97,921
Johnston-Willis Medical
Offices................... Richmond, VA $7,500,000 114,566
Southwest General........... San Antonio, TX $1,400,000 26,645
The sponsor of the borrower is Healthcare
Realty Trust, Inc., a publicly traded (NYSE)
self-administered real estate investment trust
that invests in healthcare related facilities
throughout the United States.
Villa La Jolla
Apartments.................... The Villa La Jolla Apartment loan is secured
by a first lien deed of trust on 385
condominium units in the 500 condominium unit
Villa La Jolla apartment complex.
As of February 2001, the occupancy rate of the
mortgaged property (exclusive of any
condominium units not securing such mortgage
loan) was 93%. The mortgaged property is
located near the University of California--San
Diego, the University of San Diego and the Cal
Winston School of Law.
The sponsor of the borrower is Garden Home
Development Company which owns and manages in
excess of 40,000 apartments units.
Gardiner Manor Mall..... The Gardiner Manor Mall loan is secured by a
first lien mortgage on a leasehold interest on
Gardiner Manor Mall, an anchored retail
shopping center located in Islip, NY. The
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ground lessor pledged its interest in the fee
to the related mortgage loan originator.
The mortgaged property is comprised of 4
single-story buildings that contain
approximately 221,752 square feet of net
rentable area in the aggregate. As of April
2001, the occupancy rate for the mortgaged
property was 99.3%. The following table
presents certain information relating to the
major tenants at the mortgaged property:
NET % OF NET
RENTABLE RENTABLE DATE OF
TENANT AREA (SF) AREA LEASE EXPIRATION
------ --------- -------- ----------------
King Kullen.................... 48,000 21.6% August 2019
The Wiz........................ 25,444 11.5% November 2014
Old Navy....................... 24,080 10.9% August 2010
Staples........................ 24,000 10.8% June 2015
Michael's...................... 23,434 10.6% May 2009
Barnes & Noble................. 21,335 9.6% November 2014
Eckerd Drug Store.............. 18,036 8.1% June 2019
Modell's....................... 17,000 7.7% September 2019
The sponsor of the borrower is Starwood
Ceruzzi LLC, a joint venture between Louis
Ceruzzi and Starwood Capital Group LLC with
total assets of $452.4 million primarily
comprised of retail properties.
Campus Lodge
Apartments.................... The Campus Lodge Apartments loan is secured by
a first lien deed of trust on the Campus Lodge
Apartments located in Tallahassee, Florida.
The mortgaged property is comprised of 288
apartment units and is located near Florida
State University, Florida University and
Tallahassee Community College. The mortgaged
property was constructed in the year 2000 and
contains a 7,950 square feet clubhouse,
lighted basketball and volleyball courts, a
swimming pool and a gated entrance. As of
January 2001, the mortgaged property was 97%
occupied.
The sponsor of the borrower is David Fort of
Campus Development who has been involved in
the development of over 3,400 multifamily
units.
Wynnton Multifamily
Portfolio............. The Wynnton Multifamily Portfolio consists of
a single mortgage loan which is secured by 4
first lien mortgages on 4 multifamily
properties in Florida.
As of October 2000, the weighted average
occupancy rate for the mortgaged properties
securing the Wynnton Multifamily Portfolio
loan was 95.8%. The following table presents
certain information relating to the mortgaged
properties securing the Wynnton Multifamily
Portfolio loan:
CUT-OFF DATE NUMBER
PROPERTY ALLOCATED OF
PROPERTY NAME LOCATION LOAN BALANCE UNITS
------------- ----------------------- ------------ ------
Plantation
Apartments.......... Temple Terrace, Florida $ 4,960,000 126
Granada Apartments.... Tampa, Florida $ 4,380,000 112
Palmview Apartments... St. Petersburg, Florida $ 9,100,000 304
Grandview
Apartments.......... Largo, Florida $10,200,000 304
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The sponsor of the borrower is WCP Holdings,
LLC, a privately-held company.
Stadium Crossing......... The Stadium Crossing loan is secured by a
first lien deed of trust on an office
development located in Anaheim, CA.
The mortgaged property is comprised of 153,636
square feet of net rentable area within 7
separately parceled buildings, and the
mortgaged property also includes a parking
structure. As of December 2000, the occupancy
rate for the mortgaged property was 100%. The
following table presents certain information
relating to the major tenants at the mortgaged
property:
TENANT
NET % OF NET
RENTABLE RENTABLE DATE OF LEASE
TENANT AREA (SF) AREA EXPIRATION
------ --------- -------- --------------
Hewlett Packard................ 54,266 35.3% March 2010
CB Richard Ellis............... 25,985 16.9% September 2009
Willdan Associates............. 18,985 12.4% February 2005
Spectrum Sports Club........... 36,500 23.8% June 2014
QWEST AND RITE AID AB MORTGAGE
LOANS....................... Five (5) companion mortgage loans are not part
of the trust fund but are each secured by the
same mortgage as a mortgage loan which is part
of the trust fund. One (1) of the mortgage
loans, the Qwest mortgage loan, has a
principal balance as of the cut-off date of
$23,750,000, representing 2.4% of the mortgage
pool. The other 4 mortgage loans, the Rite Aid
AB mortgage loans, have an aggregate principal
balance as of the cut-off date of $8,082,349
representing 0.8% of the mortgage pool in the
aggregate. The master servicer and special
servicer will service and administer these
mortgage loans and their related companion
loans pursuant to the pooling and servicing
agreement for so long as the related mortgage
loan is part of the trust fund. Amounts
attributable to any companion loan will not be
assets of the trust fund, and will be
beneficially owned by the holder of such
companion loan. See "DESCRIPTION OF THE
MORTGAGE POOL--Qwest and Rite Aid AB Mortgage
Loans" in this prospectus supplement.
The holder of a companion loan will not have
the right to enforce the mortgagee's rights
upon a default of the related mortgage loan,
but will have the right to purchase the
mortgage loan under certain limited
circumstances as described under "DESCRIPTION
OF THE MORTGAGE POOL--Qwest and Rite Aid AB
Mortgage Loans" in this prospectus supplement.
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RISK FACTORS
- - 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.
- - 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.
- - 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.
- - 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........ 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) on the mortgage loans included
in the trust fund and how such payments are
allocated among the offered certificates
entitled to distributions of principal.
In addition, upon the occurrence of certain
limited events, a party may be required to
repurchase 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 would be payable with respect to any
such repurchase). 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.
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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 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. In
addition, because the Class E certificates
bear interest at a rate limited by the
weighted average net mortgage rate of the
mortgage loans, the yield on the Class E
certificates will be adversely affected if
mortgage loans with higher mortgage interest
rates pay faster than mortgage loans with
lower mortgage interest rates.
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 or prepayment premium
provision, to the extent enforceable, than
similar mortgage loans without such
provisions, with shorter lockout periods or
with lower prepayment premiums.
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 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
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casualty or condemnation and would not be paid
in connection with repurchases of mortgage
loans for breaches of representations or
warranties.
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
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 type changes.
See the table entitled "Range of Remaining
Term to Maturity or Anticipated Repayment Date
for all Mortgage Loans as of the Cut-off Date"
under "DESCRIPTION OF THE MORTGAGE
POOL--Additional Mortgage Loan Information" in
this prospectus supplement for a description
of the respective maturity dates of the
mortgage loans included in the trust fund.
Because principal on the certificates (other
than the Class IO, Class Z-I, Class Z-II,
Class R-I, Class R-II and Class V
certificates) is payable in sequential order
to the extent described in this prospectus
supplement under "DESCRIPTION OF THE
CERTIFICATES--Distributions", classes that
have a lower priority of distributions are
more likely to be exposed to the risk of
changing concentrations discussed under
"--Special Risks Associated With High Balance
Mortgage Loans" above than classes with a
higher sequential priority.
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.
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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, to the extent
not allocated to such class of offered
certificates, may result in a higher
percentage ownership interest evidenced by
such certificates than would otherwise have
resulted absent such loss. The consequent
effect on the weighted average life and yield
to maturity of the offered certificates will
depend upon the characteristics of the
remaining mortgage loans.
ADDITIONAL COMPENSATION TO THE
SERVICER WILL AFFECT YOUR
RIGHT TO RECEIVE
DISTRIBUTIONS............... To the extent described in this prospectus
supplement, the master servicer or the
trustee, as applicable, will be entitled to
receive interest on unreimbursed advances and
unreimbursed servicing expenses. The right of
the master servicer or the trustee to receive
such payments of interest is senior to the
rights of certificateholders to receive
distributions on the offered certificates and,
consequently, may result in additional trust
fund expenses being allocated to the offered
certificates that would not have resulted
absent the accrual of such interest. In
addition, the special servicer will receive a
fee with respect to each specially serviced
mortgage loan and any collections thereon,
including specially serviced mortgage loans
which have been returned to performing status.
This will result in shortfalls which will be
allocated to the offered certificates.
SUBORDINATION OF SUBORDINATE
OFFERED CERTIFICATES........ As described in this prospectus supplement,
unless your certificates are Class A-1 and
Class A-2 certificates, your
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rights to receive distributions of amounts
collected or advanced on or in respect of the
mortgage loans will be subordinated to those
of the holders of the offered certificates
with an earlier alphabetical designation.
See "DESCRIPTION OF THE CERTIFICATES--
Distributions--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 not
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 property.
Additionally, less than all of the
certificateholders may amend the pooling and
servicing agreement in certain circumstances.
See "SERVICING OF THE MORTGAGE LOANS--The
Controlling Class Representative" and
"DESCRIPTION OF THE CERTIFICATES--Voting
Rights" in this prospectus supplement and the
accompanying prospectus.
LIQUIDITY FOR CERTIFICATES MAY
BE LIMITED.................... There is currently no secondary market for the
offered certificates. While each underwriter
has informed us that it intends to make a
secondary market in the offered certificates,
neither is under any obligation to do so. No
secondary market for your certificates may
develop. If a secondary market does develop,
it may not provide you with liquidity of
investment or continue for the life of your
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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 one of the mortgage loan
sellers. This affiliation could cause a
conflict with the master servicer's duties to
the trust under the pooling and servicing
agreement. 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.
First Union National Bank, which is the master
servicer, is also the holder of the companion
loans with respect to 5 mortgage loans,
representing 3.2% of the mortgage pool and is
expected to be the holder of all or a portion
of the Class V certificates. This could cause
a conflict between First Union National Bank's
duties to the trust under the pooling and
servicing agreement and its interest as a
holder of a companion loan or the Class V
certificates. See "DESCRIPTION OF THE MORTGAGE
POOL--Qwest and Rite Aid AB Mortgage Loans" in
this prospectus supplement. The special
servicer or an affiliate is expected to
purchase certain of the non-offered
certificates (including the controlling class
and a portion of the Class V certificates) and
an economic interest in the companion loans.
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.
The special servicer will be involved in
determining whether to liquidate or modify
defaulted mortgage loans. The special servicer
or an affiliate of the special servicer may
purchase certain other non-offered
certificates (including the controlling
class). 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. See "SERVICING OF THE MORTGAGE
LOANS--Modifications, Waivers and Amendments"
in this prospectus supplement.
In any case, 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 standards 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:
- a substantial number of the mortgaged
properties are managed by property
managers affiliated with the respective
borrowers;
- these property managers also may manage
and/or franchise additional properties,
including properties that may compete with
the mortgaged properties; and
- affiliates of the property manager and/or
the borrowers, or the property managers
and/or the borrowers themselves also may
own other properties, including competing
properties.
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:
- to generate income sufficient to pay debt
service, operating expenses and leasing
commissions and to
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make necessary repairs, tenant improvements
and capital improvements; and
- 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:
- economic conditions generally and in the
area of the project;
- the age, quality, functionality and design
of the project;
- the degree to which the project competes
with other projects in the area;
- changes or continued weakness in specific
industry segments;
- increases in operating costs;
- the willingness and ability of the owner
to provide capable property management and
maintenance;
- 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;
- an increase in the capital expenditures
needed to maintain the properties or make
improvements;
- a decline in the financial condition of a
major tenant;
- the location of a mortgaged property;
- whether a mortgaged property can be easily
converted to alternative uses;
- an increase in vacancy rates;
- perceptions regarding the safety,
convenience and attractiveness of such
properties;
- vulnerability to litigation by tenants and
patrons; and
- environmental contamination.
If leases are not renewed or replaced, if
tenants default, if rental rates fall and/or
if operating expenses increase, the
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borrower's ability to repay the loan may be
impaired and the resale value of the property,
which is substantially dependent upon the
property's ability to generate income, may
decline. Even if borrowers successfully renew
leases or relet vacated space, the costs
associated with reletting, including tenant
improvements, leasing commissions and free
rent, can exceed the amount of any reserves
maintained for that purpose and reduce cash
from the mortgaged properties. Although some
of the mortgage loans included in the trust
fund require the borrower to 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, the
availability of credit for refinancing and
changes in interest-rate levels that may
adversely affect the value of a project (and
thus the borrower's ability to sell or
refinance) without necessarily affecting the
ability to generate current income.
Other factors are more general in nature, such
as:
- national, regional or local economic
conditions (including plant and military
installation closings, industry slowdowns
and unemployment rates);
- local real estate conditions (such as an
oversupply of retail space, office space
or multifamily housing);
- demographic factors;
- consumer confidence
- consumer tastes and preferences; and
- 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:
- the length of tenant leases;
- the creditworthiness of tenants;
- in the case of rental properties, the rate
at which new rentals occur; and
- 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).
A decline in the real estate market or in the
financial condition of a major tenant will
tend to have a more immediate effect on the
net operating income of properties
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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 to alternative uses
if those properties were to become
unprofitable for any reason. For example, the
mortgaged property relating to the Villa La
Jolla Apartment loan, representing 3.4% of the
mortgage pool, is secured by a deed of trust
on 385 condominium units in a 500 condominium
unit apartment complex. Such mortgaged
property could only be converted to an
alternative use to the extent permission was
obtained from all of the owners of the other
condominium units. In addition, converting
commercial properties to alternate uses
generally requires substantial capital
expenditures. The liquidation value of any
such mortgaged property consequently may be
substantially less than would be the case if
the property were readily adaptable to other
uses.
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, the mortgage loan sellers, the
underwriters, the master servicer, the special
servicer, the trustee 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:
- 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 effects
the value of a mortgage loan or the
interests of the certificateholders; or
- certain of their respective
representations or warranties concerning
such mortgage loan are breached, and such
defect or breach materially and adversely
affects your interests and is not cured as
required.
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We cannot provide assurance that the
applicable mortgage loan seller will be in a
financial position to make such a repurchase
or substitution.
RISKS RELATING TO CERTAIN
PROPERTY TYPES.............. Particular types of income properties are
exposed to particular risks. For instance:
SPECIAL RISKS ASSOCIATED WITH
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:
- the physical attributes of the apartment
building (for example, its age, appearance
and construction quality);
- the location of the property (for example,
a change in the neighborhood over time);
- the ability of management to provide
adequate maintenance and insurance;
- the types of services and amenities that
the property provides;
- the property's reputation;
- the level of mortgage interest rates
(which, if relatively low, may encourage
tenants to purchase rather than lease
housing);
- the presence of competing properties;
- adverse local or national economic
conditions; and
- state and local regulations.
Multifamily properties secure 37 of the
mortgage loans included in the trust fund as
of the cut-off date, representing 33.3% of the
mortgage pool.
SPECIAL RISKS ASSOCIATED WITH
OFFICE PROPERTIES........... Office properties may require their owners to
expend significant amounts of cash to pay for
general capital improvements, tenant
improvements and costs of re-
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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:
- the quality of an office building's
tenants;
- 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);
- 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;
- the desirability of the area as a business
location;
- the presence of competing properties; and
- the strength and nature of the local
economy (including labor costs and
quality, tax environment and quality of
life for employees).
Moreover, the cost of refitting office space
for a new tenant is often higher than the cost
of refitting other types of property.
Office properties secure 28 of the mortgage
loans included in the trust fund as of the
cut-off date, representing 29.4% of the
mortgage pool (including 1 mortgage loan
secured by a fee interest in the related land
(but not the office building on the land) and
the borrower's interest as a landlord in a
ground lease).
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 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 tenant to renew its lease, the
termination of an anchor
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tenant's lease, the bankruptcy or economic
decline of an anchor tenant, or the cessation
of the business of an anchor tenant at its
store, notwithstanding its continued 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 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 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 Concentration
Tenant Properties" in this prospectus
supplement.
Retail properties, including shopping centers,
secure 26 of the mortgage loans included in
the trust fund as of the cut-off date,
representing 18.8% of the mortgage pool.
SPECIAL RISKS ASSOCIATED WITH
HOSPITALITY PROPERTIES...... Hospitality properties are affected by various
factors, including:
- location;
- quality;
- management ability;
- amenities;
- franchise affiliation (or lack thereof);
- continuing expenditures for modernizing,
refurbishing and maintaining existing
facilities prior to the expiration of
their anticipated useful lives;
- a deterioration in the financial strength
or managerial capabilities of the owner
and operator of a hotel;
- changes in travel patterns caused by
changes in access, energy prices, strikes,
relocation of highways, the construction
of additional highways or other factors;
- 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
- 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.
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48
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:
- the continued existence and financial
strength of the franchisor or hotel
management company;
- the public perception of the franchise or
hotel chain service mark; and
- the duration of the franchise licensing or
management agreements.
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 3 of the
mortgage loans included in the trust fund as
of the cut-off date, representing 6.2% of the
mortgage pool.
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SPECIAL RISKS ASSOCIATED WITH
INDUSTRIAL AND MIXED-USE
FACILITIES.................. Industrial and mixed-use facilities present
risks not associated with other properties.
Significant factors determining the value of
industrial properties include:
- the quality of tenants;
- building design and adaptability; and
- 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.
Industrial and mixed-use facilities secure 10
of the mortgage loans included in the trust
fund as of the cut-off date, representing 8.7%
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.
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, the liquidation value of self storage
properties may be substan-
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50
tially 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 2 of the
mortgage loans included in the trust fund as
of the cut-off date, representing 3.5% of the
mortgage pool.
SPECIAL RISKS ASSOCIATED WITH
THE CREDIT LEASE LOAN......... The payment of interest and principal on a
credit lease loan is dependent principally on
the payment by each tenant and/or guarantor of
the credit lease, if any, of monthly rental
payments and other payments due under the
terms of its credit lease.
Because the ability of a borrower to make
payments on the related credit lease loan is
dependent upon revenue from a single tenant,
in the event of a default under a credit lease
or the associated guarantee, as the case may
be, the related borrower may not have the
ability to make required payments on such
credit lease loan until the premises are
re-let. If a payment default on the credit
lease loan occurs, the special servicer may be
entitled to foreclose upon or otherwise
realize upon the related mortgaged property to
recover amounts due under the credit lease
loan, and will also be entitled to pursue the
remedies against the defaulting tenant and any
guarantor as set forth in the pooling and
servicing agreement.
Any failure by the provider of any residual
value policy to pay under the terms of any
such policy, or any downgrade, qualification
or withdrawal of the credit rating of such
provider or of any tenant or guarantor, may
have an adverse effect on the ratings of your
certificates. See "DESCRIPTION OF THE MORTGAGE
POOL--Credit Lease Loan" and "RISK
FACTORS--Special Risks Associated With Balloon
Loans and Anticipated Repayment Date Loans" in
this prospectus supplement.
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Six (6) of the mortgage loans included in the
trust fund as of the cut-off date are credit
lease loans, representing 3.4% 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 will be subject to certain
risks including the following:
- a reduction in the value of such mortgaged
property which may make it impractical or
imprudent to foreclose against such
mortgaged property;
- 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 difficulty in
bringing its operations into compliance
with environmental laws;
- 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
- the inability to sell the related mortgage
loan in the secondary market or to lease
such mortgaged property to potential
tenants.
Under certain federal and state laws, federal
and state agencies may impose a statutory lien
over affected property to secure the
reimbursement of remedial costs incurred by
these agencies to correct 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 removal or
remediation of hazardous or toxic substances
on, under, adjacent to or in such property.
The cost of any required remediation and the
owner's liability therefore 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
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52
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 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 removal or
remediation of hazardous substances. The trust
fund's potential exposure to liability for
cleanup 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 THE MORTGAGE LOANS AND
LEASES--Environmental Considerations" in the
accompanying prospectus, and "DESCRIPTION OF
THE MORTGAGE POOL--Assessments of Property
Condition--Environmental Assessments" in this
prospectus supplement.
A third-party environmental consultant
conducted an environmental site assessment (or
updated a previously conducted environmental
site assessment) with respect to each
mortgaged property securing a mortgage loan
included in the trust fund. Such assessments
do not generally include invasive
environmental testing. In each case where the
environmental site assessment or update
revealed a material adverse environmental
condition or circumstance at any mortgaged
property, then (depending on the nature of the
condition or circumstance) one or more of the
following actions has been or is expected to
be taken:
- an environmental insurance policy, having
the characteristics described below, was
obtained from a third-party insurer; or
- either (i) an operations and maintenance
program, including, in several cases, with
respect to asbestos-containing materials,
lead-based paint 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 has been or is expected to
be performed; or
- 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.
We cannot provide assurance, however, that the
environmental assessments identified all
environmental conditions
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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 issues. In
addition, the environmental condition of the
underlying real properties could be adversely
affected by tenants or by the condition of
land or operations in the vicinity of the
properties, such as underground storage tanks.
With respect to 3 mortgage loan included in
the trust fund as of the cut-off date,
representing 3.4% of the mortgage pool, the
related borrowers were required to obtain a
secured creditor impaired property
environmental insurance policy in lieu of or
in addition to environmental escrows
established, provided:
- the policy premium for the term is fully
paid;
- at issuance, the issuer has a claims
paying ability of not less than "AAA" by
S&P, "Aaa" by Moody's, "AAA" by Fitch,
Inc. or "A++XV" by A.M. Best Company; and
- except with respect to 1 of the mortgage
loans, representing 2.6% of the mortgage
pool, the policy is in an amount not less
than the full principal amount of the
loan.
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 AGREEMENTS--Realiza-
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tion Upon Defaulted Mortgage Loans," "RISK
FACTORS--Environmental Liability May Affect
Lien on Mortgaged Property and Expose Lender
to Costs" and "CERTAIN LEGAL ASPECTS OF THE
MORTGAGE LOANS AND LEASES--Environmental
Considerations" in the accompanying
prospectus.
SPECIAL RISKS ASSOCIATED WITH
BALLOON LOANS AND
ANTICIPATED REPAYMENT DATE
LOANS....................... Seventy-seven (77) of the mortgage loans,
representing 68.6% 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 scheduled payments of interest
only and, in each case, a balloon payment on
their respective maturity dates. Ten (10) of
the mortgage loans included in the trust fund
as of the cut-off date, representing 22.8% 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.
- 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.
- 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.
- The ability of a borrower to effect a
refinancing or sale will be affected by a
number of factors, including the value of
the related mortgaged property, the level
of available mortgage rates at the time of
sale or refinancing, the borrower's equity
in the mortgaged property, the financial
condition and operating history of the
borrower and the mortgaged property, 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
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loan on the related maturity date or
anticipated repayment date, as applicable. For
additional description of risks associated
with balloon loans, see "RISK FACTORS--Balloon
Payments on Mortgage Loans Result in
Heightened Risk of Borrower Default" in the
accompanying prospectus.
In order to maximize recoveries on defaulted
mortgage loans, the pooling and servicing
agreement permits the special servicer to
extend and modify mortgage loans that are in
material default or as to which a payment
default (including the failure to make a
balloon payment) is imminent; subject,
however, to the limitations described under
"SERVICING OF THE MORTGAGE
LOANS--Modifications, Waivers and Amendments"
in this prospectus supplement. We cannot
provide assurance, however, that any such
extension or modification will increase the
present value of recoveries in a given case.
Any delay in collection of a balloon payment
that would otherwise be distributable on your
certificates, whether such delay is due to
borrower default or to modification of the
related mortgage loan, will likely extend the
weighted average life of your certificates.
See "YIELD AND MATURITY CONSIDERATIONS" in
this prospectus supplement and "YIELD
CONSIDERATIONS" in the accompanying
prospectus.
ADVERSE CONSEQUENCES
ASSOCIATED WITH BORROWER
CONCENTRATION, BORROWERS
UNDER COMMON CONTROL AND
RELATED BORROWERS........... Certain borrowers under the mortgage loans
included in the trust fund are affiliated or
under common control with one another. In such
circumstances, any adverse circumstances
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
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56
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:
- 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
- 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.
In addition, as indicated on the following
chart, the Cornerstone Portfolio
concentration (loan numbers 21, 24, 32, 47,
48, 55 and 65) consists of 7 mortgage loans
representing 6.1% of the mortgage pool. The
sponsor of each mortgage loan is Cornerstone
Realty Income Trust, Inc. These mortgage
loans are cross-collateralized and
cross-defaulted with each other.
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 table,
less than 5.0% of the mortgage loans, by
initial pool balance, are secured by mortgaged
properties in any one state.
MORTGAGED PROPERTIES BY GEOGRAPHIC
CONCENTRATION(1)
PERCENTAGE OF
NUMBER OF AGGREGATE CUT-OFF
MORTGAGED CUT-OFF DATE POOL
STATE PROPERTIES DATE BALANCE BALANCE
----- ---------- --------------- -------------
CA................... 26 $ 227,842,057 22.7%
Southern(2)........ 16 144,761,512 14.5
Northern(2)........ 10 83,080,545 8.3
TX................... 26 122,113,363 12.2
FL................... 14 98,287,338 9.8
PA................... 6 83,840,441 8.4
NY................... 7 81,717,771 8.2
DC................... 1 54,520,757 5.4
Other................ 54 333,217,312 33.3
---- -------------- -----
Total........... 134 $1,001,539,038 100.0%
==== ============== =====
----------------------------------------------------
(1) Because this table presents information
relating to the mortgaged properties and
not the mortgage loans, the information
for mortgage loans secured by
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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).
(2) For purposes of determining whether a
mortgaged property is in Northern
California or Southern California,
mortgaged properties located north of
Bakersfield were included in Northern
California and mortgaged properties
located in or south of Bakersfield were
included in Southern California.
The concentration of mortgaged properties in a
specific state or region will make the
performance of the trust fund as a whole more
sensitive to the following in the state or
region where the mortgagors and the mortgaged
properties are located:
- economic conditions;
- conditions in the real estate market;
- changes in governmental rules and fiscal
policies;
- acts of God (which may result in uninsured
losses); and
- 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 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.
- The largest single mortgage loan included
in the trust fund as of the cut-off date
represents 5.4% of the mortgage pool.
- The largest group of cross-collateralized
mortgage loans included in the trust fund
as of the cut-off date represents in the
aggregate 6.1% of the mortgage pool.
- The five largest mortgage loans or groups
of cross-collateralized mortgage loans
included in the trust fund as of the
cut-off date represent, in the aggregate,
24.3% of the mortgage pool.
- The ten largest mortgage loans or groups
of cross-collateralized mortgage loans
included in the trust fund as of the
cut-off date represent, in the aggregate,
39.7% of the mortgage pool.
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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.
In that regard:
- mortgage loans included in the trust fund
and secured by multifamily properties
represent as of the cut-off date 33.3% of
the mortgage pool;
- mortgage loans included in the trust fund
and secured by office properties represent
as of the cut-off date 29.4% of the
mortgage pool (based on the primary
property type for combined office/retail
properties) (which includes 1 credit lease
loan, representing 2.4% of the mortgage
pool);
- mortgage loans included in the trust fund
and secured by retail properties represent
as of the cut-off date 18.8% of the
mortgage pool (based on the primary
property type for combined office/retail
properties) (which includes 5 credit lease
loans, representing 1.1% of the mortgage
pool);
- mortgage loans included in the trust fund
and secured by hospitality properties
represent as of the cut-off date 6.2% of
the mortgage pool; and
- mortgage loans included in the trust fund
and secured by industrial and mixed use
properties represent as of the cut-off
date 8.7% 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. 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
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included in the trust fund, it is possible
that the reunderwriting process may have
revealed problems with a mortgage loan not
covered by representations or warranties given
by the mortgage loan sellers. In addition, we
cannot provide assurance that the mortgage
loan sellers will be able to repurchase or
substitute a mortgage loan if a representation
or warranty has been breached. See
"DESCRIPTION OF THE MORTGAGE
POOL--Representations and Warranties;
Repurchases and Substitutions" in this
prospectus supplement.
FORECLOSURE ON MORTGAGED
PROPERTIES MAY RESULT IN
ADVERSE TAX CONSEQUENCES.... One or more of the REMICs established under
the pooling and servicing agreement 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.
INSURANCE COVERAGE ON
MORTGAGED PROPERTIES MAY NOT
COVER SPECIAL HAZARD
LOSSES...................... The master servicer and/or special servicer
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 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 condi-
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tions, most such policies typically do not
cover any physical damage resulting from:
- war;
- revolution;
- governmental actions;
- floods, and other water-related causes;
- earth movement (including earthquakes,
landslides and mud flows);
- wet or dry rot;
- vermin;
- domestic animals;
- sink holes or similarly occurring soil
conditions; and
- other kinds of risks not specified in the
preceding paragraph.
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:
- required to satisfy any existing
indebtedness encumbering the related
mortgaged property as of the closing of
the related mortgage loan; and
- prohibited from encumbering the related
mortgaged property with additional secured
debt without the lender's prior approval.
With respect to 2 mortgage loans included in
the trust fund as of the cut-off date (loan
numbers 70 and 83), representing 0.6% of the
mortgage pool, the related mortgaged property
remains encumbered by existing subordinate
debt, subject to the terms of a subordination
and standstill agreement entered into in favor
of the lender.
With respect to 1 mortgage loan included in
the trust fund as of the cut-off date (loan
number 22), representing 1.5% of the mortgage
pool, the related mortgage loan documents
provide that the borrower, under certain
specified circumstances, may encumber the
related mortgaged property with a subordinate
mortgage in the future.
In addition with respect to 1 mortgage loans
included in the trust fund as of the cut-off
date (loan number 23)
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representing 1.4% of the mortgage pool have
existing unsecured debt.
With respect to 4 mortgage loans included in
the trust fund as of the cut-off date (loan
numbers 1, 17, 19 and 30), representing 9.8%
of the mortgage pool, the related mortgage
loan documents provide that the borrowers
under certain circumstances, may pledge their
limited partnership interests or other
ownership interests in the borrower as
security for mezzanine debt in the future. In
addition, 2 of the mortgage loans included in
the trust fund as of the cut-off date (loan
numbers 7 and 35), representing 3.8% of the
mortgage pool, the related mortgage loan
documents provide that the borrowers under
certain circumstances may incur additional
unsecured indebtedness.
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. Many of the
mortgage loans included in the trust fund, and
the mortgage loan documents and organizational
documents of the related borrower, do not
prohibit the borrower from incurring
additional indebtedness if incurred in the
ordinary course of business and not secured by
a lien on the related mortgaged properties.
Certain of the mortgage loans permit
additional liens on the related mortgaged
properties for (1) assessments, taxes or other
similar charges or (2) liens which in the
aggregate constitute an immaterial and
insignificant monetary amount with respect to
the net value of the related borrower's
assets. A default by the borrower on such
additional indebtedness could impair the
borrower's financial condition and result in
the bankruptcy or receivership of the borrower
which would cause a delay in the foreclosure
by the trust fund on the mortgaged property.
It may not be evident that a borrower has
incurred any such future subordinate second
lien debt until the related mortgage loan
otherwise defaults. In cases in which one or
more subordinate liens are imposed on a
mortgaged property or the borrower incurs
other indebtedness, the trust fund is subject
to additional risks, including, without
limitation, the following:
- 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
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subordinate financing and that the value of
the mortgaged property may fall as a
result;
- the risk that the borrower may have a
greater incentive to repay the subordinate
or unsecured indebtedness first;
- 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;
- 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
- 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 THE MORTGAGE
LOANS AND LEASES--Subordinate Financing" and
"--Due-on-Sale and Due-on-Encumbrance" in the
accompanying prospectus and "DESCRIPTION OF
THE MORTGAGE POOL--Certain Terms and
Conditions of the Mortgage Loans--Other
Financing" and "--Due-on-Sale and
Due-on-Encumbrance Provisions" in this
prospectus supplement.
Mezzanine debt is debt that is incurred by the
owner of equity in one or more borrowers and
is secured by a pledge of the equity ownership
interests in such borrowers. Because mezzanine
debt is secured by the obligor's equity
interest in the related borrowers, such
financing effectively reduces the obligor's
economic stake in the related mortgaged
property. The existence of mezzanine debt may
reduce cash flow on the borrower's mortgaged
property after the payment of debt service and
may increase the likelihood that the owner of
a borrower will permit the value or income
producing potential of a mortgaged property to
fall and may create a slightly 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
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foreclose upon the equity in the related
mortgagor, which has been pledged to secure
payment of such mezzanine debt. Although such
transfer of equity would 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.
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 Rite Aid-Palm Desert mortgage
loan does not include its subordinate
component and the 5 mortgage loans which have
companion loans do not include the related
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:
- the risk that the necessary maintenance of
the related mortgaged property could be
deferred to allow the borrower to pay the
required debt service on these subordinate
obligations and that the value of the
mortgaged property may fall as a result;
and
- the risk that it may be more difficult for
the borrower to refinance the mortgage
loan or to sell the mortgaged property for
purposes of making any balloon payment on
the entire balance of both the senior
obligations and the subordinate
obligations upon the maturity of the
mortgage loan.
THE BORROWER'S FORM OF ENTITY
MAY CAUSE SPECIAL RISKS..... The borrowers may be either individuals or
legal entities. 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, various types of 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,
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may impair the ability of the lender to
enforce its rights and remedies under the
related mortgage.
Many of the borrowers are not
bankruptcy-remote entities, and therefore may
be more likely to become insolvent or the
subject of a voluntary or involuntary
bankruptcy proceeding because such borrowers
may be:
- operating entities with businesses
distinct from the operation of the
property with the associated liabilities
and risks of operating an ongoing
business; and
- individuals that have personal liabilities
unrelated to the property.
However, any borrower, even a
bankruptcy-remote entity, as 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.
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
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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 and
assignment to the extent they are used by the
borrower to maintain the mortgaged property or
for other court authorized expenses.
Additionally, pursuant to subordination
agreements for certain of the mortgage loans,
the subordinate lenders may have agreed that
they will not take any direct actions with
respect to the related subordinated debt,
including any actions relating to the
bankruptcy of the borrower, and that the
holder of the mortgage loan will have all
rights to direct all such actions. There can
be no assurance that in the event of the
borrower's bankruptcy, a court will enforce
such restrictions against a subordinated
lender.
In its recent decision in In re 203 North
LaSalle Street Partnership, 246 B.R. 325
(Bankr. N.D. Ill. March 10, 2000), the United
States Bankruptcy Court for the Northern
District of Illinois refused to enforce a
provision of a subordination agreement that
allowed a first mortgagee to vote a second
mortgagee's claim with respect to a Chapter 11
reorganization plan on the grounds that
pre-bankruptcy contracts cannot override
rights expressly provided by the Bankruptcy
Code. This holding, which one court has
already followed, potentially limits the
ability of a senior lender to accept or reject
a reorganization plan or to control the
enforcement of remedies against a common
borrower over a subordinated lender's
objections.
As a result of the foregoing, the trustee's
recovery with respect to borrowers in
bankruptcy proceedings may be
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significantly delayed, and the aggregate
amount ultimately collected may be
substantially less than the amount owed.
INSPECTIONS AND APPRAISALS MAY
NOT ACCURATELY REFLECT VALUE
OR CONDITION OF MORTGAGED
PROPERTY.................... In general, appraisals represent only the
analysis and opinion of qualified experts and
are not guaranties of present or future value,
and may determine a value of a property that
is significantly higher than the amount that
can be obtained from the sale of a mortgaged
property under a distress or liquidation sale.
Information regarding the values of the
mortgaged properties at the date of such
report is presented under "DESCRIPTION OF THE
MORTGAGE POOL--Additional Mortgage Loan
Information" in this prospectus supplement for
illustrative purposes only. Any engineering
reports or site inspections obtained in
connection with this offering represent only
the analysis of the individual engineers or
site inspectors preparing such reports at the
time of such report, and may not reveal all
necessary or desirable repairs, maintenance or
capital improvement items.
THE MORTGAGED PROPERTIES MAY
NOT BE IN COMPLIANCE WITH
CURRENT ZONING LAWS......... The mortgaged properties securing the mortgage
loans 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 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.
RESTRICTIONS ON CERTAIN OF THE
MORTGAGED PROPERTIES MAY
LIMIT THEIR USE............. In addition, 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.
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In addition, certain of the mortgaged
properties are subject to certain use
restrictions imposed pursuant to reciprocal
easement agreements or operating agreements.
Such use restrictions include, for example,
limitations on the character of the
improvements or the properties, limitations
affecting noise and parking requirements,
among other things, and limitations on the
borrowers' right to operate certain types of
facilities within a prescribed radius. These
limitations could adversely affect the ability
of the related borrower to lease the mortgaged
property on favorable terms, thus adversely
affecting the borrower's ability to fulfill
its obligations under the related mortgage
loan.
COMPLIANCE WITH APPLICABLE
LAWS AND REGULATIONS MAY
RESULT IN LOSSES............ A borrower may be required to incur costs to
comply with various existing and future
federal, state or local laws and regulations
applicable to the related mortgaged property
securing a mortgage loan included in the trust
fund. Examples of these laws and regulations
include zoning laws and the Americans with
Disabilities Act of 1990, which requires all
public accommodations to meet certain federal
requirements related to access and use by
disabled persons. See "CERTAIN LEGAL ASPECTS
OF MORTGAGE LOANS AND LEASES--Americans with
Disabilities Act" in the accompanying
prospectus. The expenditure of such costs or
the imposition of injunctive relief, penalties
or fines in connection with the borrower's
noncompliance could negatively impact the
borrower's cash flow and, consequently, its
ability to pay its mortgage loan.
ENFORCEABILITY OF DUE-ON-SALE
CLAUSES AND ASSIGNMENTS OF
LEASES AND RENTS IS
LIMITED..................... The mortgages securing the mortgage loans
included in the trust fund generally contain
due-on-sale clauses, which permit the
acceleration of the maturity of the related
mortgage loan if the borrower sells, transfers
or conveys the related mortgaged property or
its interest in the mortgaged property without
the consent of the lender. There also may be
limitations on the enforceability of such
clauses. The mortgages also generally include
a debt-acceleration clause, which 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.
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However, certain of the mortgage loans
included in the trust fund permit one or more
transfers of the related mortgaged property to
pre-approved borrowers or pursuant to pre-
approved conditions without the lender
approval. See "CERTAIN LEGAL ASPECTS OF
MORTGAGE LOANS AND LEASES--Due-on-Sale and
Due-on-Encumbrance" in the accompanying
prospectus.
The mortgage loans included in the trust fund
may also be secured by an assignment of leases
and rents pursuant to which the borrower
typically assigns its right, title and
interest as landlord under the leases on the
related mortgaged property and the income
derived therefrom to the lender as further
security for the related mortgage loan, while
retaining a license to collect rents for so
long as there is no default. In the event the
borrower defaults, the license terminates and
the lender is entitled to collect the rents.
Such assignments are typically not perfected
as security interests prior to the lender's
taking possession of the related mortgaged
property and/or appointment of a receiver.
Some state laws may require that the lender
take possession of the mortgaged property and
obtain a judicial appointment of a receiver
before becoming entitled to collect the rents.
In addition, if bankruptcy or similar
proceedings are commenced by or in respect of
the borrower, the lender's ability to collect
the rents may be adversely affected. See
"CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
AND LEASES--Leases and Rents" in the
accompanying prospectus.
LIMITATIONS ON THE BENEFITS OF
CROSS-COLLATERALIZED AND
CROSS-DEFAULTED
PROPERTIES.................. Five (5) groups of mortgage loans included in
the trust fund as of the cut-off date ((1)
loan numbers 21, 24, 32, 47, 48, 55 and 65;
(2) loan numbers 40, 43, 46, 68, 77, 78, 89
and 99; (3) loan numbers 52 and 67; (4) loan
numbers 87 and 92; and (5) loan numbers 16 and
64) representing 13.3% of the mortgage pool,
are cross-collateralized and cross-defaulted
with one or more related cross-collateralized
loans. In addition, 1 mortgage loan (loan
number 2), representing 5.0% of the mortgage
pool, is secured by 6 first lien deeds of
trust or mortgages, as applicable, on 6
properties from 6 different 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
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lien granted by any such borrower could be
voided if a court determines that:
- 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
- the borrower did not, when it allowed its
mortgaged property to be encumbered by the
liens securing the indebtedness
represented by the other
cross-collateralized loans, receive "fair
consideration" or "reasonably equivalent
value" for pledging such mortgaged
property for the equal benefit of the
other related borrowers.
We cannot provide assurances that a lien
granted by a borrower on a
cross-collateralized loan to secure the
mortgage loan of another borrower, or any
payment thereon, would not be avoided as a
fraudulent conveyance. See "DESCRIPTION OF THE
MORTGAGE POOL--Certain Terms and Conditions of
the Mortgage Loans--Cross-Default and
Cross-Collateralization of Certain Mortgage
Loans" and Annex A-5 to this prospectus
supplement for more information regarding the
cross-collateralized loans. No mortgage loan
included in the trust fund 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.............. Certain of the mortgaged properties securing
mortgage loans included in the trust fund are
leased wholly or in large part to a single
tenant or are wholly or 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).
Mortgaged properties leased to a single
tenant, or a small number of tenants, also are
more likely to experience interruptions of
cash flow if a tenant fails to renew its lease
because there may be less or no rental income
until new tenants are found and it may be
necessary to expend substantial amounts of
capital to make the space acceptable to new
tenants.
Retail and office properties also may be
adversely affected if there is a concentration
of particular tenants among the
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mortgaged properties or of tenants in a
particular business or industry.
THE FAILURE OF A TENANT WILL
HAVE A NEGATIVE IMPACT ON
SINGLE AND CONCENTRATION
TENANT PROPERTIES........... The bankruptcy or insolvency of a major
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
AFFECT ON BORROWERS......... From time to time, there may be legal
proceedings pending or threatened against the
borrowers and their affiliates relating to the
business of, or arising out of the ordinary
course of business of, the borrowers and their
affiliates, and certain of the borrowers are
subject to legal proceedings relating to the
business of, or arising out of the ordinary
course of business of, the borrowers or their
affiliates. It is possible that future
litigation 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:
- responding to changes in the local market;
- planning and implementing the rental
structure;
- operating the property and providing
building services;
- managing operating expenses; and
- assuring that maintenance and capital
improvements are carried out in a timely
fashion.
Properties deriving revenues primarily from
short-term sources, such as short-term leases,
are generally more management intensive than
properties leased to creditworthy tenants
under long-term leases.
We make no representation or warranty as to
the skills of any present or future managers.
Additionally, we cannot provide assurance that
the property managers will be in a
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financial condition to fulfill their
management responsibilities throughout the
terms of their respective management
agreements.
THE STATUS OF A GROUND LEASE
MAY BE UNCERTAIN IN A
BANKRUPTCY PROCEEDING....... Eight (8) of the mortgaged properties included
in the trust fund as of the cut-off date,
representing 8.3% of the mortgage pool, are
secured in whole or in part by leasehold
interests. Pursuant to Section 365(h) of the
Bankruptcy Code, ground lessees have the right
to continue in a ground lease even though the
representative of their bankrupt ground lessor
rejects the lease. The leasehold mortgages
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. 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 (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.
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 First Union
National Bank 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
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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 AGREEMENTS--Representations and
Warranties; Repurchases" in the accompanying
prospectus.
ONE ACTION JURISDICTION MAY
LIMIT THE ABILITY OF THE
SPECIAL SERVICER TO
FORECLOSE ON THE MORTGAGED
PROPERTY.................... Some states (including California) have laws
that prohibit more than one judicial action to
enforce a mortgage obligation, and some courts
have construed the term judicial action
broadly. Accordingly, the special servicer is
required to obtain advice of counsel prior to
enforcing any of the trust fund's rights under
any of the mortgage loans that include
mortgaged properties where this rule could be
applicable. In the case of either a
cross-collateralized and cross-defaulted
mortgage loan or a multi-property mortgage
loan which is secured by mortgaged properties
located in multiple states, the special
servicer may be required to foreclose first on
properties located in states where such "one
action" rules apply (and where non- judicial
foreclosure is permitted) before foreclosing
on properties located in the states where
judicial foreclosure is the only permitted
method of foreclosure. As a result, the
special servicer may incur delay and 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.
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool is expected to consist of 107 fixed rate mortgage loans
(the "Mortgage Loans"), with an aggregate principal balance (the "Cut-Off Date
Pool Balance") as of June 1, 2001, for 106 of the Mortgage Loans, and June 10,
2001 for the Qwest Mortgage Loan (such date with respect to each Mortgage Loan,
the "Cut-Off Date") of $1,001,539,038. The "Cut-Off Date Balance" of each
Mortgage Loan will equal the unpaid principal balance thereof as of the Cut-Off
Date, after reduction for all
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payment of principal due on or before such date, whether or not received. The
Cut-Off Date Balances of the Mortgage Loans range from $516,705 to $54,520,757
and the Mortgage Loans have an average Cut-Off Date Balance of $9,360,178.
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. All percentages of the Mortgage Loans, or of 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 5 Mortgage Loans with Companion Loans and
the Rite Aid-Palm Desert Mortgage Loan is calculated without regard to the
related Companion Loan or Subordinate Component in the Rite Aid-Palm Desert
Mortgage Loan.
All of the Mortgage Loans are evidenced by a promissory note (each a
"Mortgage Note"). All of the Mortgage Loans are secured by a mortgage, deed of
trust or other similar security instrument (each, a "Mortgage") that creates a
first mortgage lien on a borrower's fee simple estate (or, with respect to 8
Mortgage Loans, representing 8.3% of the Cut-Off Date Pool Balance, on the
related borrower's leasehold estate) in an income-producing real property (each,
a "Mortgaged Property").
Set forth below are the number of Mortgage Loans, and the approximate
percentage of the Cut-Off Date Pool Balance represented by such Mortgage Loans,
that are secured by Mortgaged Properties operated for each indicated purpose:
MORTGAGED PROPERTIES BY PROPERTY TYPE
NUMBER AGGREGATE PERCENTAGE
OF MORTGAGED CUT-OFF OF CUT-OFF
PROPERTY TYPE LOANS/PROPERTIES DATE BALANCE DATE POOL BALANCE
- ------------- ---------------- -------------- -----------------
Multifamily..................................... 37/40 $ 333,815,394 33.3%
Office(1)....................................... 28/29 294,305,944 29.4
Retail(2)....................................... 26/26 188,313,050 18.8
Retail - Anchored......................... 11/11 142,989,834 14.3
Retail - Unanchored....................... 14/14 40,437,356 4.0
Retail - Shadow Anchored.................. 1/1 4,885,861 0.5
Hospitality..................................... 3/8 61,739,565 6.2
Industrial...................................... 7/7 50,168,861 5.0
Mixed Use....................................... 3/3 36,816,493 3.7
Self Storage.................................... 2/20 35,482,283 3.5
Mobile Home Park................................ 1/1 897,447 0.1
------- -------------- ------
Total................................. 107/134 $1,001,539,038 100.0%
======= ============== ======
- ---------------
(1) Includes 1 Credit Lease Loan, representing 2.4% of the Cut-Off Date Pool
Balance.
(2) Includes 5 Credit Lease Loans, representing 1.1% of the Cut-Off Date Pool
Balance.
MORTGAGE LOAN HISTORY
All of the Mortgage Loans will be acquired on the Closing Date by the
Depositor from the Mortgage Loan Sellers. First Union National Bank, in its
capacity as a Mortgage Loan Seller, originated or acquired 77 of the Mortgage
Loans to be included in the Trust Fund representing 65.1% of the Cut-Off Date
Pool Balance. Merrill Lynch Mortgage Capital Inc. ("MLMCI") and Merrill Lynch
Mortgage Lending, Inc. ("MLML", and together with MLMCI, the "Merrill Lynch
Originators") originated or acquired 30 of the Mortgage Loans to be included in
the Trust Fund representing 34.9% of the Cut-Off Date Pool Balance. None of the
Mortgage Loans was 30 days or more delinquent as of the Cut-Off Date, and no
Mortgage Loan has been 30 days or more delinquent during the 12 months preceding
the Cut-Off Date (or since the date of origination if such Mortgage Loan has
been originated within the past 12 months).
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CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Mortgage Rates; Calculations of Interest. All of the Mortgage Loans bear
interest at rates (each a "Mortgage Rate") that will remain fixed for their
remaining terms, provided, however, that after the applicable Anticipated
Repayment Date, the interest rate on the related ARD Loans will increase as
described in this Prospectus Supplement. See "--Amortization" below. One hundred
and one (101) of the Mortgage Loans, representing 96.6% 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. Six (6) of the Mortgage Loans,
representing 3.4% 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. Eight
(8) of the Mortgage Loans, representing 16.5% of the Cut-Off Date Pool Balance,
have periods during which only interest is due and periods in which principal
and interest are due. Seven (7) of the Mortgage Loans, representing 6.1% 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 Mortgage Loans are due on the date (each such
date, a "Due Date") occurring on the first day of the month (or, in the case of
the Qwest Mortgage Loan, the tenth day of the month). No mortgage loan has a
grace period that extends payment beyond the 10th day of any calendar month and
the Qwest Mortgage Loan does not have a grace period.
Amortization. Seventy-seven (77) of the Mortgage Loans (the "Balloon
Loans"), representing 68.6% of the Cut-Off Date Pool Balance, provide for
Periodic Payments based on amortization schedules significantly longer than
their respective terms to maturity or for Periodic Payments of interest only, 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"). Ten (10) of the Mortgage Loans (the
"ARD Loans"), representing 22.8% 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, all the ARD Loans,
generally require the related borrower to enter into a cash management agreement
whereby all Excess Cash Flow will be deposited directly into a lockbox account.
Any amount received in respect of Additional Interest will be distributed to the
holders of the Class Z-I and Class Z-II 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.
Two (2) of the Mortgage Loans, representing 0.6% of the Cut-Off Date Pool
Balance, all of which are Credit Lease Loans, have a Balloon Payment which is
insured (an "Insured Balloon Payment") through a Residual Value Insurance
Policy. If a default occurs under such Balloon Loans with respect to an Insured
Balloon Payment and no recovery is available from the related borrower, the
Special Servicer will be entitled to recover in full the amount of the Balloon
Payment due under such Mortgage Loan through the Residual Value Insurance Policy
after the maturity date for such Mortgage Loan. In the event a Residual Value
Insurer defaults on an Insured Balloon Payment, the Special Servicer will still
be able to assert whatever other remedies it has with respect to the related
Mortgaged Property and the Residual Value Insurer.
Residual Value Insurance Policy. Two (2) Mortgage Loans which have an
Insured Balloon Payment will have the benefit of a related non-cancelable
Residual Value Insurance Policy obtained to cover the Balloon Payment relating
to such Mortgaged Property (each such policy, a "Residual Value Insurance
Policy"). The Residual Value Insurance Policy will be or has been issued by
Financial Structures Limited and reinsured by Royal Indemnity Co. (the "Residual
Value Insurer") which, as of January 2001, had a
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financial strength rating of "AA-" by S&P. Each Residual Value Insurance Policy
is subject to certain limited exclusions. The Residual Value Insurer under each
Residual Value Insurance Policy is not required to pay amounts due under the
Mortgage Loan other than the related Balloon Payment and, subject to certain
limitations set forth in the Residual Value Insurance Policy, accrued interest,
and therefore is not required to pay any Prepayment Premium or Yield Maintenance
Charge or interest due thereunder or any amounts the related borrower may be
obligated to pay thereunder as reimbursement for outstanding P&I Advances.
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 payments for most or all of the term of the
related Mortgage Loan, but permit defeasance after a date specified in the
related Mortgage Note for most of the remaining term (104 Mortgage Loans, or
93.1% of the Cut-Off Date Pool Balance), (ii) prohibit voluntary prepayments of
principal for a period ending on a date specified in the related Mortgage Note,
and thereafter impose a Prepayment Premium or Yield Maintenance Charge (but not
both) (2 Mortgage Loans, or 1.4% of the Cut-Off Date Pool Balance) or (iii)
prohibit prepayment of principal, until a date specified in the related Mortgage
Note, then permit Defeasance until a date specified in the related Mortgage
Note, and thereafter impose a Prepayment Premium or Yield Maintenance Charge for
most of the remaining term (1 Mortgage Loan, or 5.4% of the Cut-Off Date Pool
Balance) provided that, for purposes of each of the foregoing, "remaining term"
refers to either the remaining term to maturity or the Anticipated Repayment
Date, as applicable, of the related Mortgage Loan. See "-- Additional Mortgage
Loan Information" in this Prospectus Supplement. Prepayment Premiums and Yield
Maintenance Charges, if and to the extent collected, will be distributed to the
holders of the Class IO Certificates as described in this Prospectus Supplement
under "DESCRIPTION OF THE CERTIFICATES--Distributions--Allocation of Prepayment
Premiums and Yield Maintenance Charges." 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. None of the Mortgage Loans require the payment of Prepayment Premiums or
Yield Maintenance Charges in connection with a prepayment of the related
Mortgage Loan as a result of 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, the
obligation to pay such Prepayment Premium or Yield Maintenance Charge will be
enforceable under applicable state law.
One hundred and five (105) of the Mortgage Loans, or 98.6% 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 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. In general, "Defeasance
Collateral" is required to consist of United States government obligations that
provide for payments 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), with each such payment being equal to or greater than
(with any excess to be returned to the borrower), the Periodic Payment
(including on the Subordinate Component of the Rite Aid-Palm Desert Mortgage
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 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 provided for in the
related Mortgage Note, but in each case subject to certain conditions, including
that the defeasance would not have an adverse effect on REMIC status of any of
the REMICs (accordingly, no defeasance would be required or permitted prior to
the second anniversary of
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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 United States government obligations 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. With respect to 2
Mortgage Loans (loan numbers 70 and 83), representing 0.6% of the Cut-Off Date
Pool Balance, the related Mortgaged Property remains encumbered by existing
subordinate debt, subject to the terms of a subordination and standstill
agreement entered in favor of the lender. With respect to 1 Mortgage (loan
number 22), representing 1.5% of the Cut-Off Date Pool Balance, the related
Mortgage Loan documents provide that the borrower may, under certain specified
circumstances, encumber the related Mortgaged Property with a subordinate
mortgage in the future. In addition, 2 of the Mortgage Loans (loan numbers 7 and
35), representing 3.8% of the Cut-Off Date Pool Balance, expressly permit
unsecured indebtedness subject to certain conditions. See "--Due-On-Sale and
Due-On-Encumbrance Provisions" below.
With respect to 4 Mortgage Loans (loan numbers 1, 17, 19 and 30),
representing 9.8% of the Cut-Off Date Pool Balance, the related Mortgage Loan
documents provide that the borrowers may, under certain circumstances, pledge
their limited partnership interests or other ownership interests in the borrower
as security for mezzanine debt in the future. In addition 1 Mortgage Loan (loan
number 23), representing 1.4% of the Cut-Off Date Pool Balance, has existing
unsecured debt. See "RISK FACTORS--Some Mortgaged Properties May Be Encumbered
by Subordinated Debt Which May Delay Foreclosure" in this Prospectus Supplement.
In addition, with respect to the Qwest Mortgage Loan and the Rite Aid AB
Mortgage Loans, the related Mortgaged Property also secures the lien of the
applicable Companion Loan. See "--Qwest and Rite Aid AB Mortgage 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 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 thus 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 permit one or more transfers of the related Mortgaged Property to
pre-approved borrowers or pursuant to pre-approved conditions without lender
approval. 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 in this Prospectus Supplement under "SERVICING OF THE
MORTGAGE LOANS--General," 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.
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Cross-Default and Cross-Collateralization of Certain Mortgage Loans. Five
(5) groups of Mortgage Loans, representing 13.3% of the Cut-Off Date Pool
Balance ((1) loan numbers 21, 24, 32, 47, 48, 55 and 65; (2) loan numbers 40,
43, 46, 68, 77, 78, 89 and 99; (3) loan numbers 52 and 67; (4) loan numbers 87
and 92; and (5) loan numbers 16 and 64), are cross-collateralized and
cross-defaulted with one or more Mortgage Loans in the Mortgage Pool as
indicated in Annex A-5. As of the Closing Date, no Mortgage Loan, except the
Qwest Mortgage Loan and the Rite Aid AB Mortgage 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.
ASSESSMENTS OF PROPERTY CONDITION
Property Inspections. Generally, all of 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 interests of the
holders of the Offered Certificates or for which adequate reserves have not been
established.
Appraisals. All of the Mortgaged Properties were appraised by a
state-certified appraiser or an appraiser belonging to the Appraisal Institute
in accordance with the Federal Institutions Reform, Recovery and Enforcement Act
of 1989. The primary purpose of each appraisal was to provide an opinion of 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 105 of the
Mortgage Loans or approximately 97.0% of the Cut-Off Date Balance, a licensed
engineer or architect inspected the related Mortgaged Property to assess the
condition of the structure, exterior walls, roofing, interior structure and
mechanical and electrical systems. No engineering inspections were made with
respect to the remaining 2 Mortgage Loans, representing 3.0% of the Cut-Off Date
Pool Balance, which were determined by the applicable Mortgage Loan Seller to be
"new construction" or a "substantially rehabilitated property" pursuant to its
underwriting guidelines. 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.
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, 4 of the Mortgaged Properties, securing Mortgage Loans
which represent approximately 4.5% 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
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the improvements located on the related Mortgaged Property. The Mortgaged
Properties described above have earthquake insurance in place. In addition, with
respect to 1 Mortgage Loan which is secured by 10 Mortgaged Properties, 1
Mortgaged Property has a probable maximum loss in excess of 20%. Such Mortgaged
Property is not covered by earthquake insurance.
RITE AID-PALM DESERT MORTGAGE LOAN
The ownership interest in one of the Mortgage Loans (the "Rite Aid-Palm
Desert Mortgage Loan") will be split into a senior interest (the "Senior
Component") and a subordinate interest (the "Subordinate Component"). The Senior
Component will represent approximately 0.3% of the Cut-Off Date Pool Balance.
All distributions of principal and interest with respect to the Senior Component
will be distributed to the Certificates as described herein. The holders of the
Subordinate Component, represented by the Class V Certificates, are only
entitled to distributions of principal or interest after the Senior Component
has been reduced to zero, and only then with respect to payments received on the
Rite Aid-Palm Desert Mortgage Loan. The Class V Certificates are not being
offered hereby.
The following table describes certain information regarding the Rite
Aid-Palm Desert Mortgage Loan and the Senior Component and Subordinate
Component.
COMBINED SENIOR SUBORDINATE
CUT-OFF COMPONENT COMPONENT
MORTGAGE CONTROL DATE CUT-OFF DATE CUT-OFF DATE MORTGAGE MATURITY COMBINED COMBINED
LOAN NO. BALANCE BALANCE BALANCE RATE DATE LTV DSCR
- ------------------------- ------- ---------- ------------ ------------ -------- --------- -------- --------
Rite Aid-Palm Desert 82 $3,812,383 $2,637,272 $1,175,112 6.83% June 2013 95.3% 1.00x
If the Rite Aid-Palm Desert Mortgage Loan becomes a Defaulted Mortgage
Loan, the holder of a majority percentage interest in the Class V Certificates
will have the option, but not the obligation, to purchase the Rite Aid-Palm
Desert Mortgage Loan (including the Subordinate Component thereof) from the
Trust Fund at a price equal to the Purchase Price thereof. The Purchase Price
paid in connection with such purchase will be applied as described under
"DESCRIPTION OF THE CERTIFICATES--Distributions--Class V Certificates and the
Rite Aid-Palm Desert Mortgage Loan." If the holder of a majority percentage
interest in the Class V Certificates fails to exercise this option within a time
period set forth in the Pooling and Servicing Agreement, certain other parties
may have the option to purchase the Rite Aid-Palm Desert Mortgage Loan as
described under "SERVICING OF THE MORTGAGE LOANS--Defaulted Mortgage Loans; REO
Properties; Sale of Mortgage Loans."
For more information regarding the relationship between the Senior
Component and the Subordinate Component, see "DESCRIPTION OF THE CERTIFICATES"
in this Prospectus Supplement.
QWEST AND RITE AID AB MORTGAGE LOANS
Five (5) companion mortgage loans (each, a "Companion Loan") are not part
of the Trust Fund but are each secured by the same Mortgage as a Mortgage Loan
which is part of the trust fund. One (1) of the Mortgage Loans (the "Qwest
Mortgage Loan") (loan number 10) has a Cut-Off Date Balance of $23,750,000,
representing 2.4% of the Cut-Off Date Pool Balance. The other 4 such Mortgage
Loans (the "Rite Aid AB Mortgage Loans") (loan numbers 73, 93, 96 and 97) have a
Cut-Off Date Balance of $8,082,349, representing 0.8% of the Cut-Off Date Pool
Balance. The Qwest Mortgage Loan and the Rite Aid AB Mortgage Loans accrue
interest on a 30/360 basis. Each Mortgage Loan and its related Companion Loan
are cross-defaulted. No Companion Loan is part of the Trust Fund. Under the
terms of separate Co-Lender and Servicing Agreements (each, a "Co-Lender and
Servicing Agreement"), each holder of a Companion Loan has agreed to subordinate
its interest in certain respects to the related Mortgage Loan. The Qwest
Mortgage Loan and the Rite Aid AB Mortgage Loans are Credit Lease Loans. See
"--Credit Lease Loans" in this Prospectus Supplement.
The Co-Lender and Servicing Agreement. The Master Servicer and Special
Servicer will service and administer each Mortgage Loan that has a Companion
Loan and its related Companion Loan pursuant to the Pooling and Servicing
Agreement for so long as such Mortgage Loan is part of the Trust Fund. In the
event of an acceleration of such Mortgage Loan and its related Companion Loan
after an event of default
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under the Mortgage Loan documents the holder of such Companion Loan will be
entitled to purchase the related Mortgage Loan from the Trust Fund at the
Purchase Price for such Mortgage Loan. The holder of any Companion Loan will not
be entitled to exercise any other remedies with respect to such Companion Loan
or the related Mortgage Loan. The Controlling Class Representative will be
entitled to advise the Special Servicer with respect to certain matters related
to each Mortgage Loan and its related Companion Loan. See "SERVICING OF THE
MORTGAGE LOANS--The Controlling Class Representative" in this prospectus
supplement.
Pursuant to the Co-Lender and Servicing Agreement, to the extent described
below, the right of the holder of any Companion Loan to receive payments with
respect to such Companion Loan is subordinated to the payment rights of the
Trust Fund to receive payments with respect to the related Mortgage Loan. Prior
to the occurrence of an event of default with respect to any Mortgage Loan that
has a Companion Loan, which is an event of default as defined in such Mortgage
Loan's related Mortgage or Mortgage Note (a "Mortgage Event of Default"), after
payment or reimbursement of any Advances, advance interest or other costs, fees
or expenses related to or allocable to such Mortgage Loan or the related
Companion Loan to the extent such amounts (other than related Master Servicing
Fees and Trustee Fees) may be withdrawn from the Certificate Account, all
payments and proceeds (of whatever nature) received with respect to such
Mortgage Loan and the related Companion Loan will be paid (i) with respect to
the Qwest Mortgage Loan, first, to the Trust Fund, in an amount equal to
interest due with respect to such Mortgage Loan; second, to the Trust Fund, in
an amount equal to the portion of any scheduled or unscheduled payments of
principal allocable to such Mortgage Loan, third, to the holder of the related
Companion Loan, in an amount equal to interest due with respect to such
Companion Loan; fourth, to the holder of the related Companion Loan, in an
amount equal to the portion of any scheduled or unscheduled payments of
principal allocable to such Companion Loan; and fifth, any excess to the Trust
Fund and the holder of the related Companion Loan on a pro rata basis and (ii)
with respect to each Rite Aid AB Mortgage Loan, first, to the Trust Fund, in an
amount equal to interest due with respect to such Mortgage Loan; second, to the
Trust Fund, in an amount equal to the portion of any scheduled or unscheduled
payments of principal allocable to such Mortgage Loan, until such Mortgage Loan
has been fully paid; third, after such Mortgage Loan has been paid in full, to
the holder of the related Companion Loan, in an amount equal to interest due
with respect to such Companion Loan; and fourth, to the holder of such Companion
Loan in an amount equal to the portion of any scheduled or unscheduled payments
of principal allocable to such Companion Loan;
Following the occurrence and during the continuance of a Mortgage Event of
Default with respect to any Mortgage Loan that has a Companion Loan, after
payment or reimbursement of any Advances, advance interest or other costs, fees
or expenses related to or allocable to such Mortgage Loan or the related
Companion Loan to the extent such amounts (other than related Master Servicing
Fees and Trustee Fees) may be withdrawn from the Certificate Account, all
payments and proceeds (of whatever nature) on such Companion Loan will be
subordinated to all payments due on the related Mortgage Loan and the amounts
with respect to such Mortgage Loan and Companion Loan will be paid first, to the
Trust Fund, in an amount equal to interest due with respect to such Mortgage
Loan; second, to the Trust Fund, in an amount equal to the principal balance of
such Mortgage Loan until paid in full; third, to the holder of the related
Companion Loan, in an amount equal to interest due with respect to such
Companion Loan; fourth, to the holder of the related Companion Loan, in an
amount equal to the principal balance of such Companion Loan until paid in full;
and fifth, if any excess amount is paid by the related borrower, and not
otherwise applied in accordance with the foregoing four clauses, such amount
will be paid to the Trust Fund and the holder of the related Companion Loan on a
pro rata basis.
On or before each Distribution Date, amounts payable to the Trust Fund as
holder of any Mortgage Loan with a Companion Loan pursuant to a Co-Lender and
Servicing Agreement will be included in the Available Distribution Amount for
such Distribution Date and amounts payable to the holder of the related
Companion Loan will be distributed to the holder net of Master Servicing Fees,
Trustee Fees and certain other fees and expenses on such Companion Loan.
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CREDIT LEASE LOANS
Six (6) of the Mortgage Loans, representing 3.4% of the Cut-Off Date Pool
Balance (the "Credit Lease Loans"), were underwritten based upon the financial
strength of the tenant (each a "Tenant") to which the related Mortgaged Property
is leased. With respect to the Rite Aid-Palm Desert Mortgage Loan and the Rite
Aid AB Mortgage Loans (collectively, the "Rite Aid Mortgage Loans"), the Tenant
possesses (or the parent of which or other affiliate of which guarantees the
Tenant's lease obligation possesses) the rating indicated in the Credit Lease
Table below. The Tenant with respect to the Qwest Mortgage Loan is not rated and
its obligations under the related lease (the "Credit Lease") have not been
guaranteed. Scheduled monthly rent payments (the "Monthly Rental Payments")
under the related lease are generally determined in underwriting to be
sufficient to pay in full and on a timely basis all interest and principal
scheduled to be paid with respect to the related Credit Lease Loans (other than
any Balloon Payment, which is covered by a Residual Value Insurance Policy). The
Credit Leases generally provide that the Tenant is responsible for all costs and
expenses incurred in connection with the maintenance and operation of the
related Mortgaged Property.
The payment of interest and principal on Credit Lease Loans is dependent
principally on the payment by each Tenant or guarantor of the Tenant's Credit
Lease (the "Guarantor"), if any, of Monthly Rental Payments and other payments
due under the terms of its Credit Lease. Each Credit Lease has a primary lease
term (the "Primary Term") that expires on or after the scheduled final maturity
date of the related Credit Lease Loan. The Credit Lease Loans are scheduled to
be fully repaid from (i) Monthly Rental Payments made over the Primary Term of
the related Credit Lease or (ii) with respect to Credit Lease Loans which are
Balloon Loans, Monthly Rental Payments and the related Residual Value Insurance
Policy or a refinancing by the borrower.
The amount of the Monthly Rental Payments payable by each Tenant is equal
to or greater than the scheduled payment of all principal, interest and other
amounts due each month on the related Credit Lease Loan (other than any Balloon
Payments).
Two (2) of the Credit Lease Loans (each a Rite Aid Mortgage Loan),
representing 0.6% of the Cut-Off Date Pool Balance, which are Balloon Loans are
insured to the extent of the related Balloon Payment through a Residual Value
Insurance Policy. Pursuant to the terms of such policies, if a default occurs
under such Credit Lease Loans and no recovery is available from the related
Mortgagor, the Special Servicer will be entitled to recover in full the amount
of the Balloon Payment due under such Credit Lease Loan after the maturity date
for such Credit Lease Loan. Notwithstanding the foregoing, the portions of the 2
Rite Aid Mortgage Loans with Residual Value Insurance (included in the Trust
Fund) have been structured pursuant to the related Co-Lender and Servicing
Agreement to "fully amortize" prior to the related Balloon Date.
Set forth in the table below (the "Credit Lease Loan Table") for each
Credit Lease Loan, is the name of the Tenant, the Cut-Off Date Balance of the
related Credit Lease Loan, the Guarantor, if any, the rating of the Tenant or
Guarantor and the Credit Lease type.
CREDIT LEASE LOAN TABLE
CUT-OFF
LOAN DATE LEASE S&P/MOODY'S
NUMBER PROPERTY NAME BALANCE PROPERTY TYPE TYPE(1) GUARANTOR/TENANT RATING(2)
- ------ -------------------------- ----------- ------------- -------- ---------------- -----------
10................... Qwest Communications Corp. $23,750,000 Office NNN Qwest NPR/NPR(3)
73................... Rite Aid Galt $ 3,308,968 Retail B Rite Aid B/Caa3
82................... Rite Aid Palm Desert $ 2,637,272 Retail B Rite Aid B/Caa3
93................... Rite Aid Portage Oakland $ 1,706,072 Retail NN Rite Aid B/Caa3
96................... Rite Aid Roanoke Jamison $ 1,588,520 Retail NN Rite Aid B/Caa3
97................... Rite Aid Warren $ 1,478,788 Retail NNN Rite Aid B/Caa3
- ---------------
(1) "NNN" means triple net lease; "NN" means double net lease; "B" means bond
type lease.
(2) Unless otherwise indicated, such ratings were the highest assigned to the
applicable Tenant or Guarantor, as applicable, by S&P or Moody's.
(3) "NPR" means not publicly rated.
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Generally, each Credit Lease provides that the related Tenant is
responsible for all real property taxes and assessments levied or assessed
against the related Mortgaged Property except as discussed below in the case of
certain Double Net Leases, all charges for utility services, insurance and other
operating expenses incurred in connection with the operation of the related
Mortgaged Property.
Generally, each Credit Lease Loan provides that if the Tenant defaults
beyond applicable notice and grace periods in the performance of any covenant or
agreement in such Credit Lease (a "Credit Lease Default"), then the holder of
the related Mortgage may require the related Mortgagor either (i) to terminate
such Credit Lease or (ii) refrain from the exercise of any of its rights
thereunder. A Credit Lease Default will constitute a default under the related
Credit Lease Loan, although in certain cases the Mortgagor may possess certain
cure rights.
In addition, most of the Credit Leases permit the Tenant, at its own
expense, and generally with the consent of the Mortgagor, to make alterations or
improvements on the related Mortgaged Property as the Tenant may deem necessary
or desirable. Such actions, if undertaken by the Tenant, will not affect the
Tenant's obligations under the Credit Lease.
Lease termination rights and rent abatement rights, if any, provide that
Tenants in the Credit Leases may be divided into three categories: (i)
termination and abatement rights directly arising from certain casualty
occurrences or condemnations ("Casualty or Condemnation Rights"), (ii)
termination and abatement rights arising from a Mortgagor's default relating to
its obligations under a Credit Lease to perform required maintenance, repairs or
replacements with respect to the related Mortgaged Property ("Maintenance
Rights") and (iii) termination and abatement rights arising from a Mortgagor's
default in the performance of various other obligations under the Credit Lease,
including remediating environmental conditions not caused by the Tenant,
enforcement of restrictive covenants affecting other property owned by the
Mortgagor in the area of the related Mortgaged Property and complying with laws
affecting such Mortgaged Property or common areas related to such Mortgaged
Property ("Additional Rights"). Certain Credit Leases ("Bond-Type Leases")
provide neither Casualty or Condemnation Rights, Maintenance Rights nor
Additional Rights and the Tenants thereunder are required, at their expense, to
maintain their related Mortgaged Property in good order and repair. Other Credit
Leases provide Casualty or Condemnation Rights and may provide Additional Rights
("Triple Net Leases"). The Tenants under Triple Net Leases are required, at
their expense, to maintain their Mortgaged Properties, including the roof and
structure, in good order and repair. Additionally, certain of the Credit Leases
provide Casualty or Condemnation Rights and Maintenance Rights and may provide
Additional Rights ("Double Net Leases"). If the Mortgagor defaults in the
performance of certain obligations under a Triple Net Lease or a Double Net
Lease and the Tenant exercises its Additional Rights or Maintenance Rights,
there could be a disruption in the stream of Monthly Rental Payments available
to pay principal and interest to the Credit Lease Loans. Generally, Additional
Rights and Maintenance Rights are mitigated by repair and maintenance reserves,
debt service coverage ratios in excess of 1.0x and, prior to the disbursement of
such Mortgage Loan, receiving Tenant estoppel certificates (i.e., Tenant
certificates confirming the non-existence of landlord default). In addition, to
the extent the Mortgagor fails to fulfill certain obligations under the related
Credit Lease, the Tenant is entitled to exercise Additional Rights or
Maintenance Rights only after notice to the Master Servicer or the Special
Servicer, as applicable, giving the Master Servicer or the Special Servicer, as
applicable, an opportunity to cure.
Credit Leases with respect to 2 of the Mortgage Loans, representing 0.6% of
the Cut-Off Date Pool Balance, are Bond-Type Leases and Credit Leases with
respect to 2 Mortgage Loans, representing 2.6% of the Cut-Off Date Pool Balance,
are Triple Net Leases; provided, that the Tenant with respect to the Qwest
Mortgage Loan does not have termination and abatement rights directly arising
from casualty occurrences. Credit Leases with respect to 2 of the Mortgage
Loans, representing 0.3% of the Cut-Off Date Pool Balance, are Double Net
Leases.
At the end of the term of the Credit Leases, Tenants are generally
obligated to surrender the related Mortgaged Properties in good order and in its
original condition received by the Tenant, except for ordinary wear and tear and
repairs required to be performed by the Mortgagor.
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Pursuant to the terms of each assignment of a Credit Lease (the "Credit
Lease Assignment"), the related Mortgagor has assigned to the Mortgagee of the
related Credit Lease Loan, as security for such Mortgagor's obligations
thereunder, such Mortgagor's rights under the Credit Leases and its rights to
all income and profits to be derived from the operation and leasing of the
related Mortgaged Property including, but not limited to, an assignment of any
guarantee of the Tenant's obligations under the Credit Lease and an assignment
of the right to receive all Monthly Rental Payments due under the Credit Leases.
Pursuant to the terms of the Credit Lease Assignments, each Tenant is obligated
under its Credit Lease to make all Monthly Rental Payments directly to the owner
of the related Credit Lease Loan. Repayment of the Credit Lease Loans and other
obligations of the Mortgagors are expected to be funded from such Monthly Rental
Payments and Tenant Balloon Payments. Notwithstanding the foregoing, the
Mortgagors remain liable for all obligations under the Credit Lease Loans
(subject to the non-recourse provisions thereof).
Lease Enhancement Policies. Each Credit Lease Loan that provides the
Tenant with a Casualty or Condemnation Right has the benefit of a noncancellable
Lease Enhancement Policy issued by Chubb Custom Insurance Company (the
"Enhancement Insurer"), which, as of May 2001, was rated "AAA" by S&P. Each
Lease Enhancement Policy provides, subject to customary exclusions, that in the
event of a permitted termination by a Tenant of its Credit Lease as a result of
a casualty or condemnation, the Enhancement Insurer will pay to the Master
Servicer on behalf of the Trustee the "Loss of Rents" (that is, a lump sum
payment of all outstanding principal plus, subject to the limitation below,
accrued interest on the Credit Lease Loan). The Enhancement Insurer is not
required to pay interest for a period greater than 75 days past the date of the
exercise of a Casualty or Condemnation Right. If the Credit Lease permits the
Tenant to abate all or a portion of the rent in the event of a condemnation, the
"Loss of Rents" will be in an amount equal to the portion of any Monthly Rental
Payments not made by such Tenant for the period from the date the abatement
commences until the earlier of the date the abatement ceases or the expiration
date of the initial term of such Credit Lease; provided that in the event such
payments would exceed the limits of liability under the policy, then the related
Enhancement Insurer may, at its option, pay the present value of the stream of
partial abatement payments in a lump sum. The Enhancement Insurer is not
required to pay amounts due under the Credit Lease Loan other than principal
and, subject to the limitation above, accrued interest, and therefore is not
required to pay any Prepayment Premium or Yield Maintenance Charge due
thereunder or any amounts the Mortgagor is obligated to pay thereunder to
reimburse the Master Servicer or the Trustee for outstanding Advances.
Each Lease Enhancement Policy contains certain exclusions from coverage,
including loss arising from damage or destruction directly or indirectly caused
by war, insurrection, rebellion, revolution, usurped power, pollutants or
radioactive matter, or from a taking (other than by condemnation by reason of
public health, public safety or the environment).
The Mortgage Loans which are Credit Lease Loans are indicated on Annex A-1
to this Prospectus Supplement and information regarding certain of the payment
terms of the Credit Lease Loans is presented on Annex A-6 to this Prospectus
Supplement.
ADDITIONAL MORTGAGE LOAN INFORMATION
The Mortgage Pool. For a detailed presentation of certain of the
characteristics of the Mortgage Loans and the Mortgaged Properties, on an
individual basis, see Annexes A-1, A-2, A-3, A-4, 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 include only the Senior Component in the
Rite Aid-Palm Desert Mortgage Loan and excludes any Companion Loans. Certain
additional information regarding the Mortgage Loans is contained in this
Prospectus Supplement under "--Assignment of the Mortgage Loans; Repurchases and
Substitutions" and "--Representations and Warranties; Repurchases and
Substitutions," and in the Prospectus under "DESCRIPTION OF THE TRUST FUNDS" and
"CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND LEASES."
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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 Group" with respect to the other Mortgage Loans with which
they are cross-collateralized.
Each of the following tables sets forth certain characteristics of the
Mortgage Pool presented, where applicable, as of the Cut-Off Date. For purposes
of the tables and Annexes A-1, A-2, A-3, A-4, 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 community, 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 (i) with respect to 8 Mortgage Loans (loan
numbers 2, 3, 10, 11, 26, 44, 76 and 90), representing 16.5% 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, and (ii) with respect to 2 of the
Mortgage Loans (loan numbers 4, and 14) (the "LOC Loans"),
representing 5.4% of the Cut-Off Date Pool Balance, the debt service
was calculated after reducing the applicable principal balances of
the Mortgage Loans by amounts available for payment of debt service
under certain letters of credit pledged as additional collateral to
secure such Mortgage Loans (provided that such letters of credit may
be released if certain minimum debt service coverage tests are met).
In general, the Mortgage Loan Sellers relied on either full-year
operating statements, rolling 12-month operating statements and/or
applicable year-to-date financial statements, if available, and on
rent rolls for all Rental Properties that were current as of a date
not earlier than six months prior to the respective date of
origination in determining Net Cash Flow for the Mortgaged
Properties.
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 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
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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 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, and with respect to limited service hospitality
properties, where a minimum of 4.0% of gross receipts was assumed and, with
respect to single tenant properties, where fees as low as 3.0% of effective
gross receipts were assumed), (c) assumptions were made with respect to reserves
for leasing commissions, tenant improvement expenses and capital expenditures
and (d) expenses were assumed to include annual replacement reserves. See
"--Underwriting Standards--Escrow Requirements--Replacement Reserves" in this
Prospectus Supplement. In addition, in some instances, the Mortgage Loan Sellers
recharacterized as capital expenditures those items reported by borrowers as
operating expenses (thus increasing "net cash flow") where the Mortgage Loan
Sellers determined appropriate.
The borrowers' financial information used to determine Net Cash Flow was in
most cases borrower certified, but unaudited, and neither the Mortgage Loan
Sellers nor the Depositor verified their accuracy.
(ii) References to "Cut-Off Date LTV" and "Cut-Off Date LTV Ratio" are
references to the ratio, expressed as a percentage, of the Cut-Off Date
Balance of a Mortgage Loan to the appraised value of the related
Mortgaged Property as shown on the most recent third-party appraisal
thereof available to the Mortgage Loan Sellers; provided that, with
respect to LOC Loans, the Cut-Off Date Balance was reduced by the amounts
available under the applicable letter of credit serving as additional
collateral for such Mortgage Loan.
(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 prior to the Cut-Off Date
(or, with respect to the Gardiner Manor Mall Loan, its origination date
(which is after the Cut-Off Date)).
(iv) References to "Loan per Sq. Ft., Unit, Bed, Pad or Room" are, for each
Mortgage Loan secured by a lien on a multifamily property (including a
mobile home community), hospitality property or assisted living facility
or other residential healthcare property, respectively, references to the
Cut-
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Off Date Balance of such Mortgage Loan divided by the number of dwelling
units, pads, guest rooms or beds, respectively that the related Mortgaged
Property comprises, and, for each Mortgage Loan secured by a lien on a
retail, industrial/warehouse, self storage or office property, references
to the Cut-Off Date Balance of such Mortgage Loan divided by the net
rentable square foot area of the related Mortgaged Property.
(v) References to "Year Built" are references to the year that a Mortgaged
Property was originally constructed or substantially renovated. With
respect to any Mortgaged Property which was constructed in phases, the
"Year Built" refers to the year that the first phase was originally
constructed.
(vi) References to "weighted averages" are references to averages weighted on
the basis of the Cut-Off Date Balances of the related Mortgage Loans.
(vii) References to "Underwritten Replacement Reserves" represent estimated
annual capital costs, as used by the Mortgage Loan Sellers in determining
Net Cash Flow.
(viii) References to "Administrative Cost Rate" for each Mortgage Loan represent
the sum of (a) the Master Servicing Fee Rate for such Mortgage Loan, and
(b) 0.0022%, 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 (or, with respect to the Gardiner Manor Mall Loan, its
origination date (which is after the Cut-Off Date)) and the end of any
interest-only period, if any, to the month in which such Mortgage Loan
would fully or substantially amortize in accordance with such loan's
amortization schedule without regard to any Balloon Payment, if any, due
on such Mortgage Loan.
(xi) References to "L ( )" or "Lockout" or "Lockout Period" represent, with
respect to each Mortgage Loan, the period during which prepayments of
principal are prohibited and no substitution of Defeasance Collateral is
permitted. The number indicated in the parentheses indicates the duration
in years of such period (calculated for each Mortgage Loan from the date
of its origination). References to "O ( )" represent the period 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. 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 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 communities and
assisted living facilities, the percentage of units rented, (b) in the
case of office and retail properties, the percentage of the net rentable
square footage rented, and (c) in the case of self-storage facilities,
either the percentage of the net rentable square footage rented or the
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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.
The sum in any column of any of the following tables may not equal the
indicated total due to rounding.
(xx) The sum in any column of any of the following tables may not equal the
indicated total due to rounding.
S-86
87
MORTGAGED PROPERTIES BY PROPERTY TYPE FOR ALL MORTGAGE LOANS
% BY
NUMBER AGGREGATE CUT-OFF AVERAGE HIGHEST
NUMBER OF CUT-OFF DATE CUT-OFF CUT-OFF
OF MORTGAGED DATE POOL DATE DATE
PROPERTY TYPE LOANS PROPERTIES BALANCE BALANCE BALANCE BALANCE
- ------------- ------ ------------ -------------- ------- ----------- -----------
Multifamily............................... 37 40 $ 333,815,394 33.3% $ 9,022,038 $34,092,026
Office(3)................................. 28 29 294,305,944 29.4 $10,510,927 $54,520,757
Retail.................................... 26 26 188,313,050 18.8 $ 7,242,810 $32,750,000
Retail - Anchored........................ 11 11 142,989,834 14.3 $12,999,076 $32,750,000
Retail - Unanchored...................... 14 14 40,437,356 4.0 $ 2,888,383 $ 5,992,079
Retail - Shadow Anchored................. 1 1 4,885,861 0.5 $ 4,885,861 $ 4,885,861
Hospitality............................... 3 8 61,739,565 6.2 $20,579,855 $50,000,000
Industrial................................ 7 7 50,168,861 5.0 $ 7,166,980 $17,878,221
Mixed Use................................. 3 3 36,816,493 3.7 $12,272,164 $23,750,000
Self Storage.............................. 2 20 35,482,283 3.5 $17,741,141 $18,443,578
Mobile Home Park.......................... 1 1 897,447 0.1 $ 897,447 $ 897,447
--- --- --------------
107 134 $1,001,539,038 100.0% $ 9,360,178 $54,520,757
=== === ==============
WTD. AVG.
WTD. AVG. STATED MINIMUM MAXIMUM
CUT-OFF WTD. AVG. REMAINING WTD. AVG. CUT-OFF CUT-OFF
DATE LTV TERM TO CUT-OFF DATE DATE WTD. AVG.
LTV RATIO AT MATURITY DATE DSC DSC OCCUPANCY
PROPERTY TYPE RATIO MATURITY(1) (MOS)(1) DSC RATIO RATIO RATIO RATE(2)
- ------------- --------- ----------- --------- --------- ------- ------- ----------
Multifamily............................... 72.3% 65.5% 112 1.36x 1.20x 1.97x 94.9%
Office(3)................................. 61.9% 49.5% 115 1.37x 1.20x 2.41x 98.8%
Retail.................................... 73.7% 61.6% 118 1.30x 1.00x 1.67x 95.8%
Retail - Anchored........................ 75.2% 66.0% 116 1.30x 1.23x 1.40x 95.3%
Retail - Unanchored...................... 69.4% 46.3% 123 1.31x 1.00x 1.67x 97.9%
Retail - Shadow Anchored................. 63.9% 56.8% 116 1.32x 1.32x 1.32x 90.6%
Hospitality............................... 54.9% 49.0% 115 1.99x 1.42x 2.12x 83.7%
Industrial................................ 72.1% 64.5% 115 1.31x 1.20x 1.71x 99.8%
Mixed Use................................. 45.9% 20.6% 113 1.60x 1.22x 1.80x 99.1%
Self Storage.............................. 63.2% 52.1% 116 1.36x 1.35x 1.38x 85.4%
Mobile Home Park.......................... 71.8% 69.3% 55 1.25x 1.25x 1.25x 98.6%
67.1% 56.9% 114 1.40X 1.00X 2.41X 96.3%(4)
WTD.
AVG.
MORTGAGE
PROPERTY TYPE RATE
- ------------- --------
Multifamily............................... 7.50%
Office(3)................................. 7.72%
Retail.................................... 7.57%
Retail - Anchored........................ 7.54%
Retail - Unanchored...................... 7.65%
Retail - Shadow Anchored................. 7.70%
Hospitality............................... 7.93%
Industrial................................ 8.09%
Mixed Use................................. 7.87%
Self Storage.............................. 7.87%
Mobile Home Park.......................... 8.50%
7.66%
- ------------------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
(2) Occupancy Rates were calculated based upon rent rolls made available to the
applicable Mortgage Loan Seller by the related borrowers as of the rent roll
date set forth on Annex A-1 to this Prospectus Supplement without reference
to hospitality properties.
(3) Includes one Mortgaged Property secured by a fee interest in the related
land and the borrower's interest as a landlord under a ground lease (and the
ground lease is improved with an office building).
(4) Excludes 3 Mortgage Loans secured by hospitality properties, representing
6.2% of the Cut-Off Date Pool Balance.
S-87
88
RANGE OF CUT-OFF DATE BALANCES FOR ALL MORTGAGE LOANS
AGGREGATE % BY AVERAGE HIGHEST WTD. AVG.
RANGE OF CUT-OFF NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
DATE BALANCE ($) LOANS BALANCE POOL BALANCE BALANCE BALANCE LTV RATIO
- ---------------- --------- -------------- ------------ ------------ ------------ ------------
500,001- 2,000,000............. 18 $ 24,550,608 2.5% $ 1,363,923 $ 2,000,000 66.2%
2,000,001- 4,000,000............. 19 53,616,185 5.4 $ 2,821,904 $ 3,986,108 69.0%
4,000,001- 6,000,000............. 22 110,320,675 11.0 $ 5,014,576 $ 5,992,079 69.0%
6,000,001- 8,000,000............. 10 70,405,345 7.0 $ 7,040,534 $ 7,989,087 51.8%
8,000,001-10,000,000............. 8 73,860,362 7.4 $ 9,232,545 $ 9,748,218 70.3%
10,000,001-15,000,000............. 10 130,040,065 13.0 $13,004,007 $15,000,000 71.2%
15,000,001-20,000,000............. 6 102,858,480 10.3 $17,143,080 $18,443,578 71.0%
20,000,001-25,000,000............. 6 134,670,540 13.4 $22,445,090 $24,600,856 64.0%
25,000,001-30,000,000............. 2 54,952,554 5.5 $27,476,277 $28,549,985 73.8%
30,000,001-35,000,000............. 3 97,743,466 9.8 $32,581,155 $34,092,026 72.9%
40,000,001-45,000,000............. 1 44,000,000 4.4 $44,000,000 $44,000,000 57.1%
45,000,001-50,000,000............. 1 50,000,000 5.0 $50,000,000 $50,000,000 50.4%
50,000,001-55,000,000............. 1 54,520,757 5.4 $54,520,757 $54,520,757 74.5%
--- -------------- -----
TOTAL/WEIGHTED AVERAGE............ 107 $1,001,539,038 100% $ 9,360,178 $54,520,757 67.1%
=== ============== =====
WTD. AVG.
STATED
WTD. AVG. REMAINING
LTV TERM TO WTD. AVG. WTD. AVG.
RANGE OF CUT-OFF RATIO AT MATURITY DSC MORTGAGE
DATE BALANCE ($) MATURITY(1) (MOS)(1) RATIO RATE
- ---------------- ----------- --------- --------- -------------
500,001- 2,000,000............. 45.8% 119 1.29x 7.82%
2,000,001- 4,000,000............. 48.5% 115 1.27x 7.64%
4,000,001- 6,000,000............. 60.6% 115 1.37x 7.78%
6,000,001- 8,000,000............. 35.4% 116 1.54x 7.68%
8,000,001-10,000,000............. 62.2% 115 1.37x 7.72%
10,000,001-15,000,000............. 65.2% 114 1.43x 7.59%
15,000,001-20,000,000............. 60.6% 117 1.30x 7.54%
20,000,001-25,000,000............. 51.3% 115 1.35x 7.64%
25,000,001-30,000,000............. 68.5% 93 1.22x 8.36%
30,000,001-35,000,000............. 64.3% 117 1.22x 7.68%
40,000,001-45,000,000............. 49.7% 116 1.69x 6.79%
45,000,001-50,000,000............. 45.7% 115 2.12x 7.75%
50,000,001-55,000,000............. 60.9% 116 1.31x 7.58%
TOTAL/WEIGHTED AVERAGE............ 56.9% 114 1.40X 7.66%
- ------------------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-88
89
RANGE OF CUT-OFF DATE BALANCES FOR ALL MORTGAGE LOANS(1)
NUMBER OF AGGREGATE % BY AVERAGE HIGHEST WTD. AVG.
RANGE OF CUT-OFF CROSSED POOLS CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
DATE BALANCES ($) AND LOANS BALANCE POOL BALANCE BALANCE BALANCE LTV RATIO
- ----------------- ------------- -------------- ------------ ------------ ------------ ------------
500,001- 2,000,000............. 16 $ 21,189,596 2.1% $ 1,324,350 $ 2,000,000 66.3%
2,000,001- 4,000,000............. 15 43,407,659 4.3 $ 2,893,844 $ 3,986,108 72.2%
4,000,001- 6,000,000............. 17 85,534,855 8.5 $ 5,031,462 $ 5,992,079 73.7%
6,000,001- 8,000,000............. 5 36,722,651 3.7 $ 7,344,530 $ 7,989,087 52.6%
8,000,001-10,000,000............. 8 74,227,095 7.4 $ 9,278,387 $ 9,866,733 69.3%
10,000,001-15,000,000............. 8 100,790,065 10.1 $12,598,758 $14,814,651 73.6%
15,000,001-20,000,000............. 5 84,980,259 8.5 $16,996,052 $18,443,578 70.7%
20,000,001-25,000,000............. 7 157,412,835 15.7 $22,487,548 $24,600,856 64.9%
25,000,001-30,000,000............. 2 54,952,554 5.5 $27,476,277 $28,549,985 73.8%
30,000,001-35,000,000............. 4 132,550,710 13.2 $33,137,677 $34,807,244 65.6%
40,000,001-45,000,000............. 1 44,000,000 4.4 $44,000,000 $44,000,000 57.1%
45,000,001-50,000,000............. 1 50,000,000 5.0 $50,000,000 $50,000,000 50.4%
50,000,001-55,000,000............. 1 54,520,757 5.4 $54,520,757 $54,520,757 74.5%
60,000,001-65,000,000............. 1 61,250,000 6.1 $61,250,000 $61,250,000 62.1%
--- -------------- ------
TOTAL/WEIGHTED AVERAGE............ 91 $1,001,539,038 100.0% $11,005,923 $61,250,000 67.1%
=== ============== ======
WTD. AVG.
WTD. STATED WTD. AVG.
AVG. REMAINING CUT-OFF
LTV TERM TO DATE WTD. AVG.
RANGE OF CUT-OFF RATIO AT MATURITY DSC MORTGAGE
DATE BALANCES ($) MATURITY (MOS) RATIO RATE
- ----------------- -------- --------- --------- -------------
500,001- 2,000,000............. 46.5% 119 1.29x 7.84%
2,000,001- 4,000,000............. 56.4% 115 1.27x 7.70%
4,000,001- 6,000,000............. 65.6% 115 1.32x 7.87%
6,000,001- 8,000,000............. 47.1% 114 1.62x 8.05%
8,000,001-10,000,000............. 60.5% 115 1.32x 7.77%
10,000,001-15,000,000............. 65.9% 114 1.29x 7.66%
15,000,001-20,000,000............. 59.8% 116 1.30x 7.51%
20,000,001-25,000,000............. 52.9% 116 1.34x 7.65%
25,000,001-30,000,000............. 68.5% 93 1.22x 8.36%
30,000,001-35,000,000............. 47.4% 118 1.22x 7.56%
40,000,001-45,000,000............. 49.7% 116 1.69x 6.79%
45,000,001-50,000,000............. 45.7% 115 2.12x 7.75%
50,000,001-55,000,000............. 60.9% 116 1.31x 7.58%
60,000,001-65,000,000............. 62.1% 115 1.85x 7.35%
TOTAL/WEIGHTED AVERAGE............ 56.9% 114 1.40X 7.66%
- ------------------
(1) This table presents certain information based on the assumption that any
Mortgage Loans included in the Trust Fund which are cross-collateralized and
cross-defaulted with other mortgage loans included in the Trust Fund are a
single mortgage loan. See Annex A-1 to this Prospectus Supplement, for more
information regarding cross-collateralized and cross-defaulted Mortgage
Loans included in the Trust Fund.
S-89
90
MORTGAGED PROPERTIES BY STATE FOR
ALL MORTGAGE LOANS(1)
NUMBER OF AGGREGATE % BY AVERAGE HIGHEST WTD. AVG.
MORTGAGED CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
STATE PROPERTIES(1) BALANCE POOL BALANCE BALANCE BALANCE LTV RATIO
----- ------------- -------------- ------------ ------------ ------------ ------------
CA................................ 26 $ 227,842,057 22.7% $ 8,763,156 $34,092,026 63.4%
Southern(3)..................... 16 144,761,512 14.5 $ 9,047,594 $34,092,026 68.8%
Northern(3)..................... 10 83,080,545 8.3 $ 6,308,054 $23,750,000 54.1%
TX................................ 26 122,113,363 12.2 $ 4,696,668 $15,000,000 60.1%
FL................................ 14 98,287,338 9.8 $ 7,020,524 $30,901,440 75.2%
PA................................ 6 83,840,441 8.4 $13,973,407 $44,000,000 65.4%
NY................................ 7 81,717,771 8.2 $11,673,967 $32,750,000 65.1%
DC................................ 1 54,520,757 5.4 $54,520,757 $54,520,757 74.5%
NV................................ 4 48,827,531 4.9 $12,206,883 $22,500,000 76.1%
VA................................ 6 40,656,112 4.1 $ 6,776,019 $12,775,379 66.2%
NJ................................ 5 34,404,087 3.4 $ 6,880,817 $16,122,325 73.0%
NC................................ 2 27,336,992 2.7 $13,668,496 $17,226,054 74.9%
MD................................ 2 24,600,856 2.5 $12,300,428 $16,853,000 56.6%
HI................................ 1 20,892,755 2.1 $20,892,755 $20,892,755 72.0%
GA................................ 3 18,326,957 1.8 $ 6,108,986 $ 8,056,395 64.6%
CT................................ 4 12,942,038 1.3 $ 3,235,510 $ 8,056,395 55.0%
IN................................ 1 12,400,000 1.2 $12,400,000 $12,400,000 80.0%
SC................................ 1 11,883,933 1.2 $11,883,933 $11,883,933 79.8%
DE................................ 2 11,812,523 1.2 $ 5,906,261 $ 9,454,450 74.3%
AL................................ 3 11,536,115 1.2 $ 3,845,372 $ 6,484,202 48.4%
TN................................ 4 9,945,247 1.0 $ 2,486,312 $ 3,680,417 76.4%
ME................................ 1 9,427,286 0.9 $ 9,427,286 $ 9,427,286 72.5%
IL................................ 2 7,587,094 0.8 $ 3,793,547 $ 5,234,237 78.6%
MA................................ 3 7,441,121 0.7 $ 2,480,374 $ 4,924,416 61.3%
OK................................ 1 7,241,000 0.7 $ 7,241,000 $ 7,241,000 63.0%
MI................................ 3 5,480,832 0.5 $ 1,826,944 $ 2,295,971 71.7%
WI................................ 1 2,907,067 0.3 $ 2,907,067 $ 2,907,067 75.5%
MO................................ 1 2,498,929 0.2 $ 2,498,929 $ 2,498,929 60.5%
NM................................ 1 1,693,842 0.2 $ 1,693,842 $ 1,693,842 69.1%
AZ................................ 1 1,573,176 0.2 $ 1,573,176 $ 1,573,176 60.5%
AR................................ 1 919,224 0.1 $ 919,224 $ 919,224 65.7%
ID................................ 1 882,595 0.1 $ 882,595 $ 882,595 73.6%
--- -------------- -----
TOTAL/WEIGHTED AVERAGE............ 134 $1,001,539,038 100.0% $ 7,474,172 $54,520,757 67.1%
=== ============== =====
WTD. AVG.
STATED
WTD. AVG. REMAINING
LTV TERM TO WTD. AVG. WTD. AVG.
RATIO AT MATURITY DSC MORTGAGE
STATE MATURITY(2) (MOS)(2) RATIO RATE
----- ----------- --------- --------- ---------
CA................................ 51.9% 114 1.38x 7.97%
Southern(3)..................... 60.2% 114 1.25x 7.98%
Northern(3)..................... 37.3% 115 1.62x 7.95%
TX................................ 53.0% 113 1.67x 7.55%
FL................................ 67.4% 105 1.32x 7.78%
PA................................ 57.5% 116 1.49x 7.21%
NY................................ 58.0% 116 1.39x 7.82%
DC................................ 60.9% 116 1.31x 7.58%
NV................................ 69.5% 116 1.22x 7.33%
VA................................ 46.0% 116 1.27x 7.32%
NJ................................ 60.4% 115 1.26x 7.52%
NC................................ 65.7% 118 1.33x 7.18%
MD................................ 51.2% 113 1.27x 8.33%
HI................................ 59.7% 115 1.31x 8.00%
GA................................ 57.9% 116 1.69x 7.73%
CT................................ 48.8% 115 1.89x 7.80%
IN................................ 73.1% 119 1.25x 7.44%
SC................................ 70.2% 118 1.26x 7.29%
DE................................ 61.3% 116 1.34x 7.32%
AL................................ 0.0% 119 1.21x 7.22%
TN................................ 68.5% 116 1.27x 8.02%
ME................................ 63.8% 118 1.40x 7.30%
IL................................ 69.6% 116 1.30x 7.49%
MA................................ 52.4% 116 1.42x 7.85%
OK................................ 57.5% 119 1.20x 7.44%
MI................................ 27.1% 133 1.21x 7.20%
WI................................ 62.0% 116 1.31x 7.75%
MO................................ 49.9% 116 1.38x 7.88%
NM................................ 63.1% 113 1.35x 8.75%
AZ................................ 49.9% 116 1.38x 7.88%
AR................................ 54.1% 116 1.35x 7.88%
ID................................ 65.9% 116 1.30x 8.00%
TOTAL/WEIGHTED AVERAGE............ 56.9% 114 1.40X 7.66%
- ---------------
(1) Because this table is presented at the Mortgaged Property Level, weighted
averages are based on allocated loan amounts (allocated by either the amount
allocated in the related Mortgage or the appraised value of the Mortgaged
Property) for the Mortgage Loans secured by more than one Mortgaged Property
and may therefore deviate slightly from weighted averages presented at the
mortgage pool level in other tables in this Prospectus Supplement.
(2) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
(3) For purposes of determining whether a Mortgaged Property is in Northern
California or Southern California, Mortgaged Properties north of Bakersfield
were included in Northern California and Mortgaged Properties in or south of
Bakersfield were included in Southern California.
S-90
91
RANGE OF DSC RATIOS
FOR ALL MORTGAGE LOANS
% BY WTD. AVG.
CUT-OFF AVERAGE CUT-OFF
AGGREGATE DATE CUT-OFF HIGHEST DATE
RANGE OF NUMBER OF CUT-OFF DATE POOL DATE CUT-OFF LTV
DSC RATIOS (X) LOANS BALANCE BALANCE BALANCE BALANCE RATIO
- -------------- --------- -------------- ------------ ------------ ----------- ---------
1.00-1.04......................... 4 $ 9,131,100 0.9% $ 2,282,775 $ 3,308,968 67.7%
1.10-1.14......................... 1 1,588,520 0.2 $ 1,588,520 $ 1,588,520 59.9%
1.20-1.24......................... 28 270,340,646 27.0 $ 9,655,023 $34,092,026 70.6%
1.25-1.29......................... 21 210,581,574 21.0 $10,027,694 $32,750,000 71.4%
1.30-1.34......................... 20 184,944,923 18.5 $ 9,247,246 $54,520,757 71.6%
1.35-1.39......................... 11 85,440,137 8.5 $ 7,767,285 $18,443,578 67.6%
1.40-1.44......................... 5 31,644,214 3.2 $ 6,328,843 $ 9,427,286 72.4%
1.45-1.49......................... 2 7,476,565 0.7 $ 3,738,282 $ 5,180,594 74.0%
1.60-1.64......................... 1 2,000,000 0.2 $ 2,000,000 $ 2,000,000 50.0%
1.65-1.69......................... 2 46,243,762 4.6 $23,121,881 $44,000,000 57.4%
1.70-1.74......................... 3 15,408,511 1.5 $ 5,136,170 $ 7,463,915 54.9%
1.75-1.79......................... 2 14,750,000 1.5 $ 7,375,000 $ 9,500,000 62.8%
1.80-1.84......................... 2 38,750,000 3.9 $19,375,000 $23,750,000 46.2%
1.90-1.94......................... 1 4,750,000 0.5 $ 4,750,000 $ 4,750,000 57.9%
1.95-1.99......................... 2 20,500,000 2.0 $10,250,000 $14,250,000 62.1%
2.00-2.50......................... 2 57,989,087 5.8 $28,994,543 $50,000,000 45.9%
--- -------------- ------
TOTAL/WEIGHTED AVERAGE............ 107 $1,001,539,038 100.0% $ 9,360,178 $54,520,757 67.1%
=== ============== ======
WTD. AVG.
STATED
WTD. AVG. REMAINING WTD. WTD.
LTV TERM TO AVG. AVG.
RANGE OF RATIO AT MATURITY DSC MORTGAGE
DSC RATIOS (X) MATURITY(1) (MOS)(1) RATIO RATE
- -------------- ----------- --------- ----- --------
1.00-1.04......................... 0.0% 144 1.00x 6.89%
1.10-1.14......................... 0.0% 144 1.14x 6.82%
1.20-1.24......................... 58.7% 111 1.22x 7.67%
1.25-1.29......................... 62.8% 116 1.26x 7.76%
1.30-1.34......................... 61.7% 114 1.32x 7.70%
1.35-1.39......................... 57.9% 116 1.36x 7.84%
1.40-1.44......................... 63.3% 116 1.42x 7.68%
1.45-1.49......................... 63.5% 114 1.47x 8.37%
1.60-1.64......................... 47.1% 115 1.62x 7.63%
1.65-1.69......................... 50.0% 116 1.69x 6.85%
1.70-1.74......................... 51.8% 114 1.72x 7.74%
1.75-1.79......................... 62.8% 115 1.76x 7.35%
1.80-1.84......................... 24.4% 114 1.81x 7.63%
1.90-1.94......................... 57.9% 115 1.92x 7.35%
1.95-1.99......................... 62.1% 115 1.96x 7.35%
2.00-2.50......................... 41.9% 115 2.16x 7.77%
TOTAL/WEIGHTED AVERAGE............ 56.9% 114 1.40X 7.66%
- ---------------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-91
92
RANGE OF LTV RATIOS
FOR ALL MORTGAGE LOANS
AS OF THE CUT-OFF DATE
AGGREGATE % BY AVERAGE HIGHEST WTD. AVG.
RANGE OF CUT-OFF NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
LTV RATIOS (%) LOANS BALANCE POOL BALANCE BALANCE BALANCE LTV RATIO
- ---------------- --------- -------------- ------------ ------------ ------------ ------------
15.01-20.00.......................... 1 $ 7,989,087 0.8% $ 7,989,087 $ 7,989,087 18.3%
35.01-40.00.......................... 1 23,750,000 2.4 $23,750,000 $23,750,000 35.5%
40.01-45.00.......................... 3 18,895,361 1.9 $ 6,298,454 $ 7,458,695 42.5%
45.01-50.00.......................... 7 25,375,797 2.5 $ 3,625,114 $ 7,463,915 48.1%
50.01-55.00.......................... 3 55,742,711 5.6 $18,580,904 $50,000,000 50.5%
55.01-60.00.......................... 7 103,200,223 10.3 $14,742,889 $44,000,000 57.5%
60.01-65.00.......................... 16 115,692,753 11.6 $ 7,230,797 $17,038,704 62.4%
65.01-70.00.......................... 14 96,115,294 9.6 $ 6,865,378 $34,092,026 66.9%
70.01-75.00.......................... 26 276,196,366 27.6 $10,622,937 $54,520,757 73.1%
75.01-80.00.......................... 29 278,581,446 27.8 $ 9,606,257 $32,750,000 77.7%
--- -------------- ------
TOTAL/WEIGHTED AVERAGE............... 107 $1,001,539,038 100.0% $ 9,360,178 $54,520,757 67.1%
=== ============== ======
WTD. AVG.
STATED
WTD. AVG. REMAINING
LTV TERM TO WTD. AVG.
RANGE OF CUT-OFF RATIO AT MATURITY WTD. AVG. MORTGAGE
LTV RATIOS (%) MATURITY(1) (MOS)(1) DSC RATIO RATE
- ---------------- ----------- --------- --------- ---------
15.01-20.00.......................... 17.7% 114 2.41x 7.88%
35.01-40.00.......................... 0.0% 113 1.80x 7.80%
40.01-45.00.......................... 0.0% 119 1.23x 7.22%
45.01-50.00.......................... 16.0% 117 1.40x 7.48%
50.01-55.00.......................... 45.8% 115 2.03x 7.76%
55.01-60.00.......................... 50.6% 114 1.49x 7.62%
60.01-65.00.......................... 58.5% 115 1.59x 7.64%
65.01-70.00.......................... 54.1% 117 1.26x 7.96%
70.01-75.00.......................... 62.5% 114 1.29x 7.69%
75.01-80.00.......................... 69.7% 113 1.25x 7.56%
TOTAL/WEIGHTED AVERAGE............... 56.9% 114 1.40X 7.66%
- ---------------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-92
93
RANGE OF LTV RATIOS
FOR ALL MORTGAGE LOANS AS OF THE MATURITY DATE
% BY WTD. AVG.
CUT-OFF AVERAGE CUT-OFF
AGGREGATE DATE CUT-OFF HIGHEST DATE
NUMBER OF CUT-OFF DATE POOL DATE CUT-OFF DATE LTV
RANGE OF MATURITY DATE LTV RATIOS (%)(1) LOANS BALANCE BALANCE BALANCE BALANCE RATIO
- ---------------------------------------- --------- -------------- ------------ ------------ ------------ ---------
0-15.00................................... 14 $ 69,276,864 6.9% $ 4,948,347 $23,750,000 45.2%
15.01-20.00.................................. 1 7,989,087 0.8 $ 7,989,087 $ 7,989,087 18.3%
40.01-45.00.................................. 1 7,463,915 0.7 $ 7,463,915 $ 7,463,915 46.6%
45.01-50.00.................................. 6 118,781,415 11.9 $19,796,903 $50,000,000 54.4%
50.01-55.00.................................. 5 71,305,281 7.1 $14,261,056 $24,600,856 59.8%
55.01-60.00.................................. 14 118,613,916 11.8 $ 8,472,423 $34,092,026 66.2%
60.01-65.00.................................. 27 264,924,494 26.5 $ 9,812,018 $54,520,757 70.3%
65.01-70.00.................................. 26 220,434,078 22.0 $ 8,478,234 $32,750,000 76.0%
70.01-75.00.................................. 13 122,749,989 12.3 $ 9,442,307 $28,549,985 78.6%
--- -------------- ------
TOTAL/WEIGHTED AVERAGE....................... 107 $1,001,539,038 100.0% $ 9,360,178 $54,520,757 67.1%
=== ============== ======
WTD. AVG.
STATED
WTD. AVG. REMAINING WTD. WTD.
LTV TERM TO AVG. AVG.
RATIO AT MATURITY DSC MORTGAGE
RANGE OF MATURITY DATE LTV RATIOS (%)(1) MATURITY(1) (MOS)(1) RATIO RATE
- ---------------------------------------- ----------- --------- ----- --------
0-15.00................................... 0.0% 121 1.39x 7.37%
15.01-20.00.................................. 17.7% 114 2.41x 7.88%
40.01-45.00.................................. 41.9% 112 1.72x 8.00%
45.01-50.00.................................. 47.8% 115 1.81x 7.42%
50.01-55.00.................................. 52.7% 113 1.31x 8.24%
55.01-60.00.................................. 58.0% 115 1.31x 7.92%
60.01-65.00.................................. 62.3% 115 1.42x 7.70%
65.01-70.00.................................. 67.4% 115 1.27x 7.48%
70.01-75.00.................................. 71.9% 107 1.26x 7.68%
TOTAL/WEIGHTED AVERAGE....................... 56.9% 114 1.40X 7.66%
- ---------------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-93
94
RANGE OF MORTGAGE RATES
FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
AVERAGE HIGHEST
AGGREGATE % BY CUT-OFF CUT-OFF WTD. AVG.
RANGE OF NUMBER OF CUT-OFF CUT-OFF DATE DATE DATE CUT-OFF DATE
MORTGAGE RATES (%) LOANS DATE BALANCE POOL BALANCE BALANCE BALANCE LTV RATIO
- ------------------ --------- -------------- ------------ ----------- ----------- ------------
6.750-6.999..................... 6 $ 54,719,620 5.5% $ 9,119,937 $44,000,000 59.0%
7.000-7.249..................... 14 140,953,421 14.1 $10,068,102 $30,901,440 67.2%
7.250-7.499..................... 22 228,443,507 22.8 $10,383,796 $22,500,000 72.4%
7.500-7.749..................... 14 123,543,739 12.3 $ 8,824,553 $54,520,757 73.3%
7.750-7.999..................... 18 194,059,813 19.4 $10,781,101 $50,000,000 57.9%
8.000-8.249..................... 15 133,573,568 13.3 $ 8,904,905 $34,092,026 70.0%
8.250-8.499..................... 8 45,665,313 4.6 $ 5,708,164 $24,600,856 62.2%
8.500-8.749..................... 8 64,071,563 6.4 $ 8,008,945 $26,402,569 70.4%
8.750-8.999..................... 2 16,508,493 1.6 $ 8,254,247 $14,814,651 59.6%
--- -------------- -----
TOTAL/WEIGHTED AVERAGE.......... 107 $1,001,539,038 100.0% $ 9,360,178 $54,520,757 67.1%
=== ============== =====
WTD. AVG.
STATED
WTD. AVG. REMAINING
LTV TERM TO WTD. AVG. WTD. AVG.
RANGE OF RATIO AT MATURITY DSC MORTGAGE
MORTGAGE RATES (%) MATURITY(1) (MOS)(1) RATIO RATE
- ------------------ ----------- --------- --------- ---------
6.750-6.999..................... 40.0% 121 1.56x 6.81%
7.000-7.249..................... 49.2% 118 1.26x 7.18%
7.250-7.499..................... 65.8% 115 1.43x 7.34%
7.500-7.749..................... 62.8% 116 1.32x 7.61%
7.750-7.999..................... 47.2% 116 1.62x 7.80%
8.000-8.249..................... 62.5% 107 1.29x 8.05%
8.250-8.499..................... 56.6% 109 1.26x 8.35%
8.500-8.749..................... 63.3% 110 1.29x 8.66%
8.750-8.999..................... 54.7% 109 1.33x 8.86%
TOTAL/WEIGHTED AVERAGE.......... 56.9% 114 1.40X 7.66%
- ---------------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-94
95
RANGE OF ORIGINAL TERMS TO MATURITY OR ANTICIPATED REPAYMENT DATE
FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
RANGE OF ORIGINAL % BY WTD. AVG.
TERMS TO MATURITY CUT-OFF AVERAGE CUT-OFF WTD. AVG.
OR ANTICIPATED AGGREGATE DATE CUT-OFF HIGHEST DATE LTV
REPAYMENT DATE NUMBER OF CUT-OFF DATE POOL DATE CUT-OFF DATE LTV RATIO AT
(MONTHS) LOANS BALANCE BALANCE BALANCE BALANCE RATIO MATURITY(1)
- ----------------- --------- -------------- ------- ----------- ------------ --------- -----------
0-60............................ 2 $ 4,184,073 0.4% $ 2,092,037 $ 3,286,626 71.5% 69.0%
73-84............................ 1 28,549,985 2.9 $28,549,985 $28,549,985 77.2% 72.4%
97-108........................... 1 11,993,403 1.2 $11,993,403 $11,993,403 71.8% 65.1%
109-120........................... 97 902,091,957 90.1 $ 9,299,917 $54,520,757 67.2% 57.2%
121-132........................... 1 44,000,000 4.4 $44,000,000 $44,000,000 57.1% 49.7%
133-144........................... 5 10,719,620 1.1 $ 2,143,924 $ 3,308,968 66.6% 0.0%
--- -------------- -----
TOTAL/WEIGHTED AVERAGE............ 107 $1,001,539,038 100.0% $ 9,360,178 $54,520,757 67.1% 56.9%
=== ============== =====
WTD. AVG.
RANGE OF ORIGINAL STATED
TERMS TO MATURITY REMAINING WTD. WTD.
OR ANTICIPATED TERM TO AVG. AVG.
REPAYMENT DATE MATURITY DSC MORTGAGE
(MONTHS) (MOS)(1) RATIO RATE
- ----------------- --------- -------- --------
0-60............................ 53 1.23x 8.34%
73-84............................ 79 1.24x 8.05%
97-108........................... 101 1.31x 7.41%
109-120........................... 115 1.39x 7.70%
121-132........................... 116 1.69x 6.79%
133-144........................... 144 1.02x 6.88%
TOTAL/WEIGHTED AVERAGE............ 114 1.40X 7.66%
- ---------------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-95
96
RANGE OF REMAINING TERM TO MATURITY OR ANTICIPATED REPAYMENT DATE
FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
RANGE OF REMAINING % BY WTD. AVG.
TERMS TO MATURITY CUT-OFF AVERAGE CUT-OFF
OR ANTICIPATED AGGREGATE DATE CUT-OFF HIGHEST DATE
REPAYMENT DATE NUMBER OF CUT-OFF DATE POOL DATE CUT-OFF DATE LTV
(MONTHS) LOANS BALANCE BALANCE BALANCE BALANCE RATIO
------------------ --------- -------------- ------- ----------- ------------ ---------
0-60...................................... 2 $ 4,184,073 0.4% $ 2,092,037 $ 3,286,626 71.5%
73-84..................................... 1 28,549,985 2.9 $28,549,985 $28,549,985 77.2%
97-108.................................... 3 35,752,437 3.6 $11,917,479 $14,814,651 68.2%
109-120................................... 96 922,332,922 92.1 $ 9,607,635 $54,520,757 66.8%
133-144................................... 5 10,719,620 1.1 $ 2,143,924 $ 3,308,968 66.6%
--- -------------- -----
TOTAL/WEIGHTED AVERAGE.................... 107 $1,001,539,038 100.0% $ 9,360,178 $54,520,757 67.1%
=== ============== =====
WTD. AVG.
RANGE OF REMAINING STATED
TERMS TO MATURITY WTD. AVG. REMAINING
OR ANTICIPATED LTV TERM TO WTD. AVG. WTD. AVG.
REPAYMENT DATE RATIO AT MATURITY DSC MORTGAGE
(MONTHS) MATURITY(1) (MOS)(1) RATIO RATE
------------------ ----------- --------- --------- ---------
0-60...................................... 69.0% 53 1.23x 8.34 %
73-84..................................... 72.4% 79 1.24x 8.05 %
97-108.................................... 62.2% 106 1.31x 8.31 %
109-120................................... 56.8% 116 1.41x 7.63 %
133-144................................... 0.0% 144 1.02x 6.88 %
TOTAL/WEIGHTED AVERAGE.................... 56.9% 114 1.40X 7.66 %
- ------------------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-96
97
RANGE OF REMAINING AMORTIZATION TERMS
FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
WTD. AVG.
AGGREGATE % BY AVERAGE HIGHEST CUT-OFF
RANGE OF REMAINING AMORTIZATION NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE DATE
TERMS(1) LOANS BALANCE POOL BALANCE BALANCE BALANCE LTV RATIO
- ------------------------------- --------- -------------- ------------ ------------ ------------ ---------
109-120.......................... 9 $ 58,557,244 5.8% $ 6,506,360 $23,750,000 41.3%
133-144.......................... 5 10,719,620 1.1 $ 2,143,924 $ 3,308,968 66.6%
289-300.......................... 12 254,374,610 25.4 $21,197,884 $54,520,757 64.9%
337-348.......................... 2 23,759,035 2.4 $11,879,517 $14,814,651 66.3%
349-360.......................... 71 584,889,443 58.4 $ 8,237,879 $34,092,026 71.9%
361< 1 7,989,087 0.8 $ 7,989,087 $ 7,989,087 18.3%
Interest only.................... 7 61,250,000 6.1 $ 8,750,000 $15,000,000 62.1%
--- --------------
TOTAL/WEIGHTED AVERAGE........... 107 $1,001,539,038 100.0% $ 9,360,178 $54,520,757 67.1%
=== ============== =====
WTD. AVG.
STATED
REMAINING WTD.
WTD. AVG. TERM TO AVG.
RANGE OF REMAINING AMORTIZATION LTV RATIO MATURITY WTD. AVG. MORTGAGE
TERMS(1) AT MATURITY(2) (MOS)(2) DSC RATIO RATE
- ------------------------------- -------------- --------- --------- --------
109-120.......................... 0.0% 117 1.46x 7.46%
133-144.......................... 0.0% 144 1.02x 6.88%
289-300.......................... 54.6% 116 1.54x 7.56%
337-348.......................... 60.7% 108 1.30x 8.76%
349-360.......................... 64.4% 113 1.28x 7.72%
361< 17.7% 114 2.41x 7.88%
Interest only.................... 62.1% 115 1.85x 7.35%
TOTAL/WEIGHTED AVERAGE........... 56.9% 114 1.40X 7.66%
The weighted average remaining amortization term for all Mortgage Loans
(excluding Mortgage Loans that are interest-only for their entire term) is 324
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 it is interest-only, but rather is the number of months
remaining at the end of such interest-only period. Mortgage Loans that are
interest-only for their entire term do not have an amortization term.
(2) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-97
98
AMORTIZATION TYPES FOR ALL MORTGAGE LOANS
% BY WTD. AVG.
CUT-OFF AVERAGE CUT-OFF WTD. AVG.
AGGREGATE DATE CUT-OFF HIGHEST DATE LTV
NUMBER OF CUT-OFF DATE POOL DATE CUT-OFF DATE LTV RATIO AT
AMORTIZATION TYPES LOANS BALANCE BALANCE BALANCE BALANCE RATIO MATURITY(1)
- ------------------ --------- -------------- ------- ----------- ------------ --------- -----------
Amortizing Balloon(2)............. 70 $ 545,486,111 54.5% $ 7,792,659 $54,520,757 71.5% 62.6%
Amortizing ARD.................... 9 184,186,406 18.4 $20,465,156 $32,750,000 69.3% 61.1%
Interest Only, Amortizing
Balloon(3)...................... 6 97,339,657 9.7 $16,223,276 $50,000,000 61.9% 57.1%
Interest Only..................... 7 61,250,000 6.1 $ 8,750,000 $15,000,000 62.1% 62.1%
Fully Amortizing.................. 13 45,526,864 4.5 $ 3,502,066 $ 7,458,695 50.3% 0.0%
Interest Only, Amortizing ARD..... 1 44,000,000 4.4 $44,000,000 $44,000,000 57.1% 49.7%
Interest Only, Fully Amortizing... 1 23,750,000 2.4 $23,750,000 $23,750,000 35.5% 0.0%
--- -------------- -----
TOTAL/WEIGHTED AVERAGE............ 107 $1,001,539,038 100.0% $ 9,360,178 $54,520,757 67.1% 56.9%
=== ============== =====
WTD. AVG.
STATED
REMAINING
TERM TO WTD. AVG. WTD. AVG.
MATURITY DSC MORTGAGE
AMORTIZATION TYPES (MOS)(1) RATIO RATE
- ------------------ --------- --------- ---------
Amortizing Balloon(2)............. 113 1.32x 7.75%
Amortizing ARD.................... 115 1.26x 7.86%
Interest Only, Amortizing
Balloon(3)...................... 116 1.69x 7.61%
Interest Only..................... 115 1.85x 7.35%
Fully Amortizing.................. 125 1.17x 7.14%
Interest Only, Amortizing ARD..... 116 1.69x 6.79%
Interest Only, Fully Amortizing... 113 1.80x 7.80%
TOTAL/WEIGHTED AVERAGE............ 114 1.40X 7.66%
- ---------------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
(2) Contains certain Credit Lease Loan that are subject to changes in the amount
of the monthly payment at specified times in the future.
(3) These Mortgage Loans require payments of interest only for a period of 24 to
60 months from origination prior to the commencement of payments of
principal and interest.
S-98
99
RANGE OF OCCUPANCY RATES FOR ALL MORTGAGE LOANS
OTHER THAN LOANS SECURED BY HOSPITALITY PROPERTIES(1)
% BY
AGGREGATE CUT-OFF AVERAGE HIGHEST WTD. AVG.
CUT-OFF DATE CUT-OFF CUT-OFF CUT-OFF
RANGE OF NUMBER OF DATE POOL DATE DATE DATE LTV
OCCUPANCY RATES(%) LOANS BALANCE BALANCE BALANCE BALANCE RATIO
- ------------------ --------- ------------ ------- ----------- ----------- ---------
80.00-84.99.................................. 3 $ 28,764,583 2.9% $ 9,588,194 $17,038,704 59.8%
85.00-89.99.................................. 6 64,021,758 6.4 $10,670,293 $20,892,755 69.5%
90.00-94.99.................................. 21 191,468,580 19.1 $ 9,117,551 $34,092,026 69.7%
95.00-99.99.................................. 29 291,869,363 29.1 $10,064,461 $32,750,000 73.4%
100.00-100.00................................. 45 363,675,188 36.3 $ 8,081,671 $54,520,757 62.9%
---- ------------ -----
TOTAL/WEIGHTED AVERAGE........................ 104 $939,799,473 93.8% $ 9,036,533 $54,520,757 67.9%
==== ============ =====
WTD. AVG.
STATED
WTD. AVG. REMAINING
LTV TERM TO WTD. AVG. WTD. AVG.
RANGE OF RATIO AT MATURITY DSC MORTGAGE
OCCUPANCY RATES(%) MATURITY(2) (MOS)(2) RATIO RATE
- ------------------ ----------- --------- ---------- ----------
80.00-84.99.................................. 51.3% 117 1.33x 7.75%
85.00-89.99.................................. 59.5% 116 1.37x 7.74%
90.00-94.99.................................. 63.3% 114 1.39x 7.59%
95.00-99.99.................................. 65.4% 112 1.31x 7.61%
100.00-100.00................................. 48.0% 116 1.38x 7.67%
TOTAL/WEIGHTED AVERAGE........................ 57.4% 114 1.36X 7.64%
- ---------------
(1) Excludes 3 hospitality Mortgage Loans, representing 6.2% of the Cut-Off Date
Pool Balance.
(2) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-99
100
PERCENTAGE OF MORTGAGE POOL BY
PREPAYMENT RESTRICTION (1)
JUNE JUNE JUNE JUNE JUNE
PREPAYMENT RESTRICTION 2001 2002 2003 2004 2005
- ---------------------- --------- ------- ------- ------- -------
Lock-out/Defeasance....................................... 100.00% 100.00% 98.59% 98.58% 98.58%
Yield Maintenance......................................... 0.00% 0.00% 1.41% 1.42% 1.42%
Open...................................................... 0.00% 0.00% 0.00% 0.00% 0.00%
--------- ------- ------- ------- -------
Total..................................................... 100.00% 100.00% 100.00% 100.00% 100.00%
========= ======= ======= ======= =======
Total Beginning Balance as of the Cut-off Date (in
millions)................................................ $1,001.54 $991.93 $981.54 $970.08 $956.90
Percent of Initial Balance................................ 100.0% 99.0% 98.0% 96.9% 95.5%
JUNE JUNE JUNE JUNE JUNE JUNE
PREPAYMENT RESTRICTION 2006 2007 2008 2009 2010 2011
- ---------------------- ------- ------- ------- ------- ------- ------
Lock-out/Defeasance....................................... 93.21% 90.25% 92.96% 92.93% 85.67% 100.00%
Yield Maintenance......................................... 6.79% 6.81% 7.04% 7.07% 7.39% 0.00%
Open...................................................... 0.00% 2.94% 0.00% 0.00% 6.94% 0.00%
------- ------- ------- ------- ------- ------
Total..................................................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
======= ======= ======= ======= ======= ======
Total Beginning Balance as of the Cut-off Date (in
millions)................................................ $938.12 $917.55 $868.87 $845.30 $787.34 $ 2.45
Percent of Initial Balance................................ 93.7% 91.6% 86.8% 84.4% 78.6% 0.2%
JUNE JUNE
PREPAYMENT RESTRICTION 2012 2013
- ---------------------- ------ ------
Lock-out/Defeasance....................................... 100.00% 0.00%
Yield Maintenance......................................... 0.00% 0.00%
Open...................................................... 0.00% 0.00%
------ ------
Total..................................................... 100.00% 0.00%
====== ======
Total Beginning Balance as of the Cut-off Date (in
millions)................................................ $ 1.27 $ --
Percent of Initial Balance................................ 0.1%
- ---------------
(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 an ARD Loan will be repaid in full on its Anticipated
Repayment Date), if any.
S-100
101
TEN LARGEST MORTGAGE LOANS
The following table and summaries describe the ten largest Mortgage Loans
or groups of cross-collateralized mortgage loans in the Mortgage Pool by Cut-Off
Date Balance:
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER PERCENTAGE OF CUT-OFF LTV WEIGHTED WEIGHTED
OF LOANS/ CUT-OFF CUT-OFF DATE RATIO AT AVERAGE AVERAGE
MORTGAGED DATE DATE POOL PROPERTY LTV MATURITY DSC MORTGAGE
LOAN NAME PROPERTIES BALANCE(1) BALANCE(1) TYPE(2) RATIO OR ARD RATIO RATE
--------- ---------- ------------ ------------- ------------- -------- -------- -------- --------
Cornerstone
Portfolio............ 7/7 $ 61,250,000 6.1% Multifamily- 62.1% 62.1% 1.85x 7.35 %
Conventional
1330 Connecticut
Avenue, N.W.......... 1/1 54,520,757 5.4 Office-CBD 74.5% 60.9% 1.31x 7.58 %
Innkeepers Portfolio... 1/6 50,000,000 5.0 Hospitality- 50.4% 45.7% 2.12x 7.75 %
Suite
One Franklin........... 1/1 44,000,000 4.4 Office-CBD 57.1% 49.7% 1.69x 6.79 %
HRT Portfolio.......... 8/8 34,807,244 3.5 Office-Medical 45.3% 0.0% 1.22x 7.22 %
Office
Villa La Jolla
Apartments........... 1/1 34,092,026 3.4 Multifamily- 65.7% 57.8% 1.21x 8.03 %
Conventional
Gardiner Manor Mall.... 1/1 32,750,000 3.3 Retail-Anchored 76.2% 67.7% 1.26x 7.77 %
Campus Lodge
Apartments........... 1/1 30,901,440 3.1 Multifamily- 77.3% 67.9% 1.20x 7.21 %
Student
Housing
Wynnton Portfolio...... 1/4 28,549,985 2.9 Multifamily- 77.2% 72.4% 1.24x 8.05 %
Conventional
Stadium Crossing....... 1/1 26,402,569 2.6 Office-CBD 70.2% 64.2% 1.20x 8.70 %
----- ------------ ----
Total/Weighted
Average.............. 23/31 $397,274,021 39.7% 64.6% 54.5% 1.50x 7.58 %
===== ============ ====
- ---------------
(1) In the case of a concentration of cross-collateralized mortgage loans, the
aggregate principal balance.
(2) "CBD" refers to central business district.
(3) The HRT Portfolio is a "fully amortizing" Mortgage Loan.
Cornerstone Portfolio
The Loans. The Cornerstone Portfolio is comprised of 7 Mortgage Loans (the
"Cornerstone Loans") which are collectively secured by first lien deeds of
trusts on 7 multifamily properties located in Texas. Each Cornerstone Loan is
cross-collateralized and cross-defaulted with each other Cornerstone Loan. Each
Cornerstone Loan provides for interest-only payments during the entire term of
the related mortgage loan.
The Properties. As of November 2000, the average occupancy rate for the
Mortgaged Properties securing the Cornerstone Loans was 94%. The following table
presents certain information relating to the Mortgaged Properties securing the
Cornerstone Loans:
CUT-OFF DATE
PROPERTY NAME PROPERTY LOCATION LOAN BALANCE NUMBER OF UNITS
------------- ------------------ ------------ ---------------
The Arbors on Forest Ridge Apartments.......... Bedford, Texas $ 6,250,000 210 units
Timberglen Apartments.......................... Dallas, Texas $ 9,500,000 304 units
Toscana Apartments............................. Dallas, Texas $ 5,250,000 192 units
Eagle Crest Apartments......................... Irving, Texas $15,000,000 484 units
Remington Hills @ Las Colinas.................. Irving, Texas $14,250,000 362 units
Cutter's Point Apartments...................... Richardson, Texas $ 6,250,000 196 units
Sierra Ridge Apartments........................ San Antonio, Texas $ 4,750,000 232 units
S-101
102
Escrows. Escrows were generally required in accordance with the
underwriting guidelines of the related Mortgage Loan Seller. See "DESCRIPTION OF
THE MORTGAGE LOAN POOL--Underwriters Guidelines" and Annex A-3 to this
Prospectus Supplement for information regarding escrow reserves.
Lockbox Account. The borrower, with respect to any Cornerstone Loan, is
required to notify the tenants that any and all tenant payments due under the
applicable tenant leases are required to be directly deposited into a mortgagee
designated lockbox account (i) if the debt service coverage ratio, as computed
by the mortgagee, is less than 1.15x, or (ii) upon the occurrence of an event of
default.
Sponsorship. The sponsor of the borrowers is Cornerstone Realty Income
Trust, Inc., a publicly traded (NYSE) real estate investment trust with
ownership interests in approximately 87 properties encompassing over 20,500
units in 5 states.
1330 Connecticut Avenue, N.W.
The Loan. The 1330 Connecticut Avenue, N.W. loan (the "1330 Connecticut
Avenue Loan") is secured by a first lien deed of trust on the fee interest in a
10-story office building located in the central business district of N.W.
Washington, D.C.
The Property. The Mortgaged Property is comprised of 252,136 square feet
of net rentable area. As of December 2000, the Mortgaged Property was 100%
occupied. The following table presents certain information relating to the major
tenants at the Mortgaged Property:
% OF NET DATE OF LEASE
TENANT NET RENTABLE AREA (SF) RENTABLE AREA EXPIRATION
- ------ ---------------------- ------------- -------------
Steptoe & Johnson, LLP........................ 186,840 74.1% December 2013
Recording Industry Association of America..... 27,744 11.0% December 2006
Escrows. To mitigate certain potential risks associated with Steptoe &
Johnson, LLP, which occupies 74.1% of the net rentable area of the Mortgaged
Property, the originator required an upfront escrow of $2.0 million and annual
escrows in the amount of $250,000.00 for capital improvements and rollover
costs. In addition, escrows were generally required in accordance with the
underwriting guidelines of the related Mortgage Loan Seller. See "DESCRIPTION OF
THE MORTGAGE POOL--Underwriting Guidelines" and Annex A-3 to this prospectus
supplement for information regarding escrow reserves.
Lockbox Account. Pursuant to the loan documents, payments due under the
applicable tenant leases are required to be directly deposited into a mortgagee
designated lockbox account.
The Sponsor. The sponsor of the borrower is Steptoe & Johnson, LLP, a
Washington, D.C. law firm.
Innkeepers Portfolio
The Loans. The Innkeepers Portfolio is a single Mortgage Loan (the
"Innkeepers Loan") secured by 6 first lien deeds of trusts or mortgages (as
applicable) on 6 extended stay hospitality suite properties located in 5 states.
The Innkeepers Loan provides for interest-only payments for the first 48 months
of the term of the loan, and thereafter, fixed monthly payments of principal and
interest.
The Properties. Each Mortgaged Property is improved with a Residence Inn
by Marriott International, Inc., a worldwide operator and franchiser of hotels
and related lodging facilities.
Each related borrower may obtain a release of the lien encumbering the
related Mortgaged Property by substituting its fee interest in one or more hotel
properties of like kind and quality, provided that (i) no substitution may occur
after the related maturity date, during the first year of the loan or more than
once in any four-year period and (ii) the borrower satisfies the conditions
required for substitution under the loan documents.
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The following table presents certain information relating to the Mortgaged
Properties:
CUT-OFF DATE
ALLOCATED
FRANCHISE NAME PROPERTY LOCATION LOAN BALANCE NUMBER OF ROOMS
- -------------- -------------------------- ------------- ---------------
Residence Inn by Marriott(R).......... Dallas, Texas $8,300,000 150
Residence Inn by Marriott(R).......... Altamonte Springs, Florida $5,300,000 128
Residence Inn by Marriott(R).......... Arlington, Texas $4,300,000 114
Residence Inn by Marriott(R).......... Atlanta, Georgia $7,500,000 160
Residence Inn by Marriott(R).......... San Mateo, California $15,600,000 159
Residence Inn by Marriott(R).......... Shelton, Connecticut $9,000,000 96
Escrows. Escrows were generally required in accordance with the
underwriting guidelines of the related Mortgage Loan Seller. See "DESCRIPTION OF
THE MORTGAGE LOAN POOL--Underwriters Guidelines" and Annex A-3 to this
Prospectus Supplement for information regarding escrow reserves.
Lockbox Account. The originator did not require a lockbox account.
Sponsor. The sponsor of the borrower is Innkeepers USA Trust, a publicly
traded (NYSE), self-administered real estate investment trust with ownership
interests in approximately 67 extended-stay hotels, with an aggregate of 8,138
rooms.
One Franklin
The Loan. The One Franklin loan (the "One Franklin Loan") is secured by a
first lien mortgage secured by a leasehold interest on a 24-story office
building located in the Center City District of Philadelphia, PA. The One
Franklin Loan provides for interest-only payments during the first three years
of the term of the Mortgaged Loan, and thereafter, monthly payments of principal
and interest.
The Property. The Mortgaged Property is comprised of approximately 607,036
square feet of net rentable area. As of September 2000, the occupancy rate for
the Mortgaged Property securing the One Franklin Loan was approximately 100%.
The Mortgaged Property shares a common atrium entrance and a two-level
underground parking garage with the adjacent Wyndham Franklin Plaza Hotel. The
office building on the Mortgaged Property also has a fully enclosed connecting
bridge from the third floor to the Two Franklin Plaza office building. The
following table presents certain information relating to the major tenants at
the Mortgaged Property:
% OF NET DATE OF
TENANT NET RENTABLE AREA (SF) RENTABLE AREA LEASE EXPIRATION
- ------ ---------------------- ------------- ----------------
SmithKline Beecham Corp...................... 596,128 98.2% March 2013
Associated Press............................. 9,012 1.5% November 2002
Escrows. Escrows were generally required in accordance with the
underwriting guidelines of the related Mortgage Loan Seller. See "DESCRIPTION OF
THE MORTGAGE LOAN POOL--Underwriters Guidelines" and Annex A-3 of this
Prospectus Supplement for information regarding escrow reserves.
Lockbox Account. The originator required that payments due under the
applicable tenant leases shall be directly deposits into a mortgagee designated
lockbox account.
The Sponsor. The sponsor of the borrower is HRPT Properties Trust, a
publicly traded (NYSE) real estate investment trust, with ownership interests in
191 office properties.
HRT Portfolio
The Loan. The HRT Portfolio is comprised of 8 Mortgage Loans (the "HRT
Loans") which are collectively secured by first lien deeds of trust or mortgages
(as applicable) on 8 medical office properties located in 3 states. Each HRT
Loan is cross-collateralized and cross-defaulted with each other HRT Loan. The
HRT Loan is a 10 year self amortizing loan.
The Properties. As of April 2001, 7 of the Mortgaged Properties were 100%
master leased by an adjacent hospital, and the occupancy rate for the other
Mortgaged Property was 98%. All 8 of the Mortgaged Properties are located near
to major hospitals in their respective submarkets. Most of the
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medical office buildings located on the Mortgaged Properties are physically
connected to the adjacent hospitals via enclosed corridors or covered walkways.
The following table presents certain information relating to the Mortgaged
Properties securing the HRT Loans:
CUT-OFF DATE
LOAN NET RENTABLE
PROPERTY CITY/STATE BALANCE AREA (SF)
- -------- --------------- ------------ ------------
American Sports Medicine Institute................... Birmingham, AL $2,100,000 27,800
Birmingham Medical Building I........................ Birmingham, AL $3,000,000 42,500
Birmingham Medical Building II....................... Birmingham, AL $6,500,000 81,800
Bellaire Plaza....................................... Houston, TX $3,000,000 56,031
Kelsey-Siebold West.................................. Houston, TX $7,300,000 80,740
Chippenham Medical-Janke & Hioks..................... Richmond, VA $4,200,000 97,921
Johnston-Willis Medical Offices...................... Richmond, VA $7,500,000 114,566
Southwest General.................................... San Antonio, TX $1,400,000 26,645
Escrows. Escrows were generally required in accordance with the
underwriting guidelines of the related Mortgage Loan Seller. See "DESCRIPTION OF
THE MORTGAGE LOAN POOL--Underwriters Guidelines" and Annex A-3 to this
Prospectus Supplement for information regarding escrow reserves.
Lockbox Account. The originator did not require a lockbox account.
Sponsorship. The sponsor of the borrower is Healthcare Realty Trust, Inc.,
a publicly traded (NYSE) self-administered real estate investment trust that
invests in healthcare related facilities throughout the United States.
Villa La Jolla Apartments.
The Loan. The Villa La Jolla Apartment loan (the "Villa La Jolla Apartment
Loan") is secured by a first lien deed of trust on 385 condominium units in the
500 condominium unit Villa La Jolla apartment complex.
The Property. As of February 2001, the occupancy rate of the Mortgaged
Property (exclusive of any condominium units not securing such Mortgage Loan)
was 93%. The Mortgaged Property is located near the University of California-
San Diego, the University of San Diego and the Cal Winston School of Law.
Escrow. The originator required the borrower to post a $5,000,000 letter
of credit as additional collateral. The letter of credit is automatically
renewable on an annual basis and will not be released until (a) the Mortgaged
Property reflects a LTV Ratio of less than 80% based on the full loan amount and
(b) the Mortgaged Property achieves a minimum DSC Ratio for the trailing
12-month period of 1.20x on the fully funded loan amount. In addition, escrows
were generally required in accordance with the underwriting guidelines of the
related Mortgage Loan Seller. See "DESCRIPTION OF THE MORTGAGE LOAN
POOL--Underwriters Guidelines" and Annex A-3 to this Prospectus Supplement for
information regarding escrow reserves.
Lockbox Account. The originator did not require a lockbox account.
Sponsor. The sponsor of the borrower is Garden Home Development Company
which owns and manages in excess of 40,000 apartments units.
Gardiner Manor Mall
The Loan. The Gardiner Manor Mall loan (the "Gardiner Manor Mall Loan") is
secured by a first lien mortgage on a leasehold interest on Gardiner Manor Mall,
an anchored retail shopping center located in Islip, NY. The ground lessor
pledged its interest in the fee to the related Mortgage Loan Originator.
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The Property. The Mortgaged Property is comprised of 4 single-story
buildings that contain approximately 221,752 square feet of net rentable area in
the aggregate. As of April 2001, the occupancy rate for the Mortgaged Property
was 99.3%. The following table presents information relating to the major
tenants at the Mortgaged Property:
NET RENTABLE % OF NET DATE OF LEASE
TENANT AREA (SF) RENTABLE AREA EXPIRATION
- ------ ------------ ------------- --------------
King Kullen.......................................... 48,000 21.6% August 2019
The Wiz.............................................. 25,444 11.5% November 2014
Old Navy............................................. 24,080 10.9% August 2010
Staples.............................................. 24,000 10.8% June 2015
Michael's............................................ 23,434 10.6% May 2009
Barnes & Noble....................................... 21,335 9.6% November 2014
Eckerd Drug Store.................................... 18,036 8.1% June 2019
Modell's............................................. 17,000 7.7% September 2019
Escrows. For so long as Starwood Capital Group remains a key principal of
the borrowing entity, the related Mortgage Loan Seller agreed to waive the
collection of tax escrows. Upon the transfer of the Mortgaged Property to an
entity that is not affiliated with Starwood Capital Group, tax escrows will be
required. Additionally, ongoing replacement reserves in the amount of $0.15 per
square foot per annum are collected on a monthly basis. In addition, escrows
were generally required in accordance with the underwriting guidelines of the
related Mortgage Loan Seller. See "DESCRIPTION OF THE MORTGAGE LOAN
POOL -- Underwriters Guidelines" and Annex A-3 to this Prospectus Supplement for
information regarding escrow reserves.
Lockbox Account. The originator required that payments due under the
applicable tenant leases shall be directly deposits into a mortgagee designated
lockbox account.
Sponsor. The sponsor of the borrower is Starwood Ceruzzi, LLC, a joint
venture between Louis Ceruzzi and Starwood Capital Group, LLC with total assets
of $452.4 million primarily comprised of retail properties.
Campus Lodge Apartments
The Loan. The Campus Lodge Apartments loan (the "Campus Lodge Apartments
Loan") is secured by a first lien deed of trust on the Campus Lodge Apartments
located in Tallahassee, Florida.
The Property. The Mortgaged Property is comprised of 288 apartment units
and is located near Florida State University, Florida A&M University and
Tallahassee Community College. The Mortgaged Property was constructed in the
year 2000 and contains a 7,950 square feet clubhouse, lighted basketball and
volleyball courts, a swimming pool and a gated entrance. As of January 2001, the
Mortgaged Property was 97% occupied.
Escrows. Escrows were generally required in accordance with the
underwriting guidelines of the related Mortgage Loan Seller. See "DESCRIPTION OF
THE MORTGAGE LOAN POOL--Underwriters Guidelines" and Annex A-3 to this
Prospectus Supplement for information regarding escrow reserves.
Lockbox Account. The borrower, with respect to any Campus Lodge Apartment
Loan, is required to notify the tenants that any and all tenant payments due
under the applicable tenant leases are required to be directly deposited into a
mortgagee designated lockbox account (i) if the debt service coverage ratio, as
computed by the lender, is less than 1.15x, or (ii) upon the occurrence of an
event of default.
Sponsor. The sponsor of the borrower is David Fort of Campus Development
who has been involved in the development of over 3,400 multifamily units.
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Wynnton Multifamily Portfolio
The Loan. The Wynnton Multifamily Portfolio consists of a single Mortgage
Loan (the "Wynnton Multifamily Loan") which is secured by 4 first lien mortgages
on 4 multifamily properties in Florida.
The Properties. As of October 2000, the weighted average occupancy rate
for the Mortgaged Properties securing the Wynnton Multifamily Loan was 95.8%.
The following table presents certain information relating to the Mortgaged
Properties securing the Wynnton Multifamily Loan:
CUT-OFF DATE
ALLOCATED NUMBER OF
PROPERTY NAME PROPERTY LOCATION LOAN BALANCE UNITS
- ------------- ----------------- ------------ ---------
Plantation Apartments........................... Temple Terrace, Florida $ 4,960,000 126
Granada Apartments.............................. Tampa, Florida $ 4,380,000 112
Palmview Apartments............................. St. Petersburg, Florida $ 9,100,000 304
Grandview Apartments............................ Largo, Florida $10,200,000 304
Escrows. Escrows were generally required in accordance with the
underwriting guidelines of the related Mortgage Loan Seller. See "DESCRIPTION OF
THE MORTGAGE LOAN POOL -- Underwriters Guidelines" and Annex A-3 to this
Prospectus Supplement for information regarding escrow reserves.
Lockbox Account. The originator did not require a lockbox account.
Sponsor. The sponsor of the borrower is WCP Holdings, LLC, a
privately-held company.
Stadium Crossing
The Loan. The Stadium Crossing loan (the "Stadium Crossing Loan") is
secured by a first lien deed of trust on an office development located in
Anaheim, CA.
The Property. The Mortgaged Property is comprised of 153,636 square feet
of net rentable area within 7 separately parceled buildings, and the Mortgaged
Property also includes a parking structure. As of December 2000, the occupancy
rate for the Mortgaged Property was 100%. The following table presents certain
information relating to the major tenants at the Mortgaged Property:
TENANT NET
RENTABLE AREA % OF NET DATE OF LEASE
TENANT (SF) RENTABLE AREA EXPIRATION
- ------ ------------- ------------- --------------
Hewlett Packard.................................... 54,266 35.3% March 2010
CB Richard Ellis................................... 25,985 16.9% September 2009
Willdan Associates................................. 18,985 12.4% February 2005
Spectrum Sports Club............................... 36,500 23.8% June 2014
Escrows. Borrower is required to deposit the sum of $13,000 per month for
81 months to be used for tenant improvements and leasing expenses in connection
with the Hewlett Packard space. The originator also received a pledge of the
Hewlett Packard termination fee (estimated to be $1.1 million). Finally, an
escrow in the amount of $2,145,812 was taken at closing which equals the amount
due to Hewlett Packard from the Borrower as a tenant improvement allowance under
its lease. In addition, escrows were generally required in accordance with the
underwriting guidelines of the related Mortgage Loan Seller. See "DESCRIPTION OF
THE MORTGAGE LOAN POOL -- Underwriters Guidelines" and Annex A-3 to this
Prospectus Supplement for information regarding escrow reserves.
Lockbox Account. The originator required that payments due under the
applicable tenant leases shall be directly deposited into a mortgagee designated
lockbox account.
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
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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."
Seventy-seven (77) of the Mortgage Loans (the "First Union Mortgage
Loans"), representing 65.1% of the Cut-Off Date Balance, were originated or
acquired by First Union National Bank. Thirty (30) of the Mortgage Loans (the
"Merrill Mortgage Loans"), representing 34.9% of the Cut-Off Date Pool Balance,
were originated or acquired by Merrill Lynch Mortgage Capital Inc. or Merrill
Lynch Mortgage Lending, Inc. (the "Merrill Lynch Originators"). First Union
National Bank has no obligation to repurchase or substitute any of the Merrill
Mortgage Loans and the Merrill Lynch Originators have no obligation to
repurchase or substitute any of the First Union Mortgage Loans.
All information concerning the Merrill Mortgage Loans contained herein or
used in the preparation of this Prospectus Supplement is as underwritten by the
Merrill Lynch Originators.
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 a vertically integrated entity,
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 distinct groups
responsible for loan origination and closing mortgage loans.
Upon receipt of a loan package, 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 also
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
bankruptcy-remote entities. The collateral analysis includes an analysis of the
historical property operating statements, rent rolls and a projection of future
performance and a review of tenant leases. Each Mortgage Loan Seller requires
third party appraisals, as well as environmental and building condition reports.
Each report is reviewed for acceptability by a staff member of the applicable
Mortgage Loan Seller for compliance with program standards and such staff member
approves or rejects such report. The results of these reviews are incorporated
into the underwriting report.
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
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. See Annex A-1 to this
Prospectus Supplement.
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Escrow Requirements. 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:
- 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.
- 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.
- Replacement Reserves--Replacement reserves are calculated in accordance
with the expected useful life of the components of the property during
the term of the mortgage loan.
- Completion Repair/Environmental Remediation--Typically, a completion
repair or remediation reserve is required. An initial deposit, upon
funding of the applicable Mortgage Loan, in an amount equal to at least
125% of the estimated costs of repairs or replacements to be completed
within the first year of the mortgage loan pursuant to the building
condition report is required.
- 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 Subordinate Component of the Rite Aid-Palm Desert Mortgage 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 originated or acquired by the applicable Mortgage
Loan Sellers (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 with evidence of recording indicated
thereon or certified by the applicable recorders 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), with evidence
of recording indicated thereon or certified by the applicable recorders office;
(iv) an original assignment of the Mortgage in favor of the Trustee or in blank
and 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 in recordable form; (vi) the original assignment of all
unrecorded documents relating to the Mortgage Loan; (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) 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
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jurisdiction; (xi) any intercreditor agreement relating to permitted debt of the
mortgagor; and (xii) copies of any loan agreement, escrow agreement, security
agreement or letter of credit relating to a Mortgage Loan; and (xiii) the
original or copy of any ground lease, ground lessor estoppel, credit lease,
Residual Value Insurance Policy or guaranty relating to a Mortgage Loan.
As described 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 above-described
documents 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 interests of the Certificateholders, the
applicable Mortgage Loan Seller, if it does not deliver the document or cure the
defect (other than omissions solely due to a document not having been returned
by the related recording office) within a period of 90 days following such
Mortgage Loan Seller's receipt of notice thereof, will be obligated pursuant to
the applicable Mortgage Loan Purchase Agreement (the relevant rights under which
will be assigned by the Depositor to the Trustee) to (1) repurchase the affected
Mortgage Loan (including the Subordinate Component of the Rite Aid-Palm Desert
Mortgage Loan) within such 90-day period at a price (the "Purchase Price")
generally equal to the sum of (i) the unpaid principal balance of such Mortgage
Loan (including the Subordinate Component of the Rite Aid-Palm Desert Mortgage
Loan), (ii) the unpaid accrued interest on such Mortgage Loan (including the
Subordinate Component of the Rite Aid-Palm Desert Mortgage Loan) (calculated at
the applicable Mortgage Rate) to but not including the Due Date in the
Collection Period in which the purchase is to occur and (iii) certain Additional
Trust Fund Expenses in respect of such Mortgage Loan, including but not limited
to, servicing expenses that are reimbursable to the Master Servicer, the Special
Servicer or the Trustee plus any interest thereon and on any related P&I
Advances or (2) other than with respect to the Rite Aid-Palm Desert Mortgage
Loan, substitute a Qualified Substitute Mortgage Loan for such Mortgage Loan and
pay the Trustee 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 this 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 has delivered to the Trustee an officer's
certificate that describes the reasons that such delivery or cure was not
effected within the first 90-day cure period and the actions it proposes to take
to effect such delivery or cure, and which states that it anticipates such
delivery or cure will be effected within the additional 90-day period and
provided further, that no such document omission or defect (other than with
respect to the Mortgage Note, the Mortgage, the title insurance policy, the
ground lease or any letter of credit) will be considered to materially and
adversely affect the interests of the Certificateholders 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 servicing obligation. No
substitution of a Qualified Substitute Mortgage Loan for a deleted Mortgage Loan
will be permitted under the Pooling and Servicing Agreement if after such
substitution, the aggregate of the Stated Principal Balances of all Qualified
Substitute Mortgage Loans which were previously substituted for deleted Mortgage
Loans exceed 10% of the aggregate Cut-Off Date Balance of all the Mortgage
Loans. 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 in the real property records
of the jurisdiction in which the related Mortgaged Property is located. See
"DESCRIPTION OF THE POOLING AGREEMENTS--Assignment of Mortgage Loans;
Repurchases" in the Prospectus.
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A "Qualified Substitute Mortgage Loan" is a mortgage loan which must, on
the date of substitution: (i) have an outstanding Stated Principal Balance,
after application of all scheduled payments of principal and interest due during
or prior to the month of substitution, not in excess of the Stated Principal
Balance of the deleted Mortgage Loan as of the Due Date in the calendar month
during which the substitution occurs; (ii) have a Mortgage Rate not less than
the Mortgage Rate of the deleted Mortgage Loan; (iii) have the same Due Date as
the deleted Mortgage Loan; (iv) accrue interest on the same basis as the deleted
Mortgage Loan (for example, on the basis of a 360-day year consisting of twelve
30-day months); (v) have a remaining term to stated maturity not greater than,
and not more than two years less than, the remaining term to stated maturity of
the deleted Mortgage Loan; (vi) have an original loan-to-value ratio not higher
than that of the deleted Mortgage Loan and a current loan-to-value ratio not
higher than the then-current loan-to-value ratio of the deleted Mortgage Loan;
(vii) comply as of the date of substitution with all of the representations and
warranties set forth in the applicable Mortgage Loan Purchase Agreement; (viii)
have an environmental report with respect to the related Mortgaged Property
which will be delivered as a part of the related Mortgage 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 three 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; provided that such approval of the Controlling Class
Representative may not be unreasonably withheld; 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. When a Qualified Substitute Mortgage
Loan is substituted for a deleted Mortgage Loan, the applicable Mortgage Loan
Seller shall certify that such Mortgage Loan meets all of the requirements of
the above definition and shall send such certification to the Trustee.
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) is true and
correct in all material respects as of the Cut-Off Date (or, with
respect to the Gardiner Manor Mall Loan, its origination 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 title to,
and was the sole owner of, each Mortgage Loan, and is transferring
the Mortgage Loan free and clear of any and all liens, pledges,
charges or security interests of any nature encumbering such
Mortgage Loan;
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(iv) the proceeds of such Mortgage Loan have been fully disbursed and
there is no requirement for future advances thereunder;
(v) each of the related Mortgage Note, related Mortgage, related
assignment of leases, if any, and other agreements executed in
connection with such Mortgage Loan are the legal, valid and binding
obligations 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 their
terms, except with respect to provisions relating to default
interest, yield maintenance charges or prepayment premiums and
except as such enforcement may be limited by bankruptcy, insolvency,
receivership, reorganization, moratorium, redemption or other
similar 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 (or, with respect to Gardiner Manor Mall Loan, its origination
date), to the actual knowledge of the applicable Mortgage Loan
Seller 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;
(vii) the assignment of the related Mortgage and assignment of leases in
favor of the Trustee constitutes the legal, valid and binding
assignment of such Mortgage and leases to the Trustee (subject to
customary limitations);
(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) liens for current real property taxes,
ground rents, water charges, sewer rents and assessments not yet due
and payable, (b) covenants, conditions and restrictions, rights of
way, easements and other matters of public record, none of which,
individually or in the aggregate, materially interferes with the
current use of the Mortgaged Property or the security intended to be
provided by such Mortgage or with the borrower'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) set forth in the
related title insurance policy or appearing of record, (d) other
matters to which like properties are commonly subject, (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 interferes with the current use of
the Mortgaged Property or the security intended to be provided by
such Mortgage or with the borrower's ability to pay its obligations
when they become due or materially and adversely affects the value
of the Mortgaged Property;
(ix) all real estate taxes and governmental assessments that prior to the
Cut-Off Date became due and owing 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) to the applicable Mortgage Loan Seller's actual knowledge as of the
Cut-Off Date, and to the applicable Mortgage Loan Seller's actual
knowledge based solely upon due diligence customarily performed with
the origination of comparable mortgage loans by the Mortgage Loan
Seller, each related Mortgaged Property was free and clear of any
material damage (other than deferred maintenance for which escrows
were established at origination) that would affect materially and
adversely the value of such Mortgaged Property as security for the
Mortgage Loan and to the applicable Mortgage Loan Seller's actual
knowledge as of the Cut-
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Off Date there was no proceeding pending for the total or partial
condemnation of such Mortgaged Property;
(xi) as of the date of its origination, all insurance coverage required
under each related Mortgage, which insurance covered such risks as
were customarily acceptable to prudent commercial and multifamily
mortgage lending institutions lending on the security of property
comparable to the related Mortgaged Property in the jurisdiction in
which such Mortgaged Property is located, and with respect to a fire
and extended perils insurance policy, was in an amount (subject to a
customary deductible) equal to the lesser of (a) the replacement
cost of improvements located on such Mortgaged Property, or (b) the
initial principal balance of the Mortgage Loan, and was in full
force and effect with respect to each related Mortgaged Property;
(xii) as of the Cut-Off Date, the 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
(xiii) 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
either Mortgage Loan Purchase Agreement that materially and adversely affects
the value of a Mortgage Loan or the interests of the Certificateholders, 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 Rite Aid-Palm Desert Mortgage 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, and has delivered to the Trustee an officer's certificate that
describes the reasons that a cure was not effected within the first 90-day cure
period and the actions it proposes to take to effect such cure and which states
that it anticipates such cure will be effected within the additional 90-day
period. Each Mortgage Loan Seller is solely responsible for its repurchase or
substitution obligation, and such obligations will not be the responsibility of
the Depositor.
Any breach of a representation or warranty as to a Mortgage Loan that is
cross-collateralized and cross-defaulted with one or more other Mortgage Loans
(each a "Crossed Loan") that materially and adversely affects the value of such
other Mortgage Loans, and is not cured as provided for above, will require the
repurchase or substitution of all such cross-collateralized and cross-defaulted
Mortgage Loans which are materially and adversely affected by such breach;
provided, that if any Crossed Loan is not so repurchased or substituted, then
such Crossed Loan shall be released from its cross-collateralization and
cross-default provision so long as such Crossed Loan is held in the Trust Fund.
The foregoing substitution or repurchase obligation constitutes the sole
remedy available to the Certificateholders and the Trustee for any uncured
breach of any Mortgage Loan Seller's representations and warranties regarding
its Mortgage Loans. There can be no assurance that the applicable Mortgage Loan
Seller will have the financial resources to repurchase any Mortgage Loan at any
particular time. Each Mortgage Loan Seller is the sole warranting party in
respect of the Mortgage Loans sold by such Mortgage Loan Seller to the
Depositor, and none of the Depositor nor any of such party's affiliates (except
with respect to First Union National Bank 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
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Loan Seller's representations and warranties if such Mortgage Loan Seller
defaults on its obligation to do so.
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
(including the Subordinate Component of the Rite Aid-Palm Desert Mortgage Loan)
for the benefit of the Certificateholders, in accordance with applicable law,
the terms of the Pooling and Servicing Agreement and the terms of the respective
Mortgage Loans and, to the extent consistent with the foregoing, (a) in the same
manner in which, and with the same care, skill, prudence and diligence with
which, the Master Servicer or the Special Servicer, as the case may be,
generally services and administers similar mortgage loans with similar borrowers
(i) for other third-parties, giving due consideration to customary and usual
standards of practice of prudent institutional commercial mortgage lenders
servicing their own loans, or (ii) held in its own portfolio, whichever standard
is higher, (b) with a view to the maximization of the recovery on such Mortgage
Loans on a net present value basis and the best interests of the
Certificateholders and the Trust, 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; (ii) the ownership of
any Certificate by the Master Servicer or the Special Servicer, as the case may
be, or by any affiliate thereof; (iii) the right of the Master Servicer or the
Special Servicer, as the case may be, to receive compensation or other fees for
its services rendered pursuant to the Pooling and Servicing Agreement; (iv) the
obligation of the Master Servicer to make Advances (as defined in this
Prospectus Supplement); (v) the ownership, servicing or management by the Master
Servicer or the Special Servicer or any affiliate thereof for others of any
other mortgage loans or real property; (vi) any obligation of the Master
Servicer, or any affiliate thereof, to repurchase or substitute a Mortgage Loan
as a Mortgage Loan Seller; (vii) any obligation of the Master Servicer or any
affiliate thereof to cure a breach of a representation and warranty with respect
to a Mortgage Loan; and (viii) any debt the Master Servicer or Special Servicer
or any affiliate of either has extended to any obligor on a Mortgage Note.
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The Master Servicer may appoint sub-servicers with respect to the Mortgage
Loans; provided that the Master Servicer will remain obligated under the Pooling
and Servicing Agreement for the servicing of the Mortgage Loans. 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 (including the Subordinate Component of the Rite Aid-Palm Desert Mortgage
Loan). Reference is also made to the Prospectus, in particular to the section
captioned "DESCRIPTION OF THE POOLING AGREEMENTS," for important information in
addition to that set forth in this Prospectus Supplement regarding the terms and
conditions of the Pooling and Servicing Agreement as they relate to the rights
and obligations of the Master Servicer and Special Servicer thereunder. The
Special Servicer generally has all of the rights to indemnity and reimbursement,
and limitations on liability, that the Master Servicer is described as having in
the Prospectus and certain additional rights to indemnity as provided in the
Pooling and Servicing Agreement relating to actions taken at the direction of
the Controlling Class Representative, and the Special Servicer rather than the
Master Servicer will perform the servicing duties described in the Prospectus
with respect to Specially Serviced Mortgage Loans and REO Properties (each as
described in this Prospectus Supplement). In addition to the circumstances for
resignation of the Master Servicer set forth in the Prospectus, the Master
Servicer and the Special Servicer each has the right to resign at any other time
provided that (i) a willing successor thereto has been found, (ii) each of the
Rating Agencies confirms in writing that the successor's appointment will not
result in a withdrawal, qualification or downgrade of any rating or ratings
assigned to any class of Certificates, (iii) the resigning party pays all costs
and expenses in connection with such transfer, and (iv) the successor accepts
appointment prior to the effectiveness of such resignation. See "DESCRIPTION OF
THE POOLING AGREEMENTS--Certain Matters Regarding the Master Servicer and the
Depositor" in the Prospectus.
THE MASTER SERVICER AND THE SPECIAL SERVICER
First Union National Bank, 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 and REO Properties). 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.
First Union National Bank is a wholly-owned subsidiary of First Union
Corporation, and as such is our affiliate and one of the Mortgage Loan Sellers.
In addition, it is anticipated that First Union National Bank will be the holder
of the 5 Companion Loans described herein and is expected to be the holder of a
portion of the Class V Certificates. First Union National Bank's principal
servicing offices are located at NC 1075, 8739 Research Drive--URP4, Charlotte,
North Carolina 28262-1075.
As of March 31, 2001, First Union National Bank and its affiliates were
responsible for master or primary servicing approximately 6,173 commercial and
multifamily loans, totaling approximately $41 billion in aggregate outstanding
principal amounts, including loans securitized in mortgage-backed securitization
transactions.
The information set forth in this Prospectus Supplement concerning First
Union National Bank has been provided by First Union National Bank, and neither
the Depositor nor the Underwriters make any representation or warranty as to the
accuracy or completeness of such information. First Union National Bank (apart
from its obligations as a Mortgage Loan Seller and except for the information in
the first two 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.
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Lennar Partners, Inc., a Florida corporation and a subsidiary of LNR
Property Corporation ("LNR"), will initially be appointed as special servicer
under the Pooling and Servicing Agreement (the "Special Servicer"), and will be
responsible for servicing the Specially Serviced Mortgage Loans and REO
Properties. The principal executive offices of the Special Servicer are located
at 760 NW 107th Avenue, Miami, Florida 33172, and its telephone number is (305)
485-2000. LNR, its subsidiaries and affiliates are involved in the real estate
investment and management business and engage principally in (i) acquiring,
developing, managing and repositioning commercial and multi-family residential
real estate properties, (ii) acquiring (often in partnership with financial
institutions or real estate funds) and managing portfolios of mortgage loans and
other real estate related assets, (iii) investing in unrated and non-investment
grade rated commercial mortgage-backed securities as to which LNR has the right
to be special servicer, and (iv) making high yielding real estate loans and
equity investments. The Special Servicer has regional offices located across the
country in Florida, Georgia, Oregon and California. As of March 2001, the
Special Servicer and its affiliates were managing a portfolio which included an
original count of over 12,800 assets in most states with an original face value
of over $59 billion, most of which are commercial real estate assets. Included
in this managed portfolio are $55 billion of commercial real estate assets
representing 73 securitization transactions, for which the Special Servicer is
servicer or special servicer. The Special Servicer and its affiliates own and
are in the business of acquiring assets similar in type to the assets of the
Trust Fund. Accordingly, the assets of the Special Servicer and its affiliates
may, depending upon the particular circumstances including the nature and
location of such assets, compete with the Mortgaged Properties for tenants,
purchasers, financing and so forth. It is anticipated that Lenner Partners, Inc.
will be the holder of a portion of the Class V Certificates and an economic
interest in the 5 Companion Loans.
The information set forth herein regarding the Special Servicer has been
provided by Lennar Partners, Inc. and neither the Depositor nor any Underwriter
makes any representation or warranty as to the accuracy or completeness of such
information.
The Pooling and Servicing Agreement permits the holder (or holders) of the
majority of the Voting Rights allocated to the Controlling Class to replace the
Special Servicer and to select a representative (the "Controlling Class
Representative") who may advise the Special Servicer and whose approval is
required for certain actions by the Special Servicer under certain
circumstances. In addition, the Pooling and Servicing Agreement permits the
holders of the Class V Certificates to select a representative (the "Rite
Aid-Palm Desert Representative") who may consult with the Controlling Class
Representative in advising the Special Servicer with respect to the Rite
Aid-Palm Desert Mortgage Loan. The Controlling Class Representative is selected
by holders of Certificates representing more than 50% of the Certificate Balance
of the Controlling Class. See "--The Controlling Class Representative" in this
Prospectus Supplement. Such holder (or holders) will be required to pay all
out-of-pocket costs related to the transfer of servicing if the Special Servicer
is replaced other than due to an Event of Default, including without limitation,
any costs relating to Rating Agency confirmation and legal fees associated with
the transfer. The "Controlling Class" is the Class of Sequential Pay
Certificates, (a) which bears the latest alphabetical Class designation and (b)
the Certificate Balance of which is (i) greater than 25% of its original
Certificate Balance and (ii) equal to or greater than 1.0% of the sum of the
original Certificate Balances of all the Sequential Pay Certificates; provided,
however, that if no Class of Sequential Pay Certificates satisfies clause (b)
above, the Controlling Class shall be the outstanding Class of Certificates
(other than the Class V, Class Z-I and Class Z-II Certificates, the REMIC
Residual Certificates or the Class IO 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. Any such replacement
of a Special Servicer will be subject to, among other things, (i) the delivery
of notice of the proposed replacement to the Rating Agencies and receipt of
written confirmation from the Rating Agencies that the replacement will not
result in a qualification, downgrade or withdrawal of any of the then current
ratings assigned to the Certificates, and (ii) the written agreement of the
successor Special Servicer to be bound by the terms and conditions of the
Pooling and Servicing Agreement. See "DESCRIPTION OF THE CERTIFICATES--Voting
Rights" in this Prospectus Supplement and the accompanying Prospectus.
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The Special Servicer is responsible for servicing and administering any
Mortgage Loan or Companion Loan 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 written evidence from
an institutional lender of such lender's binding commitment to refinance such
Mortgage Loan or Companion Loan within 60 days after the due date of such
Balloon Payment, 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 has determined, in its good faith reasonable judgment,
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) that the Master Servicer
shall have determined, in its good faith and reasonable judgment, materially
impairs the value of the Mortgaged Property as security for the Mortgage Loan or
otherwise materially adversely affects the interests of Certificateholders and
that continues unremedied for 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, each Companion Loan will be serviced and administered under the
Pooling and Servicing Agreement as if it were a Mortgage Loan and the holder of
the related Mortgage Note were a Certificateholder. If a Companion Loan becomes
specially serviced, then the related Mortgage Loan will become a Specially
Serviced Mortgage Loan.
If any amounts due under the Qwest Mortgage Loan, the Rite Aid AB Mortgage
Loans or the related Companion Loans are accelerated after an event of default
under the applicable Mortgage Loan documents, the holder of the related
Companion Loan will be entitled to purchase the related Mortgage Loan at the
price described under "DESCRIPTION OF THE MORTGAGE POOL--Qwest and Rite Aid AB
Mortgage Loans" in this Prospectus Supplement.
If a Servicing Transfer Event occurs with respect to any Mortgage Loan, the
Master Servicer is in general required to transfer its servicing
responsibilities with respect to such Mortgage Loan to the Special Servicer.
Notwithstanding such transfer, the Master Servicer will continue to receive
payments on such Mortgage Loan (including amounts collected by the Special
Servicer), to make certain calculations with respect to such Mortgage Loan, and
to make remittances (including, if necessary, P&I Advances) and prepare certain
reports to the Trustee with respect to such Mortgage Loan. If title to the
related Mortgaged Property is acquired by the Trust Fund (upon acquisition, an
"REO Property"), whether through foreclosure, deed in lieu of foreclosure or
otherwise, the Special Servicer will continue to be responsible for the
management thereof. Mortgage Loans 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 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
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connection with a bankruptcy or similar proceeding involving the related
borrower or by reason of a modification, waiver or amendment granted or
agreed to by the Special Servicer);
(b) with respect to any of the circumstances described in clauses (b),
(d), (e) and (f) of the definition of Servicing Transfer Event, when such
circumstances cease to exist in the good faith, reasonable judgment of the
Special Servicer, but, with respect to any bankruptcy or insolvency
proceedings described in clauses (d), (e) and (f) no later than the entry
of an order or decree dismissing such proceeding;
(c) with respect to the circumstances described in clause (c) of the
definition of Servicing Transfer Event, when such default is cured; and
(d) with respect to the circumstances described in clause (g) of the
definition of Servicing Transfer Event, when such proceedings are
terminated;
so long as at that time no other Servicing Transfer Event then exists and
provided no additional default is foreseeable in the reasonable judgment of the
Special Servicer.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The principal compensation to be paid to the Master Servicer in respect of
its servicing activities is the Master Servicing Fee. The "Master Servicing Fee"
is payable monthly on a loan-by-loan basis from amounts received in respect of
interest on each Mortgage Loan (including each Specially Serviced Mortgage Loan,
and from REO Revenue with respect to each REO Mortgage Loan), is calculated on
the basis of a 360-day year consisting of twelve 30-day months, accrues at the
related Master Servicing Fee Rate and is computed on the basis of the same
principal amount respecting which any related interest payment due on the
Mortgage Loan is computed. The "Master Servicing Fee Rate" is a per annum rate
ranging from 0.025% to 0.085%. As of the Cut-Off Date the weighted average
Master Servicing Fee Rate will be approximately 0.054% per annum. The Master
Servicer will not be entitled to receive a separate fee with respect to the
Subordinate Component of the Rite Aid-Palm Desert Mortgage Loan or the Companion
Loans. Otherwise, all references in this section to "Mortgage Loans" will
include the Subordinate Component of the Rite Aid-Palm Desert Mortgage Loan and
the Companion Loans.
If a borrower voluntarily 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) 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 0.025% 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. Compensating Interest Payments will not cover
shortfalls in Mortgage Loan interest accruals that result from any liquidation
of a defaulted
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Mortgage Loan, or of any REO Property acquired in respect thereof, that occurs
during a Collection Period prior to the related Due Date therein or involuntary
prepayments.
The principal compensation to be paid to the Special Servicer in respect of
its special servicing activities is the Special Servicing Fee (together with the
Master Servicing Fee, the "Servicing Fees") and, under the circumstances
described in this Prospectus Supplement, Principal Recovery 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, as the case may be.
However, earned Special Servicing Fees are payable out of general collections on
the Mortgage Loans then on deposit in the Certificate Account. The Special
Servicing Fee with respect to any Specially Serviced Mortgage Loan (or REO
Mortgage Loan) will cease to accrue if such loan (or the related REO Property)
is liquidated or if such loan becomes a Corrected Mortgage Loan. The Special
Servicer is entitled to a "Principal Recovery Fee" with respect to each
Specially Serviced Trust Fund Asset, which Principal Recovery 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 Principal
Recovery Fee will be payable in connection with, or out of, insurance proceeds,
condemnation proceeds or Liquidation Proceeds (as defined in the Prospectus)
resulting from the purchase of any Specially Serviced Trust Fund Asset (i) by a
Mortgage Loan Seller (as described in this Prospectus Supplement under
"DESCRIPTION OF THE MORTGAGE POOL--Assignment of the Mortgage Loans; Repurchases
and Substitutions" and "--Representations and Warranties; Repurchases and
Substitutions"), (ii) by the Master Servicer, the Special Servicer or the
Majority Subordinate Certificateholder as described in this Prospectus
Supplement under "DESCRIPTION OF THE CERTIFICATES--Termination" or (iii) in
certain other limited circumstances. 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 causing
the Mortgage Loan to be a Specially Serviced 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 Special Servicer is entitled to
retain all assumption fees and the Master Servicer or the Special Servicer is
entitled to retain all modification fees, assumption application fees, late
payment charges and default interest (to the extent not used to offset interest
on Advances 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, each of the Master Servicer and the Special
Servicer is authorized to invest or direct the investment of funds held in those
accounts maintained by it that relate to the Mortgage Loans or REO Properties,
as the case may be, in certain short-term United States government securities
and 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.
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
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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 AGREEMENTS--Certificate Account" and '--Servicing Compensation and
Payment of Expenses" in the Prospectus.
As and to the extent described in this Prospectus Supplement under
"DESCRIPTION OF THE CERTIFICATES--P&I Advances," each of the Master Servicer and
the Trustee is entitled to receive interest, at the Reimbursement Rate, on any
reimbursable servicing expenses incurred by it. Such interest will compound
annually and will be paid, contemporaneously with the reimbursement of the
related servicing expense, first out of late payment charges and default
interest received on the related Mortgage Loan during the Collection Period in
which such reimbursement is made and then from general collections on the
Mortgage Loans then on deposit in the Certificate Account. 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 during the preceding 12-month period 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
Subject to requirements regarding the resolution of Defaulted Mortgage
Loans described below under "--Defaulted Mortgage Loans; REO Properties; Sale of
Mortgage Loans," the Pooling and Servicing Agreement permits the Special
Servicer to modify, waive or amend any term of any Mortgage Loan if (a) it
determines, in accordance with the servicing standard described under
"--General" above, 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 $20,000,000, permit the transfer of 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 or (v) 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.
Subject to requirements regarding the resolution of Defaulted Mortgage
Loans described below under "--Defaulted Mortgage Loans; REO Properties; Sale of
Mortgage Loans," notwithstanding clause (b) of the preceding paragraph, 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 Mortgage Loan, 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 Served Mortgage
Loan or, in the reasonable, good faith judgment of the Special Servicer, such
default by the
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borrower is reasonably foreseeable, (y) in the reasonable, good faith judgment
of the Special Servicer, such modification, would increase the recovery to
Certificateholders on a net present value basis and (z) such modification,
waiver or amendment does not result in a tax being imposed on the Trust Fund or
cause any REMIC created pursuant to the Pooling and Servicing Agreement 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 the Class IO
Certificates) then outstanding, and (C) a rate below the then prevailing
interest rate for comparable loans, as determined by the Special Servicer, (iii)
if the Mortgage Loan is secured by a ground lease (and not also by the
corresponding fee simple interest), extend the maturity date of such Mortgage
Loan beyond a date which is 20 years prior to the expiration of the term of such
ground lease or (iv) defer interest due on any Mortgage Loan in excess of 10% of
the Stated Principal Balance of such Mortgage Loan or defer the collection of
interest on any Mortgage Loan without accruing interest on such deferred
interest at a rate at least equal to the Mortgage Rate of such Mortgage Loan.
The Special Servicer will have the ability, subject to the servicing standard
described under "-- General" above, to modify Mortgage Loans with respect to
which default is reasonably foreseeable, but which are not yet in default.
The Special Servicer is required to notify the Trustee, the Master
Servicer, the Controlling Class Representative and the Rating Agencies 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, 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 10 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" in this
Prospectus Supplement.
For any Mortgage Loan other than a Specially Serviced Mortgaged Loan and
subject to the rights of the Special Servicer, the Master Servicer is
responsible for any request by a borrower for the consent to modify, waive or
amend certain terms as specified in the Pooling and Servicing Agreement,
including, without limitation, (i) approving certain leasing activity, (ii)
approving certain substitute property managers, (iii) approving certain waivers
regarding the timing or need to audit certain financial statements and (iv)
approving certain consents with respect to right-of-ways and easements and
consents to subordination of the related Mortgage Loan to such easements or
right-of-ways.
THE CONTROLLING CLASS REPRESENTATIVE
Subject to the succeeding paragraph, the Controlling Class Representative
(and with respect to the Rite Aid-Palm Desert Mortgage Loan, the Controlling
Class Representative in consultation with the Rite Aid-Palm Desert
Representative) is entitled to advise the Special Servicer with respect to the
following actions of the Special Servicer and, with respect to items (iv)
through (vii), the Special Servicer is not permitted to take any such action as
to which the Controlling Class Representative (and with respect to the Rite
Aid-Palm Desert Mortgage Loan, the Controlling Class Representative in
consultation with the Rite Aid-Palm Desert 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 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 a Money Term of a Mortgage Loan other than a
modification consisting of the extension of the maturity date of a Mortgage
Loan for one year or less;
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(iii)any proposed sale of a Defaulted Mortgage Loan or 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);
(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;
(vii)any acceptance of substitute or additional 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; and
(vii)any acceptance of an assumption agreement releasing a borrower from
liability under a Mortgage Loan.
In addition, the Controlling Class Representative may, in consultation with
the Rite Aid-Palm Desert Representative with respect to the Rite Aid-Palm Desert
Mortgage Loan, 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, provision of the Pooling and Servicing Agreement or applicable law,
including the Special Servicer's obligation to act in accordance with the
servicing standards described under "General" above, (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, or (iii)
overrule, or cause the Special Servicer to disregard, the Net Present Value
determination described below under "--Defaulted Mortgage Loans; REO Properties;
Sale of Mortgage Loans."
Limitation on Liability of Controlling Class Representative. Neither the
Controlling Class Representative nor the Rite Aid-Palm Desert Representative
will have any liability to the Certificateholders for any action taken, or for
refraining from the taking of any action, in good faith pursuant to the Pooling
and Servicing Agreement, or for errors in judgment; provided, however, that
neither the Controlling Class Representative nor the Rite Aid-Palm Desert
Representative will be protected against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence in the
performance of duties or by reason of reckless disregard of obligations or
duties. By its acceptance of a Certificate, each Certificateholder confirms its
understanding that each of the Controlling Class Representative and the Rite
Aid-Palm Desert 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 or the Rite Aid-Palm Desert
Representative may have special relationships and interests that conflict with
those of holders of some Classes of the Certificates; and, absent willful
misfeasance, bad faith or negligence on the part of the Controlling Class
Representative or the Rite Aid-Palm Desert Representative, as the case may be,
each Certificateholder agrees to take no action against the Controlling Class
Representative or the Rite Aid-Palm Desert Representative or any of their
respective officers, directors, employees, principals or agents as a result of
such a special relationship or conflict.
DEFAULTED MORTGAGE LOANS; REO PROPERTIES; SALE OF MORTGAGE LOANS
The Pooling and Servicing Agreement contains provisions requiring the
Special Servicer to follow the course of action with respect to a Defaulted
Mortgage Loan which results in the highest estimated Net Present Value of
proceeds to be realized from the alternative Asset Disposition Methods. A
"Defaulted Mortgage Loan" is a Specially Serviced Mortgage Loan which is in
default under the terms of the applicable Mortgage Loan documents and for which
any applicable grace period has expired.
If any Mortgage Loan becomes a Defaulted Mortgage Loan, the Special
Servicer shall estimate its Net Present Value pursuant to three separate asset
disposition methods (each, an "Asset Disposition Method"). "Net Present Value"
means an amount determined by the Special Servicer, in consultation with the
Controlling Class Representative (and, if applicable, the Rite Aid-Palm Desert
Representative),
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with respect to a Defaulted Mortgage Loan pursuant to an Asset Deposition
Method, by (i) determining the cash flow stream expected to be generated by a
particular Asset Disposition Method with respect to a Defaulted Mortgage Loan,
(ii) subtracting the amount of expenses expected to be incurred by the Trust in
pursuing such Asset Disposition Method and (iii) discounting such remainder at a
rate equal to the Net Mortgage Rate of such Defaulted Mortgage Loan. In
determining the cash flow stream expected from any Asset Disposition Method, the
Special Servicer and the Controlling Class Representative shall refer to all
relevant information contained in the most recent appraisal with respect to the
related Mortgaged Property or Properties. In addition, the Special Servicer and
Controlling Class Representative (and, if applicable, the Rite Aid-Palm Desert
Representative) shall consider all available objective third-party information
obtained from generally available sources as well as information obtained from
vendors providing real estate services to the Special Servicer concerning the
market for distressed real estate loans and the real estate markets for the
related property types in regions in which the Mortgaged Properties are located.
The Special Servicer shall follow the Asset Disposition Method that has the
highest Net Present Value. Notwithstanding that the Controlling Class
Representative (and, if applicable, the Rite Aid-Palm Desert Representative) has
the right to consult with the Special Servicer on the Asset Disposition Method,
the Special Servicer's determination of the highest Net Present Value to the
Trust will be the Asset Disposition Method effected. To the extent consistent
with the servicing standard described under "-- General" above, the Special
Servicer is permitted to recalculate the Net Present Value of a Defaulted
Mortgage Loan based upon changed circumstances or new information and utilize
different Asset Disposition Methods to the extent warranted by such recalculated
Net Present Value.
The first Asset Disposition Method requires the Special Servicer to
estimate the potential proceeds from the sale of the Defaulted Mortgage Loan.
The Majority Subordinate Certificateholder, the Master Servicer, the Special
Servicer and each of the Mortgage Loan Sellers with respect to the Mortgage
Loans it originated or acquired (each, in such capacity, a "Defaulted Loan
Purchaser") have been granted a right of first refusal, subject to the right of
the holder of a majority interest in the Class V Certificates with respect to
the Rite Aid-Palm Desert Mortgage Loan and the holder of each Companion Loan
with respect to its related Mortgage Loan described under "DESCRIPTION OF THE
MORTGAGE POOL--Qwest and Rite Aid AB Mortgage Loans" and "--Rite Aid-Palm Desert
Mortgage Loan," to purchase the Defaulted Mortgage Loan from the Trust at a cash
price equal to 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, and, in the event that a Defaulted Loan Purchaser notifies the Special
Servicer that it intends to exercise such option, then a sale of the Defaulted
Mortgage Loan to the Defaulted Loan Purchaser pursuant to such option shall be
deemed to be the Asset Disposition Method that has the highest Net Present
Value. Otherwise, if and when the Special Servicer determines that the Net
Present Value of a sale of a Defaulted Mortgage Loan is higher than the Net
Present Value of either a Workout or a Foreclosure, it shall offer the Defaulted
Mortgage Loan for sale for cash. Such offering shall be made in a commercially
reasonable manner for a period of not less than 20 days or more than 90 days.
The Special Servicer shall give the Controlling Class Representative (and, if
applicable, the Rite Aid-Palm Desert Representative), the Master Servicer and
the Trustee not less than five days' prior written notice of its intention to
sell such Defaulted Mortgage Loan. The Special Servicer shall accept the highest
cash bid received from any Person for such Defaulted Mortgage Loan in an amount
at least equal to the outstanding principal balance of such Mortgage Loan as of
the date of purchase, all accrued but unpaid interest, and related fees and
expenses; provided, however, that in the absence of any such bid, the Special
Servicer shall accept the highest cash bid received from any Person that exceeds
the greater of the Net Present Value of a Foreclosure or the Net Present Value
of a Workout. In the absence of any such bid, the Special Servicer shall proceed
to Foreclose or Workout such Defaulted Mortgage Loan, depending on which Asset
Disposition Method yields the higher Net Present Value.
The second Asset Disposition Method requires the Special Servicer to pursue
negotiations with the related Mortgagor designed to workout the Defaulted
Mortgage Loan in a manner that results in the Defaulted Mortgage Loan becoming:
(i) a Corrected Mortgage Loan with no modification of any Money Term, (ii)
modified as to one or more Money Terms and becoming a Corrected Mortgage Loan,
or (iii) paid off due to the acceptance of a discounted payoff from the
Mortgagor (in each case, a "Workout"). "Money Term" shall mean any term of the
related Mortgage Loan documents that relates to
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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.
The third Asset Disposition Method requires the Special Servicer to
estimate the potential proceeds derived from foreclosing upon or otherwise
converting to ownership the related Mortgaged Property (a "Foreclosure"). If and
when the Special Servicer determines that the Net Present Value of a Foreclosure
is higher than the Net Present Value of either a Workout or a sale of the
Defaulted Mortgage Loan, it shall proceed to foreclose on such Defaulted
Mortgage Loan. 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 (and, if applicable, the Rite Aid-Palm Desert
Representative), shall use its reasonable best efforts to sell any REO Property
as soon as practicable in accordance with the most favorable Asset Disposition
Method and 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 created pursuant to the Pooling and Servicing Agreement 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 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 (and,
if applicable, the Desert Rite Aid-Palm Desert 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 described in the Pooling and Servicing Agreement; provided,
however, that the Master Servicer, Special Servicer, Majority Subordinate
Certificateholder, any independent contractor engaged by the Master Servicer or
the Special Servicer pursuant to the Pooling and Servicing Agreement (or any
officer or affiliate thereof) shall not be permitted to purchase the REO
Property at a price less than the outstanding principal balance of such Mortgage
Loan as of the date of purchase, plus all accrued but unpaid interest and
related fees and expenses, except in limited circumstances set forth in the
Pooling and Servicing Agreement; and provided, further that if the Special
Servicer intends to bid on any REO Property, (i) the Special Servicer shall
notify the Trustee of such intent, (ii) the Trustee shall promptly obtain, at
the expense of the Trust 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
fair market value set forth in such appraisal.
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 Defaulted Mortgage Loan or REO Property,
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 or purchase any
Defaulted Mortgage Loan or REO Property. Any sale of a Defaulted Mortgage Loan
or REO Property shall be without recourse to, or representation or warranty by,
the Trustee, the Depositor, 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 herewith.
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 this 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.
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INSPECTIONS; COLLECTION OF OPERATING INFORMATION
The Special Servicer is required to perform or cause to be performed a
physical inspection of a Mortgaged Property as soon as practicable after the
related Mortgage Loan becomes a Specially Serviced Mortgage Loan or the related
debt service coverage ratio is below 1.0x; the expense of which will be payable
first, out of 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, then at the Trust Fund's expense. In
addition, 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
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 year. 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 described under "-- General" above to collect from
the related borrower and review the quarterly and annual operating statements of
each Mortgaged Property 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.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The First Union National Bank Commercial Mortgage Trust, Commercial
Mortgage Pass-Through Certificates, Series 2001-C2 (the "Certificates") will be
issued pursuant to a Pooling and Servicing Agreement, dated as of June 10, 2001,
among the Depositor, the Master Servicer, the Special Servicer, and the Trustee
(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 (including the
Subordinate Component of the Rite Aid-Palm Desert Mortgage Loan) and all
payments and other collections in respect of the Mortgage Loans received or
applicable to periods after the 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 REO Accounts, the Additional Interest Account and the Interest Reserve
Account (see "DESCRIPTION OF THE POOLING 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 (together, 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, Class P
and
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Class Q Certificates (collectively, the "Subordinate Certificates" and, together
with the Class A Certificates, the "Sequential Pay Certificates"); (iii) the
Class IO Certificates (the "Class IO Certificates" and collectively with the
Sequential Pay Certificates, the "REMIC Regular Certificates"); (iv) the Class
R-I and Class R-II Certificates (collectively, the "REMIC Residual
Certificates"); (v) the Class V Certificates and (vi) the Class Z-I and Class
Z-II Certificates.
Only the Class A-1, Class A-2, Class B, Class C, Class D and Class E
Certificates (collectively, the "Offered Certificates") are offered hereby. The
Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class O,
Class P, Class Q and Class IO Certificates (collectively, the "Non-Offered
Certificates"), the Class V Certificates, the Class Z-I and Class Z-II
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 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, Class D and Class E Certificates will be offered in
denominations of not less than $10,000 actual principal amount and in integral
multiples of $1 in excess thereof.
Holders of Offered Certificates may hold their Certificates through DTC (in
the United States) or Clearstream Banking, societe anonyme ("Clearstream
Luxembourg") or Euroclear (in Europe) if they are Participants of such
respective system, or indirectly through organizations that are Participants in
such systems. Clearstream Luxembourg and Euroclear will hold omnibus positions
on behalf of the Clearstream Luxembourg Participants and the Euroclear
Participants, respectively, through customers' securities accounts in
Clearstream Luxembourg 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 Luxembourg Participants and Euroclear Participants
will occur in accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly through Clearstream Luxembourg
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures. If the transaction complies with all relevant requirements,
Euroclear or Clearstream Luxembourg, 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, credits of securities in Clearstream
Luxembourg or Euroclear as a result of a transaction with a DTC Participant will
be made during the subsequent securities settlement processing, dated the
business day following the DTC settlement date, and such credits or any
transactions
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in such securities settled during such processing will be reported to the
relevant Clearstream Luxembourg Participant or Euroclear Participant on such
business day. Cash received in Clearstream Luxembourg or Euroclear as a result
of sales of securities by or through a Clearstream Luxembourg Participant or a
Euroclear Participant to a DTC Participant will be received with value on the
DTC settlement date but will be available in the relevant Clearstream Luxembourg
or Euroclear cash account only as of the business day following settlement in
DTC.
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, Euroclear, Clearstream Luxembourg 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 Luxembourg, Euroclear or holders of Offered
Certificates, as applicable.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Offered Certificates among Participants on whose behalf it acts with respect to
the Offered Certificates and to receive and transmit distributions of principal
of, and interest on, the Offered Certificates. Participants and Indirect
Participants with which the holders of Offered Certificates have accounts with
respect to the Offered Certificates similarly are required to make book-entry
transfers and receive and transmit such payments on behalf of their respective
holders of Offered Certificates. Accordingly, although the holders of Offered
Certificates will not possess the Offered Certificates, the Rules provide a
mechanism by which Participants will receive payments on Offered Certificates
and will be able to transfer their interest.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a holder of
Offered Certificates to pledge such Certificates to persons or entities that do
not participate in the DTC system, or to otherwise act with respect to such
Certificates, may be limited due to the lack of a physical certificate for such
Certificates.
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, nor the Trustee will have any liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Offered Certificates held by Cede & Co., as nominee for DTC, or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
Clearstream Luxembourg is a limited liability company (a societe anonyme)
organized under the laws of Luxembourg. Clearstream Luxembourg holds securities
for its participating organizations ("Clearstream Luxembourg Participants") and
facilitates the clearance and settlement of securities transactions between
Clearstream Luxembourg Participants through electronic book-entry changes in
accounts of Clearstream Luxembourg Participants, thereby eliminating the need
for physical movement of certificates.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear system ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear
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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
Luxembourg or Euroclear and their book-entry systems has been obtained from
sources believed to be reliable, but none of the Depositor or the Underwriters
takes any responsibility for the accuracy or completeness thereof.
CERTIFICATE BALANCES AND NOTIONAL AMOUNT
Subject to a permitted variance of plus or minus 5.0%, the respective
Classes of Sequential Pay Certificates will have the Certificate Balances
representing the approximate percentage of the Cut-Off Date Pool Balance as set
forth in the following table:
PERCENTAGE OF
CLOSING DATE CUT-OFF DATE
CLASS OF CERTIFICATES CERTIFICATE BALANCE POOL BALANCE
- --------------------- ------------------- -------------
Class A-1 Certificates................................. $190,553,000 19.03%
Class A-2 Certificates................................. $590,647,000 58.97%
Class B Certificates................................... $ 42,565,000 4.25%
Class C Certificates................................... $ 12,520,000 1.25%
Class D Certificates................................... $ 12,519,000 1.25%
Class E Certificates................................... $ 20,031,000 2.00%
Non-Offered Certificates (other than Class IO
Certificates)........................................ $132,704,038 13.25%
The "Certificate Balance" of any Class of Sequential Pay Certificates
outstanding at any time represents the maximum amount that the holders thereof
are entitled to receive as distributions allocable to principal from the cash
flow on the Mortgage Loans and the other assets in the Trust Fund. The
Certificate Balance of each Class of Sequential Pay Certificates will be reduced
on each Distribution Date 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 IO Certificates do not have a Certificate Balance, but represent
the right to receive the distributions of interest in an amount equal to the
aggregate interest accrued on its notional amount (the "Notional Amount"). The
Class IO Certificates have seventeen separate components (each a "Component"),
each corresponding to a different Class of Sequential Pay Certificates. Each
such Component has the same letter and/or numerical designation as its related
Class of Sequential Pay Certificates. The component balance (the "Component
Balance") of each Component will equal the Certificate Balance of the
corresponding Class of Sequential Pay Certificates outstanding from to time to
time. On each Distribution Date, the Notional Amount of the Class IO
Certificates will be equal to the aggregate outstanding Component Balances of
the Components on such date. On the Closing Date, the Notional Amount of the
Class IO Certificates will equal approximately $1,001,539,038, which amount will
equal the Cut-Off Date Pool Balance.
The Certificate Balance of any Class of Sequential Pay Certificates may be
increased by the amount, if any, of Certificate Deferred Interest added to such
Class Certificate Balance. With respect to any Mortgage Loan as to which the
Mortgage Rate has been reduced through a modification on any Distribution Date,
"Mortgage Deferred Interest" is the amount by which (a) interest accrued at such
reduced rate is less than (b) the amount of interest that would have accrued on
such Mortgage Loan at the Mortgage Rate before such reduction, to the extent
such amount has been added to the outstanding principal balance of such Mortgage
Loan. Mortgage Deferred Interest on the Rite Aid-Palm Desert Mortgage Loan
(including the Subordinate Component thereof) will be allocated first to the
Subordinate Component and then to the Senior Component, and the corresponding
Component Principal Balance will be increased by the amount of such allocation.
Any allocation of Mortgage Deferred Interest to such Subordinate Component will
reduce the amount distributed in respect of principal on such date on the Senior
Component. On each Distribution Date the amount of interest distributable to a
Class of
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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. 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 Certificates will result in an increase in the Notional
Amount of the Class IO Certificates.
The REMIC Residual Certificates do not have Certificate Balances or
notional amounts, but represent the right to receive on each Distribution Date
any portion of the Available Distribution Amount (as defined below) for such
date that remains after the required distributions have been made on all the
REMIC Regular Certificates. It is not anticipated that any such portion of the
Available Distribution Amount will result in more than a de minimis distribution
to the REMIC Residual Certificates.
The Class Z-I and Class Z-II 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.
For purposes of calculating the allocation of collections on the Rite
Aid-Palm Desert Mortgage Loan between the Senior Component, on the one hand, and
the Subordinate Component on the other, the Senior Component and the Subordinate
Component will each be deemed to have a principal balance (a "Component
Principal Balance") that is initially equal to $2,637,252 in the case of the
Senior Component, and $1,175,112 in the case of the Subordinate 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 Mortgage
Rate in effect for the Rite Aid-Palm Desert Mortgage Loan as of the commencement
of such Interest Accrual Period. The Component Principal Balance of the Senior
Component will be reduced on each Distribution Date by all distributions of
principal made in respect thereof on such Distribution Date as described under
"DESCRIPTION OF THE CERTIFICATES--Distributions," and the Component Principal
Balance of the Subordinate Component will be reduced on each Distribution Date
by all distributions of principal made in respect thereof on such Distribution
Date as described under "DESCRIPTION OF THE CERTIFICATES--Distributions."
PASS-THROUGH RATES
The Pass-Through Rate 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 rate per annum set forth on the front cover of this Prospectus
Supplement. The Pass-Through Rate applicable to the Class E Certificates for
each Distribution Date will equal the lesser of the fixed rate per annum set
forth on the front cover of this Prospectus Supplement and the Weighted Average
Net Mortgage Rate for such Distribution Date.
The Pass-Through Rate applicable to the Class IO Certificates for the
initial Distribution Date will equal approximately 0.98352% per annum. The
Pass-Through Rate applicable to the Class IO Certificates for each Distribution
Date will, in general, equal the weighted average of the Strip Rates for the
Components for such Distribution Date (weighted on the basis of the respective
Component Balances of such Components outstanding immediately prior to such
Distribution Date). The "Strip Rate" in respect of any Class of Components for
any Distribution Date will, in general, equal the Weighted Average Net Mortgage
Rate for such Distribution Date, minus the Pass-Through Rate for the Class of
Sequential Pay Certificates corresponding to such Component (but in no event
will any Strip Rate be less than zero).
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 IO Certificates, the 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
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"Interest Accrual Period" will be the preceding calendar month which will be
deemed to consist of 30 days.
The Class V Certificates will be entitled to distributions of interest only
after the Component Principal Balance of the Senior Component has been reduced
to zero and only from collections on the Rite Aid-Palm Desert Mortgage Loan.
The Class Z-I and Class Z-II Certificates will not have a Pass-Through Rate
or be entitled to distributions in respect of interest other than Additional
Interest.
The "Weighted Average Net Mortgage Rate" for each Distribution Date is the
weighted average of the Net Mortgage Rates for the Mortgage Loans as of the
commencement of the related Collection Period, weighted on the basis of their
respective Stated Principal Balances immediately following the preceding
Distribution Date; provided that, for the purpose of determining the Weighted
Average Net Mortgage Rate only, if the Mortgage Rate for any Mortgage Loan has
been modified in connection with a bankruptcy or similar proceeding involving
the related borrower or a modification, waiver or amendment granted or agreed to
by the Special Servicer, the Weighted Average Net Mortgage Rate for such
Mortgage Loan will be calculated without regard to such event. The "Net Mortgage
Rate" for each Mortgage Loan will generally equal (x) the Mortgage Rate in
effect for such Mortgage Loan as of the Cut-Off Date, minus (y) the applicable
Administrative Cost Rate for such Mortgage Loan. Notwithstanding the foregoing,
because no Mortgage Loan, other than 6 Mortgage Loans (loan numbers 10, 73, 82,
93, 96 and 97), 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 calculating the
Weighted Average Net Mortgage Rate for each Distribution Date, the Mortgage Rate
of each Mortgage Loan, other than the 6 Mortgage Loans, representing 3.4% of the
Cut-Off Date Pool Balance, which accrue interest on a 30/360 basis, in effect
during any calendar month will be deemed to be the annualized rate at which
interest would have to accrue in respect of such loan on a 30/360 basis in order
to derive the aggregate amount of interest (other than default interest)
actually accrued in respect 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 and (b) in February of each
year will be determined inclusive of the one day of interest retained from the
immediately preceding January and, if applicable, December. The "Stated
Principal Balance" of each Mortgage Loan outstanding at any time will generally
be an amount equal to the principal balance (excluding the Subordinate Component
with respect to the Rite Aid-Palm Desert Mortgage Loan) 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 (excluding the
Subordinate Component with respect to the Rite Aid-Palm Desert Mortgage Loan)
during the related Collection Period and (b) increased on each Distribution Date
by any Mortgage Deferred Interest added to the principal balance of such
Mortgage Loan (excluding the Subordinate Component with respect to the Rite
Aid-Palm Desert Mortgage Loan) on such Distribution Date. The Stated Principal
Balance of a Mortgage Loan may also be reduced in connection with any forced
reduction of the actual unpaid principal balance thereof imposed by a court
presiding over a bankruptcy proceeding in which the related borrower is a
debtor. 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.
The "Collection Period" for each Distribution Date is the period that
begins immediately following the Determination Date in the month preceding the
month in which such Distribution Date occurs and ends on and includes the
Determination Date in the same month as such Distribution Date. The
"Determination Date" will be the 8th day of each month (or, if not a business
day, the immediately succeeding business day).
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DISTRIBUTIONS
General. Except as described below with respect to the Class V
Certificates, distributions on the Certificates are made by the Trustee, to the
extent of the Available Distribution Amount, on the 12th day of each month or,
if any such 12th day is not a business day, then on the next succeeding business
day with the same force and effect (each, a "Distribution Date"); provided,
however, that the Distribution Date will be no earlier than the fourth business
day following the related Determination Date. Except as described below, all
such distributions will be made to the persons in whose names the Certificates
are registered (the "Certificateholders") at the close of business on the last
business day of the month preceding the month in which the related Distribution
Date occurs and shall be made by wire transfer of immediately available funds,
if such Certificateholder shall have provided wiring instructions no less than
five business days prior to such record date, or otherwise by check mailed to
the address of such Certificateholder as it appears in the Certificate register.
The final distribution on any Certificate (determined without regard to any
possible future reimbursement of any Realized Loss or Additional Trust Fund
Expense previously allocated to such Certificate) will be made only upon
presentation and surrender of such Certificate at the location that will be
specified in a notice of the pendency of such final distribution. All
distributions made with respect to a Class of Certificates will be allocated pro
rata among the outstanding Certificates of such Class based on their respective
percentage interests in such Class. The first Distribution Date on which
investors in the Offered Certificates may receive distributions will be the
Distribution Date occurring in July 2001.
Class V Certificates and the Rite Aid-Palm Desert Mortgage Loan. The Class
V Certificates will only be entitled to distributions from amounts collected on
the Rite Aid-Palm Desert Mortgage Loan. All collections of principal and
interest in respect of the Rite Aid-Palm Desert Mortgage Loan (including the
Subordinate Component thereof) 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, Principal Recovery Fees, interest on
Advances and any other Additional Trust Fund Expenses, in respect of such
Mortgage Loan (including the Subordinate Component thereof)) will be applied on
the related Distribution Date, together with any P&I Advance and Compensating
Interest Payment made in respect of such Mortgage Loan (including the
Subordinate Component thereof), for the purposes and in the following order of
priority:
(i) to the Certificateholders as part of the Available Distribution
Amount for such Distribution Date, up to an amount equal to all unpaid
interest accrued in respect of the Senior Component through the end of the
related Interest Accrual Period;
(ii) to the Certificateholders as part of the Available Distribution
Amount for such Distribution Date, up to an amount equal to the lesser of
(A) the sum of (1) the portion of such amounts being distributed that are
allocable to principal of the Rite Aid-Palm Desert Mortgage Loan, and (2)
on any date prior to the reduction of the Component Principal Balance of
the Senior Component to zero, the portion of such amounts being distributed
that are allocable to interest accrued on the Subordinate Component which
is being capitalized on such date, and (B) the Component Principal Balance
of the Senior Component outstanding immediately prior to such Distribution
Date;
(iii) to the Certificateholders as part of the Available Distribution
Amount for such Distribution Date, to reimburse the Senior Component for
all Realized Losses and Additional Trust Fund Expenses, if any, previously
allocated to the Senior Component and for which no reimbursement has
previously been received;
(iv) after the Component Principal Balance of the Senior Component has
been reduced to zero, to make distributions of interest to the holders of
the Class V Certificates, up to an amount equal to all unpaid interest
accrued in respect of the Subordinate Component through the end of the
related Interest Accrual Period;
(v) after the Component Principal Balance of the Senior Component has
been reduced to zero, to make distributions of principal to the holders of
the Class V Certificates until the Component Principal Balance of the
Subordinate Component is reduced to zero; and
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(vi) to the holders of the Class V Certificates, to reimburse the
Class V Certificates for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to the Subordinate Component and for
which no reimbursement has been previously received.
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 below to make distributions
on the Certificates.
The Available Distribution Amount. The aggregate amount available for
distributions of interest and principal to Certificateholders (other than Class
V 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 (including the Subordinate Component
of the Rite Aid-Palm Desert Mortgage Loan) by the Master Servicer as of the
close of business on the related Determination Date 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 and any Master
Servicing Fee and Trustee Fee on the Companion Loans to the extent
amounts payable to the holder of the Companion Loans are insufficient to
pay such fees;
(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-I and Class Z-II Certificates);
(vi) if such Distribution Date occurs during February of any year
or during January of any year that is not a leap year, the Interest
Reserve Amounts with respect to the Mortgage Loans to be deposited in
the Interest Reserve Account and held for future distribution; and
(vii) any amounts distributable to the Class V Certificates in
respect of the Rite Aid-Palm Desert Mortgage Loan as described in
clauses (iv), (v) and (vi) under "DESCRIPTION OF THE
CERTIFICATES--Distributions--Class V Certificates and the Rite Aid-Palm
Desert Mortgage Loan";
(b) all P&I Advances made by the Master Servicer or the Trustee with
respect to such Distribution Date;
(c) any Compensating Interest Payment made by the Master Servicer to
cover the aggregate of any Prepayment Interest Shortfalls experienced
during the related Collection Period; and
(d) if such Distribution Date occurs during March of any year, the
aggregate of the Interest Reserve Amounts then on deposit in the Interest
Reserve Account in respect of each Mortgage Loan.
See "SERVICING OF THE MORTGAGE LOANS--Servicing and Other Compensation and
Payment of Expenses" in this Prospectus Supplement, "--P&I Advances" below and
"DESCRIPTION OF THE POOLING AGREEMENTS--Certificate Account" in the Prospectus.
Any Prepayment Premiums or Yield Maintenance Charges actually collected
will be distributed separately from the Available Distribution Amount. See
"--Distributions--Allocation of Prepayment Premiums and Yield Maintenance
Charges."
Interest Reserve Account. The Master Servicer will establish and maintain
an "Interest Reserve Account" in the name of the Trustee for the benefit of the
holders of the Certificates. With respect to each Distribution Date occurring in
February and each Distribution Date occurring in any January which
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occurs in a year that is not a leap year, there will be withdrawn from the
Certificate Account and deposited to the Interest Reserve Account in respect of
each Mortgage Loan (the "Interest Reserve Loans") 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, 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.
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-I and Class Z-II 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 Certificate Account, to the extent of the
Available Distribution Amount, in the following order of priority:
(1) to distributions of interest to the holders of the Class A-1
Certificates, Class A-2 Certificates and Class IO 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 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/or 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;
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(9) after the Class A-1 Certificates, Class A-2 Certificates and Class
B Certificates 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 the Class A-1 Certificates, Class A-2
Certificates and/or Class B Certificates 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 the Class A-1 Certificates, Class A-2 Certificates, Class B
Certificates and Class C Certificates 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 the
Class A-1 Certificates, Class A-2 Certificates, Class B Certificates and/or
Class C Certificates 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 the Class A-1 Certificates, Class A-2 Certificates, Class B
Certificates, Class C Certificates and Class D Certificates 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 the Class A-1 Certificates, Class A-2 Certificates, Class B
Certificates, Class C Certificates and/or Class D Certificates 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;
(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 the Class A-1 Certificates, Class A-2 Certificates, Class B
Certificates, Class C Certificates, Class D Certificates and Class E
Certificates 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 the Class A-1 Certificates, Class A-2
Certificates, Class B Certificates, Class C Certificates, Class D
Certificates and/or Class E Certificates 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;
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(21) after the Class A-1 Certificates, Class A-2 Certificates, Class B
Certificates, Class C Certificates, Class D Certificates, Class E
Certificates and Class F Certificates 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 the
Class A-1 Certificates, Class A-2 Certificates, Class B Certificates, Class
C Certificates, Class D Certificates, Class E Certificates and/or Class F
Certificates 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 the Class A-1 Certificates, Class A-2 Certificates, Class B
Certificates, Class C Certificates, Class D Certificates, Class E
Certificates, Class F Certificates and Class G Certificates 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 the Class A-1 Certificates, Class A-2 Certificates, Class B
Certificates, Class C Certificates, Class D Certificates, Class E
Certificates, Class F Certificates and/or Class G Certificates 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 the Class A-1 Certificates, Class A-2 Certificates, Class B
Certificates, Class C Certificates, Class D Certificates, Class E
Certificates, Class F Certificates, Class G Certificates and Class H
Certificates 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 the Class A-1 Certificates, Class A-2
Certificates, Class B Certificates, Class C Certificates, Class D
Certificates, Class E Certificates, Class F Certificates, Class G
Certificates and/or Class H Certificates 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;
(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 the Class A-1 Certificates, Class A-2 Certificates, Class B
Certificates, Class C Certificates, Class D Certificates, Class E
Certificates, Class F Certificates, Class G Certificates, Class H
Certificates and Class J Certificates 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 the
Class A-1 Certificates, Class A-2 Certificates, Class B Certificates, Class
C Certificates, Class D Certificates, Class E Certificates,
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Class F Certificates, Class G Certificates, Class H Certificates and/or
Class J Certificates 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 the Class A-1 Certificates, Class A-2 Certificates, Class B
Certificates, Class C Certificates, Class D Certificates, Class E
Certificates, Class F Certificates, Class G Certificates, Class H
Certificates, Class J Certificates and Class K Certificates 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 the Class A-1 Certificates, Class A-2 Certificates, Class B
Certificates, Class C Certificates, Class D Certificates, Class E
Certificates, Class F Certificates, Class G Certificates, Class H
Certificates, Class J Certificates and/or Class K Certificates 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 the Class A-1 Certificates, Class A-2 Certificates, Class B
Certificates, Class C Certificates, Class D Certificates, Class E
Certificates, Class F Certificates, Class G Certificates, Class H
Certificates, Class J Certificates, Class K Certificates and Class L
Certificates 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 the Class A-1 Certificates, Class A-2
Certificates, Class B Certificates, Class C Certificates, Class D
Certificates, Class E Certificates, Class F Certificates, Class G
Certificates, Class H Certificates, Class J Certificates, Class K
Certificates and/or Class L Certificates 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 the Class A-1 Certificates, Class A-2 Certificates, Class B
Certificates, Class C Certificates, Class D Certificates, Class E
Certificates, Class F Certificates, Class G Certificates, Class H
Certificates, Class J Certificates, Class K Certificates, Class L
Certificates and Class M Certificates 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 the
Class A-1 Certificates, Class A-2 Certificates, Class B Certificates, Class
C Certificates, Class D Certificates, Class E Certificates, Class F
Certificates, Class G Certificates, Class H Certificates, Class J
Certificates, Class K Certificates, Class L Certificates and/or Class M
Certificates on such Distribution Date;
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(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;
(42) after the Class A-1 Certificates, Class A-2 Certificates, Class B
Certificates, Class C Certificates, Class D Certificates, Class E
Certificates, Class F Certificates, Class G Certificates, Class H
Certificates, Class J Certificates, Class K Certificates, Class L
Certificates, Class M Certificates and Class N Certificates 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 the Class A-1 Certificates, Class A-2 Certificates, Class B
Certificates, Class C Certificates, Class D Certificates, Class E
Certificates, Class F Certificates, Class G Certificates, Class H
Certificates, Class J Certificates, Class K Certificates, Class L
Certificates, Class M Certificates and/or Class N Certificates 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 the Class A-1 Certificates, Class A-2 Certificates, Class B
Certificates, Class C Certificates, Class D Certificates, Class E
Certificates, Class F Certificates, Class G Certificates, Class H
Certificates, Class J Certificates, Class K Certificates, Class L
Certificates, Class M Certificates, Class N Certificates and Class O
Certificates 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 the Class A-1 Certificates, Class A-2
Certificates, Class B Certificates, Class C Certificates, Class D
Certificates, Class E Certificates, Class F Certificates, Class G
Certificates, Class H Certificates, Class J Certificates, Class K
Certificates, Class L Certificates, Class M Certificates, Class N
Certificates and/or Class O Certificates 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;
(47) to distributions of interest to the holders of the Class Q
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;
(48) after the Class A-1 Certificates, Class A-2 Certificates, Class B
Certificates, Class C Certificates, Class D Certificates, Class E
Certificates, Class F Certificates, Class G Certificates, Class H
Certificates, Class J Certificates, Class K Certificates, Class L
Certificates, Class M Certificates, Class N Certificates, Class O
Certificates and Class P Certificates have been retired, to distributions
of principal to the holders of the Class Q Certificates in an amount (not
to exceed the then outstanding Certificate Balance of the Class Q
Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-1 Certificates, Class A-2 Certificates, Class B Certificates, Class
C Certificates, Class D Certificates, Class E Certificates, Class F
Certificates, Class G Certificates, Class H Certificates, Class J
Certificates, Class K Certificates, Class L Certificates, Class M
Certificates, Class N Certificates, Class O Certificates and/or Class P
Certificates on such Distribution Date;
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(49) to distributions to the holders of the Class Q 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
(50) 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 (49) 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
(prior to retirement of the Class A-1 Certificates and the Class A-2
Certificates) 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 "DESCRIPTION OF THE
CERTIFICATES--Termination" in this Prospectus Supplement), the payments of
principal to be made as contemplated by clauses (2) and (3) 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 up to an amount equal
to, and pro rata as between such Classes in accordance with, the respective then
outstanding Certificate Balances of such Classes of Certificates and without
regard to the Principal Distribution Amount for such date.
Distributable Certificate Interest. The "Distributable Certificate
Interest" in respect of each Class of REMIC Regular Certificates for each
Distribution Date equals the Accrued Certificate Interest in respect of such
Class of Certificates for such Distribution Date, reduced (other than in the
case of the Class IO 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 voluntary principal prepayments
made on the Mortgage Loans during the related Collection Period that are not
covered by the Master Servicer's Compensating Interest Payment for such
Distribution Date (the aggregate of such Prepayment Interest Shortfalls that are
not so covered, as to such Distribution Date, the "Net Aggregate Prepayment
Interest Shortfall") and (ii) any Certificate Deferred Interest allocated to
such Class of REMIC Regular Certificates.
The "Accrued Certificate Interest" in respect of each Class of Sequential
Pay Certificates for each Distribution Date will equal one month's interest at
the Pass-Through Rate applicable to such Class of Certificates, as the case may
be, for such Distribution Date accrued for the related Interest Accrual Period
on the related Certificate Balance outstanding immediately prior to such
Distribution Date. The "Accrued Certificate Interest" in respect of the Class IO
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 IO
Certificates 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 IO 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 IO Certificates) for
such Distribution Date.
With respect to the Rite Aid-Palm Desert Mortgage Loan, Prepayment Interest
Shortfalls will be allocated between the Senior Component and the Subordinate
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 Rite Aid-Palm Desert Mortgage Loan
for any Distribution Date will be used first, to cover the Prepayment Interest
Shortfalls incurred during the related Collection Period allocated to the Senior
Component, and second, to cover any Prepayment Interest Shortfalls incurred
during the related Collection Period allocated to the Subordinate Component. Any
such Prepayment Interest Shortfalls allocated to the Subordinate Component, to
the extent not covered by the Master Servicer's Compensating Interest Payment
for such Distribution Date, will reduce the Subordinate Component's
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interest entitlement for the related Distribution Date (without giving effect to
any capitalization of interest). Any such Prepayment Interest Shortfalls
allocated to the Senior Certificates, to the extent not covered by the Master
Servicer's Compensating Interest Payment for such Distribution Date, will reduce
the Distributable Certificate Interest as described above.
Principal Distribution Amount. The "Principal Distribution Amount" for
each Distribution Date will generally equal the aggregate of the following
(without duplication) to the extent paid by the related borrower during the
related Collection Period or advanced by the Master Servicer or the Trustee, as
applicable:
(a) the aggregate of the principal portions of all Scheduled Payments
(other than Balloon Payments) and of any Assumed Scheduled Payments due or
deemed due, on or in respect of the Mortgage Loans for their respective Due
Dates occurring during the related Collection Period, to the extent not
previously paid by the related borrower or advanced by the Master Servicer
or Trustee, as applicable, prior to such Collection Period;
(b) the aggregate of all principal prepayments received on the
Mortgage Loans during the related Collection Period;
(c) with respect to any Mortgage Loan as to which the related stated
maturity date occurred during or prior to the related Collection Period,
any payment of principal made by or on behalf of the related borrower
during the related Collection Period (including any Balloon Payment), net
of any portion of such payment that represents a recovery of the principal
portion of any Scheduled Payment (other than a Balloon Payment) due, or the
principal portion of any Assumed Scheduled Payment deemed due, in respect
of such Mortgage Loan on a Due Date during or prior to the related
Collection Period and not previously recovered;
(d) the aggregate of the principal portion of all Liquidation
Proceeds, Insurance Proceeds (each as defined in the Prospectus),
condemnation awards and proceeds of Mortgage Loan repurchases and
Substitution Shortfall Amounts and, to the extent not otherwise included in
clause (a), (b) or (c) above, payments and other amounts that were received
on or in respect of Mortgage Loans during the related Collection Period 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;
(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; and
(f) on any date prior to the reduction of the Component Principal
Balance of the Senior Component to zero, amounts in respect of interest on
the Subordinate Component which are being capitalized on such date (other
than as a result of Mortgage Deferred Interest).
The "Scheduled Payment" due on any Mortgage Loan on any related Due Date is
the amount of the Periodic Payment (including Balloon Payments) that is or would
have been, as the case may be, due thereon on such date, without regard to any
waiver, modification or amendment of such Mortgage Loan granted or agreed to by
the Special Servicer or otherwise resulting from a bankruptcy or similar
proceeding involving the related borrower, without regard to the accrual of
Additional Interest on or the application of any Excess Cash Flow to pay
principal on an ARD Loan, without regard to any acceleration of principal by
reason of default, and with the assumption that each prior Scheduled Payment has
been made in a timely manner. The "Assumed Scheduled Payment" is an amount
deemed due (i) on any Balloon Loan that is delinquent in respect of its Balloon
Payment beyond the first Determination Date that follows its stated maturity
date and (ii) on an REO Mortgage Loan. The Assumed Scheduled Payment deemed due
on any such Balloon Loan on its stated maturity date and on each successive
related Due Date that it remains or is deemed to remain outstanding will equal
the Scheduled Payment that would have been due
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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 Mortgage Loan and such Due Date coincides
with or follows what had been its stated maturity date, the Assumed Scheduled
Payment that would have been deemed due in respect of such Mortgage Loan on such
Due Date had it remained outstanding).
Distributions of the Principal Distribution Amount will constitute the only
distributions of principal on the Certificates. Reimbursements of previously
allocated Realized Losses and Additional Trust Fund Expenses will not constitute
distributions of principal for any purpose and will not result in an additional
reduction in the Certificate Balance of the Class of Certificates in respect of
which any such reimbursement is made.
Treatment of REO Properties. Notwithstanding that any Mortgaged Property
may be acquired as part of the Trust Fund through foreclosure, deed in lieu of
foreclosure or otherwise, the related Mortgage Loan will be treated, for
purposes of determining (i) distributions on the Certificates, (ii) allocations
of Realized Losses and Additional Trust Fund Expenses to the Certificates, and
(iii) the amount of Trustee Fees and Servicing Fees payable under the Pooling
and Servicing Agreement, as having remained outstanding until such REO Property
is liquidated. In connection therewith, operating revenues and other proceeds
derived from such REO Property (net of related operating costs) will be
"applied" by the Master Servicer as principal, interest and other amounts that
would have been "due" on such Mortgage Loan, and the Master Servicer will be
required to make P&I Advances in respect of such Mortgage Loan, in all cases as
if such Mortgage Loan had remained outstanding. References to "Mortgage Loan" or
"Mortgage Loans" in the definitions of "Principal Distribution Amount" and
"Weighted Average Net Mortgage Rate" are intended to include any Mortgage Loan
as to which the related Mortgaged Property has become an REO Property (an "REO
Mortgage Loan").
Allocation of Prepayment Premiums and Yield Maintenance Charges. In the
event a borrower is required to pay any Prepayment Premium or Yield Maintenance
Charge, the amount of such payments actually collected will be distributed in
respect of the Offered Certificates and the Class F, Class G, Class H and Class
J 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".
Prepayment Premiums 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 on the Mortgage Loans,
the holders of each Class of Offered Certificates and the Class F, Class G,
Class H and J Certificates then entitled to distributions of principal on such
Distribution Date will be entitled to an amount of Prepayment Premiums equal to
the product of (a) the amount of such Prepayment Premiums; and (b) a fraction,
the numerator of which is equal to the amount of principal distributable to such
Class of Certificates on such Distribution Date, and the denominator of which is
the Principal Distribution Amount for such Distribution Date. The portion, if
any, of the Prepayment Premiums remaining after any such payments described
above will be distributed to the Class IO Certificates.
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 Yield Maintenance Charges on the Mortgage
Loans, the holders of each Class of Offered Certificates and the Class F, Class
G, Class H and Class J Certificates then entitled to distributions of principal
on such
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Distribution Date will be entitled to an amount of Yield Maintenance Charges
equal to the product of (a) the amount of such Yield Maintenance Charges; (b) a
fraction (which in no event may be greater than one), the numerator of which is
equal to the excess, if any, of the Pass-Through Rate of such Class of
Certificates over the relevant Discount Rate (as defined below), and the
denominator of which is equal to the excess, if any, of the Mortgage Rate of the
prepaid Mortgage Loan over the relevant Discount Rate; and (c) a fraction, the
numerator of which is equal to the amount of principal distributable on such
Class of Certificates on such Distribution Date, and the denominator of which is
the Principal Distribution Amount for such Distribution Date. If there is more
than one such Class of Certificates entitled to distributions of principal on
any particular Distribution Date on which a Yield Maintenance Charge is
distributable, the aggregate amount of such 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 Yield Maintenance
Charges remaining after any such payments described above will be distributed to
the holders of the Class IO Certificates.
The "Discount Rate" applicable to any Class of Offered Certificates and the
Class F, Class G, Class H and Class J Certificates will be equal to the discount
rate stated in the related mortgage loan documents used in calculating the Yield
Maintenance Charge with respect to such principal prepayment. To the extent a
discount rate is not stated therein, the "Discount Rate" will equal the yield
(when compounded monthly) on the U.S. Treasury issue with a maturity date
closest to the maturity date for the prepaid Mortgage Loan or REO Mortgage Loan.
In the event that there are two or more such U.S. Treasury issues (a) with the
same coupon, the issue with the lowest yield will be utilized, and (b) with
maturity dates equally close to the maturity date for the prepaid Mortgage Loan
or REO Mortgage Loan, the issue with the earliest maturity date will be
utilized.
For an example of the foregoing allocation of Prepayment Premiums and Yield
Maintenance Charges, see "SUMMARY OF PROSPECTUS SUPPLEMENT" in this Prospectus
Supplement. The Depositor makes no representation as to the enforceability of
the provision of any Mortgage Note requiring the payment of a Yield Maintenance
Charge, or of the collectability of any Prepayment Premiums or Yield Maintenance
Charge. See "DESCRIPTION OF THE MORTGAGE POOL--Certain Terms and Conditions of
the Mortgage Loans--Prepayment Provisions" in this Prospectus Supplement.
Distributions of Additional Interest. On each Distribution Date, any
Additional Interest collected on an ARD Loan during the related Collection
Period will be distributed to, in the case of Additional Interest collected on a
First Union Mortgage Loan, all the holders of the Class Z-I Certificates, and,
in the case of Additional Interest collected on a Merrill Mortgage Loan, all the
holders of the Class Z-II 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 IO Certificates and each other such
Class of Subordinate Certificates, if any, with an earlier alphabetical Class
designation. The Subordinate Component, and thus the Class V Certificates, will
represent interests in, and will be payable only out of payments, advances and
other collections on, the Rite Aid-Palm Desert Mortgage Loan. The rights of the
holders of the Class V Certificates to receive distributions of amounts
collected or advanced on the Rite Aid-Palm Desert Mortgage Loan will be
subordinated, to the extent described in this Prospectus Supplement, to the
rights of the holders of the Senior Certificates and the Subordinate
Certificates. This subordination provided by the Subordinate Certificates and,
to the extent provided herein, the Subordinate Component, is intended to enhance
the likelihood of timely receipt by the holders of the Class A and Class IO
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, the
Class C, Class D and the Class E Certificates of the full amount
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of Distributable Certificate Interest payable in respect of such Classes of
Certificates on each Distribution Date, and the ultimate receipt by the holders
of such Certificates of, in the case of each such Class thereof, principal equal
to the entire related Certificate Balance. The protection afforded (a) to the
holders of the Class E Certificates by means of the subordination of the
Non-Offered Certificates (other than the Class IO Certificates) and, to the
extent provided herein, the Subordinate Component, (b) to the holders of the
Class D Certificates by means of the subordination of the Class E and the
Non-Offered Certificates (other than the Class IO Certificates) and, to the
extent provided herein, the Subordinate Component, (c) to the holders of the
Class C Certificates by means of the subordination of the Class D, Class E and
the Non-Offered Certificates (other than the Class IO Certificates) and, to the
extent provided herein, the Subordinate Component, (d) to the holders of the
Class B Certificates by means of the subordination of the Class C, Class D,
Class E and the Non-Offered Certificates (other than the Class IO Certificates)
and, to the extent provided herein, the Subordinate Component, and (e) to the
holders of the Class A and Class IO Certificates by means of the subordination
of the Subordinate Certificates and, to the extent provided herein, the
Subordinate Component, 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 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 and
Class IO Certificates 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 Subordinate Component (in each case in reduction of their respective
Certificate Balances and Component Principal Balances, as applicable) as
follows, but in the aggregate only to the extent that (i) with respect to
Realized Losses and Additional Trust Fund Expenses relating to the Rite Aid-Palm
Desert Mortgage Loan, the Component Principal Balance of the Subordinate
Component has been reduced to zero, and (ii) the aggregate Certificate Balance
of all Classes of Sequential Pay Certificates remaining outstanding after giving
effect to the distributions on such Distribution Date exceeds the aggregate
Stated Principal Balance of the Mortgage Pool that will be outstanding
immediately following such Distribution Date: first, to the Class Q
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; second, to the Class P Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
third, to the Class O Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; fourth, to the Class N
Certificates, until the remaining Certificate Balance
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of such Class of Certificates is reduced to zero; fifth, to the Class M
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; sixth, to the Class L Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
seventh, to the Class K Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; eighth, to the Class J
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; ninth, to the Class H Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
tenth, to the Class G Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; eleventh, to the Class F
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; twelfth, to the Class E Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
thirteenth, to the Class D Certificates, until the remaining Certificate Balance
of such Class of Certificates is reduced to zero; fourteenth, to the Class C
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; fifteenth, 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 Rite Aid-Palm Desert Mortgage Loan will first be allocated to the
Subordinate Component (and thus, the Class V Certificates) prior to being
allocated to the Senior Component (and thus, the Sequential Pay Certificates).
"Realized Losses" are losses arising from the inability to collect all
amounts due and owing under any defaulted Mortgage Loan, including by reason of
the fraud or bankruptcy of the borrower or a casualty of any nature at the
related Mortgaged Property, to the extent not covered by insurance. The Realized
Loss in respect of a liquidated Mortgage Loan (or related REO Property) is an
amount generally equal to the excess, if any, of (a) the outstanding principal
balance of such Mortgage Loan as of the date of liquidation, together with (i)
all accrued and unpaid interest thereon to but not including the Due Date in the
Collection Period in which the liquidation occurred (exclusive of any related
default interest in excess of the Mortgage Rate, Additional Interest, Prepayment
Premium or Yield Maintenance Charges) and (ii) certain related unreimbursed
servicing expenses, over (b) the aggregate amount of Liquidation Proceeds, if
any, recovered in connection with such liquidation. If any portion of the debt
due under a Mortgage Loan (other than Additional Interest and default interest
in excess of the Mortgage Rate) is forgiven, whether in connection with a
modification, waiver or amendment granted or agreed to by the Special Servicer
or in connection with the bankruptcy or similar proceeding involving the related
borrower, the amount so forgiven also will be treated as a Realized Loss.
"Additional Trust Fund Expenses" include, among other things, (i) any
Special Servicing Fees, Principal Recovery Fees, or Workout Fees paid to the
Special Servicer, (ii) any interest paid to the Master Servicer, and/or the
Trustee in respect of unreimbursed Advances (to the extent not otherwise offset
by penalty interest and late payment charges) and amounts payable to the Special
Servicer in connection with certain inspections of Mortgaged Properties required
pursuant to the Pooling and Servicing Agreement (to the extent not otherwise
offset by penalty interest and late payment charges otherwise payable to the
Special Servicer and received in the Collection Period during which such
inspection related expenses were incurred) and (iii) any of certain
unanticipated expenses of the Trust Fund, including certain indemnities and
reimbursements to the Trustee of the type described under "DESCRIPTION OF THE
POOLING 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 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; Sale
of Mortgage Loans" in this Prospectus Supplement. Additional Trust Fund Expenses
will reduce amounts payable to
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Certificateholders and, subject to the distribution priorities described above,
may result in a loss on one or more Classes of Offered Certificates.
P&I ADVANCES
On or about each Distribution Date, the Master Servicer is obligated,
subject to the recoverability determination described in the next paragraph, to
make advances (each, a "P&I Advance") out of its own funds or, subject to the
replacement thereof as provided in the Pooling and Servicing Agreement, from
funds held in the Certificate Account that are not required to be distributed to
Certificateholders (or paid to any other Person pursuant to the Pooling and
Servicing Agreement) on such Distribution Date, in an amount that is generally
equal to the aggregate of all Periodic Payments (other than Balloon Payments)
and any Assumed Scheduled Payments, net of related Master Servicing Fees, in
respect of the Mortgage Loans 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 related Determination Date.
The Master Servicer's obligations to make P&I Advances in respect of any
Mortgage Loan, subject to the recoverability determination, will continue until
liquidation of such Mortgage Loan or disposition of any REO Property acquired in
respect thereof. However, if the Periodic Payment on any Mortgage Loan has been
reduced in connection with a bankruptcy or similar proceeding or a modification,
waiver or amendment granted or agreed to by the Special Servicer, the Master
Servicer will be required to advance only the amount of the reduced Periodic
Payment (net of related Servicing Fees) in respect of subsequent delinquencies.
In addition, if it is determined that an Appraisal Reduction Amount exists with
respect to any Required Appraisal Loan (as defined below), then, with respect to
the Distribution Date immediately following the date of such determination and
with respect to each subsequent Distribution Date for so long as such Appraisal
Reduction Amount exists, the Master Servicer will be required in the event of
subsequent delinquencies to advance in respect of such Mortgage Loan only an
amount equal to the sum of (i) the amount of the interest portion of the P&I
Advance that would otherwise be required without regard to this sentence, minus
the product of (a) such Appraisal Reduction Amount and (b) the per annum Pass-
Through Rate, or with respect to any Appraisal Reduction Amount allocated to the
Subordinate Component of the Rite Aid-Palm Desert Mortgage Loan, the per annum
Net Mortgage Rate (i.e., for any month, one twelfth of the Pass-Through Rate or
Net Mortgage Rate, as applicable) applicable to the Class of Certificates or the
Subordinate Component, as applicable, 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. Neither the Master
Servicer nor Trustee will be required to make a P&I Advance or any other advance
for any Balloon Payments, default interest, Prepayment Premium, Yield
Maintenance Charges or Additional Interest.
The Master Servicer (or the Trustee) is entitled to recover any P&I Advance
made out of its own funds from any amounts collected in respect of the Mortgage
Loan (net of related Master Servicing Fees with respect to collections of
interest and net of related Principal Recovery Fees and Workout Fees with
respect to collections of principal) as to which such P&I Advance was made
whether such amounts are collected in the form of late payments, insurance and
condemnation proceeds or Liquidation Proceeds, or any other recovery of the
related Mortgage Loan or REO Property ("Related Proceeds"). Neither the Master
Servicer nor the Trustee is obligated to make any P&I Advance that it determines
in accordance with the servicing standards described in this Prospectus
Supplement, would, if made, not be recoverable from Related Proceeds (a
"Nonrecoverable P&I Advance"), and the Master Servicer (or the Trustee) is
entitled to recover, from general funds on deposit in the Certificate Account,
any P&I Advance made that it later determines to be a Nonrecoverable P&I
Advance. See "DESCRIPTION OF THE CERTIFICATES--Advances in Respect of
Delinquencies" and "DESCRIPTION OF THE POOLING AGREEMENTS--Certificate Account"
in the Prospectus.
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In connection with the recovery by the Master Servicer or the Trustee of
any P&I Advance made by it or the recovery by the Master Servicer or the Trustee
of any reimbursable servicing expense incurred by it (each such P&I Advance or
expense, an "Advance"), the Master Servicer or the Trustee, as applicable, is
entitled to be paid interest compounded annually at a per annum rate equal to
the Reimbursement Rate. Such interest will be paid contemporaneously with the
reimbursement of the related Advance first out of late payment charges and
default interest received on the related Mortgage Loan during the Collection
Period in which such reimbursement is made and then from general collections on
the Mortgage Loans then on deposit in the Certificate Account. 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
during the preceding 12-month period and not previously reimbursed, 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; provided,
however, that no interest will accrue on any P&I Advance made with respect to a
Mortgage Loan if the related Periodic Payment is received prior to the
expiration of any applicable grace period. 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.
APPRAISAL REDUCTIONS
Upon the earliest of the date (each such date, a "Required Appraisal Date")
that (1) any Mortgage Loan is 60 days delinquent in respect of any Periodic
Payments, (2) any REO Property is acquired on behalf of the Trust Fund in
respect of any Mortgage Loan, (3) any Mortgage Loan has been modified by the
Special Servicer to reduce the amount of any Periodic Payment, other than a
Balloon Payment, (4) a receiver is appointed and continues in such capacity in
respect of the Mortgaged Property securing any Mortgage Loan, (5) a borrower
with respect to any Mortgage Loan becomes subject to any bankruptcy proceeding
or (6) a Balloon Payment with respect to any Mortgage Loan has not been paid on
its scheduled maturity date (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 standing of the Appraisal Institute, and that, if the state in which the
subject Mortgaged Property is located certifies or licenses appraisers, is
certified or licensed in such state, and in each such case, who has a minimum of
five years experience in the subject property type and market. The cost of such
appraisal will be advanced by the Master Servicer, subject to the Master
Servicer's right to be reimbursed therefor out of Related Proceeds or, if not
reimbursable therefrom, out of general funds on deposit in the Certificate
Account. As a result of any such appraisal, it may be determined that an
"Appraisal Reduction Amount" exists with respect to the related Required
Appraisal Loan, such determination to be made by the Master Servicer as
described below. The Appraisal Reduction Amount for any Required Appraisal Loan
will equal the excess, if any, of (a) the sum (without duplication), as of the
first Determination Date immediately succeeding the Master Servicer's obtaining
knowledge of the occurrence of the Required Appraisal Date if no new appraisal
is required or the date on which the appraisal or internal valuation, if
applicable, is obtained and each Determination Date thereafter so long as the
related Mortgage Loan remains a Required Appraisal Loan, of (i) the Stated
Principal Balance of such Required Appraisal Loan, (ii) to the extent not
previously advanced by or on behalf of the Master Servicer or the Trustee, all
unpaid interest on the Required Appraisal Loan through the most recent Due Date
prior to such Determination Date at a per annum rate equal to the related Net
Mortgage Rate (exclusive of any portion thereof that constitutes
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Additional Interest), (iii) all accrued but unpaid Servicing Fees and all
accrued but unpaid Additional Trust Fund Expenses in respect of such Required
Appraisal Loan, (iv) all related unreimbursed Advances (plus accrued interest
thereon) made by or on behalf of the Master Servicer, the Special Servicer or
the Trustee with respect to such Required Appraisal Loan and (v) all currently
due and unpaid real estate taxes and reserves owed for improvements and
assessments, insurance premiums, and, if applicable, ground rents in respect of
the related Mortgaged Property, over (b) an amount equal to the sum of (i) all
escrows, reserves and letters of credit held for the purposes of reserves
(provided such letters of credit may be drawn upon for reserve purposes under
the related Mortgage Loan documents) held with respect to such Required
Appraisal Loan, plus (ii) 90% of the appraised value (net of any prior liens and
estimated liquidation expenses) of the related Mortgaged Property as determined
by such appraisal. If the Special Servicer has not obtained a new appraisal (or
performed an internal valuation, if applicable) within the time limit described
above, the Appraisal Reduction Amount for the related Mortgage Loan will equal
25% of the principal balance of such Mortgage Loan, to be adjusted upon receipt
of the new appraisal (or internal valuation, if applicable).
As a result of calculating an Appraisal Reduction Amount with respect to a
Mortgage Loan, the P&I Advance for such Mortgage Loan for the related
Distribution Date will be reduced, which will have the effect of reducing the
amount of interest available for distribution to the Subordinate Certificates in
reverse alphabetical order of the Classes. See "--P&I Advances" above. For the
purpose of calculating P&I Advances only, an Appraisal Reduction Amount with
respect to the Rite Aid-Palm Desert Mortgage Loan will be allocated to the
Component Principal Balance of the Subordinate Component and the aggregate
Appraisal Reduction Amounts, to the extent not allocated to the Subordinate
Component of the Rite Aid-Palm Desert Mortgage Loan, will be allocated to the
Certificate Balance of each Class of Sequential Pay Certificates in reverse
alphabetical order.
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 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.ctslink.com/cmbs") or by first class mail on each Distribution Date to each
Certificateholder:
1. A statement (a "Distribution Date Statement"), substantially in the
form of Annex B to this Prospectus Supplement, setting forth, among other
things, for each Distribution Date:
(i) the amount of the distribution to the holders of each Class of REMIC
Regular Certificates in reduction of the Certificate Balance thereof;
(ii) the amount of the distribution to the holders of each Class of REMIC
Regular Certificates allocable to Distributable Certificate Interest;
(iii) the amount of the distribution to the holders of each Class of REMIC
Regular Certificates allocable to Prepayment Premiums and Yield
Maintenance Charges;
(iv) the amount of the distribution to the holders of each Class of REMIC
Regular Certificates in reimbursement of previously allocated Realized
Losses and Additional Trust Fund Expenses;
(v) the Available Distribution Amount for such Distribution Date;
(vi) the aggregate amount of P&I Advances made in respect of such Distribution
Date and (B) the aggregate amount of servicing advances as of the close
of business on the related Determination Date; (C) the aggregate unpaid
principal balance of the Mortgage Pool outstanding 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;
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(ix) the number, aggregate unpaid principal balance, weighted average
remaining term to maturity or Anticipated Repayment Date and weighted
average Mortgage Rate of the Mortgage Loans as of the close of business
on the related Determination Date;
(x) the number and aggregate Stated Principal Balance (immediately after such
Distribution Date) (and with respect to each delinquent Mortgage Loan, a
brief description of the reason for delinquency, if known by the Master
Servicer or Special Servicer, as applicable) of Mortgage Loans (A)
delinquent 30-59 days, (B) delinquent 60-89 days, (C) delinquent 90 days
or more, and (D) as to which foreclosure proceedings have been commenced;
(xi) as to each Mortgage Loan referred to in the preceding clause (x) above;
(A) the loan number thereof, (B) the Stated Principal Balance thereof
immediately following such Distribution Date and (C) a brief description
of any loan modification;
(xii) with respect to any Mortgage Loan as to which a liquidation event
occurred during the related Collection Period (other than a payment in
full), (A) the loan number thereof, (B) the aggregate of all liquidation
proceeds and other amounts received in connection with such liquidation
event (separately identifying the portion thereof allocable to
distributions on the Certificates), and (C) the amount of any Realized
Loss in connection with such liquidation event;
(xiii) with respect to any REO Property included in the Trust Fund as to which
the Special Servicer has determined, in accordance with accepted
servicing standards, that all payments or recoveries with respect to such
property have been ultimately recovered (a "Final Recovery
Determination") was made during the related Collection Period, (A) the
loan number of the related Mortgage Loan, (B) the aggregate of all
liquidation proceeds and other amounts received in connection with such
Final Recovery Determination (separately identifying the portion thereof
allocable to distributions on the Certificates), and (C) the amount of
any Realized Loss in respect of the related REO Property in connection
with such Final Recovery Determination;
(xiv) the Accrued Certificate Interest in respect of each Class of REMIC
Regular Certificates for such Distribution Date;
(xv) any unpaid Distributable Certificate Interest in respect of each Class of
REMIC Regular Certificates after giving effect to the distributions made
on such Distribution Date;
(xvi) the Pass-Through Rate for each Class of REMIC Regular Certificates for
such Distribution Date;
(xvii) the Principal Distribution Amount for such Distribution Date (and, in the
case of any principal prepayment or other unscheduled collection of
principal received during the related Collection Period, the loan number
for the related Mortgage Loan and the amount of such prepayment or other
collection of principal);
(xviii)the aggregate of all Realized Losses incurred during the related
Collection Period and all Additional Trust Fund Expenses incurred during
the related Collection Period;
(xix) the aggregate of all Realized Losses and Additional Trust Fund Expenses
that were allocated to each Class on such Distribution Date;
(xx) the Certificate Balance of each Class of REMIC Regular Certificates
(other than the Class IO Certificates) and the Notional Amount of the
Class IO Certificates immediately before and immediately after such
Distribution Date, separately identifying any reduction therein due to
the allocation of Realized Losses and Additional Trust Fund Expenses on
such Distribution Date;
(xxi) the certificate factor for each Class of REMIC Regular Certificates
immediately following such Distribution Date;
(xxii) the aggregate amount of interest on P&I Advances paid to the Master
Servicer or the Trustee during the related Collection Period;
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(xxiii)the aggregate amount of interest on servicing advances paid to the Master
Servicer, the Special Servicer and the Trustee during the related
Collection Period;
(xxiv) the aggregate amount of servicing fees and Trustee fees paid to the
Master Servicer, the Special Servicer and the Trustee, as applicable,
during the related Collection Period;
(xxv) the loan number for each Required Appraisal Loan and any related
Appraisal Reduction Amount as of the related Determination Date;
(xxvi) the original and then current credit support levels for each Class of
REMIC Regular Certificates;
(xxvii)the original and then current ratings for each Class of REMIC Regular
Certificates;
(xxviii)
the aggregate amount of Prepayment Premiums and Yield Maintenance Charges
collected during the related Collection Period; and
(xxix) the amounts, if any, actually distributed with respect to the Class V
Certificates, Class R-I Certificates, Class R-II Certificates, Class Z-I
Certificates and Class Z-II Certificates on such Distribution Date.
2. 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 the
Mortgage Loans and the Mortgaged Properties, respectively.
3. A "CMSA Collateral Summary File" and a "CMSA Bond File" setting
forth certain information with respect to the Mortgage Loans and the
Certificates, respectively.
The Master Servicer and/or the Special Servicer is required to deliver (in
electronic format acceptable to the Trustee) to the Trustee prior to each
Distribution Date, and the Trustee is required to provide or make available
either electronically or by first class mail to each Certificateholder, the
Depositor, the Underwriters and each Rating Agency on each Distribution Date,
the following nine reports providing the required information (unless otherwise
specified below) as of the Determination Date immediately preceding the
preparation of each such report:
(a) A "Delinquent Loan Status Report" containing substantially the
content set forth in Annex C attached to this Prospectus Supplement,
prepared by the Master Servicer (combining reports prepared by the Master
Servicer and the Special Servicer) setting forth, among other things, those
Mortgage Loans that were delinquent 30-59 days, delinquent 60-89 days,
delinquent 90 days or more, current but specially serviced, or in
foreclosure but not REO Property and status of resolution.
(b) A "Historical Loan Modification Report" containing substantially
the content set forth in Annex D attached to this Prospectus Supplement,
prepared by the Special Servicer setting forth, among other things, those
Mortgage Loans that have been modified pursuant to the Pooling and
Servicing Agreement (i) during the related Collection Period and (ii) since
the Cut-Off Date, showing the original and the revised terms thereof.
(c) A "Historical Liquidation Report" containing substantially the
content set forth in Annex E attached to this Prospectus Supplement,
prepared by the Special Servicer setting forth, among other things, (i) the
aggregate amount of Liquidation Proceeds and expenses relating to each
Final Recovery Determination, both during the related Collection Period and
historically, and (ii) the
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amount of Realized Losses occurring during the related Collection Period,
set forth on a loan-by-loan basis.
(d) An "REO Status Report" containing substantially the content set
forth in Annex F attached to this Prospectus Supplement, prepared by the
Special Servicer setting forth, among other things, with respect to each
REO Property then currently included in the Trust Fund, (i) the acquisition
date of such REO Property, (ii) the amount of income collected with respect
to such REO Property (net of related expenses) and other amounts, if any,
received on such REO Property during the related Collection Period and
(iii) the value of the REO Property based on the most recent appraisal or
other valuation thereof available to the Special Servicer as of such
Determination Date (including any prepared internally by the Special
Servicer).
(e) A "Watch List Report" containing substantially the content set
forth in Annex G attached to this Prospectus Supplement, prepared by the
Master Servicer identifying each Mortgage Loan that is not a Specially
Serviced Mortgage Loan (i) with a debt service coverage ratio of less than
1.05x, other than the Credit Lease Loans or Mortgage Loans whose operating
results for the first year of operations represent less than seven months
of operating history, (ii) that has a stated maturity date occurring in the
next ninety days, (iii) that is delinquent in respect of its real estate
taxes, (iv) for which any Advance has been outstanding for 30 days or more,
(v) that has been a Specially Serviced Mortgage Loan in the past 90 days,
(vi) for which the debt service coverage ratio has decreased by more than
10% in the prior 12 months, (vii) for which any lease relating to more than
25% of the rentable area of the related Mortgaged Property has expired,
been terminated, is in default or will expire within the next three months
(without being replaced by one or more tenants or leases), (viii) that is
late in making its Periodic Payment three or more times in the preceding 12
months, (ix) with material deferred maintenance at the related Mortgaged
Property or (x) that is 30 or more days delinquent; provided that a
Mortgage Loan will not be identified on the Watch List solely because the
related borrower has failed to deliver operating statements, rent rolls or
other financial statements required to be delivered under the Mortgage Loan
documents.
(f) An "Operating Statement Analysis" containing substantially the
content set forth in Annex H attached to this Prospectus Supplement,
together with copies of the operating statements and rent rolls (but only
to the extent the related borrower is required by the Mortgage to deliver,
or otherwise agrees to provide, such information). The Master Servicer or
the Special Servicer is required consistent with the servicing standards
described in this Prospectus Supplement to endeavor to obtain such
operating statements and rent rolls.
(g) With respect to any Mortgaged Property or REO Property, an "NOI
Adjustment Worksheet" containing substantially the content set forth in
Annex I attached to this Prospectus Supplement, for such property (with the
related annual operating statements attached thereto as an exhibit),
presenting the computations made in accordance with the methodology
described in the Pooling and Servicing Agreement to "normalize" the full
year net operating income and debt service coverage numbers used by the
Master Servicer or the Special Servicer in the other reports referenced
above.
(h) A "Comparative Financial Status Report" containing substantially
the content set forth in Annex J attached to this Prospectus Supplement,
setting forth, among other things, the occupancy, revenue, net operating
income and DSCR for each Mortgage Loan or the related Mortgaged Property,
as applicable, as of the end of the calendar month immediately preceding
the preparation of such report for each of the following three periods (to
the extent such information is in the Master Servicer's or Special
Servicer's possession, as applicable): (i) the most current available
year-to-date, (ii) each of the previous two full fiscal years stated
separately; and (iii) the "base year" (representing the original analysis
of information used as of the Cut-Off Date).
(i) An "Interim Delinquent Loan Status Report" identifying each
Mortgage Loan that was delinquent as of the end of the calendar month
immediately preceding the preparation of such report.
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(j) A "Credit Lease Loan Report" identifying each Credit Lease Loan
and all publicly available ratings of S&P and Moody's for the related
tenant or guarantor as of the Closing Date and the immediately preceding
Determination Date and whether the related tenant or guarantor has been
placed on a "credit watch".
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 related
Distribution Date. Absent manifest error, none of the Master Servicer, the
Special Servicer or the Trustee 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 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 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. The Trustee will make available each
month, to any interested party, the Distribution Date Statement via the
Trustee's internet website and its fax-on-demand service. In addition, the
Trustee will make available each month the Unrestricted Servicer Reports on the
Trustee's internet website. The Trustee's internet website will initially be
located at www.ctslink.com/cmbs. The Trustee's fax-on-demand service may be
accessed by calling (301) 815-6610. For assistance with the above mentioned
services, investors may call (301) 815-6600. In addition, the Trustee will also
make Mortgage Loan information as presented in the CMSA loan setup file, CMSA
Collateral Summary File, CMSA Bond File and CMSA Loan Periodic Update File
format available each month to any Certificateholder, any Certificate Owner, the
Rating Agencies, or any other interested party via the Trustee's internet
website. In addition, pursuant to the Pooling and Servicing Agreement, the
Trustee will make available as a convenience for interested parties the Pooling
and Servicing Agreement via the Trustee's internet website. The Trustee will
make no representations or warranties as to the accuracy or completeness of such
documents and will assume no responsibility therefore. In addition, the Trustee
may disclaim responsibility for any information distributed by the Trustee for
which it is not the original source.
The Trustee will make available each month, the Restricted Servicer Reports
and the CMSA Property File, to any Privileged Person (defined below) via the
Trustee's internet website with the use of a
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password (or other comparable restricted access mechanism) provided by the
Trustee to such Privileged Person.
The Master Servicer may make available each month via the Master Servicer's
internet website, initially located at "www.firstunion.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, the Underwriters or any party to the Pooling and
Servicing Agreement.
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 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 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 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.
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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.............................................. June 12, 2010
Class A-2.............................................. February 12, 2011
Class B................................................ March 12, 2011
Class C................................................ March 12, 2011
Class D................................................ March 12, 2011
Class E................................................ April 12, 2011
THE ASSUMED FINAL DISTRIBUTION DATES SET FORTH ABOVE WERE CALCULATED
WITHOUT REGARD TO ANY DELAYS IN THE COLLECTION OF BALLOON PAYMENTS AND WITHOUT
REGARD TO A REASONABLE LIQUIDATION TIME WITH RESPECT TO ANY MORTGAGE LOANS THAT
MAY BE DELINQUENT. ACCORDINGLY, IN THE EVENT OF DEFAULTS ON THE MORTGAGE LOANS,
THE ACTUAL FINAL DISTRIBUTION DATE FOR ONE OR MORE CLASSES OF THE OFFERED
CERTIFICATES MAY BE LATER, AND COULD BE SUBSTANTIALLY LATER, THAN THE RELATED
ASSUMED FINAL DISTRIBUTION DATE(S).
In addition, the Assumed Final Distribution Dates set forth above were
calculated on the basis of a 0% CPR (as defined in this Prospectus Supplement)
(except that it is assumed that the ARD Loans pay their respective principal
balances on their related Anticipated Repayment Dates) and no losses on the
Mortgage Loans. Because the rate of principal payments (including prepayments)
on the Mortgage Loans can be expected to exceed the scheduled rate of principal
payments, and could exceed such scheduled rate by a substantial amount, and
because losses may occur in respect of the Mortgage Loans, the actual final
Distribution Date for one or more Classes of the Offered Certificates may be
earlier, and could be substantially earlier, than the related Assumed Final
Distribution Date(s). The rate of principal payments (including prepayments) on
the Mortgage Loans will depend on the characteristics of the Mortgage Loans, as
well as on the prevailing level of interest rates and other economic factors,
and no assurance can be given as to actual principal payment experience.
Finally, the Assumed Final Distribution Dates were calculated assuming there
would not be an early termination of the Trust Fund. See "YIELD AND MATURITY
CONSIDERATIONS" in this Prospectus Supplement and "DESCRIPTION OF THE MORTGAGE
POOL" in this Prospectus Supplement and in the accompanying Prospectus.
The "Rated Final Distribution Date" with respect to each Class of Offered
Certificates is the Distribution Date in January 2043, 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 IO Certificates 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,
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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-I and Class Z-II Certificates will not be
entitled to any Voting Rights. Except with respect to determining the Rite
Aid-Palm Desert Representative and on matters described in this Prospectus
Supplement with respect to the Rite-Aid Palm Desert Mortgage Loan, the holders
of the Class V 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 subject
thereto, and (ii) the purchase of all of the Mortgage Loans (including the
Subordinate Component of the Rite Aid-Palm Desert Mortgage 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 the Mortgage Loan
Sellers) 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 (other
than REO Mortgage Loans) then included in the Trust Fund, plus (ii) the fair
market value of all REO Properties then included in the Trust Fund, as
determined by an independent appraiser selected by the Master Servicer and
approved by the Trustee (which may be less than the Purchase Price for the
corresponding REO Loan), minus (iii) if the purchaser is the Master Servicer,
the aggregate of amounts payable or reimbursable to the Master Servicer under
the Pooling and Servicing Agreement. Such purchase will effect early retirement
of the then outstanding Offered Certificates, but the right of the Master
Servicer, the Special Servicer or the Majority Subordinate Certificateholder to
effect such purchase is subject to the requirement that the aggregate principal
balance of the Mortgage Loans is less than 1% of the Cut-Off Date Pool Balance.
The purchase price paid in connection with the purchase of all Mortgage
Loans and REO Properties remaining in the Trust Fund, exclusive of any portion
thereof payable or reimbursable to any person other than the Certificateholders,
will constitute part of the Available Distribution Amount for the final
Distribution Date. The Available Distribution Amount for the final Distribution
Date will be distributed by the 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.
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THE TRUSTEE
Wells Fargo Bank Minnesota, N.A. ("Wells Fargo") is acting as Trustee
pursuant to the Pooling and Servicing Agreement. Wells Fargo, a direct, wholly
owned subsidiary of Wells Fargo & Company, is a national banking association
originally chartered in 1872 and is engaged in a wide range of activities
typical of a national bank. Wells Fargo principal office is located at Wells
Fargo Center, Sixth and Marquette, Minneapolis, Minnesota 55479-0113.
Certificate transfer services are conducted at Wells Fargo offices in
Minneapolis. Wells Fargo otherwise conducts its trustee and securities
administration services at its offices in Columbia, Maryland. Its address there
is 11000 Broken Land Parkway, Columbia, Maryland 21044-3562. Certificateholders
and other interested parties should direct their inquires to Wells Fargo CMBS
Customer Service office. The telephone number is (301) 815-6600. See
"DESCRIPTION OF THE POOLING AGREEMENTS--The Trustee," "--Duties of the Trustee,"
"--Certain Matters Regarding the Trustee" and "--Resignation and Removal of the
Trustee" in the Prospectus. As compensation for its services, the Trustee will
be entitled to receive monthly, from general funds on deposit in the Certificate
Account, the Trustee Fee. The "Trustee Fee" for each Mortgage Loan and REO Loan
for any Distribution Date equals one month's interest for the most recently
ended calendar month (calculated on the basis of a 360-day year consisting of
twelve 30-day months), accrued at the trustee fee rate on the Stated Principal
Balance of such Mortgage Loan or REO Loan, as the case may be, outstanding
immediately following the prior Distribution Date (or, in the case of the
initial Distribution Date, as of the Closing Date). The trustee fee 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 the Subordinate Component of the Rite Aid-Palm Desert Mortgage
Loan or 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.
YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General. The yield on any Offered Certificate will depend on (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 (including the Subordinate Component) 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 in reduction of the Distributable Certificate
Interest payable on the related Class.
Rate and Timing of Principal Payment. The yield to holders of any Offered
Certificates purchased at a discount or premium will be affected by the rate and
timing of principal payments made in reduction of the Certificate Balance of any
Class of Sequential Pay Certificates. As described in this Prospectus
Supplement, the Principal Distribution Amount for each Distribution Date will
generally be distributable first in respect of the Class A-1 Certificates until
the Certificate Balance thereof is reduced to zero, and then, in respect of the
Class A-2 Certificates and thereafter will generally be distributable entirely
in
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respect of the Class B Certificates, the Class C Certificates, the Class D
Certificates, the Class E Certificates and then the Non-Offered Certificates
(other than the Class IO 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.
Prepayments and, assuming the respective stated maturity dates therefor
have not occurred, liquidations and purchases of the Mortgage Loans, will result
in distributions on the Certificates of amounts that would otherwise be
distributed over the remaining terms of the Mortgage Loans. Defaults on the
Mortgage Loans, particularly at or near their stated maturity dates, may result
in significant delays in payments of principal on the Mortgage Loans (and,
accordingly, on the Offered Certificates that are Sequential Pay Certificates)
while work-outs are negotiated or foreclosures are completed. See "SERVICING OF
THE MORTGAGE LOANS--Modifications, Waivers and Amendments" in this Prospectus
Supplement and "DESCRIPTION OF THE POOLING AGREEMENTS--Realization Upon
Defaulted Mortgage Loans" and "CERTAIN LEGAL ASPECTS OF MORTGAGE
LOANS--Foreclosure" in the Prospectus.
The extent to which the yield to maturity of any Class of Offered
Certificates may vary from the anticipated yield will depend upon the degree to
which such Certificates are purchased at a discount or premium and when, and to
what degree, payments of principal on the Mortgage Loans in turn are distributed
or otherwise result in reduction of the Certificate Balance of such
Certificates. An investor should consider, in the case of any Offered
Certificate purchased at a discount, the risk that a slower than anticipated
rate of principal payments on the Mortgage Loans could result in an actual yield
to such investor that is lower than the anticipated yield and, in the case of
any Offered Certificate purchased at a premium, the risk that a faster than
anticipated rate of principal payments could result in an actual yield to such
investor that is lower than the anticipated yield. In general, the earlier a
payment of principal on the Mortgage Loans is distributed or otherwise results
in reduction of the principal balance of an Offered Certificate purchased at a
discount or premium, the greater will be the effect on an investor's yield to
maturity. As a result, the effect on an investor's yield of principal payments
on the Mortgage Loans occurring at a rate higher (or lower) than the rate
anticipated by the investor during any particular period would not be fully
offset by a subsequent like reduction (or increase) in the rate of such
principal payments. Because the rate of principal payments on the Mortgage Loans
will depend on future events and a variety of factors (as described more fully
below), no assurance can be given as to such rate or the rate of principal
prepayments in particular. The Depositor is not aware of any relevant publicly
available or authoritative statistics with respect to the historical prepayment
experience of a large group of mortgage loans comparable to the Mortgage Loans.
Losses and Shortfalls. The yield to holders of the Offered Certificates
will also depend on the extent to which such holders are required to bear the
effects of any losses or shortfalls on the Mortgage Loans.
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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 Subordinate Component with respect to the Rite Aid-Palm Desert
Mortgage Loan and with respect to all other Mortgage Loans 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 Subordinate Component with respect to the Rite
Aid-Palm Desert Mortgage Loan and, with respect to all other Mortgage Loans, to
the holders of the respective Classes of Sequential Pay Certificates (in
reduction of the Certificate Balance of each such Class), in reverse
alphabetical order of their Class designations. In the event of a reduction of
the Certificate Balances of all such Classes of Certificates, such losses and
shortfalls will then be borne, pro rata, by the Class A-1 Certificates and Class
A-2 Certificates (and the Class IO Certificates with respect to shortfalls of
interest). As more fully described in this Prospectus Supplement under
"DESCRIPTION OF THE CERTIFICATES--Distributions--Distributable Certificate
Interest," Net Aggregate Prepayment Interest Shortfalls will generally be borne
by the respective Classes of REMIC Regular Certificates (other than the Class IO
Certificates) on a pro rata basis.
Pass-Through Rates. The Pass-Through Rate on the Class E Certificates will
be limited by the Weighted Average Net Mortgage Rate of the Mortgage Loans.
Accordingly, the yield on the Class E Certificates could also be adversely
affected if Mortgage Loans with higher interest rates pay faster than the
Mortgage Loans with lower interest rates.
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 and/or any
period when the holder of a Mortgage may require a borrower to pledge Defeasance
Collateral in lieu of prepaying the related Mortgage Loan (a "Required
Defeasance Period"), subject, in most 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
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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 14 days
following the Due Dates for the Mortgage Loans during the related Collection
Period, the effective yield to the holders of the Offered Certificates will be
lower than the yield that would otherwise be produced by the applicable
Pass-Through Rates and purchase prices (assuming such prices did not account for
such delay).
Unpaid Distributable Certificate Interest. As described under "DESCRIPTION
OF THE CERTIFICATES--Distributions--Application of the Available Distribution
Amount" in this Prospectus Supplement, if the portion of the Available
Distribution Amount distributable in respect of interest on any Class of Offered
Certificates on any Distribution Date is less than the Distributable Certificate
Interest then payable for such Class, the shortfall will be distributable to
holders of such Class of Certificates on subsequent Distribution Dates, to the
extent of available funds. Any such shortfall will not bear interest, however,
and will therefore negatively affect the yield to maturity of such Class of
Certificates for so long as it is outstanding.
Optional Termination. Any optional termination of the Trust Fund would
have an effect similar to a prepayment in full of the Mortgage Loans (without,
however, the payment of any Prepayment Premiums or Yield Maintenance Charges)
and, as a result, investors in any Certificates purchased at a premium might not
fully recoup their initial investment. See "DESCRIPTION OF THE CERTIFICATES--
Termination" in this Prospectus Supplement.
WEIGHTED AVERAGE LIFE
The weighted average life of any Class A-1, Class A-2, Class B, Class C,
Class D and Class E Certificate refers to the average amount of time that will
elapse from the assumed Closing Date until each dollar allocable to principal of
such Certificate is distributed to the investor. The weighted average life of
any such Offered Certificate will be influenced by, among other things, the rate
at which principal on the Mortgage Loans is paid or otherwise collected or
advanced and applied to pay principal 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 Balances thereof is reduced to zero, and,
will thereafter generally be distributable entirely in respect of the Class B
Certificates, the Class C Certificates, the Class D Certificates and the Class E
Certificates, in that order, in each case until the Certificate Balance of such
Class of Certificates is reduced to zero.
The following tables indicate the percentage of the initial Certificate
Balance of each Class of Offered Certificates that would be outstanding after
each of the dates shown 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, Class D and Class E
Certificates may mature earlier or later than indicated by the tables. In
particular, voluntary prepayments on the Mortgage Loans in fact are not
permitted. 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
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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 "3%
CPR", "6% CPR", "9% CPR" and "12% 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 (otherwise, in the case of each table, each
Mortgage Loan is assumed to prepay at the indicated level of CPR, with each
prepayment being applied on the first day of the applicable month in which it is
assumed to be received), (ii) the Pass-Through Rates and initial Certificate
Balances of the respective Classes of Sequential Pay Certificates are as
described in this Prospectus Supplement, (iii) there are no delinquencies or
defaults with respect to, and no modifications, waivers or amendments of the
terms of, the Mortgage Loans, (iv) there are no Realized Losses, Additional
Trust Fund Expenses or Appraisal Reduction Amounts with respect to the Mortgage
Loans or the Trust Fund, (v) scheduled interest and principal payments on the
Mortgage Loans are timely received, (vi) ARD Loans pay in full on their
Anticipated Repayment Dates, (vii) all Mortgage Loans have Due Dates on the
first day of each month and accrue interest on the respective basis described in
this Prospectus Supplement (i.e., a 30/360 basis or an actual/360 basis), (viii)
all prepayments are accompanied by a full month's interest and there are no
Prepayment Interest Shortfalls, (ix) there are no breaches of the Mortgage Loan
Sellers' representations and warranties regarding its Mortgage Loans, (x) all
applicable Prepayment Premiums and Yield Maintenance Charges are collected, (xi)
no party entitled thereto exercises its right of optional termination of the
Trust Fund described in this Prospectus Supplement, (xii) distributions on the
Certificates are made on the 12th day (each assumed to be a business day) of
each month, commencing in July 2001, and (xiii) the Closing Date for the sale of
the Offered Certificates is June 11, 2001.
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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 (but without application of any Prepayment Premiums or Yield
Maintenance Charges). 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 AND DEFEASANCE
OTHERWISE AT INDICATED CPR
-------------------------------------------
DISTRIBUTION DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ----------------- ------ ------ ------ ------ -------
Initial Date....................................... 100 100 100 100 100
06/12/02........................................... 95 95 95 95 95
06/12/03........................................... 90 89 89 89 89
06/12/04........................................... 83 83 83 83 83
06/12/05........................................... 77 76 76 75 75
06/12/06........................................... 67 66 65 64 63
06/12/07........................................... 56 54 52 51 49
06/12/08........................................... 30 28 25 23 21
06/12/09........................................... 18 14 11 8 6
06/12/10........................................... 0 0 0 0 0
Weighted average life (in years)................... 5.70 5.59 5.50 5.42 5.34
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS A-2
CERTIFICATES
0% CPR DURING LOCKOUT AND DEFEASANCE
OTHERWISE AT INDICATED CPR
-------------------------------------------
DISTRIBUTION DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ----------------- ------ ------ ------ ------ -------
Initial Date....................................... 100 100 100 100 100
06/12/02........................................... 100 100 100 100 100
06/12/03........................................... 100 100 100 100 100
06/12/04........................................... 100 100 100 100 100
06/12/05........................................... 100 100 100 100 100
06/12/06........................................... 100 100 100 100 100
06/12/07........................................... 100 100 100 100 100
06/12/08........................................... 100 100 100 100 100
06/12/09........................................... 100 100 100 100 100
06/12/10........................................... 96 95 93 92 91
06/12/11........................................... 0 0 0 0 0
Weighted average life (in years)................... 9.54 9.52 9.51 9.49 9.48
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PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS B CERTIFICATES
0% CPR DURING LOCKOUT AND DEFEASANCE
OTHERWISE AT INDICATED CPR
-------------------------------------------
DISTRIBUTION DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ----------------- ------ ------ ------ ------ -------
Initial Date....................................... 100 100 100 100 100
06/12/02........................................... 100 100 100 100 100
06/12/03........................................... 100 100 100 100 100
06/12/04........................................... 100 100 100 100 100
06/12/05........................................... 100 100 100 100 100
06/12/06........................................... 100 100 100 100 100
06/12/07........................................... 100 100 100 100 100
06/12/08........................................... 100 100 100 100 100
06/12/09........................................... 100 100 100 100 100
06/12/10........................................... 100 100 100 100 100
06/12/11........................................... 0 0 0 0 0
Weighted average life (in years)................... 9.68 9.68 9.68 9.67 9.67
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS C CERTIFICATES
0% CPR DURING LOCKOUT AND DEFEASANCE
OTHERWISE AT INDICATED CPR
-------------------------------------------
DISTRIBUTION DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ----------------- ------ ------ ------ ------ -------
Initial Date....................................... 100 100 100 100 100
06/12/02........................................... 100 100 100 100 100
06/12/03........................................... 100 100 100 100 100
06/12/04........................................... 100 100 100 100 100
06/12/05........................................... 100 100 100 100 100
06/12/06........................................... 100 100 100 100 100
06/12/07........................................... 100 100 100 100 100
06/12/08........................................... 100 100 100 100 100
06/12/09........................................... 100 100 100 100 100
06/12/10........................................... 100 100 100 100 100
06/12/11........................................... 0 0 0 0 0
Weighted average life (in years)................... 9.75 9.75 9.75 9.75 9.75
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS D CERTIFICATES
0% CPR DURING LOCKOUT AND DEFEASANCE
OTHERWISE AT INDICATED CPR
-------------------------------------------
DISTRIBUTION DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ----------------- ------ ------ ------ ------ -------
Initial Date....................................... 100 100 100 100 100
06/12/02........................................... 100 100 100 100 100
06/12/03........................................... 100 100 100 100 100
06/12/04........................................... 100 100 100 100 100
06/12/05........................................... 100 100 100 100 100
06/12/06........................................... 100 100 100 100 100
06/12/07........................................... 100 100 100 100 100
06/12/08........................................... 100 100 100 100 100
06/12/09........................................... 100 100 100 100 100
06/12/10........................................... 100 100 100 100 100
06/12/11........................................... 0 0 0 0 0
Weighted average life (in years)................... 9.75 9.75 9.75 9.75 9.75
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PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS E CERTIFICATES
0% CPR DURING LOCKOUT AND DEFEASANCE
OTHERWISE AT INDICATED CPR
-------------------------------------------
DISTRIBUTION DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ----------------- ------ ------ ------ ------ -------
Initial Date....................................... 100 100 100 100 100
06/12/02........................................... 100 100 100 100 100
06/12/03........................................... 100 100 100 100 100
06/12/04........................................... 100 100 100 100 100
06/12/05........................................... 100 100 100 100 100
06/12/06........................................... 100 100 100 100 100
06/12/07........................................... 100 100 100 100 100
06/12/08........................................... 100 100 100 100 100
06/12/09........................................... 100 100 100 100 100
06/12/10........................................... 100 100 100 100 100
06/12/11........................................... 0 0 0 0 0
Weighted average life (in years)................... 9.79 9.78 9.77 9.76 9.75
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 Cadwalader, Wickersham & Taft, 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 any
Additional Interest on the ARD Loans. A separate REMIC election will also be
made with respect to the Rite Aid-Palm Desert Mortgage Loan. The Senior
Component and the Subordinate Component will represent "regular interests" in
such REMIC. Upon the issuance of the Offered Certificates, Cadwalader,
Wickersham & Taft will deliver its opinion generally to the effect that,
assuming compliance with all provisions of the Pooling and Servicing Agreement,
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 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-I and Class Z-II Certificates will represent undivided
beneficial interests in those assets.
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TAXATION OF THE OFFERED CERTIFICATES
Based on expected issue prices, certain of the classes of Offered
Certificates, depending on their issue price, may be treated as having been
issued with original issue discount for federal income tax reporting purposes.
The prepayment assumption that will be used in determining the rate of accrual
of original issue discount for federal income tax purposes will be based on the
assumption that subsequent to the date of any determination the Mortgage Loans
will prepay at a rate equal to a CPR of 0%, except that it is assumed that the
ARD Loans pay their respective outstanding principal balances on their related
Anticipated Repayment Dates. No representation is made that the Mortgage Loans
will prepay at that rate or at any other rate. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--REMICs--Taxation of Owners of REMIC Regular Certificates--Original
Issue Discount" in the Prospectus.
If the method for computing original issue discount described in the
accompanying Prospectus results in a negative amount for any period with respect
to a Certificateholder, the amount of original issue discount allocable to such
period would be zero and such Certificateholder generally will be permitted to
offset such negative amount only against future original issue discount (if any)
attributable to such Certificates. However, although the matter is not free from
doubt, a Certificateholder that realizes any negative amortization of original
issue discount with respect to its Certificate may be permitted to deduct a loss
to the extent that its respective remaining basis in such Certificate exceeds
the maximum amount of future payments to which such Certificateholder is
entitled, assuming no further prepayments of the Mortgage Loans. Any such loss
might be treated as a capital loss.
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 from that used by
the issuer. Accordingly, it is possible that the holder of an Offered
Certificate 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.
Certain Classes of the Offered Certificates may be treated for federal
income tax purposes as having been issued at a premium. Whether any holder of
such a Class of Certificates will be treated as holding a Certificate with
amortizable bond premium will depend on such Certificateholder's purchase price
and the distributions remaining to be made on such Certificate at the time of
its acquisition by such Certificateholder. Holders of each such class of
Certificates should consult their own tax advisors regarding the possibility of
making an election to amortize such premium. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of Owners of REMIC Regular Certificates--Premium" in the
accompanying Prospectus.
The Offered Certificates will be treated as "real estate assets" within the
meaning of Section 856(c)(5)(B) of the Code. In addition, interest (including
original issue discount) on the Offered Certificates will be interest described
in Section 856(c)(3)(B) of the Code. However, the Offered Certificates will
generally only be considered assets described in Section 7701(a)(19)(C) of the
Code to the extent that the Mortgage Loans are secured by residential property
and, accordingly, investment in the Offered Certificates may not be suitable for
certain thrift institutions. The Offered Certificates will not qualify under the
foregoing sections to the extent of any Mortgage Loan that has been defeased
with U.S. government obligations.
Prepayment Premiums and Yield Maintenance Charges actually collected will
be distributed to the holders of the Offered Certificates as described in this
Prospectus Supplement. It is not entirely clear under the Code when the amount
of a Yield Maintenance Charge should be taxed to the holder of an Offered
Certificate, but it is not expected, for federal income tax reporting purposes,
that Yield Maintenance Charges will be treated as giving rise to any income to
the holders of the Offered Certificates prior to the Master Servicer's actual
receipt of a Yield Maintenance Charge. It is not entirely clear
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whether Yield Maintenance Charges give rise to ordinary income or capital gains
and Certificateholders should consult their own tax advisors concerning this
character issue and the treatment of and Yield Maintenance Charges in general.
The Treasury Department has issued new regulations (the "New Regulations")
which make certain modifications to the withholding, backup withholding, and
information reporting rules described in the prospectus. The New Regulations
attempt to unify certification requirements and to modify reliance standards.
The New Regulations are effective for payments made after December 31, 2000,
subject to certain transition rules. Prospective investors are urged to consult
their tax advisors regarding the New Regulations.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--REMICs" in the Prospectus.
ERISA CONSIDERATIONS
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 the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), Section
4975 of the Code or any materially similar provisions of applicable federal,
state or local law ("Similar Law" and any of the foregoing, a "Plan") should
carefully review with its legal advisors whether the purchase or holding of
Offered Certificates could give rise to a transaction that is prohibited or is
not otherwise permitted either under ERISA or Section 4975 of the Code or
whether there exists any statutory or administrative exemption applicable
thereto. Governmental plans (as defined in Section 3(32) of ERISA), while not
subject to ERISA and the Code, may be subject to 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 First Union Corporation, and its subsidiaries and its affiliates, which
include First Union Securities, Inc. ("First Union Securities"), PTE 90-29 (May
24, 1990) to Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") and
PTE 90-59 (September 6, 1990) to Greenwich Capital Markets, Inc. ("Greenwich
Capital Markets"), each as amended by PTE 97-34 and PTE 2000-58) (each, 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 Exemption are satisfied. For purposes of this discussion, the term
"Underwriter" shall include (a) MLPF&S, (b) First Union Securities, (c)
Greenwich Capital Markets (d) any person directly or indirectly, through one or
more intermediaries, controlling, controlled by or under common control with
MLPF&S, First Union Securities or Greenwich Capital Markets and (e) any member
of the underwriting syndicate or selling group of which MLPF&S, First Union
Securities or Greenwich Capital Markets or a person described in (d) 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 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 1
of ERISA, such as certain Keogh plans and certain individual retirement
accounts.
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 Certificates by a Plan must be on terms that are
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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. ("S&P"), Moody's Investors Service, Inc. ("Moody's")
or Fitch, Inc. ("Fitch") (each, an "NRSRO"). Third, the Trustee cannot be an
affiliate of any other member of the "Restricted Group," which consists of each
of the Underwriters, the Depositor, the Master Servicer, the Special Servicer,
the Trustee, any sub-servicer, and any borrower 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. 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, a 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.
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 categories of
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 such Certificates.
If the general conditions of the Exemptions are satisfied, they 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 a borrower is a "Party
in Interest," as defined in the Prospectus, with respect to the investing Plan,
(ii) the direct or indirect acquisition or disposition in the secondary market
of the Offered Certificates by a Plan and (iii) the holding of Offered
Certificates by a Plan. However, no exemption is provided from the restrictions
of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or
holding of the Offered Certificate on behalf of an "Excluded Plan" by any person
who has discretionary authority or renders investment advice with respect to the
assets of such Excluded Plan. For purposes hereof, an Excluded Plan is a Plan
sponsored by any member of the Restricted Group.
If certain specific conditions of the Exemptions are also satisfied, each
such Exemption may provide relief from the restrictions imposed by 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 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 (or its affiliate) is an obligor with
respect to 5% or less of the fair market value of the assets contained in the
Trust and is otherwise not a member of the Restricted Group, (ii) a Plan's
investment in the Offered 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 the Master Servicer and
(iv) in the case of the acquisition of the Offered Certificates in connection
with their initial issuance, at least 50% of the aggregate interest in the Trust
Fund is acquired by persons independent of the Restricted Group.
S-163
164
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 and (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.
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 Certificates should consult
with its counsel with respect to the applicability of the Exemptions and other
issues and determine on its own whether all conditions have been satisfied and
whether the Certificates are an appropriate investment for a Plan under ERISA
and the Code (or, in the case of governmental plans, under applicable Federal,
state or local law). 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
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.
LEGAL INVESTMENT
Any Offered Certificates rated in the category of "AAA" or "AA" (or the
equivalent) by at least one Rating Agency will constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984, as amended ("SMMEA"). All other Offered Certificates (the "Non-SMMEA
Certificates") will not constitute "mortgage related securities" for purposes of
SMMEA. As a result, the appropriate characterization of the Non-SMMEA
Certificates under various legal investment restrictions, and thus the ability
of investors subject to these restrictions to purchase the Non-SMMEA
Certificates of any Class, may be subject to significant interpretative
uncertainties. In addition, institutions whose investment activities are subject
to review by federal or state regulatory authorities may be or may become
subject to restrictions on the investment by such institutions in certain forms
of mortgage related securities. Investors should consult their own legal
advisors to determine whether and to what extent the Offered Certificates
constitute legal investments for them. See "LEGAL INVESTMENT" in the Prospectus.
The Depositor makes no representation as to the proper characterization of
any Class of 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 or other
restrictions. All institutions whose investment activities are subject to legal
investment laws and regulations, regulatory capital requirements or review by
regulatory authorities should consult with their own legal advisors in
determining whether and to what extent the Offered Certificates constitute legal
investments for them or are subject to investment, capital or other
restrictions. See "LEGAL INVESTMENT" in the Prospectus.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement") among the Depositor and MLPF&S, First Union
Securities and Greenwich Capital Markets (collectively, the "Underwriters"), the
Depositor has agreed to sell to each of MLPF&S, First Union
S-164
165
Securities, and Greenwich Capital Markets and each of MLPF&S, First Union
Securities and Greenwich Capital Markets 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 MLPF&S FIRST UNION SECURITIES GREENWICH CAPITAL MARKETS
- ----- ------ ---------------------- -------------------------
Class A-1................. $ 66,414,676.00 $124,138,324.00 --
Class A-2................. $197,148,626.00 $368,498,374.00 $25,000,000.00
Class B................... $ 14,835,456.00 $ 27,729,544.00 --
Class C................... $ 4,363,677.00 $ 8,156,323.00 --
Class D................... $ 4,363,328.00 $ 8,155,672.00 --
Class E................... $ 6,981,535.00 $ 13,049,465.00 --
MLPF&S and First Union Securities are acting as co-lead managers and
co-bookrunners of the offering. Greenwich Capital Markets is acting as a
co-manager for the offering.
Proceeds to the Depositor from the sale of the Offered Certificates, before
deducting expenses payable by the Depositor, will be approximately
$873,852,295.08, 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. 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, MLPF&S, First Union Securities
and Greenwich Capital Markets 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, neither Underwriter has any obligation to do so,
any market making may be discontinued at any time and there can be no assurance
that an active secondary market for the Offered Certificates will develop. See
"RISK FACTORS--Liquidity for Certificates May Be Limited" in this Prospectus
Supplement and "RISK FACTORS--Your Ability to Resell Certificates May Be Limited
Because of Their Characteristics" in the accompanying Prospectus.
This Prospectus Supplement and the Prospectus may be used by the Depositor,
First Union 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. First Union Securities or any such other
affiliate may act as principal or agent in such transactions. Such sales will be
made at prices related to prevailing market prices at the time of sale or
otherwise.
The Depositor has agreed to indemnify each Underwriter and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the
Securities Act against, or make contributions to each Underwriter and each such
controlling person with respect to, certain liabilities, including liabilities
under the Securities Act.
S-165
166
MLPF&S, one of the Underwriters, is an affiliate of the Merrill Lynch
Originators. First Union Securities, one of the Underwriters, is an affiliate of
the Depositor and First Union National Bank, which is one of the Mortgage Loan
Sellers, the Master Servicer and the holder of the Companion Loans. It is
expected that the Mortgage Loan Sellers or one of their affiliates will
initially own the Class Z-I and Class Z-II Certificates.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Cadwalader,
Wickersham & Taft, Charlotte, North Carolina, and for the Underwriters by
Willkie, Farr & Gallagher, New York, New York.
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 MOODY'S/S&P
- ----- ------------
Class A-1................................................... Aaa/AAA
Class A-2................................................... Aaa/AAA
Class B..................................................... Aa2/AA
Class C..................................................... Aa3/AA-
Class D..................................................... A1/A+
Class E..................................................... A2/A
The ratings on the Offered Certificates address the likelihood of timely
receipt by holders thereof of all distributions of interest to which they are
entitled and distributions of principal by the Rated Final Distribution Date set
forth on the cover page of this Prospectus Supplement. The ratings take into
consideration the credit quality of the Mortgage Pool, structural and legal
aspects associated with the Offered Certificates, and the extent to which the
payment stream from the Mortgage Pool is adequate to make payments required
under the Offered Certificates. 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-166
167
INDEX OF DEFINED TERMS
PAGE
-----------
1330 Connecticut Avenue Loan................................ S-102
30/360 basis................................................ S-74
Accrued Certificate Interest................................ S-137
Actual/360 basis............................................ S-74
Additional Interest......................................... S-74
Additional Interest Account................................. S-132
Additional Rights........................................... S-81
Additional Trust Fund Expenses.............................. S-142
Administrative Cost Rate.................................... S-85
Advance..................................................... S-144
Anticipated Repayment Date.................................. S-74
Appraisal Reduction Amount.................................. S-144
ARD Loans................................................... S-74
Asset Disposition Method.................................... S-121
Assumed Final Distribution Date............................. S-151
Assumed Scheduled Payment................................... S-138
Available Distribution Amount............................... S-131
Balloon Loans............................................... S-74
Balloon Payment............................................. S-74
Bed......................................................... S-84
Bond-Type Leases............................................ S-81
Campus Lodge Apartments Loan................................ S-105
Capital Imp. Reserve........................................ S-86
Casualty or Condemnation Rights............................. S-81
Certificate Balance......................................... S-127
Certificate Deferred Interest............................... S-128
Certificateholders.......................................... S-129
Certificates................................................ S-124
Class....................................................... S-124
Class A Certificates........................................ S-124
Class IO Certificates....................................... S-125
Clearstream Luxembourg...................................... S-125
Clearstream Luxembourg Participants......................... S-126
CMSA Bond File.............................................. S-147
CMSA Collateral Summary File................................ S-147
CMSA Loan Periodic Update File.............................. S-147
CMSA Property File.......................................... S-147
Co-Lender and Servicing Agreement........................... S-78
Collection Period........................................... S-129
Companion Loan.............................................. S-78
Comparative Financial Status Report......................... S-148
Compensating Interest Payment............................... S-117
Component................................................... S-127
Component Balance........................................... S-127
Component Principal Balance................................. S-128
Constant Prepayment Rate.................................... S-156
Controlling Class........................................... S-115
Controlling Class Representative............................ S-115
Cornerstone Loans........................................... S-101
Corrected Mortgage Loan..................................... S-116
S-167
168
PAGE
-----------
CPR......................................................... S-156
Credit Lease................................................ S-80
Credit Lease Assignment..................................... S-82
Credit Lease Default........................................ S-81
Credit Lease Loan Report.................................... S-149
Credit Lease Loan Table..................................... S-80
Credit Lease Loans.......................................... S-80
Crossed Loan................................................ S-112
Custodian................................................... S-108
Cut-Off Date................................................ S-72
Cut-Off Date Balance........................................ S-72
Cut-Off Date LTV............................................ S-84
Cut-Off Date LTV Ratio...................................... S-84
Cut-Off Date Pool Balance................................... S-72
Defaulted Loan Purchaser.................................... S-122
Defaulted Mortgage Loan..................................... S-121
Defeasance.................................................. S-85
Defeasance Collateral....................................... S-75
Delinquent Loan Status Report............................... S-147
Depositaries................................................ S-125
Determination Date.......................................... S-129
Discount Rate............................................... S-140
Distributable Certificate Interest.......................... S-137
Distribution Date........................................... S-129
Distribution Date Statement................................. S-145
Double Net Leases........................................... S-81
DSC Ratio................................................... S-83
DSCR........................................................ S-83
DTC......................................................... S-125
Due Date.................................................... S-74
Enhancement Insurer......................................... S-82
ERISA....................................................... S-162
Euroclear Participants...................................... S-126
Excess Cash Flow............................................ S-74
Exemption................................................... S-162
Exemptions.................................................. S-162
Final Recovery Determination................................ S-146
First Union Mortgage Loans.................................. S-107
First Union Securities...................................... S-162
Fitch....................................................... S-163
Foreclosure................................................. S-123
Form 8-K.................................................... S-113
Gardiner Manor Mall Loan.................................... S-104
Guarantor................................................... S-80
Greenwich Capital Markets................................... S-162
Historical Liquidation Report............................... S-147
Historical Loan Modification Report......................... S-147
HRT Loans................................................... S-103
Indirect Participants....................................... S-125
Innkeepers Loan............................................. S-102
Insured Balloon Payment..................................... S-74
Interest Accrual Period..................................... S-129
S-168
169
PAGE
-----------
Interest Reserve Account.................................... S-131
Interest Reserve Amount..................................... S-132
Interest Reserve Loans...................................... S-132
Interim Delinquent Loan Status Report....................... S-148
IRS......................................................... S-161
Loan per Sq. Ft............................................. S-84
LNR......................................................... S-115
LOC Loans................................................... S-83
LTV at ARD.................................................. S-85
Maintenance Rights.......................................... S-81
Majority Subordinate Certificateholder...................... S-152
Master Servicer............................................. S-114
Master Servicing Fee........................................ S-117
Master Servicing Fee Rate................................... S-117
Maturity.................................................... S-85
Maturity Date LTV Ratio..................................... S-85
Merrill Lynch Originators................................... S-73, S-107
Merrill Mortgage Loans...................................... S-107
MLMCI....................................................... S-73
MLML........................................................ S-73
MLPF&S...................................................... S-162
Money Term.................................................. S-122
Monthly Rental Payments..................................... S-80
Moody's..................................................... S-163
Mortgage.................................................... S-73
Mortgage Deferred Interest.................................. S-127
Mortgage Event of Default................................... S-79
Mortgage File............................................... S-108
Mortgage Loan Purchase Agreement............................ S-106
Mortgage Loan Purchase Agreements........................... S-107
Mortgage Loans.............................................. S-72
Mortgage Note............................................... S-73
Mortgage Rate............................................... S-74
Mortgaged Property.......................................... S-73
NA.......................................................... S-86
NAV......................................................... S-86
Net Aggregate Prepayment Interest Shortfall................. S-137
net cash flow............................................... S-83
Net Mortgage Rate........................................... S-129
Net Present Value........................................... S-121
New Regulations............................................. S-162
NOI Adjustment Worksheet.................................... S-148
Non-Offered Certificates.................................... S-125
Nonrecoverable P&I Advance.................................. S-143
Non-SMMEA Certificates...................................... S-164
Notional Amount............................................. S-127
NRSRO....................................................... S-165
Occupancy Percentage........................................ S-85
Offered Certificates........................................ S-125
OID Regulations............................................. S-161
One Franklin Loan........................................... S-103
Open Period................................................. S-85
S-169
170
PAGE
-----------
Operating Statement Analysis................................ S-148
Original Term to Maturity................................... S-86
P&I Advance................................................. S-143
Pad......................................................... S-84
Periodic Payments........................................... S-74
Plan........................................................ S-162
Pooling and Servicing Agreement............................. S-124
Prepayment Interest Excess.................................. S-117
Prepayment Interest Shortfall............................... S-117
Prepayment Premiums......................................... S-139
Primary Term................................................ S-80
Principal Distribution Amount............................... S-138
Principal Recovery Fee...................................... S-118
Privileged Person........................................... S-150
PTE......................................................... S-162
Purchase Price.............................................. S-109
Qualified Appraiser......................................... S-144
Qualified Substitute Mortgage Loan.......................... S-110
Qwest Mortgage Loan......................................... S-78
Rated Final Distribution Date............................... S-151
Rating Agencies............................................. S-166
Realized Losses............................................. S-142
Reimbursement Rate.......................................... S-144
Related Proceeds............................................ S-143
Remaining Amortization Term................................. S-85
Remaining Term to Maturity.................................. S-85
REMIC....................................................... S-20
REMIC Administrator......................................... S-153
REMIC Regular Certificates.................................. S-125
REMIC Regulations........................................... S-160
REMIC Residual Certificates................................. S-125
Rental Property............................................. S-83
REO Extension............................................... S-123
REO Mortgage Loan........................................... S-139
REO Property................................................ S-116
REO Status Report........................................... S-148
Replacement Reserve......................................... S-86
Required Appraisal Date..................................... S-144
Required Appraisal Loan..................................... S-144
Required Defeasance Period.................................. S-155
Residual Value Insurance Policy............................. S-74
Residual Value Insurer...................................... S-74
Restricted Servicer Reports................................. S-149
Rite Aid AB Mortgage Loans.................................. S-78
Rite Aid Mortgage Loans..................................... S-80
Rite Aid-Palm Desert Mortgage Loan.......................... S-78
Rite Aid-Palm Desert Mortgage Representative................ S-115
Room........................................................ S-84
Rules....................................................... S-122
S&P......................................................... S-163
Scenario.................................................... S-157
S-170
171
PAGE
-----------
Scheduled Payment........................................... S-138
Senior Component............................................ S-78
Sequential Pay Certificates................................. S-125
Servicing Fees.............................................. S-118
Servicing Transfer Event.................................... S-116
Similar Law................................................. S-162
SMMEA....................................................... S-164
Special Servicer............................................ S-115
Special Servicing Fee....................................... S-118
Special Servicing Fee Rate.................................. S-118
Specially Serviced Mortgage Loans........................... S-116
Specially Serviced Trust Fund Assets........................ S-116
Stadium Crossing Loan....................................... S-106
Stated Principal Balance.................................... S-129
Strip Rate.................................................. S-128
Subordinate Certificates.................................... S-124
Subordinate Component....................................... S-78
Substitution Shortfall Amount............................... S-109
Table Assumptions........................................... S-157
Tenant...................................................... S-80
Terms and Conditions........................................ S-127
TI/LC Reserve............................................... S-86
Triple Net Leases........................................... S-81
Trust Fund.................................................. S-124
Trustee Fee................................................. S-153
Underwriters................................................ S-164
Underwriting Agreement...................................... S-164
Underwritten Replacement Reserves........................... S-85
Unit........................................................ S-84
Unrestricted Servicer Reports............................... S-149
Villa La Jolla Apartment Loan............................... S-104
Voting Rights............................................... S-151
Watch List Report........................................... S-148
Weighted Average Net Mortgage Rate.......................... S-129
weighted averages........................................... S-85
Wells Fargo................................................. S-153
Workout..................................................... S-122
Workout Fee................................................. S-118
Wyntonn MultiFamily Loan.................................... S-106
Year Built.................................................. S-85
Yield Maintenance Charges................................... S-139
S-171
172
[This Page Intentionally Left Blank]
173
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2001-C2
ANNEX A-1 CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
AND MORTGAGED PROPERTIES
LOAN ZIP
NUMBER PROPERTY NAME ADDRESS CITY STATE CODE
- ------------------------------------------------------------------------------------------------------------------------------------
1 1330 Connecticut Ave., N.W. 1330 Connecticut Ave., N.W. Washington DC 20036
2 Innkeepers Portfolio Various Various Various Various
2.1 Marriott Residence Inn Dallas-Addison 14975 Quorum Dr. Dallas TX 75240
2.2 Marriott Residence Inn -Arlington 1050 Brook Hollow Plaza Dr. Arlington TX 76006
2.3 Marriott Residence Inn Atlanta - Downtown 134 Peachtree St. NW Atlanta GA 30303
2.4 Marriott Residence Inn Orlando-Altamonte 270 Douglas Ave. Alamonte Springs FL 32714
2.5 Marriott Residence Inn - San Mateo 2000 Windward Way San Mateo CA 94404
2.6 Marriott Residence Inn - Shelton 1001 Bridgeport Ave. Shelton CT 06484
3 One Franklin 200 North 16th Street Philadelphia PA 19102
4 Villa La Jolla Apartments 8540 Via Mallorca Drive La Jolla CA 92037
5 Gardiner Manor Mall Sunrise Highway & Manor Lane Islip NY 11751
6 Campus Lodge Apartments 2677 Old Bainbridge Road Tallahassee FL 32303
7 Wynnton Multi Portfolio Various Various Various Various
7.1 Granada Apartments 7015 North 56th Street Tampa FL 33617
7.2 Grandview Apartments 7049 Ulmerton Road Largo FL 33771
7.3 Palmview Apartments 2680 54th Avenue South St. Petersburg FL 33712
7.4 Plantation Apartments 10605 North 56th Street Temple Terrace FL 33617
8 Stadium Crossing Katella and State College Blvd Anaheim CA 92806
9 Alexandria RE Portfolio Various Gaithersburg MD Various
9.1 Watkins 25, 35 & 45 West Watkins Mill Road Gaithersburg MD 20877
9.2 Quince 708 Quince Orchard Road Gaithersburg MD 20878
10 Qwest Communications Building 1100 North Market Boulevard Sacramento CA 95834
11 La Villa Estates Apartments 10175 Spring Mountain Road Las Vegas NV 89117
12 8 West 40th Street 8 West 40th Street New York NY 10018
13 Windward City Shopping Center 45-480 Kaneohe Bay Drive Kaneohe HI 96744
14 Monaco Park Apartments 8350 West Desert Inn Road Las Vegas NV 89117
15 U-Haul Various Various Various Various
15.01 I-30 9302 Interstate 30 Little Rock AR 72209
15.02 Ivar Avenue 3527 Ivar Avenue Rosemead CA 91770
15.03 East Alosta 1301 East Alosta Avenue Glendora CA 91740
15.04 Black Rock 3029 Fairfield Avenue Bridgeport CT 06605
15.05 Merrill St. 6 Merrill Street Salisbury MA 01952
15.06 Blackwood Clementon 611 Blackwood-Clementon Road Lindenwold NJ 08021
15.07 Business Ave. 5600 Business Avenue Clay NY 13039
15.08 West Hwy 287 ByPass 1103 West Hwy 287 Bypass Waxahachie TX 75165
15.09 Tarrant Rd. 2455 Tarrant Road Grand Prairie TX 75050
15.10 South Hulen 7225 South Hulen Street Ft. Worth TX 76133
16 Spectrum Pointe 9-19 Spectrum Pointe Drive and 20 & 80 Empire Lake Forest CA 92630
17 Center Point Shopping Center 1218-1226 East Dixie Drive Asheboro NC 27203
18 U-Haul II Various Various Various Various
18.01 Rio Salado 500 North Scottsdale Road Tempe AZ 85281
18.02 Sycamore Avenue 36 North Sycamore Avenue Pasadena CA 91107
18.03 White Lane 6201 White Lane Bakersfield CA 93309
18.04 Newfield Street 1200 Newfield Street Middletown CT 06457
18.05 Southside 2101 South Kings Highway Boulevard St. Louis MO 63110
18.06 Connecticut Drive 94 Connecticut Drive Burlington NJ 08016
18.07 Ridgeway Avenue 2055 Ridgeway Avenue Greece NY 14616
18.08 Rufe Snow 6404 Browning Drive N. Richland Hills TX 76180
18.09 Alma Drive 3401 Alma Drive Plano TX 75023
18.10 Westchase 7743 Eckhert Road San Antonio TX 78240
19 Peppertree Apartments 7911 Arlington Ave Riverside CA 92503
20 Brighton Arms Apartments 301, 311, 401 W. Sylvania Avenue Neptune City NJ 07753
21 Eagle Crest Apartments 4013 West Northgate Drive Irving TX 75062
22 156 William Street 156 William Street New York NY 10038
23 Polo Club Apartments 916 Beaver Grade Road Moon Township PA 15108
24 Remington Hills Apartments 1201 North Meadow Creek Drive Irving TX 75062
25 Market at Opitz US Route 1 and Opitz Blvd. Woodbridge VA 22191
26 Sterling University Glen 500 Park Ridge Road Bloomington IN 47407
27 Eight Neshaminy Interplex Old Lincoln Highway & Northgate Road Bensalem Township PA 19053
28 Westwood Village Square 1101-1151 Westwood Boulevard Los Angeles CA 90024
29 Hilton Head Village 1460 US Hwy 278 Bluffton SC 29910
30 Deep River Shopping Center 985-1021 High Point Street Randleman NC 27317
31 Harmony Foods Building 2200 Delaware Avenue Santa Cruz CA 95060
32 Timberglen Apartments 3773 Timberglen Road Dallas TX 75287
33 Gainsborough Square North Battlefield Boulevard Chesapeake VA 23320
34 Valley Run Apartments 2601 Carpenter Road Wilmington DE 19810
35 LW-Airport mall 111 Union Street Bangor ME 04401
36 Tree Haven Apartments Ravine & 33 Aberdeen Road Matawan NJ 07747
37 610 Weddell 610-630 E. Weddell Drive Sunnyvale CA 94089
38 Roberts Business Park 2842-2912 Colorado Ave. Santa Monica CA 90404
39 Chanin Building 122 East 42nd Street New York NY 10022
40 Johnston- Willis MOB's 1403-1475 Johnston-Willis Drive Richmond VA 23235
41 Wilshire La Jolla 6399 Wilshire Blvd Los Angeles CA 90069
42 10 United Nations Plaza 1130 Market Street San Francisco CA 94102
43 Kelsey Seibold West 1111 Augusta Drive Houston TX 77057
44 Sterling University Greens 2900 Oak Tree Avenue Norman OK 73702
45 Residence Inn - Sabal Park 9719 Princess Palm Avenue Sabal Park FL 33619
46 Birmingham MOB #2 1201 11th Avenue South Birmingham AL 35203
47 Cutter's Point Apartments 1111 Abrams Road Richardson TX 75081
48 The Arbors on Forest Ridge Apartments 2200 Forest Ridge Drive Bedford TX 76021
49 Regency Pointe Shopping Center 9430 Arlington Expressway Jacksonville FL 32225
50 Hilltop Plaza 3799 Route 46 East Parsippany NJ 07054
51 Granville Plaza Shopping Center 11819 Wilshire Blvd Los Angeles CA 90025
52 Vista Ridge Office Building 912 Capitol of Texas Highway Austin TX 78746
53 Bayshore Palms 2035 Phillipe Parkway Safety Harbor FL 34695
174
CROSS % OF
COLLATERALIZED AGGREGATE
AND CROSS CUT-OFF
DEFAULTED LOAN GENERAL SPECIFIC ORIGINAL LOAN CUT-OFF DATE DATE ORIGINATION
LOAN FLAG ORIGINATOR PROPERTY TYPE PROPERTY TYPE BALANCE ($) BALANCE ($) BALANCE DATE
- -------------- ---------- ------------- ------------- ------------- ------------ --------- -----------
FUNB Office CBD 54,770,000.00 54,520,756.83 5.44% 04-Jan-01
Innkeepers FUNB Hospitality Suite 50,000,000.00 50,000,000.00 4.99% 28-Dec-00
Innkeepers FUNB Hospitality Suite
Innkeepers FUNB Hospitality Suite
Innkeepers FUNB Hospitality Suite
Innkeepers FUNB Hospitality Suite
Innkeepers FUNB Hospitality Suite
Innkeepers FUNB Hospitality Suite
ML Office CBD 44,000,000.00 44,000,000.00 4.39% 15-Dec-00
FUNB Multifamily Conventional 34,200,000.00 34,092,026.15 3.40% 15-Dec-00
ML Retail Anchored 32,750,000.00 32,750,000.00 3.27% 17-May-01
FUNB Multifamily Student Housing 31,000,000.00 30,901,440.30 3.09% 30-Jan-01
ML Multifamily Conventional 28,640,000.00 28,549,985.14 2.85% 21-Dec-00
ML Multifamily Conventional
ML Multifamily Conventional
ML Multifamily Conventional
ML Multifamily Conventional
ML Office CBD 26,545,108.00 26,402,569.17 2.64% 21-Jun-00
ML Office Suburban 24,700,000.00 24,600,856.10 2.46% 04-Oct-00
ML Office Suburban
ML Office Suburban
FUNB Mixed Use Office/Industrial 23,750,000.00 23,750,000.00 2.37% 09-Feb-01
FUNB Multifamily Conventional 22,500,000.00 22,500,000.00 2.25% 21-Dec-00
FUNB Office CBD 22,500,000.00 22,468,627.69 2.24% 09-Mar-01
ML Retail Anchored 21,000,000.00 20,892,754.94 2.09% 26-Dec-00
FUNB Multifamily Conventional 20,500,000.00 20,458,301.13 2.04% 27-Feb-01
ML Self Storage Self Storage 18,524,000.00 18,443,578.47 1.84% 29-Jan-01
ML Self Storage Self Storage
ML Self Storage Self Storage
ML Self Storage Self Storage
ML Self Storage Self Storage
ML Self Storage Self Storage
ML Self Storage Self Storage
ML Self Storage Self Storage
ML Self Storage Self Storage
ML Self Storage Self Storage
ML Self Storage Self Storage
Olen 2 FUNB Industrial Flex 17,900,000.00 17,878,220.92 1.79% 07-Mar-01
FUNB Retail Anchored 17,250,000.00 17,226,054.24 1.72% 14-Mar-01
ML Self Storage Self Storage 17,113,000.00 17,038,704.31 1.70% 29-Jan-01
ML Self Storage Self Storage
ML Self Storage Self Storage
ML Self Storage Self Storage
ML Self Storage Self Storage
ML Self Storage Self Storage
ML Self Storage Self Storage
ML Self Storage Self Storage
ML Self Storage Self Storage
ML Self Storage Self Storage
ML Self Storage Self Storage
FUNB Multifamily Conventional 16,200,000.00 16,149,597.72 1.61% 01-Feb-01
FUNB Multifamily Conventional 16,200,000.00 16,122,324.59 1.61% 22-Jan-01
Cornerstone 2 FUNB Multifamily Conventional 15,000,000.00 15,000,000.00 1.50% 12-Dec-00
ML Office CBD 14,900,000.00 14,814,651.37 1.48% 26-May-00
ML Multifamily Conventional 14,500,000.00 14,455,417.72 1.44% 17-Jan-01
Cornerstone 2 FUNB Multifamily Conventional 14,250,000.00 14,250,000.00 1.42% 12-Dec-00
FUNB Retail Anchored 12,800,000.00 12,775,379.26 1.28% 13-Feb-01
FUNB Multifamily Student Housing 12,400,000.00 12,400,000.00 1.24% 24-Apr-01
FUNB Office Suburban 12,400,000.00 12,356,343.86 1.23% 16-Nov-00
FUNB Retail Anchored 12,000,000.00 11,993,402.55 1.20% 03-Apr-01
ML Retail Anchored 11,900,000.00 11,883,932.76 1.19% 27-Mar-01
FUNB Retail Anchored 10,125,000.00 10,110,937.96 1.01% 14-Mar-01
ML Industrial Light Mfg/Office/Warehouse 9,775,000.00 9,748,217.59 0.97% 08-Dec-00
Cornerstone 2 FUNB Multifamily Conventional 9,500,000.00 9,500,000.00 0.95% 12-Dec-00
FUNB Retail Anchored 9,500,000.00 9,466,276.76 0.95% 21-Dec-00
FUNB Multifamily Conventional 9,500,000.00 9,454,449.61 0.94% 22-Jan-01
ML Retail Anchored 9,440,000.00 9,427,285.92 0.94% 20-Mar-01
FUNB Multifamily Conventional 9,300,000.00 9,255,408.55 0.92% 22-Jan-01
ML Industrial Flex 9,000,000.00 8,944,383.49 0.89% 22-May-00
FUNB Mixed Use Office/Industrial 8,100,000.00 8,064,340.25 0.81% 27-Oct-00
ML Office CBD 8,000,000.00 7,989,086.73 0.80% 14-Nov-00
HRT POOL FUNB Office Medical Office 7,500,000.00 7,458,695.04 0.74% 12-Apr-01
FUNB Office Suburban 7,500,000.00 7,469,678.01 0.75% 04-Oct-00
FUNB Office CBD 7,500,000.00 7,463,914.73 0.75% 25-Sep-00
HRT POOL FUNB Office Medical Office 7,300,000.00 7,259,796.50 0.72% 12-Apr-01
FUNB Multifamily Student Housing 7,241,000.00 7,241,000.00 0.72% 25-Apr-01
FUNB Hospitality Suite 6,600,000.00 6,558,971.57 0.65% 12-Oct-00
HRT POOL FUNB Office Medical Office 6,500,000.00 6,464,202.36 0.65% 12-Apr-01
Cornerstone 2 FUNB Multifamily Conventional 6,250,000.00 6,250,000.00 0.62% 12-Dec-00
Cornerstone 2 FUNB Multifamily Conventional 6,250,000.00 6,250,000.00 0.62% 12-Dec-00
ML Retail Unanchored 6,000,000.00 5,992,079.10 0.60% 15-Mar-01
ML Office Suburban 5,890,000.00 5,864,892.37 0.59% 29-Sep-00
ML Retail Unanchored 5,700,000.00 5,676,014.28 0.57% 11-Sep-00
B&G Pool FUNB Office Suburban 5,400,000.00 5,381,854.44 0.54% 28-Dec-00
FUNB Multifamily Conventional 5,360,000.00 5,344,747.54 0.53% 22-Jan-01
FIRST PAY MATURITY
DATE DATE OR ARD
- --------- -----------
01-Mar-01 01-Feb-11
01-Feb-01 01-Jan-11
01-Feb-01 31-Jan-11
01-Feb-01 01-Jan-11
01-Jul-01 01-Jun-11
01-Mar-01 01-Feb-11
01-Feb-01 01-Jan-08
01-Aug-00 01-Jul-10
01-Dec-00 01-Nov-10
10-Mar-01 10-Nov-10
01-Feb-01 01-Jan-11
01-May-01 01-Apr-11
01-Feb-01 01-Jan-11
01-Apr-01 01-Mar-11
01-Mar-01 01-Feb-11
01-May-01 01-Apr-11
01-May-01 01-Apr-11
01-Mar-01 01-Feb-11
01-Mar-01 01-Feb-11
01-Mar-01 01-Feb-11
01-Feb-01 01-Jan-11
01-Jul-00 01-Jun-10
01-Mar-01 01-Feb-11
01-Feb-01 01-Jan-11
01-Apr-01 01-Mar-11
01-Jun-01 01-May-11
01-Jan-01 01-Dec-10
01-Jun-01 01-Nov-09
01-May-01 01-Apr-11
01-May-01 01-Apr-11
01-Feb-01 01-Jan-11
01-Feb-01 01-Jan-11
01-Feb-01 01-Jan-11
01-Mar-01 01-Feb-11
01-May-01 01-Apr-11
01-Mar-01 01-Feb-11
01-Jul-00 01-Jun-10
01-Dec-00 01-Nov-10
01-Jan-01 01-Dec-10
01-Jun-01 01-May-11
01-Dec-00 01-Nov-10
01-Nov-00 01-Oct-10
01-Jun-01 01-May-11
01-Jun-01 01-May-11
01-Dec-00 01-Nov-10
01-Jun-01 01-May-11
01-Feb-01 01-Jan-11
01-Feb-01 01-Jan-11
01-May-01 01-Apr-11
01-Nov-00 01-Oct-10
01-Nov-00 01-Oct-10
01-Feb-01 01-Jan-11
01-Mar-01 01-Feb-11
175
ORIGINAL REMAINING MATURITY
LOAN TERM TO TERM TO REMAINING MONTHLY DATE
ADMINISTRATIVE INTEREST MATURITY MATURITY IO ORIGINAL REMAINING P&I OR ARD
MORTGAGE COST RATE ACCRUAL OR ARD OR ARD PERIOD AMORT TERM AMORT TERM PAYMENTS BALLOON ARD
RATE (%) (%) METHOD (MOS.) (MOS.) (MOS.) (MOS.) (MOS.) ($) BALANCE ($) LOANS
--------- -------------- ---------- -------- --------- --------- ---------- ---------- ----------- -------------- -----
7.58% 0.0522% Actual/360 120 116 300 296 407,599.81 44,563,670.12 N
7.75% 0.0522% Actual/360 120 115 43 300 300 377,664.38 45,402,308.38 N
6.79% 0.0672% Actual/360 121 116 31 300 300 305,224.69 38,274,134.50 Y
8.03% 0.0522% Actual/360 120 115 360 355 251,663.10 30,593,990.26 N
7.77% 0.0672% Actual/360 120 120 360 360 235,077.80 29,125,395.93 Y
7.21% 0.0522% Actual/360 120 116 360 356 210,634.24 27,170,353.43 Y
8.05% 0.0672% Actual/360 84 79 360 355 211,149.30 26,799,551.80 N
8.70% 0.0472% Actual/360 120 109 360 349 207,883.25 24,126,118.67 Y
8.33% 0.0672% Actual/360 120 113 360 353 186,953.83 22,251,770.42 Y
7.80% 0.0522% 30/360 117 113 59 117 117 See Annex A-6 N
7.37% 0.0522% Actual/360 120 115 55 360 360 155,325.24 21,400,777.79 N
7.16% 0.0522% Actual/360 120 118 360 358 152,118.57 19,704,844.06 Y
8.00% 0.0672% Actual/360 120 115 300 295 162,081.41 17,300,794.79 N
7.09% 0.0522% Actual/360 120 117 360 357 137,628.35 17,923,114.00 N
7.88% 0.0672% Actual/360 120 116 300 296 141,440.74 15,202,800.76 Y
7.70% 0.0522% Actual/360 120 118 360 358 127,619.87 15,892,236.38 N
7.18% 0.0522% Actual/360 120 118 360 358 116,834.17 15,114,130.56 N
7.88% 0.0672% Actual/360 120 116 300 296 130,666.99 14,044,781.93 Y
7.32% 0.0522% Actual/360 120 116 360 356 111,282.76 14,238,800.72 N
7.25% 0.0522% Actual/360 120 116 300 296 117,094.71 13,051,208.83 N
7.35% 0.0522% Actual/360 120 115 115 NA NA 15,000,000.00 N
8.87% 0.0672% Actual/360 120 108 360 348 118,497.68 13,590,477.51 N
7.38% 0.0272% Actual/360 120 116 360 356 100,197.31 12,764,047.86 N
7.35% 0.0522% Actual/360 120 115 115 NA NA 14,250,000.00 N
7.30% 0.0522% Actual/360 120 117 360 357 87,753.08 11,252,309.05 N
7.44% 0.0522% Actual/360 120 119 23 360 360 86,193.71 11,327,280.05 N
8.14% 0.0522% Actual/360 120 114 360 354 92,199.90 11,123,509.52 N
7.41% 0.0522% Actual/360 102 101 360 359 83,167.45 10,868,959.56 N
7.29% 0.0272% Actual/360 120 118 360 358 81,502.09 10,456,802.36 N
7.18% 0.0522% Actual/360 120 118 360 358 68,562.88 8,870,876.27 N
8.65% 0.0672% Actual/360 120 115 360 355 76,202.88 8,869,424.57 N
7.35% 0.0522% Actual/360 120 115 115 NA NA 9,500,000.00 N
7.50% 0.0522% Actual/360 120 115 360 355 66,425.38 8,389,357.38 N
7.25% 0.0522% Actual/360 120 116 300 296 68,666.65 7,653,486.82 N
7.30% 0.0672% Actual/360 120 118 360 358 64,717.90 8,297,275.54 N
7.25% 0.0522% Actual/360 120 116 300 296 67,221.04 7,492,360.13 N
8.59% 0.0672% Actual/360 120 108 360 348 69,777.08 8,158,423.16 N
7.94% 0.0522% Actual/360 120 113 360 353 59,096.48 7,230,786.79 N
7.88% 0.0672% Actual/360 120 114 480 474 54,905.78 7,704,251.14 N
7.22% 0.0522% Actual/360 120 119 120 119 87,934.13 N
8.30% 0.0522% Actual/360 120 113 360 353 56,608.84 6,751,954.88 Y
8.00% 0.0522% Actual/360 120 112 360 352 55,032.34 6,706,032.97 N
7.22% 0.0522% Actual/360 120 119 120 119 85,589.22 N
7.44% 0.0522% Actual/360 120 119 23 360 360 50,332.96 6,614,582.93 N
8.70% 0.0522% Actual/360 120 113 300 293 54,037.46 5,544,999.78 N
7.22% 0.0522% Actual/360 120 119 120 119 76,209.58 N
7.35% 0.0522% Actual/360 120 115 115 NA NA 6,250,000.00 N
7.35% 0.0522% Actual/360 120 115 115 NA NA 6,250,000.00 N
7.38% 0.0672% Actual/360 120 118 360 358 41,460.96 5,284,492.25 N
8.48% 0.0672% Actual/360 120 112 360 352 45,205.54 5,325,483.83 N
8.53% 0.0672% Actual/360 120 112 360 352 43,949.32 5,159,512.72 N
7.75% 0.0522% Actual/360 120 115 360 355 38,686.26 4,798,242.20 N
7.77% 0.0522% Actual/360 120 116 360 356 38,473.80 4,764,156.79 N
176
CUT-OFF
DATE LTV RATIO AT
APPRAISED APPRAISAL LTV MATURITY YEAR
PREPAYMENT PROVISIONS VALUE ($) DATE DSCR (X) RATIO ARD BUILT
- --------------------------------- ------------- ----------- ------- ------- ------------ ------
L(2.33),D(2.67),YM1%(4.75),O(.25) 73,200,000.00 December-00 1.31 74.48% 60.88% 1986
L(2.42),D(7.33),O(.25) 99,300,000.00 Various 2.12 50.35% 45.72% Various
15,000,000.00 November-00 1996
9,700,000.00 November-00 1995
16,000,000.00 November-00 1929
12,400,000.00 January-01 1985
30,200,000.00 November-00 1985
16,000,000.00 November-00 1986
L(2.42),D(7.18),O(0.5) 77,000,000.00 October-00 1.69 57.14% 49.71% 1980
L(2.42),D(7.33),O(.25) 44,250,000.00 August-00 1.21 65.74% 57.84% 1972
L(2),D(7.75),O(0.25) 43,000,000.00 February-01 1.26 76.16% 67.73% 1999
L(4),D(5.75),O(.25) 40,000,000.00 January-01 1.20 77.25% 67.93% 1999
L(2.42),D(4.08),O(0.5) 37,000,000.00 November-00 1.24 77.16% 72.43% Various
5,500,000.00 November-00 1968
12,750,000.00 November-00 1974
12,550,000.00 November-00 1972
6,200,000.00 November-00 1968
L(2.92),D(7.08) 37,600,000.00 March-00 1.20 70.22% 64.17% 1999
L(2.58),D(7.17),O(0.25) 43,500,000.00 Various 1.27 56.55% 51.15% Various
29,800,000.00 July-00 1989
13,700,000.00 August-00 1982
L(2),D(7.75) 66,900,000.00 December-00 1.80 35.50% 2000
L(5),D(4),O(1) 29,100,000.00 November-00 1.20 77.32% 73.54% 1999
L(2.17),D(7.58),O(.25) 31,600,000.00 February-01 1.27 71.10% 62.36% 1917
L(2.42),D(7.33),O(0.25) 29,000,000.00 October-00 1.31 72.04% 59.66% 1958-1998
L(2.25),D(7.58),O(.17) 25,300,000.00 January-01 1.24 75.33% 66.00% 1999
L(2.33),D(7.42),O(0.25) 28,090,000.00 Various 1.35 65.66% 54.12% Various
1,400,000.00 October-00 1984
2,720,000.00 September-00 1986
3,000,000.00 September-00 1987
2,070,000.00 October-00 1990
7,500,000.00 September-00 1954
1,820,000.00 October-00 1988
1,980,000.00 September-00 1988
2,200,000.00 October-00 1994
2,650,000.00 September-00 1994
2,750,000.00 September-00 1987
L(4),D(5.83),O(.17) 24,700,000.00 December-00 1.28 72.38% 64.34% 1999
L(4),D(5.75),O(.25) 23,000,000.00 February-01 1.32 74.90% 65.71% 1999
L(2.33),D(7.42),O(0.25) 28,160,000.00 Various 1.38 60.51% 49.87% Various
2,600,000.00 August-00 1983
2,820,000.00 September-00 1989
3,210,000.00 September-00 1983
2,120,000.00 October-00 1985
4,130,000.00 September-00 1997
3,250,000.00 October-00 1988
1,880,000.00 September-00 1988
1,550,000.00 September-00 1985
2,980,000.00 October-00 1996
3,620,000.00 August-00 1986
L(4),D(5.75),O(.25) 20,350,000.00 January-01 1.20 79.36% 69.97% 1991
L(4),D(5.75),O(.25) 21,700,000.00 December-00 1.24 74.30% 60.14% 1968
L(2.42),D(7.33),O(.25) 23,800,000.00 November-00 1.83 63.03% 63.03% 1985
L(3),D(6.75),O(0.25) 25,300,000.00 May-00 1.33 58.56% 53.72% 1955
L(2.33),D(7.42),O(0.25) 18,150,000.00 December-00 1.29 79.64% 70.33% 1990
L(2.42),D(7.33),O(.25) 22,650,000.00 December-00 1.95 62.91% 62.91% 1984
L(3),D(6.75),O(.25) 16,600,000.00 January-01 1.30 76.96% 67.78% 1990
L(4),D(5.83),O(.17) 15,500,000.00 February-01 1.25 80.00% 73.08% 2000
L(2.50),D(7.25),O(.25) 17,700,000.00 October-00 1.25 69.81% 62.84% 1987
L(4),D(4.25),O(.25) 16,700,000.00 February-01 1.31 71.82% 65.08% 1977
L(2.17),D(7.58),O(0.25) 14,900,000.00 February-01 1.26 79.76% 70.18% 1999
L(4),D(5.75),O(.25) 13,500,000.00 February-01 1.36 74.90% 65.71% 1999
L(2.42),D(7.33),O(0.25) 15,600,000.00 August-00 1.35 62.49% 56.86% 1970
L(2.42),D(7.33),O(.25) 15,250,000.00 December-00 1.75 62.30% 62.30% 1984
L(3),D(6.75),O(.25) 12,170,000.00 November-00 1.31 77.78% 68.93% 1999
L(4),D(5.75),O(.25) 12,700,000.00 December-00 1.35 74.44% 60.26% 1969
L(2.17),YM1%(7.58),O(0.25) 13,000,000.00 February-01 1.40 72.52% 63.83% 1969-1970
L(4),D(5.75),O(.25) 12,600,000.00 December-00 1.26 73.46% 59.46% 1965
L(3),D(6.75),O(0.25) 11,300,000.00 April-00 1.26 79.15% 72.20% 1983
L(4),D(5.75),O(.25) 13,600,000.00 August-00 1.25 59.30% 53.17% 1938
L(2.50),D(7.25),O(0.25) 43,600,000.00 October-00 2.41 18.32% 17.67% NAP
L(2.08),D(7.75),O(.17) 17,850,000.00 January-01 1.22 41.79% 1980/1987/1993
L(3),D(6.75),O(.25) 11,300,000.00 January-00 1.28 66.10% 59.75% 1953
L(4),D(5.75),O(.25) 16,000,000.00 July-00 1.72 46.65% 41.91% 1982
L(2.08),D(7.75),O(.17) 16,250,000.00 January-01 1.22 44.68% 1975
L(4),D(5.83),O(.17) 11,500,000.00 February-01 1.20 62.97% 57.52% 1999
L(4),D(5.75),O(.25) 8,800,000.00 August-00 1.42 74.53% 63.01% 1998
L(2.08),D(7.75),O(.17) 13,250,000.00 January-01 1.20 48.79% 1991
L(2.42),D(7.33),O(.25) 10,350,000.00 December-00 1.97 60.39% 60.39% 1978
L(2.42),D(7.33),O(.25) 10,200,000.00 November-00 1.73 61.27% 61.27% 1983
L(2.17),D(7.58),O(0.25) 7,500,000.00 January-01 1.44 79.89% 70.46% 1981
L(2.67),D(7.08),O(0.25) 7,900,000.00 April-00 1.25 74.24% 67.41% 1989
L(2.67),D(7.08),O(0.25) 9,100,000.00 June-00 1.38 62.37% 56.70% 1988
L(4),D(5.50),O(.50) 9,250,000.00 October-00 1.34 58.18% 51.87% 1986
L(4),D(5.75),O(.25) 6,700,000.00 July-00 1.25 79.77% 71.11% 1974
CUT-OFF
DATE LOAN
YEAR NUMBER OF UNIT OF AMOUNT PER
RENOVATED (UNITS) MEASURE (UNIT) ($)
--------- --------- ------- ----------
NA 252,136 Sq. Ft. 216
Various 807 Rooms 61,958
NA 150 Rooms
NA 114 Rooms
1996 160 Rooms
1998 128 Rooms
NA 159 Rooms
2000 96 Rooms
NA 607,036 Sq. Ft. 72
1999 385 Units 88,551
NA 221,752 Sq. Ft. 148
NA 288 Units 107,297
Various 846 Units 33,747
1993 112 Units
1997 304 Units
2000 304 Units
1998 126 Units
NA 153,636 Sq. Ft. 172
Various 188,163 Sq. Ft. 131
NA 138,938 Sq. Ft.
1998 49,225 Sq. Ft.
NA 92,200 Sq. Ft. 258
NA 336 Units 66,964
1990 123,277 Sq. Ft. 182
1993-1997 193,894 Sq. Ft. 108
NA 284 Units 72,036
Various 5,314 Units 3,471
NA 393 Units
NA 452 Units
NA 412 Units
NA 706 Units
1999 935 Units
NA 326 Units
NA 405 Units
NA 425 Units
NA 595 Units
NA 665 Units
NA 175,167 Sq. Ft. 102
NA 296,496 Sq. Ft. 58
Various 4,873 Units 3,497
NA 528 Units
NA 461 Units
NA 541 Units
NA 324 Units
NA 481 Units
NA 499 Units
NA 397 Units
NA 484 Units
NA 445 Units
1998 713 Units
NA 390 Units 41,409
NA 428 Units 37,669
1998 484 Units 30,992
Various 217,569 Sq. Ft. 68
NA 280 Units 51,626
1998 362 Units 39,365
NA 158,286 Sq. Ft. 81
NA 188 Units 65,957
NA 129,099 Sq. Ft. 96
NA 58,075 Sq. Ft. 207
NA 111,000 Sq. Ft. 107
NA 183,880 Sq. Ft. 55
1998 323,000 Sq. Ft. 30
1998 304 Units 31,250
NA 88,838 Sq. Ft. 107
NA 278 Units 34,009
1992/1994 229,384 Sq. Ft. 41
NA 268 Units 34,535
NA 63,072 Sq. Ft. 142
1986 78,958 Sq. Ft. 102
NA 29,645 Sq. Ft. 269
NA 114,566 Sq. Ft. 65
NA 85,223 Sq. Ft. 88
NA 71,553 Sq. Ft. 104
1997 80,740 Sq. Ft. 90
NA 156 Units 46,417
NA 102 Rooms 64,304
1999 81,800 Sq. Ft. 79
1996 196 Units 31,888
1998 210 Units 29,762
NA 67,063 Sq. Ft. 89
NA 47,907 Sq. Ft. 122
NA 39,686 Sq. Ft. 143
NA 69,370 Sq. Ft. 78
2001 200 Units 26,724
177
LARGEST LARGEST
OCCUPANCY OCCUPANCY NET CASH FLOW TENANT TENANT
RATE (%) AS OF DATE ($) LARGEST TENANT SQ. FT % OF NRA
- --------- ----------- ------------- -------------- ------- ----------
100.00% 31-Dec-00 6,415,301.22 Steptoe & Johnson 186,840 74.1%
84.50% 9,616,355.94
82.03% 1,527,494.58
82.71% 945,197.28
76.69% 1,564,682.79
80.00% 1,097,991.76
91.76% 2,792,195.76
84.23% 1,688,793.77
100.00% 22-Sep-00 6,181,869.00 SmithKline Beecham Corp. 596,128 98.2%
92.90% 20-Feb-01 3,121,566.50
99.30% 09-Apr-01 3,563,896.00 King Kullen Grocery Co., Inc. 48,000 21.6%
97.00% 22-Jan-01 3,043,481.94
Various 3,142,893.00
97.32% 25-Oct-00 468,449.00
97.37% 25-Oct-00 1,138,188.00
93.09% 25-Oct-00 976,566.00
96.83% 25-Oct-00 559,690.00
100.00% 31-Dec-00 2,992,914.00 Hewlett Packard 54,266 35.3%
Various 2,856,132.00 Various Various
100.00% 01-Jul-00 1,766,548.00 MedImmune 84,668 60.9%
100.00% 01-Jun-00 1,089,583.00 Gene Logic 49,225 100.0%
100.00% 01-Jan-00 7,036,247.64 Qwest Communications Corporation 92,200 100.0%
98.21% 01-Mar-01 2,234,099.45
100.00% 01-Dec-00 2,311,829.08 London Fog Industries 16,500 13.4%
89.30% 15-Feb-01 2,543,379.00 Longs Drug Store 30,784 15.9%
93.70% 20-Feb-01 1,910,626.76
Various 2,295,456.00
80.40% 19-Nov-00 114,891.00
88.50% 19-Nov-00 238,974.00
90.53% 19-Nov-00 264,472.00 Republic Western 4,620
91.60% 19-Nov-00 142,581.00
93.58% 19-Nov-00 594,952.00 Zyacorp Entertainment 32,946
84.70% 17-Nov-00 161,846.00
84.20% 19-Nov-00 143,610.00
89.40% 19-Nov-00 173,859.00
83.50% 05-Nov-00 229,294.00
74.60% 19-Nov-00 230,976.00
100.00% 03-Jan-01 1,962,123.04 Futurelink Micro Visions 77,326 44.1%
96.35% 15-Jan-01 1,852,519.53 Wal-Mart 221,896 74.8%
Various 2,166,258.00
75.95% 19-Nov-00 237,790.00
88.00% 19-Nov-00 267,658.00
70.50% 19-Nov-00 115,898.00 La Cabana Restaurant 2,400
92.90% 19-Nov-00 180,317.00
88.19% 19-Nov-00 303,744.00
86.97% 24-Nov-00 292,622.00
86.65% 19-Nov-00 168,302.00
81.00% 19-Nov-00 119,278.00
83.40% 19-Nov-00 220,797.00
79.10% 17-Nov-00 259,851.00
95.90% 21-Dec-00 1,602,636.38
93.93% 29-Dec-00 1,748,867.64
94.42% 20-Nov-00 2,014,060.51
99.65% 01-Jan-01 1,886,656.00 The City of New York's Dept. of Youth
& Community Development 78,145 35.9%
95.00% 30-Nov-00 1,552,170.00
92.37% 20-Nov-00 2,041,953.76
86.42% 06-Feb-01 1,364,308.59 Safeway 51,922 32.8%
94.50% 19-Feb-01 1,297,362.34
95.33% 01-Nov-00 1,384,609.03 Bell Atlantic Mobile Systems 25,277 19.6%
91.98% 08-Mar-01 1,310,237.67 Bank of America (sub-let to Rite-Aid) 24,744 42.6%
100.00% 12-Jan-01 1,233,128.00 Marshall's 30,000 27.0%
99.18% 10-Jan-01 1,115,679.28 Wal-Mart 151,980 82.7%
100.00% 01-Aug-00 1,238,169.00 Harmony Foods 160,000 49.5%
93.42% 20-Nov-00 1,225,264.85
94.60% 28-Feb-01 1,042,336.23 Food Lion, Inc. 44,874 50.5%
97.12% 29-Dec-00 1,114,808.97
97.31% 12-Mar-01 1,089,472.00 Ames 77,352 33.7%
95.90% 29-Dec-00 1,018,260.19
100.00% 31-Mar-00 1,058,170.00 Analog Devices 63,072 100.0%
100.00% 25-Sep-00 885,820.13 Lee, Burkhard, Lui, Inc. 13,515 17.1%
100.00% 28-Aug-00 1,588,400.00 Lexington Avenue & 42nd Street 29,645 100.0%
100.00% 31-Dec-00 1,289,095.38 HCA -The Healthcare Company 114,566 100.0%
91.65% 06-Apr-01 869,625.20 604 - RP Property Management 4,358 5.1%
96.12% 15-Dec-00 1,137,223.88 E-Color 24,649 34.4%
100.00% 31-Dec-00 1,255,884.71 KS Management Services, L.L.P. 80,740 100.0%
82.40% 19-Feb-01 723,858.55
81.54% 917,726.37
100.00% 31-Dec-00 1,099,199.62 HEALTHSOUTH Medical Center, Inc. 81,800 100.0%
96.43% 20-Nov-00 903,640.59
92.38% 20-Nov-00 794,425.65
98.60% 12-Feb-01 716,245.00 Olive Garden 9,098 13.6%
95.90% 11-Sep-00 677,593.00 TGI Fridays 8,894 18.6%
100.00% 31-May-00 727,596.00 Rite Aid 6,330 16.0%
100.00% 28-Dec-00 624,095.28 Applied Materials, Inc. 20,108 29.0%
90.00% 01-Jan-01 578,815.79
LARGEST
TENANT
EXP. DATE 2ND LARGEST TENANT
--------------- ------------------
Multiple Spaces RIAA
31-Mar-13 Associated Press
31-Aug-19 The Wiz
31-Mar-10 Spectrum Sports Club
Various Various
30-Nov-06 Genetic Therapy
30-Nov-07
14-Dec-10
30-Sep-09 WRB Associates/Marchon Eyewear
31-May-08 Foodland
31-Mar-05 American Business Machines
31-Mar-09 Greater Newberryport Education
13-Aug-10 Interworks Computer Products
14-Sep-19 Goody's
31-Mar-04 Money Mart
01-Feb-10 Pace University
30-Sep-10 Boat America Corporation
Multiple Spaces Silicon Graphics
01-Aug-07 Kaplan Test Prep
30-Apr-10 Old Navy
16-Mar-19 Movie Gallery
01-Aug-10 Lipton Company
17-Dec-19 Eckerd Corporation
28-Feb-19 Shop n Save
31-Mar-10
Multiple Spaces Syndesis Studio, Inc.
30-Jun-11
30-Jun-04
01-Oct-03 PH1, PH4, PH6 & PH7 - Earthquake Edit Inc.
31-Mar-07 Genesys Telecommunications
31-Aug-11
30-Jun-09
13-Feb-05 Transworld/Coconuts
01-May-03 Nori, Hennion & Walsh
31-May-05 Mishima Foods
30-Apr-04 Hand Technologies, Inc.
178
3RD 3RD
2ND 2ND 2ND 3RD LARGEST 3RD
LARGEST LARGEST LARGEST LARGEST TENANT LARGEST
TENANT TENANT TENANT TENANT % OF TENANT
SQ. FT % OF NRA EXP. DATE 3RD LARGEST TENANT SQ. FT NRA EXP. DATE
- ------- -------- --------------- ------------------ ------ ------- ---------
27,744 11.0% Multiple Spaces Dorsey & Whitney 17,750 7.0% 31-Jul-01
9,012 1.5% 30-Nov-02 Dewa Corporation 1,896 0.3% 31-Jan-01
25,444 11.5% 30-Nov-14 Old Navy 24,080 10.9% 31-Aug-10
36,500 23.8% 30-Jun-14 CB Richard Ellis 25,985 16.9% 30-Sep-09
Various Various Various Various Various
39,494 28.4% 31-Jul-03 Earth Data 14,776 10.6% 30-Jun-03
14,144 11.5% 31-Aug-10 Sticht Women's World Banking 12,144 9.9% 31-Dec-04
28,435 14.7% 31-Dec-10 Ross Stores, Inc. 28,304 14.6% 30-Jun-07
1,829 30-Sep-01 Image Time 1,368 31-Jul-01
11,920 30-Jun-08 Tom's Discount 11,272 31-Oct-03
21,400 12.2% 05-Mar-05 Clarion Advanced Technology 16,803 9.6% 15-Nov-04
25,200 8.5% 30-Nov-14 Fashion Bug 8,000 2.7% 30-Nov-04
2,400 30-Jun-02 Yellow Rose 2,400 MTM
21,369 9.8% 30-Sep-04 Riverside Research 14,947 6.9% 30-May-10
10,550 6.7% 15-Jan-06 Blockbuster Video 6,400 4.0% 28-Feb-06
19,017 14.7% 31-May-03 International SOS Assistance 18,753 14.5% 31-Mar-04
15,587 26.8% 01-Nov-07 Course Reader Material 2,495 4.3% 30-Mar-06
25,000 22.5% 30-Jun-05 Bed Bath & Beyond 25,000 22.5% 31-Jan-11
4,500 2.4% 31-Aug-05 Dollar Tree 4,400 2.4% 20-May-04
145,400 45.0% 08-Dec-05
10,908 12.3% 24-Jan-20 New Fitness For Ladies 5,000 5.6% 28-Feb-05
53,690 23.4% 31-Aug-13 Staples 17,000 7.4% 30-Apr-04
6,225 7.9% 31-Aug-02 Peter Norton 5,450 6.9% 31-Aug-03
2,899 3.4% 30-Jun-03 206/208 - Britt, Joe Freeman 2,048 2.4% 31-Jul-01
16,973 23.7% 31-Mar-03 American Lawyer Media 14,632 20.4% 31-Aug-09
7,840 11.7% 31-Jan-06 Gateway 2000 7,376 11.0% 31-Oct-02
8,208 17.1% 31-Aug-02 FYI Systems Inc 8,032 16.8% 14-May-04
5,868 14.8% 12-May-10 Westwood Surgical 4,508 11.4% 30-Nov-03
19,143 27.6% 11-Jun-04 RMT, Inc. 18,978 27.4% 31-Aug-03
LARGEST
AFFILIATED
SPONSOR FLAG
(> THAN 4.0%
LOCKBOX OF POOL) LOAN NUMBER
------------ ------------ -----------
Springing 1
Innkeepers 2
Innkeepers 2.1
Innkeepers 2.2
Innkeepers 2.3
Innkeepers 2.4
Innkeepers 2.5
Innkeepers 2.6
Hard 3
4
Hard 5
Hard 6
7
7.1
7.2
7.3
7.4
Hard-Upfront 8
Soft-Springing 9
9.1
9.2
Hard 10
11
12
13
14
Springing 15
15.01
15.02
15.03
15.04
15.05
15.06
15.07
15.08
15.09
15.10
Springing 16
17
Springing 18
18.01
18.02
18.03
18.04
18.05
18.06
18.07
18.08
18.09
18.10
19
Hard 20
Springing Cornerstone 21
22
23
Springing Cornerstone 24
25
26
27
28
29
30
Hard-Upfront 31
Springing Cornerstone 32
33
Hard 34
35
Hard 36
Hard-Upfront 37
38
39
Springing 40
41
42
Springing 43
44
45
Springing 46
Springing Cornerstone 47
Springing Cornerstone 48
49
Hard-Springing 50
51
52
53
179
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2001-C2
ANNEX A-1 CERTAIN CHARACTERISTICS OF THE
MORTGAGE LOANS AND MORTGAGED PROPERTIES
LOAN ZIP
NUMBER PROPERTY NAME ADDRESS CITY STATE CODE
- -----------------------------------------------------------------------------------------------------------------------------------
54 1425 Lover's Lane 1425 Lover's Lane Augusta GA 30901
55 Toscana Apartments 17910 Kelly Boulevard Dallas TX 75287
56 Saddle Oak Apartments 1014 Lois Place Joliet IL 60435
57 North Royal Plaza 1029 N Royal Street Alexandria VA 22314
58 TownePlace Suites - Tallahassee 1876 Capital Circle Tallahassee FL 32308
59 Nucleus Business Plaza 900 West Owens Avenue Las Vegas NV 89106
60 GG-Green Valley Apartments 150 Ridge Pke Lafayette Hills PA 19444
61 Sherwin Williams Pavilion 1323-1393 Mt. Zion Road Morrow GA 30260
62 Skyline Terrace Apartments 1330 Skyline Drive Monterey CA 93940
63 Pacific Rim Shopping Center 10795 Blaney Avenue Cupertino CA 95014
64 Pacific Pointe Corporate Center 903 Calle Amanecer San Clemente CA 92673
65 Sierra Ridge Apartments 1401 Patricia Drive San Antonio TX 78213
66 The Colonnade Shopping Center 9031 Research Blvd. Austin TX 78759
67 800 & 801 West 34th Street 800 & 801 West 34th Street Austin TX 78705
68 Chippenham Medical - Hioaks & Janke 500 Hioaks & 7103-7153 Jahnke Road Richmond VA 23225
69 8151 Blanding Blvd. 8151 Blanding Blvd. Jacksonville FL 32299
70 800 Waterfront 800 Waterfront Drive Pittsburgh PA 15222
71 Copper Beech Townhomes Oakwood Ave. Patton Township PA 16803
72 3615 Lamar Avenue 3615 Lamar Avenue Memphis TN 38118
73 Rite Aid Galt 1063 C Street Galt CA 95632
74 Pecan Place Apartment 2001 Jenkins Street Pasadena TX 77506
75 Villa Marquis 2730 Fyke Road Farmers Branch TX 75234
76 Andrew's Mark Townhomes 701 E. Arkansas Lane Arlington TX 76010
77 Birmingham MOB #1 1222 14th Avenue South Birmingham AL 35203
78 Bellaire Plaza 5420 Dashwood Houston TX 77007
79 Gardens Square Retail 11701 US Highway 1 Palm Beach Gardens FL 33408
80 Kendall Building 1522 South Broadway Green Bay WI 54304
81 Healdsburg Plaza II 375 Healdsburg Avenue Healdsburg CA 95448
82 Rite Aid Palm Desert 41800 Washington Street Palm Desert CA 92260
83 Kershaw Commons 88-108 Cleveland Avenue & 82-96 Kershaw Street Newark DE 19711
84 Kmart Center - Sterling 2901 Lincoln Way Sterling IL 61081
85 Russell Woods Apartments 2255 Webb Detroit MI 48206
86 1930 West Main Street 1930 West Main Street Stamford CT 06902
87 ZION- Buccaneer Court Apts 1604 Cherokee Road Johnson City TN 37604
88 Riverside Apartments 939 S. Riverside Road Clarksville TN 37040
89 American Sports Medicine Institute 1313 13th Street South Birmingham AL 35205
90 Brookside Apartments 5,7,10 and 12 Totman Road Woburn MA 01801
91 Potter Building - San Francisco 576 Sacramento Street San Francisco CA 94111
92 ZION- Homestead Properties 1500 & 1616 Seminole Dr & 806-818 Morningside Dr. Johnson City TN 37604
93 Rite Aid -Portage Oakland 1950 W. Centre St. Portage MI 49024
94 Robert Reid Warehouse 6817/6829 Avenue K Plano TX 75074
95 Scottsdale Village Center 3107 Eubank Blvd NE Albuquerque NM 87111
96 Rite Aid Roanoke Jamison 1301 Jamison Avenue Roanoke VA 24013
97 Rite Aid-Warren NE Corner of 8 Mile & Van Dyke Roads Warren MI 48092
98 17514 Ventura Blvd. 17514 Ventura Blvd. Encino CA 91316
99 Southwest General Medical Building 7390 Barlite Road San Antonio TX 78224
100 Sunshine Village Apartments 1800 - 1880 Sunshine Boulevard Naples FL 34116
101 901 North Broadway 901 North Broadway White Plains NY 10603
102 Stuart Gardens 1600 S. Kanner Highway Stuart FL 34994
103 Greenhill Estates MHP 800 North Walnut Roanoke TX 76262
104 Meridian Retail Center 1518 - 1560 East First Street Meridian ID 83642
105 Harbin Avenue Apartments 217-221 Harbin Avenue Carson City NV 89702
106 Long Beach Retail 4545 E. Pacific Coast Highway Long Beach CA 90804
107 Cameron Street Apartments 47-51 Cameron Street Brookline MA 02146
(1) For loan numbers 4 and 14 amounts available under certain Letters of Credit
were taken into consideration when calculating the DSCR and the Cut-Off Date
LTV Ratio as described in the Prospectus Supplement.
180
CROSS % OF
COLLATERALIZED AGGREGATE
AND CROSS CUT-OFF
DEFAULTED LOAN GENERAL SPECIFIC ORIGINAL LOAN CUT-OFF DATE DATE
LOAN FLAG ORIGINATOR PROPERTY TYPE PROPERTY TYPE BALANCE ($) LOAN BALANCE ($) BALANCE
- -------------------------------------------------------------------------------------------------------------------------
FUNB Industrial Warehouse/Distribution 5,325,000.00 5,315,958.24 0.53%
Cornerstone 2 FUNB Multifamily Conventional 5,250,000.00 5,250,000.00 0.52%
ML Multifamily Conventional 5,250,000.00 5,234,236.72 0.52%
FUNB Office Suburban 5,200,000.00 5,190,371.26 0.52%
FUNB Hospitality Extended Stay 5,213,000.00 5,180,593.80 0.52%
FUNB Mixed Use Office/Retail 5,020,000.00 5,002,153.04 0.50%
ML Multifamily Conventional 5,000,000.00 4,980,816.51 0.50%
FUNB Retail Unanchored 4,969,000.00 4,954,604.29 0.49%
ML Multifamily Conventional 4,950,000.00 4,932,902.32 0.49%
FUNB Retail Shadow Anchored 4,900,000.00 4,885,860.58 0.49%
Olen 2 FUNB Office Suburban 4,870,000.00 4,864,074.63 0.49%
Cornerstone 2 FUNB Multifamily Conventional 4,750,000.00 4,750,000.00 0.47%
ML Retail Unanchored 4,700,000.00 4,685,061.33 0.47%
B&G Pool FUNB Office Medical Office 4,500,000.00 4,484,878.70 0.45%
HRT POOL FUNB Office Medical Office 4,200,000.00 4,176,869.22 0.42%
ML Retail Anchored 4,130,000.00 4,110,951.53 0.41%
ML Office CBD 4,075,000.00 4,061,755.12 0.41%
FUNB Multifamily Student Housing 4,000,000.00 3,986,107.73 0.40%
FUNB Industrial Warehouse/Distribution 3,686,000.00 3,680,416.93 0.37%
FUNB Retail Drug Store 3,308,967.89 3,308,967.89 0.33%
FUNB Multifamily Conventional 3,300,000.00 3,286,626.28 0.33%
ML Multifamily Conventional 3,250,000.00 3,240,241.78 0.32%
FUNB Multifamily Conventional 3,200,000.00 3,198,657.20 0.32%
HRT POOL FUNB Office Medical Office 3,000,000.00 2,983,478.02 0.30%
HRT POOL FUNB Office Medical Office 3,000,000.00 2,983,478.02 0.30%
FUNB Retail Unanchored 2,935,000.00 2,926,412.01 0.29%
FUNB Industrial Warehouse/Distribution 2,920,000.00 2,907,066.95 0.29%
ML Office Suburban 2,850,000.00 2,842,254.83 0.28%
FUNB Retail Drug Store 2,637,271.59 2,637,271.59 0.26%
FUNB Multifamily Conventional 2,365,000.00 2,358,072.98 0.24%
FUNB Retail Anchored 2,360,000.00 2,352,857.69 0.23%
FUNB Multifamily Conventional 2,300,000.00 2,295,971.09 0.23%
FUNB Retail Unanchored 2,250,000.00 2,243,761.59 0.22%
ZION ML Multifamily Conventional 2,160,000.00 2,153,134.58 0.21%
FUNB Multifamily Conventional 2,150,000.00 2,142,972.90 0.21%
HRT POOL FUNB Office Medical Office 2,100,000.00 2,088,434.61 0.21%
FUNB Multifamily Conventional 2,000,000.00 2,000,000.00 0.20%
FUNB Office CBD 2,000,000.00 1,997,597.99 0.20%
ZION ML Multifamily Conventional 1,975,000.00 1,968,722.57 0.20%
FUNB Retail Drug Store 1,706,072.12 1,706,072.12 0.17%
ML Industrial Flex 1,700,000.00 1,694,596.63 0.17%
ML Retail Unanchored 1,700,000.00 1,693,841.66 0.17%
FUNB Retail Drug Store 1,588,520.49 1,588,520.49 0.16%
FUNB Retail Drug Store 1,478,788.32 1,478,788.32 0.15%
FUNB Office Suburban 1,473,000.00 1,466,704.77 0.15%
HRT POOL FUNB Office Medical Office 1,400,000.00 1,392,289.74 0.14%
FUNB Multifamily Conventional 1,280,000.00 1,276,433.23 0.13%
FUNB Office Suburban 1,263,000.00 1,257,832.28 0.13%
FUNB Multifamily Conventional 1,206,000.00 1,202,018.19 0.12%
FUNB Mobile Home Park Conventional 900,000.00 897,446.84 0.09%
FUNB Retail Unanchored 885,000.00 882,594.91 0.09%
FUNB Multifamily Conventional 870,000.00 867,076.53 0.09%
FUNB Retail Unanchored 665,000.00 663,366.40 0.07%
FUNB Multifamily Conventional 518,000.00 516,705.35 0.05%
ORIGINATION FIRST PAY MATURITY
DATE DATE DATE OR ARD
- -----------------------------------------------
01-Mar-01 01-Apr-01 01-Mar-11
12-Dec-00 01-Feb-01 01-Jan-11
26-Jan-01 01-Mar-01 01-Feb-11
06-Feb-01 01-Apr-01 01-Mar-11
12-Oct-00 01-Dec-00 01-Nov-10
28-Nov-00 01-Jan-01 01-Dec-10
21-Dec-00 01-Feb-01 01-Jan-11
16-Jan-01 01-Mar-01 01-Feb-11
05-Dec-00 01-Feb-01 01-Jan-11
31-Jan-01 01-Mar-01 01-Feb-11
07-Mar-01 01-May-01 01-Apr-11
12-Dec-00 01-Feb-01 01-Jan-11
28-Dec-00 01-Feb-01 01-Jan-11
28-Dec-00 01-Feb-01 01-Jan-11
12-Apr-01 01-Jun-01 01-May-11
28-Sep-00 01-Nov-00 01-Oct-10
28-Dec-00 01-Feb-01 01-Jan-11
29-Dec-00 01-Feb-01 01-Jan-11
15-Feb-01 01-Apr-01 01-Mar-11
01-May-01 01-Jul-01 01-Jun-13
01-Nov-00 01-Dec-00 01-Nov-05
26-Jan-01 01-Mar-01 01-Feb-11
31-Oct-00 01-Dec-00 01-Nov-10
12-Apr-01 01-Jun-01 01-May-11
12-Apr-01 01-Jun-01 01-May-11
22-Jan-01 01-Mar-01 01-Feb-11
12-Jan-01 01-Mar-01 01-Feb-11
03-Jan-01 01-Mar-01 01-Feb-11
01-May-01 01-Jul-01 01-Jun-13
24-Jan-01 01-Mar-01 01-Feb-11
18-Jan-01 01-Mar-01 01-Feb-11
05-Feb-01 01-Apr-01 01-Mar-11
05-Jan-01 01-Mar-01 01-Feb-11
22-Dec-00 01-Feb-01 01-Jan-11
05-Dec-00 01-Feb-01 01-Jan-11
12-Apr-01 01-Jun-01 01-May-11
21-Dec-00 01-Feb-01 01-Jan-11
13-Mar-01 01-May-01 01-Apr-11
22-Dec-00 01-Feb-01 01-Jan-11
01-May-01 01-Jul-01 01-Jun-13
15-Dec-00 01-Feb-01 01-Jan-11
04-Oct-00 01-Dec-00 01-Nov-10
01-May-01 01-Jul-01 01-Jun-13
01-May-01 01-Jul-01 01-Jun-13
22-Sep-00 01-Nov-00 01-Oct-10
12-Apr-01 01-Jun-01 01-May-11
17-Jan-01 01-Mar-01 01-Feb-11
20-Oct-00 01-Dec-00 01-Nov-10
14-Nov-00 01-Jan-01 01-Dec-10
15-Dec-00 01-Feb-01 01-Jan-06
18-Jan-01 01-Mar-01 01-Feb-11
22-Dec-00 01-Feb-01 01-Jan-11
12-Jan-01 01-Mar-01 01-Feb-11
23-Jan-01 01-Mar-01 01-Feb-11
181
ORIGINAL REMAINING MATURITY
LOAN TERM TO TERM TO REMAINING MONTHLY DATE
ADMINISTRATIVE INTEREST MATURITY MATURITY IO ORIGINAL REMAINING P&I OR ARD
MORTGAGE COST RATE ACCRUAL OR ARD OR ARD PERIOD AMORT TERM AMORT TERM PAYMENTS BALLOON ARD
RATE (%) (%) METHOD (MOS.) (MOS.) (MOS.) (MOS.) (MOS.) ($) BALANCE ($) LOANS
- ----------------------------------------------------------------------------------------------------------------------------------
7.75% 0.0522% Actual/360 120 117 360 357 38,148.95 4,734,361.75 N
7.35% 0.0522% Actual/360 120 115 115 NA NA 5,250,000.00 N
7.50% 0.0672% Actual/360 120 116 360 356 36,708.76 4,635,440.95 N
7.44% 0.0522% Actual/360 120 117 360 357 36,145.75 4,587,621.55 N
8.70% 0.0522% Actual/360 120 113 300 293 42,681.40 4,379,710.80 N
8.10% 0.0522% Actual/360 120 114 360 354 37,185.53 4,498,998.00 N
7.14% 0.0672% Actual/360 120 115 360 355 33,736.56 4,375,052.99 N
7.68% 0.0522% Actual/360 120 116 360 356 35,358.46 4,406,932.55 N
7.63% 0.0672% Actual/360 120 115 360 355 35,035.79 4,384,912.12 N
7.70% 0.0522% Actual/360 120 116 360 356 34,935.05 4,347,866.08 N
7.70% 0.0522% Actual/360 120 118 360 358 34,721.16 4,323,753.73 N
7.35% 0.0522% Actual/360 120 115 115 NA NA 4,750,000.00 N
8.00% 0.0672% Actual/360 120 115 360 355 34,486.93 4,201,448.96 N
7.75% 0.0522% Actual/360 120 115 360 355 32,238.55 3,998,535.17 N
7.22% 0.0522% Actual/360 120 119 120 119 49,243.11 N
8.17% 0.0672% Actual/360 120 112 360 352 30,795.34 3,707,630.61 Y
7.90% 0.0272% Actual/360 120 115 360 355 29,617.32 3,634,059.15 N
7.60% 0.0872% Actual/360 120 115 360 355 28,242.99 3,541,171.74 N
8.14% 0.0522% Actual/360 120 117 360 357 27,407.16 3,308,029.05 N
6.94% 0.0522% 30/360 144 144 144 144 33,926.58 0.00 N
8.29% 0.0522% Actual/360 60 53 360 353 24,884.66 3,169,109.00 N
7.50% 0.0672% Actual/360 120 116 360 356 22,724.47 2,869,558.77 N
8.18% 0.0522% Actual/360 120 113 360 359 23,883.24 2,898,924.17 N
7.22% 0.0522% Actual/360 120 119 120 119 35,173.65 N
7.22% 0.0522% Actual/360 120 119 120 119 35,173.65 N
7.63% 0.0522% Actual/360 120 116 360 356 20,783.84 2,599,809.86 N
7.75% 0.0522% Actual/360 120 116 300 296 22,055.60 2,387,774.45 N
8.00% 0.0672% Actual/360 120 116 360 356 20,912.29 2,547,196.68 N
6.83% 0.0522% 30/360 144 144 144 144 26,880.00 0.00 N
7.63% 0.0522% Actual/360 120 116 360 356 16,739.32 2,094,648.12 N
7.46% 0.0522% Actual/360 120 116 360 356 16,436.87 2,081,653.76 N
7.64% 0.0522% Actual/360 120 117 360 357 16,303.00 2,039,344.30 N
7.90% 0.0522% Actual/360 120 116 360 356 16,353.12 2,006,159.82 N
8.00% 0.0672% Actual/360 120 115 360 355 15,849.31 1,930,879.13 N
7.88% 0.0522% Actual/360 120 115 360 355 15,588.99 1,916,205.11 N
7.22% 0.0522% Actual/360 120 119 120 119 24,621.56 N
7.63% 0.0522% Actual/360 120 115 43 360 360 14,155.88 1,884,320.00 N
7.75% 0.0522% Actual/360 120 118 360 358 14,328.24 1,777,851.17 N
8.00% 0.0672% Actual/360 120 115 360 355 14,491.85 1,765,502.16 N
6.99% 0.0522% 30/360 144 144 144 144 17,535.83 0.00 N
8.00% 0.0672% Actual/360 120 115 360 355 12,474.00 1,519,672.28 N
8.75% 0.0672% Actual/360 120 113 360 353 13,373.91 1,546,001.11 N
6.82% 0.0522% 30/360 144 144 144 144 16,184.02 0.00 N
6.75% 0.0522% 30/360 144 144 144 144 15,011.22 0.00 N
8.47% 0.0522% Actual/360 120 112 360 352 11,294.79 1,331,521.74 N
7.22% 0.0522% Actual/360 120 119 120 119 16,414.37 N
7.88% 0.0522% Actual/360 120 116 360 356 9,280.89 1,140,597.44 N
8.25% 0.0522% Actual/360 120 113 360 353 9,488.50 1,135,717.52 N
8.40% 0.0522% Actual/360 120 114 360 354 9,187.76 1,088,376.09 N
8.50% 0.0522% Actual/360 60 55 360 355 6,920.22 866,044.08 N
8.00% 0.0522% Actual/360 120 116 360 356 6,493.82 790,970.93 N
7.75% 0.0522% Actual/360 120 115 360 355 6,232.79 773,049.47 N
8.50% 0.0522% Actual/360 120 116 360 356 5,113.27 601,243.97 N
8.42% 0.0522% Actual/360 120 116 360 356 3,951.81 467,439.06 N
182
CUT-OFF
DATE LTV RATIO AT
APPRAISED APPRAISAL LTV MATURITY OR YEAR YEAR NUMBER OF
PREPAYMENT PROVISIONS VALUE($) DATE DSCR(x) RATIO ARD BUILT RENOVATED (UNITS)
- ---------------------------------------------------------------------------------------------------------------------
L(2.25),D(7.50),O(.25) 6,920,000.00 October-00 1.33 76.82% 68.42% 1987 NA 277,500
L(2.42),D(7.33),O(.25) 8,250,000.00 December-00 1.78 63.64% 63.64% 1986 1998 192
L(2.33),D(7.42),O(0.25) 6,700,000.00 November-00 1.33 78.12% 69.19% 1972 1997-2000 188
L(3),D(6.75),O(.25) 6,800,000.00 January-01 1.25 76.33% 67.47% 1992 NA 37,051
L(4),D(5.75),O(.25) 6,950,000.00 August-00 1.46 74.54% 63.02% 1998 NA 95
L(3),D(6.75),O(.25) 6,810,000.00 September-00 1.22 73.45% 66.06% 1964 1993 75,071
L(2.42),D(7.33),O(0.25) 7,750,000.00 November-00 1.41 64.27% 56.45% 1965 1985/2000 98
L(4),D(5.75),O(.25) 6,625,000.00 November-00 1.37 74.79% 66.52% 1984 1994 66,946
L(2.42),D(7.33),O(0.25) 6,700,000.00 October-00 1.22 73.63% 65.45% 1974 2000 40
L(4), D(5.75), O(.25) 7,650,000.00 December-00 1.32 63.87% 56.83% 1963 2000 45,605
L(4),D(5.83),O(.17) 7,700,000.00 January-01 1.34 63.17% 56.15% 1997 NA 41,522
L(2.42),D(7.33),O(0.25) 8,200,000.00 December-00 1.92 57.93% 57.93% 1981 1999 232
L(2),YM1%(7.75),O(0.25) 6,900,000.00 October-00 1.42 67.90% 60.89% 1984 NA 57,372
L(4),D(5.50),O(.50) 8,600,000.00 October-00 1.32 52.15% 46.49% 1965/1975 1996 68,652
L(2.08),D(7.75),O(.17) 10,400,000.00 January-01 1.25 40.16% 1972/1982/1994 NA 97,921
L(2.67),D(6.83),O(0.5) 5,400,000.00 April-00 1.23 76.13% 68.66% 1985 1996 94,164
L(2.42),D(7.33),O(0.25) 5,150,000.00 November-00 1.21 78.87% 70.56% 2000 NA 35,366
L(4),D(5.75),O(.25) 5,100,000.00 December-00 1.23 78.16% 69.43% 2000 NA 48
L(4),D(5.75),O(.25) 5,150,000.00 October-00 1.20 71.46% 64.23% 1971 2000 157,000
L(2),D(10) 5,000,000.00 April-98 1.00 66.18% 0.00% 1991 NA 31,456
L(2.58),D(2.17),O(.25) 4,600,000.00 October-00 1.23 71.45% 68.89% 1977 1998 251
L(2.33),D(7.42),O(0.25) 4,250,000.00 November-00 1.36 76.24% 67.52% 1969 1997 142
L(4),D(5.75),O(.25) 4,600,000.00 October-00 1.25 69.54% 63.02% 1969 NA 138
L(2.08),D(7.75),O(.17) 6,300,000.00 January-01 1.24 47.36% 1981 NA 42,500
L(2.08),D(7.75),O(.17) 6,000,000.00 January-01 1.24 49.72% 1994 NA 56,031
L(4), D(5.75), O(.25) 4,200,000.00 September-00 1.38 69.68% 61.90% 2000 NA 19,895
L(3),D(6.75),O(.25) 3,850,000.00 December-00 1.31 75.51% 62.02% 1920 1999 189,721
L(2.33),D(7.42),O(0.25) 4,000,000.00 October-00 1.30 71.06% 63.68% 1998 NA 28,897
L(2),D(10) 4,000,000.00 June-98 1.00 65.93% 0.00% 1998 NA 17,700
L(4),D(5.75),O(.25) 3,200,000.00 November-00 1.31 73.69% 65.46% 1986 NA 30
L(2.33),D(7.42),O(.25) 2,950,000.00 October-00 1.24 79.76% 70.56% 1972 1997 104,960
L(4),D(5.75),O(.25) 3,150,000.00 November-00 1.49 72.89% 64.74% 1948 1998 156
L(4),D(5.75),O(.25) 3,600,000.00 May-00 1.67 62.33% 55.73% 1986 1992 36,000
L(2.42),D(7.33),O(0.25) 2,700,000.00 October-00 1.39 79.75% 71.51% 1975 NA 116
L(4),D(5.75),O(.25) 2,700,000.00 July-00 1.21 79.37% 70.97% 1975 NA 113
L(2.08),D(7.75),O(.17) 4,300,000.00 January-01 1.21 48.57% 1992 NA 27,800
L(3),D(6),O(1) 4,000,000.00 November-00 1.62 50.00% 47.11% 1964 NA 44
L(4),D(5.75),O(.25) 3,175,000.00 August-00 1.28 62.92% 56.00% 1907 1994 12,600
L(2.42),D(7.33),O(0.25) 2,500,000.00 October-00 1.34 78.75% 70.62% 1974 NA 91
L(2),D(10) 2,375,000.00 December-98 1.00 71.83% 0.00% 1998 NA 11,180
L(2.42),D(7.33),O(0.25) 2,500,000.00 October-00 1.71 67.78% 60.79% 2000 NA 29,000
L(2.58),D(7.17),O(0.25) 2,450,000.00 August-00 1.35 69.14% 63.10% 1978 NA 38,260
L(2),D(10) 2,650,000.00 July-98 1.14 59.94% 0.00% 1998 NA 11,057
L(2),D(10) 2,125,000.00 November-98 1.00 69.59% 0.00% 1998 NA 11,060
L(4),D(5.75),O(.25) 2,125,000.00 August-00 1.30 69.02% 62.66% 1978 1993 13,717
L(2.08),D(7.75),O(.17) 2,950,000.00 January-01 1.21 47.20% 1983 NA 26,645
L(4),D(5.75),O(.25) 1,660,000.00 November-00 1.23 76.89% 68.71% 1980 NA 39
L(4),D(5.75),O(.25) 2,500,000.00 September-00 1.20 50.31% 45.43% 1968 1999 30,761
L(3),D(6.75),O(.25) 1,600,000.00 October-00 1.20 75.13% 68.02% 1971 NA 32
L(4),D(.75),O(.25) 1,250,000.00 June-00 1.25 71.80% 69.28% 1983 NA 72
L(4),D(5.75),O(.25) 1,200,000.00 December-00 1.30 73.55% 65.91% 1978 1999 10,000
L(4),D(5.75),O(.25) 1,130,000.00 December-00 1.27 76.73% 68.41% 1996 NA 18
L(4),D(5.75),O(.25) 980,000.00 September-00 1.32 67.69% 61.35% 2000 NA 4,175
L(4),D(5.75),O(.25) 820,000.00 November-00 1.25 63.01% 57.00% 1900 NA 8
CUT-OFF
DATE LOAN
UNIT OF AMOUNT PER
MEASURE (UNIT)($)
- --------------------------
Sq. Ft. 19
Units 27,344
Units 27,842
Sq. Ft. 140
Rooms 54,533
Sq. Ft. 67
Units 50,825
Sq. Ft. 74
Units 123,323
Sq. Ft. 107
Sq. Ft. 117
Units 20,474
Sq. Ft. 82
Sq. Ft. 65
Sq. Ft. 43
Sq. Ft. 44
Sq. Ft. 115
Units 83,044
Sq. Ft. 23
Sq. Ft. 105
Units 13,094
Units 22,819
Units 23,179
Sq. Ft. 70
Sq. Ft. 53
Sq. Ft. 147
Sq. Ft. 15
Sq. Ft. 98
Sq. Ft. 149
Units 78,602
Sq. Ft. 22
Units 14,718
Sq. Ft. 62
Units 18,562
Units 18,964
Sq. Ft. 75
Units 45,455
Sq. Ft. 159
Units 21,634
Sq. Ft. 153
Sq. Ft. 58
Sq. Ft. 44
Sq. Ft. 144
Sq. Ft. 134
Sq. Ft. 107
Sq. Ft. 52
Units 32,729
Sq. Ft. 41
Units 37,563
Pads 12,465
Sq. Ft. 88
Units 48,171
Sq. Ft. 159
Units 64,588
183
LARGEST LARGEST
OCCUPANCY OCCUPANCY NET CASH FLOW TENANT TENANT
RATE AS OF DATE ($) LARGEST TENANT SQ. FT. % OF NRA
- ----------------------------------------------------------------------------------------------------------------------------------
100.00% 26-Feb-01 610,422.24 Richmond Bonded Warehouse Corp. 277,500 100.0%
97.92% 20-Nov-00 687,296.16
95.21% 20-Dec-00 587,210.00
100.00% 01-Feb-01 542,385.12 Young & Rubicam,Inc. 18,104 48.9%
78.93% 748,226.00
93.07% 28-Nov-00 546,067.40 Nucleus Associates, Ltd. (d/b/a Nucleus Medical & Dental) 18,600 24.8%
95.90% 11-Dec-00 572,268.00
94.27% 01-Dec-00 582,008.33 FCA of Ohio, Inc. (JoAnn Fabrics) 14,500 21.7%
100.00% 05-Nov-00 514,060.00
90.62% 11-Jan-01 554,424.49 Tin Tin Supermarket 21,871 48.0%
87.75% 03-Jan-01 557,314.66 Sunstone Hotel Investors 28,185 67.9%
89.13% 20-Nov-00 670,185.35
96.70% 01-Dec-00 586,972.00 Mother of Pearls 5,800 10.1%
81.06% 28-Dec-00 509,181.45 Scirex Xorp 12,540 18.3%
100.00% 31-Dec-00 740,906.39 HCA Health Services of Virginia, Inc. 97,921 100.0%
100.00% 11-Sep-00 455,871.00 Best Buy 45,000 47.8%
100.00% 01-Dec-00 429,535.00 Anthony Crane Retail, LP 21,476 60.7%
100.00% 20-Dec-00 416,287.44
100.00% 10-Apr-01 394,676.49 Builders First Source 157,000 100.0%
100.00% NA -- Single Tenant 407,119.00 Rite Aid of California 31,456 100.0%
94.00% 23-Feb-01 367,920.31
97.18% 12-Jan-01 370,722.00
92.00% 31-Jan-01 356,979.12
100.00% 31-Dec-00 521,433.30 HEALTH SOUTH Medical Center, Inc. 42,500 100.0%
98.38% 31-Mar-01 524,374.34 West Houston Healthcare Group 21,777 38.9%
90.95% 18-Apr-01 343,639.39 City Mattress of Florida, Inc. 13,898 69.9%
95.75% 12-Jan-01 346,487.85 Next Fiber 97,886 51.6%
100.00% 28-Sep-00 326,525.00 The Wine Alliance 15,181 52.5%
100.00% NA -- Single Tenant 322,560.00 Rite Aid of California 17,700 100.0%
100.00% 24-Jan-01 262,144.52
97.71% 03-Jan-01 243,686.25 Kmart 84,000 80.0%
88.46% 31-Jan-01 292,419.60
100.00% 05-Jan-01 327,337.63 BKM Enterprises 18,000 50.0%
97.41% 13-Oct-00 264,067.00
93.00% 20-Aug-00 226,745.84
100.00% 31-Dec-00 356,518.95 HEALTHSOUTH Medical Center, Inc. 27,800 100.0%
100.00% 05-Dec-00 275,669.50
100.00% 01-Dec-00 220,350.94 Transactions Unlimited 3,540 28.1%
95.60% 31-Oct-00 233,566.00
100.00% NA -- Single Tenant 211,061.00 Rite Aid of Michigan, Inc. 11,180 100.0%
100.00% 27-Apr-01 256,550.00 Signature Collectable 3,750 12.9%
96.90% 26-Feb-01 216,007.00 KLYT 3,600 9.4%
100.00% NA -- Single Tenant 221,067.00 Rite Aid of Virginia, Inc. 11,057 100.0%
100.00% NA -- Single Tenant 180,675.00 Rite Aid of Michigan, Inc. 11,060 100.0%
90.68% 22-Sep-00 176,404.26 Munoz Financial - Suite 102 1,400 10.2%
100.00% 31-Dec-00 237,964.51 New Medical Property Investors Company 26,645 100.0%
100.00% 30-Nov-00 136,810.54
92.93% 19-Oct-00 137,073.42 Terminix 5,000 16.3%
100.00% 14-Nov-00 132,317.60
98.60% 15-Dec-00 104,082.60
100.00% 16-Nov-00 101,246.91 Vina 3,000 30.0%
100.00% 01-Dec-00 95,059.95
100.00% 16-Oct-00 80,981.56 Starbucks Corporation 1,614 38.7%
100.00% 23-Jan-01 59,292.75
LARGEST
TENANT
EXP. DATE 2ND LARGEST TENANT
- ------------------------------------------------------------------------
31-Jul-08
Multiple Spaces ADI Technology Corporation (S/L ASAP Ventures.com)
31-Jul-05 Nevada Business Service
31-Jan-06 Sherwin Williams Paints
31-Oct-24 Tien Dau
06-Jun-05 Medicine Net
30-Jun-04 Black Eyed Pea
30-Jun-03 Jack Moncrief
30-Jun-04
31-Jan-19 Ashley's Furniture
31-Jul-10 McKeeson Automated Healthcare, Inc.
01-Sep-15
31-May-20
30-Jun-09
11-May-05 Baylor Methodist Primary Care
31-May-15 Third Federal Savings & Loan Association of Cleveland
31-Dec-04 Bay Engineering Castings
31-Jul-08 The Brown Bag
31-May-20
31-Jul-18 Dollar General
31-Jan-10 Dining Furniture of CT
30-Jun-09
14-May-04 Mission Valley Textiles
07-Jan-19
Multiple Spaces Total Lighting Products, Inc
31-May-01 Blue Eagel Book Shop
31-Aug-18
30-Nov-18
31-Aug-01 American Title - Suite 103
31-Dec-09
31-Oct-04 DRG Telemarketing
01-Aug-03 Alaser
14-Nov-10 General Mobile Electronics
184
3RD
2ND 2ND 2ND 3RD LARGEST 3RD
LARGEST LARGEST LARGEST LARGEST TENANT LARGEST
TENANT TENANT TENANT TENANT % OF TENANT
SQ. FT. % OF NRA EXP. DATE 3RD LARGEST TENANT SQ. FT. NRA EXP. DATE LOCKBOX
- -------------------------------------------------------------------------------------------------------------------------
Springing
12,491 33.7% 31-Jul-02 Trippi McMahon & Squier 6,456 17.4% 31-Dec-04
10,246 13.6% 30-Jun-05 Expertise School of Beauty 5,125 6.8% 30-Nov-05
7,986 11.9% 31-Dec-05 Outback Steakhouse 6,705 10.0% 30-Jun-04
2,867 6.3% 30-Nov-04 Ho Ho Restaurant 2,825 6.2% 31-May-03
4,381 10.6% 20-Nov-03 Charles Schwab & CO 1,840 4.4% 30-Jun-02 Hard
Springing
5,000 8.7% 28-Feb-01 Go Dance 4,090 7.1% 31-May-04
11,040 16.1% 31-Jul-07 Health South Inc. 6,325 9.2% 31-Mar-03
Springing
26,250 27.9% 31-Jan-11 George's Music 22,914 24.3% 31-Jan-11 Hard-Upfront
13,890 39.3% 04-Dec-08
00-Jan-00 00-Jan-00 Hard
Springing
14,892 26.6% 30-May-02 Joseph A. Montes, MD 4,430 7.9% 15-Feb-08 Springing
4,197 21.1% 31-Dec-05
44,566 23.5% 31-Oct-02 K&K Warehousing 39,209 20.7% 30-Nov-10
3,644 12.6% 14-Feb-04 Bear Republic Brewing Company 3,528 12.2% 30-Nov-03
00-Jan-00 00-Jan-00 Hard
7,760 7.4% 14-Jun-05 Rent-a-Center 4,800 4.6% 31-Dec-04
15,000 41.7% 31-Dec-04 Gloria's Kids 3,000 8.3% 31-Dec-04
Springing
1,510 12.0% 31-May-03 Jarvis and Associates 1,510 12.0% 28-Feb-03
00-Jan-00 00-Jan-00 Hard
3,500 12.1% 31-Jul-03 Usertool Foundry 3,500 12.1% 31-Oct-01
3,600 9.4% 28-Feb-02 Annies Soup 3,400 8.9% 30-May-02
00-Jan-00 00-Jan-00 Hard
00-Jan-00 00-Jan-00 Hard
1,330 9.7% 30-Jun-02 Monteiro Rose Agency - Suite 205 1,168 8.5% 30-Apr-03
Springing
4,000 13.0% 31-Dec-00 WJCS 3,824 12.4% 31-Oct-02
1,800 18.0% 01-Jan-05 Subway Sandwich 1,500 15.0% 01-Aug-02
1,500 35.9% 14-Nov-10 Robeks Juice 1,061 25.4% 14-Nov-10
LARGEST
AFFILIATED
SPONSOR FLAG
(> THAN 4.0% LOAN
OF POOL) NUMBER
- ---------------------------------
54
Cornerstone 55
56
57
58
59
60
61
62
63
64
Cornerstone 65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
185
[This Page Intentionally Left Blank]
186
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2001-C2
ANNEX A-2 CERTAIN INFORMATION REGARDING MULTIFAMILY
MORTGAGED PROPERTIES
LOAN
NUMBER PROPERTY NAME ADDRESS CITY
- ------------------------------------------------------------------------------------------------------------------------------------
4 Villa La Jolla Apartments 8540 Via Mallorca Drive La Jolla
6 Campus Lodge Apartments 2677 Old Bainbridge Road Tallahassee
7 Wynnton Multi Portfolio Various Various
7.1 Granada Apartments 7015 North 56th Street Tampa
7.2 Grandview Apartments 7049 Ulmerton Road Largo
7.3 Palmview Apartments 2680 54th Avenue South St. Petersburg
7.4 Plantation Apartments 10605 North 56th Street Temple Terrace
11 La Villa Estates Apartments 10175 Spring Mountain Road Las Vegas
14 Monaco Park Apartments 8350 West Desert Inn Road Las Vegas
19 Peppertree Apartments 7911 Arlington Ave Riverside
20 Brighton Arms Apartments 301, 311, 401 W. Sylvania Avenue Neptune City
21 Eagle Crest Apartments 4013 West Northgate Drive Irving
23 Polo Club Apartments 916 Beaver Grade Road Moon Township
24 Remington Hills Apartments 1201 North Meadow Creek Drive Irving
26 Sterling University Glen 500 Park Ridge Road Bloomington
32 Timberglen Apartments 3773 Timberglen Road Dallas
34 Valley Run Apartments 2601 Carpenter Road Wilmington
36 Tree Haven Apartments Ravine & 33 Aberdeen Road Matawan
44 Sterling University Greens 2900 Oak Tree Avenue Norman
47 Cutter's Point Apartments 1111 Abrams Road Richardson
48 The Arbors on Forest Ridge Apartments 2200 Forest Ridge Drive Bedford
53 Bayshore Palms 2035 Phillipe Parkway Safety Harbor
55 Toscana Apartments 17910 Kelly Boulevard Dallas
56 Saddle Oak Apartments 1014 Lois Place Joliet
60 GG-Green Valley Apartments 150 Ridge Pke Lafayette Hills
62 Skyline Terrace Apartments 1330 Skyline Drive Monterey
65 Sierra Ridge Apartments 1401 Patricia Drive San Antonio
71 Copper Beech Townhomes Oakwood Ave. Patton Township
74 Pecan Place Apartment 2001 Jenkins Street Pasadena
75 Villa Marquis 2730 Fyke Road Farmers Branch
76 Andrew's Mark Townhomes 701 E. Arkansas Lane Arlington
83 Kershaw Commons 88-108 Cleveland Avenue & 82-96 Kershaw Street Newark
85 Russell Woods Apartments 2255 Webb Detroit
87 ZION- Buccaneer Court Apts 1604 Cherokee Road Johnson City
88 Riverside Apartments 939 S. Riverside Road Clarksville
90 Brookside Apartments 5,7,10 and 12 Totman Road Woburn
92 ZION- Homestead Properties 1500 Seminole Dr & 1616 Seminole Dr & 806-818 Morningside Dr Johnson City
100 Sunshine Village Apartments 1800 - 1880 Sunshine Boulevard Naples
102 Stuart Gardens 1600 S. Kanner Highway Stuart
105 Harbin Avenue Apartments 217-221 Harbin Avenue Carson City
107 Cameron Street Apartments 47-51 Cameron Street Brookline
GENERAL SPECIFIC
STATE ZIP CODE COUNTY PROPERTY TYPE PROPERTY TYPE
------ -------- ------------ ------------- ----------------
CA 92037 San Diego Multifamily Conventional
FL 32303 Leon Multifamily Student Housing
Various Various Various Multifamily Conventional
FL 33617 Hillsborough Multifamily Conventional
FL 33771 Pinellas Multifamily Conventional
FL 33712 Pinellas Multifamily Conventional
FL 33617 Hillsborough Multifamily Conventional
NV 89117 Clark Multifamily Conventional
NV 89117 Clark Multifamily Conventional
CA 92503 Riverside Multifamily Conventional
NJ 07753 Monmouth Multifamily Conventional
TX 75062 Dallas Multifamily Conventional
PA 15108 Allegheny Multifamily Conventional
TX 75062 Dallas Multifamily Conventional
IN 47407 Monroe Multifamily Student Housing
TX 75287 Denton Multifamily Conventional
DE 19810 New Castle Multifamily Conventional
NJ 07747 Monmouth Multifamily Conventional
OK 73702 Cleveland Multifamily Student Housing
TX 75081 Dallas Multifamily Conventional
TX 76021 Tarrant Multifamily Conventional
FL 34695 Pinellas Multifamily Conventional
TX 75287 Denton Multifamily Conventional
IL 60435 Will Multifamily Conventional
PA 19444 Montgomery Multifamily Conventional
CA 93940 Monterey Multifamily Conventional
TX 78213 Bexar Multifamily Conventional
PA 16803 Centre Multifamily Student Housing
TX 77506 Harris Multifamily Conventional
TX 75234 Dallas Multifamily Conventional
TX 76010 Tarrant County Multifamily Conventional
DE 19711 New Castle Multifamily Conventional
MI 48206 Wayne Multifamily Conventional
TN 37604 Washington Multifamily Conventional
TN 37040 Montgomery Multifamily Conventional
MA 01801 Middlesex Multifamily Conventional
TN 37604 Washington Multifamily Conventional
FL 34116 Collier Multifamily Conventional
FL 34994 Martin Multifamily Conventional
NV 89702 Carson City Multifamily Conventional
MA 02146 Norfolk Multifamily Conventional
187
NUMBER OF NUMBER NUMBER NUMBER NUMBER OF AVERAGE RENT;
ELEVATOR UTILITIES STUDIO OF 1 BR OF 2 BR OF 3 BR 4 BR+ RENT RANGES -
BUILDIGS TENANT PAYS UNITS UNITS UNITS UNITS UNITS STUDIO UNITS
- -------- ----------- ----- ----- ----- ----- ----- ------------
N E,G,W,S 101 222 62 NA NA 325; 325-325
N None NA NA 60 84 144 NA
N NA 288 427 131 NA NA
N E NA NA 77 35 NA NA
N E NA 144 128 32 NA NA
N E NA 144 130 30 NA NA
N E NA NA 92 34 NA NA
N E,G,P,C NA 128 176 32 NA NA
N E,P,C NA 90 168 26 NA NA
N E,G,P,C 64 175 151 NA NA 480; 399-515
N E,P,C NA 300 128 NA NA NA
N E,P,C NA 288 196 NA NA NA
N E,G NA 144 136 NA NA NA
N E,P,C NA 158 204 NA NA NA
N E,P,C NA NA 36 152 NA NA
N E,P,C NA 232 72 NA NA NA
N E,P,C NA 75 87 116 NA NA
N E,P,C NA 192 76 NA NA NA
N E,P,C NA NA NA 108 48 NA
N E,P,C NA 80 60 56 NA NA
N E,P,C NA 170 40 NA NA NA
N E,P,C NA 108 92 NA NA NA
N E,P,C 64 128 NA NA NA 515; 515-515
N E,G,W 24 116 48 NA NA 420; 399-475
Y E,G NA 43 49 6 NA NA
N E,G, W, S NA NA 40 NA NA NA
N E,P,C NA 140 92 NA NA NA
N E,P,C NA NA NA 48 NA NA
N E,P,C NA 106 104 40 1 NA
N E 1 29 90 22 NA 445; 445-445
N E,P,C NA 8 66 64 NA NA
N W,E,P,C NA NA 21 7 2 NA
N E,G,P,C NA 96 60 NA NA NA
N E,G NA 28 88 NA NA NA
N W,E,G,C 1 58 54 NA NA 325; 325-325
N E,P,C NA 10 34 NA NA NA
N E,G,W,S NA NA 91 NA NA NA
N E,G,P,C NA NA 39 NA NA NA
N E,P,C NA 10 22 NA NA NA
N E,P,C NA NA 18 NA NA NA
N E,G,P,C 3 3 2 NA NA 933; 900-975
AVERAGE RENT; AVERAGE RENT; AVERAGE RENT; AVERAGE RENT;
RENT RANGES-1 RENT RANGES-2 RENT RANGES-3 RENT RANGES-4 LOAN
BR UNITS BR UNITS BR UNITS BR UITS NUMBER
------------- -------------- --------------- --------------- -------
390; 390-390 450; 450-450 NA NA 4
NA 1158; 1158-1158 1587; 1587-1587 1956; 1956-1956 6
Various Various Various NA 7
NA 647; 555-950 803; 730-870 NA 7.1
511; 434-584 612; 539-685 746; 680-810 NA 7.2
466; 410-685 646; 458-709 807; 740-875 NA 7.3
NA 649; 550-775 797; 730-870 NA 7.4
735; 730-740 968; 895-1005 1195; 1190-1200 NA 11
770; 720-845 913; 880-955 1095; 1075-1185 NA 14
578; 490-640 677; 525-815 NA NA 19
676; 600-775 813; 785-980 NA NA 20
718; 620-745 738; 805-965 NA NA 21
747; 630-835 879; 835-925 NA NA 23
807; 740-950 981; 900-1095 NA NA 24
NA 820; 820-820 1048; 1000-1080 NA 26
605; 540-755 883; 845-960 NA NA 32
543; 520-575 628; 585-775 827; 755-905 NA 34
721; 690-810 822; 800-920 NA NA 36
NA NA 1033; 975-1050 1220; 1220-1220 44
615; 615-615 870; 870-870 1020; 1020-1020 NA 47
695; 630-735 840; 840-840 NA NA 48
490; 490-490 611; 590-650 NA NA 53
618; 585-645 NA NA NA 55
488; 445-525 605; 575-735 NA NA 56
779; 720-885 888; 835-1050 1115; 1040-1250 NA 60
NA 1375; 1050-1700 NA NA 62
497; 470-510 623; 610-655 NA NA 65
NA NA 1033; 950-1050 NA 71
417; 360-450 520; 450-570 638; 575-690 699; 699-699 74
497; 485-505 568; 560-590 775; 775-775 NA 75
470; 426-495 566; 477-649 713; 637-725 NA 76
NA 1095; 1095-1095 1116; 945-1195 1423; 1395-1450 83
404; 400-425 483; 450-500 NA NA 85
345; 345-345 439; 377-462 NA NA 87
390; 390-390 450; 450-450 NA NA 88
815; 730-900 902; 820-950 NA NA 90
NA 464; 425-550 NA NA 92
NA 625; 625-625 NA NA 100
570; 570-570 647; 622-662 NA NA 102
NA 600; 585-625 NA NA 105
1125; 1100-1150 1225; 1200-1250 NA NA 107
188
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2001-C2
ANNEX A-3 RESERVE ACCOUNT INFORMATION
MONTHLY
LOAN GENERAL SPECIFIC MONTHLY TAX INSURANCE
NUMBER PROPERTY NAME PROPERTY TYPE PROPERTY TYPE ESCROW ESCROW
- -----------------------------------------------------------------------------------------------------------------------------------
1 1330 Connecticut Ave., N.W. Office CBD Y Y
2 Innkeepers Portfolio Hospitality Suite Y Y
2.1 Marriott Residence Inn Dallas-Addison Hospitality Suite
2.2 Marriott Residence Inn -Arlington Hospitality Suite
2.3 Marriott Residence Inn Atlanta - Downtown Hospitality Suite
2.4 Marriott Residence Inn Orlando-Altamonte Hospitality Suite
2.5 Marriott Residence Inn - San Mateo Hospitality Suite
2.6 Marriott Residence Inn - Shelton Hospitality Suite
3 One Franklin Office CBD Y N
4 Villa La Jolla Apartments Multifamily Conventional Y N
5 Gardiner Manor Mall Retail Anchored N N
6 Campus Lodge Apartments Multifamily Student Housing Y Y
7 Wynnton Multi Portfolio Multifamily Conventional Y Y
7.1 Granada Apartments Multifamily Conventional
7.2 Grandview Apartments Multifamily Conventional
7.3 Palmview Apartments Multifamily Conventional
7.4 Plantation Apartments Multifamily Conventional
8 Stadium Crossing Office CBD Y Y
9 Alexandria RE Portfolio Office Suburban Y N
9.1 Watkins Office Suburban
9.2 Quince Office Suburban
10 Qwest Communications Building Mixed Use Office/Industrial N N
11 La Villa Estates Apartments Multifamily Conventional Y Y
12 8 West 40th Street Office CBD Y Y
13 Windward City Shopping Center Retail Anchored Y Y
14 Monaco Park Apartments Multifamily Conventional Y Y
15 U-Haul Self Storage Self Storage Y Y
15.01 I-30 Self Storage Self Storage
15.02 Ivar Avenue Self Storage Self Storage
15.03 East Alosta Self Storage Self Storage
15.04 Black Rock Self Storage Self Storage
15.05 Merrill St. Self Storage Self Storage
15.06 Blackwood Clementon Self Storage Self Storage
15.07 Business Ave. Self Storage Self Storage
15.08 West Hwy 287 ByPass Self Storage Self Storage
15.09 Tarrant Rd. Self Storage Self Storage
15.10 South Hulen Self Storage Self Storage
16 Spectrum Pointe Industrial Flex Y Y
17 Center Point Shopping Center Retail Anchored Y Y
18 U-Haul II Self Storage Self Storage Y Y
18.01 Rio Salado Self Storage Self Storage
18.02 Sycamore Avenue Self Storage Self Storage
18.03 White Lane Self Storage Self Storage
18.04 Newfield Street Self Storage Self Storage
18.05 Southside Self Storage Self Storage
18.06 Connecticut Drive Self Storage Self Storage
18.07 Ridgeway Avenue Self Storage Self Storage
18.08 Rufe Snow Self Storage Self Storage
18.09 Alma Drive Self Storage Self Storage
18.10 Westchase Self Storage Self Storage
19 Peppertree Apartments Multifamily Conventional Y N
20 Brighton Arms Apartments Multifamily Conventional Y N
21 Eagle Crest Apartments Multifamily Conventional Y Y
22 156 William Street Office CBD Y Y
23 Polo Club Apartments Multifamily Conventional Y Y
24 Remington Hills Apartments Multifamily Conventional Y Y
25 Market at Opitz Retail Anchored Y N
26 Sterling University Glen Multifamily Student Housing Y N
27 Eight Neshaminy Interplex Office Suburban Y Y
28 Westwood Village Square Retail Anchored Y N
29 Hilton Head Village Retail Anchored Y N
30 Deep River Shopping Center Retail Anchored Y Y
31 Harmony Foods Building Industrial Light Mfg/Office/Warehouse Y Y
32 Timberglen Apartments Multifamily Conventional Y Y
33 Gainsborough Square Retail Anchored Y Y
34 Valley Run Apartments Multifamily Conventional Y N
35 LW-Airport mall Retail Anchored Y Y
36 Tree Haven Apartments Multifamily Conventional Y N
37 610 Weddell Industrial Flex Y N
38 Roberts Business Park Mixed Use Office/Industrial Y Y
39 Chanin Building Office CBD N N
40 Johnston- Willis MOB's Office Medical Office N N
41 Wilshire La Jolla Office Suburban Y Y
42 10 United Nations Plaza Office CBD Y Y
43 Kelsey Seibold West Office Medical Office N N
44 Sterling University Greens Multifamily Student Housing Y N
45 Residence Inn - Sabal Park Hospitality Suite Y Y
46 Birmingham MOB #2 Office Medical Office N N
47 Cutter's Point Apartments Multifamily Conventional Y Y
48 The Arbors on Forest Ridge Apartments Multifamily Conventional Y Y
49 Regency Pointe Shopping Center Retail Unanchored Y N
50 Hilltop Plaza Office Suburban Y Y
51 Granville Plaza Shopping Center Retail Unanchored Y Y
ANNUAL DEPOSIT INITIAL DEPOSIT
TO TO CAPITAL
LOAN REPLACEMENT IMPROVEMENTS INITIAL TI/LC ONGOING TI/LC
NUMBER RESERVE RESERVE ESCROW FOOTNOTE
- ----------------------------------------------------------------------------------
1 (1)
2 977,080
2.1
2.2
2.3
2.4
2.5
2.6
3 212,856
4
5 33,264
6 115,200 4,244
7 211,488 33,000
7.1
7.2
7.3
7.4
8 23,640 2,145,812 (1)
9 37,632 56,030 (1)
9.1
9.2
10
11 67,200
12 153,698 250,000
13 29,532 113,750 65,000 (1)
14 56,800
15 97,020 99,526
15.01
15.02
15.03
15.04
15.05
15.06
15.07
15.08
15.09
15.10
16 17,517
17 2,250
18 85,692 52,855
18.01
18.02
18.03
18.04
18.05
18.06
18.07
18.08
18.09
18.10
19 100,565 53,125
20 107,000 109,320
21 96,800
22 43,584 1,400,000 (1)
23 70,008 70,000
24 72,400 126,340
25 33,240 9,084 (1)
26 47,000
27 28,402 44,193 500,000
28 12,610 1,500
29 16,656 (1)
30
31 48,456 11,250 200,000 (1)
32 60,800 2,200
33 8,884
34 90,628 77,588
35 34,404 (1)
36 70,524 103,288
37 10,728 100,000 (1)
38 32,373
39
40
41 35,634 44,750
42 18,604 46,500
43
44 39,000
45 104,622
46
47 39,200 5,000
48 42,000
49 10,092 13,031 75,893
50 9,576 30,500 (1)
51 6,348 (1)
189
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2001-C2
ANNEX A-3 RESERVE ACCOUNT INFORMATION
MONTHLY
LOAN GENERAL SPECIFIC MONTHLY TAX INSURANCE
NUMBER PROPERTY NAME PROPERTY TYPE PROPERTY TYPE ESCROW ESCROW
- -----------------------------------------------------------------------------------------------------------------------------------
52 Vista Ridge Office Building Office Suburban Y Y
53 Bayshore Palms Multifamily Conventional Y Y
54 1425 Lover's Lane Industrial Warehouse/Distribution N N
55 Toscana Apartments Multifamily Conventional Y Y
56 Saddle Oak Apartments Multifamily Conventional Y Y
57 North Royal Plaza Office Suburban Y Y
58 TownePlace Suites - Tallahassee Hospitality Extended Stay Y Y
59 Nucleus Business Plaza Mixed Use Office/Retail Y Y
60 GG-Green Valley Apartments Multifamily Conventional Y Y
61 Sherwin Williams Pavilion Retail Unanchored Y Y
62 Skyline Terrace Apartments Multifamily Conventional Y Y
63 Pacific Rim Shopping Center Retail Shadow Anchored Y Y
64 Pacific Pointe Corporate Center Office Suburban Y Y
65 Sierra Ridge Apartments Multifamily Conventional Y Y
66 The Colonnade Shopping Center Retail Unanchored Y Y
67 800 & 801 West 34th Street Office Medical Office Y Y
68 Chippenham Medical - Hioaks & Janke Office Medical Office N N
69 8151 Blanding Blvd. Retail Anchored N N
70 800 Waterfront Office CBD Y N
71 Copper Beech Townhomes Multifamily Student Housing Y Y
72 3615 Lamar Avenue Industrial Warehouse/Distribution N N
73 Rite Aid Galt Retail Drug Store N N
74 Pecan Place Apartment Multifamily Conventional Y Y
75 Villa Marquis Multifamily Conventional Y Y
76 Andrew's Mark Townhomes Multifamily Conventional Y Y
77 Birmingham MOB #1 Office Medical Office N N
78 Bellaire Plaza Office Medical Office N N
79 Gardens Square Retail Retail Unanchored Y Y
80 Kendall Building Industrial Warehouse/Distribution Y Y
81 Healdsburg Plaza II Office Suburban Y Y
82 Rite Aid Palm Desert Retail Drug Store N N
83 Kershaw Commons Multifamily Conventional Y Y
84 Kmart Center - Sterling Retail Anchored N Y
85 Russell Woods Apartments Multifamily Conventional Y Y
86 1930 West Main Street Retail Unanchored Y Y
87 ZION- Buccaneer Court Apts Multifamily Conventional Y Y
88 Riverside Apartments Multifamily Conventional Y Y
89 American Sports Medicine Institute Office Medical Office N N
90 Brookside Apartments Multifamily Conventional Y Y
91 Potter Building - San Francisco Office CBD Y Y
92 ZION- Homestead Properties Multifamily Conventional Y Y
93 Rite Aid -Portage Oakland Retail Drug Store N N
94 Robert Reid Warehouse Industrial Flex Y Y
95 Scottsdale Village Center Retail Unanchored Y Y
96 Rite Aid Roanoke Jamison Retail Drug Store N N
97 Rite Aid-Warren Retail Drug Store N N
98 17514 Ventura Blvd. Office Suburban Y Y
99 Southwest General Medical Building Office Medical Office N N
100 Sunshine Village Apartments Multifamily Conventional N Y
101 901 North Broadway Office Suburban Y Y
102 Stuart Gardens Multifamily Conventional Y Y
103 Greenhill Estates MHP Mobile Home Park Conventional Y Y
104 Meridian Retail Center Retail Unanchored Y Y
105 Harbin Avenue Apartments Multifamily Conventional Y Y
106 Long Beach Retail Retail Unanchored Y Y
107 Cameron Street Apartments Multifamily Conventional Y Y
ANNUAL DEPOSIT INITIAL DEPOSIT
TO TO CAPITAL
LOAN REPLACEMENT IMPROVEMENTS INITIAL TI/LC ONGOING TI/LC
NUMBER RESERVE RESERVE ESCROW FOOTNOTE
- ----------------------------------------------------------------------------------
52 13,180 (1)
53 50,000 149,118
54 10,000 (1)
55 38,400
56 47,004
57 7,781 4,373 (1)
58 68,240
59 16,956 625,000 (1)
60 24,504
61 7,364 222,750 55,670
62 9,996 5,000
63 10,945 102,180 250,000
64 4,152
65 46,400
66 8,604 91,188 465,000
67 20,252 18,500 (1)
68
69 280,000
70 7,068 (1)
71 12,000
72 15,700
73
74 62,750 71,159
75 35,496 328,750
76 36,846 149,034
77
78
79 1,996 17,313 100,000 (1)
80 18,972 3,438 (1)
81 4,332 (1)
82
83 10,500
84 15,744 34,205
85 46,800 53,893
86 10,976 25,000 (1)
87 29,000
88 36,386 47,563
89
90 12,848 11,063
91 1,260 1,875
92 22,752
93 3,354
94 4,356 (1)
95 8,412 100,000
96 2,211
97
98 2,058
99
100 9,750 5,538
101 4,167
102 6,400
103 3,600 22,025
104 1,000 17,156
105 4,500
106 417 29,000
107 2,000
EXPLANATION TENANT IMPROVEMENT / LEASING COMMISSION (TI/LC) FOOTNOTES:
(1) IN ADDITION TO ANY SUCH ESCROWS FUNDED AT LOAN CLOSING FOR POTENTIAL
TI/LC, THESE 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 BORROWER
UPON SATISFACTION OF CERTAIN LEASING CONDITIONS.
190
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2001-C2
ANNEX A-4 COMMERCIAL TENANT SCHEDULE
LOAN CUT-OFF DATE LOAN NUMBER
NUMBER PROPERTY NAME GENERAL PROPERTY TYPE SPECIFIC PROPERTY TYPE BALANCE ($) OF (UNITS)
- -----------------------------------------------------------------------------------------------------------------------------
1 1330 Connecticut Ave., N.W. Office CBD 54,520,757 252,136
3 One Franklin Office CBD 44,000,000 607,036
5 Gardiner Manor Mall Retail Anchored 32,750,000 221,752
8 Stadium Crossing Office CBD 26,402,569 153,636
9 Alexandria RE Portfolio Office Suburban 24,600,856 188,163
9.1 Watkins Office Suburban 138,938
9.2 Quince Office Suburban 49,225
10 Qwest Communications Building Mixed Use Office/Industrial 23,750,000 92,200
12 8 West 40th Street Office CBD 22,468,628 123,277
13 Windward City Shopping Center Retail Anchored 20,892,755 193,894
16 Spectrum Pointe Industrial Flex 17,878,221 175,167
17 Center Point Shopping Center Retail Anchored 17,226,054 296,496
22 156 William Street Office CBD 14,814,651 217,569
25 Market at Opitz Retail Anchored 12,775,379 158,286
27 Eight Neshaminy Interplex Office Suburban 12,356,344 129,099
28 Westwood Village Square Retail Anchored 11,993,403 58,075
29 Hilton Head Village Retail Anchored 11,883,933 111,000
30 Deep River Shopping Center Retail Anchored 10,110,938 183,880
31 Harmony Foods Building Industrial Light Mfg/Office/Warehouse 9,748,218 323,000
33 Gainsborough Square Retail Anchored 9,466,277 88,838
35 LW-Airport mall Retail Anchored 9,427,286 229,384
37 610 Weddell Industrial Flex 8,944,383 63,072
38 Roberts Business Park Mixed Use Office/Industrial 8,064,340 78,958
39 Chanin Building Office CBD 7,989,087 29,645
40 Johnston- Willis MOB's Office Medical Office 7,458,695 114,566
41 Wilshire La Jolla Office Suburban 7,469,678 85,223
42 10 United Nations Plaza Office CBD 7,463,915 71,553
43 Kelsey Seibold West Office Medical Office 7,259,797 80,740
46 Birmingham MOB #2 Office Medical Office 6,464,202 81,800
49 Regency Pointe Shopping Center Retail Unanchored 5,992,079 67,063
50 Hilltop Plaza Office Suburban 5,864,892 47,907
51 Granville Plaza Shopping Center Retail Unanchored 5,676,014 39,686
52 Vista Ridge Office Building Office Suburban 5,381,854 69,370
54 1425 Lover's Lane Industrial Warehouse/Distribution 5,315,958 277,500
57 North Royal Plaza Office Suburban 5,190,371 37,051
59 Nucleus Business Plaza Mixed Use Office/Retail 5,002,153 75,071
61 Sherwin Williams Pavilion Retail Unanchored 4,954,604 66,946
63 Pacific Rim Shopping Center Retail Shadow Anchored 4,885,861 45,605
64 Pacific Pointe Corporate Center Office Suburban 4,864,075 41,522
66 The Colonnade Shopping Center Retail Unanchored 4,685,061 57,372
67 800 & 801 West 34th Street Office Medical Office 4,484,879 68,652
68 Chippenham Medical - Hioaks & Janke Office Medical Office 4,176,869 97,921
69 8151 Blanding Blvd. Retail Anchored 4,110,952 94,164
70 800 Waterfront Office CBD 4,061,755 35,366
72 3615 Lamar Avenue Industrial Warehouse/Distribution 3,680,417 157,000
73 Rite Aid Galt Retail Drug Store 3,308,968 31,456
77 Birmingham MOB #1 Office Medical Office 2,983,478 42,500
78 Bellaire Plaza Office Medical Office 2,983,478 56,031
79 Gardens Square Retail Retail Unanchored 2,926,412 19,895
80 Kendall Building Industrial Warehouse/Distribution 2,907,067 189,721
81 Healdsburg Plaza II Office Suburban 2,842,255 28,897
82 Rite Aid Palm Desert Retail Drug Store 2,637,272 17,700
84 Kmart Center - Sterling Retail Anchored 2,352,858 104,960
86 1930 West Main Street Retail Unanchored 2,243,762 36,000
89 American Sports Medicine Institute Office Medical Office 2,088,435 27,800
91 Potter Building - San Francisco Office CBD 1,997,598 12,600
93 Rite Aid -Portage Oakland Retail Drug Store 1,706,072 11,180
94 Robert Reid Warehouse Industrial Flex 1,694,597 29,000
95 Scottsdale Village Center Retail Unanchored 1,693,842 38,260
96 Rite Aid Roanoke Jamison Retail Drug Store 1,588,520 11,057
97 Rite Aid-Warren Retail Drug Store 1,478,788 11,060
98 17514 Ventura Blvd. Office Suburban 1,466,705 13,717
99 Southwest General Medical Building Office Medical Office 1,392,290 26,645
101 901 North Broadway Office Suburban 1,257,832 30,761
104 Meridian Retail Center Retail Unanchored 882,595 10,000
106 Long Beach Retail Retail Unanchored 663,366 4,175
LARGEST TENANT % OF
UNIT OF MEASURE LARGEST TENANT NRA
- -------------------------------------------------------------------------------------------------
Sq. Ft. Steptoe & Johnson 74.1%
Sq. Ft. SmithKline Beecham Corp. 98.2%
Sq. Ft. King Kullen Grocery Co., Inc. 21.6%
Sq. Ft. Hewlett Packard 35.3%
Sq. Ft. Various
Sq. Ft. MedImmune 60.9%
Sq. Ft. Gene Logic 100.0%
Sq. Ft. Qwest Communications Corporation (NNN LEASE) 100.0%
Sq. Ft. London Fog Industries 13.4%
Sq. Ft. Longs Drug Store 15.9%
Sq. Ft. Futurelink Micro Visions 44.1%
Sq. Ft. Wal-Mart 74.8%
Sq. Ft. The City of New York's Dept. of Youth & Community Development 35.9%
Sq. Ft. Safeway 32.8%
Sq. Ft. Bell Atlantic Mobile Systems 19.6%
Sq. Ft. Bank of America (sub-let to Rite-Aid) 42.6%
Sq. Ft. Marshall's 27.0%
Sq. Ft. Wal-Mart 82.7%
Sq. Ft. Harmony Foods 49.5%
Sq. Ft. Food Lion, Inc. 50.5%
Sq. Ft. Ames 33.7%
Sq. Ft. Analog Devices 100.0%
Sq. Ft. Lee, Burkhard, Lui, Inc. 17.1%
Sq. Ft. Lexington Avenue & 42nd Street 100.0%
Sq. Ft. HCA -The Healthcare Company 100.0%
Sq. Ft. 604 - RP Property Management 5.1%
Sq. Ft. E-Color 34.4%
Sq. Ft. KS Management Services, L.L.P. 100.0%
Sq. Ft. HEALTHSOUTH Medical Center, Inc. 100.0%
Sq. Ft. Olive Garden 13.6%
Sq. Ft. TGI Fridays 18.6%
Sq. Ft. Rite Aid 16.0%
Sq. Ft. Applied Materials, Inc. 29.0%
Sq. Ft. Richmond Bonded Warehouse Corp. 100.0%
Sq. Ft. Young & Rubicam,Inc. 48.9%
Sq. Ft. Nucleus Associates, Ltd. (d/b/a Nucleus Medical & Dental) 24.8%
Sq. Ft. FCA of Ohio, Inc. (JoAnn Fabrics) 21.7%
Sq. Ft. Tin Tin Supermarket 48.0%
Sq. Ft. Sunstone Hotel Investors 67.9%
Sq. Ft. Mother of Pearls 10.1%
Sq. Ft. Scirex Xorp 18.3%
Sq. Ft. HCA Health Services of Virginia, Inc. 100.0%
Sq. Ft. Best Buy 47.8%
Sq. Ft. Anthony Crane Retail, LP 60.7%
Sq. Ft. Builders First Source 100.0%
Sq. Ft. Rite Aid of California 100.0%
Sq. Ft. HEALTH SOUTH Medical Center,Inc. 100.0%
Sq. Ft. West Houston Healthcare Group 38.9%
Sq. Ft. City Mattress of Florida, Inc. 69.9%
Sq. Ft. Next Fiber 51.6%
Sq. Ft. The Wine Alliance 52.5%
Sq. Ft. Rite Aid of California 100.0%
Sq. Ft. Kmart 80.0%
Sq. Ft. BKM Enterprises 50.0%
Sq. Ft. HEALTHSOUTH Medical Center, Inc. 100.0%
Sq. Ft. Transactions Unlimited 28.1%
Sq. Ft. Rite Aid of Michigan, Inc. 100.0%
Sq. Ft. Signature Collectable 12.9%
Sq. Ft. KLYT 9.4%
Sq. Ft. Rite Aid of Virginia, Inc. 100.0%
Sq. Ft. Rite Aid of Michigan, Inc. 100.0%
Sq. Ft. Munoz Financial - Suite 102 10.2%
Sq. Ft. New Medical Property Investors Company 100.0%
Sq. Ft. Terminix 16.3%
Sq. Ft. Vina 30.0%
Sq. Ft. Starbucks Corporation 38.7%
191
LARGEST TENANT EXP. 2ND LARGEST TENANT % 2ND LARGEST TENANT
DATE 2ND LARGEST TENANT OF NRA EXP. DATE
- -----------------------------------------------------------------------------------------------------------------------
Multiple Spaces RIAA 11.0% Multiple Spaces
March-13 Associated Press 1.5% November-02
August-19 The Wiz 11.5% November-14
March-10 Spectrum Sports Club 23.8% June-14
Various Various Various
November-06 Genetic Therapy 28.4% July-03
November-07
December-10
September-09 WRB Associates/Marchon Eyewear 11.5% August-10
May-08 Foodland 14.7% December-10
August-10 Interworks Computer Products 12.2% March-05
September-19 Goody's 8.5% November-14
February-10 Pace University 9.8% September-04
September-10 Boat America Corporation 6.7% January-06
Multiple Spaces Silicon Graphics 14.7% May-03
August-07 Kaplan Test Prep 26.8% November-07
April-10 Old Navy 22.5% June-05
March-19 Movie Gallery 2.4% August-05
August-10 Lipton Company 45.0% December-05
December-19 Eckerd Corporation 12.3% January-20
February-19 Shop n Save 23.4% August-13
March-10
Multiple Spaces Syndesis Studio, Inc. 7.9% August-02
30-Jun-11
June-04
October-03 PH1, PH4, PH6 & PH7 - Earthquake Edit Inc. 3.4% June-03
March-07 Genesys Telecommunications 23.7% March-03
August-11
June-09
February-05 Transworld/Coconuts 11.7% January-06
May-03 Nori, Hennion & Walsh 17.1% August-02
May-05 Mishima Foods 14.8% May-10
April-04 Hand Technologies, Inc. 27.6% June-04
July-08
Multiple Spaces ADI Technology Corporation (S/L ASAP Ventures.com) 33.7% July-02
July-05 Nevada Business Service 13.6% June-05
January-06 Sherwin Williams Paints 11.9% December-05
October-24 Tien Dau 6.3% November-04
June-05 Medicine Net 10.6% November-03
June-04 Black Eyed Pea 8.7% February-01
June-03 Jack Moncrief 16.1% July-07
June-04
January-19 Ashley's Furniture 27.9% January-11
July-10 McKeeson Automated Healthcare, Inc. 39.3% December-08
September-15
May-20 January-00
June-09
May-05 Baylor Methodist Primary Care 26.6% May-02
May-15 Third Federal Savings & Loan Association of Cleveland 21.1% December-05
December-04 Bay Engineering Castings 23.5% October-02
July-08 The Brown Bag 12.6% February-04
May-20 January-00
July-18 Dollar General 7.4% June-05
January-10 Dining Furniture of CT 41.7% December-04
June-09
May-04 Mission Valley Textiles 12.0% May-03
January-19 January-00
Multiple Spaces Total Lighting Products, Inc 12.1% July-03
May-01 Blue Eagel Book Shop 9.4% February-02
August-18 January-00
November-18 January-00
August-01 American Title - Suite 103 9.7% June-02
December-09
October-04 DRG Telemarketing 13.0% December-00
August-03 Alaser 18.0% January-05
November-10 General Mobile Electronics 35.9% November-10
3RD LARGEST
TENANT % OF 3RD LARGEST TENANT EXP. LOAN
3RD LARGEST TENANT NRA DATE NUMBER
- ----------------------------------------------------------------------------------
Dorsey & Whitney 7.0% July-01 1
Dewa Corporation 0.3% January-01 3
Old Navy 10.9% August-10 5
CB Richard Ellis 16.9% September-09 8
Various Various 9
Earth Data 10.6% June-03 9.1
9.2
10
Sticht Women's World Banking 9.9% December-04 12
Ross Stores, Inc. 14.6% June-07 13
Clarion Advanced Technology 9.6% November-04 16
Fashion Bug 2.7% November-04 17
Riverside Research 6.9% May-10 22
Blockbuster Video 4.0% February-06 25
International SOS Assistance 14.5% March-04 27
Course Reader Material 4.3% March-06 28
Bed Bath & Beyond 22.5% January-11 29
Dollar Tree 2.4% May-04 30
31
New Fitness For Ladies 5.6% February-05 33
Staples 7.4% April-04 35
37
Peter Norton 6.9% August-03 38
39
40
206/208 - Britt, Joe Freeman 2.4% July-01 41
American Lawyer Media 20.4% August-09 42
43
46
Gateway 2000 11.0% October-02 49
FYI Systems Inc 16.8% May-04 50
Westwood Surgical 11.4% November-03 51
RMT, Inc. 27.4% August-03 52
54
Trippi McMahon & Squier 17.4% December-04 57
Expertise School of Beauty 6.8% November-05 59
Outback Steakhouse 10.0% June-04 61
Ho Ho Restaurant 6.2% May-03 63
Charles Schwab & CO 4.4% June-02 64
Go Dance 7.1% May-04 66
Health South Inc. 9.2% March-03 67
68
George's Music 24.3% January-11 69
70
72
January-00 73
77
Joseph A. Montes, MD 7.9% February-08 78
79
K&K Warehousing 20.7% November-10 80
Bear Republic Brewing Company 12.2% November-03 81
January-00 82
Rent-a-Center 4.6% December-04 84
Gloria's Kids 8.3% December-04 86
89
Jarvis and Associates 12.0% February-03 91
January-00 93
Usertool Foundry 12.1% October-01 94
Annies Soup 8.9% May-02 95
January-00 96
January-00 97
Monteiro Rose Agency - Suite 205 8.5% April-03 98
99
WJCS 12.4% October-02 101
Subway Sandwich 15.0% August-02 104
Robeks Juice 25.4% November-10 106
192
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2001-C2
ANNEX A-5
Cross
Collateralized
and Cross
Loan Property Name Defaulted Original Loan
Number City State Loan Flag Balance ($)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Cornerstone Rollup 61,250,000.00
- ----------------------------------------------------------------------------------------------------------------------------------
21 Eagle Crest Apartments Irving TX Cornerstone 2 15,000,000.00
24 Remington Hills Apartments Irving TX Cornerstone 2 14,250,000.00
32 Timberglen Apartments Dallas TX Cornerstone 2 9,500,000.00
47 Cutter's Point Apartments Richardson TX Cornerstone 2 6,250,000.00
48 The Arbors on Forest Ridge Apartments Bedford TX Cornerstone 2 6,250,000.00
55 Toscana Apartments Dallas TX Cornerstone 2 5,250,000.00
65 Sierra Ridge Apartments San Antonio TX Cornerstone 2 4,750,000.00
2 Innkeepers Portfolio 50,000,000.00
- ----------------------------------------------------------------------------------------------------------------------------------
2.1 Marriott Residence Inn Dallas-Addison Dallas TX Innkeepers
2.2 Marriott Residence Inn -Arlington Arlington TX Innkeepers
2.3 Marriott Residence Inn Atlanta - Downtown Atlanta GA Innkeepers
2.4 Marriott Residence Inn Orlando-Altamonte Alamonte Springs FL Innkeepers
2.5 Marriott Residence Inn - San Mateo San Mateo CA Innkeepers
2.6 Marriott Residence Inn - Shelton Shelton CT Innkeepers
- ----------------------------------------------------------------------------------------------------------------------------------
HRT Rollup 35,000,000.00
- ----------------------------------------------------------------------------------------------------------------------------------
40 Johnston- Willis MOB's Richmond VA HRT POOL 7,500,000.00
43 Kelsey Seibold West Houston TX HRT POOL 7,300,000.00
46 Birmingham MOB #2 Birmingham AL HRT POOL 6,500,000.00
68 Chippenham Medical - Hioaks & Janke Richmond VA HRT POOL 4,200,000.00
77 Birmingham MOB #1 Birmingham AL HRT POOL 3,000,000.00
78 Bellaire Plaza Houston TX HRT POOL 3,000,000.00
89 American Sports Medicine Institute Birmingham AL HRT POOL 2,100,000.00
99 Southwest General Medical Building San Antonio TX HRT POOL 1,400,000.00
7 Wynnton Rollup 28,640,000.00
- ----------------------------------------------------------------------------------------------------------------------------------
7.1 Granada Apartments Tampa FL
7.2 Grandview Apartments Largo FL
7.3 Palmview Apartments St. Petersburg FL
7.4 Plantation Apartments Temple Terrace FL
9 Alexandria Rollup 24,700,000.00
- ----------------------------------------------------------------------------------------------------------------------------------
9.1 Watkins Gaithersburg MD
9.2 Quince Gaithersburg MD
Olen Rollup 22,770,000.00
- ----------------------------------------------------------------------------------------------------------------------------------
16 Spectrum Pointe Lake Forest CA Olen 2 17,900,000.00
64 Pacific Pointe Corporate Center San Clemente CA Olen 2 4,870,000.00
15 U-Haul Rollup 18,524,000.00
- ----------------------------------------------------------------------------------------------------------------------------------
15.01 I-30 Little Rock AR
15.02 Ivar Avenue Rosemead CA
15.03 East Alosta Glendora CA
15.04 Black Rock Bridgeport CT
15.05 Merrill St. Salisbury MA
15.06 Blackwood Clementon Lindenwold NJ
15.07 Business Ave. Clay NY
15.08 West Hwy 287 ByPass Waxahachie TX
15.09 Tarrant Rd. Grand Prairie TX
15.10 South Hulen Ft. Worth TX
- ----------------------------------------------------------------------------------------------------------------------------------
18 U-Haul II Rollup 17,113,000.00
- ----------------------------------------------------------------------------------------------------------------------------------
18.01 Rio Salado Tempe AZ
18.02 Sycamore Avenue Pasadena CA
18.03 White Lane Bakersfield CA
18.04 Newfield Street Middletown CT
18.05 Southside St. Louis MO
18.06 Connecticut Drive Burlington NJ
18.07 Ridgeway Avenue Greece NY
18.08 Rufe Snow N. Richland Hills TX
18.09 Alma Drive Plano TX
18.10 Westchase San Antonio TX
B&G Rollup 9,900,000.00
- ----------------------------------------------------------------------------------------------------------------------------------
52 Vista Ridge Office Building Austin TX B&G Pool 5,400,000.00
67 800 & 801 West 34th Street Austin TX B&G Pool 4,500,000.00
ZION Rollup 4,135,000.00
- ----------------------------------------------------------------------------------------------------------------------------------
87 ZION- Buccaneer Court Apts Johnson City TN ZION 2,160,000.00
92 ZION- Homestead Properties Johnson City TN ZION 1,975,000.00
% of Original Remaining Remaining
Aggregate Term to Term to IO
Cut-Off Maturity Maturity Period
Cut-Off Date Date or ARD or ARD (Mos.)
Loan Balance ($) Balance (Mos.) (Mos.)
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
61,250,000.00 6.12%
- ----------------------------------------------------------------------------------------
15,000,000.00 1.50% 120 115 115
14,250,000.00 1.42% 120 115 115
9,500,000.00 0.95% 120 115 115
6,250,000.00 0.62% 120 115 115
6,250,000.00 0.62% 120 115 115
5,250,000.00 0.52% 120 115 115
4,750,000.00 0.47% 120 115 115
50,000,000.00 4.99% 120 115 43
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
34,807,243.51 3.48%
- ----------------------------------------------------------------------------------------
7,458,695.04 0.74% 120 119
7,259,796.50 0.72% 120 119
6,464,202.36 0.65% 120 119
4,176,869.22 0.42% 120 119
2,983,478.02 0.30% 120 119
2,983,478.02 0.30% 120 119
2,088,434.61 0.21% 120 119
1,392,289.74 0.14% 120 119
28,549,985.14 2.85% 84 79
- ----------------------------------------------------------------------------------------
24,600,856.10 2.46% 120 113
- ----------------------------------------------------------------------------------------
22,742,295.55 2.27%
- ----------------------------------------------------------------------------------------
17,878,220.92 1.79% 120 118
4,864,074.63 0.49% 120 118
18,443,578.47 1.84% 120 116
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
17,038,704.31 1.70% 120 116
- ----------------------------------------------------------------------------------------
9,866,733.14 0.99%
- ----------------------------------------------------------------------------------------
5,381,854.44 0.54% 120 115
4,484,878.70 0.45% 120 115
4,121,857.15 0.41%
- ----------------------------------------------------------------------------------------
2,153,134.58 0.21% 120 115
1,968,722.57 0.20% 120 115
193
MATURITY
MONTHLY DATE CUT-OFF
ORIGINAL REMAINING P&I OR ARD DATE LTV RATIO AT
AMORT TERM AMORT TERM PAYMENTS BALLOON APPRAISED LTV MATURITY OR
(MOS.) (MOS.) ($) BALANCE($) VALUE($) DSCR(X) RATIO ARD
- ----------------------------------------------------------------------------------------------------------------------------
61,250,000.00 96,700,000.00 1.85 62.10% 62.10%
- ----------------------------------------------------------------------------------------------------------------------------
NA NA 15,000,000.00 23,800,000.00 1.83 63.03% 63.03%
NA NA 14,250,000.00 22,650,000.00 1.95 62.91% 62.91%
NA NA 9,500,000.00 15,250,000.00 1.75 62.30% 62.30%
NA NA 6,250,000.00 10,350,000.00 1.97 60.39% 60.39%
NA NA 6,250,000.00 10,200,000.00 1.73 61.27% 61.27%
NA NA 5,250,000.00 8,250,000.00 1.78 63.64% 63.64%
NA NA 4,750,000.00 8,200,000.00 1.92 57.93% 57.93%
300 300 377,664.38 45,402,308.38 99,300,000.00 2.12 50.35% 45.72%
- ----------------------------------------------------------------------------------------------------------------------------
15,000,000.00
9,700,000.00
16,000,000.00
12,400,000.00
30,200,000.00
16,000,000.00
- ----------------------------------------------------------------------------------------------------------------------------
410,359.27 1.22 45.28%
- ----------------------------------------------------------------------------------------------------------------------------
120 119 87,934.13 17,850,000.00 1.22 41.79%
120 119 85,589.22 16,250,000.00 1.22 44.68%
120 119 76,209.58 13,250,000.00 1.20 48.79%
120 119 49,243.11 10,400,000.00 1.25 40.16%
120 119 35,173.65 6,300,000.00 1.24 47.36%
120 119 35,173.65 6,000,000.00 1.24 49.72%
120 119 24,621.56 4,300,000.00 1.21 48.57%
120 119 16,414.37 2,950,000.00 1.21 47.20%
360 355 211,149.30 26,799,551.80 37,000,000.00 1.24 77.16% 72.43%
- ----------------------------------------------------------------------------------------------------------------------------
5,500,000.00
12,750,000.00
12,550,000.00
6,200,000.00
360 353 186,953.83 22,251,770.42 43,500,000.00 1.27 56.55% 51.15%
- ----------------------------------------------------------------------------------------------------------------------------
29,800,000.00
13,700,000.00
162,341.03 20,215,990.11 1.29 70.45% 62.59%
- ----------------------------------------------------------------------------------------------------------------------------
360 358 127,619.87 15,892,236.38 24,700,000.00 1.28 72.38% 64.34%
360 358 34,721.16 4,323,753.73 7,700,000.00 1.34 63.17% 56.15%
300 296 141,440.74 5,202,800.76 28,090,000.00 1.35 65.66% 54.12%
- ----------------------------------------------------------------------------------------------------------------------------
1,400,000.00
2,720,000.00
3,000,000.00
2,070,000.00
7,500,000.00
1,820,000.00
1,980,000.00
2,200,000.00
2,650,000.00
2,750,000.00
- ----------------------------------------------------------------------------------------------------------------------------
300 296 130,666.99 14,044,781.93 28,160,000.00 1.38 60.51% 49.87%
- ----------------------------------------------------------------------------------------------------------------------------
2,600,000.00
2,820,000.00
3,210,000.00
2,120,000.00
4,130,000.00
3,250,000.00
1,880,000.00
1,550,000.00
2,980,000.00
3,620,000.00
70,924.81 8,796,777.38 1.33 55.44% 49.42%
- ----------------------------------------------------------------------------------------------------------------------------
360 355 38,686.26 4,798,242.20 9,250,000.00 1.34 58.18% 51.87%
360 355 32,238.55 3,998,535.17 8,600,000.00 1.32 52.15% 46.49%
30,341.16 3,696,381.29 1.37 79.27% 71.09%
- ----------------------------------------------------------------------------------------------------------------------------
360 355 15,849.31 1,930,879.13 2,700,000.00 1.39 79.75% 71.51%
360 355 14,491.85 1,765,502.16 2,500,000.00 1.34 78.75% 70.62%
CUT-OFF
DATE LOAN
NUMBER OF UNIT OF AMOUNT PER NET CASH FLOW LOAN
(UNITS) MEASURE (UNIT)($) ($) NUMBER
- -------------------------------------------------------------------------
1,980 Units 31,817 8,336,826.88
- -------------------------------------------------------------------------
484 Units 30,992 2,014,060.51 21
362 Units 39,365 2,041,953.76 24
304 Units 31,250 1,225,264.85 32
196 Units 31,888 903,640.59 47
210 Units 29,762 794,425.65 48
192 Units 27,344 687,296.16 55
232 Units 20,474 670,185.35 65
807 Rooms 61,958 9,616,355.94 2
- -------------------------------------------------------------------------
150 Rooms 1,527,494.58 2.1
114 Rooms 945,197.28 2.2
160 Rooms 1,564,682.79 2.3
128 Rooms 1,097,991.76 2.4
159 Rooms 2,792,195.76 2.5
96 Rooms 1,688,793.77 2.6
- -------------------------------------------------------------------------
528,003 Sq. Ft. 70 6,025,377.20
- -------------------------------------------------------------------------
114,566 Sq. Ft. 65 1,289,095.38 40
80,740 Sq. Ft. 90 1,255,884.71 43
81,800 Sq. Ft. 79 1,099,199.62 46
97,921 Sq. Ft. 43 740,906.39 68
42,500 Sq. Ft. 70 521,433.30 77
56,031 Sq. Ft. 53 524,374.34 78
27,800 Sq. Ft. 75 356,518.95 89
26,645 Sq. Ft. 52 237,964.51 99
846 Units 33,747 3,142,893.00 7
- -------------------------------------------------------------------------
112 Units 468,449.00 7.1
304 Units 1,138,188.00 7.2
304 Units 976,566.00 7.3
126 Units 559,690.00 7.4
188,163 Sq. Ft. 131 2,856,132.00 9
- -------------------------------------------------------------------------
138,938 Sq. Ft. 1,766,548.00 9.1
49,225 Sq. Ft. 1,089,583.00 9.2
216,689 Sq. Ft. 105 2,519,437.70
- -------------------------------------------------------------------------
175,167 Sq. Ft. 102 1,962,123.04 16
41,522 Sq. Ft. 117 557,314.66 64
5,314 Units 3,471 2,295,456.00 15
- -------------------------------------------------------------------------
393 Units 114,891.00 15.01
452 Units 238,974.00 15.02
412 Units 264,472.00 15.03
706 Units 142,581.00 15.04
935 Units 594,952.00 15.05
326 Units 161,846.00 15.06
405 Units 143,610.00 15.07
425 Units 173,859.00 15.08
595 Units 229,294.00 15.09
665 Units 230,976.00 15.10
- -------------------------------------------------------------------------
4,873 Units 3,497 2,166,258.00 18
- -------------------------------------------------------------------------
528 Units 237,790.00 18.01
461 Units 267,658.00 18.02
541 Units 115,898.00 18.03
324 Units 180,317.00 18.04
481 Units 303,744.00 18.05
499 Units 292,622.00 18.06
397 Units 168,302.00 18.07
484 Units 119,278.00 18.08
445 Units 220,797.00 18.09
713 Units 259,851.00 18.10
138,022 Sq. Ft. 72 1,133,276.73
- -------------------------------------------------------------------------
69,370 Sq. Ft. 78 624,095.28 52
68,652 Sq. Ft. 65 509,181.45 67
207 Units 20,029 497,633.00
- -------------------------------------------------------------------------
116 Units 18,562 264,067.00 87
91 Units 21,634 233,566.00 92
194
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2001-C2
ANNEX A-6 DEBT SERVICE PAYMENT SCHEDULE FOR QWEST COMMUNICATIONS BUILDING
CONTROL #10 CONTROL #10
LOAN QWEST PAYMENT LOAN QWEST PAYMENT
PAY PERIOD SCHEDULES PAY PERIOD SCHEDULE ($)
---------- ------------- ---------- -------------
1 154,375.00 60 154,375.00
2 154,375.00 61 154,375.00
3 154,375.00 62 154,375.00
4 154,375.00 63 154,375.00
5 154,375.00 64 243,697.58
6 154,375.00 65 529,166.67
7 154,375.00 66 529,166.67
8 154,375.00 67 529,166.67
9 154,375.00 68 529,166.67
10 154,375.00 69 529,166.67
11 154,375.00 70 529,166.67
12 154,375.00 71 529,166.67
13 154,375.00 72 529,166.67
14 154,375.00 73 529,166.67
15 154,375.00 74 529,166.67
16 154,375.00 75 529,166.67
17 154,375.00 76 529,166.67
18 154,375.00 77 529,166.67
19 154,375.00 78 529,166.67
20 154,375.00 79 529,166.67
21 154,375.00 80 529,166.67
22 154,375.00 81 529,166.67
23 154,375.00 82 529,166.67
24 154,375.00 83 529,166.67
25 154,375.00 84 529,166.67
26 154,375.00 85 529,166.67
27 154,375.00 86 529,166.67
28 154,375.00 87 529,166.67
29 154,375.00 88 529,166.67
30 154,375.00 89 529,166.67
31 154,375.00 90 529,166.67
32 154,375.00 91 529,166.67
33 154,375.00 92 529,166.67
34 154,375.00 93 529,166.67
35 154,375.00 94 529,166.67
36 154,375.00 95 529,166.67
37 154,375.00 96 529,166.67
38 154,375.00 97 529,166.67
39 154,375.00 98 529,166.67
40 154,375.00 99 529,166.67
41 154,375.00 100 529,166.67
42 154,375.00 101 529,166.67
43 154,375.00 102 529,166.67
44 154,375.00 103 529,166.67
45 154,375.00 104 529,166.67
46 154,375.00 105 529,166.67
47 154,375.00 106 529,166.67
48 154,375.00 107 529,166.67
49 154,375.00 108 529,166.67
50 154,375.00 109 529,166.67
51 154,375.00 110 529,166.67
52 154,375.00 111 529,166.67
53 154,375.00 112 529,166.67
54 154,375.00 113 529,166.67
55 154,375.00 114 529,166.67
56 154,375.00 115 529,166.67
57 154,375.00 116 529,166.67
58 154,375.00 117 529,166.68
59 154,375.00
195
------------------------------------------
For Additional Information, please contact
[WELLS FARGO LOGO] FIRST UNION COMMERCIAL MORTGAGE TRUST CTSLink Customer Service
WELLS FARGO BANK MINNESOTA, N. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES (301) 815-6600
CORPORATE TRUST SERVICES SERIES 2001-C2 Reports Available on the World Wide Web
11000 BROKEN LAND PARKWAY @www.ctslink.com/cmbs
------------------------------------------
COLUMBIA, MD 21044 PAYMENT DATE: 07/13/2001
RECORD DATE: 06/29/2001
DISTRIBUTION DATE STATEMENT
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
STATEMENT SECTIONS PAGE(S)
- ------------------ -------
Certificate Distribution Detail 2
Certificate Factor Detail 3
Reconciliation Detail 4
Other Required Information 5
Ratings Detail 6
Current Mortgage Loan and Property Stratification Tables 7-9
Mortgage Loan Detail 10
Principal Prepayment Detail 11
Historical Detail 12
Delinquency Loan Detail 13
Specially Serviced Loan Detail 14-15
Modified Loan Detail 16
Liquidated Loan Detail 17
- --------------------------------------------------------------------------------
UNDERWRITER UNDERWRITER MASTER SERVICER SPECIAL SERVICER
First Union Securities, Inc. Merrill Lynch, Pierce, Fenner & Smith Inc. First Union National Bank Lennar Partners, Inc.
201 South College Street World Financial Center, North Tower Charlotte Plaza, Floor 23 NC-1075 700 N.W. 107th Avenue
Charlotte, NC 28288 250 Vesey Street 201 South College Street Miami, FL 33172
New York, NY 10281 Charlotte, NC 28288
Contact: William J. Cohane Contact: John E. Gluszak Contact: Timothy S. Ryan Contact: Steve Bruha
Phone Number (704) 383-4984 Phone Number (212) 449-1000 Phone Number (704) 593-7878 Phone Number
(305) 229-6614
This report has been compiled from information provided to Wells Fargo Bank MN,
N.A. by various third parties, which may include the Master Servicer, Special
Servicer and others. Wells Fargo Bank MN, N.A. has not independently confirmed
the accuracy of information received from these third parties and assumes no
duty to do so. Wells Fargo Bank MN, N.A. expressly disclaims any responsibility
for the accuracy or completeness of information furnished by third parties.
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 1 of 17
196
For Additional Information, please contact
[WELLS FARGO LOGO] FIRST UNION COMMERCIAL MORTGAGE TRUST CTSLink Customer Service
WELLS FARGO BANK MINNESOTA, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES (301) 815-6600
CORPORATE TRUST SERVICES SERIES 2001-C2 Reports Available on the World Wide Web
11000 BROKEN LAND PARKWAY @www.ctslink.com/cmbs
COLUMBIA, MD 21044 PAYMENT DATE: 07/13/2001
RECORD DATE: 06/29/2001
CERFICIATE DISTRIBUTION DETAIL
- -----------------------------------------------------------------------------------------------------------------------------------
Realized Loss/ Current
Additional Total Subor-
Class\ Pass-Through Original Beginning Principal Interest Prepayment Trust Fund Distri- Ending dination
Component CUSIP Rate Balance Balance Distribution Distribution Premium Expenses bution Balance Level (1)
- -----------------------------------------------------------------------------------------------------------------------------------
A-1 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
A-2 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
B 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
C 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
D 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
E 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
F 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
G 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
H 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
J 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
K 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
L 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
M 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
N 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
O 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
P 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
Q 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
Z-I 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
Z-II 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
R-I 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
R-II 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
- ----------------------------------------------------------------------------------------------------------------------------------
Totals
==================================================================================================================================
- --------------------------------------------------------------------------------------------------
Original Beginning Ending
Pass-Through Notional Notional Interest Prepayment Total Notional
Class CUSIP Rate Amount Amount Distribution Premium Distribution Amount
- --------------------------------------------------------------------------------------------------
IO 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------------------------
(1) Calculated by taking (A) the sum of the ending certificate balance of
all classes less (B) the sum of (i) the ending certificate balance of
the designated class and (ii) the ending certificate balance of all
classes which are not subordinate to the designated class and dividing
the result by (A).
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 2 of 17
197
For Additional Information, please contact
[LOGO] FIRST UNION COMMERCIAL MORTGAGE TRUST CTSLink Customer Service
WELLS FARGO BANK MINNESOTA, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES (301) 815-6600
CORPORATE TRUST SERVICES SERIES 2001-C2 Reports Available on the World Wide Web
11000 BROKEN LAND PARKWAY @www.ctslink.com/cmbs
COLUMBIA, MD 21044 PAYMENT DATE: 07/13/2001
RECORD DATE: 06/29/2001
CERTIFICATE FACTOR DETAIL
- ----------------------------------------------------------------------------------------------------------------------------------
REALIZED LOSS/
BEGINNING PRINCIPAL INTEREST PREPAYMENT ADDITIONAL TRUST ENDING
CLASS CUSIP BALANCE DISTRIBUTION DISTRIBUTION PREMIUM FUND EXPENSES BALANCE
- ----------------------------------------------------------------------------------------------------------------------------------
A-1 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
A-2 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
B 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
C 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
D 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
E 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
F 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
G 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
H 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
J 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
K 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
L 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
M 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
N 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
O 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
P 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
Q 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
Z-I 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
Z-II 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-I 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-II 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
BEGINNING PRINCIPAL ENDING
NOTIONAL INTEREST PREPAYMENT NOTIONAL
CLASS CUSIP BALANCE DISTRIBUTION PREMIUM AMOUNT
- --------------------------------------------------------------------------------------
IO 0.00000000 0.00000000 0.00000000 0.00000000
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 3 of 17
198
------------------------------------------
For Additional Information, please contact
[WELLS FARGO LOGO] FIRST UNION COMMERCIAL MORTGAGE TRUST CTSLink Customer Service
WELLS FARGO BANK MINNESOTA, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES (301) 815-6600
CORPORATE TRUST SERVICES SERIES 2001-C2 Reports Available on the World Wide Web
11000 BROKEN LAND PARKWAY @www.ctslink.com/cmbs
COLUMBIA, MD 21044 ----------------------------------------
PAYMENT DATE: 07/13/2001
RECORD DATE: 06/29/2001
RECONCILIATION DETAIL
ADVANCE SUMMARY SERVICING FEE SUMMARY
P & I Advances Outstanding 0.00 Current Period Accrued Servicing Fees 0.00
Servicing Advances Outstanding 0.00 Less Delinquent Servicing Fees 0.00
Reimbursement for Interest on Advances 0.00 Less Reductions to Servicing Fees 0.00
paid from general collections
Plus Servicing Fees for Delinquent Payments Received 0.00
Reimbursement for Interest on Servicing 0.00
Advances paid from general collections Plus Adjustments for Prior Servicing Calculation 0.00
Total Servicing Fees Collected 0.00
Aggregate Amount of Nonrecoverable Advances 0.00
CERTIFICATE INTEREST RECONCILIATION
- -----------------------------------------------------------------------------------------------------------------------------------
Accrued Net Aggregate Distributable Distributable Additional Remaining Unpaid
Certificate Prepayment Certificate Certificate Interest Trust Fund Interest Distributable
Class Interest Interest Shortfall Interest Adjustment Expenses Distribution Certificate Interest
- -----------------------------------------------------------------------------------------------------------------------------------
A-1
A-2
IO
B
C
D
E
F
G
H
J
K
L
M
N
O
P
Q
- -----------------------------------------------------------------------------------------------------------------------------------
Total
===================================================================================================================================
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 4 of 17
199
------------------------------------------
For Additional Information, please contact
[WELLS FARGO LOGO] FIRST UNION COMMERCIAL MORTGAGE TRUST CTSLink Customer Service
WELLS FARGO BANK MINNESOTA, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES (301) 815-6600
CORPORATE TRUST SERVICES SERIES 2001-C2 Reports Available on the World Wide Web
11000 BROKEN LAND PARKWAY @www.ctslink.com/cmbs
COLUMBIA, MD 21044 ------------------------------------------
PAYMENT DATE: 07/13/2001
RECORD DATE: 06/29/2001
OTHER REQUIRED INFORMATION
Available Distribution Amount 0.00
Aggregate Number of Outstanding Loans 0
Aggregate Stated Principal Balance of Loans before Distributions 0.00
Aggregate Stated Principal Balance of Loans after Distributions 0.00
Aggregate Unpaid Principal Balance of Loans 0.00
Aggregate Amount of Servicing Fee 0.00
Aggregate Amount of Special Servicing Fee 0.00
Aggregate Amount of Trustee Fee 0.00
Aggregate Trust Fund Expenses 0.00
Interest Reserve Deposit 0.00
Interest Reserve Withdrawal 0.00
Specially Serviced Loans not Delinquent
Number of Outstanding Loans 0
Aggregate Unpaid Principal Balance 0.00
Appraisal Reduction Amount
- -------------------------------------------------------------------------------
Appraisal Cumulative Most Recent
Loan Reduction ASER App. Red.
Number Amount Amount Date
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total
===============================================================================
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 5 of 17
200
------------------------------------------
For Additional Information, please contact
[WELLS FARGO LOGO] FIRST UNION COMMERCIAL MORTGAGE TRUST CTSLink Customer Service
WELLS FARGO BANK MINNESOTA, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES (301) 815-6600
CORPORATE TRUST SERVICES SERIES 2001-C2 Reports Available on the World Wide Web
11000 BROKEN LAND PARKWAY @www.ctslink.com/cmbs
COLUMBIA, MD 21044 ------------------------------------------
PAYMENT DATE: 07/13/2001
RECORD DATE: 06/29/2001
RATINGS DETAIL
- ------------------------------------------------------------------------------------------------------------------
Original Ratings Current Ratings (1)
---------------------------------------------------------------------------------------
Class CUSIP Fitch Moody's S & P Fitch Moody's S & P
- ------------------------------------------------------------------------------------------------------------------
A-1
A-2
IO
B
C
D
E
F
G
H
J
K
L
M
N
O
P
Q
- ------------------------------------------------------------------------------------------------------------------
NR - Designates that the class was not rated by the above agency at the
time of original issuance.
X - Designates that the above rating agency did not rate any classes in
this transaction at the time of original issuance.
N/A - Data not available this period.
1) For any class not rated at the time of original issuance by any
particular rating agency, no request has been made subsequent to issuance to
obtain rating information, if any, from such rating agency. The current ratings
were obtained directly from the applicable rating agency within 30 days of the
payment date listed above. The ratings may have changed since they were
obtained. Because the ratings may have changed, you may want to obtain current
ratings directly from the rating agencies.
Fitch, Inc.
One State Street Plaza
New York, New York 10004
(212) 908-0500
Moody's Investors Service
99 Church Street
New York, New York 10007
(212) 553-0300
Standard & Poor's Rating Services
55 Water Street
New York, New York 10041
(212) 438-2430
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 6 of 17
201
------------------------------------------
[WELLS FARGO LOGO] FIRST UNION COMMERCIAL MORTGAGE TRUST For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES CTSLink Customer Service
CORPORATE TRUST SERVICES SERIES 2001-C2 (301) 815-6600
11000 BROKEN LAND PARKWAY Reports Available on the World Wide Web
COLUMBIA, MD 21044 @www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 07/13/2001
RECORD DATE: 06/29/2001
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
SCHEDULED BALANCE
- ----------------------------------------------------------------
% of
Scheduled # of Scheduled Agg. WAM WAC Weighted
Balance Loans Balance Bal. (2) Avg DSCR (1)
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Totals
================================================================
STATE (3)
- ----------------------------------------------------------------
% of
State # of Scheduled Agg. WAM WAC Weighted
Props Balance Bal. (2) Avg DSCR (1)
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Totals
================================================================
See footnotes on last page of this section.
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 7 of 17
202
---------------------------------------------
[WELLS FARGO LOGO] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES FIRST UNION COMMERCIAL MORTGAGE TRUST (301) 815-6600
11000 BROKEN LAND PARKWAY COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
COLUMBIA, MD 21044 SERIES 2001-C2 @www.ctslink.com/cmbs
---------------------------------------------
PAYMENT DATE: 07/13/2001
RECORD DATE: 06/29/2001
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
DEBT SERVICE COVERAGE RATIO (1)
-------------------------------------------------------------------------------------------
% of
Debt Service # of Scheduled Agg. (WAM) Weighted
Coverage Ratio Loans Balance Bal. (2) (WAC) Avg DSCR (1)
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Totals
===========================================================================================
NOTE RATE
-------------------------------------------------------------------------------------------
% of
Note # of Scheduled Agg. (WAM) Weighted
Rate Loans Balance Bal. (2) (WAC) Avg DSCR (1)
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Totals
===========================================================================================
PROPERTY TYPE (3)
-------------------------------------------------------------------------------------------
% of
Property # of Scheduled Agg. (WAM) Weighted
Type Loans Balance Bal. (2) (WAC) Avg DSCR (1)
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Totals
===========================================================================================
SEASONING
-------------------------------------------------------------------------------------------
% of
Seasoning # of Scheduled Agg. (WAM) Weighted
Loans Balance Bal. (2) (WAC) Avg DSCR (1)
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Totals
===========================================================================================
See footnotes on last page of this section.
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 8 of 17
203
---------------------------------------------
[WELLS FARGO LOGO] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES FIRST UNION COMMERCIAL MORTGAGE TRUST (301) 815-6600
11000 BROKEN LAND PARKWAY COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
COLUMBIA, MD 21044 SERIES 2001-C2 @www.ctslink.com/cmbs
---------------------------------------------
PAYMENT DATE: 07/13/2001
RECORD DATE: 06/29/2001
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
ANTICIPATED REMAINING TERM (ARD AND BALLOON LOANS)
--------------------------------------------------------------------------------------------------
% of
Anticipated Remaining # of Scheduled Agg. WAM WAC Weighted
Term (2) Loans Balance Bal. (2) Avg DSCR (1)
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
Totals
==================================================================================================
REMAINING AMORTIZATION TERM (ARD AND BALLOON LOANS)
--------------------------------------------------------------------------------------------------
% of
Remaining Amortization # of Scheduled Agg. WAM WAC Weighted
Term Loans Balance Bal. (2) Avg DSCR (1)
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
Totals
==================================================================================================
REMAINING STATED TERM (FULLY AMORTIZING LOANS)
--------------------------------------------------------------------------------------------------
% of
Remaining Stated # of Scheduled Agg. WAM WAC Weighted
Term Loans Balance Bal. (2) Avg DSCR (1)
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
Totals
==================================================================================================
AGE OF MOST RECENT NOI
--------------------------------------------------------------------------------------------------
% of
Age of Most # of Scheduled Agg. WAM WAC Weighted
Recent NOI Loans Balance Bal. (2) Avg DSCR (1)
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
Totals
==================================================================================================
(1) Debt Service Coverage Ratios are updated periodically as new NOI figures become available from borrowers on an asset level. In
all cases the most current DSCR provided by the Servicer is used. To the extent that no DSCR is provided by the Servicer,
information from the offering document is used. The Trustee makes no representations as to the accuracy of the data provided by the
borrower for this calculation.
(2) Anticipated Remaining Term and WAM are each calculated based upon the term from the current month to the earlier of the
Anticipated Repayment Date, if applicable, and the Maturity Date.
(3) Data in this table was calculated by allocating pro-rata the current loan information to the properties based upon the Cut-off
Date balance of each property as disclosed in the offering document.
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 9 of 17
204
---------------------------------------------
[WELLS FARGO LOGO] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES FIRST UNION COMMERCIAL MORTGAGE TRUST (301) 815-6600
11000 BROKEN LAND PARKWAY COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
COLUMBIA, MD 21044 SERIES 2001-C2 @www.ctslink.com/cmbs
---------------------------------------------
PAYMENT DATE: 07/13/2001
RECORD DATE: 06/29/2001
MORTGAGE LOAN DETAIL
- -----------------------------------------------------------------------------------------------------------------------------
Anticipated Neg.
Loan ODCR Property CITY STATE Interest Principal Gross Repayment Maturity Amort
Number Type (1) Payment Payment Coupon Date Date (Y/N)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
=============================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------------
Beginning Ending Paid Appraisal Appraisal Res. Mod.
Scheduled Scheduled Thru Reduction Reduction Strat. Code
Balance Balance Date Date Amount (2) (3)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
=============================================================================================================================
(1) Property Type Code
MF - Multi-Family OF - Office
RT - Retail MU - Mixed Use
HC - Health Care LO - Lodging
IN - Industrial SS - Self Storage
WH - Warehouse OT - Other
MH- Mobile Home Park
(2) Resolution Strategy Code
1 - Modification 6 - DPO 10 - Deed in Lieu Of
2 - Foreclosure 7 - REO Foreclosure
3 - Bankruptcy 8 - Resolved 11 - Full Payoff
4 - Extension 9 - Pending Return 12 - Reps and Warranties
5 - Note Sale to Master Servicer 13 - Other or TBD
(3) Modification Code
1 - Maturity Date Extension
2 - Amortization Change
3 - Principal Write-Off
4 - Combination
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 10 of 17
205
---------------------------------------------
[WELLS FARGO LOGO] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES FIRST UNION COMMERCIAL MORTGAGE TRUST (301) 815-6600
11000 BROKEN LAND PARKWAY COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
COLUMBIA, MD 21044 SERIES 2001-C2 @www.ctslink.com/cmbs
---------------------------------------------
PAYMENT DATE: 07/13/2001
RECORD DATE: 06/29/2001
PRINCIPAL PREPAYMENT DETAIL
- ----------------------------------------------------------------------------------------------------------------------------------
Principal Prepayment Amount Prepayment Penalties
Loan Number Offering Document ----------------------------------- -------------------------------------------------
Cross-Reference Payoff Amount Curtailment Amount Prepayment Premium Yield Maintenance Premium
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Totals
==================================================================================================================================
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 11 of 17
206
---------------------------------------------
[WELLS FARGO LOGO] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES FIRST UNION COMMERCIAL MORTGAGE TRUST (301) 815-6600
11000 BROKEN LAND PARKWAY COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
COLUMBIA, MD 21044 SERIES 2001-C2 @www.ctslink.com/cmbs
---------------------------------------------
PAYMENT DATE: 07/13/2001
RECORD DATE: 06/29/2001
HISTORICAL DETAIL
- ----------------------------------------------------------------------------------------------------------------------------------
Delinquencies
- ----------------------------------------------------------------------------------------------------------------------------------
Distribution 30-59 Days 60-89 Days 90 Days or More Foreclosure REO Modifications
Date # Balance # Balance # Balance # Balance # Balance # Balance
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Prepayments Rate and Maturities
- ----------------------------------------------------------------------------------------------------------------------------------
Curtailments Payoff Next Weighted Avg. WAM
# Amount # Amount Coupon Remit
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Note: Foreclosure and REO Totals are excluded from the delinquencies aging categories.
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 12 of 17
207
---------------------------------------------
[WELLS FARGO LOGO] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES FIRST UNION COMMERCIAL MORTGAGE TRUST (301) 815-6600
11000 BROKEN LAND PARKWAY COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
COLUMBIA, MD 21044 SERIES 2001-C2 @www.ctslink.com/cmbs
---------------------------------------------
PAYMENT DATE: 07/13/2001
RECORD DATE: 06/29/2001
DELINQUENCY LOAN DETAIL
- ----------------------------------------------------------------------------------------------------------------------------------
Offering # of Paid Through Current Outstanding Status of Resolution Servicing
Loan Number Document Months Date P & I P & I Mortgage Strategy Transfer Date
Cross-Reference Delinq. Advances Advances (**) Loan (1) Code (2)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Totals
==================================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
Foreclosure Actual Outstanding Bankruptcy REO
Date Principal Servicing Date Date
Balance Advances
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Totals
==================================================================================================================================
A - Payment Not Received But Still in Grace Period
B - Late Payment But Less Than 1 Month Delinquent
(1) Status of Mortgage Loan
0 - Current - Assumed Scheduled Payment
1 - One Month Delinquent (Performing Matured Balloon)
2 - Two Months Delinquent 7 - Foreclosure
3 - Three or More Months Delinquent 9 - REO
(2) Resolution Strategy Code
1 - Modification 6 - DPO 10- Deed In Lieu Of
2 - Foreclosure 7 - REO Foreclosure
3 - Bankruptcy 8 - Resolved 11 - Full Payoff
4 - Extension 9 - Pending Return 12 - Reps and Warranties
5 - Note Sale to Master Servicer 13 - Other or TBD
(**) Outstanding P & I Advances include the current period advance.
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 13 of 17
208
---------------------------------------------
[WELLS FARGO LOGO] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES FIRST UNION COMMERCIAL MORTGAGE TRUST (301) 815-6600
11000 BROKEN LAND PARKWAY COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
COLUMBIA, MD 21044 SERIES 2001-C2 @www.ctslink.com/cmbs
---------------------------------------------
PAYMENT DATE: 07/13/2001
RECORD DATE: 06/29/2001
SPECIALLY SERVICED LOAN DETAIL - PART 1
- ----------------------------------------------------------------------------------------------------------------------------------
Loan Offering Servicing Resolution Scheduled Property State Interest Actual Net DSCR
Number Document Transfer Strategy Balance Type (2) Rate Balance Operating Date
Cross-Reference Date Code (1) Income
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Note Maturity Remaining
DSCR Date Date Amortization
Term
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
(1) Resolution Strategy Code
1 - Modification 6 - DPO 10 - Deed in Lieu Of
2 - Foreclosure 7 - REO Foreclosure
3 - Bankruptcy 8 - Resolved 11 - Full Payoff
4 - Extension 9 - Pending Return 12 - Reps and Warranties
5 - Note Sale to Master Servicer 13 - Other or TBD
(2) Property Type Code
MF - Multi-Family OF - Office
RT - Retail MU - Mixed Use
HC - Health Care LO - Lodging
IN - Industrial SS - Self Storage
WH - Warehouse OT - Other
MH - Mobile Home Park
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 14 of 17
209
---------------------------------------------
[WELLS FARGO LOGO] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES FIRST UNION COMMERCIAL MORTGAGE TRUST (301) 815-6600
11000 BROKEN LAND PARKWAY COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
COLUMBIA, MD 21044 SERIES 2001-C2 @www.ctslink.com/cmbs
---------------------------------------------
PAYMENT DATE: 07/13/2001
RECORD DATE: 06/29/2001
SPECIALLY SERVICED LOAN DETAIL - PART 2
- -----------------------------------------------------------------------------------------------------------------------------------
Loan Offering Resolution Site Phase 1 Appraisal Appraisal Other REO Comment
Number Document Strategy Inspection Date Date Value Property Revenue
Cross-Reference Code (1) Date
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Resolution Strategy Code
1 - Modification 6 - DPO 10 - Deed in Lieu Of
2 - Foreclosure 7 - REO Foreclosure
3 - Bankruptcy 8 - Resolved 11 - Full Payoff
4 - Extension 9 - Pending Return 12 - Reps and Warranties
5 - Note Sale to Master Servicer 13 - Other or TBD
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 15 of 17
210
---------------------------------------------
[WELLS FARGO LOGO] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES FIRST UNION COMMERCIAL MORTGAGE TRUST (301) 815-6600
11000 BROKEN LAND PARKWAY COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
COLUMBIA, MD 21044 SERIES 2001-C2 @www.ctslink.com/cmbs
---------------------------------------------
PAYMENT DATE: 07/13/2001
RECORD DATE: 06/29/2001
MODIFIED LOAN DETAIL
- -----------------------------------------------------------------------------------------------------------------------------------
Loan Offering Pre-Modification Modification Date Modification Description
Number Document Balance
Cross-Reference
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Totals
===================================================================================================================================
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 16 of 17
211
---------------------------------------------
[WELLS FARGO LOGO] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES FIRST UNION COMMERCIAL MORTGAGE TRUST (301) 815-6600
11000 BROKEN LAND PARKWAY COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
COLUMBIA, MD 21044 SERIES 2001-C2 @www.ctslink.com/cmbs
---------------------------------------------
PAYMENT DATE: 07/13/2001
RECORD DATE: 06/29/2001
LIQUIDATED LOAN DETAIL
- -----------------------------------------------------------------------------------------------------------------------------------
Loan Final Recovery Offering Appraisal Appraisal Actual Gross Gross Proceeds
Number Determination Document Date Value Balance Proceeds as a % of
Date Cross-Reference Actual Balance
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Current Total
===================================================================================================================================
Cumulative Total
===================================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
Aggregate Net Net Proceeds Realized Repurchased
Liquidation Liquidation as a % of Loss by Seller
Expenses(*) Proceeds Actual Balance (Y/N)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Current Total
===================================================================================================================================
Cumulative Total
===================================================================================================================================
(*) Aggregate liquidation expenses also include outstanding P & I advances and unpaid fees (servicing, trustee, etc.).
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 17 of 17
212
[This Page Intentionally Left Blank]
213
ANNEX C
CMSA INVESTOR REPORTING PACKAGE
DELINQUENT LOAN STATUS REPORT
as of _____________
(Loan Level Report)
Operating Information Reflected As NOI ______ or NCF _______
S4 S55 S61 S57 S58 S62 or S63 L8 L7 L37 L39 L38 L25
- ---------- -------- -------- ---- ----- ---------- ---- ---------- ----------- ----------- ----------- -------
(a) (b) (c) (d) (e)=a+b+c+d
---------- ----------- ----------- ----------- ----------- -------
ENDING OTHER
LOAN PAID SCHEDULED TOTAL P&I EXPENSE TOTAL T&I CURRENT
PROSPECTUS PROPERTY PROPERTY SQ FT OR THRU LOAN ADVANCES ADVANCE ADVANCES TOTAL MONTHLY
ID NAME TYPE CITY STATE UNITS DATE BALANCE OUTSTANDING OUTSTANDING OUTSTANDING EXPOSURE P&I
- ---------- -------- -------- ---- ----- ---------- ---- ---------- ----------- ----------- ----------- ---------- -------
LOANS IN FORECLOSURE AND NOT REO
90 + DAYS DELINQUENT
60 TO 89 DAYS DELINQUENT
30 TO 59 DAYS DELINQUENT
CURRENT AND AT SPECIAL SERVICER
L54 OR L56 OR
L58 L68/L92 L70/L93
L10 L11 OR L73 OR L96 OR L97 L74 L75 L35 L77 L79 L76
- -------- -------- -------- ------- --------- --------- --------- --------- -------- ----------- ---------
(F) (.90*F) - e
--------- -----------
LOSS DATE ASSET
APPRAISAL USING TOTAL EXPECTED TO
CURRENT LTM LTM BPO OR 90% APPRAISAL BE RESOLVED
INTEREST MATURITY NOI/NCF LTM DSCR VALUATION INTERNAL APPR. OR REDUCTION TRANSFER OR WORKOUT
RATE DATE DATE NOI/NCF (NOI/NCF) DATE VALUE** BPO(F) REALIZED DATE FORECLOSED STRATEGY* COMMENTS
- -------- -------- -------- ------- --------- --------- --------- ----------- --------- -------- ----------- --------- --------
LOANS IN FORECLOSURE AND NOT REO
90 + DAYS DELINQUENT
60 TO 89 DAYS DELINQUENT
30 TO 59 DAYS DELINQUENT
CURRENT AND AT SPECIAL SERVICER
FCL = Foreclosure
LTM = Latest 12 Months either Last Normalized Annual, Normalized YTD or Trailing
12 months, if available.
*Workout Strategy should match the CMSA Loan Periodic Update File using
abbreviated words in place of a code number such as (FCL - In Foreclosure, MOD -
Modification, DPO - Discount Payoff, NS - Note Sale, BK - Bankruptcy, PP -
Payment Plan, TBD - To be determined etc...). It is possible to combine the
status codes if the loan is going in more than one direction (i.e. FCL/Mod,
BK/Mod, BK/FCL/DPO).
**BPO - Broker opinion
214
[This Page Intentionally Left Blank]
215
ANNEX D
CMSA INVESTOR REPORTING PACKAGE
HISTORICAL LOAN MODIFICATION REPORT
as of _____________
(Loan Level Report)
S4 S57 S58 L49 L48 L7* L7* L50* L50* L25* L25*
BALANCE
EXTENSION WHEN
MOD/ PER DOCS EFFECTIVE SENT TO BALANCE AT THE # MTHS
PROSPECTUS EXTENSION OR DATE OF SPECIAL EFFECTIVE DATE OF OLD FOR RATE NEW NEW
ID CITY STATE FLAG SERVICER MODIFICATION SERVICER MODIFICATION RATE CHANGE RATE OLD P&I P&I
- ---------- ---- ----- --------- --------- ------------ -------- ----------------- ---- -------- ---- ------- ---
L11* L11* L47
(2) EST.
FUTURE
INTEREST
TOTAL # (1) LOSS TO
MTHS FOR REALIZED TRUST $
OLD NEW CHANGE LOSS TO (RATE
MATURITY MATURITY OF MOD TRUST $ REDUCTION) COMMENT
- -------- -------- -------- -------- ---------- -------
THIS REPORT IS HISTORICAL
Information is as of modification. Each line should not change in the future.
Only new modifications should be added.
TOTAL FOR ALL LOANS:
* The information in these columns is from a particular point in time and
should not change on this report once assigned.
(1) Actual principal loss taken by bonds
(2) Expected future loss due to a rate reduction. This is just an estimate
calculated at the time of the modification.
216
[This Page Intentionally Left Blank]
217
ANNEX E
CMSA INVESTOR REPORTING PACKAGE
HISTORICAL LIQUIDATION REPORT
(REO-SOLD, DISCOUNTED PAYOFF OR NOTE SALE)
AS OF ________________________
(LOAN LEVEL REPORT)
S4 S55 S61 S57 S58 L75 L29 L45
(c) = b/a (a) (b) (d)
LATEST
% APPRAISAL
RECEIVED OR EFFECTIVE NET AMT
PROSPECTUS PROPERTY PROPERTY FROM BROKERS DATE OF SALES RECEIVED
LOAN ID NAME TYPE CITY STATE LIQUIDATION OPINION LIQUIDATION PRICE FROM SALE
THIS REPORT IS HISTORICAL
All information is from the liquidation date and does not need to be updated.
TOTAL ALL LOANS:
CURRENT MONTH ONLY:
L7 L37 L39+L38 L47
(e) (f) (g) (h) (i)=d - (f+g+h) (k) (m) (n)=k+m (o)=n/e
TOTAL T & I DATE OF
AND OTHER DATE MINOR
ENDING TOTAL P&I EXPENSE SERVICING LOSS MINOR ADJ TOTAL LOSS LOSS % OF
SCHEDULED ADVANCE ADVANCE FEES REALIZED PASSED ADJ TO PASSED WITH SCHEDULED
BALANCE OUTSTANDING OUTSTANDING EXPENSE NET PROCEEDS LOSS THRU TRUST THRU ADJUSTMENT BALANCE
THIS REPORT IS HISTORICAL
All information is from the liquidation date and does not need to be updated.
TOTAL ALL LOANS:
CURRENT MONTH ONLY:
(h) Servicing Fee Expense includes fees such as Liquidation or Disposition fees
charged by the Special Servicer.
218
[This Page Intentionally Left Blank]
219
ANNEX F
CMSA INVESTOR REPORTING PACKAGE
REO STATUS REPORT
AS OF ________________________
(PROPERTY LEVEL REPORT)
P16
OR
P4 P7 P13 P9 P10 P17 L8 P21 L37 L39 L38
(a) (b) (c) (d) (e)=a+b+c+d
ALLOCATED
ENDING OTHER
SQ FT PAID SCHEDULED TOTAL P&I EXPENSE TOTAL T & I
PROPERTY PROPERTY PROPERTY OR THRU LOAN ADVANCE ADVANCE ADVANCE TOTAL
ID NAME TYPE CITY STATE UNITS DATE AMOUNT OUTSTANDING OUTSTANDING OUTSTANDING EXPOSURE
P53 P58 OR
OR P72/P79
L25 L11 P74 OR P83 P24 P25 L35 L77 P28 P26
(f) (g) (h)=(.90*g)-e
APPRAISAL DATE
BPO OR APPRAISAL TOTAL ASSET
CURRENT LTM INTERNAL BPO OR LOSS USING APPRAISAL REO EXPECTED
MONTHLY MATURITY NOI/NCF LTM DSCR VALUATION VALUE INTERNAL 90% APPR. OR REDUCTION TRANSFER ACQUISITION TO BE COM-
P&I DATE DATE (NOI/NCF) DATE SOURCE(1) VALUE BPO(F) REALIZED DATE DATE RESOLVED MENTS
REO's data reflected at the property level for relationships with more than one
(1) property should use the Allocated Ending Scheduled Loan Amount, and prorate
all advances and expenses or other loan level data as appropriate.
220
[This Page Intentionally Left Blank]
221
ANNEX G
CMSA INVESTOR REPORTING PACKAGE
SERVICER WATCH LIST
AS OF _____________
(LOAN LEVEL REPORT)
Operating Information Reflected As NOI __________ or NCF __________
S4 S55 S61 S57 S58 L7 L8 L11 L56/L93 L70/L97
ENDING PRECEDING MOST
SCHEDULED PAID FISCAL YR RECENT
PROSPECTUS PROPERTY LOAN THRU MATURITY DSCR DSCR COMMENT/ACTION
LOAN ID PROPERTY NAME TYPE CITY STATE BALANCE DATE DATE NOI/NCF NOI/NCF TO BE TAKEN
List all loans on watch list in descending balance order.
Comment section should include reason and other pertinent information.
Should not include loans that are specially serviced.
WATCH LIST SELECTION CRITERIA SHOULD BE FOOTNOTED ON THE REPORT. THE CRITERIA
MAY BE DICTATED AS PER THE PSA OR THE SERVICER'S INTERNAL POLICY.
TOTAL: $
222
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223
ANNEX H
COMMERCIAL OPERATING STATEMENT ANALYSIS REPORT (includes Retail/Office/Industrial/Warehouse/Mixed Use/Self Storage)
AS OF MM/DD/YY
PROPERTY OVERVIEW
PROSPECTUS ID
Current Scheduled Loan Balance/Paid to Date Current Allocated Loan Amount%
Property Name
Property Type
Property Address, City, State
Net Rentable SF/Units/Pads, Beds Use second box to specify sqft., units...
Year Built/Year Renovated
Cap Ex Reserve (annually)/per Unit.etc.(1) specify annual/per unit...
Year of Operations UNDERWRITING MM/DD/YY MM/DD/YY MM/DD/YY MM/DD/YY
Occupancy Rate (physical)
Occupancy Date
Average Rental Rate
(1) Total $ amount of Capital Reserves required annually by loan documents,
excl. Leasing Commission and TI's
INCOME: (prcdng yr (prcdng yr to
Number of Mos. Covered to base) 2nd prcdng)
Period Ended UNDERWRITING 3RD PRECEDING 2ND PRECEDING PRECEDING YR. TTM/YTD(2) YYYY-U/W YYYY-YYYY
Statement Classification(yr) BASE LINE (fm NOI Adj Sheet) AS OF / /XX VARIANCE VARIANCE
Gross Potential Rent(3)
Less: Vacancy Loss
OR
Bass Rent(3)
Expense Reimbursement
Percentage Rent
Parking Income
Other Income
*EFFECTIVE GROSS INCOME
(2) Servicer will not be expected to "Normalize" these YTD/TTM numbers.
(3) Use either Gross Potential (with Vacancy Loss) or Base Rents; use negative $amt for Vacancy
Loss
OPERATING EXPENSES:
Real Estate Taxes
Property Insurance
Utilities
Repair and Maintenance
Janitorial
Management Fees
Payroll & Benefits
Advertising & Marketing
Professional Fees
General and Administrative
Other Expenses
Ground Rent
*TOTAL OPERATING EXPENSES
OPERATING EXPENSE RATIO
*NET OPERATING INCOME
Leasing Commissions
Tenant Improvements
Capital Expenditures
Extraordinary Capital
Expenditures
TOTAL CAPITAL ITEMS
*NET CASH FLOW
DEBT SERVICE (PER SERVICER)
*NET CASH FLOW AFTER DEBT
SERVICE
*DSCR: (NOI/DEBT SERVICE)
*DSCR: (NCF/DEBT SERVICE)
SOURCE OF FINANCIAL DATA:
(ie. operating statements, financial statements, tax return, other)
NOTES AND ASSUMPTIONS: Years above will roll, always showing a 3yr sequential
history. Comments from the most recent NOI Adjustment Worksheet should be
carried forward to Operating Statement Analysis Report. Year-over-year
variances (either higher or lower) must be explained and noted for the
following: >10% DSCR CHANGE, >15% EGI/TOTAL OPERATING EXPENSES OR TOTAL CAPITAL
ITEMS.
INCOME: COMMENTS
EXPENSE: COMMENTS
CAPITAL ITEMS: COMMENTS
* Used in the CMSA Comparative Financial Status Report/CMSA Property File/CMSA
Loan Periodic Update File. Note that information for multiple property loans
must be consolidated (if available) for reporting to the CMSA Loan Periodic
Update file.
224
MULTIFAMILY OPERATING STATEMENT ANALYSIS REPORT (includes Mobile Home Parks)
AS OF MM/DD/YY
PROPERTY OVERVIEW
PROSPECTUS ID
Current Scheduled Loan Balance/Paid to Date Current Allocated Loan Amount %
Property Name
Property Type
Property Address, City, State
Net Rentable SF/Units/Pads, Beds Use second box to specify sq ft., units...
Year Built/Year Renovated
Cap Ex Reserve (annually)/per Unit.etc.(1) specify annual/per unit...
Year of Operations UNDERWRITING MM/DD/YY MM/DD/YY MM/DD/YY MM/DD/YY
Occupancy Rate (physical)
Occupancy Date
Average Rental Rate
(1) Total $ amount of Capital Reserves required annually by loan documents.
INCOME: (prcdng yr (prcdng yr to
Number of Mos. Covered to base) 2nd prcdng)
Period Ended UNDERWRITING 3RD PRECEDING 2ND PRECEDING PRECEDING YR. TTM/YTD(2) YYYY-U/W YYYY-YYYY
Statement Classification(yr) BASE LINE (fm NOI Adj Sheet) AS OF / / VARIANCE VARIANCE
Gross Potential Rent(3)
Less: Vacancy Loss
OR
Bass Rent(3)
Laundry/Vending Income
Parking Income
Other Income
*EFFECTIVE GROSS INCOME
(2) Servicer will not be expected to "Normalize" these YTD/TTM numbers.
(3) Use either Gross Potential (with Vacancy Loss) or Base Rents; use negative $amt for Vacancy
Loss
OPERATING EXPENSES:
Real Estate Taxes
Property Insurance
Utilities
Repair and Maintenance
Management Fees
Payroll & Benefits
Advertising & Marketing
Professional Fees
General and Administrative
Other Expenses
Ground Rent
*TOTAL OPERATING EXPENSES
OPERATING EXPENSE RATIO
*NET OPERATING INCOME
Capital Expenditures
Extraordinary Capital
Expenditures
TOTAL CAPITAL ITEMS
*NET CASH FLOW
DEBT SERVICE (PER SERVICER)
*NET CASH FLOW AFTER DEBT
SERVICE
*DSCR: (NOI/DEBT SERVICE)
*DSCR: (NCF/DEBT SERVICE)
SOURCE OF FINANCIAL DATA:
(ie. operating statements, financial statements, tax return, other)
NOTES AND ASSUMPTIONS: Years above will roll, always showing a 3yr sequential
history. Comments from the most recent NOI Adjustment Worksheet should be
carried forward to Operating Statement Analysis Report. Year-over-year
variances (either higher or lower) must be explained and noted for the
following: >10% DSCR CHANGE, >15% EGI/TOTAL OPERATING EXPENSES OR TOTAL CAPITAL
ITEMS.
INCOME: COMMENTS
EXPENSE: COMMENTS
CAPITAL ITEMS: COMMENTS
* Used in the CMSA Comparative Financial Status Report/CMSA Property File/CMSA
Loan Periodic Update File. Note that information for multiple property loans
must be consolidated (if available) for reporting to the CMSA Loan Periodic
Update file.
225
HEALTHCARE OPERATING STATEMENT ANALYSIS REPORT
AS OF MM/DD/YY
PROPERTY OVERVIEW
PROSPECTUS ID
Current Scheduled Loan Balance/Paid to Date Current Allocated Loan Amount %
Property Name
Property Type
Property Address, City, State
Net Rentable SF/Units/Pads, Beds Use second box to specify sqft., units...
Year Built/Year Renovated
Cap Ex Reserve (annually)/per Unit.etc.(1) specify annual/per unit...
Year of Operations UNDERWRITING MM/DD/YY MM/DD/YY MM/DD/YY MM/DD/YY
Occupancy Rate (physical)
Occupancy Date
Average Rental Rate
(1) Total $ amount of Capital Reserves required annually by loan documents
INCOME: (prcdng yr (prcdng yr to
Number of Mos. Covered to base) 2nd prcdng)
Period Ended UNDERWRITING 3RD PRECEDING 2ND PRECEDING PRECEDING YR. TTM/YTD(2) YYYY-U/W YYYY-YYYY
Statement Classification(yr) BASE LINE (fm NOI Adj Sheet) AS OF / / VARIANCE VARIANCE
Gross Potential Rent(3)
Less: Vacancy Loss
OR
Private Pay(3)
Medicare/Medicaid
Nursing/Medical Income
Meals Income
Other Income
*EFFECTIVE GROSS INCOME
(2) Servicer will not be expected to "Normalize" these YTD/TTM numbers.
(3) Use either Gross Potential (with Vacancy Loss) or Base Rents; use negative $amt for Vacancy
Loss
OPERATING EXPENSES:
Real Estate Taxes
Property Insurance
Utilities
Repair and Maintenance
Management Fees
Payroll & Benefits
Advertising & Marketing
Professional Fees
General and Administrative
Room expense - housekeeping
Meal expense
Other Expenses
Ground Rent
*TOTAL OPERATING EXPENSES
OPERATING EXPENSE RATIO
*NET OPERATING INCOME
Capital Expenditures
Extraordinary Capital
Expenditures
TOTAL CAPITAL ITEMS
*NET CASH FLOW
DEBT SERVICE (PER SERVICER)
*NET CASH FLOW AFTER DEBT
SERVICE
*DSCR: (NOI/DEBT SERVICE)
*DSCR: (NCF/DEBT SERVICE)
SOURCE OF FINANCIAL DATA:
(ie. operating statements, financial statements, tax return, other)
NOTES AND ASSUMPTIONS: Years above will roll, always showing a 3yr sequential
history. Comments from the most recent NOI Adjustment Worksheet should be
carried forward to Operating Statement Analysis Report. Year-over-year
variances (either higher or lower) must be explained and noted for the
following: >10% DSCR CHANGE, >15% EGI/TOTAL OPERATING EXPENSES OR TOTAL CAPITAL
ITEMS.
INCOME: COMMENTS
EXPENSE: COMMENTS
CAPITAL ITEMS: COMMENTS
* Used in the CMSA Comparative Financial Status Report/CMSA Property File/CMSA
Loan Periodic Update File. Note that information for multiple property loans
must be consolidated (if available) for reporting to the CMSA Loan Periodic
Update file.
226
LODGING OPERATING STATEMENT ANALYSIS REPORT
AS OF MM/DD/YY
PROPERTY OVERVIEW
PROSPECTUS ID
Current Scheduled Loan Balance/Paid to Date Current Allocated Loan Amount %
Property Name
Property Type
Property Address, City, State
Net Rentable SF/Units/Pads, Beds Use second box to specify sqft., units...
Year Built/Year Renovated
Cap Ex Reserve (annually)/per Unit.etc.(1) specify annual/per unit...
Year of Operations UNDERWRITING MM/DD/YY MM/DD/YY MM/DD/YY MM/DD/YY
Occupancy Rate (physical)
Occupancy Date
Average Rental Rate
Rev per avg ream
(1) Total $ amount of Capital Reserves required annually by loan documents
INCOME: (prcdng yr (prcdng yr to
Number of Mos. Covered to base) 2nd prcdng)
Period Ended UNDERWRITING 3RD PRECEDING 2ND PRECEDING PRECEDING YR. TTM/YTD(2) YYYY-U/W YYYY-YYYY
Statement Classification(yr) BASE LINE (fm NOI Adj Sheet) AS OF / / VARIANCE VARIANCE
Room Revenue
Food & Beverage Revenues
Telephone Revenue
Other Departmental Revenue
Other Income
Departmental Revenue
(2) Servicer will not be expected to "Normalize" these YTD/TTM numbers.
OPERATING EXPENSES:
DEPARTMENTAL
Room
Food & Beverage
Telephone Expenses
Other Dept. Expenses
DEPARTMENTAL EXPENSES:
DEPARTMENTAL INCOME:
GENERAL/UNALLOCATED
Real Estate Taxes
Property Insurance
Utilities
Repairs and Maintenance
Franchise Fee
Management Fees
Payroll & Benefits
Advertising & Marketing
Professional Fees
General and Administrative
Other Expenses
Ground Rent
TOTAL GENERAL/UNALLOCATED
(For CMSA files, Total Expenses =
Dept. Exp + General Exp.)
OPERATING EXPENSE RATIO
(=Departmental Revenue/(Dept.
Exp. + General Exp.))
*NET OPERATING INCOME
Capital Expenditures
Extraordinary Capital
Expenditures
TOTAL CAPITAL ITEMS
*NET CASH FLOW
DEBT SERVICE (PER SERVICER)
*NET CASH FLOW AFTER DEBT
SERVICE
*DSCR: (NOI/DEBT SERVICE)
*DSCR: (NCF/DEBT SERVICE)
SOURCE OF FINANCIAL DATA:
(ie. operating statements, financial statements, tax return, other)
NOTES AND ASSUMPTIONS: Years above will roll, always showing a 3yr sequential
history. Comments from the most recent NOI Adjustment Worksheet should be
carried forward to Operating Statement Analysis Report. Year-over-year
variances (either higher or lower) must be explained and noted for the
following: >10% DSCR CHANGE, >15% EGI/TOTAL OPERATING EXPENSES OR TOTAL CAPITAL
ITEMS.
INCOME: COMMENTS
EXPENSE: COMMENTS
CAPITAL ITEMS: COMMENTS
* Used in the CMSA Comparative Financial Status Report/CMSA Property File/CMSA
Loan Periodic Update File. Note that information for multiple property loans
must be consolidated (if available) for reporting to the CMSA Loan Periodic
Update file.
227
ANNEX I
COMMERCIAL NOI ADJUSTMENT WORKSHEET (Includes Retail/Office/Industrial/Warehouse/Mixed Use/Self Storage)
AS OF MM/DD/YY
PROPERTY OVERVIEW
PROSPECTUS ID
Current Scheduled Loan Balance/Paid to Date Current Allocated Loan Amount 1%
Property Name
Property Type
Property Address, City, State
Net Rentable SF/Units/Pads, Beds Use second box to specify sqft., units....
Year Built/Year Renovated
Cap Ex Reserve (annually)/per Unit. etc.(1) Specify annual/per unit
Year of Operations
Occupancy Rate (physical)
Occupancy Date
Average Rental Rate
(1) Total $ amount of Capital Reserves required annually by loan documents, excl. Leasing Commission and TI's
INCOME: YYYY Notes
Statement Classification Borrower Adjustment Normalized
Gross Potential Rent(2) Actual
Less: Vacancy Loss
OR
Base Rent(2)
Expense Reimbursement
Percentage Rate
Parking Income
Other Income
EFFECTIVE GROSS INCOME
(2) Use either Gross Potential (with Vacancy Loss) or Base Rents; use negative $amt for Vacancy Loss
OPERATING EXPENSES:
Real Estate Taxes
Property Insurance
Utilities
Repairs and Maintenance
Janitorial
Management Fees
Payroll & Benefits Expense
Professional Fees
General and Administrative
Other Expenses For self-storage include franchise fees
Ground Rent
TOTAL OPERATING EXPENSES
OPERATING EXPENSE RATIO
NET OPERATING INCOME
Leasing Commissions(3)
Tenant Improvements(3)
Capital Expenditures
Extraordinary Capital
Expenditures
TOTAL CAPITAL ITEMS
(3) Actual current yr, but normalize for annual if possible via contractual, U/W or other data
Net Cash Flow
DEBT SERVICE (PER SERVICER)
NET CASH FLOW AFTER DEBT
SERVICE
DSCR: (NOI/DEBT SERVICE)
DSCR: (NCF/DEBT SERVICE)
SOURCE OF FINANCIAL DATA:
(ie. operating statements, financial statements, tax return, other)
NOTES AND ASSUMPTIONS: This report should be completed annually for
"Normalization" of Borrower's numbers. Methodology used is per MBA/CMSA Standard
Methodology unless otherwise noted. The "Normalized" column and corresponding
comments should roll through to the Operating Statement Analysis Report.
INCOME: COMMENTS
EXPENSE: COMMENTS
CAPITAL ITEMS: COMMENTS
228
MULTIFAMILY NOI ADJUSTMENT WORKSHEET (Includes Mobile Home Parks)
AS OF MM/DD/YY
PROPERTY OVERVIEW
PROSPECTUS ID
Current Scheduled Loan Balance/Paid to Date Current Allocated Loan Amount 1%
Property Name
Property Type
Property Address, City, State
Net Rentable SF/Units/Pads, Beds Use second box to specify sqft., units....
Year Built/Year Renovated
Cap Ex Reserve (annually)/per Unit. etc.(1) specify annual/per unit....
Year of Operations
Occupancy Rate (physical)
Occupancy Date
Average Rental Rate
(1) Total $ amount of Capital Reserves required annually by loan documents.
INCOME: YYYY NOTES
BORROWER ADJUSTMENT NORMALIZED
Statement Classification ACTUAL
Gross Potential Rent(2) Include Pad/RV rent
Less: Vacancy Loss
OR
Base Rent(2)
Laundry/Vending Income
Parking Income
Other Income Include forfeited security/late fees/pet
EFFECTIVE GROSS INCOME
(2) Use either Gross Potential (with Vacancy Loss) or Base Rents; use negative $amt for Vacancy Loss
OPERATING EXPENSES:
Real Estate Taxes
Property Insurance
Utilities
Repair and Maintenance
Management Fees
Payroll & Benefits Expense
Advertising & Marketing
Professional Fees
General and Administrative
Other Expenses
Ground Rent
TOTAL OPERATING EXPENSES
OPERATING EXPENSE RATIO
NET OPERATING INCOME
Capital Expenditures
Extraordinary Capital
Expenditures
TOTAL CAPITAL ITEMS
NET CASH FLOW
DEBT SERVICE (PER SERVICER)
NET CASH FLOW AFTER DEBT SERVICE
DSCR: (NOI/DEBT SERVICE)
DSCR: (NCF/DEBT SERVICE)
SOURCE OF FINANCIAL DATA:
(ie., operating statements, financial statements, tax return, other)
NOTES AND ASSUMPTIONS: This report should be completed annually for
"Normalization", numbers. Methodology used is per MBA/CMSA Standard Methodology
unless otherwise noted. The "Normalized" column and corresponding comments
should roll through to the Operating Statement Analysis Report.
INCOME: COMMENTS
EXPENSE: COMMENTS
CAPITAL ITEMS: COMMENTS
229
HEALTHCARE NOI ADJUSTMENT WORKSHEET
AS OF MM/DD/YY
PROPERTY OVERVIEW
PROSPECTUS ID
Current Scheduled Loan Balance/Paid to Date Current Allocated Loan Amount %
Property Name
Property Type
Property Address, City, State
Net Rentable SF/Units/Pads, Beds Use second box to specify sqft., units....
Year Built/Year Renovated
Cap Ex Reserve (annually)/per Unit. etc.(1) specify annual/per unit...
Year of Operations
Occupancy Rate (physical)
Occupancy Date
Average Rental Rate
(1) Total $ amount of Capital Reserves required annually by loan documents.
INCOME: YYYY NOTES
BORROWER ADJUSTMENT NORMALIZED
Statement Classification ACTUAL
Gross Potential Rent(2)
Less: Vacancy Loss
OR
Private Pay(2)
Medicare/Medicaid
Nursing/Medical Income
Meals Income
Other Income
EFFECTIVE GROSS INCOME
(2) Use either Gross Potential (with Vacancy Loss) or Private Pay/Medicare/Medicaid
use negative for Vacancy Loss
OPERATING EXPENSES:
Real Estate Taxes
Property Insurance
Utilities
Repair and Maintenance
Management Fees
Payroll & Benefits
Advertising & Marketing
Professional Fees
General and Administrative
Room expense - housekeeping
Meal expense
Other Expenses
Ground Rent
TOTAL OPERATING EXPENSES
OPERATING EXPENSE RATIO
NET OPERATING INCOME
Capital Expenditures
Extraordinary Capital
Expenditures
TOTAL CAPITAL ITEMS
NET CASH FLOW
DEBT SERVICE (PER SERVICER)
NET CASH FLOW AFTER DEBT SERVICE
DSCR: (NOI/DEBT SERVICE)
DSCR: (NCF/DEBT SERVICE)
SOURCE OF FINANCIAL DATA:
(ie., operating statements, financial statements, tax return, other)
NOTES AND ASSUMPTIONS: This report should be completed annually for
"Normalization" of Borrower's numbers. Methodology used is per MBA/CMSA Standard
Methodology unless otherwise noted. The "Normalized" column and corresponding
comments should roll through to the Operating Statement Analysis Report.
INCOME: COMMENTS
EXPENSE: COMMENTS
CAPITAL ITEMS: COMMENTS
230
LODGING NOI ADJUSTMENT WORKSHEET
AS OF MM/DD/YY
PROPERTY OVERVIEW
PROSPECTUS ID
Current Scheduled Loan Balance/Paid to Date Current Allocated Loan Amount %
Property Name
Property Type
Property Address, City, State
Net Rentable SF/Units/Pads, Beds Use second box to specify sqft., units....
Year Built/Year Renovated
Cap Ex Reserve (annually)/per Unit. etc.(1) specify annual/per unit
Year of Operations
Occupancy Rate (physical)
Occupancy Date
Average Daily Rate
Rev per Av. Room
(1) Total $ amount of Capital Reserves required annually by loan documents.
INCOME: YYYY Notes
Borrower Adjustment Normalized
Statement Classification Actual
Room Revenue
Food & Beverage Revenues
Telephone Revenue
Other Departmental Revenue
Other Income
DEPARTMENTAL REVENUE:(2)
(2) Report Departmental Revenue as EGI for CMSA Loan Periodic and Property files
OPERATING EXPENSES:
DEPARTMENTAL
Room
Food & Beverage
Telephone Expenses
Other Dept. Expenses
DEPARTMENTAL EXPENSES:
DEPARTMENTAL INCOME:
GENERAL/UNALLOCATED
Real Estate Taxes
Property Insurance
Utilities
Repairs and Maintenance
Franchise Fee
Management Fees
Payroll & Benefits
Advertising & Marketing
Professional Fees
General and Administrative
Other Expenses
Ground Rent
TOTAL OPERATING/UNALLOCATED
(For CMSA files, Total Expenses = Dept. Exp + General Exp.)
OPERATING EXPENSE RATIO
(=Departmental Revenue/(Dept. Exp. + General Exp.))
NET OPERATING INCOME
Capital Expenditures
Extraordinary Capital Expenditures
TOTAL CAPITAL ITEMS
NET CASH FLOW
DEBT SERVICE (PER SERVICER)
NET CASH FLOW AFTER DEBT SERVICE
DSCR: (NOI/DEBT SERVICE)
DSCR: (NCF/DEBT SERVICE)
SOURCE OF FINANCIAL DATA:
(ie. operating statements, financial statements, tax return, other)
NOTES AND ASSUMPTIONS: This report should be completed annually for
"Normalization" of Borrower's numbers. Methodology used is per MBA/CMSA Standard
Methodology unless otherwise noted. The "Normalized" column and corresponding
comments should roll through to the Operating Statement Analysis Report.
INCOME: COMMENTS
EXPENSE: COMMENTS
CAPITAL ITEMS: COMMENTS
231
ANNEX J
CMSA INVESTOR REPORTING PACKAGE
COMPARATIVE FINANCIAL STATUS REPORT
AS OF _______________
(PROPERTY LEVEL REPORT)
Operating Information Reflected As NOI____ or NCF____
P4 P9 P10 P52 P21 L8 P57 S72 S69 S70 S83 S84
ORIGINAL UNDERWRITING
INFORMATION
BASE YEAR
Last Current Allocated
Property Allocated Paid Annual Financial $
Property Inspection Loan Thru Debt Info as of % Total NOI/ (1)
ID City State Date Amount Date Service Date Occ Revenue NCF DSCR
yyyymmdd yyyymmdd
List all properties currently in deal with or without information largest to
smallest loan
This report should reflect the information provided in the CMSA Property File
and CMSA Loan Periodic Update File.
Total $ $ ** WA $ $ WA
P60 P66 P61 P63 or P80 P65 or P81 P53 P59 P54 P65 or P78 P58 or P79
2ND PRECEDING ANNUAL OPERATING PRECEDING ANNUAL OPERATING
INFORMATION INFORMATION
AS OF____ NORMALIZED AS OF____ NORMALIZED
Financial Financial
Info as of % Total $ (1) Info as of % Total $ (1)
Date Occ Revenue NOI/NCF DSCR Date Occ Revenue NOI/NCF DSCR
yyyymmdd yyyymmdd
WA $ $ WA WA $ $ WA
P73 P74 P30 P29 P68 P70 OR P82 P72 OR P83 (2)
MOST RECENT FINANCIAL NET CHANGE
INFORMATION
*NORMALIZED OR ACTUAL PRECEDING & BASIS
%
FS Start FS End Occ As of % Total $ (1) % Total (1)
Date Date Date Occ Revenue NOI/NCF DSCR Occ Revenue DSCR
yyyymmdd yyyymmdd yyyymmdd
WA $ $ WA WA $ WA
(1) DSCR should match to Operating Statement Analysis Report and is normally
calculated using NOI or NCF/Debt Service times the allocated loan
percentage.
(2) Net change should compare the latest year to the Base Year.
* As required by Trust Agreements.
** Weighted Averages should be computed and reflected if the data is relevant
and applicable.
232
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233
PROSPECTUS
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
FIRST UNION COMMERCIAL MORTGAGE SECURITIES, INC.
DEPOSITOR
First Union 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:
- - multifamily and commercial mortgage loans, including participations therein;
- - mortgage-backed securities evidencing interests in or secured by multifamily
and commercial mortgage loans, including participations therein, and other
mortgage-backed securities;
- - direct obligations of the United States or other government agencies; or
- - 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 11 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.
May 15, 2001
234
TABLE OF CONTENTS
PAGE
----
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT..... 3
ADDITIONAL INFORMATION...................................... 4
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE........... 4
SUMMARY OF PROSPECTUS....................................... 5
RISK FACTORS................................................ 11
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 AGREEMENTS....................... 54
DESCRIPTION OF CREDIT SUPPORT............................... 68
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND LEASES.......... 70
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.................... 85
STATE AND OTHER TAX CONSEQUENCES............................ 109
ERISA CONSIDERATIONS........................................ 109
LEGAL INVESTMENT............................................ 113
METHOD OF DISTRIBUTION...................................... 115
LEGAL MATTERS............................................... 116
FINANCIAL INFORMATION....................................... 116
RATINGS..................................................... 116
INDEX OF PRINCIPAL DEFINITIONS.............................. 117
2
235
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:
- this prospectus, which provides general information, some of which may
not apply to your series of certificates; and
- 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, First Union Securities, Inc., 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. First Union Securities, Inc. 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 in this
prospectus.
In this prospectus, the terms "depositor", "we", "us" and "our" refer to
First Union 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.
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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
Suite 1300, 7 World Trade Center, New York, New York 10048 and Suite 1400,
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661-2511. The
Securities and Exchange Commission also maintains a site on the World Wide Web
at "http://www.sec.gov" at which you can view and download copies of reports,
proxy and information statements and other information filed electronically
through the Electronic Data Gathering, Analysis and Retrieval 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 First
Union Commercial Mortgage Securities, Inc., 201 South College Street, Charlotte,
North Carolina 28288-0166, Attention: Secretary, or by telephone at
704-374-6161.
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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:
- mortgage assets;
- certificate accounts;
- forms of credit support;
- cash flow agreements; and
- 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:
- multifamily and commercial mortgage loans,
including participations therein;
- commercial mortgage-backed securities,
including participations therein;
- direct obligations of the United States or
other government agencies; and
- 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:
- residential properties consisting of five or
more rental or cooperatively owned dwelling
units;
- shopping centers;
- retail buildings or centers;
- hotels and motels;
- office buildings;
- nursing homes;
- hospitals or other health-care related
facilities;
- industrial properties;
- warehouse, mini-warehouse or self-storage
facilities;
- mobile home parks;
- mixed use properties; and
- 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
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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:
- is fixed over its term;
- adjusts from time to time;
- is partially fixed and partially floating;
- is floating based on one or more formulae or
indices;
- may be converted from a floating to a fixed
interest rate;
- may be converted from a fixed to a floating
interest rate; or
- interest is not paid currently but is accrued
and added to the principal balance.
A mortgage loan may provide for any of the
following:
- scheduled payments to maturity;
- payments that adjust from time to time;
- negative amortization or accelerated
amortization;
- full amortization or require a balloon
payment due on its stated maturity date;
- prohibitions on prepayment;
- releases or substitutions of collateral,
including defeasance thereof with direct
obligations of the United States; and
- 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:
- the mortgaged properties may be located in
any one of the 50 states, the District of
Columbia or the Commonwealth of Puerto Rico;
- all mortgage loans will have original terms
to maturity of not more than 40 years;
- all mortgage loans will have individual
principal balances at origination of not less
than $100,000;
- all mortgage loans will have been originated
by persons other than the depositor; and
- 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.
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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:
- subordination of junior certificates;
- over collateralization;
- letters of credit;
- insurance policies;
- guarantees;
- reserve funds; and/or
- 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 and increase the likelihood of timely
distributions on the certificates. The trust
fund may include any of the following types of
cash flow agreements:
- guaranteed investment contracts;
- interest rate swap or exchange contracts;
- interest rate cap or floor agreements;
- currency exchange agreements;
- yield supplement agreements; or
- 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.
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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:
- provide for the accrual of interest thereon
based on fixed, variable or floating rates;
- 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;
- be entitled to principal distributions, with
disproportionately low, nominal or no
interest distributions;
- be entitled to interest distributions, with
disproportionately low, nominal or no
principal distributions;
- 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;
- 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;
- provide for distributions of principal
sequentially, based on specified payment
schedules or other methodologies; and
- 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
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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 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.
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:
- "regular interests" or "residual interests"
in a trust fund treated as a "real estate
mortgage investment conduit" under the
Internal Revenue Code of 1986, as amended;
- interests in a trust fund treated as a
grantor trust under applicable provisions of
the Internal Revenue Code of 1986, as
amended;
- "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
- 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.
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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
authority is subject to legal restrictions you
should consult your legal counsel to determine
whether and to what extent the offered
certificates constitute legal investments for
you.
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.
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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:
- a secondary market for your certificates
may not develop;
- interest rates fluctuations;
- the absence of redemption rights; and
- 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
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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 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:
- the voluntary prepayment terms of the
mortgage loan, including prepayment
lock-out periods and prepayment premiums;
- then-current interest rates being charged
on similar mortgage loans; and
- 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
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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.
The yield on your certificates may be less
than anticipated because:
- the prepayment premium or yield
maintenance required under the certain
prepayment scenarios may not be
enforceable in some states or under
federal bankruptcy laws; and
- 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
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entitled under the related pooling agreement.
Ratings do not address:
- the likelihood that principal prepayments
(including those caused by defaults) on
the related mortgage loans will be made;
- the degree to which the rate of
prepayments on the related mortgage loans
might differ from that originally
anticipated;
- the likelihood of early optional
termination of the related trust fund;
- 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
- 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 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
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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 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
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time. Property value, cash flow and net
operating income depend upon a number of
factors, including:
- changes in general or local economic
conditions and/or specific industry
segments;
- declines in real estate values;
- an oversupply of commercial or multifamily
properties in the relevant market;
- declines in rental or occupancy rates;
- increases in interest rates, real estate
tax rates and other operating expenses;
- changes in governmental rules, regulations
and fiscal policies, including
environmental legislation;
- perceptions by prospective tenants and, if
applicable, their customers, of the
safety, convenience, services and
attractiveness of the property;
- the age, construction quality and design
of a particular property;
- whether the mortgaged properties are
readily convertible to alternative uses;
- acts of God; and
- 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 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 wilful
misconduct) there will generally only be
recourse against the specific mortgaged
properties and other assets that have been
pledged 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,
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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:
- construction of additional housing units;
- local military base closings;
- developments at local colleges and
universities;
- national, regional and local politics,
including, in the case of multifamily
rental properties, current or future rent
stabilization and rent control laws and
agreements;
- the level of mortgage interest rates,
which may encourage tenants in multifamily
rental properties to purchase housing;
- 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;
- 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
- 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 relatively
short period of time. Because multifamily
apartment units are typically leased on a
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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:
- the quality of the tenants; and
- 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:
- catalogue retailers;
- home shopping networks;
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- the internet;
- telemarketing; and
- outlet centers.
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:
- location, quality and franchise
affiliation (or lack thereof);
- 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;
- the construction of competing hospitality
properties, which may result in a
reduction in occupancy levels;
- 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;
- 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
- 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
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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:
- the quality of the tenants in the
building;
- the physical attributes of the building in
relation to competing buildings; and
- 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:
- age;
- condition;
- design (e.g., floor sizes and layout);
- access to transportation; and
- 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.
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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.
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.
- 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;
- 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;
- Skilled nursing facilities provide
services to post trauma and frail
residents with limited mobility who
require extensive medical treatment; and
- 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
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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 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
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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
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
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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:
- the number of competing facilities in the
local market;
- the facility's age and appearance;
- the reputation and management of the
facility;
- the types of services the facility
provides; and
- 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.
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:
- the quality of tenants;
- building design and adaptability; and
- 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, proper-
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ties 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:
- operating the property;
- providing building services;
- responding to changes in the local market;
and
- 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.
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, generally the property managers are
operating companies and unlike limited purpose
entities, may not be restricted from incurring
debt
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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:
- its ability to fully refinance the loan;
or
- 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:
- the value of the related mortgaged
property;
- the level of available mortgage interest
rates at the time of sale or refinancing;
- the borrower's equity in the related
mortgaged property;
- the financial condition and operating
history of the borrower and the related
mortgaged property;
- tax laws;
- rent control laws (with respect to certain
residential properties);
- Medicaid and Medicare reimbursement rates
(with respect to hospitals and nursing
homes);
- prevailing general economic conditions;
and
- the availability of credit for loans
secured by commercial or multifamily, as
the case may be, real properties
generally.
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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 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 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.
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.
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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 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.
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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 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.
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INCLUSION IN A TRUST FUND OF
DELINQUENT MORTGAGE LOANS
MAY ADVERSELY AFFECT THE
RATE OF DEFAULTS AND
PREPAYMENTS ON THE MORTGAGE
LOANS....................... If so provided in the prospectus supplement,
the trust fund for a series of certificates
may include mortgage loans that are delinquent
as of the date they are deposited in the trust
fund. A mortgage loan will be considered
"delinquent" if it is 30 days or more past its
most recently contractual scheduled payment
date in payment of all amounts due according
to its terms. In any event, at the time of its
creation, the trust fund will not include
delinquent loans which by principal amount are
more than 20% of the aggregate principal
amount of all mortgage loans in the trust
fund. If so specified in the prospectus
supplement, the servicing of such mortgage
loans will be performed by a special servicer.
Credit support provided with respect to a
series of certificates may not cover all
losses related to delinquent mortgage loans,
and investors should consider the risk that
the inclusion of such mortgage loans in the
trust fund may adversely affect the rate of
defaults and prepayments on the mortgage loans
in the trust fund and the yield on the offered
certificates of such series.
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 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
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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.
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
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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 at the time the mortgage
loans were originated 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.
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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.
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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, or (iii) a combination of mortgage loans,
participations therein and/or CMBS. 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 share
of the operating expenses, insurance premiums and real estate taxes associated
with the mortgaged
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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
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Net Operating Income of a mortgaged property will fluctuate over time and may
not be sufficient to cover 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
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comparable properties at the date of the appraisal), the cost replacement method
(the cost of replacing the property at such date), the income capitalization
method (a projection of value based upon the property's projected net cash
flow), or upon a selection from or interpolation of the values derived from such
methods. Each of these appraisal methods can present analytical difficulties. It
is often difficult to find truly comparable properties that have recently been
sold; the replacement cost of a property may have little to do with its current
market value; and income capitalization is inherently based on inexact
projections of income and expense and the selection of an appropriate
capitalization rate. 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 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
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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 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.
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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.
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 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 is
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
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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."
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.
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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 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 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
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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 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
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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 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.
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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 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
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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 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
First Union Commercial Mortgage Securities, Inc., the depositor, is a North
Carolina corporation organized on August 17, 1988 as a wholly-owned subsidiary
of First Union National Bank, a national banking association with its main
office located in Charlotte, North Carolina. First Union National Bank is a
subsidiary of First Union Corporation, a North Carolina corporation registered
as a bank holding company under the Bank Holding Company Act of 1956, as
amended. First Union 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 201 South College Street, Charlotte, N.C. 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
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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.
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 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 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
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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
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
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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."
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.
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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 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.
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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 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:
(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 (A) prepayment premiums
and (B) payments on account of a lender's equity participation in
the related mortgaged property;
(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 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 each mortgage loan that is delinquent in respect
of three or more scheduled payments, (A) the loan number, (B) the
unpaid balance, (C) whether the delinquency is in respect of any
balloon payment, (D) the aggregate amount of unreimbursed
servicing expenses and unreimbursed advances in respect of the
mortgage loan, (E) if applicable, the aggregate amount of any
interest accrued and payable to the related master servicer, a
special servicer and/or any other entity on related servicing
expenses and related advances, (F) whether a notice of
acceleration has been sent to the borrower and, if so, the date
of such notice and (G) a brief description of the status of any
foreclosure proceedings or negotiations with the borrower;
(ix) 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, (A) the loan number, (B) the
manner in which the mortgage loan was liquidated, (C) the
aggregate amount of liquidation proceeds received, (D) the portion
of liquidation proceeds payable or
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reimbursable to the related master servicer or a special servicer
in respect of the mortgage loan and (E) the amount of any loss to
certificateholders;
(x) with respect to each REO Property included in the related trust
fund as of the end of the related due period or prepayment period,
as applicable, (A) the loan number of the related mortgage loan,
(B) the date of acquisition, (C) the principal balance of the
related mortgage loan (calculated as if such mortgage loan were
still outstanding taking into account certain limited
modifications to the terms thereof specified in the related
pooling agreement), (D) the aggregate amount of unreimbursed
servicing expenses and unreimbursed advances in respect of the
related mortgage loan, and (E) if applicable, the aggregate amount
of interest accrued and payable to the related master servicer, a
special servicer and/or any other entity on related servicing
expenses and related advances;
(xi) 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, (C) the portion
of such sales proceeds payable or reimbursable to the related
master servicer or a special servicer in respect of such REO
Property or the related mortgage loan and (D) the amount of any
loss to certificateholders in respect of the related mortgage
loan;
(xii) the certificate balance or notional amount of each class of
certificates (including any class of certificates not offered
hereby) at the close of business on 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 and any increase in the certificate balance of a
class of Accrual Certificates in the event that Accrued
Certificate Interest has been added to such balance;
(xiii) the aggregate amount of principal prepayments made on the
mortgage loans during the related prepayment period;
(xiv) 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;
(xv) 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;
(xvi) if such class of offered certificates has a variable pass-through
rate or an adjustable pass-through rate, the pass-through rate
applicable thereto for such distribution date and, if
determinable, for the next succeeding distribution date; and
(xvii) if the related trust fund includes one or more types of credit
support, such as a letter of credit, an insurance policy and/or a
surety bond, the amount of coverage under each such instrument as
of the close of business on such distribution date.
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 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."
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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 agreement and as
otherwise specified in the prospectus supplement. See "Description of the
Pooling 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 agreement on the part of the
master servicer. See "Description of the Pooling Agreements--Events of Default,"
"--Rights upon Event of Default" and "--Resignation and Removal of the Trustee."
TERMINATION
The obligations created by the pooling agreement for each series of
certificates will terminate 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 agreement following the earlier of (i) the final payment or other
liquidation of the last mortgage asset subject to the pooling agreement or the
disposition of all property acquired upon foreclosure of any mortgage loan
subject to the pooling 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 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 certificateholders, provided, however, that there can be no
assurance that in all events a court would accept such a contractual
stipulation.
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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 agreement) of a
book-entry certificate will be the nominee of DTC, and the certificate owners
will not be recognized as certificateholders under the pooling agreement.
Certificate owners will be permitted to exercise the rights of
certificateholders under the related pooling agreement
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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 agreement only at the direction of
one or more participants to whose account with DTC interests in the book-entry
certificates are credited.
Because DTC can act only on behalf of direct participants in the DTC
system, who in turn act on behalf of indirect participants and certain
certificate owners, the ability of a certificate owner to pledge its interest in
book-entry certificates to persons or entities that do not participate in the
DTC system, or otherwise take actions in respect of its interest in book-entry
certificates, may be limited due to the lack of a physical certificate
evidencing such interest.
As may be specified in the prospectus supplement, certificates initially
issued in book-entry form will be issued as definitive certificates to
certificate owners or their nominees, rather than to DTC or its nominee, only if
(i) the depositor advises the trustee in writing that DTC is no longer willing
or able to properly discharge its responsibilities as depository with respect to
such certificates and the depositor is unable to locate a qualified successor or
(ii) the depositor, at its option, elects to terminate the book-entry system
through DTC with respect to such certificates. Upon the occurrence of either of
the events described in the preceding sentence, DTC will be required to notify
all participants of the availability through DTC of definitive certificates.
Upon surrender by DTC of the certificate or certificates representing a class of
book-entry certificates, together with instructions for registration, the
trustee or other designated party will be required to issue to the certificate
owners identified in such instructions the definitive certificates to which they
are entitled, and thereafter the holders of such definitive certificates will be
recognized as certificateholders under the related pooling agreement.
DESCRIPTION OF THE POOLING AGREEMENTS
GENERAL
The certificates of each series will be issued pursuant to a pooling and
servicing agreement or other agreement specified in the prospectus supplement.
In general, the parties to a pooling 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 agreement. However, a pooling 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 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 agreement will vary depending upon the nature of the
certificates to be issued thereunder and the nature of the related trust fund.
The following summaries describe certain provisions that may appear in a pooling
agreement under which certificates that evidence interests in mortgage loans
will be issued. The prospectus supplement for a series of certificates will
describe any provision of the related pooling agreement that materially differs
from the description thereof contained in this prospectus and, if the related
trust fund includes CMBS, will summarize all of the material provisions of the
related pooling agreement. The summaries in this prospectus do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the pooling agreement for each series of
certificates and the description of 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. The depositor will provide a copy of the pooling agreement (without
exhibits) that relates to any series of certificates without charge upon written
request of a holder of a certificate of such series addressed to First Union
Commercial Mortgage Securities, Inc., 201 South College Street, Charlotte, N.C.
28288-0166, Attention: Securitization Services.
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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 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 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 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 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 agreement will
require that either the depositor or the trustee promptly cause any CMBS in
certificated
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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 accuracy of the
information set forth for such mortgage loan on the schedule of mortgage loans
appearing as an exhibit to the related pooling agreement; (ii) the
enforceability of the related mortgage note and mortgage and the existence of
title insurance insuring the lien priority of the related mortgage; (iii) the
warranting party's title to the mortgage loan and the authority of the
warranting party to sell the mortgage loan; and (iv) the payment status of the
mortgage loan. Each warranting party will be identified in the prospectus
supplement.
Each pooling agreement will provide that the master servicer and/or trustee
will be required to notify promptly any warranting party of any breach of any
representation or warranty made by it in respect of a mortgage loan that
materially and adversely affects the interests of the 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 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 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.
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Deposits. Unless otherwise provided in the related pooling 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):
(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;"
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(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 agreement and described
in the prospectus supplement.
Withdrawals. Unless otherwise provided in the related pooling 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 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 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;
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(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;"
(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 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
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 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
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 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
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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 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 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 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 agreement
or may be appointed by the master servicer or 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 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 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 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 agreement, or against any expense or liability
that such person is specifically required to bear pursuant to the terms of such
pooling 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 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
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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 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, unless
otherwise specified in the prospectus supplement, the master servicer may offer
to sell any defaulted mortgage loan if and when the master servicer determines,
consistent with the servicing standard specified in the pooling agreement, that
such a sale would produce a greater recovery on a present value basis than would
liquidation of the related mortgaged property. Generally, the related pooling
agreement will require that the master servicer accept the highest cash bid
received from any person (including itself, an affiliate of the master servicer
or any certificateholder) that constitutes a fair price for such defaulted
mortgage loan. In the absence of any bid determined in accordance with the
related pooling agreement to be fair, the master servicer will generally be
required to proceed with respect to such defaulted mortgage loan as described
below.
If a default on a mortgage loan has occurred or, in the master servicer's
judgment, is imminent, 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
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 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
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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 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.
If any mortgaged property suffers damage that the proceeds, if any, of the
related hazard insurance policy are insufficient to fully restore, the master
servicer will not be required to expend its own funds to restore the damaged
property unless (and to the extent not otherwise provided in the prospectus
supplement) it determines (i) that such restoration will increase the proceeds
to certificateholders on liquidation of the mortgage loan after reimbursement of
the master servicer for its expenses and (ii) that such expenses will be
recoverable by it from related insurance proceeds or liquidation proceeds.
HAZARD INSURANCE POLICIES
Each pooling 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
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 mortgaged property or released to
the borrower in accordance with the master servicer's normal servicing
procedures and/or to the terms and conditions of the related mortgage and
mortgage note) will be deposited in the related certificate account. The pooling
agreement may provide that the master servicer may satisfy its obligation to
cause each borrower to maintain 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, 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.
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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 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 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 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 either the Uniform
Single Audit Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for Freddie Mac, the servicing by or on behalf of the master servicer
of mortgage loans under pooling and servicing
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agreements substantially similar to each other (which may include the related
pooling 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, either the Audit Program for Mortgages serviced for Freddie Mac or
paragraph 4 of the Uniform Single Audit Program for Mortgage Bankers, as the
case may be, requires it to report. Each pooling 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 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 without charge
upon written request to the master servicer.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE DEPOSITOR
The master servicer under a pooling agreement may be an affiliate of the
depositor and may have other normal business relationships with the depositor or
the depositor's affiliates. The related pooling 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 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
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 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 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, warranty or covenant made in such pooling
agreement, or against any expense or liability that such person is specifically
required to bear pursuant to the terms of such pooling 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 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 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 agreement; (ii) incurred in connection with any breach of a
representation, warranty or covenant made in the pooling agreement; (iii)
incurred by reason of misfeasance, bad faith or negligence in the performance of
obligations or duties under the pooling agreement. In addition, each pooling
agreement will provide that neither the master servicer nor the depositor will
be under any obligation to appear in, prosecute or defend any legal action
unless such action is related to its respective duties under the pooling
agreement and, unless it is specifically required under the pooling and
servicing agreement to bear the costs of such legal
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action, in its opinion 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 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 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
agreement.
EVENTS OF DEFAULT
The events of default for a series of certificates under the related
pooling 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 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
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;
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 agreement remains
unremedied, the depositor or the trustee will be authorized, and at the
direction of certificateholders entitled to not less 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
agreement, whereupon the trustee will succeed to all of the responsibilities,
duties and liabilities of the master servicer under the pooling agreement
(except that if the master servicer is required to make advances 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 agreement. Pending
such appointment, the trustee will be obligated to act in such capacity.
No certificateholder will have the right under any pooling 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
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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 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 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
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 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 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
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 agreement, the trustee will be prohibited from consenting to any
amendment of a pooling 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.
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 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 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 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 agreement has
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occurred and is continuing, the trustee will be required to perform only those
duties specifically required under the related pooling agreement. However, upon
receipt of any of the various certificates, reports or other instruments
required to be furnished to it pursuant to the pooling agreement, the trustee
will be required to examine such documents and to determine whether they conform
to the requirements of the pooling 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
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 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 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 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
agreement, or if at any time the trustee becomes incapable of acting, or if
certain events of (or proceedings in respect of) bankruptcy or insolvency occur
with respect to the trustee, the depositor will be authorized to remove the
trustee and appoint a successor trustee. In addition, 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 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.
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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.
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 agreement. Unless otherwise specified in the prospectus
supplement, any
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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 types of credit support
described in this prospectus. The prospectus supplement for any series of
certificates evidencing an interest in a trust fund that includes CMBS will
describe to the extent information is available and deemed material, any similar
forms of credit support that are provided by or with respect to, or are included
as part of the trust fund evidenced by or providing security for, such CMBS. The
type, characteristic and amount of credit support will be determined based on
the characteristics of the mortgage assets and other factors and will be
established, in part, on the basis of requirements of each rating agency rating
the certificates of such series. If so specified in the prospectus supplement,
any such credit support may apply only in the event of certain types of losses
or delinquencies and the protection against losses or delinquencies provided by
such credit support will be limited.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND LEASES
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties.
Because such legal aspects are governed by applicable state law (which laws may
differ substantially), the summaries do not purport to be complete, to reflect
the laws of any particular state, or to encompass the laws of all states in
which the security for the mortgage loans (or mortgage loans underlying any
CMBS) is situated. Accordingly, the summaries are qualified in their entirety by
reference to the applicable laws of those states. See "Description of the Trust
Funds--Mortgage Loans--Leases." For purposes of the following discussion,
"mortgage loan" includes a mortgage loan underlying a CMBS.
GENERAL
Each mortgage loan will be evidenced by a note or bond and secured by an
instrument granting a security interest in real property, which may be a
mortgage, deed of trust or a deed to secure debt, depending upon the prevailing
practice and law in the state in which the related mortgaged property is
located. Mortgages, deeds of trust and deeds to secure debt are collectively
referred to as "mortgages" in this prospectus and, unless otherwise specified,
in any prospectus supplement. A mortgage creates a lien upon, or grants a title
interest in, the real property covered thereby, and represents the security for
the repayment of the indebtedness customarily evidenced by a promissory note.
The priority of the lien created or interest granted will depend on the terms of
the mortgage and, in some cases, on the terms of separate subordination
agreements or intercreditor agreements with others that hold interests in the
real property, the knowledge of the parties to the mortgage and, generally, the
order of recordation of the mortgage in the appropriate public recording office.
However, the lien of a recorded mortgage will generally be subordinate to
later-arising liens for real estate taxes and assessments and other charges
imposed under governmental police powers. Additionally, in some states,
mechanic's and materialman's liens have priority over mortgage liens.
The mortgagee's authority under a mortgage, the beneficiary's authority
under a deed of trust and the grantee's authority under a deed to secure debt
are governed by the express provisions of the related instrument, the law of the
state in which the real property is located, certain federal laws (including,
without limitation, the Soldiers' and Sailors' Civil Relief Act of 1940) and, in
some deed of trust transactions, the trustee's authority is further limited by
the directions of the beneficiary.
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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 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
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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 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.
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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 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.
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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 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
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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.
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
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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 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
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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 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.
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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 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 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
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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 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.
To the extent described in the related prospectus supplement, 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. To the extent described in the related prospectus supplement,
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
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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 that could
exceed the value of the property or the amount of the lender's loan. In certain
circumstances, a lender may decide to abandon a contaminated mortgaged property
as collateral for its loan rather than foreclose and risk liability for clean-up
costs.
Superlien Laws. Under certain 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" 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 the
facility holds indicia of ownership primarily to protect his security interest
in the facility. This secured creditor exemption is intended to provide a lender
protection 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 substances 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."
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Importantly, the Lender Liability Act does not, among other things: (1)
completely eliminate potential liability to lenders under CERCLA or RCRA, (2)
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) affect
liabilities or potential liabilities under state environmental laws.
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 without substantial assets. Accordingly, it is possible
that such costs could become a liability of the trust fund and occasion a loss
to the certificateholders.
To reduce the likelihood of such a loss, unless otherwise specified in the
prospectus supplement, the pooling 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
Agreements--Realization upon Defaulted Mortgage Loans."
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
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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 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.
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In addition, even where Title V is not so rejected, any state is authorized
by the law to adopt a provision limiting discount points or other charges on
mortgage loans covered by Title V. Certain states have taken action to reimpose
interest rate limits and/or to limit discount points or other charges.
No mortgage loan originated in any state in which application of Title V
has been expressly rejected or a provision limiting discount points or other
charges has been adopted will (if originated after that rejection or adoption)
be eligible for inclusion in a trust fund unless (i) such mortgage loan provides
for such interest rate, discount points and charges as are permitted in such
state or (ii) such mortgage loan provides that the terms thereof are to be
construed in accordance with the laws of another state under which such interest
rate, discount points and charges would not be usurious and the borrower's
counsel has rendered an opinion that such choice of law provision would be given
effect.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a borrower who enters military service after the
origination of such borrower's mortgage loan (including a borrower who was in
reserve status and is called to active duty after origination of the mortgage
loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such borrower's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
individuals who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to
individuals who enter military service (including reservists who are called to
active duty) after origination of the related mortgage loan, no information can
be provided as to the number of loans with individuals as borrowers that may be
affected by the Relief Act. Application of the Relief Act would adversely
affect, for an indeterminate period of time, the ability of any servicer to
collect full amounts of interest on certain of the mortgage loans. Any
shortfalls in interest collections resulting from the application of the Relief
Act would result in a reduction of the amounts distributable to the holders of
the related series of certificates, and would not be covered by advances or,
unless otherwise specified in the prospectus supplement, any form of credit
support provided in connection with such certificates. In addition, the Relief
Act imposes limitations that would impair the ability of the servicer to
foreclose on an affected mortgage loan during the borrower's period of active
duty status and, under certain circumstances, during an additional three-month
period thereafter.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such 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.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984, the
government may seize the property even
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before conviction. The government must publish notice of the forfeiture
proceeding and may give notice to all parties "known to have an alleged interest
in the property," including the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based or (ii) the lender was, at the
time of execution of the mortgage, "reasonably without cause to believe" that
the property was used in, or purchased with the proceeds of, illegal drug or
RICO activities.
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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.
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REMICS
Classification of REMICs. It is the opinion of Cadwalader, Wickersham &
Taft, counsel to the depositor, that upon the issuance of each series of REMIC
Certificates, assuming compliance with all provisions of the related pooling
agreement and based upon the law on the date hereof, for 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 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, 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
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related pooling agreement, the tiered REMICs will each 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 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
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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").
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
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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 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.
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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:
- on the basis of a constant yield method;
- 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
- 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.
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
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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 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
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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--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
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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 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.
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In general, the "excess inclusions" with respect to a REMIC Residual
Certificate for any calendar quarter will be the excess, if any, of:
- the sum of the daily portions of REMIC taxable income allocable to such
REMIC Residual Certificate; over
- 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:
- will not be permitted to be offset by deductions, losses or loss
carryovers from other activities;
- will be treated as "unrelated business taxable income" to an otherwise
tax-exempt organization; and
- 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
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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. 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 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 that
no purpose of such transfer is to impede the assessment or collection of tax,
including certain representations as to the financial condition of the
prospective transferee, as to which the transferor is also required to make a
reasonable investigation to determine such transferee's historic payment of its
debts and ability to continue to pay its debts as they come due in the future.
In addition to the transferor's investigation of the transferee's financial
condition and the transferee's affidavit, a third requirement has been added
that must be satisfied in one of two alternative ways for the transferor to have
a "safe harbor" against ignoring the transfer. First, proposed Treasury
Regulations (the "Proposed Regulations") would require that 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%). Further, present values are generally computed using a
discount rate equal to the applicable Federal rate set forth in Section 1274(d)
of the Code compounded semi-annually. However, a lower rate may be used if the
transferee can demonstrate that it regularly borrows, in the course of its trade
or business, substantial funds at such lower rate from unrelated third parties.
In some situations, to satisfy this "minimum transfer price" alternative, the
transferor of a noneconomic residual interest may have to pay more consideration
to the transferee than would otherwise be the case if the Proposed Regulations
were not applicable.
The second alternative appears in Revenue Procedure 2001-12 published on
January 16, 2001 (the "Revenue Procedure"). The Revenue Procedure restates the
minimum transfer price alternative described in the proposed Treasury
regulations discussed above and adds an "eligible transferee" test as the second
alternative test for meeting the safe harbor. To meet the second alternative,
(i) the transferee must be a domestic "C" corporation (other than a corporation
exempt from taxation of a regulated investment company or real estate investment
trust) that meets certain gross and net 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 must agree 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 under
the Revenue Procedure; and (iii) the facts and circumstances known to the
transferor on or before the date of the transfer must not reasonably indicate
that the taxes associated with ownership of the residual interest will not be
paid by the transferee. The eligible transferee test, as well as the minimum
transfer price test, are effective retroactive to February 4, 2000 and apply
unless and until changed by final regulations.
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
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Certificates--Foreign Investors in REMIC Certificates" below for additional
restrictions applicable to transfers of certain REMIC Residual Certificates to
foreign persons.
Mark-to-Market Rules. Section 475 provides a requirement that a securities
dealer mark to market securities held for sale to customers. This mark-to-market
requirement applies to all securities owned by a dealer except to the extent
that the dealer has specifically identified a security as held for investment.
The regulations provide that for purposes of this mark-to-market requirement, a
REMIC Residual Certificate issued after January 4, 1995 is not treated as a
security and thus cannot be marked to market. Prospective purchasers of a REMIC
Residual Certificate should consult their tax advisors regarding the possible
application of the mark-to-market requirement to REMIC Residual Certificates.
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:
- 3% of the excess of the individual's adjusted gross income over such
amount; or
- 80% of the amount of itemized deductions otherwise allowable for the
taxable year.
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 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.
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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:
- 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
- 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
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:
- the disposition of a mortgage loan;
- the receipt of income from a source other than a mortgage loan or certain
other permitted investments;
- the receipt of compensation for services; or
- 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.
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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
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:
- 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
- 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 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 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
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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:
- 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);
- any organization that is exempt from federal income tax, unless it is
subject to the tax imposed by section 511 of the Code; or
- 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 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
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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 31% 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:
- a citizen or resident of the United States;
- 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);
- an estate whose income is includible in gross income for United States
federal income tax purposes regardless of its source; and
- 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:
- a REMIC Residual Certificateholder that owns directly or indirectly a 10%
or greater interest in the REMIC Residual Certificates; or
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- 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 agreement.
On October 6, 1997, the Treasury Department issued new regulations which
make certain modifications to the withholding, backup withholding and
information reporting rules described above. The new regulations attempt to
unify certification requirements and modify reliance standards. New regulations
are effective for payments made after December 31, 2000, subject to certain
transition rules. Prospective investors are urged to consult their own tax
advisors regarding the new 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 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.
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:
- assets described in section 7701(a)(19)(C) of the Code;
- "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
- "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.
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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 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
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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 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.
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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 provide 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 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.
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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 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
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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 slower 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 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.
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The OID regulations in so far 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 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
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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.
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 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
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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.
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.
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 and state 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).
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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
First Union Corporation ("First Union") 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," the term "underwriter" includes (i) First
Union, (ii) any person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with First
Union, and (iii) any member of the underwriting syndicate or selling group of
which First Union 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," which consists of any underwriter, the depositor, the
trustee, the master servicer, the special servicer, any sub-servicer, the
provider of any credit support and any obligor with respect to mortgage assets
(including mortgage loans underlying a CMBS not issued by Fannie Mae, Freddie
Mac or Ginnie Mae) constituting more than 5% of the aggregate unamortized
principal balance of the mortgage assets in the related trust fund as of the
date of initial issuance of the certificates.
Fourth, the sum of all payments made to and retained by the underwriter(s)
in connection with the distribution or placement of certificates must represent
not more than reasonable compensation for underwriting or placing the
certificates; the sum of all payments made to and retained by the depositor
pursuant to the assignment of the mortgage assets to the related trust fund must
represent not more than the fair market value of such obligations; and the sum
of all payments made to and retained by the master servicer and any sub-servicer
must represent not more than reasonable compensation for such person's services
under the related pooling 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
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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 agreement; (ii) the
date on which an event of default occurs under the pooling agreement; or (iii)
the date which is the later of three months or 90 days after the closing date.
In addition, the amount in the Pre-Funding Account may not exceed 25% of the
aggregate principal amount of the offered certificates. Certain other conditions
of the Exemption relating to pre-funding accounts must also be met, in order for
the exemption to apply. The prospectus supplement will discuss whether
pre-funding accounts will be used.
The Exemption also requires that the trust fund meet the following
requirements: (i) the trust fund must consist solely of assets of the type that
have been included in other investment pools; (ii) certificates in such other
investment pools must have been rated in one of the four highest categories of
Standard & Poor's, Moody's, or Fitch for at least one year prior to the Plan's
acquisition of certificates; and (iii) certificates in such other investment
pools must have been purchased by investors other than Plans for at least one
year prior to any Plan's acquisition of certificates.
The Exemption generally applies to mortgage loans such as the mortgage
loans to be included in any trust fund. It is not clear whether the Exemption
applies to participant directed plans as described in Section 404(c) of ERISA or
plans that are subject to Section 4975 of the Code but that are not subject 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 agreement and
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(b) the pooling 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. The pooling
agreements will each be a "Pooling and Servicing Agreement" as defined in the
Exemption. Each pooling 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 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 three (or, for Designated
Transactions, 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 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 on January 5, 2000 under
Section 401(c) of ERISA, that will generally become 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, 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.
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LEGAL INVESTMENT
If so specified in the related Prospectus Supplement, the offered
certificates will constitute "mortgage related securities" for purposes of
SMMEA. The appropriate characterization of those offered certificates not
qualifying as "mortgage related securities" ("Non-SMMEA Certificates") under
various legal investment restrictions, and thus the ability of investors subject
to these restrictions to purchase such offered certificates, may be subject to
significant interpretive uncertainties. Accordingly, investors whose investment
authority is subject to legal restrictions should consult their own legal
advisors to determine whether and to what extent the Non-SMMEA Certificates
constitute legal investments for them.
Generally, only classes of offered certificates that (1) are rated in one
of the two highest rating categories by one or more rating agencies and (2) are
part of a series evidencing interests in a trust fund consisting of loans
originated by certain types of originators specified in SMMEA and secured by
first liens on real estate, will be "mortgage related securities" for purposes
of SMMEA. 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 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 extent that, under applicable law,
obligations issued by or guaranteed as to principal and interest by the United
States or any agency or instrumentality thereof constitute legal investments for
such entities. Under SMMEA, a number of states enacted legislation, on or before
the October 3, 1991 cutoff for such enactments, limiting to varying extents the
ability of certain entities (in particular, insurance companies) to invest in
"mortgage related securities" secured by liens on residential, or mixed
residential and commercial properties, in most cases by requiring the affected
investors to rely solely upon existing state law, and not SMMEA. Pursuant to
Section 347 of the Riegle Community Development and Regulatory Improvement Act
of 1994, which amended the definition of "mortgage related security" (effective
December 31, 1996) to include, in relevant part, offered certificates satisfying
the rating and qualified originator requirements for "mortgage related
securities," but evidencing interests in a trust fund consisting, in whole or in
part, of first liens on one or more parcels of real estate upon which are
located one or more commercial structures, states were authorized to enact
legislation, on or before September 23, 2001, specifically referring to Section
347 and prohibiting or restricting the purchase, holding or investment by
state-regulated entities in such types of offered certificates. Section 347 also
provides that the enactment by a state of any such legislative restrictions
shall not affect the validity of any contractual commitment to purchase, hold or
invest in securities qualifying as "mortgage related securities" solely by
reason of Section 347 that was made, and shall not require the sale or
disposition of any securities acquired, prior to the enactment of such state
legislation. Accordingly, the investors affected by any such state legislation,
when and if enacted, will be authorized to invest in offered certificates
qualifying as "mortgage related securities" only to the extent provided in such
legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in "mortgage related
securities" without limitation as to the percentage of their assets represented
thereby, federal credit unions may invest in such securities, and national banks
may purchase such securities for their own account without regard to the
limitations generally applicable to investment securities set forth in 12 U.S.C.
sec. 24 (Seventh), subject in each case to such regulations as the applicable
federal regulatory authority may prescribe. In this connection, the Office of
the Comptroller of the Currency (the "OCC") has amended 12 C.F.R. Part I 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. sec. 1.5 concerning
"safety and soundness" and retention of credit information), certain "Type IV
securities," defined in 12 C.F.R. sec. 1.2(1) to include certain "commercial
mortgage-related securities" and "residential mortgage-related securities." As
so defined, "commercial mortgage-related security" and "residential
mortgage-related security" mean, in relevant part, "mortgage related security"
within the meaning of SMMEA, provided that, in the case of a "commercial
mortgage-related security," it "represents ownership of a promissory note or
certificate of interest or participation
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346
that is directly secured by a first lien on one or more parcels of real estate
upon which one or more commercial structures are located and that is fully
secured by interests in a pool of loans to numerous obligors." In the absence of
any rule or administrative interpretation by the OCC defining the term "numerous
obligors," no representation is made as to whether any class of offered
certificates will qualify as "commercial mortgage-related securities," and thus
as "Type IV securities," for investment by national banks. The National Credit
Union Administration ("NCUA") has adopted rules, codified at 12 C.F.R. Part 703,
which permit federal credit unions to invest in "mortgage related securities"
under certain limited circumstances, other than stripped mortgage related
securities, residual interests in mortgage related securities, and commercial
mortgage related securities, unless the credit union has obtained written
approval from the NCUA to participate in the "investment pilot program"
described in 12 C.F.R. sec. 703.140. The Office of Thrift Supervision (the
"OTS") has issued Thrift Bulletin 13a (December 1, 1998), "Management of
Interest Rate Risk, Investment Securities, and Derivatives Activities," which
thrift institutions subject to the jurisdiction of the OTS should consider
before investing in any of the offered certificates.
All depository institutions considering an investment in the offered
certificates should review the "Supervisory Policy Statement on Investment
Securities and End-User Derivatives Activities" (the "1998 Policy Statement") of
the Federal Financial Institutions Examination Council, which has been adopted
by the Board of Governors of the Federal Reserve System, the 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.
Institutions whose investment activities are subject to regulation by
federal and state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any offered
certificates, as certain series or classes may be deemed unsuitable investments,
or may otherwise be restricted, under such rules, policies or guidelines (in
certain instances irrespective of SMMEA).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying," and, with regard to any offered certificates issued
in book-entry form, provisions which may restrict or prohibit investments in
securities which are issued in book-entry form.
Except as to the status of certain classes of offered certificates as
"mortgage related securities," no representations are made as to the proper
characterization of the offered certificates for legal investment purposes,
financial institution regulatory purposes, or other purposes, or as to the
ability of particular investors to purchase offered certificates under
applicable legal investment restrictions. The uncertainties described above (and
any unfavorable future determinations concerning legal investment or financial
institution regulatory characteristics of the offered certificates) may
adversely affect the liquidity of the offered certificates.
Accordingly, all investors whose investment activities are subject to legal
investment laws and regulations, regulatory capital requirements or review by
regulatory authorities should consult with their legal advisors in determining
whether and to what extent the offered certificates of any class constitute
legal investments or are subject to investment, capital or other restrictions
and, if applicable, whether SMMEA has been overridden in any jurisdiction
relevant to such investor.
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347
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 First Union Securities, Inc., 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 First
Union Securities, Inc. acting as agent. If First Union Securities, Inc. acts as
agent in the sale of offered certificates, First Union Securities, Inc. 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 First Union
Securities, Inc. elects to purchase offered certificates as principal, First
Union Securities, Inc. 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, First Union Securities, Inc., 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. First Union Securities, Inc.
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 First Union Securities, Inc. 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 First Union Securities, Inc.
The depositor will agree to indemnify First Union Securities, Inc. 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, First Union Securities, Inc. 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
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348
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, 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.
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.
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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.
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350
"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.
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352
The file "FUNB2001-C2.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 "FUNB2001-C2.XLS" file.
To open the file, insert the diskette into your floppy drive. Copy the file
"FUNB2001-C2.XLS" to your hard drive or network drive. Open the file
"FUNB2001-C2.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
Cross-Collateralized/Cross-Defaulted Pools" or "A-6 Credit Tenant Lease Payment
Schedules," respectively.
* Microsoft Excel is a registered trademark of Microsoft Corporation.
353
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UNTIL AUGUST 29, 2001, 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.
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TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT
Summary of Prospectus Supplement............... S-7
Overview of the Certificates................... S-7
The Parties.................................... S-8
Important Dates and Periods.................... S-9
The Certificates............................... S-10
The Mortgage Loans............................. S-21
Risk Factors................................... S-35
Description of the Mortgage Pool............... S-72
Servicing of the Mortgage Loans................ S-113
Description of the Certificates................ S-124
Yield and Maturity Considerations.............. S-153
Use of Proceeds................................ S-160
Material Federal Income Tax Consequences....... S-160
ERISA Considerations........................... S-162
Legal Investment............................... S-164
Method of Distribution......................... S-164
Legal Matters.................................. S-166
Ratings........................................ S-166
Index of Defined Terms......................... S-167
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
Annex D........................................ D-1
Annex E........................................ E-1
Annex F........................................ F-1
Annex G........................................ G-1
Annex H........................................ H-1
Annex I........................................ I-1
Annex J........................................ J-1
PROSPECTUS
Additional Information......................... 4
Incorporation of Certain Information By
Reference.................................... 4
Summary of Prospectus.......................... 5
Risk Factors................................... 11
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 Agreements.......... 54
Description of Credit Support.................. 68
Certain Legal Aspects of Mortgage Loans And
Leases....................................... 70
Material Federal Income Tax Consequences....... 85
State and Other Tax Consequences............... 109
ERISA Considerations........................... 109
Legal Investment............................... 113
Method of Distribution......................... 115
Legal Matters.................................. 116
Financial Information.......................... 116
Ratings........................................ 116
Index of Principal Definitions................. 117
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FIRST UNION COMMERCIAL
MORTGAGE SECURITIES, INC.
(DEPOSITOR)
$868,835,000 (APPROXIMATE)
FIRST UNION NATIONAL BANK
COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES SERIES 2001-C2
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
FIRST UNION SECURITIES, INC.
GREENWICH CAPITAL MARKETS, INC.
MAY 31, 2001
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