Filed Pursuant to Rule 424(b)(5)
Registration No. 333-83930
PROSPECTUS SUPPLEMENT
(TO ACCOMPANY PROSPECTUS DATED MAY 1, 2002)
$821,786,000 (APPROXIMATE)
(Offered Certificates)
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST
Commercial Mortgage Pass-Through Certificates
Series 2002-C1
WACHOVIA COMMERCIAL MORTGAGE SECURITIES, INC.
(Depositor)
<Table>
<Caption>
---------------------------------------
THE TRUST FUND:
YOU SHOULD CAREFULLY CONSIDER THE
RISK FACTORS BEGINNING ON PAGE S-36 - As of May 11, 2002, the mortgage loans included in the trust fund will have an
OF THIS PROSPECTUS SUPPLEMENT AND ON aggregate principal balance of approximately $950,042,449.
PAGE 11 OF THE ACCOMPANYING
PROSPECTUS. - The trust fund will consist of a pool of 156 fixed rate mortgage loans.
Neither the offered certificates nor - The mortgage loans are secured by first liens on commercial and multifamily
the underlying mortgage loans are properties.
insured or guaranteed by any
government agency or instrumentality. - All of the mortgage loans were originated or acquired by Wachovia Bank, National
Association, Greenwich Capital Financial Products, Inc., Nomura Credit & Capital,
The offered certificates will Inc. or Artesia Mortgage Capital Corporation.
represent interests in the trust fund
only. They will not represent THE CERTIFICATES:
obligations of any other party.
- The trust fund will issue twenty-four classes of certificates.
The offered certificates will not be
listed on any national securities - Only the seven classes of offered certificates described in the following table are
exchange or any automated quotation being offered by this prospectus supplement and the accompanying prospectus.
system of any registered securities
association.
This prospectus supplement may be
used to offer and sell the offered
certificates only if it is
accompanied by the prospectus dated
May 1, 2002.
---------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
ORIGINAL PERCENTAGE OF ASSUMED FINAL EXPECTED
CERTIFICATE CUT-OFF DATE PASS-THROUGH DISTRIBUTION MOODY'S/S&P
CLASS BALANCE(1) POOL BALANCE RATE DATE(2) CUSIP NO. RATING(3)
- -------------------------------------------------------------------------------------------------------------------------------
Class A-1............ $ 59,085,000 6.22% 4.539% December 15, 2006 929766AA1 Aaa/AAA
Class A-2............ $135,498,000 14.26% 5.681% December 15, 2009 929766AB9 Aaa/AAA
Class A-3............ $135,167,000 14.23% 6.164% October 15, 2011 929766AC7 Aaa/AAA
Class A-4............ $404,157,000 42.54% 6.287% April 15, 2012 929766AD5 Aaa/AAA
Class B.............. $ 35,627,000 3.75% 6.413% April 15, 2012 929766AE3 Aa2/AA
Class C.............. $ 42,752,000 4.50% 6.551% April 15, 2012 929766AF0 A2/A
Class D.............. $ 9,500,000 1.00% 6.630% April 15, 2012 929766AG8 A3/A-
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(Footnotes explaining the table are on page S-4)
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.
First Union Securities, Inc., Greenwich Capital Markets, Inc. and Nomura
Securities International, Inc. are acting as co-lead managers for the offering.
First Union Securities, Inc. is acting as bookrunner for the offering. First
Union Securities, Inc. operates its investment banking business under the trade
name Wachovia Securities. First Union Securities, Inc., Greenwich Capital
Markets, Inc. and Nomura Securities International, 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 100.46%
of the initial certificate balance of the offered certificates, plus accrued
interest from May 1, 2002 before deducting expenses.
We expect that delivery of the offered certificates will be made in
book-entry form on or about May 23, 2002.
(WACHOVIA LOGO) (GREENWICH CAPITAL LOGO) (NOMURA LOGO)
May 14, 2002
Wachovia Bank Commercial Mortgage Trust
- --------------------------------------------------------------------------------
Commercial Mortgage Pass-Through Certificates Series 2002-C1
Geographic Overview of Mortgage Pool(1)
[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.]
[MAP]
<Table>
<Caption>
% OF
NUMBER OF AGGREGATE INITIAL
MORTGAGED CUT-OFF DATE POOL
PROPERTY LOCATION PROPERTIES BALANCE BALANCE
----------------- ---------- -------------- -------
CA (Southern)(2)..... 32 $ 188,006,938 19.8%
FL................... 17 $ 134,019,049 14.1
CA (Northern)(2)..... 13 $ 99,730,578 10.5
AZ................... 10 $ 63,709,574 6.7
TX................... 21 $ 55,922,689 5.9
CO................... 4 $ 32,019,052 3.4
NV................... 8 $ 29,652,519 3.1
CT................... 2 $ 28,162,141 3.0
NY................... 3 $ 26,329,988 2.8
MA................... 4 $ 25,696,216 2.7
NC................... 3 $ 23,975,734 2.5
District of Columbia. 3 $ 22,899,155 2.4
WA................... 12 $ 22,896,669 2.4
TN................... 2 $ 18,122,494 1.9
ME................... 1 $ 17,456,038 1.8
MI................... 2 $ 16,161,273 1.7
UT................... 3 $ 15,887,195 1.7
AL................... 1 $ 15,328,247 1.6
PA................... 2 $ 15,114,245 1.6
MN................... 3 $ 12,428,990 1.3
OK................... 1 $ 12,090,839 1.3
MD................... 2 $ 10,383,274 1.1
MO................... 3 $ 10,163,457 1.1
LA................... 1 $ 9,981,941 1.1
IA................... 2 $ 8,654,342 0.9
OR................... 2 $ 7,649,869 0.8
VA................... 2 $ 6,779,945 0.7
GA................... 2 $ 6,664,517 0.7
RI................... 1 $ 3,301,966 0.3
IL................... 1 $ 2,917,918 0.3
SC................... 1 $ 2,456,942 0.3
MS................... 1 $ 2,449,627 0.3
KS................... 1 $ 1,023,270 0.1
ND................... 1 $ 993,395 0.1
NJ................... 1 $ 992,365 0.1
</Table>
<Table>
<Caption>
MORTGAGE POOL BY PROPERTY TYPE
- ------------------------------
[PIE CHART] [ ] > 10.0% of Cut-Off Date Pool Balance
-
Retail............... 33.4% [ ] > 5.0% - 10.0% of Cut-Off Date Pool Balance
Multifamily.......... 28.5% [ ] > 1.0% - 5.0% of Cut-Off Date Pool Balance
Office............... 19.5% [ ] > 0 < 1.0% of Cut-Off Date Pool Balance
Industrial........... 8.2% -
Mobile Home Park..... 4.2%
Mixed Use............ 3.1%
Hospitality.......... 2.2%
Self Storage......... 0.7%
</Table>
GEOGRAPHIC OVERVIEW OF MORTGAGED PROPERTIES(3)
(1) All numerical information concerning the mortgage loans included in the
trust fund is provided on an approximate basis.
(2) For purposes of determining whether a Mortgaged Property is located in
Northern California or Southern California, mortgaged properties located north
of San Luis Obispo County, Kern County and San Bernardino County were included
in Northern California and mortgaged properties located in and south of such
counties were included in Southern California.
(3) Because this table presents information relating to the mortgaged
properties and not the mortgage loans, the information for mortgage loans
secured by more than one mortgaged property is based on allocated loan amounts
(allocating the mortgage loan principal balance to each of those properties by
the appraised values of the mortgaged properties).
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-36 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-182 in this prospectus supplement.
In this prospectus supplement, the terms "depositor," "we," "us" and "our"
refer to Wachovia Commercial Mortgage Securities, Inc.
WE DO NOT INTEND THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
TO BE AN OFFER OR SOLICITATION:
- 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.
S-3
(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 April
2034. 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 Services, Inc. and Standard and Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc. See "RATINGS" in
this prospectus supplement.
S-4
TABLE OF CONTENTS
<Table>
SUMMARY OF PROSPECTUS SUPPLEMENT............................ S-7
Overview of the Certificates.............................. S-8
The Parties............................................... S-9
Important Dates and Periods............................... S-10
The Certificates.......................................... S-11
The Mortgage Loans........................................ S-22
RISK FACTORS................................................ S-36
DESCRIPTION OF THE MORTGAGE POOL............................ S-78
General................................................... S-78
Mortgage Loan History..................................... S-79
Certain Terms and Conditions of the Mortgage Loans........ S-79
Certain State-Specific Considerations..................... S-83
Assessments of Property Condition......................... S-83
AB Mortgage Loans......................................... S-84
Additional Mortgage Loan Information...................... S-87
Ten Largest Mortgage Loans................................ S-105
The Mortgage Loan Sellers................................. S-121
Underwriting Standards.................................... S-121
Assignment of the Mortgage Loans; Repurchases and
Substitutions.......................................... S-122
Representations and Warranties; Repurchases and
Substitutions.......................................... S-125
Repurchase or Substitution of Cross-Collateralized
Mortgage Loans......................................... S-127
Changes in Mortgage Pool Characteristics.................. S-127
SERVICING OF THE MORTGAGE LOANS............................. S-129
General................................................... S-129
The Master Servicer and the Special Servicer.............. S-130
Servicing and Other Compensation and Payment of
Expenses............................................... S-132
Modifications, Waivers and Amendments..................... S-134
The Controlling Class Representative...................... S-136
Defaulted Mortgage Loans; REO Properties; Purchase
Option................................................. S-137
Inspections; Collection of Operating Information.......... S-139
DESCRIPTION OF THE CERTIFICATES............................. S-140
General................................................... S-140
Registration and Denominations............................ S-140
Certificate Balances and Notional Amount.................. S-143
Pass-Through Rates........................................ S-144
Distributions............................................. S-146
Subordination; Allocation of Losses and Certain
Expenses............................................... S-156
P&I Advances.............................................. S-158
Appraisal Reductions...................................... S-159
Reports to Certificateholders; Available Information...... S-160
Assumed Final Distribution Date; Rated Final Distribution
Date................................................... S-165
Voting Rights............................................. S-166
Termination............................................... S-166
The Trustee............................................... S-167
YIELD AND MATURITY CONSIDERATIONS........................... S-168
Yield Considerations...................................... S-168
Weighted Average Life..................................... S-171
USE OF PROCEEDS............................................. S-174
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.................... S-174
General................................................... S-174
Taxation of the Offered Certificates...................... S-175
ERISA CONSIDERATIONS........................................ S-176
LEGAL INVESTMENT............................................ S-179
METHOD OF DISTRIBUTION...................................... S-179
LEGAL MATTERS............................................... S-180
RATINGS..................................................... S-181
INDEX OF DEFINED TERMS...................................... S-182
</Table>
S-5
<Table>
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 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 -- FORM OF 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
ANNEX K -- CLASS IO-II REFERENCE RATE.................................. K-1
</Table>
S-6
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 THE MORTGAGE LOANS
INCLUDED IN THE TRUST FUND AS OF THE CUT-OFF DATE (WHICH IS MAY 1, 2002
WITH RESPECT TO 137 OF THE MORTGAGE LOANS, MAY 10, 2002 WITH RESPECT TO 1
MORTGAGE LOAN, AND MAY 11, 2002 WITH RESPECT TO 18 MORTGAGE LOANS) AFTER
GIVING EFFECT TO PAYMENTS DUE ON OR BEFORE SUCH DATE WHETHER OR NOT
RECEIVED. THE CUT-OFF DATE BALANCE OF EACH MORTGAGE LOAN INCLUDED IN THE
TRUST FUND AND EACH CUT-OFF DATE CERTIFICATE BALANCE IN THIS PROSPECTUS
SUPPLEMENT ASSUMES THE TIMELY RECEIPT OF PRINCIPAL SCHEDULED TO BE PAID
(IF ANY) ON EACH MORTGAGE LOAN AND NO DEFAULTS, DELINQUENCIES OR
PREPAYMENTS ON ANY MORTGAGE LOAN ON OR BEFORE THE RELATED CUT-OFF DATE.
PERCENTAGES OF MORTGAGED PROPERTIES ARE REFERENCES TO THE PERCENTAGES OF
THE AGGREGATE PRINCIPAL BALANCE OF ALL THE MORTGAGE LOANS INCLUDED IN THE
TRUST FUND AS OF THE CUT-OFF DATE REPRESENTED BY THE AGGREGATE PRINCIPAL
BALANCE OF THE RELATED MORTGAGE LOANS AS OF THE CUT-OFF DATE.
- ALL NUMERICAL INFORMATION CONCERNING THE MORTGAGE LOANS INCLUDED IN THE
TRUST FUND IS PROVIDED ON AN APPROXIMATE BASIS.
S-7
OVERVIEW OF THE CERTIFICATES
The table below lists certain summary information concerning the Wachovia
Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates,
Series 2002-C1, 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 Z-III, Class
R-I and Class R-II) which have not been registered under the Securities Act of
1933, as amended, and which will be sold to investors in private transactions.
<Table>
<Caption>
CLOSING DATE
CERTIFICATE PERCENTAGE PASS- INITIAL WEIGHTED CASH FLOW OR EXPECTED
BALANCE OR OF CUT-OFF THROUGH PASS- AVERAGE PRINCIPAL MOODY'S/
NOTIONAL DATE POOL CREDIT RATE THROUGH LIFE WINDOW S&P
CLASS AMOUNT(1) BALANCE SUPPORT DESCRIPTION RATE (YEARS)(2) (MON./DAY/YR.)(2) RATING(3)
- ----- ------------ ---------- ------- ----------- ------- ---------- ----------------- -----------
Class A-1........... $ 59,085,000 6.22% 22.75% Fixed 4.539% 2.75 06/02 - 12/06 Aaa/AAA
Class A-2........... $135,498,000 14.26% 22.75% Fixed 5.681% 5.50 12/06 - 12/09 Aaa/AAA
Class A-3........... $135,167,000 14.23% 22.75% Fixed 6.164% 8.44 12/09 - 10/11 Aaa/AAA
Class A-4........... $404,157,000 42.54% 22.75% Fixed 6.287% 9.68 10/11 - 04/12 Aaa/AAA
Class B............. $ 35,627,000 3.75% 19.00% Fixed 6.413% 9.89 04/12 - 04/12 Aa2/AA
Class C............. $ 42,752,000 4.50% 14.50% Fixed 6.551% 9.89 04/12 - 04/12 A2/A
Class D............. $ 9,500,000 1.00% 13.50% Fixed 6.630% 9.89 04/12 - 04/12 A3/A-
Class E............. $ 13,063,000 1.37% 12.13% Fixed(4) 7.029% (6) (6) (6)
Class F............. $ 16,626,000 1.75% 10.38% Fixed(4) 7.128% (6) (6) (6)
Class G............. $ 13,063,000 1.37% 9.00% WAC(5) 7.447% (6) (6) (6)
Class H............. $ 15,438,000 1.62% 7.38% Fixed 6.290% (6) (6) (6)
Class J............. $ 17,814,000 1.88% 5.50% Fixed 6.290% (6) (6) (6)
Class K............. $ 4,750,000 0.50% 5.00% Fixed 6.290% (6) (6) (6)
Class L............. $ 9,980,000 1.05% 3.95% Fixed 6.290% (6) (6) (6)
Class M............. $ 7,036,000 0.74% 3.21% Fixed 6.290% (6) (6) (6)
Class N............. $ 4,690,000 0.49% 2.72% Fixed 6.290% (6) (6) (6)
Class O............. $ 25,796,449 2.72% 0.00% Fixed 6.290% (6) (6) (6)
Class IO-I.......... $950,042,449(7) N/A N/A WAC-IO(7) 0.41442% (7) (7) (7)
Class IO-II......... $754,125,000(7) N/A N/A WAC-IO(7) 1.19250% (7) (7)
</Table>
- ------------------
(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 Investor's Services, 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 rates applicable to the Class E and Class F 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 G certificates for any
distribution date will be equal to the applicable weighted average net
mortgage rate for such date less 0.05% per annum.
(6) Not offered by this prospectus supplement. Any information we provide
herein regarding the terms of these certificates is provided only to
enhance your understanding of the offered certificates.
(7) The Class IO-I and Class IO-II 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-I and Class IO-II certificates
will not have certificate balances and their holders will not receive
distributions of principal, but such holders are entitled to receive
payments of the aggregate interest accrued on the notional amount of the
Class IO-I or Class IO-II certificates, as the case may be, as described in
this prospectus supplement. The interest rates applicable to the Class IO-I
and Class IO-II certificates for each distribution date will be as
described in this prospectus supplement. See "DESCRIPTION OF THE
CERTIFICATES--Pass-Through Rates" in this prospectus supplement.
<Table>
Offered certificates
Private certificates
</Table>
S-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 May 11, 2002,
by and among the depositor, the master
servicer, the special servicer and the
trustee.
THE DEPOSITOR................. Wachovia Commercial Mortgage Securities, Inc.
We are a wholly-owned subsidiary of Wachovia
Bank, National Association, which is one of
the mortgage loan sellers, the master servicer
and an affiliate of one of the underwriters.
Our principal executive office is located at
301 South College Street, Charlotte, North
Carolina 28288-0166 and our telephone number
is (704) 374-6161. Neither we nor any of our
affiliates have insured or guaranteed the
offered certificates. For more detailed
information, see "THE DEPOSITOR" in the
accompanying prospectus.
On the closing date, we will sell the mortgage
loans and related assets to be included in the
trust fund to the trustee to create the trust
fund.
THE ISSUER.................... The trust fund to be established under the
pooling and servicing agreement. For more
detailed information, see "DESCRIPTION OF THE
CERTIFICATES" in this prospectus supplement
and the accompanying prospectus.
THE MORTGAGE LOAN SELLERS..... Wachovia Bank, National Association, Greenwich
Capital Financial Products, Inc., Nomura
Credit & Capital, Inc. and Artesia Mortgage
Capital Corporation. For more information, see
"DESCRIPTION OF THE MORTGAGE POOL--The
Mortgage Loan Sellers" in this prospectus
supplement. The mortgage loan sellers will
sell and assign to us on the closing date the
mortgage loans to be included in the trust
fund. See "DESCRIPTION OF THE MORTGAGE
POOL--Representations and Warranties;
Repurchases and Substitutions" in this
prospectus supplement.
Wachovia Bank, National Association originated
or acquired 58 of the mortgage loans to be
included in the trust fund representing 44.9%
of the cut-off date pool balance of all the
mortgage loans to be included in the trust
fund. Greenwich Capital Financial Products,
Inc. originated or acquired 42 of the mortgage
loans to be included in the trust fund
representing 28.7% of the cut-off date pool
balance of all the mortgage loans to be
included in the trust fund. Nomura Credit &
Capital, Inc. originated or acquired 18 of the
mortgage loans to be included in the trust
fund representing 15.3% of the cut-off date
pool balance of all the mortgage loans to be
included in the trust fund. Artesia Mortgage
Capital Corporation originated or acquired 38
of the mortgage loans to be included in the
trust fund representing 11.0% of the cut-off
date pool balance of all the mortgage loans to
be included in the trust fund.
THE MASTER SERVICER........... Wachovia Bank, National Association. Wachovia
Bank, National Association is our affiliate
and is one of the mortgage loan sellers and an
affiliate of one of the underwriters. The
master
S-9
servicer will be primarily responsible for
collecting payments and gathering information
with respect to the mortgage loans included in
the trust fund and the 2 companion loans. See
"SERVICING OF THE MORTGAGE LOANS--The Master
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
that, in general, are in default or as to
which default is imminent. Some holders of
certificates (initially the holder of the
Class O 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. It is
anticipated that Lennar Partners, Inc. will
purchase certain non-offered classes of
certificates. 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.............. First Union Securities, Inc., Greenwich
Capital Markets, Inc. and Nomura Securities
International, Inc. First Union Securities,
Inc. is our affiliate and is an affiliate of
Wachovia Bank, National Association, which is
the master servicer and one of the mortgage
loan sellers. Greenwich Capital Markets, Inc.
is an affiliate of Greenwich Capital Financial
Products, Inc., which is one of the mortgage
loan sellers. Nomura Securities International,
Inc. is an affiliate of Nomura Credit &
Capital, Inc., which is one of the mortgage
loan sellers. First Union Securities, Inc.,
Greenwich Capital Markets, Inc. and Nomura
Securities International, Inc. are acting as
co-lead managers for the offering. First Union
Securities, Inc. is acting as bookrunner for
the offering.
IMPORTANT DATES AND PERIODS
CLOSING DATE.................. On or about May 23, 2002.
CUT-OFF DATE.................. For 137 of the mortgage loans, representing
84.3% of the mortgage pool, May 1, 2002, for 1
mortgage loan, representing 0.3% of the
mortgage pool, May 10, 2002, and for 18
mortgage loans, representing 15.3% of the
mortgage pool, May 11, 2002. The cut-off date
balance of each mortgage loan included in the
trust fund and each cut-off date certificate
balance in this prospectus supplement assumes
the timely receipt of principal scheduled to
be paid (if any) on each mortgage loan and no
defaults, delinquencies or prepayments on any
mortgage loan as of the related cut-off date.
S-10
DISTRIBUTION DATE............. The 15th day of each month or, if such 15th
day is not a business day, the next succeeding
business day, beginning in June 2002.
DETERMINATION DATE............ For any distribution date, the fourth business
day prior to the related distribution date.
COLLECTION PERIOD............. For any distribution date, the period
beginning on the 12th day in the immediately
preceding month (or the day after the
applicable cut-off date in the case of the
first collection period) through and including
the 11th day of the month in which the
distribution date occurs. Notwithstanding the
foregoing, in the event that the last day of a
collection period is not a business day, any
payments received with respect to the mortgage
loans relating to such collection period on
the business day immediately following such
day will be deemed to have been received
during such collection period and not during
any other collection period.
THE CERTIFICATES
OFFERED CERTIFICATES.......... We are offering to you the following 7 classes
of certificates of our Commercial Mortgage
Pass-Through Certificates, Series 2002-C1
pursuant to this prospectus supplement:
Class A-1
Class A-2
Class A-3
Class A-4
Class B
Class C
Class D
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-I, Class
IO-II, Class A-1, Class A-2, Class A-3 and
Class A-4 certificates.
Principal of the Class A-1 certificates, up to
the principal distribution amount, until their
certificate balance is reduced to zero.
Principal of the Class A-2 certificates, up to
the principal distribution amount, until their
certificate balance is reduced to zero.
Principal of the Class A-3 certificates, up to
the principal distribution amount, until their
certificate balance is reduced to zero.
Principal of the Class A-4 certificates, up to
the principal distribution amount, until their
certificate balance is reduced to zero.
S-11
Reimbursement to the Class A-1, Class A-2,
Class A-3 and Class A-4 certificates, pro
rata, for any realized loss and trust fund
expenses borne by such classes.
Interest on the Class B certificates.
Principal of the Class B certificates, up to
the principal distribution amount, until their
certificate balance is reduced to zero.
Reimbursement to the Class B certificates for
any realized losses and trust fund expenses
borne by such class.
Interest on the Class C certificates.
Principal of the Class C certificates, up to
the principal distribution amount, until their
certificate balance is reduced to zero.
Reimbursement to the Class C certificates for
any realized losses and trust fund expenses
borne by such class.
Interest on the Class D certificates.
Principal of the Class D certificates, up to
the principal distribution amount, until their
certificate balance is reduced to zero.
Reimbursement to the Class D certificates for
any realized losses and trust fund expenses
borne by such class.
If, on any distribution date, the certificate
balances of the Class B through Class O
certificates have been reduced to zero, but
two or more classes of the Class A-1, Class
A-2, Class A-3 or Class A-4 certificates
remain outstanding, distributions of principal
will be made pro rata to the outstanding Class
A-1, Class A-2, Class A-3 and Class A-4
certificates. See "DESCRIPTION OF THE
CERTIFICATESDistributions" in this prospectus
supplement.
INTEREST...................... On each distribution date each class of
certificates (other than the Class Z-I, Class
Z-II, Class Z-III, 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;
- minus (other than in the case of the
Class IO-I and Class IO-II 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;
S-12
- minus (other than in the case of the
Class IO-I and Class IO-II 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; and
- minus (other than in the case of the
Class IO-I and IO-II Certificates) such
class' allocable share of certificate
deferred interest.
See "DESCRIPTION OF THE
CERTIFICATES--Certificate Balances and
Notional Amount" and "--Distributions" in this
prospectus supplement. The Class IO-I and
Class IO-II certificates will be entitled to
distributions of interest only on their
respective notional amounts. On each
distribution date, the notional amount of the
Class IO-I certificates will be equal to the
aggregate outstanding component balances of
the components on such date. On each
distribution date, the notional amount of the
Class IO-II certificates will be equal to the
aggregate outstanding component balances of
the Class A-2B, Class A-3, Class A-4A, Class
A-4B, Class B, Class C, Class D, Class E,
Class F and Class G 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 (or portion thereof) on such date
that corresponds to such interest-only
component.
The Class IO-I and Class IO-II certificates
will accrue interest at a rate as described
under "Pass-Through Rates" below.
The certificates (other than the Class Z-I,
Class Z-II, Class Z-III, Class R-I and Class
R-II certificates) will accrue interest on the
basis of a 360-day year consisting of twelve
30-day months.
The interest accrual period with respect to
any distribution date and any class of
certificates (other than the Class Z-I, Class
Z-II, Class Z-III, Class R-I and Class R-II
certificates) is the calendar month preceding
the month in which such distribution date
occurs.
As reflected in the chart under "Priority of
Distributions" beginning on page S-11 above,
on each distribution date, the trustee will
distribute interest to the holders of the
offered certificates and the Class IO
certificates:
- first, pro rata, to the Class IO-I
certificates, Class IO-II certificates,
Class A-1 certificates, Class A-2
certificates, Class A-3 certificates and
Class A-4 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.
S-13
You may, in certain circumstances, also
receive distributions of prepayment premiums
and yield maintenance charges collected on the
mortgage loans included in the trust fund.
Such distributions are in addition to the
distributions of principal and interest
described above. See "DESCRIPTION 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-I, Class
IO-II, Class Z-I, Class Z-II, Class Z-III,
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-I certificates for the initial distribution
date will equal approximately 0.41442% per
annum.
The pass-through rate applicable to the Class
IO-I certificates for each distribution date
will, in general, equal the weighted average
of the Class IO-I 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 Class IO-I strip rate
in respect of any class of components for any
distribution date will, in general, equal (i)
in the case of the Class A-1, Class A-2A,
Class H, Class J, Class K, Class L, Class M,
Class N and Class O components, (x) the
weighted average net mortgage rate for such
distribution date, minus (y) the pass-through
rate for such component and (ii) in the case
of the Class A-2B, Class A-3, Class A-4A,
Class A-4B, Class B, Class C, Class D, Class
E, Class F and Class G components (x) for any
distribution date occurring on or before the
distribution date, with respect to the Class
A-2B, Class A-3 and Class A-4A components, in
September 2005, with respect to the Class
A-4B, Class B, Class C, Class D, Class E and
Class F components, in May 2009, and, with
respect to the Class G component, in May 2008,
(1) the weighted average net mortgage rate for
such distribution date, minus (2) the sum of
the pass-through rate for such component and
the Class IO-II strip rate for such component
and (y) for any distribution date occurring
after the distribution date, with respect to
the Class A-2B, Class A-3 and Class A-4A
components, in September 2005, with respect to
the Class A-4B, Class B, Class C, Class D,
Class E and Class F components, in May 2009,
and, with respect to the Class G component, in
May 2008, (1) the weighted average net
mortgage rate for such distribution date,
minus (2) the pass-through rate for such
component (but in no event will any Class IO-I
strip rate be less than zero).
The pass-through rate applicable to the Class
IO-II certificates for the initial
distribution date will equal approximately
1.19250% per annum.
The pass-through rate applicable to the Class
IO-II certificates for each distribution date
will, in general, equal the weighted average
of the Class IO-II strip rates for the Class
A-2B,
S-14
Class A-3, Class A4-A, Class A4-B, Class B,
Class C, Class D, Class E, Class F and Class G
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 Class IO-II strip rate
in respect of the Class A-2B, Class A-3, Class
A4-A, Class A4-B, Class B, Class C, Class D,
Class E, Class F and Class G components for
any distribution date will, in general, equal
(i) for any distribution date occurring on or
before the distribution date, with respect to
the Class A-2B, Class A-3 and Class A-4A
components, in September 2005, with respect to
the Class A-4B, Class B, Class C, Class D,
Class E and Class F components, in May 2009,
and, with respect to the Class G component, in
May 2008, (x) the lesser of (1) the weighted
average net mortgage rate for such
distribution date and (2) the reference rate
specified on Annex K to this prospectus
supplement for such distribution date minus
0.03% per annum, minus (y) the pass-through
rate for such component (but in no event will
any Class IO-II strip rate be less than zero),
and (ii) for any distribution date occurring
after the distribution date, with respect to
the Class A-2B, Class A-3 and Class A-4A
components, in September 2005, with respect to
the Class A-4B, Class B, Class C, Class D,
Class E and Class F components, in May 2009,
and, with respect to the Class G component, in
May 2008, 0% per annum.
Solely for the purposes of calculating the
notional amounts of the Class IO-I and Class
IO-II certificates and the pass-through rates
applicable to the Class IO-I and Class IO-II
certificates for each distribution date, the
aggregate certificate balance of each class of
certificates (other than the Class IO-I, Class
IO-II, Class Z-I, Class Z-II, Class Z-III,
Class R-I and Class R-II certificates) will be
deemed to consist of a single component (or
two components in the case of each of the
Class A-2 and Class A-4 certificates).
Each such component will be deemed to have the
component balance described in this prospectus
supplement and a pass-through rate equal to
the pass-through rate on the related class of
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.
S-15
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.
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-I, Class
IO-II, Class Z-I, Class Z-II, Class Z-III,
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-I and Class IO-II 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.
S-16
- 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.
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;
- 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 Z-I, Class Z-II, Class
Z-III, 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-I and Class IO-II certificates). The
certificate balance of a class of certificates
(other than the Class IO-I, Class IO-II, Class
Z-I, Class Z-II, Class Z-III, Class R-I and
Class R-II certificates) will be reduced on
each distribution date by any losses on the
mortgage loans that have been realized and
certain additional trust fund expenses
actually allocated to such class of
certificates on such distribution date.
Losses on the mortgage loans that have been
realized and additional trust fund expenses
will first be allocated to the certificates
(other than the Class IO-I, Class IO-II, Class
Z-I, Class Z-II, Class Z-III, 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.
S-17
<Table>
<Caption>
ORDER OF
ORIGINAL PERCENTAGE APPLICATION OF
CLASS CERTIFICATE CUT-OFF DATE LOSSES AND
DESIGNATION BALANCE POOL BALANCE EXPENSES
----------- ------------ ------------ --------------
Class A-1............ $ 59,085,000 6.22% 5
Class A-2............ $135,498,000 14.26% 5
Class A-3............ $135,167,000 14.23% 5
Class A-4............ $404,157,000 42.54% 5
Class B.............. $ 35,627,000 3.75% 4
Class C.............. $ 42,752,000 4.50% 3
Class D.............. $ 9,500,000 1.00% 2
Non-offered
certificates....... $128,256,449 13.50% 1
</Table>
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 will result in a corresponding
reduction in the notional amount of the Class
IO-I certificates and, with respect to the
Class A-3, Class A-4, Class B, Class C, Class
D, Class E, Class F and Class G certificates
and a portion of the Class A-2 certificates, a
corresponding reduction in the notional amount
of the Class IO-II 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 E, Class F
and Class G certificates then entitled to
distributions as follows:
The holders of each class of offered
certificates and the Class E, Class F and
Class G certificates then entitled to
distributions of principal on such
distribution date will generally be entitled
to a portion of prepayment premiums or yield
maintenance charges equal to the product of:
- the amount of such prepayment premiums or
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
S-18
which a prepayment premium or yield
maintenance charge is distributable, the
aggregate amount of such prepayment premium or
yield maintenance charge will be allocated
among all such classes up to, and on a pro
rata basis in accordance with, the foregoing
entitlements.
The portion, if any, of the prepayment
premiums or yield maintenance charges
remaining after any payments described above
will be distributed to the holders of the
Class IO-I certificates.
The "discount rate" applicable to any class of
offered certificates and the Class E, Class F
and Class G 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
- 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 PREPAYMENT PREMIUMS
OR YIELD MAINTENANCE CHARGES
<Table>
Mortgage interest rate.................... 8%
Pass-through rate for applicable class.... 6%
Discount rate............................. 5%
</Table>
<Table>
<Caption>
ALLOCATION PERCENTAGE ALLOCATION
FOR APPLICABLE CLASS PERCENTAGE FOR CLASS IO-I
--------------------- -------------------------
6% - 5% = 33 1/3% 100% - 33 1/3% = 66 2/3%
-------
8% - 5%
</Table>
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 sold by Wachovia Bank,
National Association, to the holders of the
Class Z-I certificates, in the case of
mortgage loans sold by Greenwich Capital
Financial Products, Inc., to the holders of
the Class Z-II certificates, and in the case
of mortgage loans sold by Nomura Credit &
Capital, Inc., to the holders of the Class
Z-III certificates.
S-19
ADVANCING..................... In the event the master servicer fails to
receive one or more scheduled payments of
principal and interest (other than balloon
payments) on a mortgage loan included in the
trust fund by the last day of the related
collection period and the master servicer
determines that such scheduled payment of
principal and interest will be ultimately
recoverable from the related mortgage loan,
the master servicer, or if it fails to do so,
the trustee is required to make a principal
and interest cash advance of such scheduled
payment of principal and interest. 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. See
"DESCRIPTION OF THE CERTIFICATES--P&I
Advances" in this prospectus supplement.
OPTIONAL TERMINATION OF THE
TRUST FUND.................... The trust fund may be terminated when the
aggregate principal balance of the mortgage
loans included in the trust fund is less than
2.6% of the aggregate principal balance of the
mortgage loans included in the trust fund as
of the cut-off date. See "DESCRIPTION OF THE
CERTIFICATES--Termination" in this prospectus
supplement and in the accompanying prospectus.
REGISTRATION AND
DENOMINATION.................. The offered certificates will be registered in
the name of Cede & Co., as nominee for The
Depository Trust Company in the 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 A-3, Class A-4, Class B, Class C
and Class D certificates will be offered in
minimum denominations of $10,000 actual
principal amount and in integral multiples of
$1 in excess of those amounts.
MATERIAL FEDERAL INCOME TAX
CONSEQUENCES................ Two separate real estate mortgage investment
conduit (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. In addition, a
S-20
separate REMIC election has been or will be
made with respect to the early defeasance
mortgage loan. The principal balance of the
early defeasance mortgage loan will represent
a "regular interest" in its related REMIC. The
Class Z-I, Class Z-II and Class Z-III
certificateholders' entitlement to any
additional interest that has accrued on a
related mortgage loan that provides for the
accrual of such additional interest if the
unamortized principal amount of such mortgage
loan is not repaid on the anticipated
repayment date set forth in the related
mortgage note will be treated as a grantor
trust (as described in the 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. It is anticipated that
the offered certificates will be treated as
having been issued at a premium for federal
income tax reporting purposes.
For further information regarding the federal
income tax consequences of investing in the
offered certificates, see "MATERIAL FEDERAL
INCOME TAX CONSEQUENCES" in this prospectus
supplement and in the accompanying prospectus.
ERISA CONSIDERATIONS.......... Subject to important considerations described
under "ERISA CONSIDERATIONS" in this
prospectus supplement and the accompanying
prospectus, the following certificates may be
eligible for purchase by persons investing
assets of employee benefit plans, individual
retirement accounts, or other retirement plans
and accounts:
Class A-1
Class A-2
Class A-3
Class A-4
Class B
Class C
Class D
This is based on an individual prohibited
transaction exemption granted to each of First
Union Securities, Inc., Greenwich Capital
Markets, Inc. and Nomura Securities
International, Inc. by the U.S. Department of
Labor. See "ERISA CONSIDERATIONS" in this
prospectus supplement and in the accompanying
prospectus.
SMMEA ELIGIBILITY............. The offered certificates will not constitute
"mortgage related securities" for purposes of
the Secondary Mortgage Market Enhancement Act
of 1984, as amended.
See "LEGAL INVESTMENT" in this prospectus
supplement and in the accompanying prospectus.
RATINGS....................... The offered certificates will not be issued
unless they have received the following
ratings from Moody's Investors Services,
S-21
Inc. and Standard and Poor's Ratings Services,
a division of the McGraw-Hill Companies, Inc.:
<Table>
<Caption>
EXPECTED
RATING FROM
CLASS MOODY'S/S&P
----- -----------
Class A-1............................... Aaa/AAA
Class A-2............................... Aaa/AAA
Class A-3............................... Aaa/AAA
Class A-4............................... Aaa/AAA
Class B................................. Aa2/AA
Class C................................. A2/A
Class D................................. A3/A-
</Table>
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 2 mortgage loans with companion loans is
calculated without regard to the related
companion loans. 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.
<Table>
Number of mortgage loans.................. 156
Number of crossed pools................... 2
Number of mortgaged properties............ 168
Aggregate balance of all mortgage loans in
the trust fund.......................... $ 950,042,449
Number of mortgage loans with balloon
payments................................ 137
Aggregate balance of mortgage loans with
balloon payments........................ $ 827,999,034
Number of mortgage loans with anticipated
repayment dates......................... 11
Aggregate balance of mortgage loans with
anticipated repayment dates............. $ 84,737,337
Minimum balance........................... $ 383,075
</Table>
S-22
<Table>
Maximum balance........................... $ 28,477,855
Average balance........................... $ 6,090,016
Maximum balance for a group of cross-
collateralized and cross-defaulted
loans(1)................................ $ 27,226,194
Weighted average cut-off date
loan-to-value ratio(2).................. 71.7%
Maximum cut-off date loan-to-value
ratio(2)................................ 80.0%
Minimum cut-off date loan-to-value
ratio(2)................................ 36.3%
Weighted average debt service coverage
ratio(2)................................ 1.33x
Maximum cut-off date debt service coverage
ratio(2)................................ 2.20x
Minimum cut-off date debt service coverage
ratio(2)................................ 1.20x
Weighted average loan-to-value ratio at
stated maturity or anticipated repayment
date(2)................................. 60.8%
Range of mortgage interest rates.......... 6.500%-8.900%
Weighted average mortgage interest rate... 7.313%
Range of remaining term to maturity or
anticipated repayment date (months)..... 55-238
Weighted average remaining term to
maturity or anticipated repayment date
(months)................................ 113
Weighted average occupancy rate(3)........ 95.9%
</Table>
-------------------------------------------------
(1) Consists of a group of 4 individual
mortgage loans (loan numbers 22, 74, 78
and 92).
(2) For purposes of determining the debt
service coverage ratio for 1 mortgage loan
(loan number 21), the debt service
payments were reduced by amounts available
under a letter of credit securing such
mortgage loan. In addition, the principal
balance of such mortgage loan was reduced
by the amount of such letter of credit for
determining the loan to-value-ratio of
such mortgage loan.
(3) The weighted average occupancy rate
information shown above excludes 2
mortgage loans secured by hospitality
properties, representing 2.2% 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-23
PROPERTY TYPES................ The following table describes the mortgaged
properties securing the mortgage loans
expected to be included in the trust fund as
of the cut-off date:
MORTGAGED PROPERTIES BY PROPERTY TYPE(1)
<Table>
<Caption>
PERCENTAGE
OF
NUMBER OF AGGREGATE CUT-OFF
LOANS/ CUT-OFF DATE DATE POOL
PROPERTY TYPE PROPERTIES BALANCE BALANCE
------------- ---------- ------------ ----------
Retail...................... 55/ 55 $317,589,775 33.4%
Retail--Anchored.......... 33/ 33 228,099,907 24.0
Retail--Unanchored........ 13/ 13 57,514,588 6.1
Retail--Shadow
Anchored*............... 9/ 9 31,975,280 3.4
Multifamily................. 41/ 45 270,788,341 28.5
Office...................... 26/ 26 185,636,088 19.5
Industrial.................. 16/ 24 78,223,230 8.2
Mobile Home Park............ 7/ 7 40,252,000 4.2
Mixed Use................... 8/ 8 29,283,570 3.1
Hospitality................. 2/ 2 21,269,445 2.2
Self Storage................ 1/ 1 7,000,000 0.7
----- ------------ -----
Total.............. 156/168 $950,042,449 100.0%
===== ============ =====
</Table>
(PROPERTY TYPE CHART THAT GRAPHICALLY
REPRESENTS CERTAIN INFORMATION IN THE TABLE
ABOVE)
-------------------------------------------------
(1) Because this table and chart present
information relating to the mortgaged
properties and not the mortgage loans, the
information for mortgage loans secured by
more than one mortgaged property is based
on allocated loan amounts (allocating the
mortgage loan principal balance to each of
those properties by the appraised values
of the mortgaged properties).
* A Mortgaged Property is considered shadow
anchored if it is in close proximity to an
anchored retail property.
S-24
GEOGRAPHIC CONCENTRATIONS..... The mortgaged properties are located
throughout 33 states and the District of
Columbia. The following table describes the
number and percentage of mortgaged properties
in states which have concentrations of
mortgaged properties above 5.0%:
MORTGAGED PROPERTIES BY GEOGRAPHIC
CONCENTRATION(1)
<Table>
<Caption>
PERCENTAGE
NUMBER OF AGGREGATE OF CUT-OFF
MORTGAGED CUT-OFF DATE DATE POOL
STATE PROPERTIES BALANCE BALANCE
----- ---------- ------------ ----------
CA...................... 45 $287,737,516 30.3%
Southern(2)........... 32 188,006,938 19.8
Northern(2)........... 13 99,730,578 10.5
FL...................... 17 134,019,049 14.1
AZ...................... 10 63,709,574 6.7
TX...................... 21 55,922,689 5.9
Other................... 75 408,653,620 43.0
--- ------------ -----
Total......... 168 $950,042,449 100.0%
=== ============ =====
</Table>
-------------------------------------------------
(1) Because this table presents information
relating to the mortgaged properties and
not the mortgage loans, the information
for mortgage loans secured by more than
one mortgaged property is based on
allocated loan amounts (allocating the
mortgage loan principal balance to each of
those properties by the appraised values
of the mortgaged properties).
(2) For purposes of determining whether a
mortgaged property is in Northern
California or Southern California,
mortgaged properties located north of San
Luis Obispo County, Kern County and San
Bernardino County were included in
Northern California and mortgaged
properties located in or south of such
counties were included in Southern
California.
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 0.3% of the
mortgage pool, are due on the 10th day of
the month and payments on 18 mortgage
loans, representing 15.3% of the mortgage
pool, are due on the 11th day of the
month. No mortgage loan due on the first
day of the month has a grace period that
extends payment beyond the 11th day of
any calendar month. No mortgage loan due
on the 11th day of the month has any
grace period.
- As of the cut-off date, 152 of the
mortgage loans, representing 99.6% of the
mortgage pool, accrue interest on an
actual/360 basis, and 4 of the mortgage
loans, representing 0.4% of the mortgage
pool, accrue interest on a 30/360 basis.
Three (3) of the mortgage loans,
representing 4.9% of the mortgage pool,
have periods during which only interest
is due and periods in which principal and
interest are due.
S-25
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
<Table>
<Caption>
PERCENTAGE OF
AGGREGATE CUT-OFF
RANGE OF CUT-OFF NUMBER OF CUT-OFF DATE DATE POOL
DATE BALANCES($) LOANS BALANCE BALANCE
---------------- --------- ------------ -------------
<2,000,000............. 28 $ 33,603,560 3.5%
2,000,001 - 3,000,000.. 21 51,587,988 5.4
3,000,001 - 4,000,000.. 12 41,671,057 4.4
4,000,001 - 5,000,000.. 22 99,698,556 10.5
5,000,001 - 6,000,000.. 13 71,736,828 7.6
6,000,001 - 7,000,000.. 14 90,678,721 9.5
7,000,001 - 8,000,000.. 10 76,894,660 8.1
8,000,001 - 9,000,000.. 7 59,822,252 6.3
9,000,001 - 10,000,000.. 7 66,500,455 7.0
10,000,001 - 15,000,000.. 10 116,716,998 12.3
15,000,001 - 20,000,000.. 7 117,540,616 12.4
20,000,001 - 25,000,000.. 2 42,612,903 4.5
25,000,001 - 30,000,000.. 3 80,977,855 8.5
--- ------------ -----
Total.................. 156 $950,042,449 100.0%
=== ============ =====
</Table>
RANGE OF MORTGAGE RATES
<Table>
<Caption>
AGGREGATE PERCENTAGE OF
NUMBER CUT-OFF DATE CUT-OFF DATE
RANGE OF MORTGAGE RATES(%) OF LOANS BALANCE POOL BALANCE
-------------------------- -------- ------------ -------------
6.500 - 6.749............ 9 $ 49,136,080 5.2%
6.750 - 6.999............ 17 129,225,398 13.6
7.000 - 7.249............ 28 206,207,191 21.7
7.250 - 7.499............ 48 322,974,501 34.0
7.500 - 7.749............ 31 136,410,338 14.4
7.750 - 7.999............ 13 63,540,458 6.7
8.000 - 8.249............ 3 25,270,215 2.7
8.250 - 8.499............ 4 4,511,191 0.5
8.500 - 8.749............ 2 11,774,711 1.2
8.750 - 8.999............ 1 992,365 0.1
--- ------------ -----
Total ................... 156 $950,042,449 100.0%
=== ============ =====
</Table>
S-26
RANGE OF DSC RATIOS(1)
<Table>
<Caption>
AGGREGATE PERCENTAGE OF
NUMBER CUT-OFF DATE CUT-OFF DATE
RANGE OF DSCRS (X) OF LOANS BALANCE POOL BALANCE
------------------ -------- ---------------- -------------
1.20 - 1.24............. 33 $202,088,668 21.3%
1.25 - 1.29............. 48 269,332,824 28.3
1.30 - 1.34............. 28 200,647,569 21.1
1.35 - 1.39............. 15 94,260,715 9.9
1.40 - 1.44............. 12 75,991,215 8.0
1.45 - 1.49............. 5 34,262,514 3.6
1.50 - 1.54............. 2 12,817,041 1.3
1.55 - 1.59............. 3 17,138,323 1.8
1.60 - 1.64............. 2 6,122,468 0.6
1.65 - 1.69............. 1 6,000,000 0.6
1.70 - 1.74............. 1 9,981,941 1.1
1.75 - 1.79............. 2 7,300,602 0.8
1.80 - 1.84............. 1 2,221,307 0.2
1.85 - 1.89 1 1,993,572 0.2
2.15 - 2.20............. 2 9,883,690 1.0
--- ------------ -----
Total......... 156 $950,042,449 100.0%
=== ============ =====
</Table>
RANGE OF CUT-OFF DATE LTV RATIOS(1)
<Table>
<Caption>
AGGREGATE PERCENTAGE OF
RANGE OF CUT-OFF NUMBER CUT-OFF DATE CUT-OFF DATE
DATE LTVS(%) OF LOANS BALANCE POOL BALANCE
---------------- -------- ------------ -------------
35.01 - 40.00............ 3 $ 11,810,864 1.2%
40.01 - 50.00............ 6 20,520,421 2.2
50.01 - 55.00............ 3 9,941,927 1.0
55.01 - 60.00............ 5 17,049,584 1.8
60.01 - 65.00............ 14 100,126,665 10.5
65.01 - 70.00............ 24 139,665,979 14.7
70.01 - 75.00............ 54 306,086,869 32.2
75.01 - 80.00............ 47 344,840,140 36.3
--- ------------ -----
Total.......... 156 $950,042,449 100.0%
=== ============ =====
</Table>
----------------------------------------------------
(1) For purposes of determining the debt
service coverage ratio of 1 mortgage loan
(loan number 21), the debt service
payments were reduced by amounts available
under a letter of credit securing such
mortgage loan. In addition, the principal
balance of such mortgage loan was reduced
by the amounts of such letter of credit
for determining the loan-to-value ratio of
such mortgage loan. See "DESCRIPTION OF
THE MORTGAGE POOL--Additional Mortgage
Loan Information" in this prospectus
supplement.
S-27
RANGE OF REMAINING TERMS TO MATURITY DATE OR
ANTICIPATED REPAYMENT DATE
<Table>
<Caption>
AGGREGATE PERCENTAGE OF
RANGE OF REMAINING NUMBER CUT-OFF DATE CUT-OFF DATE
TERMS (MOS.)* OF LOANS BALANCE POOL BALANCE
------------------ -------- ---------------- -------------
0 - 60................. 8 $ 89,122,416 9.4%
61 - 84................. 5 4,522,460 0.5
85 - 108................ 17 106,779,200 11.2
109 - 120................ 118 712,312,297 75.0
121 - 156................ 2 987,340 0.1
193 - 204................ 1 700,602 0.1
205 - 216................ 1 2,115,627 0.2
229 - 240................ 4 33,502,508 3.5
--- ------------ -----
Total.......... 156 $950,042,449 100.0%
=== ============ =====
</Table>
----------------------------------------------------
* With respect to the mortgage loans with
anticipated repayment dates, the remaining
term to maturity was calculated as of the
related anticipated repayment date.
AMORTIZATION TYPES
<Table>
<Caption>
AGGREGATE PERCENTAGE OF
NUMBER CUT-OFF DATE CUT-OFF DATE
TYPE OF AMORTIZATION OF LOANS BALANCE POOL BALANCE
-------------------- -------- ---------------- -------------
Amortizing Balloon.... 135 $792,299,034 83.4%
Amortizing ARD........ 10 74,093,337 7.8
Fully Amortizing...... 8 37,306,077 3.9
Interest-only,
Amortizing
Balloon*............ 2 35,700,000 3.8
Interest-only,
Amortizing ARD*..... 1 10,644,000 1.1
--- ------------ -----
Total....... 156 $950,042,449 100.0%
=== ============ =====
</Table>
----------------------------------------------------
* These mortgage loans require payments of
interest-only for a period of 12 to 60
months from origination prior to the
commencement of payments of principal and
interest.
Balloon loans have amortization schedules
significantly longer than their terms to
maturity and have substantial principal
payments due on their maturity dates, unless
prepaid earlier.
Mortgage loans providing for anticipated
repayment dates fully or substantially
amortize through their terms to maturity.
However, if such a mortgage loan is not
prepaid by a date specified in its mortgage
note, interest will accrue at a higher rate
and the borrower will be required to apply all
cash flow generated by the mortgaged property
in excess of its regular debt service payments
and certain other permitted expenses and
reserves to repay principal on the mortgage
loan.
In addition, because the fixed periodic
payment on the mortgage loans is determined
assuming interest is calculated on a "30/360
basis," but interest actually accrues and is
applied on the majority of the mortgage loans
on an "actual/360 basis," there will be less
amortization, absent prepayments, of the
principal balance during the term of the
related mortgage loan, resulting
S-28
in a higher final payment on such mortgage
loan. This will occur even if a mortgage loan
is a "fully amortizing" mortgage loan.
See "DESCRIPTION OF THE MORTGAGE POOL--Certain
Terms and Conditions of the Mortgage Loans,"
in this prospectus supplement.
PREPAYMENT RESTRICTIONS....... All of the mortgage loans included in the
trust fund restrict or prohibit voluntary
prepayments of principal in some manner for
some period of time.
TYPES OF PREPAYMENT RESTRICTIONS
<Table>
<Caption>
AGGREGATE PERCENTAGE OF
NUMBER CUT-OFF CUT-OFF DATE
PREPAYMENT 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 the remaining
term(1)................. 127 $809,672,996 85.2%
Prohibit prepayment until
date specified in related
mortgage note and then
impose a yield
maintenance charge for
most or all of the
remaining term(1)....... 27 109,169,453 11.5
Prohibit prepayment until
date specified in related
mortgage note and then
impose a prepayment
premium for most of the
remaining term(1)....... 1 8,700,000 0.9
Impose a yield maintenance
charge until date
specified in related
mortgage note and then
permit defeasance for
most of the remaining
term(1)................. 1 22,500,000 2.4
--- ------------ -----
Total:.......... 156 $950,042,449 100.0%
=== ============ =====
</Table>
----------------------------------------------------
(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
S-29
provisions of any mortgage notes requiring the
payment of a prepayment premium or yield
maintenance charge or limiting prepayments to
defeasance or the ability of the master
servicer or special servicer to collect any
prepayment premium or yield maintenance
charge.
DEFEASANCE.................... One hundred twenty-eight (128) of the mortgage
loans included in the trust fund as of the
cut-off date, representing 87.6% 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 (or with respect to 1 mortgage loan
(loan number 4), after a period of permitted
prepayment with payment of a yield maintenance
charge). Upon such substitution, the related
mortgaged property (or, in the case of a
mortgage loan secured by multiple mortgaged
properties, one or more of such mortgaged
properties) will no longer secure such
mortgage loan. The payments on the defeasance
collateral are required to be at least equal
to an amount sufficient to make, when due, all
payments on the related mortgage loan or
allocated to the related mortgaged property.
Except with respect to 1 such mortgage loan,
representing 1.2% of the mortgage pool,
defeasance may not occur prior to the second
anniversary of the issuance of the
certificates. See "DESCRIPTION OF THE MORTGAGE
POOL--Certain Terms and Conditions of the
Mortgage Loans--Prepayment Provisions" in this
prospectus supplement.
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.
<Table>
<Caption>
NUMBER OF
MORTGAGE
LOANS/ % OF LOAN
MORTGAGE NUMBER OF CUT-OFF CUT-OFF DATE BALANCE
LOAN MORTGAGED DATE POOL PROPERTY PER
LOAN NAME SELLER PROPERTIES BALANCE(1) BALANCE TYPE SF/UNIT
- --------- --------- ---------- ------------ ------------ ----------------------------- --------
One Enterprise Center....... Wachovia 1/1 $ 28,477,855 3.0% Office $ 89
Abbey Portfolio I........... Wachovia 4/4 27,226,194 2.9 Various(2) $ 83
Oak Brook Apartments........ Wachovia 1/1 27,000,000 2.8 Multifamily $ 88,816
Mediterranean Village....... Wachovia 1/1 25,500,000 2.7 Multifamily $ 96,591
Abbey Portfolio II.......... Wachovia 4/4 24,045,739 2.5 Various(2) $ 80
CityPlace II................ Greenwich 1/1 22,500,000 2.4 Office $ 77
Marketplace at Altamonte.... Greenwich 1/1 20,112,903 2.1 Retail -- Anchored $ 60
Broadmoor Towne Center...... Wachovia 1/1 18,973,729 2.0 Retail -- Anchored $ 110
215 East 23rd Street........ Wachovia 1/1 17,973,862 1.9 Multifamily $242,890
Maine Crossing.............. Wachovia 1/1 17,456,038 1.8 Retail -- Anchored $ 117
----- ------------ -----
TOTAL/WTD. AVG.............. 16/16 $229,266,321 24.1%
===== ============ =====
<Caption>
WEIGHTED
WEIGHTED AVERAGE WEIGHTED
WEIGHTED AVERAGE LTV RATIO AVERAGE
AVERAGE CUT-OFF DATE AT MATURITY MORTGAGE
LOAN NAME DSCR LTV RATIO OR ARD RATE
- --------- -------- ------------ ----------- --------
One Enterprise Center....... 1.30x 76.1% 66.9% 7.270%
Abbey Portfolio I........... 1.36x 73.5% 66.8% 7.250%
Oak Brook Apartments........ 1.22x 78.3% 75.0% 6.910%
Mediterranean Village....... 1.21x 77.3% 68.1% 7.370%
Abbey Portfolio II.......... 1.36x 72.4% 63.9% 7.250%
CityPlace II................ 1.44x 64.3% 61.4% 8.240%
Marketplace at Altamonte.... 1.28x 74.5% 66.2% 7.365%
Broadmoor Towne Center...... 1.29x 79.9% 70.2% 7.190%
215 East 23rd Street........ 1.30x 73.7% 64.3% 6.990%
Maine Crossing.............. 1.27x 79.4% 70.0% 7.360%
TOTAL/WTD. AVG.............. 1.30X 74.9% 67.4% 7.316%
</Table>
- ---------------
(1) In the case of a concentration of cross-collateralized mortgage loans, the
aggregate principal balance.
(2) Retail and office.
One Enterprise Center......... The One Enterprise Center loan is secured by a
first mortgage encumbering an office building
located in Jacksonville, Florida.
The mortgaged property is an approximately
318,782 square foot office building situated
on approximately 1.1 acres and constructed in
1986.
S-30
The following table presents information
relating to the major tenants at the mortgaged
property:
<Table>
<Caption>
% OF
GROSS NET
POTENTIAL RENTABLE % OF NET DATE OF LEASE
TENANT RENT AREA (SF) RENTABLE AREA EXPIRATION
------ --------- --------- ------------- -------------
Wachovia Bank,
National
Association........ 49.1% 139,753 43.8% April 2013
Smith, Hulsey &
Busey.............. 6.4% 26,898 8.4% October 2009
Craig Insurance
Agency............. 10.8% 23,890 7.5% February 2008
Tempus Software...... 2.8% 11,341 3.6% May 2004
CB Richard Ellis..... 3.5% 9,905 3.1% April 2006
</Table>
The sponsor is Henry Faison of Faison Capital
Development, Inc., a development concern in
the southeastern, mid-Atlantic and
southwestern United States and the original
developer of the Mortgaged Property.
Abbey Portfolio I............. The Abbey Portfolio I mortgage loans are
collectively secured by first deeds of trust
encumbering two office properties and two
retail properties located in California. Each
of the Abbey Portfolio I loans is
cross-collateralized and cross-defaulted with
each of the other Abbey Portfolio I loans.
The mortgaged properties consist of two retail
properties (Santa Maria Commerce Center and
Upland Freeway Center) and two office
properties (Ming Office Park and Orange
Commerce Center).
The following table presents certain
information relating to the mortgaged
properties:
<Table>
<Caption>
CUT-OFF DATE
PROPERTY LOAN NET RENTABLE
PROPERTY NAME LOCATION BALANCE AREA (SF) YEAR BUILT
------------- ------------ ------------ ------------ ----------
Upland Freeway Center..... Upland, CA $9,375,938 116,029 1986
Ming Office Park.......... Bakersfield, $7,580,546 117,847 1981
CA
Santa Maria Commerce
Center................... Santa Maria, $7,081,826 65,844 1982
CA
Orange Commerce Center.... Orange, CA $3,187,884 29,987 1984
</Table>
The sponsor of the borrowers is The Abbey
Company, a real estate investment company with
ownership interests in approximately 3.1
million square feet of office, industrial,
service center and retail properties. The
Abbey Portfolio I loans have the same sponsor
as the Abbey Portfolio II loans but are not
cross-collateralized or cross-defaulted with
the Abbey Portfolio II loans.
Oak Brook Apartments.......... The Oak Brook Apartments loan is secured by a
first mortgage encumbering a 304-unit
multifamily complex located in Rancho Cordova,
California. The Oak Brook Apartments loan
provides for interest-only payments for the
first 12 months of its term, and thereafter,
fixed monthly payments of principal and
interest.
S-31
The mortgaged property is a 304-unit
garden-style apartment complex consisting of
14 buildings, situated on approximately 15.0
acres and constructed in 2000.
The sponsor is Alvin J. Wolff, Jr., a
principal of the Wolff Companies.
Mediterranean Village......... The Mediterranean Village loan is secured by a
first mortgage encumbering a 264-unit
garden-style multifamily complex located in
Ft. Lauderdale, Florida.
The mortgaged property is a 264-unit
garden-style apartment complex consisting of
11 buildings situated on approximately 8.9
acres and constructed in 2000.
The sponsors are John Loos, Steven Halmos and
Harris Hudson.
Abbey Portfolio II............ The Abbey Portfolio II mortgage loans are
collectively secured by first deeds of trust
encumbering the fee interest on two office
properties and a retail property and a first
deed of trust encumbering the leasehold
interest in an office property located in
California. Each of the Abbey Portfolio II
loans is cross-collateralized and
cross-defaulted with each of the other Abbey
Portfolio II loans.
The mortgaged properties consist of three
office properties (4403 Donald Douglas, The
Abbey Center and La Mirada Business Center)
and one retail property (Oxnard Commerce
Center).
The following table presents certain
information relating to the Mortgaged
Properties:
<Table>
<Caption>
NET
CUT-OFF DATE RENTABLE
PROPERTY NAME PROPERTY LOCATION LOAN BALANCE AREA (SF) YEAR BUILT
------------- ----------------- ------------ --------- ----------
4403 Donald
Douglas............ Long Beach, CA $10,061,760 88,284 1986
Oxnard Commerce
Center............. Oxnard, CA $ 4,987,201 64,381 1990
The Abbey Center..... Palm Springs, CA $ 4,837,585 64,155 1982
La Mirada Business
Center............. La Mirada, CA $ 4,159,193 82,010 1975
</Table>
The sponsor of the borrowers is The Abbey
Company, a real estate investment company with
ownership interests in approximately 3.1
million square feet of office, industrial,
service center and retail properties.
CityPlace II.................. The CityPlace II loan is secured by a first
leasehold mortgage encumbering an office
building located in Hartford, Connecticut. The
CityPlace II loan, which is evidenced by a
senior note, is the senior portion of a whole
loan that was originated on November 9, 1999.
The companion loan related to the CityPlace II
loan is evidenced by a separate note.
The mortgaged property is an approximately
292,039 square foot office building situated
on approximately 0.5 acres and constructed in
1989.
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The following table presents information
relating to major tenants at the mortgaged
property:
<Table>
<Caption>
NET
% OF ACTUAL RENTABLE % OF NET DATE OF LEASE
TENANT RENT AREA (SF) RENTABLE AREA EXPIRATION
------ ----------- --------- ------------- -------------
Conning & Co. ....... 28.4% 59,276 20.3% March 2005
Webster Bank......... 19.6% 41,147 14.1% February
2006/
December 2008
Merrill Lynch........ 17.0% 32,966 11.3% July 2011
Brown Raysman........ 4.3% 16,483 5.6% October 2006
Prudential
Securities, Inc. .. 2.9% 14,524 5.0% August 2002
</Table>
The sponsors are Lawrence Gottesdiener and
Robert Gatof, owners of Northland Investment
Corporation.
Marketplace at Altamonte...... The Marketplace at Altamonte loan is secured
by a first mortgage encumbering an anchored
retail center located in Altamonte Springs,
Florida.
The mortgaged property is an approximately
335,523 square foot anchored retail center
situated on approximately 25.0 acres and
constructed in 1974. As of February 8, 2002,
the occupancy rate for the mortgaged property
securing the Marketplace at Altamonte loan was
approximately 100%.
The following table presents information
relating to the major tenants at the mortgaged
property:
<Table>
<Caption>
NET
% OF ACTUAL RENTABLE % OF NET DATE OF LEASE
TENANT RENT AREA (SF) RENTABLE AREA EXPIRATION
------ ----------- --------- ------------- -------------
Burlington Coat
Factory............ 17.9% 100,749 30.0% July 2009
Gold's Gym........... 7.1% 40,160 12.0% August 2015
Linens 'N Things,
Inc. .............. 13.3% 39,193 11.7% January 2012
Ross Dress For
Less............... 12.7% 31,379 9.4% January 2012
TJ Maxx.............. 5.3% 27,440 8.2% January 2005
Comp USA............. 10.9% 26,750 8.0% November 2010
Just for Feet of
Texas.............. 18.2% 22,043 6.6% November 2009
</Table>
The sponsors of the borrower are Hersch Klaff
and the Lubert-Adler Funds. Mr. Klaff, of
Klaff Realty, LP, has been engaged in the
acquisition, development, financing, leasing
and management of commercial real estate since
1981.
Broadmoor Towne Center........ The Broadmoor Towne Center loan is secured by
a first deed of trust encumbering an anchored
retail center located in Colorado Springs,
Colorado.
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The mortgaged property is an approximately
172,965 square foot anchored retail center
situated on approximately 38.4 acres and
constructed in 2001. As of January 11, 2002,
the occupancy rate for the mortgaged property
securing the Broadmoor Towne Center loan was
approximately 97.6%.
<Table>
<Caption>
% OF GROSS NET
POTENTIAL RENTABLE % OF NET DATE OF LEASE
TENANT RENT AREA (SF) RENTABLE AREA EXPIRATION
------ ---------- --------- ------------- --------------
Bed Bath and
Beyond............. 13.9% 30,529 17.7% January 2011
Ross Dress For
Less............... 13.1% 30,187 17.5% January 2011
Borders Books........ 17.3% 25,000 14.5% January 2022
Michaels............. 11.8% 24,228 14.0% January 2011
Petsmart............. 10.4% 19,235 11.1% July 2015
</Table>
The sponsor of the borrower is Thomas J. Lowe.
215 East 23rd Street.......... The 215 East 23rd Street loan is secured by a
first mortgage encumbering a 22-story building
located in New York, New York.
The mortgaged property contains 74 multifamily
units situated on approximately 0.1 acres and
constructed in 2001. The mortgaged property is
located at 215 East 23rd Street between 2nd
and 3rd Avenues. The mortgaged property is
adjacent to, and leased entirely to, the
School of Visual Arts for use as student
housing.
The sponsors are Arthur Leeds, Melvin Gershon
and Robert Gershon.
Maine Crossing................ The Maine Crossing loan is secured by a first
mortgage encumbering an anchored retail center
located in South Portland, Maine.
The mortgaged property is an approximately
148,672 square foot anchored retail center
situated on approximately 14.5 acres and
constructed in 2001. As of March 28, 2002, the
occupancy rate for the mortgaged property
securing the Maine Crossing loan was
approximately 96.0%.
The following table presents information
relating to the major tenants at the mortgaged
property:
<Table>
<Caption>
% OF GROSS NET
POTENTIAL RENTABLE % OF NET DATE OF LEASE
TENANT RENT AREA (SF) RENTABLE AREA EXPIRATION
------ ---------- --------- ------------- --------------
Babies R Us.......... 6.9% 30,606 20.6% November 2016
Bed Bath & Beyond.... 21.9% 30,448 20.5% January 2017
Old Navy............. 23.4% 30,000 20.2% September 2011
AC Moore............. 15.8% 23,400 15.7% January 2012
Famous Footwear...... 7.4% 9,330 6.3% November 2006
</Table>
The sponsors of the borrower are Leonard
Rudolfsky and Stephen Karp.
AB MORTGAGE LOANS............. One (1) of the mortgage loans sold by Wachovia
Bank, National Association to the Depositor
was originated by Capital
S-34
Lease Funding L.P., representing 0.3% of the
mortgage pool, and is evidenced by one of two
notes secured by a single mortgage and a
single assignment of a lease, with the second
companion loan not being part of the trust
fund. Such mortgage loan and its related
companion loan are subject to an intercreditor
agreement which, among other things, generally
allocates collections in respect of such
loans, other than certain accelerated future
rent payments payable upon default under the
related lease, first to the mortgage loan in
the trust fund and second to the companion
loan. One (1) of the mortgage loans sold by
Greenwich Capital Financial Products, Inc. to
the Depositor, representing 2.4% of the
mortgage pool, is evidenced by one of two
notes secured by a single mortgage, with the
second companion loan not being part of the
trust fund. Such mortgage loan and its related
companion loan are subject to an intercreditor
agreement which, among other things, generally
allocates collections in respect of such
loans, first to the mortgage loan in the trust
fund and second to the companion loan. 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 and the
related intercreditor 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--AB Mortgage Loans" in this
prospectus supplement. In general, with
respect to the companion loan related to the
Greenwich Capital Financial Products, Inc.
mortgage loan, if the unpaid principal balance
of such companion loan, reduced as described
below in this paragraph, is equal to or
greater than 25% of its original principal
balance, then the holder of this companion
loan will have the right, subject to the
conditions described under "DESCRIPTION OF THE
MORTGAGE POOL--AB Mortgage Loans" and
"Servicing of the Mortgage Loans--The
Controlling Class Representative," to advise
and direct the special servicer with respect
to various servicing matters affecting both
the mortgage loan and the related companion
loan. If any of the adverse events or
circumstances that we refer to under
"SERVICING OF THE MORTGAGE LOANS--Appraisal
Reductions" in this prospectus supplement
occurs or exists with respect to such
companion loan and related mortgage loan, then
for purposes of determining whether the unpaid
principal balance of such companion loan is
equal to or greater than 25% of its original
principal balance, its unpaid principal
balance will be reduced by the resulting
appraisal reduction amount referred to in that
section.
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--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 or
permitted to repurchase or purchase a mortgage
loan from the trust fund and the money paid
would be passed through to the holders of the
certificates with the same effect as if such
mortgage loan had been prepaid in full (except
that no prepayment premium or yield maintenance
charge would be payable with respect to any
such purchase or repurchase). We cannot make
any representation as to the anticipated rate
of prepayments (voluntary or involuntary) on
the mortgage
S-36
loans or as to the anticipated yield to
maturity of any certificate. See "YIELD AND
MATURITY CONSIDERATIONS" in this prospectus
supplement and "YIELD CONSIDERATIONS" in the
accompanying prospectus.
Yield. In general, if you purchase an offered
certificate at a premium and principal
distributions on that offered certificate occur
at a rate faster than you anticipated at the
time of purchase, and no prepayment premiums or
yield maintenance charge 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.
Interest Rate Environment. Mortgagors
generally are less likely to prepay if
prevailing interest rates are at or above the
rates borne by their mortgage loans. On the
other hand, mortgagors are more likely to
prepay if prevailing interest rates fall
significantly below the mortgage interest rates
of their mortgage loans. Mortgagors are less
likely to prepay mortgage loans with a lockout
period, yield maintenance charge or prepayment
premium provision, to the extent enforceable,
than similar mortgage loans without such
provisions, with shorter lockout periods or
with lower yield maintenance charges or
prepayment premiums.
Performance Escrows. In connection with the
origination of some of the mortgage loans, the
related borrowers were required to escrow funds
or post a letter of credit related to obtaining
certain performance objectives. In general,
such funds will be released to the related
borrower upon the satisfaction of certain
conditions. If the conditions are not
satisfied, although the master servicer will be
directed in the pooling and servicing agreement
to hold the escrows, letters of credit or
proceeds of such letters of credit as
additional collateral and not use the funds to
reduce the principal balance of the related
mortgage loan, in the event such funds are
required to be used to reduce the principal
balance of such mortgage loans, such amounts
will be passed through to the holders of the
certificates as principal prepayments.
Premiums. Provisions requiring prepayment
premiums and yield maintenance charges may not
be enforceable in some states and under federal
bankruptcy law, and may constitute interest for
usury purposes. Accordingly, we cannot provide
assurance that the obligation to pay such
premium or charge will be enforceable or, if
enforceable, that the foreclosure proceeds will
be sufficient to pay such prepay-
S-37
ment premium or yield maintenance charge.
Additionally, although the collateral
substitution provisions related to defeasance
are not intended to be, and do not have the
same effect on the certificateholders as, a
prepayment, we cannot provide assurance that a
court would not interpret such provisions as
requiring a prepayment premium or yield
maintenance charge and possibly determine that
such provisions are unenforceable or usurious
under applicable law. Prepayment premiums and
yield maintenance charges are generally not
charged for prepayments resulting from casualty
or condemnation and would not be paid in
connection with repurchases of mortgage loans
for breaches of representations or warranties.
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 types changes. See the table
entitled "Range of Remaining Term to Maturity
or Anticipated Repayment Date for all Mortgage
Loans as of the Cut-Off Date" under
"DESCRIPTION OF THE MORTGAGE POOL--Additional
Mortgage Loan Information" in this prospectus
supplement for a description of the respective
maturity dates of the mortgage loans included
in the trust fund. Because principal on the
certificates (other than the Class IO-I, Class
IO-II, Class Z-I, Class Z-II, Class Z-III,
Class R-I and Class R-II certificates) is
payable in sequential order to the extent
described in this prospectus supplement under
"DESCRIPTION OF THE CERTIFICATES--
Distributions," classes that have a lower
priority of distributions are more likely to be
exposed to the risk of changing concentrations
discussed under "--Special Risks Associated
With High Balance Mortgage Loans" below than
classes with a higher sequential priority.
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.
S-38
Delinquencies on the mortgage loans included in
the trust fund, if the delinquent amounts are
not advanced, may result in shortfalls in
distributions of interest and/or principal to
the offered certificates for the current month.
Any late payments received on or in respect of
the mortgage loans will be distributed to the
certificates in the priorities described more
fully in this prospectus supplement, but no
interest will accrue on such shortfall during
the period of time such payment is delinquent.
If you calculate your anticipated yield based
on an assumed default rate and an assumed
amount of losses on the mortgage pool that are
lower than the default rate and the amount of
losses actually experienced, and if such losses
are allocated to your class of certificates,
your actual yield to maturity will be lower
than the yield so calculated and could, under
certain scenarios, be negative. The timing of
any loss on a liquidated mortgage loan also
will affect the actual yield to maturity of the
offered certificates to which all or a portion
of such loss is allocable, even if the rate of
defaults and severity of losses are consistent
with your expectations. In general, the earlier
you bear a loss, the greater the effect on your
yield to maturity. See "YIELD AND MATURITY
CONSIDERATIONS" in this prospectus supplement
and "YIELD CONSIDERATIONS" in the accompanying
prospectus.
Even if losses on the mortgage loans included
in the trust fund are allocated to a particular
class of offered certificates, such losses may
affect the weighted average life and yield to
maturity of other certificates. Losses on the
mortgage loans, 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
S-39
absent the accrual of such interest. In
addition, the special servicer will receive a
fee with respect to each specially serviced
mortgage loan and any collections thereon,
including specially serviced mortgage loans
which have been returned to performing status.
This will result in shortfalls which will be
allocated to the offered certificates.
SUBORDINATION OF SUBORDINATE
OFFERED CERTIFICATES....... As described in this prospectus supplement,
unless your certificates are Class A-1, Class
A-2, Class A-3 or Class A-4 certificates, your
rights to receive distributions of amounts
collected or advanced on or in respect of the
mortgage loans will be subordinated to those of
the holders of the offered certificates with an
earlier alphabetical designation and the Class
IO-I and Class IO-II certificates.
See "DESCRIPTION OF THE
CERTIFICATES--Distributions--Application of the
Available Distribution Amount" and "DESCRIPTION
OF THE CERTIFICATES--Subordination; Allocation
of Losses and Certain Expenses" in this
prospectus supplement.
YOUR LACK OF CONTROL OVER THE
TRUST FUND CAN CREATE
RISKS...................... You and other certificateholders generally do
not have a right to vote and do not have the
right to make decisions with respect to the
administration of the trust. See "SERVICING OF
THE MORTGAGE LOANS--General" in this prospectus
supplement. Those decisions are generally made,
subject to the express terms of the pooling and
servicing agreement, by the master servicer,
the trustee or the special servicer, as
applicable. Any decision made by one of those
parties in respect of the trust, even if that
decision is determined to be in your best
interests by that party, may be contrary to the
decision that you or other certificateholders
would have made and may negatively affect your
interests.
Under certain circumstances, the consent or
approval of less than all certificateholders
will be required to take, and will bind all
certificateholders to, certain actions relating
to the trust fund. The interests of those
certificateholders may be in conflict with
those of the other certificateholders. For
example, certificateholders of certain classes
that are subordinate in right of payment may
direct the actions of the special servicer with
respect to troubled mortgage loans and related
mortgaged properties. In certain circumstances,
the holder of a companion loan may direct the
actions of the special servicer with respect to
the related mortgage loan. The interests of
such holder of a companion loan may be in
conflict with those of the certificateholders.
Addition-
S-40
ally, 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,
none of them 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
certificates. Lack of liquidity could result in
a substantial decrease in the market value of
your certificates. Your certificates will not
be listed on any securities exchange or traded
in any automated quotation system of any
registered securities association such as
NASDAQ.
BOOK-ENTRY REGISTRATION...... Your certificates will be initially represented
by one or more certificates registered in the
name of Cede & Co., as the nominee for DTC, and
will not be registered in your name. As a
result, you will not be recognized as a
certificateholder, or holder of record of your
certificates.
POTENTIAL CONFLICTS OF
INTEREST..................... The master servicer is an affiliate of the
depositor and is one of the underwriters and
one of the mortgage loan sellers. This
affiliation could cause a conflict with the
master servicer's duties to the trust under the
pooling and servicing agreement. However, the
pooling and servicing agreement provides that
the mortgage loans shall be administered in
accordance with the servicing standard
described in this prospectus supplement without
regard to an affiliation with any other party
to the pooling and servicing agreement. See
"SERVICING OF THE MORTGAGE LOANS--General" in
this prospectus supplement.
Wachovia Bank, National Association, which is
the master servicer, or one of its affiliates,
is also the holder of 1 of the companion loans
with respect to 1 mortgage loan, representing
0.3% of the mortgage pool. This could cause a
conflict between Wachovia Bank, National
Association's duties to the trust under the
pooling and servicing agreement and its or its
affiliate's interest as a holder of a companion
loan.
The special servicer will be involved in
determining whether to modify or foreclose a
defaulted mortgage loan. The special servicer
or an affiliate of the special servicer may
purchase certain other non-offered certificates
(including
S-41
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, depending upon the particular
circumstances including the nature and location
of such assets, compete with the mortgaged
properties for tenants, purchasers, financing
and so forth. See "SERVICING OF THE MORTGAGE
LOANS--Modifications, Waivers and Amendments"
in this prospectus supplement.
This could cause a conflict between the special
servicer's duties to the trust under the
pooling and servicing agreement and its
interest as a holder of a certificate. However,
the pooling and servicing agreement provides
that the mortgage loans shall be administered
in accordance with the servicing standard
without regard to ownership of any certificate
by the master servicer, the special servicer or
any affiliate of the special servicer. See
"SERVICING OF THE MORTGAGE LOANS--General" in
this prospectus supplement.
In addition, the related property managers and
borrowers may experience conflicts of interest
in the management and/or ownership of the
mortgaged properties securing the mortgage
loans because:
- 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.
In addition, certain mortgage loans included in
the trust may have been refinancings of debt
previously held by an affiliate of one of the
mortgage loan sellers.
RECENT TERRORIST ATTACKS MAY
ADVERSELY AFFECT YOUR
INVESTMENT................. On September 11, 2001, the United States was
subjected to multiple terrorist attacks which
resulted in considerable uncertainty in the
world financial markets. The full impact of
these events is not yet known but could
include, among other things, increased
volatility in the price of securities including
your certificates. The terrorist attacks may
also adversely affect the revenues or costs of
operation of the
S-42
mortgaged properties. The terrorist attacks on
the World Trade Center and the Pentagon suggest
an increased likelihood that large public areas
such as shopping malls or large office
buildings could become the target of terrorist
attacks in the future. The possibility of such
attacks could (i) lead to damage to one or more
of the mortgaged properties if any such attacks
occur, (ii) result in higher costs for
insurance premiums, particularly for large
properties, which could adversely affect the
cash flow at such mortgaged properties, or
(iii) impact leasing patterns or shopping
patterns which could adversely impact leasing
revenue and mall traffic and percentage rent.
As a result, the ability of the mortgaged
properties to generate cash flow may be
adversely affected.
The recent terrorist attacks have significantly
reduced air travel throughout the United
States, and, therefore, have had a negative
effect on revenues in areas heavily dependent
on tourism. The decrease in air travel may have
a negative effect on certain of the mortgaged
properties, including hotel mortgaged
properties and those mortgaged properties in
tourist areas, which could reduce the ability
of such mortgaged properties to generate cash
flow. See "RISK FACTORS--Special Risks
Associated with Hospitality Properties" in this
prospectus supplement.
Accordingly, these disruptions, uncertainties
and costs could materially and adversely affect
your investment in the certificates.
THE MORTGAGE LOANS
RISKS ASSOCIATED WITH
COMMERCIAL LENDING MAY BE
DIFFERENT THAN FOR
RESIDENTIAL LENDING........ Commercial and multifamily lending is generally
viewed as exposing a lender (and your
investment in the trust fund) to a greater risk
of loss than lending which is secured by
single-family residences, in part because it
typically involves making larger loans to
single borrowers or groups of related
mortgagors. In addition, unlike loans which are
secured by single-family residences, repayment
of loans secured by commercial and multifamily
properties depends upon the ability of the
related real estate project:
- to generate income sufficient to pay debt
service, operating expenses and leasing
commissions and to 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
S-43
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.
Many of the mortgaged properties securing
mortgage loans included in the trust fund have
leases that expire or may be subject to tenant
termination rights prior to the maturity date
of the related mortgage loan. Certain of such
loans may be leased entirely to a single
tenant. If leases are not renewed or replaced,
if tenants default, if rental rates fall and/or
if operating expenses increase, the borrower's
ability to repay the loan may be impaired and
the resale value of the property, which is
substantially dependent upon the
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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, tenant exclusives and
rights of first refusal to lease or purchase,
the availability of credit for refinancing and
changes in interest-rate levels that may
adversely affect the value of a project and/or
the borrower's ability to sell or refinance
without necessarily affecting the ability to
generate current income.
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;
- the property's "operating leverage" (i.e.,
the percentage of total property expenses
in relation to revenue, the ratio of fixed
operating expenses to those that vary with
revenues and the level of capital
expenditures required to maintain the
property and to retain or replace tenants);
and
- a decline in the real estate market or in
the financial condition of a major tenant
will tend to have a more immediate effect
on the net operating income of property
with short-term revenue sources, such as
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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, a mortgaged
property may not be readily convertible due to
restrictive covenants related to such mortgaged
property. In addition, converting commercial
properties to alternate uses generally requires
substantial capital expenditures. Further, in
the case of the mortgaged property relating to
the Pine Meadows Mobile Estates loan,
representing 0.2% of the mortgage pool, which
is secured by a deed of trust on 160 pads in a
178 pad complex, and in the case of the
mortgaged property relating to the Walgreens-
Chicago, IL loan, representing 0.3% of the
mortgage pool, which is secured by a deed of
trust on a single business condominium unit in
a two condominium unit complex, such mortgaged
properties could only be converted to
alternative uses to the extent permission was
obtained from all of the owners of the other
pads or units, respectively. The liquidation
value of any mortgaged property subject to
limitations of the kind described above or
other limitations on convertibility of use may
be substantially less than would be the case if
the property were readily adaptable to other
uses.
LOANS NOT INSURED OR
GUARANTEED................. Generally, the mortgage loans included in the
trust fund will not be an obligation of, or be
insured or guaranteed by, any governmental
entity, by any private mortgage insurer, or by
the depositor, any mortgage loan seller, the
underwriters, the master servicer, the special
servicer, the trustee 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.
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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 affects
the value of a mortgage loan or the
interests of certificateholders therein; or
- certain of their respective representations
or warranties concerning such mortgage loan
are breached, and such breach materially
and adversely affects the value of such
mortgage loan or the interests of the
certificateholders therein and is not cured
as required.
We cannot provide assurance that the applicable
mortgage loan seller will be in a financial
position to make such a repurchase or
substitution.
RISKS RELATING TO CERTAIN
PROPERTY TYPES............. Particular types of income properties are
exposed to particular risks. For instance:
SPECIAL RISKS ASSOCIATED WITH
SHOPPING CENTERS AND OTHER
RETAIL PROPERTIES.......... Shopping centers are affected by the health of
the retail industry, which is currently
undergoing a consolidation and is experiencing
changes due to the growing market share of
"off-price" retailing, including the popularity
of home shopping networks, shopping via
Internet web sites and telemarketing. A
particular shopping center may be adversely
affected by the bankruptcy or decline in
drawing power of an anchor or major tenant, a
shift in consumer demand due to demographic
changes (for example, population decreases or
changes in average age or income) and/or
changes in consumer preference (for example, to
discount retailers).
In the case of retail properties, the failure
of an anchor, shadow anchor or major tenant to
renew its lease, the termination of an anchor,
shadow anchor or major tenant's lease, the
bankruptcy or economic decline of an anchor,
shadow anchor or major tenant, or the cessation
of the business of an anchor, shadow anchor or
major tenant at its store, notwithstanding that
such tenant may continue payment of rent after
"going dark," may have a particularly negative
effect on the economic performance of a
shopping center property given the importance
of anchor tenants, shadow anchor tenants and
major tenants in attracting traffic to other
stores within the same shopping center. In
addition, the failure of one or more major
tenants, such as an anchor or shadow anchor
tenant, to operate from its
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premises may entitle other tenants to rent
reductions or the right to terminate their
leases. See "--The Failure of a Tenant Will
Have a Negative Impact on Single and Tenant
Concentration Properties" in this prospectus
supplement.
One mortgage loan (loan number 17),
representing 1.3% of the mortgage pool, is
secured by a mortgaged property that is
anchored by a Kmart store operated by Kmart
Corp., which filed petitions under Chapter 11
of the Bankruptcy Code on January 22, 2002.
Kmart Corp.'s bankruptcy and/or the closure of
such Kmart store could have an adverse effect
on the economic performance of the related
mortgaged property. See "--Bankruptcy
Proceedings Entail Certain Risks" and
"-- Single Tenants and Concentration of Tenants
Subject the Trust Fund to Increased Risk."
Retail properties, including shopping centers,
secure 55 of the mortgage loans included in the
trust fund as of the cut-off date, representing
33.4% of the mortgage pool.
SPECIAL RISKS ASSOCIATED WITH
MULTIFAMILY PROJECTS....... Multifamily projects are part of a market that,
in general, is characterized by low barriers to
entry. Thus, a particular apartment market with
historically low vacancies could experience
substantial new construction and a resultant
oversupply of units in a relatively short
period of time. Since multifamily apartment
units are typically leased on a short-term
basis, the tenants who reside in a particular
project within such a market may easily move to
alternative projects with more desirable
amenities or locations.
A large number of factors may adversely affect
the value and successful operation of a
multifamily property, including:
- 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
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- state and local regulations.
Furthermore, multifamily projects may be
subject to various tax credit, city, state and
federal housing subsidies, rent stabilization
or similar programs. The limitations and
restrictions imposed by these programs could
result in realized losses on the mortgage
loans. In addition, in the event that the
program is cancelled, it could result in less
income for the project. These programs may
include:
- rent limitations that could adversely
affect the ability of borrowers to increase
rents to maintain the condition of their
mortgaged properties and satisfy operating
expenses; and
- tenant income restrictions that may reduce
the number of eligible tenants in those
mortgaged properties and result in a
reduction in occupancy rates.
The differences in rents between subsidized or
supported properties and other multifamily
rental properties in the same area may not be a
sufficient economic incentive for some eligible
tenants to reside at a subsidized or supported
property that may have fewer amenities or be
less attractive as a residence. As a result,
occupancy levels at a subsidized or supported
property may decline, which may adversely
affect the value and successful operation of
such property.
Multifamily properties secure 41 of the
mortgage loans included in the trust fund as of
the cut-off date, representing 28.5% of the
mortgage pool.
SPECIAL RISKS ASSOCIATED WITH
OFFICE PROPERTIES.......... Office properties may require their owners to
expend significant amounts of cash to pay for
general capital improvements, tenant
improvements and costs of re-leasing space.
Office properties that are not equipped to
accommodate the needs of modern businesses may
become functionally obsolete and thus
non-competitive.
In addition, a large number of factors may
adversely affect the value of office
properties, including:
- 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;
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- 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 26 of the mortgage
loans included in the trust fund as of the
cut-off date, representing 19.5% of the
mortgage pool.
SPECIAL RISKS ASSOCIATED WITH
INDUSTRIAL AND MIXED-USE
FACILITIES................. Industrial and mixed-use facilities present
risks not associated with other properties.
Significant factors determining the value of
industrial properties include:
- 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.
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Industrial and mixed-use facilities secure 24
of the mortgage loans included in the trust
fund as of the cut-off date, representing 11.3%
of the mortgage pool.
SPECIAL RISKS ASSOCIATED WITH
MOBILE HOME PARK
PROPERTIES................. Mortgage loans secured by liens on mobile home
park properties pose risks not associated with
mortgage loans secured by liens on other types
of income-producing real estate.
The successful operation of a mobile home park
property may depend upon the number of other
competing residential developments in the local
market, such as:
- other mobile home park properties;
- apartment buildings; and
- site-built single family homes.
Other factors may also include:
- the physical attributes of the community,
including its age and appearance;
- location of the mobile home park property;
- the ability of management to provide
adequate maintenance and insurance;
- the types of services or amenities it
provides;
- the property's reputation; and
- state and local regulations, including rent
control and rent stabilization.
The mobile home park properties are "special
purpose" properties that could not be readily
converted to general residential, retail or
office use. Thus, if the operation of any of
the mobile home park properties becomes
unprofitable due to competition, age of the
improvements or other factors such that the
borrower becomes unable to meet its obligations
on the related mortgage loan, the liquidation
value of that mobile home park property may be
substantially less, relative to the amount
owing on the related mortgage loan, than would
be the case if the mobile home park property
were readily adaptable to other uses.
Mobile home park properties secure 7 of the
mortgage loans, representing 4.2% of the
mortgage pool.
SPECIAL RISKS ASSOCIATED WITH
HOSPITALITY PROPERTIES..... Hospitality properties are affected by various
factors, including:
- location;
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- 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.
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
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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. In addition, the events of September
11, 2001 have had an adverse impact on the
tourism and convention industry. See "RISK
FACTORS--Recent Terrorist Attacks May Adversely
Affect Your Investment" in this prospectus
supplement.
Hospitality properties secure 2 of the mortgage
loans included in the trust fund as of the
cut-off date, representing 2.2% 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
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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 therefor is generally not limited
under applicable laws. Such liability could
exceed the value of the property and/or the
aggregate assets of the owner. Under some
environmental laws, a secured lender (such as
the trust fund) may be found to be an "owner"
or "operator" of the related mortgaged property
if it is determined that the lender actually
participated in the 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 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
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- 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 and risks, that the
related borrowers will implement all
recommended operations and maintenance plans,
that such plans will adequately remediate the
environmental condition, or that any
environmental indemnity, insurance or escrow
will fully cover all potential environmental
conditions and risks. In addition, the
environmental condition of the underlying real
properties could be adversely affected by
tenants or by the condition of land or
operations in the vicinity of the properties,
such as underground storage tanks.
With respect to 1 mortgage loan, representing
0.4% of the mortgage pool, the related borrower
obtained a pollution legal liability policy
(which does not run to the benefit of the
related lender) in lieu of or in addition to
environmental escrows established.
With respect to 3 mortgage loans included in
the trust fund as of the cut-off date,
representing 4.4% of the cut-off date balance,
the related borrower was 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 Ratings,
Inc. or "A++XV" by A.M. Best Company; and
- 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
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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--Realization Upon Defaulted
Mortgage Loans," "RISK FACTORS--Environmental
Liability May Affect the Lien on a Mortgaged
Property and Expose the Lender to Costs" and
"CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND
LEASES--Environmental Considerations" in the
accompanying prospectus.
SPECIAL RISKS ASSOCIATED WITH
BALLOON LOANS AND
ANTICIPATED REPAYMENT DATE
LOANS...................... One hundred thirty-seven (137) of the mortgage
loans, representing 87.2% 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 and, in each case,
a balloon payment on their respective maturity
dates. Eleven (11) of the mortgage loans
included in the trust fund as of the cut-off
date, representing 8.9% 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
S-56
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 loan on the
related maturity date or anticipated repayment
date, as applicable. In addition, fully
amortizing mortgage loans which pay interest on
an "actual/360" basis but have fixed monthly
payments may, in fact, have a small balloon
payment due at maturity. For additional
description of risks associated with balloon
loans, see "RISK FACTORS--Balloon Payments on
Mortgage Loans Result in Heightened Risk of
Borrower Default" in the accompanying
prospectus.
In order to maximize recoveries on defaulted
mortgage loans, the pooling and servicing
agreement permits the special servicer to
extend and modify mortgage loans that are in
material default or as to which a payment
default (including the failure to make a
balloon payment) is imminent; subject, however,
to the limitations described under "SERVICING
OF THE MORTGAGE LOANS--Modifications, Waivers
and Amendments" in this prospectus supplement.
We cannot provide assurance, however, that any
such extension or modification will increase
the present value of recoveries in a given
case. Any delay in collection of a balloon
payment that would otherwise be distributable
on your certificates, whether such delay is due
to borrower default or to modification of the
related mortgage loan, will likely extend the
weighted average life of your certificates. See
"YIELD AND MATURITY CONSIDERATIONS" in this
prospectus supplement and "YIELD
CONSIDERATIONS" in the accompanying prospectus.
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ADVERSE CONSEQUENCES
ASSOCIATED WITH BORROWER
CONCENTRATION, BORROWERS
UNDER COMMON CONTROL AND
RELATED BORROWERS.......... Certain borrowers under the mortgage loans
included in the trust fund are affiliated or
under common control with one another. In such
circumstances, any adverse circumstances
relating to a borrower or an affiliate thereof
and affecting one of the related mortgage loans
or mortgaged properties could also affect other
mortgage loans or mortgaged properties of the
related borrower. In particular, the bankruptcy
or insolvency of any such borrower or affiliate
could have an adverse effect on the operation
of all of the mortgaged properties of that
borrower and its affiliates and on the ability
of such related mortgaged properties to produce
sufficient cash flow to make required payments
on the mortgage loans. For example, if a person
that owns or directly or indirectly controls
several mortgaged properties experiences
financial difficulty at one mortgaged property,
they could defer maintenance at one or more
other mortgaged properties in order to satisfy
current expenses with respect to the mortgaged
property experiencing financial difficulty, or
they could attempt to avert foreclosure by
filing a bankruptcy petition that might have
the effect of interrupting payments for an
indefinite period on all the related mortgage
loans. In particular, such person experiencing
financial difficulty or becoming subject to a
bankruptcy proceeding may have an adverse
effect on the funds available to make
distributions on the certificates and may lead
to a downgrade, withdrawal or qualification (if
applicable) of the ratings of the certificates.
Mortgaged properties owned by related borrowers
are likely to:
- 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, the Abbey concentration (loan
numbers 22, 26, 43, 46, 74, 78, 92 and 106)
consists of 8 mortgage loans (the Abbey
Portfolio I loans and the Abbey Portfolio II
loans) comprised of two sets of
cross-collateralized and cross-defaulted pools
of loans, collectively representing 5.4% of the
mortgage pool. The sponsor of each mortgage
loan is The Abbey Company. Although the
mortgage loans within an individual portfolio
are cross-collateralized and cross-defaulted
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with the other mortgage loans in such
portfolio, the mortgage loans in one portfolio
are not cross-collateralized or cross-
defaulted with the mortgage loans in the other
portfolio. No other group of borrower
concentration represents more than 3.4% of the
mortgage pool.
THE GEOGRAPHIC CONCENTRATION
OF MORTGAGED PROPERTIES
SUBJECTS THE TRUST FUND TO
A GREATER EXTENT TO STATE
AND REGIONAL CONDITIONS.... Except as indicated in the following table,
less than 5.0% of the mortgage loans, by
initial pool balance, are secured by mortgaged
properties in any one state.
<Table>
<Caption>
<Caption>
NUMBER OF AGGREGATE PERCENTAGE OF
MORTGAGED CUT-OFF DATE CUT-OFF DATE
STATE PROPERTIES BALANCE(1) POOL BALANCE
----- ---------- ------------ -------------
CA..................... 45 $287,737,516 30.3%
Southern(2).......... 32 188,006,938 19.8
Northern(2).......... 13 99,730,578 10.5
FL..................... 17 134,019,049 14.1
AZ..................... 10 63,709,574 6.7
TX..................... 21 55,922,689 5.9
Other.................. 75 408,653,620 43.0
--- ------------ -----
Total........ 168 $950,042,449 100.0%
=== ============ =====
</Table>
--------------
(1) Because this table presents information
relating to the mortgaged properties and
not the mortgage loans, the information for
mortgage loans secured by more than one
mortgaged property is based on allocated
loan amounts (allocating the mortgage loan
principal balance to each of those
properties by the appraised values of the
mortgaged properties).
(2) For purposes of determining whether a
mortgaged property is in Northern
California or Southern California,
mortgaged properties located north of San
Luis Obispo County, Kern County and San
Bernardino County were included in Northern
California and mortgaged properties located
in or south of such counties were included
in Southern California.
The concentration of mortgaged properties in a
specific state or region will make the
performance of the trust fund as a whole more
sensitive to the following in the state or
region 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 or terrorism (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
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which they are cross-collateralized, have
principal balances as of the cut-off date that
are substantially higher than the average
principal balance of the mortgage loans in the
trust fund as of the cut-off date.
In general, concentrations in a mortgage pool
of loans with larger-than-average balances can
result in losses that are more severe, relative
to the size of the pool, than would be the case
if the aggregate balance of the pool were more
evenly distributed.
- The largest single mortgage loan included
in the trust fund as of the cut-off date
represents 3.0% 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 2.9% 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,
13.9% 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,
24.1% of the mortgage pool.
CONCENTRATION OF MORTGAGED
PROPERTY TYPES SUBJECT THE
TRUST FUND TO INCREASED
RISK OF DECLINE IN A
PARTICULAR INDUSTRY........ A concentration of mortgaged property types can
increase the risk that a decline in a
particular industry or business would have a
disproportionately large impact on a pool of
mortgage loans. For example, if there is a
decline in tourism, the hotel industry might be
adversely affected, leading to increased losses
on loans secured by hospitality properties as
compared to the mortgage loans secured by other
property types.
In that regard:
- mortgage loans included in the trust fund
and secured by retail properties represent
as of the cut-off date 33.4% of the
mortgage pool (based on the primary
property type for combined office/retail
properties);
- mortgage loans included in the trust fund
and secured by multifamily properties
represent as of the cut-off date 28.5% of
the mortgage pool;
- mortgage loans included in the trust fund
and secured by office properties represent
as of the cut-off date
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19.5% of the mortgage pool (based on the
primary property type for combined
office/retail properties);
- mortgage loans included in the trust fund
and secured by industrial and mixed use
properties represent as of the cut-off date
11.3% of the mortgage pool;
- mortgage loans included in the trust fund
and secured by mobile home park properties
represent as of the cut-off date 4.2% of
the mortgage pool; and
- mortgage loans included in the trust fund
and secured by hospitality properties
represent as of the cut-off date 2.2% of
the mortgage pool.
WE HAVE NOT REUNDERWRITTEN
ANY OF THE MORTGAGE
LOANS...................... We have not reunderwritten the mortgage loans
included in the trust fund. Instead, we have
relied on the representations and warranties
made by the mortgage loan sellers, and the
mortgage loan sellers' respective obligations
to repurchase, cure or substitute a mortgage
loan in the event that a representation or
warranty was not true when made and such breach
materially and adversely affects the value of
the mortgage loan or the interests of the
certificateholders therein. These
representations and warranties do not cover all
of the matters that we would review in
underwriting a mortgage loan and you should not
view them as a substitute for reunderwriting
the mortgage loans. If we had reunderwritten
the mortgage loans included in the trust fund,
it is possible that the reunderwriting process
may have revealed problems with a mortgage loan
not covered by representations or warranties
given by the mortgage loan sellers. In
addition, we cannot provide assurance that the
mortgage loan sellers will be able to
repurchase or substitute a mortgage loan if a
representation or warranty has been breached.
See "DESCRIPTION OF THE MORTGAGE
POOL--Representations and Warranties;
Repurchases and Substitutions" in this
prospectus supplement.
FORECLOSURE ON MORTGAGED
PROPERTIES MAY RESULT IN
ADVERSE TAX CONSEQUENCES... One or more of the REMICs 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
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"--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 (with respect to mortgage
loans that are not specially serviced mortgaged
loans) and/or special servicer (with respect to
specially serviced mortgage loans) will
generally be required to cause the borrower on
each mortgage loan included in the trust fund
and serviced by it to maintain such insurance
coverage on the related mortgaged property as
is required under the related mortgage,
including hazard insurance; provided that each
of the master servicer and/or the special
servicer may satisfy its obligation to cause
hazard insurance to be maintained with respect
to any mortgaged property by acquiring a
blanket or master single interest insurance
policy. In general, the standard form of fire
and extended coverage policy covers physical
damage to or destruction of the improvements on
the related mortgaged property by fire,
lightning, explosion, smoke, windstorm and
hail, and riot, strike and civil commotion,
subject to the conditions and exclusions
specified in each policy. The mortgage loans
generally do not require earthquake insurance.
Although the policies covering the mortgaged
properties are underwritten by different
insurers under different state laws in
accordance with different applicable state
forms, and therefore do not contain identical
terms and conditions, most such policies
typically may not cover any physical damage
resulting from:
- war;
- terrorism;
- 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.
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In light of the September 11, 2001 terrorist
attacks in New York City and the Washington,
D.C. area, many reinsurance companies (which
assume some of the risk of the policies sold by
primary insurers) have indicated that they
intend to eliminate coverage for acts of
terrorism from their reinsurance policies after
December 31, 2001. Without that reinsurance
coverage, primary insurance companies would
have to assume that risk themselves, which may
cause them to eliminate or reduce such
insurance coverage in their policies and to
limit the types of acts and/or causes that may
be covered by terrorism coverage. In order to
offset this risk, casualty insurance
associations have proposed governmental
assistance for terrorism reinsurance but these
proposals have been met with skepticism by
legislators and others and even if such
proposals are instituted it is unclear what
acts will fall under the category of
"terrorism" as opposed to "acts of war,"
"natural disasters," or "chemical or biological
attacks" which may not be covered. In the event
that such casualty losses are not covered by
standard casualty insurance policies, the loan
documents may not specifically require the
borrowers to obtain this form of coverage.
Pursuant to the terms of the pooling and
servicing agreement, the master servicer or the
special servicer may not be required to
maintain insurance covering terrorist or
similar acts, nor will it be required to call a
default under a mortgage loan, if the related
borrower fails to maintain such insurance (even
if required to do so under the related loan
documents) if the special servicer has
determined, in consultation with the
controlling class representative, in accordance
with the servicing standard that either--
- such insurance is not available at
commercially reasonable rates and that such
hazards are not at the time commonly
insured against for properties similar to
the mortgaged property and located in or
around the region in which such mortgaged
property is located, or
- such insurance is not available at any
rate.
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
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- prohibited from encumbering the related
mortgaged property with additional secured
debt without the lender's prior approval.
None of the mortgage loans included in the
trust fund, other than the mortgage loans with
companion loans, are secured by mortgaged
properties that secure other loans outside the
trust fund.
One (1) mortgage loan included in the trust
fund as of the cut-off date (loan number 136),
representing 0.2% of the mortgage pool,
provides that the borrower under certain
circumstances may incur, without lender
consent, additional unsecured indebtedness
other than in the ordinary course of business.
With respect to 5 mortgage loans (loan numbers
22, 26, 43, 74 and 92), representing 3.8% of
the mortgage pool, the ownership interests of
the direct or indirect owner of the related
borrowers have been pledged as security for
mezzanine debt, subject to the terms of a
subordination and standstill agreement entered
into in favor of the lender. In addition, with
respect to these mortgage loans which do not
have existing mezzanine debt but which are
affiliates of borrowers under mortgage loans
which do have existing mezzanine debt, upon the
occurrence of an event of default under the
mezzanine loan documents with respect to such
affiliated borrower, a change in control in
such other mortgage loan borrower may occur. In
addition, in the case of 2 mortgage loans
included in the trust fund as of the cut-off
date (loan numbers 1 and 18), representing 4.2%
of the mortgage pool, the related mortgage loan
documents provide that, under certain
circumstances, the entities with a controlling
ownership interest in the borrower may pledge
their interests as security for mezzanine debt
in the future, subject to the terms of a
subordination and standstill agreement to be
entered into in favor of the lender.
Fourteen (14) mortgage loans included in the
trust fund as of the cut-off date (loan numbers
113, 124, 126, 137, 142, 143, 148, 149, 150,
151, 152, 153, 154 and 156), representing 1.7%
of the mortgage pool, do not prohibit the
related borrower from incurring additional
unsecured debt or an owner of an interest in
the related borrower from pledging its
ownership interest in the related borrower as
security for mezzanine debt because the related
borrower is not required by either the mortgage
loan documents or related organizational
documents to be a special purpose entity.
Further, certain of the mortgage loans included
in the trust fund do not prohibit limited
partners or other owners of non-controlling
interests in the related borrower from pledging
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their interests in the borrower as security for
mezzanine debt.
Secured subordinated debt encumbering any
mortgaged property may increase the difficulty
of refinancing the related mortgage loan at
maturity and the possibility that reduced cash
flow could result in deferred maintenance.
Also, in the event that the holder of the
subordinated debt has filed for bankruptcy or
been placed in involuntary receivership,
foreclosure by any senior lienholder (including
the trust fund) on the mortgaged property could
be delayed. In general, 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.
In addition, certain mortgage loans, which may
include the mortgage loans previously described
in this risk factor, permit the related
borrower to incur unsecured debt to an
affiliate of, or owner of an interest in, the
borrower or to an affiliate of such an owner.
Further, certain of the mortgage loans permit
additional liens on the related mortgaged
properties for (1) assessments, taxes or other
similar charges or (2) liens which in the
aggregate constitute an immaterial and
insignificant monetary amount with respect to
the net value of the related borrower's assets.
A default by the borrower on such additional
indebtedness could impair the borrower's
financial condition and result in the
bankruptcy or receivership of the borrower
which would cause a delay in the foreclosure by
the trust fund on the mortgaged property. It
may not be evident that a borrower has incurred
any such future subordinate second lien debt
until the related mortgage loan otherwise
defaults. In cases in which one or more
subordinate liens are imposed on a mortgaged
property or the borrower incurs other
indebtedness, the trust fund is subject to
additional risks, including, without
limitation, the following:
- the risk that the necessary maintenance of
the mortgaged property could be deferred to
allow the borrower to pay the required debt
service on the subordinate financing and
that the value of the mortgaged property
may fall as a result;
- 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
S-65
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 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 foreclose upon the equity in the
related mortgagor, which has been pledged to
secure payment of such mezzanine debt. Although
such transfer of equity may not trigger the due
on sale clause under the related mortgage loan,
it could cause the obligor under such mezzanine
debt to file for bankruptcy, which could
negatively affect the operation of the related
mortgaged property and such borrower's ability
to make payments on the related mortgage loan
in a timely manner.
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See "CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
AND LEASES--Due-on-Sale and Due-on-Encumbrance"
in the accompanying prospectus and "DESCRIPTION
OF THE MORTGAGE POOL--Certain Terms and
Conditions of the Mortgage Loans--Other
Financing" and "--Due-on-Sale and
Due-on-Encumbrance Provisions" in this
prospectus supplement.
Although the companion loans related to the 2
mortgage loans with related companion loans are
not assets of the trust fund, the related
borrower is still obligated to make interest
and principal payments on the companion loans.
As a result, the trust fund is subject to
additional risks, including:
- 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.... Most of the borrowers are legal entities rather
than individuals. Mortgage loans made to legal
entities may entail risks of loss greater than
those of mortgage loans made to individuals.
For example, a legal entity, as opposed to an
individual, may be more inclined to seek legal
protection from its creditors under the
bankruptcy laws. Unlike individuals involved in
bankruptcies, most of the entities generally do
not have personal assets and creditworthiness
at stake. The bankruptcy of a borrower, or a
general partner or managing member of a
borrower, may impair the ability of the lender
to enforce its rights and remedies under the
related mortgage.
Many of the borrowers are not 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; or
- individuals that have personal liabilities
unrelated to the property.
S-67
However, any borrower, even a bankruptcy-remote
entity, as an owner of real estate will be
subject to certain potential liabilities and
risks. We cannot provide assurances that any
borrower will not file for bankruptcy
protection or that creditors of a borrower or a
corporate or individual general partner or
managing member of a borrower will not initiate
a bankruptcy or similar proceeding against such
borrower or corporate or individual general
partner or managing member.
Furthermore, with respect to any related
borrowers, creditors of a common parent in
bankruptcy may seek to consolidate the assets
of such borrowers with those of the parent.
Consolidation of the assets of such borrowers
would likely have an adverse effect on the
funds available to make distributions on your
certificates, and may lead to a downgrade,
withdrawal or qualification of the ratings of
your certificates. See "CERTAIN LEGAL ASPECTS
OF MORTGAGE LOANS AND LEASES--Bankruptcy Laws"
in the accompanying prospectus.
In addition, with respect to 5 mortgage loans,
representing 2.2% of the mortgage pool, the
borrowers own the related mortgaged property as
tenants in common. Two (2) of these mortgage
loans, representing 1.1% of the mortgage pool,
are subject to prepayment as a result of
partition.
BANKRUPTCY PROCEEDINGS ENTAIL
CERTAIN RISKS.............. Under federal bankruptcy law, the filing of a
petition in bankruptcy by or against a borrower
will stay the sale of the mortgaged property
owned by that borrower, as well as the
commencement or continuation of a foreclosure
action. In addition, even if a court determines
that the value of the mortgaged property is
less than the principal balance of the mortgage
loan it secures, the court may prevent a lender
from foreclosing on the mortgaged property
(subject to certain protections available to
the lender). As part of a restructuring plan, a
court also may reduce the amount of secured
indebtedness to the then-current value of the
mortgaged property, which would make the lender
a general unsecured creditor for the difference
between the then-current value and the amount
of its outstanding mortgage indebtedness. A
bankruptcy court also may: (1) grant a debtor a
reasonable time to cure a payment default on a
mortgage loan; (2) reduce periodic payments due
under a mortgage loan; (3) change the rate of
interest due on a mortgage loan; or (4)
otherwise alter the mortgage loan's repayment
schedule.
Moreover, the filing of a petition in
bankruptcy by, or on behalf of, a junior
lienholder may stay the senior lienholder from
taking action to foreclose on the junior lien.
Addition-
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ally, the borrower's trustee or the borrower,
as debtor-in-possession, has certain special
powers to avoid, subordinate or disallow debts.
In certain circumstances, the claims of the
trustee may be subordinated to financing
obtained by a debtor-in-possession subsequent
to its bankruptcy.
Under federal bankruptcy law, the lender will
be stayed from enforcing a borrower's
assignment of rents and leases. Federal
bankruptcy law also may interfere with the
master servicer's or special servicer's ability
to enforce lockbox requirements. The legal
proceedings necessary to resolve these issues
can be time consuming and costly and may
significantly delay or diminish the receipt of
rents. Rents also may escape an assignment to
the extent they are used by the borrower to
maintain the mortgaged property or for other
court authorized expenses.
Additionally, pursuant to subordination
agreements for certain of the mortgage loans,
the subordinate lenders may have agreed that
they will not take any direct actions with
respect to the related subordinated debt,
including any actions relating to the
bankruptcy of the borrower, and that the holder
of the mortgage loan will have all rights to
direct all such actions. There can be no
assurance that in the event of the borrower's
bankruptcy, a court will enforce such
restrictions against a subordinated lender.
In its 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 significantly
delayed, and the aggregate amount ultimately
collected may be substantially less than the
amount owed.
Certain of the mortgage loans have a sponsor
that has previously filed bankruptcy. In each
case, the related entity or person has emerged
from bankruptcy. However, we cannot assure you
that such sponsors will not be more likely than
other sponsors to utilize their rights in
bankruptcy in
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the event of any threatened action by the
mortgagee to enforce its rights under the
related loan documents.
INSPECTIONS AND APPRAISALS
MAY NOT ACCURATELY REFLECT
VALUE OR CONDITION OF
MORTGAGED PROPERTY......... In general, appraisals represent only the
analysis and opinion of qualified experts and
are not guaranties of present or future value,
and may determine a value of a property that is
significantly higher than the amount that can
be obtained from the sale of a mortgaged
property under a distress or liquidation sale.
Information regarding the values of the
mortgaged properties at the date of such report
is presented under "DESCRIPTION OF THE MORTGAGE
POOL--Additional Mortgage Loan Information" in
this prospectus supplement for illustrative
purposes only. Any engineering reports or site
inspections obtained in connection with this
offering represent only the analysis of the
individual engineers or site inspectors
preparing such reports at the time of such
report, and may not reveal all necessary or
desirable repairs, maintenance or capital
improvement items.
THE MORTGAGED PROPERTIES MAY
NOT BE IN COMPLIANCE WITH
CURRENT ZONING LAWS........ The mortgaged properties securing the mortgage
loans 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.
S-70
In addition, certain of the mortgaged
properties are subject to certain use
restrictions imposed pursuant to restrictive
covenants, reciprocal easement agreements or
operating agreements or, in the case of
condominiums, condominium declarations. 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
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would be inequitable or unjust or the
circumstances would render acceleration
unconscionable. However, certain of the
mortgage loans included in the trust fund
permit one or more transfers of the related
mortgaged property to pre-approved borrowers or
pursuant to pre-approved conditions without the
lender's approval. See "CERTAIN LEGAL ASPECTS
OF MORTGAGE LOANS AND LEASES--Due-on-Sale and
Due-on-Encumbrance" in the accompanying
prospectus.
The mortgage loans included in the trust fund
may also be secured by an assignment of leases
and rents pursuant to which the borrower
typically assigns its right, title and interest
as landlord under the leases on the related
mortgaged property and the income derived
therefrom to the lender as further security for
the related mortgage loan, while retaining a
license to collect rents for so long as there
is no default. In the event the borrower
defaults, the license terminates and the lender
is entitled to collect the rents. Such
assignments are typically not perfected as
security interests prior to the lender's taking
possession of the related mortgaged property
and/or appointment of a receiver. Some state
laws may require that the lender take
possession of the mortgaged property and obtain
a judicial appointment of a receiver before
becoming entitled to collect the rents. In
addition, if bankruptcy or similar proceedings
are commenced by or in respect of the borrower,
the lender's ability to collect the rents may
be adversely affected. See "CERTAIN LEGAL
ASPECTS OF MORTGAGE LOANS AND LEASES--Leases
and Rents" in the accompanying prospectus.
LIMITATIONS ON THE BENEFITS
OF CROSS-COLLATERALIZED AND
CROSS-DEFAULTED
PROPERTIES................. Two (2) groups of mortgage loans (the Abbey
Portfolio I loans and the Abbey Portfolio II
loans) included in the trust fund as of the
cut-off date ((1) loan numbers 26, 43, 46 and
106; and (2) loan numbers 22, 74, 78 and 92),
representing 5.4% of the mortgage pool, are
groups of mortgage loans that are
cross-collateralized and cross-defaulted with
each of the other mortgage loans in their
respective groups. In addition, some mortgage
loans are secured by first lien deeds of trust
or mortgages, as applicable, on multiple
properties securing the joint and several
obligations of multiple borrowers. Such
arrangements could be challenged as fraudulent
conveyances by creditors of any of the related
borrowers or by the representative of the
bankruptcy estate of any related borrower if
one or more of such borrowers becomes a debtor
in a bankruptcy case. Generally, under federal
and
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most state fraudulent conveyance statutes, a
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 (other than the
mortgage loans with companion loans) is
cross-collateralized with a mortgage loan not
included in the trust fund.
SINGLE TENANTS AND
CONCENTRATION OF TENANTS
SUBJECT THE TRUST FUND TO
INCREASED RISK............. Thirty-four (34) of the mortgaged properties
securing mortgage loans, representing 15.5% of
the mortgage pool, included in the trust fund
are leased wholly to a single tenant or are
wholly owner occupied. Certain other of the
mortgaged properties are leased in large part
to a single tenant or are in large part owner
occupied. Any default by a major tenant could
adversely affect the related borrower's ability
to make payments on the related mortgage loan.
We cannot provide assurances that any major
tenant will continue to perform its obligations
under its lease (or, in the case of an owner-
occupied mortgaged property, under the related
mortgage loan documents).
In addition, certain of the mortgaged
properties that are leased to single tenants or
a major tenant may have leases that terminate
prior to the maturity date of the related
mortgage loan. Mortgaged properties leased to a
single tenant, or a small number of tenants,
are more likely to experience interruptions of
cash flow if a tenant fails to
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renew its lease because there may be less or no
rental income until new tenants are found and
it may be necessary to expend substantial
amounts of capital to make the space acceptable
to new tenants.
Retail and office properties also may be
adversely affected if there is a concentration
of particular tenants among the mortgaged
properties or of tenants in a particular
business or industry. For example, with respect
to 3 mortgage loans (loan numbers 10, 27 and
45), representing 3.4% of the mortgage pool,
the single tenant of each mortgaged property is
the Dana Corporation; with respect to 8
mortgage loans (loan numbers 89, 98, 105, 110,
111, 113, 115 and 142), representing 2.4% of
the mortgage pool, the single tenant of each
mortgaged property is Walgreen's Company; with
respect to 1 mortgage loan (loan number 12)
representing 1.6% of the mortgage pool, the
single tenant of the mortgaged property is
Honeywell Inc.; and with respect to 3 mortgage
loans (loan numbers 38, 99 and 109),
representing 1.5% of the mortgage pool, the
single tenant of each mortgaged property is
Wal-Mart Stores, Inc. For further information
regarding certain significant tenants at the
mortgaged properties, see Annex A-4 to this
prospectus supplement.
THE FAILURE OF A TENANT WILL
HAVE A NEGATIVE IMPACT ON
SINGLE TENANT AND TENANT
CONCENTRATION PROPERTIES... The bankruptcy or insolvency of a major tenant
or sole tenant, or a number of smaller tenants,
in retail, industrial and office properties may
adversely affect the income produced by a
mortgaged property. Under the Bankruptcy Code,
a tenant has the option of assuming or
rejecting any unexpired lease. If the tenant
rejects the lease, the landlord's claim for
breach of the lease would be a general
unsecured claim against the tenant (absent
collateral securing the claim) and the amounts
the landlord could claim would be limited.
LITIGATION MAY HAVE ADVERSE
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 and
their affiliates 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 such 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.
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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 financial
condition to fulfill their management
responsibilities throughout the terms of their
respective management agreements.
CONDEMNATIONS OF MORTGAGED
PROPERTIES MAY RESULT IN
LOSSES..................... From time to time, there may be condemnations
pending or threatened against one or more of
the mortgaged properties securing mortgage
loans included in the trust fund. The proceeds
payable in connection with a total condemnation
may not be sufficient to restore the related
mortgaged property or to satisfy the remaining
indebtedness of the related mortgage loan. The
occurrence of a partial condemnation may have a
material adverse effect on the continued use
of, or income generation from, the affected
mortgaged property. Therefore, we cannot give
assurances that the occurrence of any
condemnation will not have a negative impact
upon distributions on your certificates.
THE STATUS OF A GROUND LEASE
MAY BE UNCERTAIN IN A
BANKRUPTCY PROCEEDING...... Eight (8) of the mortgaged properties included
in the trust fund as of the cut-off date,
representing 8.5% 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
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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 Wachovia Bank,
National Association in its capacity as a
mortgage loan seller) are obligated to
repurchase or substitute any mortgage loan in
connection with either a breach of any mortgage
loan seller's representations and warranties or
any document defects, if such mortgage loan
seller defaults on its obligation to do so. We
cannot provide assurances that the mortgage
loan sellers will have the financial ability to
effect such repurchases or substitutions.
In addition, one or more of the mortgage loan
sellers has acquired a portion of the mortgage
loans included in the trust fund in one or more
secondary market purchases. Such purchases may
be challenged as fraudulent conveyances. Such a
challenge if successful, may have a negative
impact on the distributions on your
certificates. See "DESCRIPTION OF THE MORTGAGE
POOL--Assignment of the Mortgage Loans;
Repurchases and Substitutions" and
"--Representations and Warranties; Repurchases
and Substitutions" in this prospectus
supplement and "DESCRIPTION OF THE POOLING
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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.
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DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool is expected to consist of 156 fixed rate mortgage loans
(the "Mortgage Loans"), with an aggregate principal balance (the "Cut-Off Date
Pool Balance") as of May 1, 2002 for 137 of the Mortgage Loans, May 10, 2002 for
1 of the Mortgage Loans and May 11, 2002 for 18 of the Mortgage Loans (such date
with respect to each Mortgage Loan, the "Cut-Off Date"), of $950,042,449. 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 payments of
principal due on or before such date, whether or not received. The Cut-Off Date
Balances of the Mortgage Loans range from $383,075 to $28,477,855 and the
Mortgage Loans have an average Cut-Off Date Balance of $6,090,016. References to
percentages of Mortgaged Properties referred to in this Prospectus Supplement
without further description are references to the percentages of the Cut-Off
Date Pool Balance represented by the aggregate Cut-Off Date Balance of the
related Mortgage Loans. The descriptions in this prospectus supplement of the
Mortgage Loans and the Mortgaged Properties are based upon the pool of Mortgage
Loans as it is expected to be constituted as of the close of business on the
Closing Date, assuming that (1) all scheduled principal and/or interest payments
due on or before the Cut-Off Date will be made, and (2) there will be no
principal prepayments on or before the Cut-Off Date. All percentages of the
Mortgage Loans, or 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 2 Mortgage Loans
with Companion Loans is calculated without regard to the related Companion 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 8.5% of the Cut-Off Date Pool Balance, on the
related borrower's leasehold estate) in an income-producing real property (each,
a "Mortgaged Property").
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
<Table>
<Caption>
NUMBER OF AGGREGATE PERCENTAGE
LOANS/MORTGAGED CUT-OFF OF CUT-OFF DATE
PROPERTY TYPE PROPERTIES DATE BALANCE(1) POOL BALANCE
- ------------- --------------- --------------- -----------------
Retail....................................... 55/ 55 $317,589,775 33.4%
Retail--Anchored........................... 33/ 33 228,099,907 24.0
Retail--Unanchored......................... 13/ 13 57,514,588 6.1
Retail--Shadow Anchored(2)................. 9/ 9 31,975,280 3.4
Multifamily.................................. 41/ 45 270,788,341 28.5
Office....................................... 26/ 26 185,636,088 19.5
Industrial................................... 16/ 24 78,223,230 8.2
Mobile Home Park............................. 7/ 7 40,252,000 4.2
Mixed Use.................................... 8/ 8 29,283,570 3.1
Hospitality.................................. 2/ 2 21,269,445 2.2
Self Storage................................. 1/ 1 7,000,000 0.7
--------- -------------- --------
Total.............................. 156/168 $950,042,449 100.0%
========= ============== ========
</Table>
- ---------------
(1) Because this table presents information relating to the mortgaged properties
and not the mortgage loans, the information for mortgage loans secured by
more than one mortgaged property is based on allocated loan amounts
(allocating the mortgage loan principal balance to each of those properties
by the appraised values of the mortgaged properties).
(2) A Mortgaged Property is classified as shadow anchored if it is in close
proximity to an anchored retail property.
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MORTGAGE LOAN HISTORY
All of the Mortgage Loans will be acquired on the Closing Date by the
Depositor from the Mortgage Loan Sellers. Wachovia Bank, National Association
(as successor by merger to First Union National Bank), in its capacity as a
Mortgage Loan Seller, originated or acquired 58 of the Mortgage Loans to be
included in the Trust Fund representing 44.9% of the Cut-Off Date Pool Balance.
Greenwich Capital Financial Products, Inc. ("Greenwich") originated or acquired
42 of the Mortgage Loans to be included in the Trust Fund representing 28.7% of
the Cut-Off Date Pool Balance. Nomura Credit & Capital, Inc. ("Nomura")
originated or acquired 18 of the Mortgage Loans to be included in the Trust Fund
representing 15.3% of the Cut-Off Date Pool Balance. Artesia Mortgage Capital
Corporation ("Artesia") originated or acquired 38 of the Mortgage Loans to be
included in the Trust Fund representing 11.0% 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).
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
fifty-two (152) of the Mortgage Loans, representing 99.6% 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. Four (4) of the Mortgage Loans,
representing 0.4% 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. Three
(3) of the Mortgage Loans, representing 4.9% of the Cut-Off Date Pool Balance,
have periods during which only interest is due and periods in which principal
and interest are due. None of the Mortgage Loans 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 1
Mortgage Loan, the 10th day of the month and in the case of 18 Mortgage Loans,
the 11th day of the month). No mortgage loan due on the first day of the month
has a grace period that extends payment beyond the 11th day of any calendar
month. All of the Mortgage Loans due on the 11th day of the month do not have a
grace period.
Amortization. One hundred thirty-seven (137) of the Mortgage Loans (the
"Balloon Loans"), representing 87.2% of the Cut-Off Date Pool Balance, provide
for Periodic Payments based on amortization schedules significantly longer than
their respective terms to maturity, in each case with payments on their
respective scheduled maturity dates of principal amounts outstanding (each such
amount, together with the corresponding payment of interest, a "Balloon
Payment"). Eight (8) of the Mortgage Loans (the "Fully Amortizing Loans"),
representing 3.9% of the Cut-Off Date Pool Balance, fully or substantially
amortize through their respective remaining terms to maturity. Eleven (11) of
the Mortgage Loans (the "ARD Loans"), representing 8.9% of the Cut-Off Date Pool
Balance, provide that if the unamortized principal amount thereof is not repaid
on a date set forth in the related Mortgage Note (the "Anticipated Repayment
Date"), the Mortgage Loan will accrue additional interest (the "Additional
Interest") at the rate set forth therein and the borrower will be required to
apply excess monthly cash flow (the "Excess Cash Flow") generated by the
Mortgaged Property (as determined in the related loan documents) to the
repayment of principal outstanding on the Mortgage Loan. On or before the
Anticipated Repayment Date, the ARD Loans generally require the related borrower
to enter into a cash management agreement whereby all Excess Cash Flow will be
deposited directly into a lockbox account.
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Any amount received in respect of Additional Interest will be distributed to the
holders of the Class Z-I, Class Z-II and Class Z-III 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.
Prepayment Provisions. As of the Cut-Off Date, all of the Mortgage Loans
restrict or prohibit voluntary principal prepayment. In general, the Mortgage
Loans either (i) prohibit voluntary prepayment of principal until a date
specified in the related Mortgage Note, but permit defeasance after a date
specified in the related Mortgage Note for most of the remaining term (127
Mortgage Loans, or 85.2% of the Cut-Off Date Pool Balance), or (ii) prohibit
voluntary prepayment 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) (28 Mortgage Loans, or 12.4% of the Cut-Off
Date Pool Balance), or (iii) impose a Yield Maintenance Charge until a date
specified in the related Mortgage Note and then permit defeasance for most of
the remaining term (1 Mortgage Loan, or 2.4% of the Cut-Off Date Pool Balance);
provided that, for purposes of each of the foregoing, "remaining term" refers to
either the remaining term to maturity or the Anticipated Repayment Date, as
applicable, of the related Mortgage Loan. See "--Additional Mortgage Loan
Information" in this Prospectus Supplement. Prepayment Premiums and Yield
Maintenance Charges, if and to the extent collected, will be distributed as
described 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.
One (1) Mortgage Loan (loan number 11), representing 1.6% of the Cut-Off
Date Pool Balance, provides that if the related Mortgaged Property is sold, and
the related Mortgage Loan assumed, on or before March 11, 2003, the purchase
price with respect to such sale must satisfy an 80% loan-to-value ratio
immediately following such sale (it being assumed that the purchase price equals
the value of the related Mortgaged Property). If the ratio exceeds 80%, the
related borrower must effectuate a principal paydown that will allow the 80%
threshold to be satisfied. If the paydown amount exceeds $1,000,000, the related
borrower is not permitted to undertake the transfer. No prepayment penalty is
required in connection with the principal paydown. In the event of such
prepayment, the Master Servicer will not be obligated to pay any Prepayment
Interest Shortfall associated therewith.
Certain state laws limit the amounts that a lender may collect from a
borrower as an additional charge in connection with the prepayment of a mortgage
loan. The Mortgage Loans generally do not require the payment of Prepayment
Premiums or Yield Maintenance Charges in connection with a prepayment, in whole
or in part, of the related Mortgage Loan as a result of or in connection with a
total casualty or condemnation. Furthermore, the enforceability, under the laws
of a number of states, of provisions providing for payments comparable to the
Prepayment Premiums and/or Yield Maintenance Charges upon an involuntary
prepayment is unclear. No assurance can be given that, at the time a Prepayment
Premium or Yield Maintenance Charge is required to be made on a Mortgage Loan in
connection with an involuntary prepayment, any obligation to pay such Prepayment
Premium or Yield Maintenance Charge will be enforceable under applicable state
law.
The Mortgage Loans included in the trust fund (other than the Nomura
Mortgage Loans) provide that, in the event of a partial prepayment of such
Mortgage Loan due to the receipt of insurance proceeds or a condemnation award
in connection with a casualty or condemnation, the monthly debt service payment
of such Mortgage Loan will remain unchanged; however, the Nomura Mortgage Loans
included in the trust fund provide that the monthly debt service payment will be
reduced in order to amortize such Mortgage Loan over the remaining amortization
term. See "RISK FACTORS--Prepayment Will Affect Your Yield."
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One hundred twenty-eight (128) of the Mortgage Loans, or 87.6% 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 (except with respect to the Early Defeasance Loan), 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. Mortgage Loans secured by more than one
Mortgaged Property which provide for partial defeasance generally require that
(i) prior to the release of a related Mortgaged Property, a specified percentage
(generally 125%) of the allocated loan amount for such Mortgaged Property be
defeased and (ii) that certain debt service coverage ratios and loan-to-value
ratio tests be satisfied with respect to the remaining Mortgaged Properties
after the defeasance. In general, "Defeasance Collateral" is required to consist
of United States government obligations that provide for payments on or prior,
but as close as possible, to all successive Due Dates and the scheduled maturity
date (or the Anticipated Repayment Date in the case of the ARD Loans), with each
such payment being equal to or greater than (with any excess to be returned to
the borrower (in some cases, after the related Mortgage Loan is paid in full))
the Periodic Payment due on such date or (i) in the case of a Balloon Loan on
the scheduled maturity date, the Balloon Payment, or (ii) in the case of an ARD
Loan, the principal balance on its Anticipated Repayment Date. The Pooling and
Servicing Agreement requires the Master Servicer or the Special Servicer to
require each borrower that proposes to prepay its Mortgage Loan to pledge
Defeasance Collateral in lieu of making a prepayment, to the extent the related
Mortgage Loan documents enable the Master Servicer or the Special Servicer, as
applicable, to make such requirement, but in each case subject to certain
conditions, including that the defeasance would not have an adverse effect on
REMIC status of any of the REMICs (accordingly, no defeasance would be required
or permitted prior to the second anniversary of the Closing Date or, in the case
of the Early Defeasance Loan REMICs, the "start-up" date of each such Early
Defeasance Loan REMIC). The cash amount a borrower must expend to purchase, or
deliver to the Master Servicer in order for the Master Servicer to purchase,
such Defeasance Collateral may be in excess of the principal balance of the
related Mortgage Loan. There can be no assurances that a court would not
interpret such portion of the cash amount that exceeds the principal balance as
a form of prepayment consideration and would not take it into account for usury
purposes. In some states some forms of prepayment consideration are
unenforceable.
One (1) of the Mortgage Loans (the "Early Defeasance Loan"), representing
1.2% of the Cut-Off Date Pool Balance, permits the related borrower to defease
the related Mortgage Loan prior to the second anniversary of the Closing Date.
The Early Defeasance Loan is indicated as loan number 19 on Annex A to this
Prospectus Supplement. The Early Defeasance Loan will constitute the primary
asset of a single loan REMIC (an "Early Defeasance Loan REMIC").
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. One (1) Mortgage
Loan (loan number 136), representing 0.2% of the Cut-Off Date Pool Balance,
provides that the borrower under certain circumstances may incur additional
unsecured indebtedness other than in the ordinary course of business and without
lender consent. In addition, in the case of those Mortgage Loans which require
or allow letters of credit to be posted by the related borrowers as additional
security for such Mortgage Loans, in lieu of reserves or otherwise, the related
borrower may be obligated to pay fees and expenses associated with the letter of
credit and/or to reimburse the letter of credit issuer or others in the event of
a draw upon the letter of credit by the lender. See "--Due-On-Sale and Due-On-
Encumbrance Provisions" below.
With respect to 2 Mortgage Loans (loan numbers 1 and 18), representing 4.2%
of the Cut-Off Date Pool Balance, the related Mortgage Loan documents provide
that, under certain circumstances, the entities with a controlling ownership
interest in the borrower may pledge their interests as security for debt
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financing, generally referred to as mezzanine debt, in the future, subject to
the terms of a subordination and standstill agreement to be entered into in
favor of the lender. In addition, in the case of 5 Mortgage Loans (loan numbers
22, 26, 43, 74 and 92), representing 3.8% of the Cut-Off Date Pool Balance, the
ownership interests of the direct or indirect owner of the related borrowers of
such Mortgage Loans have been pledged as security for mezzanine debt subject to
the terms of a subordination and standstill agreement entered into in favor of
the lender. Such Mortgage Loans are subject to an intercreditor agreement which
provides, among other things, that the mezzanine lender may cure a borrower
default or purchase the related Mortgage Loan to the extent such Mortgage Loan
is in default. See "RISK FACTORS -- Some Mortgaged Properties May Be Encumbered
by Subordinated Debt Which May Delay Foreclosure" in this Prospectus Supplement.
In addition, 14 Mortgage Loans included in the trust fund as of the Cut-Off Date
(loan numbers 113, 124, 126, 137, 142, 143, 148, 149, 150, 151, 152, 153, 154,
and 156), representing 1.7% of the Cut-Off Date Pool Balance, do not prohibit
the related borrower from incurring additional unsecured debt or an owner of an
interest in the related borrower from pledging its ownership interest in the
related borrower as security for mezzanine debt because the related borrower is
not required by either the mortgage loan documents or related organizational
documents to be a special purpose entity. Further, certain of the Mortgage Loans
included in the trust fund do not prohibit limited partners or other owners of
non-controlling interests in the related borrower from pledging their interests
in the borrower as security for mezzanine debt. See "RISK FACTORS--Some
Mortgaged Properties May Be Encumbered by Subordinated Debt Which May Delay
Foreclosure" in this Prospectus Supplement.
In addition, with respect to the AB Mortgage Loans, the related Mortgaged
Property also secures the lien of the applicable Companion Loan. See "--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 therefore consider all of the Mortgage Loans to be nonrecourse.
Due-On-Sale and Due-On-Encumbrance Provisions. Substantially all of the
Mortgages contain "due-on-sale" and "due-on-encumbrance" clauses that, in
general, permit the holder of the Mortgage to accelerate the maturity of the
related Mortgage Loan if the borrower sells or otherwise transfers or encumbers
the related Mortgaged Property or prohibit the borrower from doing so without
the consent of the holder of the Mortgage. However, certain of the Mortgage
Loans 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.
Cross-Default and Cross-Collateralization of Certain Mortgage Loans;
Certain Multi-Property Mortgage Loans. Two (2) groups of Mortgage Loans,
representing 5.4% of the Cut-Off Date Pool Balance ((1) loan numbers 26, 43, 46
and 106; and (2) loan numbers 22, 74, 78 and 92), are groups of Mortgage Loans
that are cross-collateralized and cross-defaulted with the other Mortgage Loans
in such group as indicated in Annex A-5. Although the Mortgage Loans within each
group are cross-collateralized and cross-defaulted with the other mortgage loans
in such group, the Mortgage Loans in one group are not cross-collateralized or
cross-defaulted with the Mortgage Loans in the other group. As of the Closing
Date, no Mortgage Loan, except the 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.
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One (1) Mortgage Loan (loan number 137), representing 0.2% of the Cut-Off
Date Pool Balance, provides that a release of any of 3 parcels, which
collectively comprise the entirety of the related Mortgaged Property, is
permitted at any time after October 1, 2003 upon notice to the holder of the
Mortgage Loan and the satisfaction of the following conditions: (a) the borrower
must make a prepayment of principal under the related Mortgage Note, together
with the applicable prepayment fee, in the applicable allocated loan amount for
the parcel to be released; (b) the holder of the Mortgage Loan must receive an
endorsement to its title insurance policy insuring no loss of priority of the
related Mortgage over the remaining parcels; and (c) the borrower will pay all
out-of-pocket costs in connection with the partial reconveyance, including title
costs and legal fees.
CERTAIN STATE-SPECIFIC CONSIDERATIONS
Forty-five (45) of the Mortgaged Properties, representing 30.3% of the
Cut-Off Date Pool Balance, are located in the State of California. Mortgage
loans in California are generally secured by deeds of trust on the related real
estate. Foreclosure of a deed of trust in California may be accomplished by a
non-judicial trustee's sale under a specific provision in the deed of trust or
by judicial foreclosure. Public notice of either the trustee's sale or the
judgment of foreclosure is given for a statutory period of time after which the
mortgaged real estate may be sold by the trustee, if foreclosed pursuant to the
trustee's power of sale, or by court appointed sheriff under a judicial
foreclosure. Following a judicial foreclosure sale, the borrower or its
successor in interest may, for a period of up to one year, redeem the property.
California's "one action rule" requires the lender to exhaust the security
afforded under the deed of trust by foreclosure in an attempt to satisfy the
full debt before bringing a personal action (if otherwise permitted) against the
borrower for recovery of the debt, except in certain cases involving
environmentally impaired real property. California case law has held that acts
such as an offset of an unpledged account constitute violations of such
statutes. Violations of such statutes may result in the loss of some or all of
the security under the mortgage loan. Other statutory provisions in California
limit any deficiency judgment (if otherwise permitted) against the borrower
following a foreclosure to the amount by which the indebtedness exceeds the fair
value at the time of the public sale and in no event greater than the difference
between the foreclosure sale price and the amount of the indebtedness. Further,
under California law, once a property has been sold pursuant to a power-of-sale
clause contained in a deed of trust, the lender is precluded from seeking a
deficiency judgment from the borrower or, under certain circumstances,
guarantors. California statutory provisions regarding assignments of rents and
leases require that a lender whose loan is secured by such an assignment must
exercise a remedy with respect to rents as authorized by statute in order to
establish its right to receive the rents after an event of default. Among the
remedies authorized by statute is the lender's right to have a receiver
appointed under certain circumstances.
ASSESSMENTS OF PROPERTY CONDITION
Property Inspections. Generally, 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 value of the
Mortgaged Property as security for the related Mortgage Loan, except in such
cases where adequate reserves have been established.
Appraisals. All of the Mortgaged Properties were appraised by a
state-certified appraiser or an appraiser belonging to the Appraisal Institute
in accordance with the Federal Institutions Reform, Recovery and Enforcement Act
of 1989. The primary purpose of each appraisal was to provide an opinion as to
the market value of the related Mortgaged Property. There can be no assurance
that another appraiser would have arrived at the same opinion of market value.
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
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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 155 of the
Mortgage Loans or approximately 99.5% 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 Mortgage Loan, representing 0.5% of the Cut-Off Date
Pool Balance, which was 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
110% of the licensed engineer's estimated cost of the recommended repairs,
corrections or replacements to assure their completion.
Earthquake Analyses. An architectural and/or engineering consultant
performed an analysis on certain Mortgaged Properties located in areas
considered to be an earthquake risk, which includes California, in order to
evaluate the structural and seismic condition of the property and to assess,
based primarily on statistical information, the maximum probable loss for the
property in an earthquake scenario. The resulting reports concluded that in the
event of an earthquake, 4 Mortgaged Properties securing 4 Mortgage Loans,
representing 1.0% of the Cut-Off Date Pool Balance, are likely to suffer a
probable maximum loss in excess of 20% of the amount of the estimated
replacement cost of the improvements located on the related Mortgaged Property.
Three (3) of the Mortgaged Properties described above, securing 3 Mortgage
Loans, representing 0.9% of the Cut-Off Date Pool Balance, have earthquake
insurance in place, and 1 of the Mortgaged Properties described above, securing
1 Mortgage Loan, representing 0.1% of the Cut-Off Date Pool Balance, does not
have earthquake insurance in place.
AB MORTGAGE LOANS
One (1) of the Mortgage Loans originated by Capital Lease Funding L.P.
("CLF") and acquired by Wachovia Bank, National Association (the "Wachovia AB
Mortgage Loan") is evidenced by one of two notes secured by a single Mortgage
and a single assignment of a lease, with the second companion loan (the
"Wachovia Companion Loan") not being part of the Trust Fund. Such Wachovia AB
Mortgage Loan (loan number 104) has a Cut-Off Date Balance of $3,301,966,
representing 0.3% of the Cut-Off Date Pool Balance. One (1) of the Mortgage
Loans originated by Greenwich Capital Financial Products, Inc. (the "Greenwich
AB Mortgage Loan" and, together with the Wachovia AB Mortgage Loan, the "AB
Mortgage Loans") is evidenced by one of two notes secured by a single Mortgage,
with the second companion loan (the "Greenwich Companion Loan" and, together
with the Wachovia Companion Loan, the "Companion Loans") not being part of the
Trust Fund. The Greenwich AB Mortgage Loan (loan number 4) has a Cut-Off Date
Balance of $22,500,000, representing 2.4% of the Cut-Off Date Pool Balance. No
Companion Loan is part of the Trust Fund. Wachovia Bank, National Association or
one of its affiliates will be the initial holder of the Wachovia Companion Loan,
but may elect to sell such Companion Loan at any time. Greenwich Capital
Financial Products, Inc. or one of its affiliates will be the initial holder of
the Greenwich Companion Loan, but may elect to sell such Companion Loan at any
time. Wachovia Bank, National Association owns an equity interest in CLF and
provides financing to CLF secured by the Wachovia Companion Loan.
With respect to the Wachovia AB Mortgage Loan, under the terms of an
Intercreditor Agreement (the "CLF Intercreditor Agreement"), the holder of the
Wachovia Companion Loan has agreed to subordinate its interest in certain
respects to the Wachovia AB Mortgage Loan, subject to its prior right to receive
proceeds of a claim for accelerated future rent payments payable upon default
under the related lease (a "Defaulted Lease Claim"). The Master Servicer and
Special Servicer will undertake to perform the obligations of the holder of the
Wachovia AB Mortgage Loan under the CLF Intercreditor Agreement. With respect to
the Greenwich AB Mortgage Loan, under the terms of a separate Co-Lender
Agreement
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(the "Greenwich Co-Lender Agreement"), the holder of the Greenwich Companion
Loan has agreed to subordinate its interest in certain respects to the Greenwich
AB Mortgage Loan. The Master Servicer and Special Servicer will undertake to
perform the obligations of the holder of the Greenwich AB Mortgage Loan under
the Greenwich Co-Lender Agreement.
Servicing Provisions of the CLF Intercreditor Agreement. The Master
Servicer and Special Servicer will service and administer the Wachovia AB
Mortgage Loan and its related Wachovia Companion Loan pursuant to the Pooling
and Servicing Agreement and the CLF Intercreditor Agreement for so long as the
Wachovia AB Mortgage Loan is part of the Trust Fund. The Wachovia AB Mortgage
Loan and its related Wachovia Companion Loan are cross-defaulted. However, upon
an event of default which does not constitute a payment default but is limited
to a default in the performance by the borrower of its obligations under the
lease, or the failure to reimburse a servicing advance made to fulfill such
obligations, the Master Servicer will generally be required to make servicing
advances to cure any such borrower default and prevent a default under the
lease, subject to customary standards of recoverability, and will be prohibited
from foreclosing on the Mortgaged Property so long as any such advance, together
with interest thereon, would be recoverable. The Special Servicer is not
restricted by the CLF Intercreditor Agreement in its exercise of remedies for a
payment default or material covenant defaults other than those described in the
preceding sentence. In the event of an acceleration of the Wachovia AB Mortgage
Loan and its related Wachovia Companion Loan after an event of default under the
Wachovia AB Mortgage Loan documents, the holder of the Wachovia Companion Loan
will be entitled to purchase the related Wachovia AB Mortgage Loan from the
Trust Fund for a purchase price equal to the sum of (i) the principal balance of
the Wachovia AB Mortgage Loan, together with accrued and unpaid interest thereon
through the date of purchase, (ii) unreimbursed Advances together with accrued
and unpaid interest thereon and (iii) any other amounts payable under the
Mortgage Loan documents. No prepayment consideration will be payable in
connection with such a purchase of the Wachovia AB Mortgage Loan. Further, the
Special Servicer will not be permitted to amend the Wachovia AB Mortgage Loan or
the Wachovia Companion Loan in a manner materially adverse to the holder of the
Wachovia Companion Loan without the consent of the holder of the Wachovia
Companion Loan. The Controlling Class Representative will be entitled to advise
the Special Servicer with respect to certain matters related to the Wachovia AB
Mortgage Loan and the related Wachovia Companion Loan. See "SERVICING OF THE
MORTGAGE LOANS--The Controlling Class Representative" in this prospectus
supplement.
Servicing Provisions of the Greenwich Co-Lender Agreement. The Master
Servicer and Special Servicer will service and administer the Greenwich AB
Mortgage Loan and the Greenwich Companion Loan pursuant to the Pooling and
Servicing Agreement and the Greenwich Co-Lender Agreement for so long as the
Greenwich AB Mortgage Loan is part of the Trust Fund. In the event of any
default under the Greenwich AB Mortgage Loan or the Greenwich Companion Loan,
the holder of the Greenwich Companion Loan will be entitled to cure such default
prior to the expiration of any grace period set forth in the Greenwich AB
Mortgage Loan documents. In the event that the Greenwich AB Mortgage Loan
becomes specially serviced and a scheduled payment on the Greenwich AB Mortgage
Loan is at least 60 days delinquent, the holder of the Greenwich Companion Loan
will be entitled to purchase the Greenwich AB Mortgage Loan from the Trust Fund
at a price generally equal to the unpaid principal balance of the Greenwich AB
Mortgage Loan, together with all unpaid interest on the Greenwich AB Mortgage
Loan (other than default interest) at the related Mortgage Rate and any Advances
or other fees or expenses allocable to the Greenwich AB Mortgage Loan. No
prepayment consideration will be payable in connection with such a purchase of
the Greenwich AB Mortgage Loan. In addition, if the principal amount of the
Greenwich Companion Loan, less any existing related Appraisal Reduction Amount,
is at least equal to 25% of the original principal amount of the Greenwich
Companion Loan, the holder of the Greenwich Companion Loan will be entitled to
advise and direct the Special Servicer with respect to certain matters,
generally involving foreclosure or material modification of the Greenwich AB
Mortgage Loan or the Greenwich Companion Loan. However, no advice or direction
may require or cause the Special Servicer to violate any provision of the
Pooling and Servicing Agreement, including the Special Servicer's obligation to
act in accordance with the Servicing Standard. See "SERVICING OF THE MORTGAGE
LOANS--The Controlling Class Representative" in this prospectus supplement.
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Application of Payments. Pursuant to the CLF Intercreditor Agreement, to
the extent described below, the right of the holder of the Wachovia Companion
Loan to receive payments with respect to such Wachovia Companion Loan (other
than payments in respect of Defaulted Lease Claims) is subordinated to the
payment rights of the Trust Fund to receive payments with respect to the related
Wachovia AB Mortgage Loan. All payments and proceeds of the Wachovia AB Mortgage
Loan and the Wachovia Companion Loan (including, among other things, regular
payments, insurance proceeds and liquidation proceeds), other than in respect of
Defaulted Lease Claims, whether before or after the occurrence of an event of
default with respect to the Wachovia AB Mortgage Loan, may, after payment or
reimbursement of any Advances, together with interest thereon, and other costs,
fees or expenses related to or allocable to such Wachovia AB Mortgage Loan or
the related Wachovia Companion Loan from liquidation proceeds or from
reimbursements thereof under the terms of such loans, will be paid first to the
Trust Fund, in an amount equal to interest due with respect to the Wachovia AB
Mortgage Loan at the pre-default interest rate thereon; second to the Trust
Fund, in an amount equal to the portion of any scheduled payments of principal
allocable to the Wachovia AB Mortgage Loan (including, following acceleration,
the full principal balance thereof); third, to fund any applicable reserves
under the terms of the Mortgage Loan documents; fourth, to reimburse the Master
Servicer and Special Servicer for any outstanding Advances made by either such
party on such Wachovia AB Mortgage Loan or Wachovia Companion Loan, to the
extent then deemed to be nonrecoverable; fifth, to the holder of the related
Wachovia Companion Loan, in an amount equal to amounts then due with respect to
such Wachovia Companion Loan (including reimbursement of any Advances made by or
on behalf of the holder of the Wachovia Companion Loan, interest due with
respect to such Wachovia Companion Loan at the pre-default interest rate
thereon, and any scheduled payments of principal allocable to such Wachovia
Companion Loan); sixth, sequentially to the Wachovia AB Mortgage Loan and then
the Wachovia Companion Loan, in each case until paid in full, any unscheduled
payments of principal with respect thereto; seventh, to any Prepayment Premiums
or Yield Maintenance Charges (allocated pro rata based on the principal then
prepaid), and seventh, to any default interest, first to the default interest
accrued on the Wachovia AB Mortgage Loan and then default interest accrued on
the Wachovia Companion Loan. Proceeds of Defaulted Lease Claims will be applied
first to payment of amounts due under the Wachovia Companion Loan, and
thereafter will be payable to the Trust Fund. If any excess amount is paid by
the related borrower, and not otherwise applied in accordance with the foregoing
seven clauses, such amount will be paid to the Trust Fund and the holder of the
related Wachovia Companion Loan on a pro rata basis.
Pursuant to the Greenwich Co-Lender Agreement, to the extent described
below, the right of the holder of the Greenwich Companion Loan to receive
payments with respect to such Greenwich Companion Loan is subordinated to the
payment rights of the Trust Fund to receive payments with respect to the
Greenwich AB Mortgage Loan. Prior to the occurrence of an event of default with
respect to the Greenwich AB Mortgage Loan, which is an event of default as
defined in the Greenwich AB Mortgage Loan's related mortgage loan documents (an
"A/B Mortgage Event of Default"), after payment or reimbursement of any
Advances, advance interest or other costs, fees or expenses allocable to the
Greenwich AB Mortgage Loan or the Greenwich Companion Loan to the extent such
amounts may be withdrawn from the Certificate Account (pursuant to the Pooling
and Servicing Agreement), all payments and proceeds (of whatever nature)
received with respect to such Greenwich AB Mortgage Loan and the related
Greenwich Companion Loan will be paid first, to the Trust Fund, in an amount
equal to interest due with respect to the Greenwich AB 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 Greenwich AB Mortgage Loan,
until such Greenwich AB Mortgage Loan has been fully paid; third, after such
Greenwich AB Mortgage Loan has been paid in full, after payments or
reimbursements of any Advances, to the holder of the related Greenwich Companion
Loan, in an amount equal to interest due with respect to such Greenwich
Companion Loan; fourth, to the holder of the Greenwich Companion Loan in an
amount equal to the portion of any scheduled or unscheduled payments of
principal allocable to such Greenwich Companion Loan; fifth, on a pro rata
basis, to the Trust Fund and the holder of the Greenwich Companion Loan, any
Yield Maintenance Charge attributable to the Greenwich AB Mortgage Loan or its
related Companion Loan, to the extent actually paid.
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Following the occurrence and during the continuance of an A/B Mortgage
Event of Default with respect to the Greenwich AB Mortgage Loan, and subject to
the holder of the Greenwich Companion Loan's right to purchase the Greenwich AB
Mortgage Loan from the Trust Fund, after payment or reimbursement of any
Advances, advance interest or other costs, fees or expenses related to or
allocable to the Greenwich AB Mortgage Loan or the related Greenwich Companion
Loan to the extent such amounts may be withdrawn from the Certificate Account
(pursuant to the Pooling and Servicing Agreement), all payments and proceeds (of
whatever nature) on such Greenwich Companion Loan will be subordinated to all
payments due on the related Greenwich AB Mortgage Loan and the amounts with
respect to such Greenwich AB Mortgage Loan and Companion Loan will be paid
first, to the Trust Fund, in an amount equal to interest due with respect to
such Greenwich AB Mortgage Loan (other than default interest); second, to the
Trust Fund, in an amount equal to the principal balance of such Greenwich AB
Mortgage Loan until paid in full; third, to the holder of the related Greenwich
Companion Loan, in an amount equal to interest due with respect to such
Greenwich Companion Loan (other than default interest); fourth, to the holder of
the related Greenwich Companion Loan, in an amount equal to the principal
balance of such Greenwich Companion Loan until paid in full; fifth, on a pro
rata basis, to the Trust Fund and the holder of the Greenwich Companion Loan,
any Yield Maintenance Charge attributable to such AB Mortgage Loan or its
related Companion Loan, to the extent actually paid; sixth, any default interest
in excess of interest paid in accordance with clauses first and third above,
first, to the Trust Fund, at the default rate specified in the related note, and
then to the holder of the Greenwich Companion Loan, any default interest at the
default rate specified in the related note; and seventh, if any excess amount is
paid by the related borrower, and not otherwise applied in accordance with the
foregoing six clauses, such amount will be paid to the Trust Fund and the holder
of the related Greenwich Companion Loan on a pro rata basis.
Application of Amounts Paid to Trust Fund. On or before each Distribution
Date, amounts payable to the Trust Fund as holder of any AB Mortgage Loan
pursuant to the CLF Intercreditor Agreement or the Greenwich Co-Lender Agreement
will be included in the Available Distribution Amount for such Distribution Date
to the extent described in this prospectus supplement and amounts payable to the
holder of the related Companion Loan will be distributed to the holder net of
fees and expenses on such Companion Loan.
ADDITIONAL MORTGAGE LOAN INFORMATION
The Mortgage Pool. For a detailed presentation of certain of the
characteristics of the Mortgage Loans and the Mortgaged Properties, on an
individual basis, see Annexes A-1, A-2, A-3, A-4 and A-5 to this Prospectus
Supplement. For purposes of numerical and statistical information set forth in
this Prospectus Supplement and Annexes A-1, A-2, A-3, A-4 and A-5, such
numerical and statistical information excludes any Companion 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."
In the schedule and tables set forth in Annexes A-1, A-2, A-3, A-4 and A-5
to this Prospectus Supplement, cross-collateralized Mortgage Loans are not
grouped together; instead, references are made under the heading
"Cross-Collateralized Group" with respect to the other Mortgage Loans with which
they are cross-collateralized.
Each of the following tables sets forth certain characteristics of the
Mortgage Pool presented, where applicable, as of the Cut-Off Date. For purposes
of the tables and Annexes A-1, A-2, A-3, A-4 and A-5:
(i) References to "DSC Ratio" and "DSCR" are references to debt
service coverage ratios. Debt service coverage ratios are used by income
property lenders to measure the ratio of (a) cash currently generated by a
property that is available for debt service (that is, cash that remains
after average cost of non-capital expenses of operation, tenant
improvements, leasing commissions and replacement reserves during the term
of the Mortgage Loan) to (b) required debt service payments. However, debt
service coverage ratios only measure the current, or recent, ability of a
property to service mortgage debt. The DSC Ratio for any Mortgage Loan is
the ratio of "Net Cash Flow"
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produced by the related Mortgaged Property to the annualized amount of debt
service that will be payable under that Mortgage Loan commencing after the
origination date. The Net Cash Flow for a Mortgaged Property is the "net
cash flow" of such Mortgaged Property as set forth in, or determined by the
applicable Mortgage Loan Seller on the basis of, Mortgaged Property
operating statements, generally unaudited, and certified rent rolls (as
applicable) supplied by the related borrower in the case of multifamily,
mixed use, retail, mobile home park, industrial, residential health care,
self-storage and office properties (each a "Rental Property"); provided,
however, for purposes of calculating the DSC Ratios and DSCR, provided
herein (i) with respect to 3 Mortgage Loans (loan numbers 2, 21 and 32),
representing 4.9% 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 1 of the Mortgage
Loans (loan number 21) (the "LOC Loan"), representing 1.1% of the Cut-Off
Date Pool Balance, the debt service was calculated after reducing the
principal balance of the Mortgage Loan by amounts available for payment of
debt service under a letter of credit pledged as additional collateral to
secure such Mortgage Loan (however, such letter 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
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; provided, however, with respect to 1 Mortgage Loan (loan
number 19), representing 1.2% of the Cut-Off Date Pool Balance, the related
Mortgage Loan Seller determined gross receipts based on the daily rates
S-88
achieved during the prior annual reporting period. In the case of
residential health care facilities, receipts were based on historical
occupancy levels, historical operating revenues and the then current
occupancy rates. Occupancy rates for the private health care facilities
were generally within the then current market ranges, and vacancy levels
were generally a minimum of 5.0%. In general, any non-recurring items and
non-property related revenue were eliminated from the calculation except in
the case of residential health care facilities.
In determining the "expense" component of Net Cash Flow for each
Mortgaged Property, the Mortgage Loan Sellers generally relied on rolling
12-month operating statements and/or full-year or year-to-date financial
statements supplied by the related borrower, except that (a) if tax or
insurance expense information more current than that reflected in the
financial statements was available, the newer information was used, (b)
property management fees were generally assumed to be 3.0% to 7.0% of
effective gross revenue (except with respect to full service hospitality
properties, where a minimum of 3.5% of gross receipts was assumed, with
respect to limited service hospitality properties, where a minimum of 4.0%
of gross receipts was assumed, and with respect to single tenant
properties, where fees as low as 3.0% of effective gross receipts were
assumed), (c) assumptions were made with respect to reserves for leasing
commissions, tenant improvement expenses and capital expenditures and (d)
expenses were assumed to include annual replacement reserves. See
"--Underwriting Standards--Escrow Requirements--Replacement Reserves" in
this Prospectus Supplement. In addition, in some instances, the Mortgage
Loan Sellers recharacterized as capital expenditures those items reported
by borrowers as operating expenses (thus increasing "net cash flow") where
the Mortgage Loan Sellers determined appropriate.
The borrowers' financial information used to determine Net Cash Flow
was in most cases borrower certified, but unaudited, and neither the
Mortgage Loan Sellers nor the Depositor verified their accuracy.
(ii) References to "Cut-Off Date LTV" and "Cut-Off Date LTV Ratio" are
references to the ratio, expressed as a percentage, of the Cut-Off Date
Balance of a Mortgage Loan to the appraised 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 the
LOC Loan, 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; provided that, with respect to the LOC Loan, the principal
balance at maturity was reduced by the amounts available under the
applicable letter of credit serving as additional collateral for such
Mortgage Loan.
(iv) References to "Loan per Sq. Ft., Unit, Bed, Pad or Room" are, for
each Mortgage Loan secured by a lien on a multifamily property (including a
mobile home park property), hospitality property or assisted living
facility or other residential healthcare property, respectively, references
to the Cut-Off Date Balance of such Mortgage Loan divided by the number of
dwelling units, pads, guest rooms or beds, respectively that the related
Mortgaged Property comprises, and, for each Mortgage Loan secured by a lien
on a retail, industrial/warehouse, self storage or office property,
references to the Cut-Off Date Balance of such Mortgage Loan divided by the
net rentable square foot area of the related Mortgaged Property.
(v) References to "Year Built" are references to the year that a
Mortgaged Property was originally constructed or substantially renovated.
With respect to any Mortgaged Property which was constructed in phases, the
"Year Built" refers to the year that the first phase was originally
constructed.
S-89
(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) 0.00268%, which percentage represents the trustee fee rate
with respect to each Mortgage Loan. The Administrative Cost Rate for each
Mortgage Loan is set forth on Annex A-1 hereto.
(ix) References to "Remaining Term to Maturity" represent, with
respect to each Mortgage Loan, the number of months remaining from the
Cut-Off Date to the stated maturity date of such Mortgage Loan (or the
remaining number of months to the Anticipated Repayment Date with respect
to each ARD Loan).
(x) References to "Remaining Amortization Term" represent, with
respect to each Mortgage Loan, the number of months remaining from the
later of the Cut-Off Date and the end of any interest-only period, if any,
to the month in which such Mortgage Loan would fully or substantially
amortize in accordance with such loan's amortization schedule without
regard to any Balloon Payment, if any, due on such Mortgage Loan.
(xi) References to "L ( )" or "Lockout" or "Lockout Period"
represent, with respect to each Mortgage Loan, the period during which
prepayments of principal are prohibited and no substitution of Defeasance
Collateral is permitted. The number indicated in the parentheses indicates
the duration in months 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 (in months) during which the
related holder of the Mortgage has the right to require the related
borrower, in lieu of a principal prepayment, to pledge to such holder
Defeasance Collateral.
(xiii) References to "Occupancy Percentage" are, with respect to any
Mortgaged Property, references as of the most recently available rent rolls
to (a) in the case of multifamily properties, mobile home park properties
and assisted living facilities, the percentage of units rented, (b) in the
case of office and retail properties, the percentage of the net rentable
square footage rented, and (c) in the case of self-storage facilities,
either the percentage of the net rentable square footage rented or the
percentage of units rented (depending on borrower reporting), and is
exclusive of hospitality properties.
(xiv) References to "Original Term to Maturity" are references to the
term from origination to maturity for each Mortgage Loan (or the term from
origination to the Anticipated Repayment Date with respect to each ARD
Loan).
(xv) References to "NA" indicate that with respect to a particular
category of data, that such data is not applicable.
(xvi) References to "NAV" indicate that, with respect to a particular
category of data, such data is not available.
(xvii) References to "Capital Imp. Reserve" are references to funded
reserves escrowed for repairs, replacements and corrections of issues
outlined in the engineering reports.
S-90
(xviii) References to "Replacement Reserve" are references to funded
reserves escrowed for ongoing items such as repairs and replacements,
including, in the case of hospitality properties, reserves for furniture,
fixtures and equipment. In certain cases, however, the subject reserve will
be subject to a maximum amount, and once such maximum amount is reached,
such reserve will not thereafter be funded, except, in some such cases, to
the extent it is drawn upon.
(xix) References to "TI/LC Reserve" are references to funded reserves
escrowed for tenant improvement allowances and leasing commissions. In
certain cases, however, the subject reserve will be subject to a maximum
amount, and once such maximum amount is reached, such reserve will not
thereafter be funded, except, in some such cases, to the extent it is drawn
upon.
(xx) The sum in any column of any of the following tables may not
equal the indicated total due to rounding.
S-91
MORTGAGED PROPERTIES BY PROPERTY TYPE FOR ALL MORTGAGE LOANS(1)
<Table>
<Caption>
% BY
CUT-OFF WTD. AVG.
NUMBER NUMBER OF AGGREGATE DATE AVERAGE HIGHEST CUT-OFF
OF MORTGAGED CUT-OFF DATE POOL CUT-OFF DATE CUT-OFF DATE DATE
PROPERTY TYPE LOANS PROPERTIES BALANCE BALANCE BALANCE BALANCE LTV RATIO
- ------------- -------- ---------- ------------ --------- ------------ ------------ ------------
Retail......................... 55 55 $317,589,775 33.4% $ 5,744,360 $20,112,903 72.2%
Retail -- Anchored............ 33 33 228,099,907 24.0 $ 6,912,118 $20,112,903 73.2%
Retail -- Unanchored.......... 13 13 57,514,588 6.1 $ 4,424,199 $ 9,375,938 68.6%
Retail -- Shadow Anchored(5).. 9 9 31,975,280 3.4 $ 3,552,809 $ 6,127,920 71.7%
Multifamily.................... 41 45 270,788,341 28.5 $ 6,017,519 $27,000,000 73.4%
Office......................... 26 26 185,636,088 19.5 $ 7,139,850 $28,477,855 72.0%
Industrial..................... 16 24 78,223,230 8.2 $ 3,259,301 $15,622,494 70.8%
Mobile Home Park............... 7 7 40,252,000 4.2 $ 5,750,286 $12,949,872 70.6%
Mixed Use...................... 8 8 29,283,570 3.1 $ 3,660,446 $15,005,561 68.3%
Hospitality.................... 2 2 21,269,445 2.2 $10,634,723 $11,287,504 53.6%
Self Storage................... 1 1 7,000,000 0.7 $ 7,000,000 $ 7,000,000 60.5%
--- --- ------------ -----
156 168 $950,042,449 100.0% $ 5,655,015 $28,477,855 71.7%
=== === ============ =====
<Caption>
WTD. AVG.
STATED
WTD. AVG. REMAINING
LTV RATIO TERM TO WTD. AVG. MINIMUM MAXIMUM WTD. AVG. WTD. AVG
AT MATURITY DSC DSC DSC OCCUPANCY MORTGAGE
PROPERTY TYPE MATURITY(2) (MOS)(2) RATIO RATIO RATIO RATE(3)(4) RATE
- ------------- ----------- --------- --------- ------- ------- ---------- --------
Retail......................... 62.9% 114 1.34x 1.20x 2.15x 96.8% 7.330%
Retail -- Anchored............ 63.8% 116 1.33x 1.20x 2.15x 97.4% 7.322%
Retail -- Unanchored.......... 59.9% 106 1.40x 1.25x 1.48x 94.1% 7.310%
Retail -- Shadow Anchored(5).. 62.3% 116 1.34x 1.24x 1.65x 97.7% 7.429%
Multifamily.................... 65.0% 107 1.32x 1.20x 2.20x 95.9% 7.071%
Office......................... 62.9% 106 1.31x 1.22x 1.44x 94.2% 7.407%
Industrial..................... 38.2% 155 1.34x 1.25x 1.79x 96.6% 7.633%
Mobile Home Park............... 61.6% 111 1.27x 1.21x 1.83x 93.9% 7.176%
Mixed Use...................... 60.0% 110 1.28x 1.23x 1.64x 99.8% 7.512%
Hospitality.................... 43.2% 103 1.54x 1.36x 1.74x 0.0% 8.121%
Self Storage................... 49.0% 120 1.56x 1.56x 1.56x 83.7% 7.360%
60.8% 113 1.33X 1.20X 2.20X 95.9% 7.313%
</Table>
- ------------------
(1) Because this table presents information relating to the mortgaged
properties and not the mortgage loans, the information for mortgage loans
secured by more than one mortgaged property is based on allocated amounts
(allocating the mortgage loan principal balance to each of those
properties by the appraised values of the mortgaged properties).
(2) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
(3) Occupancy Rates were calculated based upon rent rolls made available to
the applicable Mortgage Loan Seller by the related borrowers as of the
rent roll date set forth on Annex A-1 to this Prospectus Supplement
without reference to hospitality properties.
(4) Excludes 2 Mortgage Loans secured by hospitality properties, representing
2.2% of the Cut-Off Date Pool Balance.
(5) A Mortgaged Property is considered "shadow anchored" if it is in close
proximity to an anchored property.
S-92
RANGE OF CUT-OFF DATE BALANCES FOR ALL MORTGAGE LOANS
<Table>
<Caption>
WTD. AVG.
AGGREGATE % BY AVERAGE HIGHEST CUT-OFF DATE
RANGE OF CUT-OFF NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE LTV
DATE BALANCE($) LOANS BALANCE POOL BALANCE BALANCE BALANCE RATIO
- ---------------- --------- ------------ ------------ ------------ ------------ ------------
<2,000,000............. 28 $ 33,603,560 3.5% $ 1,200,127 $ 2,000,000 67.1%
2,000,001- 3,000,000............. 21 51,587,988 5.4 $ 2,456,571 $ 2,988,770 71.8%
3,000,001- 4,000,000............. 12 41,671,057 4.4 $ 3,472,588 $ 3,881,113 71.7%
4,000,001- 5,000,000............. 22 99,698,556 10.5 $ 4,531,753 $ 4,987,201 73.8%
5,000,001- 6,000,000............. 13 71,736,828 7.6 $ 5,518,218 $ 6,000,000 70.0%
6,000,001- 7,000,000............. 14 90,678,721 9.5 $ 6,477,052 $ 7,000,000 71.4%
7,000,001- 8,000,000............. 10 76,894,660 8.1 $ 7,689,466 $ 7,994,478 70.6%
8,000,001- 9,000,000............. 7 59,822,252 6.3 $ 8,546,036 $ 8,966,974 69.0%
9,000,001-10,000,000............. 7 66,500,455 7.0 $ 9,500,065 $ 9,991,134 64.0%
10,000,001-15,000,000............. 10 116,716,998 12.3 $11,671,700 $12,949,872 74.1%
15,000,001-20,000,000............. 7 117,540,616 12.4 $16,791,517 $18,973,729 73.5%
20,000,001-25,000,000............. 2 42,612,903 4.5 $21,306,452 $22,500,000 69.1%
25,000,001-30,000,000............. 3 80,977,855 8.5 $26,992,618 $28,477,855 77.2%
--- ------------ -----
156 $950,042,449 100.0% $ 6,090,016 $28,477,855 71.7%
=== ============ =====
<Caption>
WTD. AVG.
STATED
WTD. AVG. REMAINING
LTV TERM TO WTD. AVG. WTD. AVG.
RANGE OF CUT-OFF RATIO AT MATURITY DSC MORTGAGE
DATE BALANCE($) MATURITY(1) (MOS)(1) RATIO RATE
- ---------------- -------------- --------- --------- ---------
<2,000,000............. 54.4% 115 1.37x 7.621%
2,000,001- 3,000,000............. 58.3% 119 1.30x 7.425%
3,000,001- 4,000,000............. 62.6% 112 1.31x 7.417%
4,000,001- 5,000,000............. 64.9% 103 1.29x 7.150%
5,000,001- 6,000,000............. 60.8% 117 1.37x 7.231%
6,000,001- 7,000,000............. 62.2% 116 1.34x 7.245%
7,000,001- 8,000,000............. 56.8% 124 1.33x 7.305%
8,000,001- 9,000,000............. 61.9% 109 1.47x 7.128%
9,000,001-10,000,000............. 46.4% 131 1.47x 7.347%
10,000,001-15,000,000............. 65.2% 105 1.27x 7.317%
15,000,001-20,000,000............. 57.0% 131 1.30x 7.362%
20,000,001-25,000,000............. 63.7% 80 1.36x 7.827%
25,000,001-30,000,000............. 70.0% 99 1.24x 7.181%
60.8% 113 1.33X 7.313%
</Table>
- ------------------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-93
MORTGAGED PROPERTIES BY STATE FOR
ALL MORTGAGE LOANS(1)
<Table>
<Caption>
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 BALANCE POOL BALANCE BALANCE BALANCE LTV RATIO
- ----- ---------- ------------ ------------ ------------ ------------ ------------
CA..................................... 45 $287,737,516 30.3% $ 6,394,167 $27,000,000 70.6%
Southern(3).......................... 32 188,006,938 19.8 $ 5,875,217 $12,664,377 71.5%
Northern(3).......................... 13 99,730,578 10.5 $ 7,671,583 $27,000,000 68.7%
FL..................................... 17 134,019,049 14.1 $ 7,883,473 $28,477,855 73.8%
AZ..................................... 10 63,709,574 6.7 $ 6,370,957 $15,005,561 71.7%
TX..................................... 21 55,922,689 5.9 $ 2,662,985 $11,640,000 75.0%
CO..................................... 4 32,019,052 3.4 $ 8,004,763 $18,973,729 77.8%
NV..................................... 8 29,652,519 3.1 $ 3,706,565 $ 6,683,367 71.7%
CT..................................... 2 28,162,141 3.0 $14,081,070 $22,500,000 66.3%
NY..................................... 3 26,329,988 2.8 $ 8,776,663 $17,973,862 70.7%
MA..................................... 4 25,696,216 2.7 $ 6,424,054 $17,180,865 66.9%
NC..................................... 3 23,975,734 2.5 $ 7,991,911 $ 8,569,545 71.2%
DC..................................... 3 22,899,155 2.4 $ 7,633,052 $10,734,952 75.0%
WA..................................... 12 22,896,669 2.4 $ 1,908,056 $ 5,263,796 72.0%
TN..................................... 2 18,122,494 1.9 $ 9,061,247 $15,622,494 70.5%
ME..................................... 1 17,456,038 1.8 $17,456,038 $17,456,038 79.4%
MI..................................... 2 16,161,273 1.7 $ 8,080,637 $ 9,283,433 72.5%
UT..................................... 3 15,887,195 1.7 $ 5,295,732 $ 8,700,000 59.0%
AL..................................... 1 15,328,247 1.6 $15,328,247 $15,328,247 79.0%
PA..................................... 2 15,114,245 1.6 $ 7,557,123 $10,644,000 79.7%
MN..................................... 3 12,428,990 1.3 $ 4,142,997 $ 5,500,000 71.7%
OK..................................... 1 12,090,839 1.3 $12,090,839 $12,090,839 78.5%
MD..................................... 2 10,383,274 1.1 $ 5,191,637 $ 7,000,000 65.3%
MO..................................... 3 10,163,457 1.1 $ 3,387,819 $ 6,577,077 67.8%
LA..................................... 1 9,981,941 1.1 $ 9,981,941 $ 9,981,941 39.9%
IA..................................... 2 8,654,342 0.9 $ 4,327,171 $ 5,433,830 70.4%
OR..................................... 2 7,649,869 0.8 $ 3,824,934 $ 5,534,242 64.3%
VA..................................... 2 6,799,945 0.7 $ 3,399,973 $ 4,596,701 73.9%
GA..................................... 2 6,664,517 0.7 $ 3,332,259 $ 4,500,000 79.1%
RI..................................... 1 3,301,966 0.3 $ 3,301,966 $ 3,301,966 73.4%
IL..................................... 1 2,917,918 0.3 $ 2,917,918 $ 2,917,918 79.9%
SC..................................... 1 2,456,942 0.3 $ 2,456,942 $ 2,456,942 78.4%
MS..................................... 1 2,449,627 0.3 $ 2,449,627 $ 2,449,627 79.8%
KS..................................... 1 1,023,270 0.1 $ 1,023,270 $ 1,023,270 64.0%
ND..................................... 1 993,395 0.1 $ 993,395 $ 993,395 79.5%
NJ..................................... 1 992,365 0.1 $ 992,365 $ 992,365 66.2%
--- ------------ -----
168 $950,042,449 100.0% $ 5,665,015 $28,477,855 71.7%
=== ============ =====
<Caption>
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..................................... 62.3% 104 1.35x 7.248%
Southern(3).......................... 62.7% 108 1.34x 7.302%
Northern(3).......................... 61.4% 98 1.37x 7.145%
FL..................................... 64.6% 114 1.31x 7.254%
AZ..................................... 62.7% 113 1.26x 7.258%
TX..................................... 66.9% 96 1.32x 7.190%
CO..................................... 68.5% 116 1.30x 7.298%
NV..................................... 63.5% 113 1.29x 7.482%
CT..................................... 62.2% 68 1.41x 8.027%
NY..................................... 60.2% 117 1.35x 7.019%
MA..................................... 59.2% 114 1.28x 7.481%
NC..................................... 45.1% 153 1.32x 7.129%
DC..................................... 65.3% 117 1.24x 7.382%
WA..................................... 62.6% 114 1.29x 7.284%
TN..................................... 12.1% 217 1.33x 7.923%
ME..................................... 70.0% 117 1.27x 7.360%
MI..................................... 29.4% 183 1.34x 7.604%
UT..................................... 51.5% 114 1.83x 7.125%
AL..................................... 69.2% 118 1.32x 7.090%
PA..................................... 68.9% 116 1.21x 7.082%
MN..................................... 63.0% 98 1.30x 7.299%
OK..................................... 69.3% 119 1.32x 7.400%
MD..................................... 54.7% 118 1.47x 7.389%
MO..................................... 51.8% 111 1.33x 6.956%
LA..................................... 27.7% 119 1.74x 7.500%
IA..................................... 62.4% 116 1.26x 7.569%
OR..................................... 40.9% 141 1.35x 7.944%
VA..................................... 65.5% 118 1.29x 7.583%
GA..................................... 66.7% 119 1.24x 7.270%
RI..................................... 60.2% 116 1.31x 7.680%
IL..................................... 71.1% 119 1.22x 7.700%
SC..................................... 68.7% 116 1.25x 7.060%
MS..................................... 70.1% 117 1.23x 7.170%
KS..................................... 54.3% 103 1.28x 8.450%
ND..................................... 70.9% 110 1.26x 7.600%
NJ..................................... 56.3% 111 1.32x 8.900%
60.8% 113 1.33X 7.313%
</Table>
- ------------------
(1) Because this table presents information relating to the mortgaged properties
and not the mortgage loans, the information for mortgage loans secured by
more than one mortgaged property is based on allocated loan amounts
(allocating the mortgage loan principal balance to each of those properties
by the appraised values of the mortgaged properties).
(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 San Luis
Obispo County, Kern County and San Bernardino County were included in
Northern California and Mortgaged Properties in or south of such counties
were included in Southern California.
S-94
RANGE OF DSC RATIOS FOR
ALL MORTGAGE LOANS
<Table>
<Caption>
AGGREGATE % BY AVERAGE HIGHEST WTD. AVG.
RANGE OF NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
DSC RATIOS(X) LOANS BALANCE POOL BALANCE BALANCE BALANCE LTV RATIO
- ------------- --------- ------------ ------------ ------------ ------------ ------------
1.20 - 1.24....................... 33 $202,088,668 21.3% $6,123,899 $27,000,000 75.5%
1.25 - 1.29....................... 48 269,332,824 28.3 $5,611,101 $20,112,903 74.3%
1.30 - 1.34....................... 28 200,647,569 21.1 $7,165,985 $28,477,855 73.3%
1.35 - 1.39....................... 15 94,260,715 9.9 $6,284,048 $15,622,494 70.7%
1.40 - 1.44....................... 12 75,991,215 8.0 $6,332,601 $22,500,000 68.9%
1.45 - 1.49....................... 5 34,262,514 3.6 $6,852,503 $ 8,370,995 67.9%
1.50 - 1.54....................... 2 12,817,041 1.3 $6,408,520 $ 9,210,000 60.4%
1.55 - 1.59....................... 3 17,138,323 1.8 $5,712,774 $ 9,493,090 65.1%
1.60 - 1.64....................... 2 6,122,468 0.6 $3,061,234 $ 5,500,000 50.2%
1.65 - 1.69....................... 1 6,000,000 0.6 $6,000,000 $ 6,000,000 60.6%
1.70 - 1.74....................... 1 9,981,941 1.1 $9,981,941 $ 9,981,941 39.9%
1.75 - 1.79....................... 2 7,300,602 0.8 $3,650,301 $ 6,600,000 45.7%
1.80 - 1.84....................... 1 2,221,307 0.2 $2,221,307 $ 2,221,307 43.6%
1.85 - 1.89....................... 1 1,993,572 0.2 $1,993,572 $ 1,993,572 49.4%
2.15 - 2.20....................... 2 9,883,690 1.0 $4,941,845 $ 8,700,000 42.6%
--- ------------ -----
156 $950,042,449 100.0% $6,090,016 $28,477,855 71.7%
=== ============ =====
<Caption>
WTD. AVG.
STATED
WTD. AVG. REMAINING WTD.
LTV TERM TO AVG.
RANGE OF RATIO AT MATURITY WTD. AVG. MORTGAGE
DSC RATIOS(X) MATURITY(1) (MOS)(1) DSC RATIO RATE
- ------------- ----------- --------- --------- --------
1.20 - 1.24....................... 66.5% 106 1.22x 7.266%
1.25 - 1.29....................... 63.7% 118 1.27x 7.366%
1.30 - 1.34....................... 64.4% 108 1.31x 7.212%
1.35 - 1.39....................... 51.5% 126 1.36x 7.442%
1.40 - 1.44....................... 54.3% 109 1.42x 7.544%
1.45 - 1.49....................... 58.7% 113 1.47x 7.055%
1.50 - 1.54....................... 53.0% 118 1.51x 7.224%
1.55 - 1.59....................... 55.7% 118 1.55x 7.508%
1.60 - 1.64....................... 43.2% 116 1.63x 7.060%
1.65 - 1.69....................... 52.9% 120 1.65x 7.000%
1.70 - 1.74....................... 27.7% 119 1.74x 7.500%
1.75 - 1.79....................... 35.4% 128 1.78x 7.333%
1.80 - 1.84....................... 20.5% 116 1.83x 6.980%
1.85 - 1.89....................... 41.7% 117 1.89x 7.020%
2.15 - 2.20....................... 36.2% 133 2.19x 6.863%
60.8% 113 1.33X 7.313%
</Table>
- ------------------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-95
RANGE OF LTV RATIOS
FOR ALL MORTGAGE LOANS
AS OF THE CUT-OFF DATE
<Table>
<Caption>
AGGREGATE % BY AVERAGE MAXIMUM WTD. AVG.
RANGE OF 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
- ------------- --------- ------------ ------------ ------------ ------------ ------------
35.01 - 40.00.................... 3 $ 11,810,864 1.2% $3,936,955 $ 9,981,941 39.5%
40.01 - 50.00.................... 6 20,520,421 2.2 $3,420,070 $ 8,700,000 44.5%
50.01 - 55.00.................... 3 9,941,927 1.0 $3,313,976 $ 5,500,000 52.3%
55.01 - 60.00.................... 5 17,049,584 1.8 $3,409,917 $ 9,210,000 59.5%
60.01 - 65.00.................... 14 100,126,665 10.5 $7,151,905 $22,500,000 63.1%
65.01 - 70.00.................... 24 139,665,979 14.7 $5,819,416 $15,622,494 68.3%
70.01 - 75.00.................... 54 306,086,869 32.2 $5,668,275 $20,112,903 73.1%
75.01 - 80.00.................... 47 344,840,140 36.3 $7,337,024 $28,477,855 78.1%
--- ------------ -----
156 $950,042,449 100.0% $6,090,016 $28,477,855 71.7%
=== ============ =====
<Caption>
WTD. AVG.
STATED
WTD. AVG. REMAINING
LTV TERM TO WTD. AVG.
RANGE OF RATIO AT MATURITY WTD. AVG. MORTGAGE
LTV RATIOS(%) MATURITY(1) (MOS)(1) DSC RATIO RATE
- ------------- ----------- --------- --------- ---------
35.01 - 40.00.................... 25.3% 129 1.77x 7.497%
40.01 - 50.00.................... 37.3% 118 1.96x 7.013%
50.01 - 55.00.................... 40.0% 106 1.49x 7.206%
55.01 - 60.00.................... 46.7% 121 1.47x 7.220%
60.01 - 65.00.................... 55.8% 102 1.43x 7.449%
65.01 - 70.00.................... 50.0% 125 1.30x 7.562%
70.01 - 75.00.................... 62.2% 118 1.31x 7.262%
75.01 - 80.00.................... 69.3% 107 1.27x 7.238%
60.8% 113 1.33X 7.313%
</Table>
- ------------------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-96
RANGE OF LTV RATIOS
FOR ALL MORTGAGE LOANS AS OF THE MATURITY DATE
<Table>
<Caption>
WTD. AVG.
% BY CUT-OFF
RANGE OF AGGREGATE CUT-OFF AVERAGE HIGHEST DATE
MATURITY DATE NUMBER OF CUT-OFF DATE DATE POOL CUT-OFF DATE CUT-OFF DATE LTV
LTV RATIOS(%) LOANS BALANCE BALANCE BALANCE BALANCE RATIO
- ------------- --------- ------------ ------------ ------------ ------------ ---------
0.00- 5.00........................ 8 $ 37,306,077 3.9% $ 4,663,260 $15,622,494 67.2%
20.01-30.00........................ 2 12,203,247 1.3 $ 6,101,624 $ 9,981,941 40.6%
30.01-40.00........................ 5 12,309,629 1.3 $ 2,461,926 $ 6,600,000 47.9%
40.01-50.00........................ 7 33,093,362 3.5 $ 4,727,623 $ 8,700,000 53.7%
50.01-55.00........................ 7 36,342,708 3.8 $ 5,191,815 $ 9,210,000 61.7%
55.01-60.00........................ 19 96,479,411 10.2 $ 5,077,864 $17,180,685 66.4%
60.01-65.00........................ 49 299,162,994 31.5 $ 6,105,367 $22,500,000 71.7%
65.01-70.00........................ 43 313,632,684 33.0 $ 7,293,783 $28,477,855 76.4%
70.01-75.00........................ 13 68,769,281 7.2 $ 5,289,945 $18,973,729 79.1%
75.01-80.00........................ 3 40,743,056 4.3 $13,581,019 $27,000,000 78.7%
--- ------------ -----
156 $950,042,449 100.0% $ 6,090,016 $28,477,855 71.7%
=== ============ =====
<Caption>
WTD. AVG.
STATED
WTD. AVG. REMAINING WTD. WTD.
RANGE OF LTV TERM TO AVG. AVG.
MATURITY DATE RATIO AT MATURITY DSC MORTGAGE
LTV RATIOS(%) MATURITY(1) (MOS)(1) RATIO RATE
- ------------- ----------- --------- ----- --------
0.00- 5.00........................ 2.5% 229 1.38x 7.945%
20.01-30.00........................ 26.4% 118 1.76x 7.405%
30.01-40.00........................ 37.1% 104 1.59x 7.344%
40.01-50.00........................ 45.5% 118 1.70x 7.035%
50.01-55.00........................ 53.0% 117 1.48x 7.182%
55.01-60.00........................ 57.0% 112 1.33x 7.458%
60.01-65.00........................ 62.9% 109 1.32x 7.290%
65.01-70.00........................ 67.6% 112 1.28x 7.299%
70.01-75.00........................ 70.8% 106 1.26x 7.296%
75.01-80.00........................ 75.3% 57 1.24x 7.015%
60.8% 113 1.33X 7.313%
</Table>
- ---------------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-97
RANGE OF MORTGAGE RATES
FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
<Table>
<Caption>
AGGREGATE % BY AVERAGE HIGHEST WTD. AVG.
RANGE OF NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
MORTGAGE RATES (%) LOANS BALANCE POOL BALANCE BALANCE BALANCE LTV RATIO
- ------------------ --------- ------------ ------------ ------------ ------------ ------------
6.500-6.749............................ 9 $ 49,136,080 5.2% $5,459,564 $ 9,991,134 69.9%
6.750-6.999............................ 17 129,225,398 13.6 $7,601,494 $27,000,000 71.8%
7.000-7.249............................ 28 206,207,191 21.7 $7,364,543 $18,973,729 72.8%
7.250-7.499............................ 48 322,974,501 34.0 $6,728,635 $28,477,855 73.4%
7.500-7.749............................ 31 136,410,338 14.4 $4,400,333 $17,180,685 69.2%
7.750-7.999............................ 13 63,540,458 6.7 $4,887,728 $15,622,494 69.7%
8.000-8.249............................ 3 25,270,215 2.7 $8,423,405 $22,500,000 65.1%
8.250-8.499............................ 4 4,511,191 0.5 $1,127,798 $ 2,115,627 64.4%
8.500-8.749............................ 2 11,774,711 1.2 $5,887,356 $11,287,504 65.4%
8.750-8.999............................ 1 992,365 0.1 $ 992,365 $ 992,365 66.2%
--- ------------ -----
156 $950,042,449 100.0% $6,090,016 $28,477,855 71.7%
=== ============ =====
<Caption>
WTD. AVG.
STATED
WTD. AVG. REMAINING WTD.
LTV TERM TO WTD. AVG. AVG.
RANGE OF RATIO AT MATURITY DSC MORTGAGE
MORTGAGE RATES (%) MATURITY(1) (MOS)(1) RATIO RATE
- ------------------ ----------- --------- --------- --------
6.500-6.749............................ 59.5% 117 1.37x 6.620%
6.750-6.999............................ 63.5% 105 1.39x 6.896%
7.000-7.249............................ 64.2% 111 1.31x 7.119%
7.250-7.499............................ 64.4% 110 1.30x 7.338%
7.500-7.749............................ 60.0% 114 1.34x 7.598%
7.750-7.999............................ 32.0% 174 1.31x 7.875%
8.000-8.249............................ 61.7% 61 1.42x 8.219%
8.250-8.499............................ 21.4% 165 1.35x 8.404%
8.500-8.749............................ 56.4% 88 1.36x 8.671%
8.750-8.999............................ 56.3% 111 1.32x 8.900%
60.8% 113 1.33X 7.313%
</Table>
- ------------------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-98
RANGE OF ORIGINAL TERMS TO MATURITY OR ANTICIPATED REPAYMENT DATE
FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
<Table>
<Caption>
RANGE OF ORIGINAL
TERMS TO MATURITY WTD. AVG.
OR ANTICIPATED AGGREGATE % BY AVERAGE HIGHEST CUT-OFF DATE
REPAYMENT DATE NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE LTV
(MONTHS) LOANS BALANCE POOL BALANCE BALANCE BALANCE RATIO
----------------- --------- ------------ ------------ ------------ ------------ ------------
0 - 60......................... 8 $ 89,122,416 9.4% $11,140,302 $27,000,000 73.0%
85 - 108......................... 9 54,254,049 5.7 $ 6,028,228 $10,061,760 72.0%
109 - 120......................... 131 769,359,907 81.0 $ 5,872,976 $28,477,855 71.7%
169 - 180......................... 2 987,340 0.1 $ 493,670 $ 604,265 52.6%
229 - 240......................... 6 36,318,737 3.8 $ 6,053,123 $15,622,494 67.6%
--- ------------ -----
156 $950,042,449 100.0% $ 6,090,016 $28,477,855 71.7%
=== ============ =====
<Caption>
WTD. AVG.
RANGE OF ORIGINAL 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......................... 69.6% 57 1.30x 7.400%
85 - 108......................... 63.7% 91 1.36x 7.253%
109 - 120......................... 62.4% 116 1.33x 7.277%
169 - 180......................... 0.0% 140 1.31x 7.558%
229 - 240......................... 2.6% 231 1.38x 7.956%
60.8% 113 1.33X 7.313%
</Table>
- ------------------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-99
RANGE OF REMAINING TERMS TO MATURITY OR ANTICIPATED REPAYMENT DATE
FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
<Table>
<Caption>
RANGE OF REMAINING
TERMS TO MATURITY WTD. AVG.
OR ANTICIPATED AGGREGATE % BY AVERAGE HIGHEST CUT-OFF DATE
REPAYMENT DATE NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE LTV
(MONTHS) LOANS BALANCE POOL BALANCE BALANCE BALANCE RATIO
- ------------------ --------- ------------ ------------ ------------ ------------ ------------
0- 60........................... 8 $ 89,122,416 9.4% $11,140,302 $27,000,000 73.0%
61- 84........................... 5 4,522,460 0.5 $ 904,492 $ 1,459,812 55.4%
85-108........................... 17 106,779,200 11.2 $ 6,281,129 $20,112,903 71.1%
109-120........................... 118 712,312,297 75.0 $ 6,036,545 $28,477,855 71.9%
121-156........................... 2 987,340 0.1 $ 493,670 $ 604,265 52.6%
193-204........................... 1 700,602 0.1 $ 700,602 $ 700,602 56.1%
205-216........................... 1 2,115,627 0.2 $ 2,115,627 $ 2,115,627 66.7%
229-240........................... 4 33,502,508 3.5 $ 8,375,627 $15,622,494 67.9%
--- ------------ -----
156 $950,042,449 100.0% $ 6,090,016 $28,477,855 71.7%
=== ============ =====
<Caption>
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........................... 69.6% 57 1.30x 7.400%
61- 84........................... 44.2% 76 1.38x 7.712%
85-108........................... 62.8% 96 1.33x 7.488%
109-120........................... 62.5% 117 1.33x 7.241%
121-156........................... 0.0% 140 1.31x 7.558%
193-204........................... 0.0% 204 1.79x 8.400%
205-216........................... 0.0% 207 1.22x 8.400%
229-240........................... 2.8% 233 1.38x 7.918%
60.8% 113 1.33X 7.313%
</Table>
- ------------------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-100
RANGE OF REMAINING AMORTIZATION TERMS
FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
<Table>
<Caption>
% BY
CUT-OFF AVERAGE HIGHEST WTD. AVG.
RANGE OF AGGREGATE DATE CUT-OFF CUT-OFF CUT-OFF
REMAINING AMORTIZATION NUMBER OF CUT-OFF DATE POOL DATE DATE DATE
TERMS(1)(MONTHS) LOANS BALANCE BALANCE BALANCE BALANCE LTV RATIO
- ---------------------- --------- ------------ ------------ ------------ ------------ ------------
133 - 144............................... 2 $ 987,340 0.1% $ 493,670 $ 604,265 52.6%
145 - 180............................... 3 6,663,234 0.7 $ 2,221,078 $ 2,982,115 50.8%
193 - 228............................... 4 3,925,904 0.4 $ 981,476 $ 2,115,627 60.8%
229 - 264............................... 8 45,924,628 4.8 $ 5,740,579 $15,622,494 61.3%
265 - 300............................... 26 114,928,379 12.1 $ 4,420,322 $11,287,504 70.5%
301 - 348............................... 7 76,114,904 8.0 $10,873,558 $22,500,000 69.0%
349 - 360............................... 106 701,498,060 73.8 $ 6,617,906 $28,477,855 73.1%
--- ------------ -----
156 $950,042,449 100.0% $ 6,090,016 $28,477,855 71.7%
=== ============ =====
<Caption>
WTD. AVG.
STATED
WTD. AVG. REMAINING WTD.
RANGE OF LTV TERM TO WTD. AVG. AVG.
REMAINING AMORTIZATION RATIO AT MATURITY DSC MORTGAGE
TERMS(1)(MONTHS) MATURITY(2) (MOS)(2) RATIO RATE
- ---------------------- ----------- --------- --------- --------
133 - 144............................... 0.0% 140 1.31x 7.558%
145 - 180............................... 30.1% 98 1.49x 7.292%
193 - 228............................... 11.3% 171 1.40x 8.295%
229 - 264............................... 10.7% 200 1.45x 7.818%
265 - 300............................... 58.3% 107 1.35x 7.402%
301 - 348............................... 62.0% 93 1.33x 7.624%
349 - 360............................... 65.0% 111 1.32x 7.226%
60.8% 113 1.33X 7.313%
</Table>
The weighted average remaining amortization term for all Mortgage Loans is 340
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.
(2) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-101
AMORTIZATION TYPES FOR ALL MORTGAGE LOANS
<Table>
<Caption>
WTD.
AVG.
CUT-OFF
AGGREGATE % BY AVERAGE HIGHEST DATE
NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE LTV
AMORTIZATION TYPES LOANS BALANCE POOL BALANCE BALANCE BALANCE RATIO
------------------ --------- ------------ ------------ ------------ ------------ ---------
Amortizing Balloon................. 135 $792,299,034 83.4% $ 5,868,882 $25,500,000 71.5%
Amortizing ARD..................... 10 74,093,337 7.8 $ 7,409,334 $28,477,855 75.4%
Fully Amortizing................... 8 37,306,077 3.9 $ 4,663,260 $15,622,494 67.2%
Interest-only, Amortizing
Balloon(2)........................ 2 35,700,000 3.8 $17,850,000 $27,000,000 69.8%
Interest-only, Amortizing ARD(2)... 1 10,644,000 1.1 $10,644,000 $10,644,000 79.6%
--- ------------ -----
156 $950,042,449 100.0% $ 6,090,016 $28,477,855 71.7%
=== ============ =====
<Caption>
WTD. AVG.
WTD. AVG. STATED
LTV REMAINING
RATIO TERM TO WTD. AVG. WTD. AVG.
AT MATURITY DSC MORTGAGE
AMORTIZATION TYPES MATURITY(1) (MOS)(1) RATIO RATE
------------------ ----------- --------- --------- ---------
Amortizing Balloon................. 62.6% 110 1.33x 7.302%
Amortizing ARD..................... 66.2% 110 1.26x 7.371%
Fully Amortizing................... 2.5% 229 1.38x 7.945%
Interest-only, Amortizing
Balloon(2)........................ 66.8% 73 1.46x 6.883%
Interest-only, Amortizing ARD(2)... 70.8% 115 1.20x 7.012%
60.8% 113 1.33X 7.313%
</Table>
- ------------------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
(2) These Mortgage Loans require payments of interest only for a period of 12 to
60 months from origination prior to the commencement of payments of
principal and interest.
S-102
RANGE OF OCCUPANCY RATES FOR ALL MORTGAGE LOANS
OTHER THAN LOANS SECURED BY HOSPITALITY PROPERTIES(1)
<Table>
<Caption>
AGGREGATE % BY AVERAGE HIGHEST WTD. AVG. WTD. AVG. LTV
RANGE OF NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF CUT-OFF DATE CUT-OFF DATE RATIO AT
OCCUPANCY RATES(%) LOANS BALANCE POOL BALANCE DATE BALANCE BALANCE LTV RATIO MATURITY(2)
- ------------------ --------- ------------ ------------ ------------ ------------ ------------ -------------
75.00 - 79.99.......... 1 $ 4,700,000 0.5% $ 4,700,000 $ 4,700,000 77.1% 73.3%
80.00 - 84.99.......... 5 38,488,522 4.1 $ 7,697,704 $12,700,000 65.2% 57.6%
85.00 - 89.99.......... 4 59,846,170 6.3 $14,961,542 $28,477,855 70.2% 63.8%
90.00 - 94.99.......... 27 191,704,564 20.2 $ 7,100,169 $27,000,000 73.5% 65.7%
95.00 - 99.99.......... 40 303,866,187 32.0 $ 7,596,655 $25,500,000 72.3% 63.2%
100.00 - 100.00.......... 77 330,167,561 34.8 $ 4,287,890 $20,112,903 72.2% 56.5%
------ ------------ ----
154 $928,773,004 97.8% $ 6,030,994 $28,477,855 72.1% 61.2%
====== ============ ====
<Caption>
WTD. AVG.
STATED
REMAINING WTD.
TERM TO AVG.
RANGE OF MATURITY WTD. AVG. MORTGAGE
OCCUPANCY RATES(%) (MOS)(2) DSC RATIO RATE
- ------------------ --------- --------- --------
75.00 - 79.99.......... 60 1.23x 7.330%
80.00 - 84.99.......... 92 1.38x 7.181%
85.00 - 89.99.......... 92 1.36x 7.654%
90.00 - 94.99.......... 103 1.31x 7.132%
95.00 - 99.99.......... 117 1.34x 7.245%
100.00 - 100.00.......... 124 1.31x 7.382%
114 1.33X 7.295%
</Table>
- ------------------
(1) Excludes 2 hospitality Mortgage Loans, representing 2.2% of the Cut-Off Date
Pool Balance.
(2) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-103
PERCENTAGE OF MORTGAGE POOL BY
PREPAYMENT RESTRICTION(1)(2)(3)
<Table>
<Caption>
PREPAYMENT RESTRICTION MAY-02 MAY-03 MAY-04 MAY-05 MAY-06 MAY-07 MAY-08
- ---------------------- ------- ------- ------- ------- ------- ------- -------
Lockout................................................. 97.63% 97.63% 55.87% 44.18% 8.90% 0.00% 0.00%
Defeasance.............................................. 0.00% 0.00% 43.43% 54.80% 86.83% 86.25% 86.24%
Yield Maintenance....................................... 2.37% 2.37% 0.71% 1.02% 4.27% 12.68% 12.48%
Prepayment Premium...................................... 0.00% 0.00% 0.00% 0.00% 0.00% 1.08% 1.08%
Open.................................................... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.20%
Total................................................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
------- ------- ------- ------- ------- ------- -------
Total Beginning Balance as of the Cut-Off Date (in
millions)............................................. $950.04 $940.50 $930.15 $918.76 $906.49 $808.57 $795.56
Percent of Cut-Off Date Pool Balance.................... 100.00% 99.00% 97.91% 96.71% 95.42% 85.11% 83.74%
<Caption>
PREPAYMENT RESTRICTION MAY-09 MAY-10 MAY-11 MAY-12
- ---------------------- ------- ------- ------- -------
Lockout................................................. 0.00% 0.00% 0.00% 0.00%
Defeasance.............................................. 85.36% 85.72% 82.08% 89.28%
Yield Maintenance....................................... 12.07% 13.09% 10.16% 10.72%
Prepayment Premium...................................... 1.10% 1.20% 0.00% 0.00%
Open.................................................... 1.48% 0.00% 7.76% 0.00%
Total................................................... 100.00% 100.00% 100.00% 100.00%
------- ------- ------- -------
Total Beginning Balance as of the Cut-Off Date (in
millions)............................................. $777.92 $704.27 $654.76 $ 24.82
Percent of Cut-Off Date Pool Balance.................... 81.88% 74.13% 68.92% 2.61%
</Table>
- ------------------
(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.
(2) As of the Cut-Off Date.
(3) Based upon the assumptions set forth in footnote (1) above, after May 2012,
the outstanding loan balances represent less than 2.6% of the Cut-Off Date
Pool Balance.
S-104
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:
<Table>
<Caption>
NUMBER OF
MORTGAGE LOANS/ % BY LOAN
MORTGAGE NUMBER OF CUT-OFF CUT-OFF DATE BALANCE
LOAN MORTGAGED DATE POOL PER
LOAN NAME SELLER PROPERTIES BALANCE(1) BALANCE PROPERTY TYPE SF/UNIT
- --------- ----------- --------------- ------------ ------------ -------------------------- ---------
One Enterprise Center.......... Wachovia 1/1 $28,477,855 3.0% Office $ 89
Abbey Portfolio I.............. Wachovia 4/4 27,226,194 2.9 Various(2) $ 83
Oak Brook Apartments........... Wachovia 1/1 27,000,000 2.8 Multifamily $ 88,816
Mediterranean Village.......... Wachovia 1/1 25,500,000 2.7 Multifamily $ 96,591
Abbey Portfolio II............. Wachovia 4/4 24,045,739 2.5 Various(2) $ 80
CityPlace II................... Greenwich 1/1 22,500,000 2.4 Office $ 77
Marketplace at Altamonte....... Greenwich 1/1 20,112,903 2.1 Retail -- Anchored $ 60
Broadmoor Towne Center......... Wachovia 1/1 18,973,729 2.0 Retail -- Anchored $ 110
215 East 23rd Street........... Wachovia 1/1 17,973,862 1.9 Multifamily $242,890
Maine Crossing................. Wachovia 1/1 17,456,038 1.8 Retail -- Anchored $ 117
----- ------------ -----
TOTAL/WTD. AVG................. 16/16 $229,266,321 24.1%
----- ============ =====
<Caption>
WEIGHTED
WEIGHTED AVERAGE WEIGHTED
WEIGHTED AVERAGE LTV RATIO AVERAGE
AVERAGE CUT-OFF DATE AT MATURITY MORTGAGE
LOAN NAME DSCR LTV RATIO OR ARD RATE
- --------- -------- ------------ ----------- --------
One Enterprise Center.......... 1.30x 76.1% 66.9% 7.270%
Abbey Portfolio I.............. 1.36x 73.5% 66.8% 7.250%
Oak Brook Apartments........... 1.22x 78.3% 75.0% 6.910%
Mediterranean Village.......... 1.21x 77.3% 68.1% 7.370%
Abbey Portfolio II............. 1.36x 72.4% 63.9% 7.250%
CityPlace II................... 1.44x 64.3% 61.4% 8.240%
Marketplace at Altamonte....... 1.28x 74.5% 66.2% 7.365%
Broadmoor Towne Center......... 1.29x 79.9% 70.2% 7.190%
215 East 23rd Street........... 1.30x 73.7% 64.3% 6.990%
Maine Crossing................. 1.27x 79.4% 70.0% 7.360%
TOTAL/WTD. AVG................. 1.30X 74.9% 67.4% 7.316%
</Table>
- ------------------
(1) In the case of a concentration of cross-collateralized mortgage loans, the
aggregate principal balance.
(2) Retail and office.
One Enterprise Center
The Loan. The Mortgage Loan (the "One Enterprise Center Loan") is secured
by a first mortgage encumbering an office building located in Jacksonville,
Florida. The One Enterprise Center Loan represents approximately 3.0% of the
Cut-Off Date Pool Balance. The One Enterprise Center Loan was originated on
March 27, 2002 and has a Cut-Off Date Balance of $28,477,855.
The One Enterprise Center Loan has a remaining term of 119 months and an
anticipated repayment date of April 1, 2012. The One Enterprise Center Loan may
be prepaid on or after January 1, 2012 and permits defeasance with United States
government obligations beginning three years after its first payment date.
The Borrower. The borrower is One Enterprise Center, LTD., a Florida
limited partnership. The borrower was converted to a special purpose entity upon
the origination of the One Enterprise Center Loan. See "RISK FACTORS -- The
Borrower's Form of Entity May Cause Special Risks" in this Prospectus
Supplement. A non-consolidation opinion was delivered in connection with the
origination of the One Enterprise Center Loan. The sponsor is Henry Faison of
Faison Capital Development, Inc. ("Faison"). Faison is a development concern in
the southeastern, mid-Atlantic and southwestern United States and was the
original developer of the Mortgaged Property. Faison has developed over 15
million square feet of commercial real estate space.
The Property. The Mortgaged Property is an approximately 318,782 square
foot office building situated on approximately 1.1 acres in Jacksonville,
Florida and constructed in 1986. As of March 31, 2002, the occupancy rate for
the Mortgaged Property securing the One Enterprise Center Loan was approximately
89.4%. The largest tenant is Wachovia occupying approximately 139,753 square
feet, or approximately 43.8% of the net rentable area. The Mortgaged Property
serves as the corporate headquarters for Wachovia in the State of Florida. As of
April 9, 2002, Wachovia had a long-term unsecured debt rating of "A1" (Moody's),
"A+" (Fitch) and "A" (S&P). The Wachovia lease expires in April 2013. The second
largest tenant is Smith, Hulsey & Busey ("Smith Hulsey") occupying approximately
26,898 square feet through three separate leases on multiple spaces, or
approximately 8.4% of the net rentable area. Smith Hulsey is a
Jacksonville-based law firm specializing in general corporate law, commercial
litigation, healthcare, commercial real estate and bankruptcy matters. Each of
the Smith Hulsey leases expires in October 2009. The third largest tenant is
Craig Insurance Agency ("Craig I/S") occupying approximately 23,890 square feet,
or approximately 7.5% of the net rentable area. Craig I/S is a provider of
business process outsourcing and professional services for the property and
casualty insurance industry, specializing in subrogation matters. The Craig I/S
lease expires in February 2008.
S-105
The following table presents information relating to the major tenants at
the Mortgaged Property:
<Table>
<Caption>
% OF
GROSS NET
POTENTIAL RENTABLE % OF NET DATE OF LEASE
TENANT RENT AREA (SF) RENTABLE AREA EXPIRATION
- ------ --------- --------- ------------- -------------
Wachovia Bank, National Association.................... 49.1% 139,753 43.8% April 2013
Smith, Hulsey & Busey.................................. 6.4% 26,898 8.4% October 2009
Craig Insurance Agency................................. 10.8% 23,890 7.5% February 2008
Tempus Software........................................ 2.8% 11,341 3.6% May 2004
CB Richard Ellis....................................... 3.5% 9,905 3.1% April 2006
</Table>
The following table presents information relating to the lease rollover
schedule at the Mortgaged Property:
<Table>
<Caption>
CUMULATIVE
% OF % OF
GROSS GROSS
# OF WA BASE CUMULATIVE POTENTIAL POTENTIAL
LEASES RENT/SF TOTAL SF % OF TOTAL % OF SF RENT RENT
YEAR ROLLING ROLLING ROLLING SF ROLLING(1) ROLLING(1) ROLLING(1) ROLLING(1)
- ---- ------- ------- -------- ------------- ----------- ---------- -----------
2002......................... 5 $10.47 19,096 6.0% 6.0% 4.5% 4.5%
2003......................... 2 $10.29 9,410 3.0% 8.9% 2.2% 6.7%
2004......................... 6 $10.76 26,840 8.4% 17.4% 6.5% 13.3%
2005......................... 0 $ 0.00 0 0.0% 17.4% 0.0% 13.3%
2006......................... 7 $16.34 22,336 7.0% 24.4% 8.3% 21.6%
2007......................... 0 $ 0.00 0 0.0% 24.4% 0.0% 21.6%
2008......................... 1 $20.00 23,890 7.5% 31.9% 10.8% 32.4%
2009......................... 4 $10.19 35,824 11.2% 43.1% 8.3% 40.7%
2010......................... 1(2) $ 0.00 2,393 0.8% 43.9% 0.0% 40.7%
2011......................... 0 $ 0.00 0 0.0% 43.9% 0.0% 40.7%
2012......................... 0 $ 0.00 0 0.0% 43.9% 0.0% 40.7%
</Table>
- ---------------
(1) Calculated based on approximate square footage occupied by each tenant.
(2) 2,393 square feet of non-revenue generating management office space rolls in
2010.
Escrows. The loan documents provide for certain escrows of real estate
taxes and insurance and provide for replacement reserves. In addition, the
borrower deposited with mortgagee at the closing of the One Enterprise Center
Loan the sum of approximately $474,690, which is to be released at such time as
mortgagee receives evidence satisfactory to mortgagee that certain tenant
improvements have been completed and all final lien waivers have been received,
and the loan documents require the borrower to deposit with the mortgagee the
sum of $225,000 per year for tenant improvements and leasing commissions. See
Annex A-3 to this Prospectus Supplement for information regarding escrow
reserves.
Lock Box Account. If the borrower does not provide the mortgagee with
notice at least 60 days prior to April 1, 2012 that it intends to refinance the
One Enterprise Center Loan, then the borrower must notify the tenants that any
and all tenant payments due under the applicable tenant leases shall be directly
deposited into a mortgagee designated lock box account.
Management. Trammell Crow Company ("Trammell Crow") is the property
manager for the Mortgaged Property securing the One Enterprise Center Loan.
Trammell Crow manages approximately 198 million square feet of office and retail
space.
Abbey Portfolio I Loans
The Loans. The four Mortgage Loans (the "Abbey Portfolio I Loans") are
collectively secured by first deeds of trust encumbering two office properties
and two retail properties located in California. The Abbey Portfolio I Loans
represent approximately 2.9% of the Cut-Off Date Pool Balance. The Abbey
Portfolio I Loans were originated on January 11, 2002 and have a Cut-Off Date
Balance of $27,226,194. Each of the Abbey Portfolio I Loans is
cross-collateralized and cross-defaulted with each of the other Abbey Portfolio
I Loans.
S-106
The Abbey Portfolio I Loans have a remaining term of 91 months and mature
on December 1, 2009. The Abbey Portfolio I Loans may be prepaid on or after
August 1, 2009 and each Abbey Portfolio I Loan permits defeasance with United
States government obligations beginning two years after the Closing Date.
The Borrowers. The borrowers are AP-Upland Freeway Center LLC, AP-Ming
LLC, AP-Santa Maria LLC and AP-Braden LLC, each a special purpose entity. A
non-consolidation opinion was delivered in connection with the origination of
each of the Abbey Portfolio I Loans. The sponsor of the borrowers is The Abbey
Company ("Abbey"), a real estate investment company with ownership interests in
approximately 3.1 million square feet of office, industrial, service center and
retail properties located predominantly in Southern California. The Abbey
Portfolio I Loans have the same sponsor as the Abbey Portfolio II Loans but are
not cross-collateralized or cross-defaulted with the Abbey Portfolio II Loans.
Pursuant to the terms of the related loan documents and upon the satisfaction of
certain conditions therein, the Mortgage Loan related to Santa Maria Commerce
Center may be assumed individually and thereby released from the
cross-collateral and cross-default provisions related to the Abbey Portfolio I
Loans.
The Properties. The Mortgaged Properties consist of two retail properties
(Santa Maria Commerce Center and Upland Freeway Center) and two office
properties (Ming Office Park and Orange Commerce Center). As of February 1,
2002, the weighted average occupancy rate for the Mortgaged Properties securing
the Abbey Portfolio I Loans was approximately 94.2%.
The following table presents certain information relating to the Mortgaged
Properties:
<Table>
<Caption>
PROPERTY CUT-OFF DATE LOAN NET RENTABLE AREA
PROPERTY NAME LOCATION BALANCE (SF) YEAR BUILT
- ------------- --------------- ----------------- ----------------- ----------
Upland Freeway Center..................... Upland, CA $9,375,938 116,029 1986
Ming Office Park.......................... Bakersfield, CA $7,580,546 117,847 1981
Santa Maria Commerce Center............... Santa Maria, CA $7,081,826 65,844 1982
Orange Commerce Center.................... Orange, CA $3,187,884 29,987 1984
</Table>
The following table presents information relating to the lease rollover
schedule at Upland Freeway Center:
<Table>
<Caption>
CUMULATIVE
% OF % OF
GROSS GROSS
# OF WA BASE CUMULATIVE POTENTIAL POTENTIAL
LEASES RENT/SF TOTAL SF % OF TOTAL % OF SF RENT RENT
YEAR ROLLING ROLLING ROLLING SF ROLLING(1) ROLLING(1) ROLLING(1) ROLLING(1)
- ---- ------- ------- -------- ------------- ----------- ---------- -----------
2002......................... 5 $11.05 34,357 29.6% 29.6% 26.9% 26.9%
2003......................... 4 $15.55 10,532 9.1% 38.7% 11.6% 38.5%
2004......................... 4 $12.64 26,419 22.8% 61.5% 23.6% 62.1%
2005......................... 1 $15.24 2,025 1.7% 63.2% 2.2% 64.3%
2006......................... 3 $13.23 10,253 8.8% 72.0% 9.6% 73.9%
2007......................... 0 $ 0.00 0 0.0% 72.0% 0.0% 73.9%
2008......................... 0 $ 0.00 0 0.0% 72.0% 0.0% 73.9%
2009......................... 1 $10.20 13,222 11.4% 83.4% 9.5% 83.4%
</Table>
- ---------------
(1) Calculated based on approximate square footage occupied by each tenant.
The following table presents information relating to the lease rollover
schedule at Ming Office Park:
<Table>
<Caption>
CUMULATIVE
% OF % OF
GROSS GROSS
# OF WA BASE CUMULATIVE POTENTIAL POTENTIAL
LEASES RENT/SF TOTAL SF % OF TOTAL % OF SF RENT RENT
YEAR ROLLING ROLLING ROLLING SF ROLLING(1) ROLLING(1) ROLLING(1) ROLLING(1)
- ---- ------- ------- -------- ------------- ----------- ---------- -----------
2002......................... 6 $15.60 13,540 11.5% 11.5% 11.4% 11.4%
2003......................... 16 $15.83 53,757 45.6% 57.1% 45.8% 57.1%
2004......................... 12 $16.02 34,556 29.3% 86.4% 29.8% 86.9%
2005......................... 4 $15.43 6,453 5.5% 91.9% 5.4% 92.3%
</Table>
S-107
<Table>
<Caption>
CUMULATIVE
% OF % OF
GROSS GROSS
# OF WA BASE CUMULATIVE POTENTIAL POTENTIAL
LEASES RENT/SF TOTAL SF % OF TOTAL % OF SF RENT RENT
YEAR ROLLING ROLLING ROLLING SF ROLLING(1) ROLLING(1) ROLLING(1) ROLLING(1)
- ---- ------- ------- -------- ------------- ----------- ---------- -----------
2006......................... 3 $14.53 6,877 5.8% 97.7% 5.4% 97.7%
2007......................... 0 $ 0.00 0 0.0% 97.7% 0.0% 97.7%
2008......................... 0 $ 0.00 0 0.0% 97.7% 0.0% 97.7%
2009......................... 1 $16.20 2,397 2.0% 99.8% 2.1% 99.8%
</Table>
- ---------------
(1) Calculated based on approximate square footage occupied by each tenant.
The following table presents information relating to the lease rollover
schedule at Santa Maria Commerce Center:
<Table>
<Caption>
CUMULATIVE
% OF % OF
GROSS GROSS
# OF WA BASE CUMULATIVE POTENTIAL POTENTIAL
LEASES RENT/SF TOTAL SF % OF TOTAL % OF SF RENT RENT
YEAR ROLLING ROLLING ROLLING SF ROLLING(1) ROLLING(1) ROLLING(1) ROLLING(1)
- ---- ------- ------- -------- ------------- ----------- ---------- -----------
2002......................... 3 $15.50 4,950 7.5% 7.5% 7.7% 7.7%
2003......................... 6 $14.99 15,799 24.0% 31.5% 23.9% 31.7%
2004......................... 3 $13.91 7,329 11.1% 42.6% 10.3% 42.0%
2005......................... 7 $14.62 9,347 14.2% 56.8% 13.8% 55.8%
2006......................... 10 $15.42 28,419 43.2% 100.0% 44.2% 100.0%
2007......................... 0 $ 0.00 0 0.0% 100.0% 0.0% 100.0%
2008......................... 0 $ 0.00 0 0.0% 100.0% 0.0% 100.0%
2009......................... 0 $ 0.00 0 0.0% 100.0% 0.0% 100.0%
</Table>
- ---------------
(1) Calculated based on approximate square footage occupied by each tenant.
The following table presents information relating to the lease rollover
schedule at Orange Commerce Center:
<Table>
<Caption>
CUMULATIVE
% OF % OF
GROSS GROSS
# OF BASE CUMULATIVE POTENTIAL POTENTIAL
LEASES RENT/SF TOTAL SF % OF TOTAL % OF SF RENT RENT
YEAR ROLLING ROLLING ROLLING SF ROLLING(1) ROLLING(1) ROLLING(1) ROLLING(1)
- ---- ------- ------- -------- ------------- ----------- ---------- -----------
2004......................... 1 $21.77 29,987 100% 100% 100% 100%
</Table>
- ---------------
(1) Calculated based on approximate square footage occupied by each tenant.
Escrows. The loan documents provide for certain escrows of real estate
taxes and insurance and provide for replacement reserves. The borrowers
deposited with mortgagee at the closing of the Mortgage Loan related to the
Orange Commerce Center the sum of $150,000, and the loan documents require the
borrower to deposit with the mortgagee the sum of (i) $40,000 per year for
Upland Freeway Center, (ii) $64,000 per year for Ming Office Park, (iii) $35,000
per year for Santa Maria Commerce Center and (iv) $50,000 per year for Orange
Commerce Center, for tenant improvements and leasing commissions. See Annex A-3
to this Prospectus Supplement for information regarding escrow reserves.
Lock Box Account. At any time during the term of the Abbey Portfolio I
Loans, (i) if the applicable DSCR, as computed by the mortgagee, is less than
1.15x or (ii) upon the occurrence of an event of default pursuant to the
applicable loan documents, the related borrower must notify the tenants that any
and all tenant payments due under the applicable tenant leases shall be directly
deposited into a mortgagee designated lock box account.
Mezzanine Loan. Capri Select Income, LLC ("Capri"), a Delaware limited
liability company, is the current holder of a $25,000,000 mezzanine loan of
which (i) $600,000 is allocated to the Upland Freeway Center loan and (ii)
$169,000 is allocated to the Ming Office Park loan. The mezzanine loan is
secured by
S-108
a pledge of membership interests of the mezzanine borrower. Pursuant to the
mezzanine loan documents, Capri possesses the right to cure a borrower's default
under the related Mortgage Loan documents, however, if (i) the Master Servicer
makes an Advance due to a default by the borrower, (ii) the Master Servicer
receives interest on such Advance and (iii) Capri thereafter cures the default,
the Trust Fund may incur a loss because the cure provisions in the mezzanine
loan documents do not expressly require the payment of interest on Advances. If
there is a material default under the Mortgage Loan documents, the mezzanine
lender may purchase the related Mortgage Loan for the Purchase Price. In
addition, the mortgage lender may not amend the Mortgage Loan documents if the
amendment effects the principal balance, the interest rate or the maturity date
of the Mortgage Loan or adversely affects the mezzanine loan. Upon the
occurrence of an event of default under the mezzanine loan documents, Capri may
foreclose upon the membership interests of the mezzanine borrower pursuant to
the terms of the related intercreditor agreement which would result in a change
of control with respect to AP-Upland Freeway Center LLC, AP-Ming, LLC, AP-Santa
Maria LLC and AP-Braden LLC. See "DESCRIPTION OF THE MORTGAGE POOL -- Certain
Terms and Conditions at the Mortgage Loans -- Other Financing" in this
Prospectus Supplement.
Management. Abbey is the property manager for the Mortgaged Properties
securing the Abbey Portfolio I Loans. The property manager is affiliated with
the borrowers.
Oak Brook Apartments
The Loan. The Mortgage Loan (the "Oak Brook Apartments Loan") is secured
by a first mortgage encumbering a 304-unit multifamily complex located in Rancho
Cordova, California. The Oak Brook Apartments Loan represents approximately 2.8%
of the Cut-Off Date Pool Balance. The Oak Brook Apartments Loan was originated
on February 21, 2002 and has a Cut-Off Date Balance of $27,000,000. The Oak
Brook Apartments Loan provides for interest-only payments for the first 12
months of its term, and thereafter, fixed monthly payments of principal and
interest.
The Oak Brook Apartments Loan has a remaining term of 58 months and matures
on March 1, 2007. The Oak Brook Apartments Loan may be prepaid on or after
January 1, 2007, and permits defeasance with United States government
obligations beginning four years after its first payment date.
The Borrower. The borrower is Oak Brook Apartments, LLC, a special purpose
entity. A non-consolidation opinion was delivered in connection with the
origination of the Oak Brook Apartments Loan. The sponsor is Alvin J. Wolff,
Jr., a principal of the Wolff Companies. The Wolff Companies, founded in 1946,
are focused on the development and ownership of Class "A" multifamily
properties, with ownership interests in and management of over 3,500 apartment
units.
The Property. The Mortgaged Property is a 304-unit garden-style apartment
complex consisting of 14 buildings, situated on approximately 15.0 acres and
constructed in 2000. The Mortgaged Property is located in Rancho Cordova,
California, within the Sacramento, California metropolitan statistical area.
With respect to the Mortgaged Property securing the Oak Brook Apartments Loan,
the borrower acquired a secured creditor impaired property environmental
insurance policy issued by a subsidiary of American International Group, which
as of April 25, 2002, had a financial strength rating of "AAA" (S&P). See "RISK
FACTORS -- Environmental Laws May Adversely Affect the Value of and Cash Flow
from a Mortgaged Property" in the this Prospectus Supplement. This policy serves
to mitigate the risk of any possible soil or groundwater contamination from an
adjacent site. As of January 25, 2002, the occupancy rate for the Mortgaged
Property securing the Oak Brook Apartments Loan was approximately 91.8%. The
Mortgaged Property includes such amenities as a heated swimming pool, a spa, a
lighted multi-sport court, a racquetball court and a clubhouse with saunas, a
fireside lounge, a business center and a fitness center.
S-109
The following table presents information relating to the unit configuration
of the Mortgaged Property:
<Table>
<Caption>
APPROXIMATE
APPROXIMATE NET RENTABLE % OF NET ASKING RENTAL
UNIT MIX NO. OF UNITS UNIT SIZE (SF) AREA (SF) RENTABLE AREA RANGE
-------- ------------ -------------- ------------ ------------- ---------------
1-BR/1-BA.......................... 148 756 111,920 37.3% $895-$960
2-BR/2-BA.......................... 148 1,198 177,280 59.0% $1,170-$1,305
3-BR/2-BA.......................... 8 1,390 11,120 3.7% $1,525
--- ------- ----
Total/Weighted Average............. 304 988 300,320 100% $1,096/$1.11/SF
=== ======= ====
</Table>
Escrows. The loan documents provide for certain escrows of real estate
taxes and insurance and provide for replacement reserves. See Annex A-3 to this
Prospectus Supplement for information regarding escrow reserves.
Lock Box Account. At any time during the term of the Oak Brook Apartments
Loan, (i) if the DSCR, as computed by the mortgagee, is less than 1.10x or (ii)
upon the occurrence of an event of default under the loan documents, the
borrower must notify the tenants that any and all tenant payments due under the
applicable tenant leases shall be directly deposited into a mortgagee designated
lock box account.
Property Management. Wolff Management Company ("Wolff Management") is the
property manager for the Mortgaged Property securing the Oak Brook Apartments
Loan. The property manager is affiliated with the sponsor.
Mediterranean Village
The Loan. The Mortgage Loan (the "Mediterranean Village Loan") is secured
by a first mortgage encumbering a 264-unit garden-style multifamily complex
located in Ft. Lauderdale, Florida. The Mediterranean Village Loan represents
approximately 2.7% of the Cut-Off Date Pool Balance. The Mediterranean Village
Loan was originated on April 16, 2002 and has a Cut-Off Date Balance of
$25,500,000.
The Mediterranean Village Loan has a remaining term of 120 months and
matures on May 1, 2012. The Mediterranean Village Loan may be prepaid on or
after March 1, 2012, and permits defeasance with United States government
obligations beginning four years after its first payment date.
The Borrower. The borrower is Mediterranean Village Limited Partnership, a
special purpose entity. A non-consolidation opinion was delivered in connection
with the origination of the Mediterranean Village Loan. The sponsors are John
Loos, Steven Halmos and Harris Hudson. Mr. Loos has been a real estate developer
since the 1970's, and his portfolio is in excess of one million square feet. Mr.
Halmos was the co-founder and CEO of SafeCard Services. Mr. Hudson is the vice
chairman of the board of directors of Republic Services, Inc. and AutoNation,
Inc.
The Property. The Mortgaged Property is a 264-unit garden-style apartment
complex consisting of 11 buildings situated on approximately 8.9 acres in Ft.
Lauderdale, Florida and constructed in 2000. As of March 19, 2002, the occupancy
rate for the Mortgaged Property securing the Mediterranean Village Loan was
approximately 95.5%. The Mortgaged Property includes such amenities as a
business center, a fitness center, a gazebo, a pool and concierge service.
The following table presents information relating to the unit configuration
of the Mortgaged Property:
<Table>
<Caption>
APPROXIMATE
APPROXIMATE NET RENTABLE % OF NET ASKING RENTAL
UNIT MIX NO. OF UNITS UNIT SIZE (SF) AREA (SF) RENTABLE AREA RANGE
- -------- ------------ -------------- ------------ ------------- ---------------
1-BR/1-BA.......................... 100 854 85,352 33.0% $ 965-1,350
2-BR/2-BA.......................... 164 1,056 173,108 67.0% $ 1,240-1,415
--- ------- -----
Total/Weighted Average............. 264 979 258,460 100.0% $1,243/$1.27/SF
=== ======= =====
</Table>
S-110
Escrows. The loan documents provide for certain escrows of real estate
taxes and insurance and provide for replacement reserves. See Annex A-3 to this
Prospectus Supplement for information regarding escrow reserves.
Property Management. Gables Residential Trust ("Gables") is the property
manager for the Mortgaged Property securing the Mediterranean Village Loan.
Gables is a publicly traded real estate investment trust that manages over
44,000 apartment units in the southeastern United States.
Abbey Portfolio II Loans
The Loans. The four mortgage loans (the "Abbey Portfolio II Loans") are
collectively secured by first deeds of trust encumbering the fee interest on two
office properties and a retail property and a first deed of trust encumbering
the leasehold interest in an office property located in California. The Abbey
Portfolio II Loans represent approximately 2.5% of the Cut-Off Date Pool
Balance. The Abbey Portfolio II Loans were originated on January 11, 2002 and
have an aggregate Cut-Off Date Balance of $24,045,739. Each of the Abbey
Portfolio II Loans is cross-collateralized and cross-defaulted with each of the
other Abbey Portfolio II Loans.
The Abbey Portfolio II Loans have a remaining term of 91 months and mature
on December 1, 2009. The Abbey Portfolio II Loans may be prepaid on or after
August 1, 2009 and each Abbey Loan permits defeasance with United States
government obligations beginning two years after the Closing Date.
The Borrowers. The borrowers are AP-Donald Douglas LLC, AP-Oxnard LLC,
AP-Farrell Ramon LLC, and APR-III LLC, each a special purpose entity. A
non-consolidation opinion was delivered in connection with the origination of
each of the Abbey Portfolio II Loans. The sponsor of the borrowers is The Abbey
Company ("Abbey"), a real estate investment company with ownership interests in
approximately 3.1 million square feet of office, industrial, service center and
retail properties located predominately in Southern California. The Abbey
Portfolio II Loans have the same sponsor as the Abbey Portfolio I Loans but are
not cross-collateralized or cross-defaulted with the Abbey Portfolio I Loans.
Pursuant to the terms of the related loan documents and upon the satisfaction of
certain conditions therein, the Mortgage Loan related to Oxnard Commerce Center
may be assumed individually and thereby released from the cross-collateral and
cross-default provisions related to the Abbey Portfolio II Loans.
The Properties. The Mortgaged Properties consist of three office
properties (4403 Donald Douglas, The Abbey Center and La Mirada Business Center)
and one retail property (Oxnard Commerce Center). With respect to the Mortgaged
Property securing the La Mirada Business Center loan, the borrower acquired a
pollution legal liability policy ("PLL Policy") (which does not run to the
benefit of the mortgagee as an additional insured) issued by a subsidiary of
American International Group, which as of April 25, 2002, had a financial
strength rating of "AAA" (S&P). The PLL Policy serves to mitigate certain
environmental risks associated with an adjacent property. See "RISK
FACTORS -- Environmental Laws May Adversely Affect the Value of and Cash Flow
from a Mortgaged Property" in this Prospectus Supplement. As of January 1, 2002
through February 1, 2002, the weighted average occupancy rate for the Mortgaged
Properties securing the Abbey Portfolio II Loans was approximately 94.5%.
The following table presents certain information relating to the Mortgaged
Properties:
<Table>
<Caption>
NET
CUT-OFF DATE RENTABLE
PROPERTY NAME PROPERTY LOCATION LOAN BALANCE AREA (SF) YEAR BUILT
- ------------- ----------------- ------------ --------- ----------
4403 Donald Douglas................................... Long Beach, CA $10,061,760 88,284 1986
Oxnard Commerce Center................................ Oxnard, CA $ 4,987,201 64,381 1990
The Abbey Center...................................... Palm Springs, CA $ 4,837,585 64,155 1982
La Mirada Business Center............................. La Mirada, CA $ 4,159,193 82,010 1975
</Table>
S-111
The following table presents information relating to the lease rollover
schedule at 4403 Donald Douglas:
<Table>
<Caption>
% OF CUMULATIVE
GROSS % OF GROSS
BASE CUMULATIVE POTENTIAL POTENTIAL
# OF LEASES RENT/SF TOTAL SF % OF TOTAL SF % OF SF RENT RENT
YEAR ROLLING ROLLING ROLLING ROLLING(1) ROLLING(1) ROLLING(1) ROLLING(1)
- ---- ----------- ------- -------- ------------- ----------- ---------- -----------
2004...................... 1 $21.00 88,284 100% 100% 100% 100%
</Table>
- ---------------
(1) Calculated based on approximate square footage occupied by each tenant.
The following table presents information relating to the lease rollover
schedule at Oxnard Commerce Center:
<Table>
<Caption>
% OF CUMULATIVE
GROSS % OF GROSS
WA BASE CUMULATIVE POTENTIAL POTENTIAL
# OF LEASES RENT/SF TOTAL SF % OF TOTAL SF % OF SF RENT RENT
YEAR ROLLING ROLLING ROLLING ROLLING(1) ROLLING(1) ROLLING(1) ROLLING(1)
- ---- ----------- --------- -------- ------------- ----------- ---------- -----------
2002.................... 4 $16.20 8,187 12.7% 12.7% 15.0% 15.0%
2003.................... 1 $17.40 1,418 2.2% 14.9% 2.8% 17.8%
2004.................... 5 $10.93 18,978 29.5% 44.4% 23.5% 41.3%
2005.................... 4 $16.17 8,276 12.9% 57.3% 15.2% 56.5%
2006.................... 3 $14.12 7,742 12.0% 69.3% 12.4% 68.9%
2007.................... 2 $11.30 5,770 9.0% 78.2% 7.4% 76.3%
2008.................... 0 $ 0.00 0 0.0% 78.2% 0.0% 76.3%
2009.................... 0 $ 0.00 0 0.0% 78.2% 0.0% 76.3%
</Table>
- ---------------
(1) Calculated based on approximate square footage occupied by each tenant.
The following table presents information relating to the lease rollover
schedule at The Abbey Center:
<Table>
<Caption>
% OF CUMULATIVE
GROSS % OF GROSS
WA BASE CUMULATIVE POTENTIAL POTENTIAL
# OF LEASES RENT/SF TOTAL SF % OF TOTAL SF % OF SF RENT RENT
YEAR ROLLING ROLLING ROLLING ROLLING(1) ROLLING(1) ROLLING(1) ROLLING(1)
- ---- ----------- --------- -------- ------------- ----------- ---------- -----------
2002.................... 14 $18.12 12,074 18.8% 18.8% 19.4% 19.4%
2003.................... 6 $16.88 7,055 11.0% 29.8% 10.5% 29.9%
2004.................... 6 $17.38 9,265 14.4% 44.3% 14.3% 44.2%
2005.................... 5 $19.07 8,507 13.3% 57.5% 14.4% 58.5%
2006.................... 9 $16.96 19,782 30.8% 88.4% 29.7% 88.2%
2007.................... 0 $ 0.00 0 0.0% 88.4% 0.0% 88.2%
2008.................... 0 $ 0.00 0 0.0% 88.4% 0.0% 88.2%
2009.................... 0 $ 0.00 0 0.0% 88.4% 0.0% 88.2%
</Table>
- ---------------
(1) Calculated based on approximate square footage occupied by each tenant.
S-112
The following table presents information relating to the lease rollover
schedule at La Mirada Business Center:
<Table>
<Caption>
% OF CUMULATIVE
GROSS % OF GROSS
WA BASE CUMULATIVE POTENTIAL POTENTIAL
# OF LEASES RENT/SF TOTAL SF % OF TOTAL SF % OF SF RENT RENT
YEAR ROLLING ROLLING ROLLING ROLLING(1) ROLLING(1) ROLLING(1) ROLLING(1)
- ---- ----------- --------- -------- ------------- ----------- ---------- -----------
2002.................... 13 $ 9.29 19,758 24.1% 24.1% 22.0% 22.0%
2003.................... 17 $ 9.36 18,851 23.0% 47.1% 21.2% 43.1%
2004(2)................. 16 $ 8.78 24,734 30.2% 77.2% 26.0% 69.2%
2005.................... 3 $ 8.42 8,937 10.9% 88.1% 9.0% 78.2%
2006.................... 2 $10.02 1,909 2.3% 90.5% 2.3% 80.5%
2007.................... 0 $ 0.00 0 0.0% 90.5% 0.0% 80.5%
2008(3)................. 0 $ 0.00 0 0.0% 90.5% 0.0% 80.5%
2009.................... 0 $ 0.00 0 0.0% 90.5% 0.0% 80.5%
</Table>
- ---------------
(1) Calculated based on approximate square footage occupied by each tenant.
(2) Other income, which accounts for 4.6% of the rental income, is not included
in the leases rolling in 2004.
(3) Other income, which accounts for 5.7% of the rental income, is not included
in the leases rolling in 2008.
Escrows. The loan documents provide for certain escrows of real estate
taxes and insurance and provide for replacement reserves. The borrowers
deposited with mortgagee at the closing of the Mortgage Loan related to 4403
Donald Douglas the sum of $300,000, and the applicable loan documents require
the borrowers to deposit with the mortgagee the sum of (i) $100,000 per year for
4403 Donald Douglas, (ii) $35,000 per year for Oxnard Commerce Center, (iii)
$30,000 per year for The Abbey Center and (iv) $30,000 per year for La Mirada
Business Center, for tenant improvements and leasing commissions. See Annex A-3
to this Prospectus Supplement for information regarding escrow reserves.
Lock Box Account. At any time during the term of the Abbey Portfolio II
Loans, (i) if the applicable DSCR, as computed by the mortgagee, is less than
1.15x or (ii) upon the occurrence of an event of default pursuant to the
applicable loan documents, the related borrower must notify its tenants that any
and all tenant payments due under the applicable tenant leases shall be directly
deposited into a mortgagee designated lock box account.
Mezannine Loan. Capri is the current holder of a $25,000,000 mezzanine
loan of which (i) $998,250 is allocated to the 4403 Donald Douglas loan, (ii)
$318,000 is allocated to the Oxnard Commerce Center loan and (iii) $697,000 is
allocated to the La Mirada Business Center loan. The mezzanine loan is secured
by a pledge of membership interests of the mezzanine borrower. Pursuant to the
mezzanine loan documents, Capri possesses the right to cure a borrower's default
under the related Mortgage Loan documents, however, if (i) the Master Servicer
makes an Advance due to a default by the borrower, (ii) the Master Servicer
receives interest on such Advance and (iii) Capri thereafter cures the default,
the Trust Fund may incur a loss because the cure provisions in the mezzanine
loan documents do not expressly require the payment of interest on Advances. If
there is a material default under the Mortgage Loan documents, the mezzanine
lender may purchase the related Mortgage Loan for the Purchase Price. In
addition, the mortgage lender may not amend the Mortgage Loan documents if the
amendment effects the principal balance, the interest rate or the maturity date
of the Mortgage Loan or adversely affects the mezzanine loan. Upon the
occurrence of an event of default under the mezzanine loan documents, Capri may
foreclose upon the membership interests of the mezzanine borrower pursuant to
the terms of the related intercreditor agreement which would result in a change
of control with respect to AP -- Donald Douglas LLC, AP -- Oxnard LLC,
AP -- Farrell Ramon LLC and APR -- III LLC. See "DESCRIPTION OF THE MORTGAGE
POOL -- Certain Terms and Conditions at the Mortgage Loans -- Other Financing"
in this Prospectus Supplement.
Management. Abbey is the property manager for the Mortgaged Properties
securing the Abbey Portfolio II Loans. The property manager is affiliated with
the borrowers.
S-113
CityPlace II
The Loan. The Mortgage Loan (the "CityPlace II Loan") is secured by a
first leasehold mortgage encumbering an office building located in Hartford,
Connecticut. The CityPlace II Loan has a Cut-Off Date Balance of $22,500,000,
which represents approximately 2.4% of the Cut-Off Date Pool Balance. The
CityPlace II Loan, which is evidenced by a senior note dated May 1, 2002, is the
senior portion of a whole loan with an original principal balance of $26,800,000
that was originated on November 9, 1999. The companion loan related to the
CityPlace II Loan is evidenced by a separate note dated May 1, 2002 (the
"CityPlace II B Note") and has a principal balance as of the Cut-Off Date of
$3,834,159. The CityPlace II Loan and the CityPlace II B Note (together, the
"CityPlace II Loan Pair") will be governed a co-lender agreement, as described
in this Prospectus Supplement under "DESCRIPTION OF THE MORTGAGE POOL -- AB
Mortgage Loans" and the CityPlace II Loan Pair will be serviced pursuant to the
Pooling and Servicing Agreement. Under the Pooling and Servicing Agreement, the
holder of the CityPlace II B Note will have certain rights with respect to the
CityPlace II Loan Pair as described in this Prospectus Supplement under
"SERVICING OF THE MORTGAGE LOANS -- The Controlling Class Representative." The
ground lease has an initial 50-year term that will expire on November 30, 2033.
All ground rent has been prepaid through the initial maturity date of the ground
lease.
The CityPlace II Loan has a remaining term of 55 months and matures on
December 1, 2006. The borrower is permitted to prepay the current unpaid
principal balance (the "Current Balance") of the CityPlace II Loan Pair, in
whole (but not in part), at any time until the date that is two years after the
Closing Date, by paying (i) interest accrued and unpaid on the Current Balance
to and including the first day of the calendar month immediately following the
date of prepayment (unless prepayment is tendered on the first day of any
calendar month, in which case to and including the date of prepayment) (such
period, the "Interest Period"), (ii) all other sums due under the terms of the
CityPlace II Loan Pair and (iii) a yield maintenance charge, which is an amount
equal to the excess, if any, of (A) the amount of monthly interest which would
otherwise be payable on the Current Balance from the end of the Interest Period
to and including the maturity date over (B) the amount of monthly interest the
mortgagee would earn if the Current Balance being prepaid were reinvested from
the end of the Interest Period to the maturity date at the current annualized
yield on United States Treasuries (such difference, if any, will be discounted
to the present value at the then applicable treasury rate). Beginning on the
date that is two years after the Closing Date, only defeasance with United
States government obligations is permitted and the borrower may not otherwise
prepay the loan until the due date occurring three months prior to the related
maturity date.
The Borrower. The borrower is Northland City Place II, LLC, a special
purpose entity. A non-consolidation opinion was delivered in connection with the
origination of the CityPlace II Loan. The sponsors are Lawrence Gottesdiener and
Robert Gatof, owners of Northland Investment Corporation ("Northland").
Northland currently owns over 14,000 multifamily units and 3.5 million square
feet of commercial space in nine states, including 1 million square feet of
commercial space in Hartford, Connecticut.
The Property. The Mortgaged Property is an approximately 292,039 square
foot office building situated on approximately 0.5 acres in Hartford,
Connecticut and constructed in 1989. As of December 31, 2001, the occupancy rate
for the Mortgaged Property securing the CityPlace II Loan was approximately
86.0%. The largest tenant is Conning & Co ("Conning") occupying approximately
59,276 square feet, or approximately 20.3% of the net rentable area. Conning is
one of the nation's largest asset managers, providing investment advising,
investment accounting/reporting and asset management services to insurance
company clients. Conning's core operations are in Hartford, Connecticut. The
Conning lease expires in March 2005. The second largest tenant is Webster Bank
("Webster") occupying approximately 41,147 square feet through 5 separate leases
on multiple spaces, or approximately 14.1% of the net rentable area. Webster
provides business and consumer banking, mortgage lending, trust and investment
and insurance services. The Webster lease, expiring in February 2006, represents
1.0% of the net rentable area, and the remaining leases, expiring in December
2008, represent 13.1% of the net rentable area. As of April 30, 2002, Webster
Financial Corporation, the parent of Webster, had a long-term unsecured debt
rating of "BBB-" (S&P) and "BBB" (Fitch). The third largest tenant is Merrill
Lynch ("Merrill
S-114
Lynch") occupying approximately 32,966 square feet, or approximately 11.3% of
the net rentable area. Merrill Lynch is one of the world's leading financial
management and advisory companies, with offices in 38 countries and total client
assets of approximately $1.5 trillion, and as an investment bank, is a leading
global underwriter of debt and equity securities. The Merrill Lynch lease
expires in July 2011. As of April 30, 2002, Merrill Lynch had a long-term
unsecured debt rating of "AA-"(S&P), "Aa3" (Moody's) and "AA" (Fitch).
The following table presents information relating to major tenants at the
Mortgaged Property:
<Table>
<Caption>
NET
% OF ACTUAL RENTABLE % OF NET DATE OF LEASE
TENANT RENT AREA (SF) RENTABLE AREA EXPIRATION
- ------ ----------- --------- ------------- ---------------
Conning & Co. .......................................... 28.4% 59,276 20.3% March 2005
Webster Bank............................................ 19.6% 41,147 14.1% February 2006/
December 2008
Merrill Lynch........................................... 17.0% 32,966 11.3% July 2011
Brown Raysman........................................... 4.3% 16,483 5.6% October 2006
Prudential Securities, Inc. ............................ 2.9% 14,524 5.0% August 2002
</Table>
The following table presents information relating to the lease rollover
schedule at the Mortgaged Property:
<Table>
<Caption>
# OF WA % OF TOTAL CUMULATIVE % CUMULATIVE
LEASES BASE RENT/ TOTAL SF OF % OF ACTUAL % OF ACTUAL
YEAR ROLLING SF ROLLING SF ROLLING ROLLING(1) SF ROLLING(1) RENT ROLLING(1) RENT ROLLING(1)
- ---- ------- ---------- ---------- ---------- ------------- --------------- ---------------
2002 4 $10.03 15,748 5.4% 5.4% 3.3% 3.3%
2003 2 $11.70 17,473 6.0% 11.4% 4.3% 7.6%
2004 2 $ 8.25 14,098 4.8% 16.2% 2.4% 10.0%
2005 3 $22.92 59,276 20.3% 36.5% 28.4% 38.5%
2006 10 $13.98 39,890 13.7% 50.2% 11.7% 50.1%
</Table>
- ---------------
(1) Calculated based on approximate square footage occupied by each tenant.
Escrows. The loan documents provide for certain escrows of real estate
taxes and insurance and provide for replacement reserves. In addition, the
borrower deposited with the mortgagee at the closing of the CityPlace II Loan
the sum of $600,000, and the loan documents require the borrower to deposit with
the mortgagee an additional $450,000 for tenant improvements and leasing
commissions. See Annex A-3 to this Prospectus Supplement for information
regarding escrow reserves.
Lock Box Account. All tenant payments due under the applicable tenant
leases are deposited into a mortgagee designated lock box account.
Management. Northland is the property manager for the Mortgaged Property
securing the CityPlace II Loan. The property manager is affiliated with the
sponsors.
Marketplace at Altamonte
The Loan. The Mortgage Loan (the "Marketplace at Altamonte Loan") is
secured by a first mortgage encumbering an anchored retail center located in
Altamonte Springs, Florida. The Marketplace at Altamonte Loan represents
approximately 2.1% of the Cut-Off Date Pool Balance. The Marketplace at
Altamonte Loan was originated on March 16, 2001 and has a Cut-Off Date Balance
of $20,112,903.
The Marketplace at Altamonte Loan has a remaining term of 107 months and
matures on April 1, 2011. The Marketplace at Altamonte Loan may be prepaid on or
after May 1, 2006 with a Yield Maintenance Charge and may be prepaid on or after
January 1, 2011 without payment of a Yield Maintenance Charge.
The Borrower. The borrower is Altamonte Springs, L.L.C., a special purpose
entity. A non-consolidation opinion was delivered in connection with the
origination of the Marketplace at Altamonte Loan. The sponsors of the borrower
are Hersch Klaff and the Lubert-Adler Funds. Mr. Klaff, of Klaff
S-115
Realty, LP ("Klaff"), has been engaged in the acquisition, development,
financing, leasing and management of commercial real estate since 1981. Klaff's
current portfolio of properties, located throughout the United States, consists
of approximately 850,000 square feet of office space, over 9 million square feet
of retail space and a self-park/retail facility with over 1,100 spaces. The
Lubert-Adler Funds are real estate opportunity funds in the business of
acquiring, operating, redeveloping and repositioning real estate throughout the
United States.
The Property. The Mortgaged Property is an approximately 335,523 square
foot anchored retail center situated on approximately 25.0 acres and constructed
in 1974. The Mortgaged Property is located in Altamonte Springs, Florida within
the Orlando, Florida metropolitan statistical area. As of February 8, 2002, the
occupancy rate for the Mortgaged Property securing the Marketplace at Altamonte
Loan was approximately 100%. The largest tenant is Burlington Coat Factory
("Burlington") occupying approximately 100,749 square feet, or approximately
30.0% of the net rentable area. Burlington operates a chain of off-price apparel
stores, which offer a broad range of current brand name merchandise for men,
women and children at prices below traditional retail prices. The Burlington
lease expires in July 2009. The second largest tenant is Gold's Gym ("Gold's"),
occupying approximately 40,160 square feet, or approximately 12.0% of the net
rentable area. Gold's is the largest chain of health and fitness centers in the
world with over 550 facilities in more than 26 countries. The Gold's lease
expires in August 2015. The third largest tenant is Linens 'N Things, Inc.
("Linens 'N Things") occupying approximately 39,193 square feet, or
approximately 11.7% of the net rentable area. Linens 'N Things is a national
retailer of home textiles, housewares and home accessories. The Linens 'N Things
lease expires in January 31, 2012.
The following table presents information relating to the major tenants at
the Mortgaged Property:
<Table>
<Caption>
NET
% OF ACTUAL RENTABLE % OF NET DATE OF LEASE
TENANT RENT AREA (SF) RENTABLE AREA EXPIRATION
- ------ ----------- --------- ------------- -------------
Burlington Coat Factory................................. 17.9% 100,749 30.0% July 2009
Gold's Gym.............................................. 7.1% 40,160 12.0% August 2015
Linens 'N Things, Inc. ................................. 13.3% 39,193 11.7% January 2012
Ross Dress For Less..................................... 12.7% 31,379 9.4% January 2012
TJ Maxx................................................. 5.3% 27,440 8.2% January 2005
Comp USA................................................ 10.9% 26,750 8.0% November 2010
Just for Feet of Texas.................................. 18.2% 22,043 6.6% November 2009
</Table>
The following table presents information relating to the lease rollover
schedule at the Mortgaged Property:
<Table>
<Caption>
# OF WA % OF TOTAL CUMULATIVE % CUMULATIVE
LEASES BASE RENT/ TOTAL SF OF % OF ACTUAL % OF ACTUAL
YEAR ROLLING SF ROLLING SF ROLLING ROLLING(1) SF ROLLING(1) RENT ROLLING(1) RENT ROLLING(1)
- ---- ------- ---------- ---------- ------------- ------------- --------------- ---------------
2002 0 $ 0.00 0 0.0% 0.0% 0.0% 0.0%
2003 0 $ 0.00 0 0.0% 0.0% 0.0% 0.0%
2004 1 $ 6.10 12,000 3.6% 3.6% 2.5% 2.5%
2005 2 $ 6.86 33,297 9.9% 13.5% 7.7% 10.2%
2006 0 $ 0.00 0 0.0% 13.5% 0.0% 10.2%
2007 2 $ 9.63 29,952 8.9% 22.4% 9.8% 20.0%
2008 0 $ 0.00 0 0.0% 22.4% 0.0% 20.0%
2009 2 $ 8.68 122,792 36.6% 59.0% 36.0% 56.0%
2010 1 $12.05 26,750 8.0% 67.0% 10.9% 66.9%
2011 0 $ 0.00 0 0.0% 67.0% 0.0% 66.9%
</Table>
- ---------------
(1) Calculated based on approximate square footage occupied by each tenant.
Escrows. The loan documents provide for certain escrows of real estate
taxes and insurance and provide for replacement reserves. In addition, the
borrower deposited with the mortgagee at the closing of the Marketplace at
Altamonte Loan, the sum of $300,000, and the loan documents require the borrower
to deposit with the mortgagee an additional $1,072,032 (in monthly payments
commencing in May 2003) for
S-116
tenant improvements and leasing commissions. See Annex A-3 to this Prospectus
Supplement for information regarding escrow reserves.
Lock Box Account. All tenant payments due under the applicable tenant
leases are deposited into a mortgagee designated lock box account.
Management. Klaff is the property manager for the Mortgaged Property
securing the Marketplace at Altamonte Loan. The property manager is an affiliate
of the sponsor.
Broadmoor Towne Center
The Loan. The Mortgage Loan (the "Broadmoor Towne Center Loan") is secured
by a first deed of trust encumbering an anchored retail center located in
Colorado Springs, Colorado. The Broadmoor Towne Center Loan represents
approximately 2.0% of the Cut-Off Date Pool Balance. The Broadmoor Town Center
Loan was originated on February 25, 2002 and has a Cut-Off Date Balance of
$18,973,729.
The Broadmoor Towne Center Loan has a remaining term of 118 months and
matures on March 1, 2012. The Broadmoor Towne Center Loan may be prepaid on or
after January 1, 2012, and permits defeasance with United States government
obligations beginning four years after its first payment date.
The Borrower. The borrower is Univest-Broadmoor, LLC, a special purpose
entity. A non-consolidation opinion was delivered in connection with the
origination of the Broadmoor Towne Center Loan. The sponsor of the borrower is
Thomas J. Lowe. Mr. Lowe is the founding principal of Univest Development Group,
a real estate development and investment firm, which has developed approximately
9 million square feet of office, industrial and retail space.
The Property. The Mortgaged Property is an approximately 172,965 square
foot anchored retail center situated on approximately 38.4 acres and constructed
in 2001. The Mortgaged Property is located in Colorado Springs, Colorado. As of
January 11, 2002, the occupancy rate for the Mortgaged Property securing the
Broadmoor Towne Center Loan was approximately 97.6%. The largest tenant is Bed
Bath and Beyond, Inc. ("Bed Bath and Beyond") occupying approximately 30,529
square feet, or approximately 17.7% of the net rentable area. Bed Bath and
Beyond operates superstores selling a variety of domestic merchandise and home
furnishings. The Bed Bath and Beyond lease expires in January 2011. As of April
8, 2002, Bed Bath and Beyond had a long-term unsecured debt rating of "BBB-"
(S&P). The second largest tenant is Ross Dress For Less ("Ross Dress For Less"),
occupying approximately 30,187 square feet, or approximately 17.5% of the net
rentable area. Ross Dress For Less is a nationally known retailer of women's
apparel. The Ross Dress For Less lease expires in January 2011. The third
largest tenant is Borders Books ("Borders Books"), occupying approximately
25,000 square feet, or approximately 14.5% of the net rentable area. Borders
Books is an operator of book and music superstores. The Borders Books lease
expires in January 2022.
The following table presents information relating to the major tenants at
the Mortgaged Property:
<Table>
<Caption>
% OF GROSS NET
POTENTIAL RENTABLE % OF NET DATE OF LEASE
TENANT RENT AREA (SF) RENTABLE AREA EXPIRATION
- ------ ---------- --------- ------------- --------------
Bed Bath and Beyond................................ 13.9% 30,529 17.7% January 2011
Ross Dress For Less................................ 13.1% 30,187 17.5% January 2011
Borders Books...................................... 17.3% 25,000 14.5% January 2022
Michaels........................................... 11.8% 24,228 14.0% January 2011
Petsmart........................................... 10.4% 19,235 11.1% July 2015
</Table>
S-117
The following table presents information relating to the lease rollover
schedule at the Mortgaged Property:
<Table>
<Caption>
CUMULATIVE
% OF GROSS % OF GROSS
WA BASE CUMULATIVE POTENTIAL POTENTIAL
# OF LEASES RENT/SF TOTAL SF % OF TOTAL SF % OF SF RENT RENT
YEAR ROLLING ROLLING ROLLING ROLLING(1) ROLLING(1) ROLLING(1) ROLLING(1)
- ---- ----------- --------- -------- ------------- ----------- ---------- ----------
2002 0 $ 0.00 0 0.0% 0.0% 0.0% 0.0%
2003 0 $ 0.00 0 0.0% 0.0% 0.0% 0.0%
2004 0 $ 0.00 0 0.0% 0.0% 0.0% 0.0%
2005 2 $21.50 2,400 1.4% 1.4% 2.2% 2.2%
2006 6 $16.56 23,795 13.8% 15.1% 17.0% 19.3%
2007 0 $ 0.00 0 0.0% 15.1% 0.0% 19.3%
2008 0 $ 0.00 0 0.0% 15.1% 0.0% 19.3%
2009 0 $ 0.00 0 0.0% 15.1% 0.0% 19.3%
2010 0 $ 0.00 0 0.0% 15.1% 0.0% 19.3%
2011 5 $11.44 91,101 52.7% 67.8% 45.1% 64.4%
2012 0 $ 0.00 0 0.0% 67.8% 0.0% 64.4%
</Table>
- ----------------
(1) Calculated based on approximate square footage occupied by each tenant.
Escrows. The loan documents provide for replacement reserves. The borrower
deposited with mortgagee at closing of the Broadmoor Towne Center Loan the sum
of $108,727, which represents the equivalent of six months of real estate taxes
and insurance premiums and, the loan documents require the borrower, beginning
six years after the closing of the Broadmoor Towne Center Loan, to deposit with
mortgagee a sum of $60,000 per year, not to exceed $300,000 in the aggregate,
for tenant improvements and leasing commissions. See Annex A-3 to Prospectus
Supplement for information regarding escrow reserves.
Lock Box Account. At any time during the term of the Broadmoor Towne
Center Loan, (i) if the DSCR, as computed by the mortgagee, is less than 1.15x
or (ii) upon the occurrence of an event of default under the loan documents, the
borrower must notify the tenants that any and all tenant payments due under the
applicable tenant leases shall be directly deposited into a mortgagee designated
lock box account.
Management. Univest Management Group ("Univest Management") is the
property manager for the Mortgaged Property securing the Broadmoor Towne Center
Loan. Univest Management currently manages over 1.5 million square feet of
commercial space. The property manager is affiliated with the sponsor.
215 East 23rd Street
The Loan. The Mortgage Loan (the "215 East 23rd Street Loan") is secured
by a first mortgage encumbering a 22-story building containing 74 multifamily
units located in New York, New York. The 215 East 23rd Street Loan represents
approximately 1.9% of the Cut-Off Date Pool Balance. The 215 East 23rd Street
Loan was originated on February 27, 2002 and has a Cut-Off Date Balance of
$17,973,862.
The 215 East 23rd Street Loan has a remaining term of 118 months and
matures on March 1, 2012. The 215 East 23rd Street Loan may be prepaid on or
after January 1, 2012 and permits defeasance with United States government
obligations beginning four years after its first payment date.
The Borrower. The borrower is Ocean Drive Realty Associates, LLC, a
special purpose entity. A non-consolidation opinion was delivered in connection
with the origination of the 215 East 23rd Street Loan. The sponsors are Arthur
Leeds, Melvin Gershon and Robert Gershon. Mr. Leeds, through his firm Arthur
Leeds Real Estate, has been active in the acquisition, renovation and management
of apartment complexes in New York City, Philadelphia, Pennsylvania and Miami
Beach, Florida since 1961. The Gershons, through their company C. Gershon
Company, have over 40 years experience in the operation and management of
commercial and residential properties throughout the New York area.
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The Property. The Mortgaged Property is a 22-story building containing 74
multifamily units situated on approximately 0.1 acres in New York, New York and
constructed in 2001. The Mortgaged Property is located at 215 East 23rd Street
between 2nd and 3rd Avenues. The Mortgaged Property is adjacent to, and leased
entirely to, the School of Visual Arts ("SVA") for use as student housing
pursuant to a 10.5 year master lease that commenced in January 2002. SVA has
been in operation since 1947 and currently has over 5,900 registered students
evenly distributed between undergraduate and continuing education students. As
of February 27, 2002, the occupancy rate for the Mortgaged Property securing the
215 East 23rd Street Loan was approximately 100.0%.
The following table presents information relating to the unit configuration
of the Mortgaged Property:
<Table>
<Caption>
APPROXIMATE
APPROXIMATE NET RENTABLE % OF NET ASKING RENTAL
UNIT MIX NO. OF UNITS UNIT SIZE (SF) AREA (SF) RENTABLE AREA RANGE
- -------- ------------ -------------- ------------ ------------- -------------
Studio.......................... 1 335 335 0.68% (1)
1-BR/1-BA....................... 35 510 17,850 36.13% (1)
1-BR/2-BA....................... 4 696 2,784 5.64% (1)
2-BR/2-BA....................... 30 790 23,700 47.97% (1)
2-BR/2-BA Duplex................ 4 1,183 4,732 9.58% (1)
-- ------ -----
Total/Weighted Average.......... 74 668 49,401 100.0% (1)
== ====== =====
</Table>
- ----------------
(1) The building is 100% leased to SVA, which pays annual rent of $2,662,000 per
year for all the residential units.
Escrows. The loan documents provide for certain escrows of real estate
taxes and insurance and provide for replacement reserves. As a condition
precedent to the closing of the 215 East 23rd Street Loan, SVA delivered to the
mortgagee (i) a letter of credit in an amount equal to $2,720,000 (the "Letter
of Credit"), which represents approximately two years of debt service payments,
and can be drawn on only in the event of default by SVA of its obligations under
its lease and (ii) a letter of credit in an amount equal to $1,000,000 (the
"Second Letter of Credit"), which shall be reduced by approximately $100,000
annually which amount equals certain additional rent payments made to the
borrower. The additional rent payments due by SVA are for the reimbursement of
improvement costs incurred by the borrower. In the event SVA does not make its
additional rent payment, the mortgagee on behalf of the borrower may draw on the
Second Letter of Credit and the proceeds will serve as additional collateral for
the 215 East 23rd Street Loan. The Letter of Credit and the Second Letter of
Credit have been collaterally assigned and delivered to the mortgagee. See Annex
A-3 to this Prospectus Supplement for information regarding escrow reserves.
Lock Box Account. At any time during the term of the 215 East 23rd Street
Loan, (i) if the DSCR falls below 1.15x, as computed by the mortgagee, or (ii)
upon the occurrence of an event of default under the loan documents, the
borrower must notify the tenants that any and all tenant payments due under the
applicable tenant leases shall be directly deposited into a mortgagee designated
lock box account.
Property Management. Arthur Leeds Management is the property manager for
the Mortgaged Property securing the 215 East 23rd Street Loan. Arthur Leeds
Management currently manages approximately 1,300 apartment units. The property
manager is affiliated with one of the sponsors.
Maine Crossing
The Loan. The Mortgage Loan (the "Maine Crossing Loan") is secured by a
first mortgage encumbering an anchored retail center located in South Portland,
Maine. The Maine Crossing Loan represents approximately 1.8% of the Cut-Off Date
Pool Balance. The Maine Crossing Loan was originated on January 31, 2002 and
Cut-Off Date Balance of $17,456,038.
The Maine Crossing Loan has a remaining term of 117 months and matures on
February 1, 2012. The Maine Crossing Loan may be prepaid on or after December 1,
2011 and permits defeasance with United States government obligations beginning
four years after its first payment date.
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The Borrower. The borrower is Running Hill SP LLC, a special purpose
entity. A non-consolidation opinion was delivered in connection with the
origination of the Maine Crossing Loan. The sponsors of the borrower are Leonard
Rudolfsky and Stephen Karp. Mr. Rudolfsky is the President and founder of
Packard Development Co., and the President and CEO of Beaver Builders, Ltd. Mr.
Karp is the founder and CEO of New England Development. Both sponsors are
involved in the development and management of retail properties in New England.
The Property. The Mortgaged Property is an approximately 148,672 square
foot anchored retail center situated on approximately 14.5 acres and constructed
in 2001. The Mortgaged Property is located in South Portland, Maine, which is
within the Portland, Maine metropolitan statistical area. As of March 28, 2002,
the occupancy rate for the Mortgaged Property securing the Maine Crossing Loan
was approximately 96.0%. The largest tenant is Babies R Us ("Babies R Us")
occupying approximately 30,606 square feet, or approximately 20.6% of the net
rentable area. Babies R Us is a subsidiary of Toys R Us, Inc. ("Toys R Us"),
which retails children's products worldwide. The Babies R Us lease expires in
November 2016. As of March 27, 2002, Toys R Us had a long-term unsecured debt
rating of "BBB+" (S&P) and "Baa3" (Moody's). The second largest tenant is Bed
Bath & Beyond, Inc. ("Bed Bath & Beyond") occupying approximately 30,448 square
feet, or approximately 20.5% of the net rentable area. Bed Bath and Beyond
operates superstores selling a variety of domestic merchandise and home
furnishings. The Bed Bath & Beyond lease expires in January 2017. As of March
27, 2002, Bed Bath & Beyond had a long-term unsecured debt rating of "BBB-"
(S&P). The third largest tenant is Old Navy ("Old Navy"), occupying
approximately 30,000 square feet, or approximately 20.2% of the net rentable
area. Old Navy is a subsidiary of The Gap, Inc. ("Gap"). Gap is a global
specialty retailer, operating stores selling casual apparel, personal care
items, and other accessories for men, women and children. The Old Navy lease
expires in September 2011.
The following table presents information relating to the major tenants at
the Mortgaged Property:
<Table>
<Caption>
% OF GROSS NET
POTENTIAL RENTABLE % OF NET DATE OF LEASE
TENANT RENT AREA (SF) RENTABLE AREA EXPIRATION
- ------ ---------- --------- ------------- --------------
Babies R Us........................................ 6.9% 30,606 20.6% November 2016
Bed Bath & Beyond.................................. 21.9% 30,448 20.5% January 2017
Old Navy........................................... 23.4% 30,000 20.2% September 2011
AC Moore........................................... 15.8% 23,400 15.7% January 2012
Famous Footwear.................................... 7.4% 9,330 6.3% November 2006
</Table>
The following table presents information relating to the lease rollover
schedule at the Mortgaged Property:
<Table>
<Caption>
CUMULATIVE
% OF GROSS % OF GROSS
WA BASE CUMULATIVE POTENTIAL POTENTIAL
# OF LEASES RENT/SF TOTAL SF % OF TOTAL SF % OF SF RENT RENT
YEAR ROLLING ROLLING ROLLING ROLLING(1) ROLLING(1) ROLLING(1) ROLLING(1)
- ---- ----------- --------- -------- ------------- ----------- ---------- ----------
2002 0 $ 0.00 0 0.0% 0.0% 0.0% 0.0%
2003 0 $ 0.00 0 0.0% 0.0% 0.0% 0.0%
2004 0 $ 0.00 0 0.0% 0.0% 0.0% 0.0%
2005 0 $ 0.00 0 0.0% 0.0% 0.0% 0.0%
2006 1 $17.00 9,330 6.3% 6.3% 7.4% 7.4%
2007 0 $ 0.00 0 0.0% 6.3% 0.0% 7.4%
2008 0 $ 0.00 0 0.0% 6.3% 0.0% 7.4%
2009 0 $ 0.00 0 0.0% 6.3% 0.0% 7.4%
2010 0 $ 0.00 0 0.0% 6.3% 0.0% 7.4%
2011 4 $18.87 43,888 29.5% 35.8% 38.5% 45.8%
2012 1 $14.50 23,400 15.7% 51.5% 15.8% 61.6%
</Table>
- ----------------
(1) Calculated based on approximate square footage occupied by each tenant.
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Escrows. The loan documents provide for certain escrows of real estate
taxes and provide for replacement reserves. In addition, the borrower deposited
with mortgagee at the closing of the Maine Crossing Loan the sum of
approximately $300,000, which is to be released at such time as certain vacant
out-parcel space is occupied and the related tenant is paying rent. See Annex
A-3 to this Prospectus Supplement for information regarding escrow reserves.
Management. Packard Development Corporation is the property manager for
the Mortgaged Property securing the Maine Crossing Loan. The property manager is
affiliated with the sponsor.
THE MORTGAGE LOAN SELLERS
The Depositor will acquire the Mortgage Loans from the Mortgage Loan
Sellers on or prior to the Closing Date pursuant to separate mortgage loan
purchase agreements (each, a "Mortgage Loan Purchase Agreement" and together,
the "Mortgage Loan Purchase Agreements"). The Mortgage Loan Sellers originated
or acquired the Mortgage Loans as described above under "--Mortgage Loan
History."
Fifty-eight (58) of the Mortgage Loans (the "Wachovia Mortgage Loans"),
representing 44.9% of the Cut-Off Date Balance, were originated or acquired by
Wachovia Bank, National Association (formerly known as First Union National
Bank). Forty-two (42) of the Mortgage Loans (the "Greenwich Mortgage Loans"),
representing 28.7% of the Cut-Off Date Pool Balance, were originated or acquired
by Greenwich Capital Financial Products, Inc. Eighteen (18) of the Mortgage
Loans (the "Nomura Mortgage Loans"), representing 15.3% of the Cut-Off Date Pool
Balance, were originated or acquired by Nomura Credit & Capital, Inc.
Thirty-eight (38) of the Mortgage Loans (the "Artesia Mortgage Loans"),
representing 11.0% of the Cut-Off Date Pool Balance, were originated or acquired
by Artesia Mortgage Capital Corporation. Wachovia Bank, National Association has
no obligation to repurchase or substitute any of the Artesia Mortgage Loans, the
Greenwich Mortgage Loans or the Nomura Mortgage Loans, Greenwich has no
obligation to repurchase or substitute any of the Wachovia Mortgage Loans, the
Artesia Mortgage Loans or the Nomura Mortgage Loans, Nomura has no obligation to
repurchase or substitute any of the Wachovia Mortgage Loans, the Artesia
Mortgage Loans or the Greenwich Mortgage Loans and Artesia has no obligation to
repurchase or substitute any of the Wachovia Mortgage Loans, the Greenwich
Mortgage Loans or the Nomura Mortgage Loans.
All information concerning the Wachovia Mortgage Loans contained herein or
used in the preparation of this Prospectus Supplement is as underwritten by
Wachovia Bank, National Association. All information concerning the Greenwich
Mortgage Loans contained herein or used in the preparation of this Prospectus
Supplement is as underwritten by Greenwich. All information concerning the
Nomura Mortgage Loans contained herein or used in the preparation of this
Prospectus Supplement is as underwritten by Nomura. All information concerning
the Artesia Mortgage Loans contained herein or used in the preparation of this
Prospectus Supplement is as underwritten by Artesia.
UNDERWRITING STANDARDS
General. Each Mortgage Loan Seller's commercial real estate finance or
commercial mortgage banking group has the authority, with the approval from the
appropriate credit committee, to originate fixed-rate, first lien mortgage loans
for securitization. Each Mortgage Loan Seller's commercial real estate finance
or commercial mortgage banking operation is staffed by real estate
professionals. Each Mortgage Loan Seller's loan underwriting group is an
integral component of the commercial real estate finance or commercial mortgage
banking group which also includes groups responsible for loan origination and
closing mortgage loans.
Upon receipt of a loan 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
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rent rolls (generally unaudited), third party credit reports, judgment, lien,
bankruptcy and pending litigation searches and, if applicable, the loan payment
history of the borrower. Each Mortgage Loan Seller typically performs a
qualitative analysis which incorporates independent credit checks and published
debt and equity information with respect to certain principals of the borrower
as well as the borrower itself. Borrowers are generally required to be
single-purpose entities although they are generally not required to be
bankruptcy-remote entities. The collateral analysis typically 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 generally requires third party appraisals, as well as environmental
and building condition reports. Each report is reviewed for acceptability by a
staff member of the applicable Mortgage Loan Seller for compliance with program
standards and such staff member approves or rejects such report. Generally, 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
generally calculated based on net cash flow at the time of origination. In
addition, each Mortgage Loan Seller's underwriting guidelines generally permit a
maximum amortization period of 30 years. However, notwithstanding such
guidelines, in certain circumstances the actual debt service coverage ratios,
loan-to-value ratios and amortization periods for the mortgage loans originated
by such Mortgage Loan Seller may vary from these guidelines.
Escrow Requirements. 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 generally 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 where an environmental or
engineering report suggests that such reserve is necessary. Upon funding
of the applicable Mortgage Loan, the Mortgage Loan Seller generally
requires that at least 110% of the estimated costs of repairs or
replacements be reserved and generally requires that repairs or
replacements be completed within a year after the funding of the
applicable Mortgage Loan.
- Tenant Improvement/Lease Commissions--In some cases, major tenants
have lease expirations within the Mortgage Loan term. To mitigate
this risk, special reserves may be required to be funded either at
closing of the Mortgage Loan and/or during the Mortgage Loan term to
cover certain anticipated leasing commissions or tenant improvement
costs which might be associated with re-leasing the space occupied
by such tenants.
ASSIGNMENT OF THE MORTGAGE LOANS; REPURCHASES AND SUBSTITUTIONS
On the Closing Date, the Depositor will transfer the Mortgage Loans,
without recourse, to the Trustee for the benefit of the Certificateholders. In
connection with such transfer, the Depositor will require each Mortgage Loan
Seller to deliver to the Trustee or to a document custodian appointed by the
Trustee (a
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"Custodian"), among other things, the following documents with respect to each
Mortgage Loan originated or acquired by the applicable Mortgage Loan Seller (the
"Mortgage File"): (i) the original Mortgage Note, endorsed on its face or by
allonge attached thereto, without recourse, to the order of the Trustee or in
blank (or, if the original Mortgage Note has been lost, an affidavit to such
effect from the applicable Mortgage Loan Seller or another prior holder,
together with a copy of the Mortgage Note); (ii) the original or a copy of the
Mortgage, together with an original or copy of any intervening assignments of
the Mortgage, in each case (unless not yet returned by the applicable recording
office) with evidence of recording indicated thereon or certified by the
applicable recorder's office; (iii) the original or a copy of any related
assignment of leases and of any intervening assignments thereof (if such item is
a document separate from the Mortgage), in each case (unless not yet returned by
the applicable recording office) with evidence of recording indicated thereon or
certified by the applicable recorder's office; (iv) an original assignment of
the Mortgage in favor of the Trustee or in blank and (subject to the completion
of certain missing recording information) in recordable form; (v) an original
assignment of any related assignment of leases (if such item is a document
separate from the Mortgage) in favor of the Trustee or in blank and (subject to
the completion of certain missing recording information) in recordable form;
(vi) the original assignment of all unrecorded documents relating to the
Mortgage Loan, if not already assigned pursuant to items (iv) or (v) above;
(vii) originals or copies of all modification, consolidation, assumption and
substitution agreements in those instances in which the terms or provisions of
the Mortgage or Mortgage Note have been modified or the Mortgage Loan has been
assumed or consolidated; (viii) the original or a copy of the policy or
certificate of lender's title insurance issued on the date of the origination of
such Mortgage Loan, or, if such policy has not been issued or located, an
irrevocable, binding commitment (which may be a marked version of the policy
that has been executed by an authorized representative of the title company or
an agreement to provide the same pursuant to binding escrow instructions
executed by an authorized representative of the title company) to issue such
title insurance policy; (ix) any filed copies (bearing evidence of filing) or
other evidence of filing satisfactory to the Trustee of any UCC financing
statements, related amendments and continuation statements in the possession of
the applicable Mortgage Loan Seller; (x) an original assignment in favor of the
Trustee of any financing statement executed and filed in favor of the applicable
Mortgage Loan Seller in the relevant jurisdiction; (xi) 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, environmental insurance policy or guaranty
relating to a Mortgage Loan.
As provided in the Pooling and Servicing Agreement, the Trustee or a
Custodian on its behalf is required to review each Mortgage File within a
specified period following its receipt thereof. If any of the documents
described in the preceding paragraph is found during the course of such review
to be missing from any Mortgage File or defective, and in either case such
omission or defect materially and adversely affects the value of the applicable
Mortgage Loan or the interests of the Certificateholders therein, 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 within such 90-day period at a price (the "Purchase Price")
generally equal to the sum of (i) the unpaid principal balance of such Mortgage
Loan, (ii) the unpaid accrued interest on such Mortgage Loan (calculated at the
applicable Mortgage Rate) to but not including the Due Date in the Collection
Period in which the purchase is to occur and (iii) certain Additional Trust Fund
Expenses in respect of such Mortgage Loan, including but not limited to,
servicing expenses that are reimbursable to the Master Servicer, the Special
Servicer or the Trustee plus any interest thereon and on any related P&I
Advances or (2) substitute a Qualified Substitute Mortgage Loan for such
Mortgage Loan and pay the Master Servicer for deposit into the Certificate
Account a shortfall amount equal to the difference between the Purchase Price of
the deleted Mortgage Loan calculated as of the date of substitution and the
Stated Principal Balance of such Qualified Substitute Mortgage Loan as of the
date of substitution (the "Substitution Shortfall Amount"); provided that,
unless the breach would cause the Mortgage Loan not to be a qualified mortgage
within the
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meaning of Section 860G(a)(3) of the Code, the applicable Mortgage Loan Seller
will generally have an additional 90-day period to deliver the document or cure
the defect, as the case may be, if it is diligently proceeding to effect such
delivery or cure and provided further, 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 in, or
the value of, the affected Mortgage Loans unless the document with respect to
which the document omission or defect exists is required in connection with an
imminent enforcement of the mortgagee's rights or remedies under the related
Mortgage Loan, defending any claim asserted by any borrower or third party with
respect to the Mortgage Loan, establishing the validity or priority of any lien
or any collateral securing the Mortgage Loan or for any immediate significant
servicing obligation. The foregoing repurchase or substitution obligation
constitutes the sole remedy available to the Certificateholders and the Trustee
for any uncured failure to deliver, or any uncured defect in, a constituent
Mortgage Loan document. Each Mortgage Loan Seller is solely responsible for its
repurchase or substitution obligation, and such obligations will not be the
responsibility of the Depositor.
The Pooling and Servicing Agreement requires the Trustee promptly to cause
each of the assignments described in clauses (iv), (v) and (x) of the second
preceding paragraph to be submitted for recording or filing, as applicable, in
the appropriate public records. See "DESCRIPTION OF THE POOLING
AGREEMENTS--Assignment of Mortgage Assets; Repurchases" in the Prospectus.
A "Qualified Substitute Mortgage Loan" is a mortgage loan which must, on
the date of substitution: (i) have an outstanding Stated Principal Balance,
after application of all scheduled payments of principal and interest due during
or prior to the month of substitution, not in excess of the Stated Principal
Balance of the deleted Mortgage Loan as of the Due Date in the calendar month
during which the substitution occurs; (ii) have a Mortgage Rate not less than
the Mortgage Rate of the deleted Mortgage Loan; (iii) have the same Due Date as
the deleted Mortgage Loan; (iv) accrue interest on the same basis as the deleted
Mortgage Loan (for example, on the basis of a 360-day year consisting of twelve
30-day months); (v) have a remaining term to stated maturity not greater than,
and not more than two years less than, the remaining term to stated maturity of
the deleted Mortgage Loan; (vi) have an original loan-to-value ratio not higher
than that of the deleted Mortgage Loan and a current loan-to-value ratio not
higher than the then-current loan-to-value ratio of the deleted Mortgage Loan;
(vii) comply as of the date of substitution with all of the representations and
warranties set forth in the applicable Mortgage Loan Purchase Agreement; (viii)
have an environmental report with respect to the related Mortgaged Property
which will be delivered as a part of the related servicing file; (ix) have an
original debt service coverage ratio not less than the original debt service
coverage ratio of the deleted Mortgage Loan; (x) be determined by an opinion of
counsel to be a "qualified replacement mortgage" within the meaning of Section
860G(a)(4) of the Code; (xi) not have a maturity date after the date 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 a Controlling Class Representative has been
elected and 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 will be required to
certify that such Mortgage Loan meets all of the requirements of the above
definition and shall send such certification to the Trustee.
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REPRESENTATIONS AND WARRANTIES; REPURCHASES AND SUBSTITUTIONS
In each Mortgage Loan Purchase Agreement, the applicable Mortgage Loan
Seller has represented and warranted with respect to each Mortgage Loan (subject
to certain exceptions specified in each Mortgage Loan Purchase Agreement), as of
the Closing Date, or as of such other date specifically provided in the
representation and warranty, among other things, generally that:
(i) the information set forth in the schedule of Mortgage Loans
attached to the applicable Mortgage Loan Purchase Agreement (which contains
certain of the information set forth in Annex A-1 to this prospectus
supplement) is true and correct in all material respects as of the Cut-Off
Date;
(ii) as of the date of its origination, such Mortgage Loan complied in
all material respects with, or was exempt from, all requirements of
federal, state or local law relating to the origination of such Mortgage
Loan;
(iii) immediately prior to the sale, transfer and assignment to the
Depositor, the applicable Mortgage Loan Seller had good 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;
(iv) the proceeds of such Mortgage Loan have been fully disbursed and
there is no requirement for future advances thereunder by the mortgagee;
(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 is the legal, valid and binding obligation of the
related mortgagor (subject to any nonrecourse provisions therein and any
state anti-deficiency or market value limit deficiency legislation),
enforceable in accordance with its terms, except that certain provisions
contained in such Mortgage Loan documents are or may be unenforceable in
whole or in part under applicable state or federal laws, but neither the
application of any such laws to any such provision nor the inclusion of any
such provisions renders any of the Mortgage Loan documents invalid as a
whole and such Mortgage Loan documents taken as a whole are enforceable to
the extent necessary and customary for the practical realization of the
rights and benefits afforded thereby, and except as such enforcement may be
limited by bankruptcy, insolvency, receivership, reorganization,
moratorium, redemption, liquidation or other laws affecting the enforcement
of creditors' rights generally, and by general principles of equity
(regardless of whether such enforcement is considered in a proceeding in
equity or at law);
(vi) as of the date of its origination, there was no valid offset,
defense, counterclaim, abatement or right to rescission with respect to any
of the related Mortgage Notes, Mortgage(s) or other agreements executed in
connection therewith, and, as of the Cut-Off Date, there was no valid
offset, defense, counterclaim or right to rescission with respect to such
Mortgage Note, Mortgage(s) or other agreements, except in each case, with
respect to the enforceability of any provisions requiring the payment of
default interest, late fees, additional interest, prepayment premiums or
yield maintenance charges;
(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 the customary
limitations set forth in (v) above);
(viii) the related Mortgage is a valid and enforceable first lien on
the related Mortgaged Property except for the exceptions set forth in
paragraph (v) above and (a) 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 and adversely 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
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specific) and exclusions set forth in the related title insurance policy or
appearing of 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,
(d) other matters to which like properties are commonly subject, none of
which, individually or in the aggregate, materially and adversely
interferes with the current use of the Mortgaged Property or the security
intended to be provided by such Mortgage or with the 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, (e)
the right of tenants (whether under ground leases, space leases or
operating leases) at the Mortgaged Property to remain following a
foreclosure or similar proceeding (provided that such tenants are
performing under such leases) and (f) if such Mortgage Loan is
cross-collateralized with any other Mortgage Loan, the lien of the Mortgage
for such other Mortgage Loan, none of which, individually or in the
aggregate, materially and adversely interferes with the current use of the
Mortgaged Property or the security intended to be provided by such Mortgage
or with the 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;
(ix) all real estate taxes and governmental assessments, or
installments thereof, which would be a lien on the Mortgaged Property and
that prior to the Cut-Off Date have become delinquent in respect of the
related Mortgaged Property have been paid, or an escrow of funds in an
amount sufficient to cover such payments has been established;
(x) 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-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) at
least 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 in any event, the amount necessary to prevent
operation of any co-insurance provisions, 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 any
Mortgage Loan Purchase Agreement that materially and adversely affects the value
of a Mortgage Loan or the interests of the
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Certificateholders therein, the applicable Mortgage Loan Seller, if it does not
cure such breach within a period of 90 days following its receipt of notice
thereof, is obligated pursuant to the applicable Mortgage Loan Purchase
Agreement (the relevant rights under which have been assigned by the Depositor
to the Trustee) to either substitute a Qualified Substitute Mortgage Loan and
pay any Substitution Shortfall Amount or to repurchase the affected Mortgage
Loan within such 90-day period at the applicable Purchase Price; provided that,
unless the breach would cause the Mortgage Loan not to be a qualified mortgage
within the meaning of Section 860G(a)(3) of the Code, the applicable Mortgage
Loan Seller generally has an additional 90-day period to cure such breach if it
is diligently proceeding with such cure. Each Mortgage Loan Seller is solely
responsible for its repurchase or substitution obligation, and such obligations
will not be the responsibility of the Depositor.
The foregoing substitution or repurchase obligation constitutes the sole
remedy available to the Certificateholders and the Trustee for any uncured
breach of any Mortgage Loan Seller's representations and warranties regarding
its Mortgage Loans. There can be no assurance that the applicable Mortgage Loan
Seller will have the financial resources to repurchase any Mortgage Loan at any
particular time. Each Mortgage Loan Seller is the sole warranting party in
respect of the Mortgage Loans sold by such Mortgage Loan Seller to the
Depositor, and none of the Depositor nor any of such party's affiliates (except
with respect to Wachovia Bank, National Association in its capacity as a
Mortgage Loan Seller) will be obligated to substitute or repurchase any such
affected Mortgage Loan in connection with a breach of a Mortgage Loan Seller's
representations and warranties if such Mortgage Loan Seller defaults on its
obligation to do so.
REPURCHASE OR SUBSTITUTION OF CROSS-COLLATERALIZED MORTGAGE LOANS
If (i) any Mortgage Loan is required to be repurchased or substituted for
in the manner described above in "--Assignment of the Mortgage Loans;
Repurchases and Substitutions" or "--Representations and Warranties; Repurchases
and Substitutions", (ii) such Mortgage Loan is cross-collateralized and
cross-defaulted with one or more other Mortgage Loans (each a "Crossed Loan"
and, collectively, a "Crossed Group"), and (iii) the applicable document
omission or defect (a "Defect") or breach of a representation and warranty (a
"Breach") does not constitute a Defect or Breach, as the case may be, as to any
other Crossed Loan in such Crossed Group (without regard to this paragraph),
then the applicable Defect or Breach, as the case may be, will be deemed to
constitute a Defect or Breach, as the case may be, as to any other Crossed Loan
in the Crossed Group for purposes of this paragraph, and the related Mortgage
Loan Seller will be required to repurchase or substitute for such other Crossed
Loan(s) in the related Crossed Group as provided above in "--Assignment of the
Mortgage Loans; Repurchases and Substitutions" or "--Representations and
Warranties; Repurchases and Substitutions" unless: (i) the debt service coverage
ratio for all of the remaining Crossed Loans for the four calendar quarters
immediately preceding the repurchase or substitution is not less than the debt
service coverage ratio for all such related Crossed Loans, including the
affected Crossed Loan, for the four calendar quarters immediately preceding the
repurchase or substitution, (ii) the loan-to-value ratio for any of the
remaining related Crossed Loans, including the affected Crossed Loan, determined
at the time of repurchase or substitution is not greater than the loan-to-value
ratio for all such related Crossed Loans, including the affected Crossed Loan,
determined at the time of repurchase or substitution, and (iii) the Trustee
receives an opinion of counsel to the effect that such repurchase or
substitution is permitted by the REMIC provisions. In the event that one or more
of such other Crossed Loans satisfy the aforementioned criteria, the Mortgage
Loan Seller may elect either to repurchase or substitute for only the affected
Crossed Loan as to which the related Breach or Defect exists or to repurchase or
substitute for all of the Crossed Loans in the related Crossed Group.
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.
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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.
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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 for the
benefit of the Certificateholders, in accordance with applicable law, the terms
of the Pooling and Servicing Agreement, the terms of the CLF Intercreditor
Agreement or Greenwich Co-Lender Agreement, if applicable, 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 or, if an AB Mortgage Loan and its related
Companion Loan (a "Loan Pair") is involved with view towards the maximization of
recovery on such Loan Pair to the Certificateholders and the holder of the
related Companion Loan and the Trust Fund (as a collective whole), 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 or Companion Loan
by the Master Servicer or the Special Servicer, as the case may be, or by any
affiliate thereof; (iii) the right of the Master Servicer or the Special
Servicer, as the case may be, to receive compensation or other fees for its
services rendered pursuant to the Pooling and Servicing Agreement; (iv) the
obligation of the Master Servicer to make Advances (as defined in this
Prospectus Supplement); (v) the ownership, servicing or management by the Master
Servicer or the Special Servicer or any affiliate thereof for others of any
other mortgage loans or real property; (vi) any obligation of the Master
Servicer, or any affiliate thereof, to repurchase or substitute a Mortgage Loan
as a Mortgage Loan Seller; (vii) any obligation of the Master Servicer or any
affiliate thereof to cure a breach of a representation and warranty with respect
to a Mortgage Loan; and (viii) any debt the Master Servicer or Special Servicer
or any affiliate of either has extended to any obligor on a Mortgage Note.
The Master Servicer and the Special Servicer may appoint sub-servicers with
respect to the Mortgage Loans; provided that the Master Servicer and the Special
Servicer will remain obligated under the Pooling and Servicing Agreement for the
servicing of the Mortgage Loans. 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. 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, in certain circumstances, the holder
of the City Place II B Note), 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
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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
Wachovia Bank, National Association, in its capacity as Master Servicer
under the Pooling and Servicing Agreement (in such capacity, the "Master
Servicer"), will be responsible for servicing the Mortgage Loans (other than
Specially Serviced Mortgage Loans 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. Wachovia Bank, National Association is a wholly owned
subsidiary of Wachovia Corporation, and is our affiliate and one of the Mortgage
Loan Sellers. In addition, it is anticipated that an affiliate of Wachovia Bank,
National Association will be the holder of the Wachovia Companion Loan described
herein. Wachovia Bank, National Association's principal servicing offices are
located at NC 1075, 8739 Research Drive URP4, Charlotte, North Carolina 28262.
As of March 31, 2002 Wachovia Bank, National Association and its affiliates
were responsible for master or primary servicing approximately 6,893 commercial
and multifamily loans, totaling approximately $50 billion in aggregate
outstanding principal amounts, including loans securitized in mortgage-backed
securitization transactions.
The information set forth in this Prospectus Supplement concerning Wachovia
Bank, National Association has been provided by Wachovia Bank, National
Association, and neither the Depositor nor the Underwriters make any
representation or warranty as to the accuracy or completeness of such
information. Wachovia Bank, National Association (apart from its obligations as
a Mortgage Loan Seller and except for the information in the first 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.
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 related loans
and equity investments. The Special Servicer has regional offices located across
the country in Florida, Georgia, Oregon and California. As of November 2001, the
Special Servicer and its affiliates were managing a portfolio which included an
original count of 12,800 assets in most states with an original face value of
over $66 billion, most of which are commercial real estate assets. Included in
this managed portfolio are $64 billion of commercial real estate assets
representing 82 securitization transactions, for which the Special Servicer is
servicer or special servicer.
The Special Servicer and its affiliates own and are in the business of
acquiring assets similar in type to the assets of the Trust Fund. Accordingly,
the assets of the Special Servicer and its affiliates may, depending upon the
particular circumstances including the nature and location of such assets,
compete with the Mortgaged Properties for tenants, purchasers, financing and so
forth.
The information set forth herein regarding the Special Servicer has been
provided by Lennar Partners, Inc. and neither the Depositor nor any Underwriter
makes any representation or warranty as to the accuracy or completeness of such
information.
The Pooling and Servicing Agreement permits the holder (or holders) of the
majority of the Voting Rights allocated to the Controlling Class to replace the
Special Servicer and to select a representative (the
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"Controlling Class Representative") who may advise the Special Servicer and
whose approval is required for certain actions by the Special Servicer under
certain circumstances. The Controlling Class Representative is selected by
holders of Certificates representing more than 50% of the Certificate Balance of
the Controlling Class. See "--The Controlling Class Representative" in this
Prospectus Supplement. Such holder (or holders) will be required to pay all
out-of-pocket costs related to the transfer of servicing if the Special Servicer
is replaced other than due to an Event of Default, 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 Z-I, Class Z-II and Class Z-III Certificates, the REMIC
Residual Certificates or the Class IO Certificates) bearing the latest
alphabetical Class designation. The Class A-1, Class A-2, Class A-3 and Class
A-4 Certificates will be treated as one Class for determining the Controlling
Class. Any such replacement of a Special Servicer will be subject to, among
other things, (i) the delivery of notice of the proposed replacement to the
Rating Agencies and receipt of written confirmation from the Rating Agencies
that the replacement will not result in a qualification, downgrade or withdrawal
of any of the then current ratings assigned to the Certificates, and (ii) the
written agreement of the successor Special Servicer to be bound by the terms and
conditions of the Pooling and Servicing Agreement. See "DESCRIPTION OF THE
CERTIFICATES--Voting Rights" in this Prospectus Supplement and the accompanying
Prospectus.
The Special Servicer is responsible for servicing and administering any
Mortgage Loan 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 (provided that if such refinancing does not occur during such
time specified in the commitment, a Servicing Transfer Event will be deemed to
have occurred), or (ii) failed to make when due any Periodic Payment (other than
a Balloon Payment), and such failure has continued unremedied for 60 days; (b)
the Master Servicer 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
and, if applicable, Companion Loan or otherwise materially adversely affects the
interests of Certificateholders and that continues unremedied beyond the
applicable grace period under the terms of the Mortgage Loan (or, if no grace
period is specified, for 60 days and provided that a default that gives rise to
an acceleration right without any grace period shall be deemed to have a grace
period equal to zero); (d) a decree or order under any bankruptcy, insolvency or
similar law shall have been entered against the related borrower and such decree
or order shall have remained in force, undischarged, undismissed or unstayed for
a period of 60 days; (e) the related borrower shall consent to the appointment
of a conservator or receiver or liquidator in any insolvency or similar
proceedings of or relating to such related borrower or of or relating to all or
substantially all of its property; (f) the related borrower shall admit in
writing its inability to pay its debts generally as they become due, file a
petition to take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors, or voluntarily
suspend payment of its obligations; or (g) the Master Servicer shall have
received notice of the commencement of foreclosure or similar proceedings with
respect to the related Mortgaged Property (each event described in clauses (a)
through (g) above, a "Servicing Transfer Event").
In general, as long as the related AB Mortgage Loan is owned by the Trust,
each Companion Loan will be serviced and administered under the Pooling and
Servicing Agreement as if it were a Mortgage Loan and the holder of the related
Mortgage Note were a Certificateholder. If a Companion Loan becomes specially
serviced, then the related AB Mortgage Loan will become a Specially Serviced
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Mortgage Loan. If an AB Mortgage Loan becomes a Specially Serviced Mortgage
Loan, then the related Companion Loan will become a Specially Serviced Mortgage
Loan.
If any amounts due under the AB Mortgage Loans or the related Companion
Loans are accelerated after an event of default under the applicable Mortgage
Loan documents, the holder of the related Companion Loan will be entitled to
purchase the related Mortgage Loan at the price described under "DESCRIPTION OF
THE MORTGAGE POOL--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 connection with
a bankruptcy or similar proceeding involving the related borrower or by
reason of a modification, waiver or amendment granted or agreed to by the
Special Servicer);
(b) with respect to any of the circumstances described in clauses (b),
(d), (e) and (f) of the definition of Servicing Transfer Event, when such
circumstances cease to exist in the good faith, reasonable judgment of the
Special Servicer, but, with respect to any bankruptcy or insolvency
proceedings described in clauses (d), (e) and (f) no later than the entry
of an order or decree dismissing such proceeding;
(c) with respect to the circumstances described in clause (c) of the
definition of Servicing Transfer Event, when such default is cured; and
(d) with respect to the circumstances described in clause (g) of the
definition of Servicing Transfer Event, when such proceedings are
terminated;
so long as at that time no other Servicing Transfer Event then exists and
provided no additional default is foreseeable in the reasonable good faith
judgment of the Special Servicer.
SERVICING 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 0.0500% to 0.1150%. As of the Cut-Off Date the weighted average
Master Servicing Fee Rate will be approximately 0.0568% per annum. The Master
Servicer will not be entitled to receive a separate fee with respect to the
Companion Loans. Otherwise, all references in this section to "Mortgage Loans"
will include the Companion Loans.
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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 and other than any Mortgage Loan on which the Special Servicer has waived a
prepayment restriction) that was subject to a voluntary Principal Prepayment
during the most recently ended Collection Period creating a Prepayment Interest
Shortfall, an amount equal to the lesser of (i) the sum of (a) the Master
Servicing Fee (up to a Master Servicing Fee Rate of 0.025% 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 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 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, including in connection with the purchase of the AB Mortgage
Loans as described under "DESCRIPTION OF THE MORTGAGE POOL--AB Mortgage Loans."
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
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Servicer is terminated or resigns, it will retain the right to receive any and
all Workout Fees payable with respect to any Mortgage Loan that became a
Corrected Mortgage Loan during the period that it acted as Special Servicer and
remained a Corrected Mortgage Loan at the time of its termination or resignation
or if the Special Servicer resolved the circumstances and/or conditions
(including by way of a modification of the related Mortgage Loan documents)
causing the Mortgage Loan to be a Specially Serviced Loan, but the Mortgage Loan
had not as of the time the Special Servicer is terminated or resigns become a
Corrected Mortgage Loan because the related borrower had not made three
consecutive monthly debt service payments and subsequently becomes a Corrected
Mortgage Loan as a result of making such three consecutive payments. The
successor Special Servicer will not be entitled to any portion of those Workout
Fees.
As additional servicing compensation, the Master Servicer or the Special
Servicer is entitled to retain all modification fees, assumption fees,
defeasance fees, assumption application fees, late payment charges and default
interest (to the extent not used to offset interest on Advances, Additional
Trust Fund Expenses 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 certain other permitted investment grade obligations, and the
Master Servicer and the Special Servicer each will be entitled to retain any
interest or other income earned on such funds held in those accounts maintained
by it, but shall be required to cover any losses on investments of funds held in
those accounts maintained by it, from its own funds without any right to
reimbursement, except in certain limited circumstances described in the Pooling
and Servicing Agreement.
Each of the Master Servicer and Special Servicer is, in general, required
to pay all ordinary expenses incurred by it in connection with its servicing
activities under the Pooling and Servicing Agreement, including the fees of any
sub-servicers retained by it, and is not entitled to reimbursement therefor
except as expressly provided in the Pooling and Servicing Agreement. However,
each of the Master Servicer and Special Servicer is permitted to pay certain of
such expenses (including certain expenses incurred as a result of a Mortgage
Loan default) directly out of the Certificate Account and at times without
regard to the Mortgage Loan with respect to which such expenses were incurred.
See "DESCRIPTION OF THE CERTIFICATES--Distributions" in this Prospectus
Supplement and "DESCRIPTION OF THE POOLING 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
The Pooling and Servicing Agreement permits the Special Servicer (subject,
with respect to the AB Mortgage Loans, to certain rights of the holder of the
related Companion Loan) 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
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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, or is one of the ten largest Mortgage Loans by Stated
Principal Balance as of such date, permit the transfer of (A) the related
Mortgage Property or any interest therein or (B) equity interests in the related
borrower or an equity owner of the borrower that would result, in the aggregate
during the term of the related Mortgage Loan, in a transfer greater than 49% of
the total interest in the borrower and/or any equity owner of the borrower or a
transfer of voting control in the borrower or an equity owner of the borrower
without the prior written confirmation from each Rating Agency (as applicable)
that such change will not result in the qualification, downgrade or withdrawal
of the ratings then assigned to the Certificates 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.
Notwithstanding clause (b) of the preceding paragraph and, with respect to
the AB Mortgage Loans, subject to certain rights of the holders of the related
Companion Loan, the Special Servicer may (i) reduce the amounts owing under any
Specially Serviced Mortgage Loan by forgiving principal, accrued interest and/or
any Prepayment Premium or Yield Maintenance Charge, (ii) reduce the amount of
the Periodic Payment on any Specially Serviced Mortgage Loan, including by way
of a reduction in the related Mortgage Rate, (iii) forbear in the enforcement of
any right granted under any Mortgage Note or Mortgage relating to a Specially
Serviced Mortgage Loan, (iv) extend the maturity date of any Specially Serviced
Mortgage Loan, and/or (v) accept a principal prepayment during any Lockout
Period; provided that (x) the related borrower is in default with respect to the
Specially Serviced Mortgage Loan or, in the reasonable, good faith judgment of
the Special Servicer, such default by the borrower is reasonably foreseeable,
(y) in the reasonable, good faith judgment of the Special Servicer, such
modification, would increase the recovery to Certificateholders on a net present
value basis and (z) 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 any Class of Class IO Certificates) then
outstanding, or (c) a rate below the then prevailing interest rate for
comparable loans, as determined by the Special Servicer, (iii) if the Mortgage
Loan is secured by a ground lease (and not also by the corresponding fee simple
interest), extend the maturity date of such Mortgage Loan beyond a date which is
20 years prior to the expiration of the term of such ground lease or (iv) defer
interest due on any Mortgage Loan in excess of 10% of the Stated Principal
Balance of such Mortgage Loan or defer the collection of interest on any
Mortgage Loan without accruing interest on such deferred interest at a rate at
least equal to the Mortgage Rate of such Mortgage Loan. The Special Servicer
will have the ability, subject to the servicing standard described under
"--General" above, to modify Mortgage Loans with respect to which default is
reasonably foreseeable, but which are not yet in default.
The Special Servicer is required to notify the Trustee, the Master
Servicer, the Controlling Class Representative, the Rating Agencies and, with
respect to the AB Mortgage Loans, the holders of the related Companion Loan, of
any material modification, waiver or amendment of any term of any Specially
Serviced Mortgage Loan, and to deliver to the Trustee or the related Custodian
(with a copy to the Master Servicer), for deposit in the related Mortgage File,
an original counterpart of the agreement related to such modification, waiver or
amendment, promptly (and in any event within ten business days)
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following the execution thereof. Copies of each agreement whereby any such
modification, waiver or amendment of any term of any Specially Serviced Mortgage
Loan is effected are required to be available for review during normal business
hours at the offices of the Special Servicer. See "DESCRIPTION OF THE
CERTIFICATES--Reports to Certificateholders; Available Information" in this
Prospectus Supplement.
For any Mortgage Loan other than a Specially Serviced 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 paragraphs, the Controlling Class Representative
is entitled to advise the Special Servicer with respect to the following actions
of the Special Servicer and, the Special Servicer is not permitted to take any
of the following actions as to which the Controlling Class Representative, has
objected in writing within ten business days of being notified thereof (provided
that if such written objection has not been received by the Special Servicer
within such ten business day period, then the Controlling Class Representative's
approval will be deemed to have been given):
(i) any foreclosure upon or comparable conversion (which may include
acquisitions of an REO Property) of the ownership of properties securing
such of the Specially Serviced Mortgage Loans as come into and continue in
default;
(ii) any modification or waiver of any term of the related Mortgage
Loan Documents of a Mortgage Loan that relates to the Maturity Date,
Mortgage Rate, principal balance, amortization term, payment frequency or
any provision requiring the payment of a Prepayment Premium or Yield
Maintenance Charge (other than a modification consisting of the extension
of the maturity date of a Mortgage Loan for one year or less);
(iii) any proposed sale of a REO Property (other than in connection
with the termination of the Trust Fund as described under "DESCRIPTION OF
THE CERTIFICATES--Termination" in this Prospectus Supplement or pursuant to
a Purchase Option as described below under "--Defaulted Mortgage Loans; REO
Properties; Purchase Option");
(iv) any determination to bring an REO Property into compliance with
applicable environmental laws or to otherwise address hazardous materials
located at an REO Property;
(v) any acceptance of substitute or additional collateral 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, direct the Special
Servicer to take, or to refrain from taking, such other actions as the
Controlling Class Representative may deem advisable or as to which provision is
otherwise made in the Pooling and Servicing Agreement; provided that no such
direction and no objection contemplated by the prior paragraph may (i) require
or cause the Special Servicer to violate any REMIC provisions, any provision of
the Pooling and Servicing Agreement or applicable law, including the Special
Servicer's obligation to act in accordance with the servicing standards
described under "--General" above, or (ii) expose the Master Servicer, the
Special Servicer, the Trust Fund or the Trustee to liability, or materially
expand the scope of the Special Servicer or its responsibilities under the
Pooling and Servicing Agreement or cause the Special Servicer to act or fail to
act in a manner which, in the reasonable judgment of the Special Servicer, is
not in the best interests of the Certificateholders.
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Notwithstanding the foregoing, if the unpaid principal amount of the
Greenwich Companion Loan, net of any existing related Appraisal Reduction Amount
with respect to the Greenwich AB Mortgage Loan and the related Greenwich
Companion Loan (calculated as if the loans were a single Mortgage Loan), is
equal to or greater than 25% of the original unpaid principal amount of the
Greenwich Companion Loan, then (i) the Controlling Class Representative will not
be entitled to exercise any of the rights and powers described above with
respect to the Greenwich AB Mortgage Loan and the Greenwich Companion Loan and,
instead, the related Greenwich Companion Loan noteholder or its designee will be
entitled to exercise those rights and powers with respect to the Greenwich AB
Mortgage Loan and the Greenwich Companion Loan and (ii) subject to the
requirements of the immediately two preceding paragraphs, the Greenwich
Companion Loan noteholder or its designee will be entitled to direct the Special
Servicer with respect to the acceptance of a discounted payoff with respect to
the Greenwich Companion Loan, the modification, extension, amendment or waiver
of any material non-monetary term of the City Place II Loan Pair if it is a
Specially Serviced Mortgage Loan, and any release of collateral for the City
Place II Loan Pair (other than in accordance with the related loan documents).
Limitation on Liability of the Controlling Class Representative and the
Greenwich Companion Loan Holder. The Controlling Class Representative will not
have any liability to the Certificateholders for any action taken, or for
refraining from the taking of any action, in good faith pursuant to the Pooling
and Servicing Agreement, or for errors in judgment; provided, however, that the
Controlling Class Representative will not be protected against any liability
which would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations or duties. By its acceptance of a Certificate, each
Certificateholder confirms its understanding that the Controlling Class
Representative may take actions that favor the interests of one or more Classes
of the Certificates over other Classes of the Certificates, and that the
Controlling Class Representative may have special relationships and interests
that conflict with those of holders of some Classes of the Certificates; and,
absent willful misfeasance, bad faith or negligence on the part of the
Controlling Class Representative each Certificateholder agrees to take no action
against the Controlling Class Representative or any of its officers, directors,
employees, principals or agents as a result of such a special relationship or
conflict.
The Greenwich Companion Loan noteholder or its designee, in connection with
exercising the rights and powers described under "--The Controlling Class
Representative" above with respect to the Greenwich AB Mortgage Loan and the
Greenwich Companion Loan, will be entitled to substantially the same limitations
on liability to which the Controlling Class Representative is entitled.
DEFAULTED MORTGAGE LOANS; REO PROPERTIES; PURCHASE OPTION
The Pooling and Servicing Agreement contains provisions requiring, within
60 days after a Mortgage Loan becomes a Defaulted Mortgage Loan, the Special
Servicer to determine the fair value of the Mortgage Loan in accordance with the
servicing standard. A "Defaulted Mortgage Loan" is a Mortgage Loan (i) that is
delinquent sixty days or more with respect to a Periodic Payment (not including
the Balloon Payment) or (ii) that is delinquent in respect of its Balloon
Payment unless the Master Servicer has, on or prior to the due date of such
Balloon Payment, received written evidence from an institutional lender of such
lender's binding commitment to refinance such Mortgage Loan within 60 days after
the due date of such Balloon Payment (provided that if such refinancing does not
occur during such time specified in the commitment, the related Mortgage Loan
will immediately become a Defaulted Mortgage Loan), in either case such
delinquency to be determined without giving effect to any grace period permitted
by the related Mortgage Loan documents and without regard to any acceleration of
payments under the related Mortgage and Mortgage Note or (iii) as to which the
Master Servicer or Special Servicer has, by written notice to the related
Mortgagor, accelerated the maturity of the indebtedness evidenced by the related
Mortgage Note. The Special Servicer will be permitted to change, from time to
time, its determination of the fair value of a Defaulted Mortgage Loan based
upon changed circumstances, new information or otherwise, in accordance with the
servicing standard; provided, however, that the Special Servicer will update its
determination of the fair value of a Defaulted Mortgage Loan at least once every
90 days.
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In the event a Mortgage Loan becomes a Defaulted Mortgage Loan, the
Majority Subordinate Certificateholder will have an assignable option to
purchase (the "Purchase Option") the Defaulted Mortgage Loan from the Trust Fund
at a price (the "Option Price") equal to (i) the outstanding principal balance
of the Defaulted Mortgage Loan as of the date of purchase, plus all accrued and
unpaid interest on such balance plus all related fees and expenses, if the
Special Servicer has not yet determined the fair value of the Defaulted Mortgage
Loan, or (ii) the fair value of the Defaulted Mortgage Loan as determined by the
Special Servicer, if the Special Servicer has made such fair value
determination. If the Purchase Option is not exercised by the Majority
Subordinate Certificateholder or any assignee thereof within 60 days of a
Mortgage Loan becoming a Defaulted Mortgage Loan, then the Majority Subordinate
Certificateholder shall assign the Purchase Option to the Special Servicer for
fifteen days. If the Purchase Option is not exercised by the Special Servicer or
its assignee within such fifteen day period, then the Purchase Option shall
revert to the Majority Subordinate Certificateholder.
Unless and until the Purchase Option with respect to a Defaulted Mortgage
Loan is exercised, the Special Servicer will be required to pursue such other
resolution strategies available under the Pooling and Servicing Agreement,
including workout and foreclosure, consistent with the servicing standard
described under "--General" above, but the Special Servicer generally will not
be permitted to sell the Defaulted Mortgage Loan other than pursuant to the
exercise of the Purchase Option.
If not exercised sooner, the Purchase Option with respect to any Defaulted
Mortgage Loan will automatically terminate upon (i) the related Mortgagor's cure
of all defaults on the Defaulted Mortgage Loan, (ii) the acquisition on behalf
of the Trust Fund of title to the related Mortgaged Property by foreclosure or
deed in lieu of foreclosure or (iii) the modification or pay-off (full or
discounted) of the Defaulted Mortgage Loan in connection with a workout. In
addition, the Purchase Option with respect to a Defaulted Mortgage Loan held by
any person will terminate upon the exercise of the Purchase Option by any other
holder of the Purchase Option.
If (a) the Purchase Option is exercised with respect to a Defaulted
Mortgage Loan and the person expected to acquire the Defaulted Mortgage Loan
pursuant to such exercise is the Majority Subordinate Certificateholder, the
Special Servicer, or any affiliate of any of them (in other words, the Purchase
Option has not been assigned to another unaffiliated person) and (b) the Option
Price is based on the Special Servicer's determination of the fair value of the
Defaulted Mortgage Loan, the Trustee will be required to determine if the Option
Price represents a fair price for the Defaulted Mortgage Loan. In making such
determination, the Trustee will be entitled to rely on the most recent appraisal
of the related Mortgaged Property that was prepared in accordance with the terms
of the Pooling and Servicing Agreement.
If title to any Mortgaged Property is acquired by the Trustee on behalf of
the Certificateholders pursuant to foreclosure proceedings instituted by the
Special Servicer or otherwise, the Special Servicer, after notice to the
Controlling Class Representative, shall use its reasonable best efforts to sell
any REO Property as soon as practicable in accordance with the servicing
standard but prior to the end of the third calendar year following the year of
acquisition, unless (i) the Internal Revenue Service grants an extension of time
to sell such property (an "REO Extension") or (ii) it obtains an opinion of
counsel generally to the effect that the holding of the property for more than
three years after the end of the calendar year in which it was acquired will not
result in the imposition of a tax on the Trust Fund or cause any REMIC 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 REO
Extension has been granted and the Special Servicer is unable to sell such REO
Property within the extended time period, the Special Servicer shall auction the
property pursuant to the auction procedure set forth below.
The Special Servicer shall give the Controlling Class Representative, the
Master Servicer and the Trustee not less than five days' prior written notice of
its intention to sell any such REO Property, and shall auction the REO Property
to the highest bidder (which may be the Special Servicer) in accordance with the
servicing standard described in the Pooling and Servicing Agreement; provided,
however, that the
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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 greater of (x) the fair market
value set forth in such appraisal (or internal valuation) or (y) the outstanding
principal balance of such Mortgage Loan, plus all accrued but unpaid interest
and related fees and expenses.
Subject to the REMIC Provisions, the Special Servicer shall act on behalf
of the Trust in negotiating and taking any other action necessary or appropriate
in connection with the sale of any REO Property or the exercise of the Purchase
Option, including the collection of all amounts payable in connection therewith.
Notwithstanding anything to the contrary herein, neither the Trustee, in its
individual capacity, nor any of its Affiliates may bid for any REO Property or
purchase any Defaulted Mortgage Loan. Any sale of a Defaulted Mortgage Loan
(pursuant to the Purchase Option) or REO Property shall be without recourse to,
or representation or warranty by, the Trustee, the Depositor, any Mortgage Loan
Seller, the Special Servicer, the Master Servicer or the Trust. Notwithstanding
the foregoing, nothing herein shall limit the liability of the Master Servicer,
the Special Servicer or the Trustee to the Trust and the Certificateholders for
failure to perform its duties in accordance with the Pooling and Servicing
Agreement. None of the Special Servicer, the Master Servicer, the Depositor or
the Trustee shall have any liability to the Trust or any Certificateholder with
respect to the price at which a Defaulted Mortgage Loan is sold if the sale is
consummated in accordance with the terms of the Pooling and Servicing Agreement.
The proceeds of any sale after deduction of the expenses of such sale incurred
in connection therewith shall be deposited within one business day in the
Certificate Account.
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
The Special Servicer 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, beginning in 2003, 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; provided that the
Master Servicer is not obligated to inspect any Mortgaged Property that has been
inspected by the Special Servicer in the previous 6 months. The Special Servicer
and the Master Servicer each will be required to prepare a written report of
each such inspection performed by it that describes the condition of the
Mortgaged Property and that specifies the existence with respect thereto of any
sale, transfer or abandonment or any material change in its condition or value.
The Special Servicer or the Master Servicer is also required consistent
with the servicing standard 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
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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 Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage
Pass-Through Certificates, Series 2002-C1 (the "Certificates") will be issued
pursuant to a Pooling and Servicing Agreement, dated as of May 11, 2002, 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 and all payments and other
collections in respect of the Mortgage Loans received or applicable to periods
after the applicable Cut-Off Date (exclusive of payments of principal and
interest due, and principal prepayments received, on or before the Cut-Off
Date); (ii) any REO Property acquired on behalf of the Trust Fund; (iii) such
funds or assets as from time to time are deposited in the Certificate Account,
the 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, Class A-2, Class A-3 and Class A-4
Certificates (collectively, the "Class A Certificates"); (ii) the Class B, Class
C, Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class
M, Class N and Class O Certificates (collectively, the "Subordinate
Certificates" and, together with the Class A Certificates, the "Sequential Pay
Certificates"); (iii) the Class IO-I and Class IO-II Certificates (collectively,
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"); and (v) the
Class Z-I, Class Z-II and Class Z-III Certificates.
Only the Class A-1, Class A-2, Class A-3, Class A-4, Class B, Class C and
Class D Certificates (collectively, the "Offered Certificates") are offered
hereby. The Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class
M, Class N, Class O, Class IO-I and Class IO-II Certificates (collectively, the
"Non-Offered Certificates"), the Class Z-I, Class Z-II and Class Z-III
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 A-3, Class A-4, Class B, Class C and Class D Certificates will
be offered in denominations of not less than $10,000 actual principal amount and
in integral multiples of $1 in excess thereof.
The holders of Offered Certificates may hold their Certificates through DTC
(in the United States) or Clearstream Banking, societe anonyme ("Clearstream
Luxembourg") or Euroclear (in Europe) if they are Participants of such
respective system, or indirectly through organizations that are Participants in
such
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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 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
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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 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 neither the Depositor nor any of the
Underwriters takes any responsibility for the accuracy or completeness thereof.
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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:
<Table>
<Caption>
PERCENTAGE OF
CLOSING DATE CUT-OFF DATE
CLASS OF CERTIFICATES CERTIFICATE BALANCE POOL BALANCE
--------------------- ------------------- -------------
Class A-1 Certificates................... $ 59,085,000 6.22%
Class A-2 Certificates................... $135,498,000 14.26%
Class A-3 Certificates................... $135,167,000 14.23%
Class A-4 Certificates................... $404,157,000 42.54%
Class B Certificates..................... $ 35,627,000 3.75%
Class C Certificates..................... $ 42,752,000 4.50%
Class D Certificates..................... $ 9,500,000 1.00%
Non-Offered Certificates (other than
Class IO Certificates)................. $128,256,449 13.50%
</Table>
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 Certificate Balances, but represent
the right to receive the distributions of interest in amounts equal to the
aggregate interest accrued on the applicable notional amount (each, a "Notional
Amount") of the related Class of Class IO Certificates. The Notional Amount of
the Class IO-I Certificates will generally be equal to the aggregate of the
Component Balances of the Components outstanding from time to time. The Notional
Amount of the Class IO-II Certificates will generally be equal to the aggregate
of the Component Balances of the Class A-2B, Class A-3, Class A-4A, Class A-4B,
Class B, Class C, Class D, Class E, Class F and Class G Components outstanding
from time to time. The initial Notional Amount for (i) the Class IO-I
Certificates will be $950,042,449, and (ii) the Class IO-II Certificates will be
$754,125,000.
Solely for the purposes of calculating the Notional Amounts of the Class
IO-I and Class IO-II Certificates and the Pass-Through Rates applicable to the
Class IO-I and Class IO-II Certificates for each Distribution Date, the
aggregate Certificate Balance of each Class of Sequential Pay Certificates will
be deemed to consist of a single (or two, in the case of each of the Class A-2
and Class A-4 Certificates) component (each a "Component"). Each Component will
have a balance (a "Component Balance") that will be reduced by any distributions
of principal (except as described below with respect to the Class A-2 and Class
A-4 Components) made on the related Class of Certificates or any allocations of
Realized Losses or Additional Trust Fund Expenses to such Class.
The Notional Amount of the Class IO-I Certificates will be reduced on each
Distribution Date by any distributions of principal actually made on, and any
Realized Losses and Additional Trust Fund Expenses actually allocated to, that
portion of the aggregate Certificate Balances of the Sequential Pay Certificates
that corresponds to the Components. The Notional Amount of the Class IO-II
Certificates will be reduced on each Distribution Date by any distributions of
principal actually made on, and any Realized Losses and Additional Trust Fund
Expenses actually allocated to, that portion of the aggregate Certificate
Balances of the Class A-2, Class A-3, Class A-4, Class B, Class C, Class D,
Class E, Class F and Class G Certificates that correspond to the Class A-2B,
Class A-3, Class A-4A, Class A-4B, Class B, Class C, Class D, Class E, Class F
and Class G Components, respectively.
The initial Component Balances of the Components will be as follows: Class
A-1 ($59,085,000), Class A-2 ($135,498,000), Class A-3 ($135,167,000), Class A-4
($404,157,000), Class B ($35,627,000),
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Class C ($42,752,000), Class D ($9,500,000), Class E ($13,063,000), Class F
($16,626,000), Class G ($13,063,000), Class H ($15,438,000), Class J
($17,814,000), Class K ($4,750,000), Class L ($9,980,000), Class M ($7,036,000),
Class N ($4,690,000) and Class O ($25,796,449).
In addition, the Class A-2 Component will be deemed to consist of two
Components. The "Class A-2A Component" will have a Component Balance initially
equal to $51,328,000, which amount will be deemed to be reduced by the amount of
all distributions of principal allocated to the Class A-2 Component until such
Component Balance is reduced to zero. The other Class A-2 Component, the "Class
A-2B Component", will have a Component Balance initially equal to $84,170,000
which, following the reduction of the Component Balance of the Class A-2A
Component to zero, will be deemed reduced by the amount of all distributions of
principal in reduction of the aggregate Component Balance of the Class A-2
Component until the Component Balance of the Class A-2B Component (and the
aggregate Component Balance of the Class A-2 Component) has been reduced to
zero.
In addition, the Class A-4 Component will be deemed to consist of two
Components. The "Class A-4A Component" will have a Component Balance initially
equal to $10,841,000, which amount will be deemed to be reduced by the amount of
all distributions of principal allocated to the Class A-4 Component until such
Component Balance is reduced to zero. The other Class A-4 Component, the "Class
A-4B Component", will have a Component Balance initially equal to $393,316,000
which, following the reduction of the Component Balance of the Class A-4A
Component to zero, will be deemed reduced by the amount of all distributions of
principal in reduction of the aggregate Component Balance of the Class A-4
Component until the Component Balance of the Class A-4B Component (and the
aggregate Component Balance of the Class A-4 Component) has been reduced to
zero.
The Certificate Balance of any Class of Sequential Pay Certificates may be
increased by the amount, if any, of Certificate Deferred Interest added to such
Class Certificate Balance. With respect to any Mortgage Loan as to which the
Mortgage Rate has been reduced through a modification on any Distribution Date,
"Mortgage Deferred Interest" is the amount by which (a) interest accrued at such
reduced rate is less than (b) the amount of interest that would have accrued on
such Mortgage Loan at the Mortgage Rate before such reduction, to the extent
such amount has been added to the outstanding principal balance of such Mortgage
Loan. On each Distribution Date the amount of interest distributable to a Class
of Sequential Pay Certificates will be reduced by the amount of Mortgage
Deferred Interest allocable to such Class (any such amount, "Certificate
Deferred Interest"), such allocation being in reverse alphabetical order. 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-I Certificates, and to the extent there is an
increase in the Certificate Balance of the Class A-2 Certificates (to the extent
allocated to the Class A-2B Component) or the Class A-3, Class A-4, Class B,
Class C, Class D, Class E, Class F or Class G Certificates, the Class IO-II
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, Class Z-II and Class Z-III Certificates do not have
Certificate Balances or notional amounts, but represent the right to receive on
each Distribution Date any amounts of Additional Interest received in the
related Collection Period.
PASS-THROUGH RATES
The Pass-Through Rate applicable to the Class A-1, Class A-2, Class A-3,
Class A-4, Class B, Class C 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. Each Component will be deemed to have a Pass-Through
Rate equal to the Pass-Through Rate on the related Class of Certificates.
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The Pass-Through Rate applicable to the Class IO-I Certificates for the
initial Distribution Date will equal approximately 0.41442% per annum. The
Pass-Through Rate applicable to the Class IO-I Certificates for each
Distribution Date will, in general, equal the weighted average of the Class IO-I
Strip Rates for the respective Classes of Components (and, in the case of the
Class A-2 Component, the Class A-2A and Class A-2B Components thereof, and, in
the case of the Class A-4 Component, the Class A-4A and Class A-4B Components
thereof) for such Distribution Date (weighted on the basis of the respective
Component Balances of such Components outstanding immediately prior to such
Distribution Date). The "Class IO-I Strip Rate" in respect of any Class of
Components (and in the case of the Class A-2 Component, the Class A-2A and Class
A-2B Components thereof, and, in the case of the Class A-4 Component, the Class
A-4A and Class A-4B Components thereof) for any Distribution Date will, in
general, equal (i) in the case of the Class A-1, Class A-2A, Class H, Class J,
Class K, Class L, Class M, Class N and Class O Components, (x) the Weighted
Average Net Mortgage Rate for such Distribution Date minus (y) the Pass-Through
Rate for such Component and (ii) in the case of the Class A-2B, Class A-3, Class
A-4A, Class A-4B, Class B, Class C, Class D, Class E, Class F and Class G
Components (x) for any Distribution Date occurring on or before the related
Component Crossover Date, (1) the Weighted Average Net Mortgage Rate for such
Distribution Date minus (2) the sum of the Pass-Through Rate for such Component
and the Class IO-II Strip Rate for such Component, and (y) for any Distribution
Date occurring after the related Component Crossover Date, (1) the Weighted
Average Net Mortgage Rate for such Distribution Date, minus (2) the Pass-Through
Rate for such Component (but in no event will any Class IO-I Strip Rate be less
than zero). The "Component Crossover Date" is (i) with respect to the Class A-2B
Component, Class A-3 Component and Class A-4A Component, the Distribution Date
occurring in September 2005, (ii) with respect to the Class A-4B Component, the
Class B Component, the Class C Component, the Class D Component, the Class E
Component and the Class F Component, the Distribution Date occurring in May
2009, and (iii) with respect to the Class G Component, the Distribution Date
occurring in May 2008.
The Pass-Through Rate applicable to the Class IO-II Certificates for the
initial Distribution Date will equal approximately 1.19250% per annum. The
Pass-Through Rate applicable to the Class IO-II Certificates for each
Distribution Date will, in general, equal the weighted average of the Class
IO-II Strip Rates for the Class A-2B, Class A-3, Class A-4A, Class A-4B, Class
B, Class C, Class D, Class E, Class F and Class G Components for such
Distribution Date (weighted on the basis of the respective Component Balances of
such Component outstanding immediately prior to such Distribution Date). The
"Class IO-II Strip Rate" in respect of the Class A-2B, Class A-3, Class A-4A,
Class A-4B, Class B, Class C, Class D, Class E, Class F and Class G Components
for any Distribution Date will, in general, equal (i) for any Distribution Date
occurring on or before the related Component Crossover Date, (x) the lesser of
(1) the Weighted Average Net Mortgage Rate for such Distribution Date and (2)
the reference rate specified on Annex K to this Prospectus Supplement for such
Distribution Date minus 0.03% per annum minus (y) the Pass-Through Rate for such
Component (but in no event will any Class IO-II Strip Rate be less than zero),
and (ii) for any Distribution Date occurring after the related Component
Crossover Date, 0% per annum.
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 respective Notional Amount)
of such Class of Certificates immediately following the Distribution Date in
such Interest Accrual Period (after giving effect to all distributions of
principal made on such Distribution Date). Interest on each Class of REMIC
Regular Certificates will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. With respect to any Class of REMIC Regular
Certificates and any Distribution Date, the "Interest Accrual Period" will be
the preceding calendar month which will be deemed to consist of 30 days.
The Class Z-I, Class Z-II and Class Z-III 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
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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 4 Mortgage Loans (loan numbers 126, 149, 154 and 156), 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 4 Mortgage Loans, representing 0.4% 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 thereof as of the Cut-Off Date, (a) reduced on each Distribution Date
(to not less than zero) by (i) the portion of the Principal Distribution Amount
for that date which is attributable to such Mortgage Loan and (ii) the principal
portion of any Realized Loss incurred in respect of such Mortgage Loan during
the related Collection Period and (b) increased on each Distribution Date by any
Mortgage Deferred Interest added to the principal balance of such Mortgage Loan
on such Distribution Date. The Stated Principal Balance of a Mortgage Loan may
also be reduced in connection with any forced reduction of the actual unpaid
principal balance thereof imposed by a court presiding over a bankruptcy
proceeding in which the related borrower is a debtor. 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 on the 12th day in the month immediately preceding the month in which
such Distribution Date occurs (or the day after the applicable Cut-Off Date in
the case of the first Collection Period) and ends on and includes the 11th day
in the same month as such Distribution Date. Notwithstanding the foregoing, in
the event that the last day of a Collection Period is not a business day, any
payments received with respect to the Mortgage Loans relating to such Collection
Period on the business day immediately following such day will be deemed to have
been received during such Collection Period and not during any other Collection
Period. The "Determination Date" will be, for any Distribution Date, the fourth
business day prior to such Distribution Date.
DISTRIBUTIONS
General. Distributions on the Certificates are made by the Trustee, to the
extent of the Available Distribution Amount, on the fifteenth day of each month
or, if any such fifteenth day is not a business day, then on the next succeeding
business day with the same force and effect (each, a "Distribution Date").
Except as described below, all such distributions will be made to the persons in
whose names the Certificates are registered (the "Certificateholders") at the
close of business on the last business day of the month preceding the month in
which the related Distribution Date occurs and shall be made by wire transfer of
immediately available funds, if such Certificateholder shall have provided
wiring instructions no less than five business days prior to such record date,
or otherwise by check mailed to the address of such Certificateholder as it
appears in the Certificate register. The final distribution on any Certificate
(determined without regard to any possible future reimbursement of any Realized
Loss or Additional Trust
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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 June 2002.
The Available Distribution Amount. The aggregate amount available for
distributions of interest and principal to Certificateholders on each
Distribution Date (the "Available Distribution Amount") will, in general, equal
the sum of the following amounts:
(a) the total amount of all cash received on or in respect of the
Mortgage Loans and any REO Properties by the Master Servicer as of the
close of business on the last day of the related Collection Period and not
previously distributed with respect to the Certificates or applied for any
other permitted purpose, exclusive of any portion thereof that represents
one or more of the following:
(i) any Periodic Payments collected but due on a Due Date after the
related Collection Period;
(ii) any Prepayment Premiums and Yield Maintenance Charges;
(iii) all amounts in the Certificate Account that are payable or
reimbursable to any person other than the Certificateholders, including
any Servicing Fees and Trustee Fees on the Mortgage Loans;
(iv) any amounts deposited in the Certificate Account in error;
(v) any Additional Interest on the ARD Loans (which is separately
distributed to the Class Z-I, Class Z-II and Class Z-III Certificates);
and
(vi) if such Distribution Date occurs during February of any year
or during January of any year that is not a leap year, the Interest
Reserve Amounts with respect to the Mortgage Loans to be deposited in
the Interest Reserve Account and held for future distribution.
(b) all P&I Advances made by the Master Servicer or the Trustee with
respect to such Distribution Date;
(c) any Compensating Interest Payment made by the Master Servicer to
cover the aggregate of any Prepayment Interest Shortfalls experienced
during the related Collection Period; and
(d) if such Distribution Date occurs during March of any year, 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 occurs in a
year that is not a leap year, there will be withdrawn from the Certificate
Account and deposited to the Interest Reserve Account in respect of each
Mortgage Loan (the "Interest Reserve Loans") which accrues interest on an
Actual/360 Basis an amount equal to one day's interest at the related Mortgage
Rate on its Stated Principal Balance, as of the Due Date in the month in which
such Distribution Date occurs, to the extent a Periodic Payment or P&I Advance
is timely made in respect thereof for such Due Date (all amounts so deposited in
any consecutive January (if applicable) and February in respect of each Interest
Reserve Loan, the "Interest Reserve Amount"). With respect to each
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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, Class Z-II and Class Z-III 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, Class A-3 Certificates, Class A-4
Certificates, Class IO-I Certificates and Class IO-II Certificates (in each
case, so long as any such Class remains outstanding), pro rata, in
accordance with the respective amounts of Distributable Certificate
Interest in respect of such Classes of Certificates on such Distribution
Date, in an amount equal to all Distributable Certificate Interest in
respect of each such Class of Certificates for such Distribution Date and,
to the extent not previously paid, for all prior Distribution Dates;
(2) to distributions of principal to the holders of the Class A-1
Certificates in an amount (not to exceed the then outstanding Certificate
Balance of the Class A-1 Certificates) equal to the Principal Distribution
Amount for such Distribution Date;
(3) after the Class A-1 Certificates have been retired, to
distributions of principal to the holders of the Class A-2 Certificates in
an amount (not to exceed the then outstanding Certificate Balance of the
Class A-2 Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-1 Certificates on such Distribution Date;
(4) after the Class A-1 Certificates and the Class A-2 Certificates
have been retired, to distributions of principal to the holders of the
Class A-3 Certificates in an amount (not to exceed the then outstanding
Certificate Balance of the Class A-3 Certificates) equal to the Principal
Distribution Amount for such Distribution Date, less any portion thereof
distributed in respect of the Class A-1 Certificates and/or Class A-2
Certificates on such Distribution Date;
(5) after the Class A-1 Certificates, the Class A-2 Certificates and
the Class A-3 Certificates have been retired, to distributions of principal
to the holders of the Class A-4 Certificates in an amount (not to exceed
the then outstanding Certificate Balance of the Class A-4 Certificates)
equal to the Principal Distribution Amount for such Distribution Date, less
any portion thereof distributed in respect of the Class A-1 Certificates,
Class A-2 Certificates and/or Class A-3 Certificates on such Distribution
Date;
(6) to distributions to the holders of the Class A-1 Certificates,
Class A-2 Certificates, Class A-3 Certificates and Class A-4 Certificates,
pro rata, in accordance with the respective amounts of Realized Losses and
Additional Trust Fund Expenses, if any, previously allocated to such
Classes of Certificates and for which no reimbursement has previously been
received, to reimburse such holders for all such Realized Losses and
Additional Trust Fund Expenses, if any;
(7) to distributions of interest to the holders of the Class B
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(8) after the Class A-1 Certificates, Class A-2 Certificates, Class
A-3 Certificates and Class A-4 Certificates have been retired, to
distributions of principal to the holders of the Class B Certificates in an
amount (not to exceed the then outstanding Certificate Balance of the Class
B Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed
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in respect of the Class A-1 Certificates, Class A-2 Certificates, Class A-3
Certificates and/or Class A-4 Certificates on such Distribution Date;
(9) to distributions to the holders of the Class B Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(10) to distributions of interest to the holders of the Class C
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(11) after the Class A-1 Certificates, Class A-2 Certificates, Class
A-3 Certificates, Class A-4 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, Class A-3
Certificates, Class A-4 Certificates and/or Class B Certificates on such
Distribution Date;
(12) to distributions to the holders of the Class C Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(13) to distributions of interest to the holders of the Class D
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(14) after the Class A-1 Certificates, Class A-2 Certificates, Class
A-3 Certificates, Class A-4 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 A-3 Certificates, Class A-4 Certificates, Class B
Certificates and/or Class C Certificates on such Distribution Date;
(15) to distributions to the holders of the Class D Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(16) to distributions of interest to the holders of the Class E
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(17) after the Class A-1 Certificates, Class A-2 Certificates, Class
A-3 Certificates, Class A-4 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 A-3 Certificates,
Class A-4 Certificates, Class B Certificates, Class C Certificates and/or
Class D Certificates on such Distribution Date;
(18) to distributions to the holders of the Class E Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(19) to distributions of interest to the holders of the Class F
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(20) after the Class A-1 Certificates, Class A-2 Certificates, Class
A-3 Certificates, Class A-4 Certificates, Class B Certificates, Class C
Certificates, Class D Certificates and Class E Certificates
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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 A-3 Certificates, Class A-4 Certificates, Class B
Certificates, Class C Certificates, Class D Certificates and/or Class E
Certificates on such Distribution Date;
(21) to distributions to the holders of the Class F Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(22) to distributions of interest to the holders of the Class G
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(23) after the Class A-1 Certificates, Class A-2 Certificates, Class
A-3 Certificates, Class A-4 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 A-3 Certificates, Class A-4 Certificates, Class B
Certificates, Class C Certificates, Class D Certificates, Class E
Certificates and/or Class F Certificates on such Distribution Date;
(24) to distributions to the holders of the Class G Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(25) to distributions of interest to the holders of the Class H
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(26) after the Class A-1 Certificates, Class A-2 Certificates, Class
A-3 Certificates, Class A-4 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 A-3 Certificates,
Class A-4 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;
(27) to distributions to the holders of the Class H Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(28) to distributions of interest to the holders of the Class J
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(29) after the Class A-1 Certificates, Class A-2 Certificates, Class
A-3 Certificates, Class A-4 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 A-3
Certificates, Class A-4 Certificates, Class B
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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;
(30) to distributions to the holders of the Class J Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(31) to distributions of interest to the holders of the Class K
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(32) after the Class A-1 Certificates, Class A-2 Certificates, Class
A-3 Certificates, Class A-4 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 A-3 Certificates, Class A-4 Certificates, Class B
Certificates, Class C Certificates, Class D Certificates, Class E
Certificates, Class F Certificates, Class G Certificates, Class H
Certificates and/or Class J Certificates on such Distribution Date;
(33) to distributions to the holders of the Class K Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(34) to distributions of interest to the holders of the Class L
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(35) after the Class A-1 Certificates, Class A-2 Certificates, Class
A-3 Certificates, Class A-4 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 A-3 Certificates,
Class A-4 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;
(36) to distributions to the holders of the Class L Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(37) to distributions of interest to the holders of the Class M
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(38) after the Class A-1 Certificates, Class A-2 Certificates, Class
A-3 Certificates, Class A-4 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 A-3
Certificates, Class A-4 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;
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(39) to distributions to the holders of the Class M Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(40) to distributions of interest to the holders of the Class N
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(41) after the Class A-1 Certificates, Class A-2 Certificates, Class
A-3 Certificates, Class A-4 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 A-3 Certificates, Class A-4 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;
(42) to distributions to the holders of the Class N Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(43) to distributions of interest to the holders of the Class O
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(44) after the Class A-1 Certificates, Class A-2 Certificates, Class
A-3 Certificates, Class A-4 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 A-3 Certificates,
Class A-4 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;
(45) to distributions to the holders of the Class O Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received; and
(46) 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 (45) 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 two or more Classes of the Class A-1 Certificates, the
Class A-2 Certificates, the Class A-3 Certificates and the Class A-4
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), (3), (4) and (5) above with
respect to the Class A-1 Certificates, the Class A-2 Certificates, the Class A-3
Certificates and the Class A-4 Certificates will be so made to the holders of
the respective Classes of such Certificates which remain outstanding up to an
amount equal to, and pro rata as between such Classes in accordance with, the
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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 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-I and Class IO-II
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-I or Class IO-II Certificates, as the case may be, outstanding immediately
prior to such Distribution Date. Accrued Certificate Interest will be calculated
on a 30/360 basis.
The portion of the Net Aggregate Prepayment Interest Shortfall for any
Distribution Date that is allocable to each Class of REMIC Regular Certificates
(other than the Class 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.
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;
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(d) the aggregate of the principal portion of all liquidation
proceeds, insurance proceeds, 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; and
(e) if such Distribution Date is subsequent to the initial
Distribution Date, the excess, if any, of the Principal Distribution Amount
for the immediately preceding Distribution Date, over the aggregate
distributions of principal made on the Certificates on such immediately
preceding Distribution Date.
The "Scheduled Payment" due on any Mortgage Loan on any related Due Date is
the amount of the Periodic Payment (including Balloon Payments) that is or would
have been, as the case may be, due thereon on such date, without regard to any
waiver, modification or amendment of such Mortgage Loan granted or agreed to by
the Special Servicer or otherwise resulting from a bankruptcy or similar
proceeding involving the related borrower, without regard to the accrual of
Additional Interest on or the application of any Excess Cash Flow to pay
principal on an ARD Loan, without regard to any acceleration of principal by
reason of default, and with the assumption that each prior Scheduled Payment has
been made in a timely manner. The "Assumed Scheduled Payment" is an amount
deemed due (i) on any Balloon Loan that is delinquent in respect of its Balloon
Payment beyond the first Determination Date that follows its stated maturity
date and (ii) on an REO Mortgage Loan. The Assumed Scheduled Payment deemed due
on any such Balloon Loan on its stated maturity date and on each successive
related Due Date that it remains or is deemed to remain outstanding will equal
the Scheduled Payment that would have been due thereon on such date if the
related Balloon Payment had not come due but rather such Mortgage Loan had
continued to amortize in accordance with such loan's amortization schedule, if
any, and to accrue interest at the Mortgage Rate in effect as of the Closing
Date. The Assumed Scheduled Payment deemed due on any REO Mortgage Loan on each
Due Date that the related REO Property remains part of the Trust Fund will equal
the Scheduled Payment that would have been due in respect of such Mortgage Loan
on such Due Date had it remained outstanding (or, if such Mortgage Loan was a
Balloon 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").
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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 E, Class F and Class G
Certificates as set forth below. "Yield Maintenance Charges" are fees paid or
payable, as the context requires, as a result of a prepayment of principal on a
Mortgage Loan, which fees have been calculated (based on Scheduled Payments on
such Mortgage Loan) to compensate the holder of the Mortgage for reinvestment
losses based on the value of a discount rate at or near the time of prepayment.
Any other fees paid or payable, as the context requires, as a result of a
prepayment of principal on a Mortgage Loan, which are calculated based upon a
specified percentage (which may decline over time) of the amount prepaid are
considered "Prepayment Premiums".
Any Prepayment Premiums or Yield Maintenance Charges collected on a
Mortgage Loan during the related Collection Period will be distributed as
follows: on each Distribution Date and with respect to the collection of any
Prepayment Premiums or Yield Maintenance Charges on the Mortgage Loans, the
holders of each Class of Offered Certificates and the Class E, Class F and Class
G Certificates then entitled to distributions of principal on such Distribution
Date will be entitled to an amount of Prepayment Premiums or Yield Maintenance
Charges equal to the product of (a) the amount of such Prepayment Premiums or
Yield Maintenance Charges; (b) a fraction (which in no event may be greater than
one), the numerator of which is equal to the excess, if any, of the Pass-Through
Rate of such Class of Certificates over the relevant Discount Rate (as defined
below), and the denominator of which is equal to the excess, if any, of the
Mortgage Rate of the prepaid Mortgage Loan over the relevant Discount Rate; and
(c) a fraction, the numerator of which is equal to the amount of principal
distributable on such Class of Certificates on such Distribution Date, and the
denominator of which is the Principal Distribution Amount for such Distribution
Date. If there is more than one such Class of Certificates entitled to
distributions of principal on any particular Distribution Date on which a
Prepayment Premium or Yield Maintenance Charge is distributable, the aggregate
amount of such Prepayment Premium or Yield Maintenance Charge will be allocated
among all such Classes up to, and on a pro rata basis in accordance with, their
respective entitlements thereto in accordance with, the first sentence of this
paragraph. The portion, if any, of the Prepayment Premiums or Yield Maintenance
Charges remaining after any such payments described above will be distributed to
the holders of the Class IO-I Certificates.
The "Discount Rate" applicable to any Class of Offered Certificates and the
Class E, Class F and Class G Certificates will be equal to the discount rate
stated in the related mortgage loan documents used in calculating the Yield
Maintenance Charge or Prepayment Premium 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 Prepayment Premium
or Yield Maintenance Charge, or of the collectability of any Prepayment Premium
or Yield Maintenance Charge. See "DESCRIPTION OF THE MORTGAGE POOL--Certain
Terms and Conditions of the Mortgage Loans--Prepayment Provisions" in this
Prospectus Supplement.
Distributions of Additional Interest. On each Distribution Date, any
Additional Interest collected on an ARD Loan during the related Collection
Period will be distributed to, in the case of Additional Interest collected on a
Wachovia Mortgage Loan, all the holders of the Class Z-I Certificates, in the
case of Additional Interest collected on a Greenwich Mortgage Loan, all the
holders of the Class Z-II Certificates and, in the case of Additional Interest
collected on a Nomura Mortgage Loan, all the holders of the Class Z-III
Certificates. There can be no assurance that any Additional Interest will be
collected on the ARD Loans.
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SUBORDINATION; ALLOCATION OF LOSSES AND CERTAIN EXPENSES
The rights of holders of the Subordinate Certificates to receive
distributions of amounts collected or advanced on the Mortgage Loans will be
subordinated, to the extent described in this Prospectus Supplement, to the
rights of holders of the Class A and Class IO Certificates and each other such
Class of Subordinate Certificates, if any, with an earlier alphabetical Class
designation. This subordination provided by the Subordinate Certificates, is
intended to enhance the likelihood of timely receipt by the holders of the Class
A and Class 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, Class C and Class D Certificates of the full amount of Distributable
Certificate Interest payable in respect of such Classes of Certificates on each
Distribution Date, and the ultimate receipt by the holders of such Certificates
of, in the case of each such Class thereof, principal equal to the entire
related Certificate Balance. The protection afforded (a) to the holders of the
Class D Certificates by means of the subordination of the Non-Offered
Certificates (other than the Class IO Certificates), (b) to the holders of the
Class C Certificates by means of the subordination of the Class D and the
Non-Offered Certificates (other than the Class IO Certificates), (c) to the
holders of the Class B Certificates by means of the subordination of the Class
C, Class D and the Non-Offered Certificates (other than the Class IO
Certificates), and (d) to the holders of the Class A and Class IO Certificates
by means of the subordination of the Subordinate Certificates, will be
accomplished by (i) the application of the Available Distribution Amount on each
Distribution Date in accordance with the order of priority described under
"--Distributions--Application of the Available Distribution Amount" above and
(ii) by the allocation of Realized Losses and Additional Trust Fund Expenses as
described below. Until the first Distribution Date after the aggregate of the
Certificate Balances of the Subordinate Certificates has been reduced to zero,
the Class A-4 Certificates will receive principal payments only after the
Certificate Balances of the Class A-1, Class A-2 and Class A-3 Certificates have
been reduced to zero, the Class A-3 Certificates will receive principal payments
only after the Certificate Balances of the Class A-1 and Class A-2 Certificates
have been reduced to zero and the Class A-2 Certificates will receive principal
payments only after the Certificate Balance of the Class A-1 Certificates has
been reduced to zero. However, after the Distribution Date on which the
Certificate Balances of the Subordinate Certificates have been reduced to zero,
the Class A-1, Class A-2, Class A-3 and Class A-4 Certificates, to the extent
such Certificates remain outstanding, will bear shortfalls in collections and
losses incurred in respect of the Mortgage Loans pro rata in respect of
distributions of principal and then the Class A-1, Class A-2, Class A-3, Class
A-4, Class IO-I and Class IO-II Certificates, to the extent such Certificates
remain outstanding, will bear such shortfalls pro rata in respect of
distributions of interest. No other form of credit support will be available for
the benefit of the holders of the Offered Certificates.
Allocation to the Class A-1, Class A-2, Class A-3 and Class A-4
Certificates (unless the aggregate Certificate Balance of each Class of
Subordinate Certificates has been reduced to zero, first to the Class A-1
Certificates until the Certificate Balance thereof has been reduced to zero,
then to the Class A-2 Certificates until the Certificate Balance thereof has
been reduced to zero, then to the Class A-3 Certificates until the Certificate
Balance thereof has been reduced to zero, then to the Class A-4 Certificates
until the Certificate Balance thereof has been reduced to zero), for so long as
they are outstanding, of the entire Principal Distribution Amount for each
Distribution Date will have the effect of reducing the aggregate Certificate
Balance of the Class A-1, Class A-2, Class A-3 and Class A-4 Certificates at a
proportionately faster rate than the rate at which the aggregate Stated
Principal Balance of the Mortgage Pool will reduce. Thus, as principal is
distributed to the holders of such Class A-1, Class A-2, Class A-3 and Class A-4
Certificates, the percentage interest in the Trust Fund evidenced by such Class
A-1, Class A-2, Class A-3 and Class A-4 Certificates will be decreased (with a
corresponding increase in the percentage interest in the Trust Fund evidenced by
the Subordinate Certificates), thereby increasing, relative to their respective
Certificate Balances, the subordination afforded such Class A-1, Class A-2,
Class A-3 and Class A-4 Certificates by the Subordinate Certificates.
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On each Distribution Date, following all distributions on the Certificates
to be made on such date, the aggregate of all Realized Losses and Additional
Trust Fund Expenses related to all Mortgage Loans, that have been incurred since
the Cut-Off Date through the end of the related Collection Period and that have
not previously been allocated as described below will be allocated among the
respective Classes of Sequential Pay Certificates (in each case in reduction of
their respective Certificate Balances) as follows, but in the aggregate only to
the extent that the aggregate Certificate Balance of all Classes of Sequential
Pay Certificates remaining outstanding after giving effect to the distributions
on such Distribution Date exceeds the aggregate Stated Principal Balance of the
Mortgage Pool that will be outstanding immediately following such Distribution
Date: first, to the Class O Certificates, until the remaining Certificate
Balance of such Class of Certificates is reduced to zero; second, to the Class N
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; third, to the Class M Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
fourth, to the Class L Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; fifth, to the Class K
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; sixth, to the Class J Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
seventh, to the Class H Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; eighth, to the Class G
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; ninth, to the Class F Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
tenth, to the Class E Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; eleventh, to the Class D
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; twelfth, to the Class C Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
thirteenth, to the Class B Certificates, until the remaining Certificate Balance
of such Class of Certificates is reduced to zero; and, last, to the Class A-1
Certificates, the Class A-2 Certificates, the Class A-3 Certificates and the
Class A-4 Certificates, pro rata, in proportion to their respective outstanding
Certificate Balances, until the remaining Certificate Balances of such Classes
of Certificates are reduced to zero.
"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
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the Master Servicer and the Depositor" in the Prospectus (the Special Servicer
having the same rights to indemnity and reimbursement as described thereunder
with respect to the Master Servicer), certain Rating Agency fees to the extent
such fees are not paid by any other party and certain federal, state and local
taxes and certain tax related expenses, payable from the assets of the Trust
Fund and described under "MATERIAL FEDERAL INCOME TAX CONSEQUENCES--Taxation of
Owners of REMIC Residual Certificates--Prohibited Transactions Tax and Other
Taxes" in the Prospectus and "SERVICING OF THE MORTGAGE LOANS--Defaulted
Mortgage Loans; REO Properties; Purchase Option" in this Prospectus Supplement.
Additional Trust Fund Expenses will reduce amounts payable to Certificateholders
and, subject to the distribution priorities described above, may result in a
loss on one or more Classes of Offered Certificates.
P&I ADVANCES
On or about each Distribution Date, the Master Servicer is obligated,
subject to the recoverability determination described in the next paragraph, to
make advances (each, a "P&I Advance") out of its own funds or, subject to the
replacement thereof as provided in the Pooling and Servicing Agreement, from
funds held in the Certificate Account that are not required to be distributed to
Certificateholders (or paid to any other Person pursuant to the Pooling and
Servicing Agreement) on such Distribution Date, in an amount that is generally
equal to the aggregate of all Periodic Payments (other than Balloon Payments)
and any Assumed Scheduled Payments, net of related Master Servicing Fees, in
respect of the Mortgage Loans and any REO Loans during the related Collection
Period, in each case to the extent such amount was not paid by or on behalf of
the related borrower or otherwise collected (or previously advanced by the
Master Servicer) as of the close of business on the last day of the Collection
Period. The Master Servicer's obligations to make P&I Advances in respect of any
Mortgage Loan, subject to the recoverability determination, will continue until
liquidation of such Mortgage Loan or disposition of any REO Property acquired in
respect thereof. However, if the Periodic Payment on any Mortgage Loan has been
reduced in connection with a bankruptcy or similar proceeding or a modification,
waiver or amendment granted or agreed to by the Special Servicer, the Master
Servicer will be required to advance only the amount of the reduced Periodic
Payment (net of related Servicing Fees) in respect of subsequent delinquencies.
In addition, if it is determined that an Appraisal Reduction Amount exists with
respect to any Required Appraisal Loan (as defined below), then, with respect to
the Distribution Date immediately following the date of such determination and
with respect to each subsequent Distribution Date for so long as such Appraisal
Reduction Amount exists, the Master Servicer will be required in the event of
subsequent delinquencies to advance in respect of such Mortgage Loan only an
amount equal to the sum of (i) the amount of the interest portion of the P&I
Advance that would otherwise be required without regard to this sentence, minus
the product of (a) such Appraisal Reduction Amount and (b) the per annum
Pass-Through Rate (i.e., for any month, one twelfth of the Pass-Through Rate)
applicable to the Class of Certificates, to which such Appraisal Reduction
Amount is allocated as described in "--Appraisal Reductions" below and (ii) the
amount of the principal portion of the P&I Advance that would otherwise be
required without regard to this sentence. Pursuant to the terms of the Pooling
and Servicing Agreement, if the Master Servicer fails to make a P&I Advance
required to be made, the Trustee shall then be required to make such P&I
Advance, in such case, subject to the recoverability standard described below.
Neither the Master Servicer nor Trustee will be required to make a P&I Advance
or any other advance for any Balloon Payments, default interest, late payment
charges, Prepayment Premiums, Yield Maintenance Charges or Additional Interest.
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
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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.
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 (or such other rate specified in the
CLF Intercreditor Agreement or the Greenwich Co-Lender Agreement, as
applicable), accrued on the amount of such Advance from the date made to but not
including the date of reimbursement. To the extent not offset or covered by
amounts otherwise payable on the Non-Offered Certificates, interest accrued on
outstanding Advances will result in a reduction in amounts payable on the
Offered Certificates, subject to the distribution priorities described in this
Prospectus Supplement.
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
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previously advanced by or on behalf of the Master Servicer or the Trustee, all
unpaid interest on the Required Appraisal Loan through the most recent Due Date
prior to such Determination Date at a per annum rate equal to the related Net
Mortgage Rate (exclusive of any portion thereof that constitutes Additional
Interest), (iii) all accrued but unpaid Servicing Fees and all accrued but
unpaid Additional Trust Fund Expenses in respect of such Required Appraisal
Loan, (iv) all related unreimbursed Advances (plus accrued interest thereon)
made by or on behalf of the Master Servicer, the Special Servicer or the Trustee
with respect to such Required Appraisal Loan and (v) all currently due and
unpaid real estate taxes and reserves owed for improvements and assessments,
insurance premiums, and, if applicable, ground rents in respect of the related
Mortgaged Property, over (b) an amount equal to the sum of (i) all escrows,
reserves and letters of credit held for the purposes of reserves (provided such
letters of credit may be drawn upon for reserve purposes under the related
Mortgage Loan documents) held with respect to such Required Appraisal Loan, plus
(ii) 90% of the appraised value (net of any prior liens and estimated
liquidation expenses) of the related Mortgaged Property as determined by such
appraisal. 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, the aggregate Appraisal Reduction
Amounts will be allocated to the Certificate Balance of each Class of Sequential
Pay Certificates in reverse alphabetical order.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
Trustee Reports. Based solely on information provided in monthly reports
prepared by the Master Servicer and the Special Servicer (and subject to the
limitations with respect thereto) and delivered to the Trustee, the Trustee is
required to provide or make available either electronically (on the Trustee's
internet website initially located at "www.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) (a) the aggregate amount of P&I Advances made in respect of such
Distribution Date; and (b) the aggregate amount of servicing advances as of
the close of business on the related Determination Date;
(vii) the aggregate unpaid principal balance of the Mortgage Pool
outstanding as of the close of business on the related Determination Date;
(viii) the aggregate Stated Principal Balance of the Mortgage Pool
outstanding immediately before and immediately after such Distribution
Date;
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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-I and Class IO-II 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 R-I Certificates, Class R-II Certificates, Class Z-I Certificates,
Class Z-II Certificates and Class Z-III 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 CMSA
Loan Periodic Update File, as of the related Determination Date) 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 and the Master Servicer) 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 ten reports providing the required
information (unless the CMSA subsequently approves another form for the
presentation of such information) as of the Determination Date (unless otherwise
specified below and provided that the Collection Period will be deemed to end on
the related 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 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
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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 Mortgage Loans whose operating results for the first
year of operations represent less than seven months of operating history,
(ii) that is delinquent in respect of its real estate taxes, (iii) for
which any Advance has been outstanding for 30 days or more, (iv) for which
the debt service coverage ratio has decreased by more than 10% in the prior
12 months and is less than 1.40x, (v) 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),
(vi) that is late in making its Periodic Payment three or more times in the
preceding 12 months, (vii) with overdue material deferred maintenance at
the related Mortgaged Property or (viii) 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.
(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.
(j) An "Updated Collection Report" identifying each mortgage loan with
respect to which the Master Servicer received a Periodic Payment after the
Determination Date and before the P&I Advance Date for the related month.
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
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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. On or prior to each Distribution
Date, the Trustee will make available to any interested party via its internet
website initially located at "www.ctslink.com/cmbs", (i) the related
Distribution Date Statement, (ii) the CMSA Loan Periodic Update File, CMSA loan
setup file, CMSA Bond File and CMSA Collateral Summary File, (iii) the
Unrestricted Servicer Reports, (iv) as a convenience for interested parties (and
not in furtherance of the distribution thereof under the securities laws), the
Prospectus Supplement, the Prospectus and the Pooling and Servicing Agreement,
and (v) any other items at the request of the Depositor.
In addition, on or prior to each Distribution Date, the Trustee will make
available via its internet website, on a restricted basis, (i) the Restricted
Servicer Reports and (ii) the CMSA Property File. The Trustee shall provide
access to such restricted reports, upon request, to any Privileged Person and to
any other person upon the direction of the Depositor.
The Trustee and Master Servicer make no representations or warranties as to
the accuracy or completeness of any report, document or other information made
available on its internet website and assumes no responsibility therefor. In
addition, the Trustee and the Master Servicer may disclaim responsibility for
any information distributed by the Trustee or the Master Servicer, as the case
may be, for which it is not the original source.
The Master Servicer may make available each month via the Master Servicer's
internet website, initially located at "www.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
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Agreement), any Rating Agency, the Mortgage Loan Sellers, any holder of a
Companion Loan (only with respect to its Companion Loan), 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.
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:
<Table>
<Caption>
ASSUMED FINAL
CLASS DESIGNATION DISTRIBUTION DATE
- ----------------- -----------------
Class A-1............................................. December 15, 2006
Class A-2............................................. December 15, 2009
Class A-3............................................. October 15, 2011
Class A-4............................................. April 15, 2012
Class B............................................... April 15, 2012
Class C............................................... April 15, 2012
Class D............................................... April 15, 2012
</Table>
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
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ANY MORTGAGE LOANS THAT MAY BE DELINQUENT. ACCORDINGLY, IN THE EVENT OF DEFAULTS
ON THE MORTGAGE LOANS, THE ACTUAL FINAL DISTRIBUTION DATE FOR ONE OR MORE
CLASSES OF THE OFFERED CERTIFICATES MAY BE LATER, AND COULD BE SUBSTANTIALLY
LATER, THAN THE RELATED ASSUMED FINAL DISTRIBUTION DATE(S).
In addition, the Assumed Final Distribution Dates set forth above were
calculated on the basis of a 0% CPR (as defined in this Prospectus Supplement)
(except that it is assumed that the ARD Loans pay their respective principal
balances on their related Anticipated Repayment Dates) and no losses on the
Mortgage Loans. Because the rate of principal payments (including prepayments)
on the Mortgage Loans can be expected to exceed the scheduled rate of principal
payments, and could exceed such scheduled rate by a substantial amount, and
because losses may occur in respect of the Mortgage Loans, the actual final
Distribution Date for one or more Classes of the Offered Certificates may be
earlier, and could be substantially earlier, than the related Assumed Final
Distribution Date(s). The rate of principal payments (including prepayments) on
the Mortgage Loans will depend on the characteristics of the Mortgage Loans, as
well as on the prevailing level of interest rates and other economic factors,
and no assurance can be given as to actual principal payment experience.
Finally, the Assumed Final Distribution Dates were calculated assuming there
would not be an early termination of the Trust Fund. See "YIELD AND MATURITY
CONSIDERATIONS" and "DESCRIPTION OF THE MORTGAGE POOL" in this Prospectus
Supplement and in the accompanying Prospectus.
The "Rated Final Distribution Date" with respect to each Class of Offered
Certificates is the Distribution Date in April 2034, 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 (allocated, pro rata, between
the Classes of Class IO Certificates based on Notional Amount) and (ii) in the
case of any other Class of Certificates, a percentage equal to the product of
96% and a fraction, the numerator of which is equal to the aggregate Certificate
Balance of such Class of Certificates (as adjusted by treating any Appraisal
Reduction Amount as a Realized Loss solely for the purposes of adjusting Voting
Rights) and the denominator of which is equal to the aggregate Certificate
Balances of all Classes of Certificates, determined as of the Distribution Date
immediately preceding such time; provided, however, that the treatment of any
Appraisal Reduction Amount as a Realized Loss shall not reduce the Certificate
Balances of any Class for the purpose of determining the Controlling Class, the
Controlling Class Representative or the Majority Subordinate Certificateholder.
The holders of the Class R-I, Class R-II, Class Z-I, Class Z-II and Class Z-III
Certificates will not be entitled to any Voting Rights. Voting Rights allocated
to a Class of Certificates will be allocated among the related
Certificateholders in proportion to the percentage interests in such Class
evidenced by their respective Certificates. The Class A-1, Class A-2, Class A-3
and Class A-4 Certificates will be treated as one Class for determining the
Controlling Class. In addition, if either the Master Servicer or the Special
Servicer is the holder of any Sequential Pay Certificate, neither of the Master
Servicer or Special Servicer, in its capacity as a Certificateholder, will have
Voting Rights with respect to matters concerning compensation affecting the
Master Servicer or the Special Servicer. See "DESCRIPTION OF THE
CERTIFICATES--Voting Rights" in the Prospectus.
TERMINATION
The obligations created by the Pooling and Servicing Agreement will
terminate following the earlier of (i) the final payment (or advance in respect
thereof) or other liquidation of the last Mortgage Loan or REO Property subject
thereto, and (ii) the purchase of all of the Mortgage Loans and all of the REO
Properties, if any, remaining in the Trust Fund by the Master Servicer, the
Special Servicer or any single
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Certificateholder (so long as such Certificateholder is not an affiliate of the
Depositor or a Mortgage Loan Seller) that is entitled to greater than 50% of the
Voting Rights allocated to the Class of Sequential Pay Certificates with the
latest alphabetical class designation then outstanding (or if no
Certificateholder is entitled to greater than 50% of the Voting Rights of such
Class, the Certificateholder with the largest percentage of Voting Rights
allocated to such Class) (the "Majority Subordinate Certificateholder") and
distribution or provision for distribution thereof to the Certificateholders.
Written notice of termination of the Pooling and Servicing Agreement will be
given to each Certificateholder, and the final distribution will be made only
upon surrender and cancellation of the Certificates at the office of the Trustee
or other registrar for the Certificates or at such other location as may be
specified in such notice of termination.
Any such purchase by the Master Servicer, the Special Servicer or the
Majority Subordinate Certificateholder of all the Mortgage Loans and all of the
REO Properties, if any, remaining in the Trust Fund is required to be made at a
price equal to (i) the aggregate Purchase Price of all the Mortgage Loans (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 2.6% 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.
THE TRUSTEE
Wells Fargo Bank Minnesota, N.A. ("Wells Fargo") is acting as Trustee
pursuant to the Pooling and Servicing Agreement. Wells Fargo, a direct, wholly
owned subsidiary of Wells Fargo & Company, is a national banking association
originally chartered in 1872 and is engaged in a wide range of activities
typical of a national bank. Wells Fargo's principal office is located at Wells
Fargo Center, Sixth and Marquette, Minneapolis, Minnesota 55479. 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 9062 Old Annapolis Road,
Columbia, Maryland 21045-1951. Certificateholders and other interested parties
should direct their inquiries to Wells Fargo CMBS Customer Service office. The
telephone number is (301) 815-6600. See "DESCRIPTION OF THE POOLING
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
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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
is also authorized to invest or direct the investment of funds held in the
distribution accounts and the Additional Interest Account maintained by it that
relate to the Mortgage Loans or REO Properties, as the case may be, in certain
short-term United States government securities and certain other permitted
investment grade obligations, and the Trustee will be entitled to retain any
interest or other income earned on such funds held in those accounts maintained
by it, but shall be required to cover any losses on investments of funds held in
those accounts maintained by it, from its own funds without any right to
reimbursement, except in certain limited circumstances described in the Pooling
and Servicing Agreement. The Trustee will not be entitled to any fee with
respect to any Companion Loan.
The Trustee also has certain duties with respect to REMIC administration
(in such capacity, the "REMIC Administrator"). See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of Owners of REMIC Residual Certificates--Reporting and
Other Administrative Matters" in the Prospectus.
YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General. The yield on any Offered Certificate will depend on, among other
things, (a) the price at which such Certificate is purchased by an investor and
(b) the rate, timing and amount of distributions on such Certificate. The rate,
timing and amount of distributions on any Offered Certificate will in turn
depend on, among other things, (i) the Pass-Through Rate for such Certificate,
(ii) the rate and timing of principal payments (including principal prepayments)
and other principal collections on the Mortgage Loans and the extent to which
such amounts are to be applied in reduction of the Certificate Balance, (iii)
the rate, timing and severity of Realized Losses and Additional Trust Fund
Expenses and the extent to which such losses and expenses are allocable in
reduction of the Certificate Balance, and (iv) the timing and severity of any
Net Aggregate Prepayment Interest Shortfalls and the extent to which such
shortfalls allocable are in reduction of the Distributable Certificate Interest
payable on the related Class.
Rate and Timing of Principal Payment. The yield to holders of any Offered
Certificates purchased at a discount or premium will be affected by the rate and
timing of principal payments made in reduction of the Certificate Balance of any
Class of Sequential Pay Certificates. As described in this Prospectus
Supplement, the Principal Distribution Amount for each Distribution Date will
generally be distributable first in respect of the Class A-1 Certificates until
the Certificate Balance thereof is reduced to zero, then, in respect of the
Class A-2 Certificates until the Certificate Balance thereof is reduced to zero,
then, in respect of the Class A-3 Certificates until the Certificate Balance
thereof is reduced to zero, and then, in respect of the Class A-4 Certificates
until the Certificate Balance thereof is reduced to zero, and thereafter will
generally be distributable entirely in respect of the Class B Certificates, the
Class C Certificates, the Class D Certificates and then the Non-Offered
Certificates (other than the Class IO-I and Class IO-II 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,
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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 AND
LEASES--Foreclosure" in the Prospectus.
The extent to which the yield to maturity of any Class of Offered
Certificates may vary from the anticipated yield will depend upon the degree to
which such Certificates are purchased at a discount or premium and when, and to
what degree, payments of principal on the Mortgage Loans in turn are distributed
or otherwise result in reduction of the Certificate Balance of such
Certificates. An investor should consider, in the case of any Offered
Certificate purchased at a discount, the risk that a slower than anticipated
rate of principal payments on the Mortgage Loans could result in an actual yield
to such investor that is lower than the anticipated yield and, in the case of
any Offered Certificate purchased at a premium, the risk that a faster than
anticipated rate of principal payments could result in an actual yield to such
investor that is lower than the anticipated yield. In general, the earlier a
payment of principal on the Mortgage Loans is distributed or otherwise results
in reduction of the principal balance of an Offered Certificate purchased at a
discount or premium, the greater will be the effect on an investor's yield to
maturity. As a result, the effect on an investor's yield of principal payments
on the Mortgage Loans occurring at a rate higher (or lower) than the rate
anticipated by the investor during any particular period would not be fully
offset by a subsequent like reduction (or increase) in the rate of such
principal payments. Because the rate of principal payments on the Mortgage Loans
will depend on future events and a variety of factors (as described more fully
below), no assurance can be given as to such rate or the rate of principal
prepayments in particular. The Depositor is not aware of any relevant publicly
available or authoritative statistics with respect to the historical prepayment
experience of a large group of mortgage loans comparable to the Mortgage Loans.
Losses and Shortfalls. The yield to holders of the Offered Certificates
will also depend on the extent to which such holders are required to bear the
effects of any losses or shortfalls on the Mortgage Loans. Losses and other
shortfalls on the Mortgage Loans will, with the exception of any Net Aggregate
Prepayment Interest Shortfalls, generally be borne by the holders of the
respective Classes of Sequential Pay Certificates to the extent of amounts
otherwise distributable in respect of such Certificates, in reverse alphabetical
order of their Class designations. Realized Losses and Additional Trust Fund
Expenses will be allocated, as and to the extent described in this Prospectus
Supplement, to the holders of the respective Classes of Sequential Pay
Certificates other than the Class A-1, Class A-2, Class A-3 and Class A-4
Certificates (in reduction of the Certificate Balance of each such Class), in
reverse alphabetical order of their Class designations. In the event of a
reduction of the Certificate Balances of all such Classes of Certificates, such
losses and shortfalls will then be borne, pro rata, by the Class A-1
Certificates, Class A-2 Certificates, Class A-3 Certificates and Class A-4
Certificates (and the Class 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.
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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 some cases, to the payment of a Prepayment
Premium or a Yield Maintenance Charge. A requirement that a prepayment be
accompanied by a Prepayment Premium or Yield Maintenance Charge may not provide
a sufficient economic disincentive to deter a borrower from refinancing at a
more favorable interest rate.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell or
refinance Mortgaged Properties in order to realize their equity therein, to meet
cash flow needs or to make other investments. In addition, some borrowers may be
motivated by federal and state tax laws (which are subject to change) to sell
Mortgaged Properties prior to the exhaustion of tax depreciation benefits.
The Depositor makes no representation as to the particular factors that
will affect the rate and timing of prepayments and defaults on the Mortgage
Loans, as to the relative importance of such factors, as to the percentage of
the principal balance of the Mortgage Loans that will be prepaid or as to
whether a default will have occurred as of any date or as to the overall rate of
prepayment or default on the Mortgage Loans.
Delay in Payment of Distributions. Because monthly distributions will not
be made to Certificateholders until a date that is scheduled to be up to 15 days
following the Due Dates for the Mortgage Loans during the related Collection
Period, the effective yield to the holders of the Offered Certificates will be
lower than the yield that would otherwise be produced by the applicable
Pass-Through Rates and purchase prices (assuming such prices did not account for
such delay).
Unpaid Distributable Certificate Interest. As described under "DESCRIPTION
OF THE CERTIFICATES--Distributions--Application of the Available Distribution
Amount" in this Prospectus Supplement, if the portion of the Available
Distribution Amount distributable in respect of interest on any Class of Offered
Certificates on any Distribution Date is less than the Distributable Certificate
Interest then payable for such Class, the shortfall will be distributable to
holders of such Class of Certificates on subsequent Distribution Dates, to the
extent of available funds. Any such shortfall will not bear interest, however,
and will therefore negatively affect the yield to maturity of such Class of
Certificates for so long as it is outstanding.
Optional Termination. Any optional termination of the Trust Fund would
have an effect similar to a prepayment in full of the Mortgage Loans (without,
however, the payment of any Prepayment Premiums or Yield Maintenance Charges)
and, as a result, investors in any Certificates purchased at a premium might not
fully recoup their initial investment. See "DESCRIPTION OF THE
CERTIFICATES--Termination" in this Prospectus Supplement.
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WEIGHTED AVERAGE LIFE
The weighted average life of any Class A-1, Class A-2, Class A-3, Class
A-4, Class B, Class C and Class D Certificate refers to the average amount of
time that will elapse from the assumed Closing Date until each dollar allocable
to principal of such Certificate is distributed to the investor. The weighted
average life of any such Offered Certificate will be influenced by, among other
things, the rate at which principal on the Mortgage Loans is paid or otherwise
collected or advanced and applied to pay principal of such Offered Certificate,
which may be in the form of scheduled amortization, voluntary prepayments,
insurance and condemnation proceeds and liquidation proceeds. As described in
this Prospectus Supplement, the Principal Distribution Amount for each
Distribution Date will generally be distributable first in respect of the Class
A-1 Certificates until the Certificate Balance thereof is reduced to zero, then,
to the Class A-2 Certificates until the Certificate Balances thereof is reduced
to zero, then, to the Class A-3 Certificates until the Certificate Balance
thereof is reduced to zero and, then, to the Class A-4 Certificates until the
Certificate Balance thereof is reduced to zero, will thereafter generally be
distributable entirely in respect of the Class B Certificates, the Class C
Certificates and the Class D Certificates, in that order, in each case until the
Certificate Balance of such Class of Certificates is reduced to zero.
The tables below indicate the percentage of the initial Certificate Balance
of each Class of Offered Certificates that would be outstanding after each of
the dates shown and the corresponding weighted average life of each such Class
of Offered Certificates. To the extent that the Mortgage Loans or the
Certificates have characteristics that differ from those assumed in preparing
the tables, the Class A-1, Class A-2, Class A-3, Class A-4, Class B, Class C and
Class D Certificates may mature earlier or later than indicated by the tables.
Accordingly, the Mortgage Loans will not prepay at any constant rate nor will
the Mortgage Loans prepay at the same rate, and it is highly unlikely that the
Mortgage Loans will prepay in a manner consistent with the assumptions described
above. In addition, variations in the actual prepayment experience and in the
balance of the Mortgage Loans that actually prepay may increase or decrease the
percentages of initial Certificate Balances (and shorten or extend the weighted
average lives) shown in the following tables. Investors are urged to conduct
their own analyses of the rates at which the Mortgage Loans may be expected to
prepay.
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this Prospectus Supplement is the "Constant Prepayment
Rate" or "CPR" model. The CPR model represents an assumed constant annual rate
of prepayment each month, expressed as a per annum percentage of the then
scheduled principal balance of the pool of mortgage loans. As used in the tables
set forth below, the column headed "0% CPR" assumes that none of the Mortgage
Loans is prepaid in whole or in part before maturity or the Anticipated
Repayment Date, as the case may be. The columns headed "25% CPR", "50% CPR",
"75% CPR" and "100% CPR," respectively, assume that prepayments are made each
month at those levels of CPR on the Mortgage Loans that are eligible for
prepayment under the Table Assumptions set forth in the next paragraph (each
such scenario, a "Scenario"). There is no assurance, however, that prepayments
on the Mortgage Loans will conform to any level of CPR, and no representation is
made that the Mortgage Loans will prepay at the levels of CPR shown or at any
other prepayment rate.
The tables below were derived from calculations based on the following
assumptions (the "Table Assumptions"): (i) no Mortgage Loan prepays during any
applicable Lockout Period or any period during which Defeasance Collateral is
permitted or required to be pledged or any period during which a yield
maintenance charge is required (otherwise, in the case of each table, each
Mortgage Loan is assumed to prepay at the indicated level of CPR, with each
prepayment being applied on the first day of the applicable month in which it is
assumed to be received), (ii) the Pass-Through Rates and initial Certificate
Balances of the respective Classes of Sequential Pay Certificates are as
described in this Prospectus Supplement, (iii) there are no delinquencies or
defaults with respect to, and no modifications, waivers or amendments of the
terms of, the Mortgage Loans, (iv) there are no Realized Losses, Additional
Trust Fund Expenses or Appraisal Reduction Amounts with respect to the Mortgage
Loans or the Trust Fund, (v) scheduled interest and principal payments on the
Mortgage Loans are timely received, (vi) ARD Loans pay in full on their
Anticipated Repayment Dates, (vii) all Mortgage Loans have Due
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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 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 15th day (each assumed to be a business day) of each month,
commencing in June 2002, and (xiii) the Closing Date for the sale of the Offered
Certificates is May 23, 2002.
The tables set forth below indicate the resulting weighted average lives of
each Class of Offered Certificates and set forth the percentages of the initial
Certificate Balance of such Class of Offered Certificates that would be
outstanding after each of the dates shown in each case assuming the indicated
level of CPR. For purposes of the following tables, the weighted average life of
an Offered Certificate is determined by (i) multiplying the amount of each
principal distribution thereon by the number of years from the assumed Closing
Date of such Certificate to the related Distribution Date, (ii) summing the
results and (iii) dividing the sum by the aggregate amount of the reductions in
the principal balance of such Certificate.
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS A-1
CERTIFICATES
<Table>
<Caption>
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE
OTHERWISE AT INDICATED CPR
-------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
----------------- ------- --------- --------- --------- ---------
Initial Date.................................. 100 100 100 100 100
5/15/03....................................... 84 84 84 84 84
5/15/04....................................... 66 66 66 66 66
5/15/05....................................... 47 47 47 47 47
5/15/06....................................... 26 26 26 26 26
5/15/07....................................... 0 0 0 0 0
Weighted average life (in years).............. 2.75 2.74 2.73 2.71 2.68
</Table>
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS A-2
CERTIFICATES
<Table>
<Caption>
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE
OTHERWISE AT INDICATED CPR
-------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
----------------- ------- --------- --------- --------- ---------
Initial Date.................................. 100 100 100 100 100
5/15/03....................................... 100 100 100 100 100
5/15/04....................................... 100 100 100 100 100
5/15/05....................................... 100 100 100 100 100
5/15/06....................................... 100 100 100 100 100
5/15/07....................................... 39 39 39 38 33
5/15/08....................................... 30 28 26 24 22
5/15/09....................................... 17 14 12 10 10
5/15/10....................................... 0 0 0 0 0
Weighted average life (in years).............. 5.50 5.44 5.40 5.36 5.21
</Table>
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PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS A-3
CERTIFICATES
<Table>
<Caption>
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE
OTHERWISE AT INDICATED CPR
-------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
----------------- ------- --------- --------- --------- ---------
Initial Date.................................. 100 100 100 100 100
5/15/03....................................... 100 100 100 100 100
5/15/04....................................... 100 100 100 100 100
5/15/05....................................... 100 100 100 100 100
5/15/06....................................... 100 100 100 100 100
5/15/07....................................... 100 100 100 100 100
5/15/08....................................... 100 100 100 100 100
5/15/09....................................... 100 100 100 100 100
5/15/10....................................... 62 58 57 56 56
5/15/11....................................... 25 20 17 15 0
5/15/12....................................... 0 0 0 0 0
Weighted average life (in years).............. 8.44 8.35 8.30 8.27 8.09
</Table>
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS A-4
CERTIFICATES
<Table>
<Caption>
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE
OTHERWISE AT INDICATED CPR
-------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
----------------- ------- --------- --------- --------- ---------
Initial Date.................................. 100 100 100 100 100
5/15/03....................................... 100 100 100 100 100
5/15/04....................................... 100 100 100 100 100
5/15/05....................................... 100 100 100 100 100
5/15/06....................................... 100 100 100 100 100
5/15/07....................................... 100 100 100 100 100
5/15/08....................................... 100 100 100 100 100
5/15/09....................................... 100 100 100 100 100
5/15/10....................................... 100 100 100 100 100
5/15/11....................................... 100 100 100 100 97
5/15/12....................................... 0 0 0 0 0
Weighted average life (in years).............. 9.68 9.66 9.64 9.61 9.43
</Table>
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS B CERTIFICATES
<Table>
<Caption>
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE
OTHERWISE AT INDICATED CPR
-------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
----------------- ------- --------- --------- --------- ---------
Initial Date.................................. 100 100 100 100 100
5/15/03....................................... 100 100 100 100 100
5/15/04....................................... 100 100 100 100 100
5/15/05....................................... 100 100 100 100 100
5/15/06....................................... 100 100 100 100 100
5/15/07....................................... 100 100 100 100 100
5/15/08....................................... 100 100 100 100 100
5/15/09....................................... 100 100 100 100 100
5/15/10....................................... 100 100 100 100 100
5/15/11....................................... 100 100 100 100 100
5/15/12....................................... 0 0 0 0 0
Weighted average life (in years).............. 9.89 9.89 9.89 9.85 9.66
</Table>
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PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS C CERTIFICATES
<Table>
<Caption>
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE
OTHERWISE AT INDICATED CPR
-------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
----------------- ------- --------- --------- --------- ---------
Initial Date.................................. 100 100 100 100 100
5/15/03....................................... 100 100 100 100 100
5/15/04....................................... 100 100 100 100 100
5/15/05....................................... 100 100 100 100 100
5/15/06....................................... 100 100 100 100 100
5/15/07....................................... 100 100 100 100 100
5/15/08....................................... 100 100 100 100 100
5/15/09....................................... 100 100 100 100 100
5/15/10....................................... 100 100 100 100 100
5/15/11....................................... 100 100 100 100 100
5/15/12....................................... 0 0 0 0 0
Weighted average life (in years).............. 9.89 9.89 9.89 9.89 9.73
</Table>
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS D CERTIFICATES
<Table>
<Caption>
0% CPR DURING LOCKOUT, DEFEASANCE AND YIELD MAINTENANCE
OTHERWISE AT INDICATED CPR
---------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
----------------- -------- --------- --------- --------- ----------
Initial Date................................ 100 100 100 100 100
5/15/03..................................... 100 100 100 100 100
5/15/04..................................... 100 100 100 100 100
5/15/05..................................... 100 100 100 100 100
5/15/06..................................... 100 100 100 100 100
5/15/07..................................... 100 100 100 100 100
5/15/08..................................... 100 100 100 100 100
5/15/09..................................... 100 100 100 100 100
5/15/10..................................... 100 100 100 100 100
5/15/11..................................... 100 100 100 100 100
5/15/12..................................... 0 0 0 0 0
Weighted average life (in years)............ 9.89 9.89 9.89 9.89 9.73
</Table>
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.
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For federal income tax purposes, two separate REMIC elections will be made
with respect to segregated asset pools that make up the trust, other than the
Early Defeasance Loan and any Additional Interest on the ARD Loans. In addition,
the Early Defeasance Loan will constitute the sole asset of an Early Defeasance
Loan REMIC and the "regular interest" in such Early Defeasance Loan REMIC
(instead of the related Mortgage Loan and any related REO Property) will be an
asset of one of the aforementioned REMICs. 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,
Class Z-II and Class Z-III certificates will represent undivided beneficial
interests in the related assets. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--REMICs" and "--Grantor Trust Funds" in the Prospectus.
TAXATION OF THE OFFERED CERTIFICATES
Based on expected issue prices, the Offered Certificates will not 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 or amortization of
issue premium for federal income tax purposes will be based on the assumption
that subsequent to the date of any determination the Mortgage Loans will pay at
a rate equal to a CPR of 0%, except that it is assumed that the ARD Loans will
pay their respective outstanding principal balances on their related Anticipated
Repayment Dates. No representation is made that the Mortgage Loans will pay at
that rate or at any other rate. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--REMICs--Taxation of Owners of REMIC Regular Certificates--Original
Issue Discount" in the Prospectus.
The Internal Revenue Service (the "IRS") has issued regulations (the "OID
Regulations") under Sections 1271 to 1275 of the Code generally addressing the
treatment of debt instruments issued with original issue discount. Purchasers of
the Offered Certificates should be aware that the OID Regulations and Section
1272(a)(6) of the Code do not adequately address certain issues relevant to, or
are not applicable to, securities such as the Offered Certificates. The OID
Regulations in some circumstances permit the holder of a debt instrument to
recognize original issue discount under a method that differs from that used by
the issuer. Accordingly, it is possible that the holder of an Offered
Certificate issued with original issue discount may be able to select a method
for recognizing original issue discount that differs from that used by the
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.
Based on their anticipated issue prices (including accrued interest) the
Offered Certificates will be treated for federal income tax purposes as having
been issued at a premium. Whether any holder of such a Class of Certificates
will be treated as holding a Certificate with amortizable bond premium will
depend on such Certificateholder's purchase price and the distributions
remaining to be made on such Certificate at the time of its acquisition by such
Certificateholder. Holders of each such class of Certificates should consult
their own tax advisors regarding the possibility of making an election to
amortize such premium. See "MATERIAL FEDERAL INCOME TAX CONSEQUENCES--Taxation
of Owners of REMIC Regular Certificates--Premium" in the accompanying
Prospectus.
The Offered Certificates will be treated as "real estate assets" within the
meaning of Section 856(c)(5)(B) of the Code. 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 multifamily and mobile
home park properties and, accordingly, investment in the Offered Certificates
may not be suitable for certain thrift institutions. The
S-175
Offered Certificates will not qualify under the foregoing sections to the extent
of any Mortgage Loan that has been defeased with U.S. government obligations.
Prepayment Premiums and Yield Maintenance Charges actually collected will
be distributed to the holders of the Offered Certificates as described in this
Prospectus Supplement. It is not entirely clear under the Code when the amount
of a Yield Maintenance Charge or Prepayment Premium should be taxed to the
holder of an Offered Certificate, but it is not expected, for federal income tax
reporting purposes, that Yield Maintenance Charges or Prepayment Premiums will
be treated as giving rise to any income to the holders of the Offered
Certificates prior to the Master Servicer's actual receipt of a Yield
Maintenance Charge or Prepayment Premium, as the case may be. It is not entirely
clear whether Yield Maintenance Charges or Prepayment Premiums give rise to
ordinary income or capital gains and Certificateholders should consult their own
tax advisors concerning this character issue and the treatment of Yield
Maintenance Charges and Prepayment Premiums in general.
The Treasury Department has issued new regulations (the "New Regulations")
which make certain modifications to the withholding, backup withholding, and
information reporting rules. The New Regulations attempt to unify certification
requirements and to modify reliance standards. The New Regulations were
effective January 1, 2001. 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
The following description is general in nature, is not intended to be
all-inclusive, is based on the law and practice in force at the date of this
document and is subject to any subsequent changes therein. In view of the
individual nature of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Code consequences, each potential investor that is a Plan
(as described below) is advised to consult its own legal advisor with respect to
the specific ERISA and Code consequences of investing in the Offered
Certificates and to make its own independent decision. The following is merely a
summary and should not be construed as legal advice.
A fiduciary of any employee benefit plan or other retirement plan or
arrangement, including individual retirement accounts and annuities, Keogh plans
and collective investment funds, separate accounts and general accounts in which
such plans, accounts or arrangements are invested, that is subject to ERISA or
Section 4975 of the Code (a "Plan") should carefully review with its legal
advisors whether the purchase or holding of Offered Certificates could give rise
to a transaction that is prohibited or is not otherwise permitted either under
ERISA or Section 4975 of the Code or whether there exists any statutory or
administrative exemption applicable thereto. Other employee benefit plans,
including governmental plans (as defined in Section 3(32) of ERISA) and church
plans (as defined in Section 3(33) of ERISA and provided no election has been
made under Section 410(d) of the Code), while not subject to the foregoing
provisions of ERISA or the Code, may be subject to materially similar provisions
of applicable federal, state or local law ("Similar Law").
The U.S. Department of Labor has issued individual exemptions to each of
the Underwriters (Prohibited Transaction Exemption ("PTE") 96-22 (April 3, 1996)
to Wachovia Corporation, and its subsidiaries and its affiliates, which include
First Union Securities, Inc. ("First Union Securities"), PTE 90-59 (September 6,
1990) to Greenwich Capital Markets, Inc. ("Greenwich Capital") and PTE 93-32
(May 14, 1993) to Nomura Securities International, Inc. ("Nomura Securities"),
each as amended by PTE 97-34 (July 21, 1997) and PTE 2000-58 (November 13, 2000)
(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,
S-176
provided that certain conditions set forth in the Exemptions are satisfied. For
purposes of this discussion, the term "Underwriter" shall include (a) First
Union Securities, (b) Greenwich Capital, (c) Nomura Securities, (d) any person
directly or indirectly, through one or more intermediaries, controlling,
controlled by or under common control with First Union Securities, Greenwich
Capital or Nomura Securities and (e) any member of the underwriting syndicate or
selling group of which First Union Securities, Greenwich Capital or Nomura
Securities 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 Offered Certificates by a Plan only if specific conditions
(certain of which are described below) are met. It is not clear whether the
Exemptions apply to participant directed Plans as described in Section 404(c) of
ERISA or Plans that are subject to Section 4975 of the Code but that are not
subject to Title I of ERISA, such as certain Keogh plans and certain individual
retirement accounts. The Exemptions would not apply to governmental plans and
other employee benefit plans that are not subject to the prohibited transaction
provisions of ERISA or the Code but that may be subject to Similar Law.
The Exemptions set forth five general conditions that, among others, must
be satisfied for a transaction involving the purchase, sale and holding of the
Offered Certificates by a Plan to be eligible for exemptive relief thereunder.
First, the acquisition of the Offered Certificates by a Plan must be on terms,
including the price paid for the Certificates, that are at least as favorable to
the Plan as they would be in an arm's-length transaction with an unrelated
party. Second, the Offered Certificates at the time of acquisition by the Plan
must be rated in one of the four highest generic rating categories by Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P"),
Moody's Investors Service, Inc. ("Moody's") or Fitch Ratings, Inc. ("Fitch") or
any successor thereto (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 obligor with respect to Mortgage Loans
constituting more than 5.0% of the aggregate unamortized principal balance of
the Mortgage Loans as of the date of initial issuance of the Offered
Certificates, and any of their affiliates. Fourth, the sum of all payments made
to and retained by any Underwriter in connection with the distribution or
placement of the Offered Certificates must represent not more than reasonable
compensation for underwriting such Certificates; the sum of all payments made to
and retained by the Depositor pursuant to the assignment of the Mortgage Loans
to the Trust Fund must represent not more than the fair market value of such
obligations; and the sum of all payments made to and retained by the Master
Servicer, the Special Servicer or any sub-servicer must represent not more than
reasonable compensation for such person's services under the Pooling and
Servicing Agreement and reimbursement of such person's reasonable expenses in
connection therewith. Fifth, the investing Plan must be an accredited investor
as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the Securities Act.
A fiduciary of a Plan contemplating purchasing any Class of the Offered
Certificates must make its own determination that, at the time of such purchase,
such Certificates satisfy the general conditions set forth above.
The Exemptions also require that the Trust Fund meet the following
requirements: (i) the Trust Fund must consist solely of assets of the type that
have been included in other investment pools; (ii) certificates in such other
investment pools must have been rated in one of the four highest generic rating
categories by S&P, Moody's or Fitch for at least one year prior to the Plan's
acquisition of the Offered Certificates; and (iii) certificates in such other
investment pools must have been purchased by investors other than Plans for at
least one year prior to any Plan's acquisition of the Offered Certificates.
If the general conditions of the Exemptions are satisfied, the Exemptions
may provide an exemption from the restrictions imposed by Sections 406(a) and
407(a) of ERISA (as well as the excise taxes imposed by Sections 4975(a) and (b)
of the Code by reason of Sections 4975(c)(1)(A) through (D) of the Code) in
connection with (i) the direct or indirect sale, exchange or transfer of the
Offered Certificates in the initial issuance of Certificates between the
Depositor or an Underwriter and a Plan
S-177
when the Depositor, an Underwriter, the Trustee, the Master Servicer, the
Special Servicer, a sub-servicer or an obligor with respect to Mortgage Loans is
a "Party in Interest," as defined in the Prospectus, with respect to the
investing Plan, (ii) the direct or indirect acquisition or disposition in the
secondary market of the Offered Certificates by a Plan and (iii) the holding of
Offered Certificates by a Plan. However, no exemption is provided from the
restrictions of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the
acquisition or holding of the Offered Certificate on behalf of an "Excluded
Plan" by any person who has discretionary authority or renders investment advice
with respect to the assets of such Excluded Plan. For purposes hereof, an
Excluded Plan is a Plan sponsored by any member of the Restricted Group.
If certain specific conditions of the Exemptions are also satisfied, each
such Exemption may provide relief from the restrictions imposed by reason of
Sections 406(b)(1) and (b)(2) of ERISA and the taxes imposed by Section
4975(c)(1)(E) of the Code to an obligor with respect to Mortgage Loans acting as
a fiduciary with respect to the investment of a Plan's assets in the Offered
Certificates (or such obligor's affiliate) only if, among other requirements (i)
such obligor is an obligor with respect to 5% or less of the fair market value
of the obligations or receivables contained in the Trust, (ii) the investing
Plan is not an Excluded Plan, (iii) a Plan's investment in each class of the
Offered Certificates does not exceed 25% of all of the Certificates of that
class outstanding at the time of the acquisition, (iv) immediately after the
acquisition, no more than 25% of the assets of the Plan are invested in
certificates representing an interest in trusts (including the Trust Fund)
containing assets sold or serviced by the Depositor or the Master Servicer and
(v) in the case of the acquisition of the Offered Certificates in connection
with their initial issuance, at least 50% of each Class of Offered Certificates
in which Plans have invested and of the aggregate interest in the Trust Fund is
acquired by persons independent of the Restricted Group.
The Exemptions also apply to transactions in connection with the servicing,
management and operation of the Trust Fund, provided that, in addition to the
general requirements described above, (a) such transactions are carried out in
accordance with the terms of a binding pooling and servicing agreement, (b) the
pooling and servicing agreement is provided to, or described in all material
respects in the prospectus or private placement memorandum provided to,
investing Plans before their purchase of Certificates issued by the Trust Fund
and (c) the terms and conditions for the defeasance of a mortgage obligation and
substitution of a new mortgage obligation, as so described, have been approved
by an NRSRO and do not result in any Offered Certificates receiving a lower
credit rating from the NRSRO than the current rating. The Pooling and Servicing
Agreement is a pooling and servicing agreement as defined in the Exemptions. The
Pooling and Servicing Agreement provides that all transactions relating to the
servicing, management and operations of the Trust Fund must be carried out in
accordance with the Pooling and Servicing Agreement.
Before purchasing any Class of Offered Certificate, a fiduciary of a Plan
should itself confirm that the specific and general conditions of the Exemptions
and the other requirements set forth in the Exemptions would be satisfied.
Any Plan fiduciary considering the purchase of Offered Certificates should
consult with its counsel with respect to the applicability of the Exemptions and
other issues and determine on its own whether all conditions have been satisfied
and whether the Offered Certificates are an appropriate investment for a Plan
under ERISA and the Code (or, in the case of governmental plans, under Similar
Law) with regard to ERISA's general fiduciary requirements, including investment
prudence and diversification and the exclusive benefit rule. Each purchaser of
the Offered Certificates with the assets of one or more Plans shall be deemed to
represent that each such Plan qualifies as an "accredited investor" as defined
in Rule 501(a)(1) of Regulation D under the Securities Act. No Plan may purchase
or hold an interest in any Class of Offered Certificates unless such
Certificates are rated in one of the top four generic rating categories by at
least one NRSRO at the time of such purchase, unless such Plan is an insurance
company general account that represents and warrants that it is eligible for,
and meets all of the requirements of, Sections I and III of Prohibited
Transaction Class Exemption 95-60.
THE SALE OF OFFERED CERTIFICATES TO A PLAN IS IN NO RESPECT A
REPRESENTATION OR WARRANTY BY THE DEPOSITOR, THE UNDERWRITERS OR ANY OTHER
PERSON THAT THIS INVESTMENT MEETS ALL RELEVANT LEGAL REQUIRE-
S-178
MENTS WITH RESPECT TO INVESTMENTS BY PLANS GENERALLY OR ANY PARTICULAR PLAN,
THAT THE EXEMPTIONS WOULD APPLY TO THE ACQUISITION OF THIS INVESTMENT BY PLANS
IN GENERAL OR ANY PARTICULAR PLAN, OR THAT THIS INVESTMENT IS APPROPRIATE FOR
PLANS GENERALLY OR ANY PARTICULAR PLAN.
LEGAL INVESTMENT
The Offered Certificates will not constitute "mortgage related securities"
for the purposes of the Secondary Mortgage Market Enhancement Act of 1984, as
amended. Investors should consult their own legal advisors to determine whether
and to what extent the Offered Certificates constitute legal investments for
them.
No representations are made as to the proper characterization of any Class
of Offered Certificates for legal investment, financial institution regulatory
purposes or other purposes or as to the ability of particular investors to
purchase the Offered Certificates under applicable legal investment
restrictions. 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 First Union Securities,
Greenwich Capital and Nomura Securities (collectively, the "Underwriters"), the
Depositor has agreed to sell to each of First Union Securities, Greenwich
Capital and Nomura Securities and each of First Union Securities, Greenwich
Capital and Nomura Securities 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%:
<Table>
<Caption>
CLASS FIRST UNION SECURITIES GREENWICH CAPITAL NOMURA SECURITIES
- ----- ---------------------- ----------------- -----------------
Class A-1............... $ 33,061,941 $ 16,955,611 $ 9,067,448
Class A-2............... $ 75,820,035 $ 38,883,836 $20,794,129
Class A-3............... $ 75,634,818 $ 38,788,849 $20,743,333
Class A-4............... $226,152,401 $115,980,858 $62,023,741
Class B................. $ 19,935,648 $ 10,223,873 $ 5,467,479
Class C................. $ 23,922,554 $ 12,268,533 $ 6,560,913
Class D................. $ 5,315,874 $ 2,726,213 $ 1,457,913
</Table>
First Union Securities, Inc. is an indirect, wholly-owned subsidiary of
Wachovia Corporation. Wachovia Corporation conducts its investment banking,
institutional, and capital markets businesses through its various bank,
broker-dealer and nonbank subsidiaries (including First Union Securities, Inc.)
under the trade name of Wachovia Securities. Any references to Wachovia
Securities in this Prospectus Supplement, however, do not include Wachovia
Securities, Inc., member NASD/SIPC, which is a separate broker-dealer subsidiary
of Wachovia Corporation and sister affiliate of First Union Securities, Inc.
Wachovia Securities, Inc. is not participating as an underwriter in the
distribution of the Offered Certificates. In connection with the consummation of
the merger of First Union Corporation and Wachovia Corporation, on or about June
15, 2002, Wachovia Securities, Inc. and First Union Securities, Inc. will merge
and the successor entity will be named Wachovia Securities, Inc.
First Union Securities, Greenwich Capital and Nomura Securities are acting
as co-lead managers of the offering. First Union Securities is acting as
bookrunner for the offering.
Proceeds to the Depositor from the sale of the Offered Certificates, before
deducting expenses payable by the Depositor, will be approximately $828,612,346,
which includes accrued interest.
S-179
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, First Union Securities, Greenwich
Capital and Nomura Securities may be deemed to have received compensation from
the Depositor in the form of underwriting discounts. Each Underwriter and any
dealers that participate with any Underwriter in the distribution of the Offered
Certificates may be deemed to be underwriters and any profit on the resale of
the Offered Certificates positioned by them may be deemed to be underwriting
discounts and commissions under the Securities Act.
Purchasers of the Offered Certificates, including dealers, may, depending
on the facts and circumstances of such purchases, be deemed to be "underwriters"
within the meaning of the Securities Act in connection with reoffers and sales
by them of Offered Certificates. Certificateholders should consult with their
legal advisors in this regard prior to any such reoffer or sale.
The Depositor also has been advised by the Underwriters that each of them,
through one or more of its affiliates, currently intends to make a market in the
Offered Certificates; however, none of the Underwriters has any obligation to do
so, any market making may be discontinued at any time and there can be no
assurance that an active secondary market for the Offered Certificates will
develop. See "RISK FACTORS--Liquidity for Certificates May Be Limited" in this
Prospectus Supplement and "RISK FACTORS--Your Ability to Resell Certificates May
Be Limited Because of Their Characteristics" in the accompanying Prospectus.
This Prospectus Supplement and the Prospectus may be used by the Depositor,
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.
First Union Securities, one of the Underwriters, is an affiliate of the
Depositor and Wachovia Bank, National Association, which is one of the Mortgage
Loan Sellers and the Master Servicer. Greenwich Capital, one of the
Underwriters, is an affiliate of Greenwich Capital Financial Products, Inc., a
Mortgage Loan Seller. Nomura Securities, one of the Underwriters, is an
affiliate of Nomura Credit & Capital, Inc., a Mortgage Loan Seller. It is
expected that Wachovia Bank, National Association, Greenwich Capital Financial
Products, Inc., and Nomura Credit & Capital, Inc. or one of their affiliates
will own the Class Z-I, Class Z-II or Class Z-III Certificates, respectively.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor and for the
Underwriters by Cadwalader, Wickersham & Taft, Charlotte, North Carolina.
S-180
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"):
<Table>
<Caption>
EXPECTED
RATINGS FROM
CLASS MOODY'S/S&P
- ----- ----------------
Class A-1................................................ Aaa/AAA
Class A-2................................................ Aaa/AAA
Class A-3................................................ Aaa/AAA
Class A-4................................................ Aaa/AAA
Class B.................................................. Aa2/AA
Class C.................................................. A2/A
Class D.................................................. A3/A-
</Table>
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-181
INDEX OF DEFINED TERMS
<Table>
215 East 23rd Street Loan................................... S-118
30/360 basis................................................ S-28, S-79
AB Mortgage Loans........................................... S-84
A/B Mortgage Event of Default............................... S-86
Abbey....................................................... S-107, S-111
Abbey Portfolio I Loans..................................... S-106
Abbey Portfolio II Loans.................................... S-111
accredited investor......................................... S-178
Accrued Certificate Interest................................ S-153
actual/360 basis............................................ S-28
Actual/360 basis............................................ S-79
Additional Interest......................................... S-79
Additional Interest Account................................. S-148
Additional Trust Fund Expenses.............................. S-157
Administrative Cost Rate.................................... S-90
Advance..................................................... S-159
Anticipated Repayment Date.................................. S-79
Appraisal Reduction Amount.................................. S-159
ARD Loans................................................... S-79
Artesia..................................................... S-79
Artesia Mortgage Loans...................................... S-121
Assumed Final Distribution Date............................. S-165
Assumed Scheduled Payment................................... S-154
Available Distribution Amount............................... S-147
Babies R Us................................................. S-120
Balloon Loans............................................... S-79
Balloon Payment............................................. S-79
Bed Bath and Beyond......................................... S-117, S-120
Borders Books............................................... S-117
Breach...................................................... S-127
Broadmoor Towne Center Loan................................. S-117
Burlington.................................................. S-116
Capital Imp. Reserve........................................ S-90
Capri....................................................... S-108
Certificate Balance......................................... S-143
Certificate Deferred Interest............................... S-144
Certificateholders.......................................... S-146
Certificates................................................ S-140
City Place II B Note........................................ S-114
City Place II Loan.......................................... S-114
City Place II Loan Pair..................................... S-114
Class....................................................... S-140
Class A Certificates........................................ S-140
Class A-2A Component........................................ S-144
Class A-2B Component........................................ S-144
Class A-4A Component........................................ S-144
Class A-4B Component........................................ S-144
Class IO Certificates....................................... S-140
Class IO-I Strip Rate....................................... S-145
Class IO-II Strip Rate...................................... S-145
Clearstream Luxembourg...................................... S-140
Clearstream Luxembourg Participants......................... S-142
</Table>
S-182
<Table>
CLF......................................................... S-84
CLF Intercreditor Agreement................................. S-84
CMSA Bond File.............................................. S-162
CMSA Collateral Summary File................................ S-162
CMSA Loan Periodic Update File.............................. S-162
CMSA Property File.......................................... S-162
Collection Period........................................... S-146
Companion Loans............................................. S-84
Comparative Financial Status Report......................... S-163
Compensating Interest Payment............................... S-133
Component................................................... S-143
Component Balance........................................... S-143
Component Crossover Date.................................... S-145
Conning..................................................... S-114
Constant Prepayment Rate.................................... S-171
Controlling Class........................................... S-131
Controlling Class Representative............................ S-131
Corrected Mortgage Loan..................................... S-132
CPR......................................................... S-171
Craig I/S................................................... S-105
Crossed Group............................................... S-127
Crossed Loan................................................ S-127
Current Balance............................................. S-114
Custodian................................................... S-123
Cut-Off Date................................................ S-78
Cut-Off Date Balance........................................ S-78
Cut-Off Date LTV............................................ S-89
Cut-Off Date LTV Ratio...................................... S-89
Cut-Off Date Pool Balance................................... S-78
D( )........................................................ S-90
Defaulted Lease Claim....................................... S-84
Defaulted Mortgage Loan..................................... S-137
Defeasance.................................................. S-90
Defeasance Collateral....................................... S-81
Defect...................................................... S-127
Delinquent Loan Status Report............................... S-162
Depositaries................................................ S-141
Determination Date.......................................... S-146
Discount Rate............................................... S-155
Distributable Certificate Interest.......................... S-153
Distribution Date........................................... S-146
Distribution Date Statement................................. S-160
DSC Ratio................................................... S-87
DSCR........................................................ S-87
DTC......................................................... S-140
Due Date.................................................... S-79
Early Defeasance Loan....................................... S-81
Early Defeasance Loan REMIC................................. S-81
ERISA....................................................... S-176
Euroclear Participants...................................... S-142
Excess Cash Flow............................................ S-79
Excluded Plan............................................... S-178
Exemption................................................... S-176
</Table>
S-183
<Table>
Exemptions.................................................. S-176
expense..................................................... S-89
Faison...................................................... S-105
Final Recovery Determination................................ S-161
First Union Securities...................................... S-176
Fitch....................................................... S-177
Form 8-K.................................................... S-128
Full Amortizing Loans....................................... S-79
Gables...................................................... S-111
Gap......................................................... S-120
Golds....................................................... S-116
Greenwich................................................... S-79
Greenwich AB Mortgage Loan.................................. S-84
Greenwich Capital........................................... S-176
Greenwich Co-Lender Agreement............................... S-85
Greenwich Companion Loan.................................... S-84
Greenwich Mortgage Loans.................................... S-121
Historical Liquidation Report............................... S-162
Historical Loan Modification Report......................... S-162
Indirect Participants....................................... S-141
Interest Accrual Period..................................... S-145
Interest Period............................................. S-114
Interest Reserve Account.................................... S-147
Interest Reserve Amount..................................... S-147
Interest Reserve Loans...................................... S-147
Interim Delinquent Loan Status Report....................... S-163
IRS......................................................... S-175
Klaff....................................................... S-116
L ( )...................................................... S-90
Letter of Credit............................................ S-119
Linens 'N Things............................................ S-116
LNR......................................................... S-130
Loan Pair................................................... S-129
Loan per Sq. Ft., Unit, Bed, Pad or Room.................... S-89
LOC Loan.................................................... S-88
Lockout..................................................... S-90
Lockout Period.............................................. S-90
LTV at ARD or Maturity...................................... S-89
Maine Crossing Loan......................................... S-119
Majority Subordinate Certificateholder...................... S-167
Marketplace at Altamonte Loan............................... S-115
Master Servicer............................................. S-130
Master Servicing Fee........................................ S-132
Master Servicing Fee Rate................................... S-132
Maturity Date LTV Ratio..................................... S-89
Mediterranean Village Loan.................................. S-110
Merrill Lynch............................................... S-114
Money Rates................................................. S-159
Moody's..................................................... S-177
Mortgage.................................................... S-78
Mortgage Deferred Interest.................................. S-144
Mortgage File............................................... S-123
Mortgage Loan Purchase Agreement............................ S-121
</Table>
S-184
<Table>
Mortgage Loan Purchase Agreements........................... S-121
Mortgage Loans.............................................. S-78, S-132
Mortgage Note............................................... S-78
Mortgage Rate............................................... S-79
Mortgaged Property.......................................... S-78
NA.......................................................... S-90
NAV......................................................... S-90
Net Aggregate Prepayment Interest Shortfall................. S-153
net cash flow............................................... S-88
Net Cash Flow............................................... S-87
Net Mortgage Rate........................................... S-146
New Regulations............................................. S-176
NOI Adjustment Worksheet.................................... S-163
Nomura...................................................... S-79
Nomura Mortgage Loans....................................... S-121
Nomura Securities........................................... S-176
Non-Offered Certificates.................................... S-140
Nonrecoverable P&I Advance.................................. S-158
Northland................................................... S-114
Notional Amount............................................. S-143
NRSRO....................................................... S-177
O ( ).................................................... S-90
Oak Brook Apartments Loan................................... S-109
Occupancy Percentage........................................ S-90
Offered Certificates........................................ S-140
OID Regulations............................................. S-175
Old Navy.................................................... S-120
One Enterprise Center Loan.................................. S-105
Open Period................................................. S-90
Operating Statement Analysis................................ S-163
Option Price................................................ S-138
Original Term to Maturity................................... S-90
P&I Advance................................................. S-158
Party in Interest........................................... S-178
Periodic Payments........................................... S-79
Plan........................................................ S-176
PLL Policy.................................................. S-111
Pooling and Servicing Agreement............................. S-140
Prepayment Interest Excess.................................. S-133
Prepayment Interest Shortfall............................... S-133
Prepayment Premiums......................................... S-155
Principal Distribution Amount............................... S-153
Principal Recovery Fee...................................... S-133
Privileged Person........................................... S-164
PTE......................................................... S-176
Purchase Option............................................. S-138
Purchase Price.............................................. S-123
Qualified Appraiser......................................... S-159
Qualified Substitute Mortgage Loan.......................... S-124
Rated Final Distribution Date............................... S-166
Rating Agencies............................................. S-181
Realized Losses............................................. S-157
Reimbursement Rate.......................................... S-159
</Table>
S-185
<Table>
Related Proceeds............................................ S-158
Remaining Amortization Term................................. S-90
remaining term.............................................. S-80
Remaining Term to Maturity.................................. S-90
REMIC....................................................... S-20
REMIC Administrator......................................... S-168
REMIC Regular Certificates.................................. S-140
REMIC Regulations........................................... S-174
REMIC Residual Certificates................................. S-140
Rental Property............................................. S-88
REO Extension............................................... S-138
REO Mortgage Loan........................................... S-154
REO Property................................................ S-132
REO Status Report........................................... S-162
Replacement Reserve......................................... S-91
Required Appraisal Date..................................... S-159
Required Appraisal Loan..................................... S-159
Required Defeasance Period.................................. S-170
Restricted Group............................................ S-177
Restricted Servicer Reports................................. S-163
revenue..................................................... S-88
Ross Dress For Less......................................... S-117
Rules....................................................... S-141
S&P......................................................... S-177
Scenario.................................................... S-171
Scheduled Payment........................................... S-154
Second Letter of Credit..................................... S-119
Sequential Pay Certificates................................. S-140
Servicing Fees.............................................. S-133
Servicing Transfer Event.................................... S-131
Similar Law................................................. S-176
Smith Hulsey................................................ S-105
Special Servicer............................................ S-130
Special Servicing Fee....................................... S-133
Special Servicing Fee Rate.................................. S-133
Specially Serviced Mortgage Loans........................... S-132
Specially Serviced Trust Fund Assets........................ S-132
Stated Principal Balance.................................... S-146
Subordinate Certificates.................................... S-140
Substitution Shortfall Amount............................... S-123
SVA......................................................... S-119
Table Assumptions........................................... S-165, S-171
Terms and Conditions........................................ S-142
TI/LC Reserve............................................... S-91
Trammell Crow............................................... S-106
Trust Fund.................................................. S-140
Trustee Fee................................................. S-167
Univest Management.......................................... S-118
Underwriters................................................ S-179
Underwriting Agreement...................................... S-179
Underwritten Replacement Reserves........................... S-90
Unrestricted Servicer Reports............................... S-163
Updated Collection Report................................... S-163
</Table>
S-186
<Table>
Voting Rights............................................... S-166
Wachovia AB Mortgage Loan................................... S-84
Wachovia Companion Loan..................................... S-84
Wachovia Mortgage Loans..................................... S-121
Watch List Report........................................... S-163
Webster..................................................... S-114
Weighted Average Net Mortgage Rate.......................... S-145
weighted averages........................................... S-90
Wells Fargo................................................. S-167
Wolff Management............................................ S-110
Workout Fee................................................. S-133
Year Built.................................................. S-89
Yield Maintenance Charges................................... S-155
YM( )....................................................... S-90
</Table>
S-187
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST SERIES 2002-C1
ANNEX A-1 CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGE PROPERTIES
MORTGAGE
LOAN
NUMBER PROPERTY NAME ADDRESS CITY STATE
- ------------------------------------------------------------------------------------------------------------------------------------
1 One Enterprise Center 225 Water Street Jacksonville FL
2 Oak Brook Apartments 12499 Folsom Boulevard Rancho Cordova CA
3 Mediterranean Village 2001 SE 10th Avenue Ft. Lauderdale FL
4 CityPlace II 151 Asylum Street Hartford CT
5 Marketplace at Altamonte State Road 436 & Interstate 4 Altamonte Springs FL
6 Broadmoor Towne Center 2130 - 2280 Southgate Road Colorado Springs CO
7 215 East 23rd Street 215 East 23rd Street New York NY
8 Maine Crossing 200 Running Hill Road South Portland ME
9 Forest Acres Apartments 28 Forest Acres Drive Bradford MA
10 Dana Corporation - Antioch 6050 Dana Way Antioch TN
11 Cox Creek Centre 372-398 Cox Creek Parkway Florence AL
12 19019 North 59th Avenue 19019 North 59th Avenue Glendale AZ
13 Holiday Village Mobile Home Park 701 South Dobson Road Mesa AZ
14 Sealy Industrial Portfolio Various San Antonio TX
14.1 Northwest Business Center 7402-7648 Reindeer Trail San Antonio TX
14.2 West Loop Business Center 5404 Bandera Road San Antonio TX
14.3 Westway Service Center 1700 Grandstand Drive San Antonio TX
14.4 Commerce Center 7042 Alamo Downs Pkwy San Antonio TX
15 Torrey Pines Corporate Center 3020 and 3030 Callan Road San Diego CA
16 Silver Springs Pointe N.W. Expressway & Council Rd Oklahoma City OK
17 Pinole Vista Shopping Center 1500-1596 Fitzgerald Drive Pinole CA
18 Avalon Square Apartments 2400 Westheimer Road Houston TX
19 Radisson Hotel & Conference Center Fresno 2333 Ventura Street Fresno CA
20 The Gatsby Apartments 1515 O Street Washington DC
21 Summit Pointe Apartments 108 Summit Pointe Drive Scranton PA
22 4403 Donald Douglas 4403 Donald Douglas Drive Long Beach CA
23 Carriage House Apartments 3900 Monroe Avenue Fremont CA
24 Radisson Hotel & Conference Center Baton Rouge 4728 Constitution Avenue Baton Rouge LA
25 Hemet Valley Center 3301-3695 West Florida Avenue Hemet CA
26 Upland Freeway Center 1348-1440 W. 7th Street Upland CA
27 Dana Corporation - Rochester Hills 2910 Waterview Drive Rochester Hills MI
28 Laguna Pavilion Shopping Center 7400 - 7440 Pavillion Boulevard Elk Grove CA
29 Perris Towne Centre 15-138 W. Nuevo Road Perris CA
30 Citivest Multifamily Portfolio Various Dallas TX
30.1 Avalon Apartments 1925 Moser Avenue Dallas TX
30.2 Catalina Apartments 2500 Bennett Avenue Dallas TX
30.3 Montecito-Sausalito Apartments 2301 North Garrett Avenue &
2222 Bennett Avenue Dallas TX
30.4 Monterey Apartments 4726 Homer Street Dallas TX
30.5 Santa Cruz Apartments 2602 North Fitzhugh Avenue Dallas TX
31 Roadrunner Club MHP 1010 Palm Canyon Drive Borrego Springs CA
32 Timber Creek Apartments 820 W. 3900 South Salt Lake City UT
33 Brookstone Apartments 6430 Brookstone Lane Fayetteville NC
34 396-400 North Moorpark Road 396-400 North Moorpark Road Thousand Oaks CA
35 Independence Square San Diego 7305 Clairemont Mesa Boulevard San Diego CA
36 Mission Valley Plaza 1011 Camino Del Rio South San Diego CA
37 Fox Hills Business Park 6100, 6120, 6140, 6160 Bristol Parkway Culver City CA
38 Main Street Station 1051 E. Broad Street Fuquay-Varina NC
39 Clearlake Plaza 500 South Australian Avenue West Palm Beach FL
40 Willow Wood Shoppes 1141 Wantagh Avenue Wantagh NY
41 1010 Vermont Avenue 1010 Vermont Avenue Washington DC
42 Austin Creek Apartments 55 Valle Vista Avenue Vallejo CA
43 Ming Office Park 5500 Ming Ave. Bakersfield CA
44 Encino Oaks Shopping Center 17300-17340 Ventura Boulevard Encino CA
45 Dana Corporation - Gastonia 1551 Mount Olive Church Road Gastonia NC
46 Santa Maria Commerce Center 230-340 E. Betteravia Road Santa Maria CA
47 Mini U Storage 9425 Snowden River Parkway Columbia MD
48 Midland Towne Center 1301-1421 Washington Street Midland MI
49 Normandy Park Apartments 11110 North 56th Street Temple Terrace FL
50 Spanish Vista Office Complex 4955 South Durango Drive Las Vegas NV
51 Gateway Courtyard 1600 Gateway Blvd. Fairfield CA
52 1930 W. Bennett Street 1930 W. Bennett Street Springfield MO
53 Rustic Village Apartments 9303 Town Park Drive Houston TX
54 Orange Canyon Village 7520-7618 East Chapman Avenue Orange CA
55 Brookwood Park Apartments 3854 West Rockwood Way West Valley City UT
56 Town View Professional Center 215 S. Hickory Street Escondido CA
57 Independence Square Reno 290-394 E. Moana Lane Reno NV
58 The Pointe at College Place 2620 College Place Fullerton CA
59 La Toscana Village 7090 North Oracle Road Tucson AZ
60 Casas Adobes Corporate Park 6840-6860 North Oracle Road Tucson AZ
61 West Boca Place 8165-8177 W Glades Rd Boca Raton FL
62 Bank of America Building 2000 West Glades Rd. Boca Raton FL
63 Los Altos Village Apartments 2525 North Los Altos Avenue
and 2530-2576 North Geronimo Avenue Tucson AZ
64 Best Buy - Manchester, CT 120 Slater Road Manchester CT
65 Park Apartments 403 Southwest 13th Place Deerfield Beach FL
66 Kruse Meadows Shopping Center 6296-6334 SW Meadows Road; 14990 -
15180 SW Bangy Road Lake Oswego OR
67 Eagle Lake Business Center III 7351 Kirkwood Lane North Maple Grove MN
68 Waterloo Apartments 1464, 1470 & 1478 English Drive and 1538,
1540, 1544, 1546, 1548 & 1550 Maurice Lane San Jose CA
69 Southridge Square Shopping Center 1200-1300 E Army Post Road Des Moines IA
70 Harmony Market Center 1514, 1526 and 1538 East Harmony Road Ft. Collins CO
71 The Village At Nisqually Ridge 9211-9223 and 9231-9343 Skokomish Way NE Olympia WA
72 Auburn Creek Apartments 4411 Gardendale Drive San Antonio TX
73 Silverado Hills Plaza Shopping Center 10380 E. Broadway Blvd. Tucson AZ
74 Oxnard Commerce Center 2311 N. Oxnard Blvd. Oxnard CA
75 Mobiland by the Sea 4400 North Harbor City Boulevard Melbourne FL
76 Rancho Santa Ynez Mobile Estates 1400 Fjord Drive Solvang CA
77 Mission Medical Office Building 22032 El Paseo Rancho Santa Margarita CA
78 The Abbey Center 340, 400 & 490 S. Farrell Drive Palm Springs CA
79 Del Flora Apartments 30598 Independence Avenue Redlands CA
80 Fallbrook Apts (Raintree, Ironwood & Smoketree) 735, 747 & 795 West Fallbrook Street Fallbrook CA
81 Tropical Palms 17100 Tamiami Trail Punta Gorda FL
82 Ahwatukee Hills Plaza 4909 and 4929 East Chandler Boulevard Phoenix AZ
83 The Shops at Chippenham Forest South 2400-2560 Sheila Lane Richmond VA
84 Deerfield Square Highway 9 & Windward Parkway Alpharetta GA
85 Lake Pointe Medical Building 2610 Tenderfoot Hill St. Colorado Springs CO
86 Colchester Apartments 1470 Beacon Street Brookline MA
87 Waynesboro Market Place 11105 Old Buchanan Trail East Waynesboro PA
88 Encore Office Park 4425-4465 S. Jones Blvd. Las Vegas NV
CROSS
COLLATERALIZED
AND CROSS
DEFAULTED LOAN LOAN GENERAL PROPERTY ORIGINAL LOAN CUT-OFF DATE LOAN
ZIP CODE FLAG ORIGINATOR TYPE SPECIFIC PROPERTY TYPE BALANCE ($) BALANCE ($)
- ----------------------------------------------------------------------------------------------------------------------------------
32202 Wachovia Office CBD 28,500,000.00 28,477,855.49
95742 Wachovia Multifamily Conventional 27,000,000.00 27,000,000.00
33316 Wachovia Multifamily Conventional 25,500,000.00 25,500,000.00
06103 GCFP Office CBD 22,500,000.00 22,500,000.00
32701 GCFP Retail Anchored 20,300,000.00 20,112,903.09
80906 Wachovia Retail Anchored 19,000,000.00 18,973,728.60
10010 Wachovia Multifamily Student Housing 18,000,000.00 17,973,862.06
04106 Wachovia Retail Anchored 17,500,000.00 17,456,037.76
01835 GCFP Multifamily Conventional 17,231,000.00 17,180,685.43
37013 NCCI Industrial Warehouse/Distribution 15,785,000.00 15,622,494.06
35630 NCCI Retail Anchored 15,350,000.00 15,328,246.92
85308 GCFP Mixed Use Office/Industrial 15,144,000.00 15,005,561.40
85202 GCFP Mobile Home Park Mobile Home Park 13,000,000.00 12,949,871.85
78238 Wachovia Industrial Warehouse/Distribution 12,700,000.00 12,700,000.00
78238 Industrial Warehouse/Distribution
78238 Industrial Warehouse/Distribution
78238 Industrial Warehouse/Distribution
78238 Industrial Warehouse/Distribution
92121 NCCI Office Suburban 12,750,000.00 12,664,377.45
73132 Wachovia Retail Anchored 12,100,000.00 12,090,838.71
94564 GCFP Retail Anchored 12,000,000.00 11,943,694.20
77098 NCCI Multifamily Conventional 11,640,000.00 11,640,000.00
93721 GCFP Hospitality Full Service 11,640,000.00 11,287,504.39
20005 Wachovia Multifamily Conventional 10,750,000.00 10,734,951.55
18508 GCFP Multifamily Conventional 10,644,000.00 10,644,000.00
90808 Abbey Portfolio II Wachovia Office Suburban 10,100,000.00 10,061,760.11
94536 Wachovia Multifamily Conventional 10,000,000.00 9,991,134.12
70808 Wachovia Hospitality Full Service 10,000,000.00 9,981,940.68
92545 Wachovia Retail Anchored 9,500,000.00 9,493,089.57
91786 Abbey Portfolio I Wachovia Retail Unanchored 9,400,000.00 9,375,938.36
48309 NCCI Industrial Flex 9,380,000.00 9,283,433.28
95758 Wachovia Retail Anchored 9,210,000.00 9,210,000.00
92571 Wachovia Retail Anchored 9,200,000.00 9,164,918.88
Various NCCI Multifamily Conventional 9,000,000.00 8,966,973.74
75206 Multifamily Conventional
75206 Multifamily Conventional
75206 Multifamily Conventional
75204 Multifamily Conventional
75204 Multifamily Conventional
92004 AMCC Mobile Home Park Mobile Home Park 8,875,000.00 8,875,000.00
84123 Wachovia Multifamily Conventional 8,700,000.00 8,700,000.00
28314 AMCC Multifamily Conventional 8,600,000.00 8,569,544.58
91360 GCFP Retail Unanchored 8,400,000.00 8,370,995.06
92111 NCCI Retail Anchored 8,250,000.00 8,239,738.78
92108 NCCI Office Suburban 8,100,000.00 8,100,000.00
90230 AMCC Office Suburban 8,000,000.00 7,994,477.71
27526 Wachovia Retail Anchored 8,000,000.00 7,993,298.82
33401 GCFP Office CBD 8,000,000.00 7,974,709.20
11793 Wachovia Retail Unanchored 7,900,000.00 7,868,918.49
20005 NCCI Office CBD 7,880,000.00 7,856,898.33
94590 Wachovia Multifamily Conventional 7,638,000.00 7,631,095.14
93309 Abbey Portfolio I Wachovia Office Suburban 7,600,000.00 7,580,545.90
91316 NCCI Retail Anchored 7,500,000.00 7,500,000.00
28052 NCCI Industrial Warehouse 7,490,000.00 7,412,890.75
93454 Abbey Portfolio I Wachovia Retail Unanchored 7,100,000.00 7,081,825.77
21046 Wachovia Self Storage Self Storage 7,000,000.00 7,000,000.00
48640 GCFP Retail Anchored 6,900,000.00 6,877,839.88
33617 Wachovia Multifamily Conventional 6,800,000.00 6,782,961.19
89113 GCFP Office Suburban 6,730,000.00 6,683,367.15
94533 Wachovia Retail Anchored 6,600,000.00 6,600,000.00
65807 GCFP Office Suburban 6,600,000.00 6,577,076.96
77036 GCFP Multifamily Conventional 6,550,000.00 6,519,395.58
92869 GCFP Retail Anchored 6,500,000.00 6,477,955.82
84120 GCFP Multifamily Conventional 6,488,000.00 6,416,980.14
92025 AMCC Office Medical 6,300,000.00 6,295,134.03
89502 GCFP Mixed Use Retail/Office 6,175,000.00 6,153,116.20
92831 NCCI Multifamily Student Housing 6,150,000.00 6,141,369.69
85741 GCFP Retail Shadow Anchored 6,152,000.00 6,127,920.25
85704 GCFP Office Suburban 6,050,000.00 6,025,604.31
33434 Wachovia Retail Shadow Anchored 6,000,000.00 6,000,000.00
33431 Wachovia Office Suburban 5,900,000.00 5,875,948.05
85705 GCFP Multifamily Conventional 5,700,000.00 5,672,630.17
06040 Wachovia Retail Anchored 5,670,000.00 5,662,140.68
33441 NCCI Multifamily Section 8 5,680,000.00 5,645,372.88
97035 GCFP Retail Unanchored 5,550,000.00 5,534,241.61
55369 Wachovia Industrial Flex 5,500,000.00 5,500,000.00
95129 AMCC Multifamily Conventional 5,500,000.00 5,500,000.00
50315 Wachovia Retail Shadow Anchored 5,450,000.00 5,433,830.02
80525 GCFP Retail Shadow Anchored 5,409,000.00 5,393,703.41
98516 AMCC Multifamily Conventional 5,280,000.00 5,263,796.06
78240 Wachovia Multifamily Conventional 5,175,000.00 5,170,630.97
85748 GCFP Retail Anchored 5,100,000.00 5,084,533.74
93030 Abbey Portfolio II Wachovia Retail Unanchored 5,000,000.00 4,987,201.26
32935 NCCI Mobile Home Park Mobile Home Park 4,950,000.00 4,945,804.47
93464 AMCC Mobile Home Park Mobile Home Park 4,925,000.00 4,925,000.00
92688 NCCI Office Medical 4,900,000.00 4,880,241.51
92262 Abbey Portfolio II Wachovia Office Suburban 4,850,000.00 4,837,585.21
92374 Wachovia Multifamily Conventional 4,800,000.00 4,795,660.73
92028 AMCC Multifamily Conventional 4,780,000.00 4,776,081.87
33955 NCCI Mobile Home Park Mobile Home Park 4,700,000.00 4,700,000.00
85048 NCCI Retail Unanchored 4,672,500.00 4,662,793.76
23225 Wachovia Retail Shadow Anchored 4,600,000.00 4,596,700.64
30201 Wachovia Retail Anchored 4,500,000.00 4,500,000.00
80906 AMCC Office Medical 4,500,000.00 4,484,821.21
02446 GCFP Multifamily Conventional 4,500,000.00 4,477,238.82
17268 Wachovia Retail Anchored 4,480,000.00 4,470,245.39
89103 GCFP Office Suburban 4,461,000.00 4,444,700.83
% OF LOAN
AGGREGATE ADMINISTRATIVE INTEREST
CUT-OFF DATE ORIGINATION FIRST PAY MATURITY DATE MORTGAGE COST RATE ACCRUAL
BALANCE DATE DATE OR ARD RATE (%) (%) METHOD
- -----------------------------------------------------------------------------------------------------------------------------------
3.00% 27-Mar-2002 1-May-2002 1-Apr-2012 7.2700% 0.05268% Actual/360
2.84% 21-Feb-2002 1-Apr-2002 1-Mar-2007 6.9100% 0.05268% Actual/360
2.68% 16-Apr-2002 1-Jun-2002 1-May-2012 7.3700% 0.05268% Actual/360
2.37% 1-May-2002 1-Jun-2002 1-Dec-2006 8.2400% 0.11268% Actual/360
2.12% 16-Mar-2001 1-May-2001 1-Apr-2011 7.3650% 0.05268% Actual/360
2.00% 25-Feb-2002 1-Apr-2002 1-Mar-2012 7.1900% 0.05268% Actual/360
1.89% 27-Feb-2002 1-Apr-2002 1-Mar-2012 6.9900% 0.05268% Actual/360
1.84% 31-Jan-2002 1-Mar-2002 1-Feb-2012 7.3600% 0.05268% Actual/360
1.81% 28-Dec-2001 1-Feb-2002 1-Jan-2012 7.6300% 0.09768% Actual/360
1.64% 26-Oct-2001 11-Dec-2001 11-Oct-2021 7.9400% 0.05268% Actual/360
1.61% 8-Mar-2002 11-Apr-2002 11-Mar-2012 7.0900% 0.09768% Actual/360
1.58% 26-Mar-2001 1-May-2001 1-Apr-2011 7.4000% 0.05268% Actual/360
1.36% 20-Nov-2001 1-Jan-2002 1-Dec-2011 7.1100% 0.05268% Actual/360
1.34% 16-Apr-2002 1-Jun-2002 1-May-2007 7.2100% 0.05268% Actual/360
1.33% 9-Oct-2001 11-Nov-2001 11-Oct-2011 7.2500% 0.05268% Actual/360
1.27% 11-Mar-2002 1-May-2002 1-Apr-2012 7.4000% 0.05268% Actual/360
1.26% 31-Oct-2001 1-Dec-2001 1-Nov-2011 7.1000% 0.09768% Actual/360
1.23% 2-May-2002 11-Jun-2002 11-May-2012 7.0600% 0.05268% Actual/360
1.19% 11-Aug-1999 1-Oct-1999 1-Sep-2009 8.6700% 0.09768% Actual/360
1.13% 14-Feb-2002 1-Apr-2002 1-Mar-2012 7.1400% 0.05268% Actual/360
1.12% 1-Nov-2001 1-Jan-2002 1-Dec-2011 7.0120% 0.05268% Actual/360
1.06% 11-Jan-2002 1-Mar-2002 1-Dec-2009 7.2500% 0.05268% Actual/360
1.05% 21-Mar-2002 1-May-2002 1-Apr-2012 6.6000% 0.08768% Actual/360
1.05% 5-Mar-2002 1-May-2002 1-Apr-2012 7.5000% 0.05268% Actual/360
1.00% 28-Mar-2002 1-May-2002 1-Apr-2012 7.6000% 0.05268% Actual/360
0.99% 11-Jan-2002 1-Mar-2002 1-Dec-2009 7.2500% 0.05268% Actual/360
0.98% 26-Oct-2001 11-Dec-2001 11-Oct-2021 7.9400% 0.05268% Actual/360
0.97% 15-Apr-2002 1-Jun-2002 1-May-2012 7.3750% 0.05268% Actual/360
0.96% 29-Jan-2002 1-Mar-2002 1-Feb-2012 7.2000% 0.05268% Actual/360
0.94% 30-Nov-2001 11-Jan-2002 11-Dec-2006 7.3400% 0.05268% Actual/360
0.93% 11-Apr-2002 1-Jun-2002 1-May-2012 7.3100% 0.05268% Actual/360
0.92% 6-Mar-2002 1-May-2002 1-Apr-2012 6.8000% 0.05268% Actual/360
0.90% 14-Dec-2001 1-Feb-2002 1-Jan-2012 6.6500% 0.08768% Actual/360
0.88% 12-Dec-2001 1-Feb-2002 1-Jan-2012 6.7800% 0.05268% Actual/360
0.87% 22-Feb-2002 11-Apr-2002 11-Mar-2012 7.6100% 0.05268% Actual/360
0.85% 19-Apr-2002 11-Jun-2002 11-May-2012 7.4200% 0.05268% Actual/360
0.84% 13-Mar-2002 1-May-2002 1-Apr-2012 7.8600% 0.05268% Actual/360
0.84% 26-Mar-2002 1-May-2002 1-Apr-2012 6.8900% 0.05268% Actual/360
0.84% 7-Dec-2001 1-Feb-2002 1-Jan-2012 7.2300% 0.09768% Actual/360
0.83% 31-Jan-2002 1-Mar-2002 1-Feb-2012 6.9800% 0.05268% Actual/360
0.83% 20-Dec-2001 11-Feb-2002 11-Jan-2012 7.6100% 0.05268% Actual/360
0.80% 18-Mar-2002 1-May-2002 1-Apr-2012 6.5000% 0.08768% Actual/360
0.80% 11-Jan-2002 1-Mar-2002 1-Dec-2009 7.2500% 0.05268% Actual/360
0.79% 16-Apr-2002 11-Jun-2002 11-May-2012 7.5600% 0.05268% Actual/360
0.78% 26-Oct-2001 11-Dec-2001 11-Oct-2021 7.9400% 0.05268% Actual/360
0.75% 11-Jan-2002 1-Mar-2002 1-Dec-2009 7.2500% 0.05268% Actual/360
0.74% 17-Apr-2002 1-Jun-2002 1-May-2012 7.3600% 0.05268% Actual/360
0.72% 7-Dec-2001 1-Feb-2002 1-Jan-2012 7.1500% 0.05268% Actual/360
0.71% 9-Jan-2002 1-Mar-2002 1-Feb-2012 7.3750% 0.05268% Actual/360
0.70% 25-Jun-2001 1-Aug-2001 1-Jul-2011 7.4000% 0.05268% Actual/360
0.69% 22-Apr-2002 1-Jun-2002 1-May-2012 7.2200% 0.05268% Actual/360
0.69% 5-Dec-2001 1-Feb-2002 1-Jan-2012 6.7500% 0.05268% Actual/360
0.69% 17-Oct-2001 1-Dec-2001 1-Nov-2011 7.1200% 0.05268% Actual/360
0.68% 30-Nov-2001 1-Jan-2002 1-Dec-2011 7.7000% 0.09768% Actual/360
0.68% 28-Jun-2001 1-Aug-2001 1-Jul-2011 7.4550% 0.05268% Actual/360
0.66% 1-Mar-2002 1-May-2002 1-Apr-2012 7.3000% 0.05268% Actual/360
0.65% 29-Nov-2001 1-Jan-2002 1-Dec-2011 7.5000% 0.05268% Actual/360
0.65% 8-Mar-2002 11-Apr-2002 11-Mar-2012 7.1300% 0.05268% Actual/360
0.65% 26-Nov-2001 1-Jan-2002 1-Dec-2011 7.0400% 0.05268% Actual/360
0.63% 27-Nov-2001 1-Jan-2002 1-Dec-2011 6.9000% 0.05268% Actual/360
0.63% 8-Apr-2002 1-Jun-2002 1-May-2012 7.0000% 0.05268% Actual/360
0.62% 23-Jan-2002 1-Mar-2002 1-Feb-2012 6.7300% 0.05268% Actual/360
0.60% 23-Oct-2001 1-Dec-2001 1-Nov-2011 6.9900% 0.05268% Actual/360
0.60% 22-Feb-2002 1-Apr-2002 1-Mar-2012 7.1800% 0.05268% Actual/360
0.59% 20-Nov-2001 11-Jan-2002 11-Dec-2011 6.9500% 0.05268% Actual/360
0.58% 19-Dec-2001 1-Feb-2002 1-Jan-2012 7.7700% 0.05268% Actual/360
0.58% 12-Apr-2002 1-Jun-2002 1-May-2012 7.4500% 0.05268% Actual/360
0.58% 24-Apr-2002 1-Jun-2002 1-May-2012 7.0100% 0.05268% Actual/360
0.57% 28-Dec-2001 1-Feb-2002 1-Jan-2012 7.5500% 0.07768% Actual/360
0.57% 26-Dec-2001 1-Feb-2002 1-Jan-2012 7.7900% 0.05268% Actual/360
0.55% 17-Dec-2001 1-Feb-2002 1-Jan-2012 7.3800% 0.05268% Actual/360
0.54% 6-Mar-2002 1-May-2002 1-Apr-2012 6.8500% 0.05268% Actual/360
0.54% 26-Dec-2001 1-Feb-2002 1-Jan-2012 7.4400% 0.05268% Actual/360
0.52% 11-Jan-2002 1-Mar-2002 1-Dec-2009 7.2500% 0.05268% Actual/360
0.52% 28-Mar-2002 11-May-2002 11-Apr-2012 6.8300% 0.05268% Actual/360
0.52% 11-Apr-2002 1-Jun-2002 1-May-2012 7.3100% 0.05268% Actual/360
0.51% 21-Nov-2001 11-Jan-2002 11-Dec-2011 6.9000% 0.05268% Actual/360
0.51% 11-Jan-2002 1-Mar-2002 1-Dec-2009 7.2500% 0.05268% Actual/360
0.50% 18-Mar-2002 1-May-2002 1-Apr-2012 6.5000% 0.08768% Actual/360
0.50% 22-Mar-2002 1-May-2002 1-Apr-2007 7.0000% 0.05268% Actual/360
0.49% 12-Apr-2002 11-Jun-2002 11-May-2007 7.3300% 0.05268% Actual/360
0.49% 28-Feb-2002 11-Apr-2002 11-Mar-2012 7.5000% 0.05268% Actual/360
0.48% 8-Mar-2002 1-May-2002 1-Apr-2012 7.6700% 0.05268% Actual/360
0.47% 5-Apr-2002 1-Jun-2002 1-May-2012 7.1600% 0.05268% Actual/360
0.47% 3-Dec-2001 1-Feb-2002 1-Jan-2012 6.9000% 0.05268% Actual/360
0.47% 2-Oct-2001 1-Dec-2001 1-Nov-2011 6.7400% 0.11268% Actual/360
0.47% 14-Feb-2002 1-Apr-2002 1-Mar-2012 7.2500% 0.05268% Actual/360
0.47% 29-Nov-2001 1-Jan-2002 1-Dec-2011 7.3600% 0.05268% Actual/360
ORIGINAL
INTEREST TERM TO REMAINING
INTEREST ACCRUAL MATURITY TERM TO REMAINING ORIGINAL REMAINING MATURITY DATE OR
ACCRUAL METHOD OR ARD MATURITY OR IO PERIOD AMORT TERM AMORT TERM MONTHLY P&I ARD BALLOON ARD
METHOD DURING IO (MOS.) ARD (MOS.) (MOS.) (MOS.) (MOS.) PAYMENTS ($) BALANCE ($) LOANS
- -----------------------------------------------------------------------------------------------------------------------------------
Actual/360 120 119 360 359 194,807.01 25,037,256.53 Y
Actual/360 Actual/360 60 58 10 360 360 178,002.67 25,883,605.47 N
Actual/360 120 120 360 360 176,035.28 22,462,174.09 N
Actual/360 55 55 331 331 171,864.20 21,498,355.26 N
Actual/360 120 107 360 347 140,068.73 17,872,366.91 N
Actual/360 120 118 360 358 128,841.16 16,659,442.16 N
Actual/360 120 118 360 358 119,633.59 15,699,702.08 N
Actual/360 120 117 360 357 120,689.30 15,397,970.24 N
Actual/360 120 116 360 356 122,019.21 15,266,754.95 N
Actual/360 239 233 239 233 131,668.45 655,995.27 N
Actual/360 120 118 360 358 103,053.42 13,423,855.32 N
Actual/360 120 107 360 347 104,854.00 13,344,846.97 N
Actual/360 120 115 360 355 87,451.83 11,368,573.04 N
Actual/360 60 60 360 360 86,292.09 12,060,000.59 N
Actual/360 120 113 324 317 89,784.73 10,695,493.06 Y
Actual/360 120 119 360 359 83,777.96 10,665,329.81 N
Actual/360 120 114 360 354 80,643.84 10,490,121.99 N
Actual/360 120 120 360 360 77,910.82 10,171,043.67 N
Actual/360 120 88 300 268 95,065.67 9,777,632.13 N
Actual/360 120 118 360 358 72,533.61 9,413,428.39 N
Actual/360 Actual/360 120 115 19 360 360 70,900.60 9,654,411.85 Y
Actual/360 94 91 300 297 73,003.49 8,690,845.38 N
Actual/360 120 119 360 359 63,865.88 8,629,019.25 N
Actual/360 120 119 240 239 80,559.32 6,932,336.32 N
Actual/360 120 119 360 359 67,077.10 8,415,898.40 N
Actual/360 94 91 360 357 64,124.57 8,572,124.66 N
Actual/360 239 233 239 233 78,242.01 389,815.37 N
Actual/360 120 120 360 360 63,611.18 8,113,846.28 N
Actual/360 120 117 300 297 66,202.16 7,400,984.99 N
Actual/360 60 55 360 355 61,946.22 8,557,968.73 N
Actual/360 120 120 360 360 60,904.75 7,805,694.47 N
Actual/360 Actual/360 120 119 59 360 360 56,717.49 8,223,359.67 N
Actual/360 120 116 360 356 55,208.98 7,427,568.74 N
Actual/360 120 116 360 356 54,649.86 7,280,575.97 N
Actual/360 120 118 360 358 58,307.88 7,311,592.83 N
Actual/360 120 120 360 360 56,193.32 7,144,147.75 N
Actual/360 120 119 360 359 57,922.29 7,132,522.72 N
Actual/360 120 119 360 359 52,634.51 6,958,034.94 N
Actual/360 120 116 360 356 54,465.62 7,016,811.99 N
Actual/360 120 117 300 297 55,734.80 6,312,234.26 N
Actual/360 120 116 360 356 55,692.86 6,978,266.36 Y
Actual/360 120 119 360 359 48,277.36 6,572,520.70 N
Actual/360 94 91 360 357 51,845.40 6,930,653.60 N
Actual/360 120 120 360 360 52,749.57 6,638,376.87 N
Actual/360 239 233 239 233 62,476.84 311,262.54 N
Actual/360 94 91 360 357 48,434.52 6,474,689.35 N
Actual/360 120 120 300 300 51,093.62 5,664,066.62 N
Actual/360 120 116 360 356 46,603.07 6,039,471.74 N
Actual/360 120 117 360 357 46,965.91 5,985,488.95 N
Actual/360 120 110 360 350 46,597.16 5,930,984.68 N
Actual/360 120 120 360 360 44,889.41 5,791,308.95 N
Actual/360 120 116 360 356 42,807.47 5,715,804.86 N
Actual/360 120 114 360 354 44,106.46 5,728,852.36 N
Actual/360 120 115 360 355 46,342.41 5,769,986.86 N
Actual/360 120 110 300 290 47,756.00 5,263,198.46 N
Actual/360 120 119 360 359 43,190.97 5,538,831.03 N
Actual/360 120 115 360 355 43,176.50 5,454,321.58 N
Actual/360 120 118 360 358 41,454.45 5,383,944.99 N
Actual/360 120 115 360 355 41,094.81 5,370,077.29 N
Actual/360 120 115 360 355 39,845.31 5,261,443.46 N
Actual/360 120 120 360 360 39,918.15 5,234,476.88 N
Actual/360 120 117 300 297 40,689.30 4,677,317.94 N
Actual/360 120 114 360 354 37,883.97 4,968,405.33 N
Actual/360 120 118 360 358 38,410.55 4,970,232.59 Y
Actual/360 120 115 300 295 39,964.07 4,535,701.66 N
Actual/360 120 116 360 356 39,837.61 4,934,246.91 N
Actual/360 120 120 360 360 38,268.67 4,854,661.21 N
Actual/360 120 120 360 360 36,628.59 4,799,544.24 N
Actual/360 120 116 360 356 38,293.96 4,819,148.75 N
Actual/360 120 116 360 356 38,900.36 4,811,229.63 N
Actual/360 120 116 360 356 36,485.65 4,648,902.80 N
Actual/360 120 119 360 359 33,909.66 4,496,135.80 N
Actual/360 120 116 360 356 35,450.64 4,497,241.21 N
Actual/360 94 91 360 357 34,108.81 4,559,641.26 N
Actual/360 120 119 360 359 32,369.28 4,298,328.98 N
Actual/360 120 120 360 360 33,797.85 4,331,610.28 N
Actual/360 120 115 360 355 32,271.41 4,261,334.65 N
Actual/360 94 91 360 357 33,085.55 4,422,851.48 N
Actual/360 120 119 360 359 30,339.27 4,130,413.28 N
Actual/360 60 59 360 359 31,801.46 4,527,910.84 N
Actual/360 60 60 360 360 32,317.71 4,469,215.84 Y
Actual/360 120 118 300 298 34,529.36 3,796,936.69 N
Actual/360 120 119 360 359 32,701.03 4,082,156.40 N
Actual/360 120 120 360 360 30,423.71 3,942,451.14 N
Actual/360 120 116 360 356 29,637.01 3,912,912.22 N
Actual/360 120 114 360 354 29,157.01 3,896,208.62 N
Actual/360 120 118 300 298 32,381.75 3,612,980.25 N
Actual/360 120 115 360 355 30,765.43 3,926,433.21 N
APPRAISED
PREPAYMENT PROVISIONS VALUE ($) APPRAISAL DATE DSCR (X)
- ----------------------------------------------------------------------------------------------------
L(36),D(80),O(4) 37,400,000 11-Feb-2002 1.30
L(48),D(9),O(3) 34,500,000 17-Jan-2002 1.22
L(48),D(69),O(3) 33,000,000 5-Dec-2001 1.21
GRTR2%orYM(24),D(27),O(4) 35,000,000 5-Mar-2002 1.44
L(60),GRTR1%orYM(56),O(4) 27,000,000 8-Mar-2001 1.28
L(48),D(69),O(3) 23,750,000 1-Feb-2002 1.29
L(48),D(69),O(3) 24,400,000 8-Jan-2002 1.30
L(48),D(69),O(3) 22,000,000 9-Jan-2002 1.27
L(28),D(88),O(4) 27,200,000 1-Aug-2001 1.31
L(30),D(203),O(6) 22,550,000 25-Oct-2001 1.35
L(26),D(91),O(3) 19,400,000 21-Jan-2002 1.32
L(37),D(79),O(4) 21,840,000 30-Mar-2001 1.25
L(29),D(87),O(4) 18,300,000 23-Oct-2001 1.22
L(24),D(33),O(3) 18,150,000 8-Jan-2002 1.31
7,900,000 8-Jan-2002
4,700,000 8-Jan-2002
3,900,000 8-Jan-2002
1,650,000 8-Jan-2002
L(31),D(83),O(6) 17,650,000 3-Aug-2001 1.22
L(48),D(69),O(3) 15,400,000 1-Mar-2002 1.32
L(30),D(86),O(4) 16,150,000 27-Jun-2001 1.31
L(24),D(93),O(3) 14,550,000 10-Jan-2002 1.24
L(47),D(69),O(4) 17,200,000 1-Sep-2001 1.36
L(48),D(69),O(3) 14,140,000 1-Apr-2002 1.21
L(47),GRTR1%orYM(69),O(4) 11,200,000 1-Jan-2002 1.20
L(27),D(62),O(5) 13,250,000 30-Sep-2001 1.32
L(48),D(69),O(3) 13,750,000 25-Jan-2002 1.40
L(48),D(59),O(13) 25,000,000 6-Nov-2001 1.74
L(48),D(66),O(6) 13,530,000 9-Nov-2001 1.55
L(27),D(62),O(5) 14,000,000 4-Oct-2001 1.37
L(30),D(203),O(6) 13,000,000 25-Oct-2001 1.40
L(48),D(69),O(3) 15,500,000 30-Jan-2002 1.50
L(48),D(68),O(4) 13,400,000 26-Oct-2001 1.28
L(29),D(25),O(6) 11,275,000 Various 1.34
3,500,000 31-Oct-2001
2,950,000 31-Oct-2001
2,600,000 31-Oct-2001
1,750,000 30-Oct-2001
475,000 30-Oct-2001
L(36),D(81),O(3) 12,950,000 29-Jan-2002 1.23
L(60),5%(24),4%(12),3%(12),O(12) 20,000,000 20-Nov-2001 2.20
L(36),D(81),O(3) 11,582,000 8-Nov-2001 1.36
L(59),GRTR1%orYM(54),O(7) 11,800,000 22-Aug-2001 1.45
L(26),D(91),O(3) 11,200,000 4-Jan-2002 1.47
L(24),D(93),O(3) 11,020,000 5-Mar-2002 1.26
L(60),GRTR1%orYM(57),O(3) 11,300,000 1-Nov-2001 1.23
L(48),D(68),O(4) 10,900,000 7-Feb-2002 1.30
L(28),D(88),O(4) 12,900,000 27-Sep-2001 1.37
L(48),D(65),O(7) 12,200,000 12-Oct-2001 1.48
L(28),D(89),O(3) 10,300,000 14-Nov-2001 1.28
L(48),D(69),O(3) 11,750,000 23-Jan-2002 1.33
L(27),D(62),O(5) 10,000,000 1-Oct-2001 1.35
L(24),D(90),O(6) 10,000,000 2-Feb-2002 1.25
L(30),D(203),O(6) 11,300,000 26-Oct-2001 1.29
L(27),D(62),O(5) 9,000,000 1-Oct-2001 1.40
L(49),D(67),O(4) 11,570,000 5-Sep-2002 1.56
L(28),D(88),O(4) 9,300,000 1-Aug-2001 1.27
L(48),D(69),O(3) 8,500,000 11-Dec-2001 1.24
L(59),GRTR1%orYM(57),O(4) 9,000,000 3-May-2001 1.25
L(48),D(69),O(3) 14,800,000 15-Sep-2001 1.78
L(59),GRTR1%orYM(57),O(4) 8,800,000 17-Oct-2001 1.35
L(30),D(86),O(4) 8,600,000 21-Feb-2001 1.29
L(29),D(87),O(4) 8,445,000 8-Aug-2001 1.27
L(41),D(75),O(4) 8,110,000 4-May-2001 1.39
L(48),D(68),O(4) 8,585,000 17-Oct-2001 1.29
L(59),GRTR1%orYM(57),O(4) 8,800,000 10-Oct-2001 1.29
L(26),D(91),O(3) 9,300,000 10-Jan-2002 1.27
L(29),D(87),O(4) 7,700,000 5-Oct-2001 1.29
L(29),D(87),O(4) 8,270,000 23-Sep-2001 1.25
L(48),D(69),O(3) 9,900,000 6-Mar-2002 1.65
L(48),D(69),O(3) 9,800,000 1-Jan-2002 1.42
L(59),GRTR1%orYM(57),O(4) 7,150,000 10-Sep-2001 1.26
L(48),D(71),O(1) 7,600,000 6-Feb-2002 1.27
L(29),D(85),O(6) 7,100,000 23-Aug-2001 1.37
L(28),D(88),O(4) 8,730,000 6-Nov-2001 1.40
L(24),D(93),O(3) 7,560,000 14-Jan-2002 1.32
L(60),GRTR1%orYM(57),O(3) 10,860,000 7-Feb-2002 1.63
L(48),D(69),O(3) 7,800,000 1-Sep-2001 1.26
L(59),GRTR1%orYM(57),O(4) 7,000,000 15-Nov-2001 1.25
L(36),D(81),O(3) 6,600,000 19-Nov-2001 1.26
L(48),D(69),O(3) 6,900,000 3-Jan-2002 1.42
L(59),GRTR1%orYM(57),O(4) 7,290,000 12-Nov-2001 1.29
L(27),D(62),O(5) 8,100,000 4-Oct-2001 1.48
L(25),D(92),O(3) 6,200,000 27-Feb-2002 1.28
L(36),D(81),O(3) 7,300,000 3-Feb-2002 1.21
L(29),D(85),O(6) 6,500,000 19-Oct-2001 1.31
L(27),D(62),O(5) 6,450,000 1-Oct-2001 1.27
L(48),D(69),O(3) 7,400,000 24-Jan-2002 1.49
L(36),D(21),O(3) 6,000,000 17-Jan-2002 1.20
L(24),D(33),O(3) 6,100,000 18-Jan-2002 1.23
L(26),D(91),O(3) 6,675,000 14-Dec-2001 1.34
L(48),D(69),O(3) 6,200,000 1-Jan-2002 1.29
L(24),D(93),O(3) 5,650,000 11-Mar-2002 1.26
L(36),D(81),O(3) 6,000,000 19-Oct-2001 1.32
L(30),D(86),O(4) 6,000,000 29-Aug-2001 1.22
L(48),D(69),O(3) 5,600,000 25-Jan-2002 1.23
L(59),GRTR1%orYM(57),O(4) 6,100,000 5-Oct-2001 1.25
CUT-OFF DATE
CUT-OFF LTV RATIO AT LOAN
DATE LTV MATURITY OR YEAR YEAR NUMBER UNIT OF AMOUNT PER OCCUPANCY
RATIO ARD BUILT RENOVATED OF UNITS MEASURE UNIT($) RATE(%)
- ------------------------------------------------------------------------------------------------------------------------------------
76.14% 66.94% 1986 318,782 Sq. Ft. 89 89.39%
78.26% 75.02% 2000 304 Units 88,816 91.78%
77.27% 68.07% 2000 264 Units 96,591 95.45%
64.29% 61.42% 1989 292,039 Sq. Ft. 77 86.00%
74.49% 66.19% 1974 1995 335,523 Sq. Ft. 60 100.00%
79.89% 70.15% 1999-2001 172,965 Sq. Ft. 110 97.57%
73.66% 64.34% 2001 74 Units 242,890 100.00%
79.35% 69.99% 2001 148,672 Sq. Ft. 117 95.96%
63.16% 56.13% 1972 2001 410 Units 41,904 95.37%
69.28% 2.91% 1999 677,400 Sq. Ft. 23 100.00%
79.01% 69.20% 2001 173,948 Sq. Ft. 88 94.25%
68.71% 61.10% 1986 252,300 Sq. Ft. 59 100.00%
70.76% 62.12% 1964 573 Pads 22,600 92.70%
69.97% 66.45% Various 484,369 Sq. Ft. 26 84.87%
1980 & 1984 251,125 Sq. Ft. 94.62%
1982 145,394 Sq. Ft. 77.09%
1986 59,863 Sq. Ft. 84.44%
1982 27,987 Sq. Ft. 38.74%
71.75% 60.60% 1983 1999 91,000 Sq. Ft. 139 100.00%
78.51% 69.26% 2001 135,028 Sq. Ft. 90 97.41%
73.95% 64.95% 1980 & 1982 164,957 Sq. Ft. 72 96.80%
80.00% 69.90% 1973 1999 220 Units 52,909 96.40%
65.63% 56.85% 1983 321 Rooms 35,164 54.85%
75.92% 66.57% 2001 52 Units 206,441 92.31%
79.61% 70.77% 1969-1972 212 Units 50,208 93.40%
75.94% 65.59% 1986 88,284 Sq. Ft. 114 100.00%
72.66% 62.76% 1971 123 Units 81,229 94.31%
39.93% 27.73% 1975 1995-1996 294 Rooms 33,952 71.55%
70.16% 62.20% 1980 1995 230,522 Sq. Ft. 41 97.09%
66.97% 61.23% 1986 116,029 Sq. Ft. 81 83.43%
71.41% 3.00% 1990 2000 143,200 Sq. Ft. 65 100.00%
59.42% 52.35% 2000 65,148 Sq. Ft. 141 90.40%
68.39% 55.23% 1988 129,048 Sq. Ft. 71 96.40%
79.53% 75.90% Various Various 348 Units 25,767 94.50%
1972 2000 107 Units 88.80%
1966 2000 86 Units 97.70%
1967 2000 78 Units 93.60%
1947 2000 60 Units 100.00%
1951 1999 17 Units 100.00%
68.53% 60.28% 1967 324 Pads 27,392 98.77%
43.50% 41.12% 1985 1999-2000 412 Units 21,117 96.85%
73.99% 64.13% 1998 282 Units 30,388 97.87%
70.94% 61.70% 1965 1995 54,000 Sq. Ft. 155 100.00%
73.57% 65.28% 1975 1994 92,784 Sq. Ft. 89 100.00%
73.50% 64.83% 1985 61,558 Sq. Ft. 132 96.10%
70.75% 63.12% 1979 1999 75,307 Sq. Ft. 106 100.00%
73.33% 63.84% 2002 151,980 Sq. Ft. 53 100.00%
61.82% 54.39% 1985 1996 101,618 Sq. Ft. 78 93.36%
64.50% 51.74% 1985 56,590 Sq. Ft. 139 95.95%
76.28% 67.75% 1927 2000 63,031 Sq. Ft. 125 98.38%
64.95% 55.94% 1987 156 Units 48,917 97.44%
75.81% 69.31% 1981 & 1982 117,847 Sq. Ft. 64 99.77%
75.00% 66.38% 1974 2002 53,269 Sq. Ft. 141 98.40%
65.60% 2.75% 1972 & 1999 541,609 Sq. Ft. 14 100.00%
78.69% 71.94% 1982 65,844 Sq. Ft. 108 100.00%
60.50% 48.95% 1998 & 2000 1,129 Units 6,200 83.70%
73.96% 64.94% 1989 115,190 Sq. Ft. 60 98.66%
79.80% 70.42% 1971 2001 144 Units 47,104 95.14%
74.26% 65.90% 1999 51,799 Sq. Ft. 129 95.40%
44.59% 39.13% 2000 83,282 Sq. Ft. 79 96.90%
74.74% 64.95% 2001 64,722 Sq. Ft. 102 100.00%
75.81% 66.61% 1975 1995 292 Units 22,327 91.80%
76.71% 68.32% 1984 46,836 Sq. Ft. 138 95.75%
79.12% 64.90% 1972 2000 216 Units 29,708 98.60%
73.33% 64.52% 1980 1997 61,923 Sq. Ft. 102 91.19%
69.92% 61.98% 1986 61,605 Sq. Ft. 100 100.00%
66.04% 57.89% 1973 1997 129 Units 47,608 100.00%
79.58% 69.74% 1996 47,267 Sq. Ft. 130 97.60%
72.86% 63.62% 2001 44,855 Sq. Ft. 134 91.97%
60.61% 52.87% 1983 58,174 Sq. Ft. 103 93.26%
59.96% 47.73% 1980 & 1981 59,120 Sq. Ft. 99 83.51%
79.34% 69.49% 1981-1984 249 Units 22,782 98.40%
74.50% 65.40% 1996 2001 44,236 Sq. Ft. 128 100.00%
79.51% 63.88% 1973 2001 168 Units 33,603 100.00%
63.39% 56.52% 1988 46,582 Sq. Ft. 119 92.94%
72.75% 64.22% 2000 95,260 Sq. Ft. 58 91.45%
50.64% 44.19% 1972 90 Units 61,111 97.78%
69.66% 61.78% 1975 & 2000 2001 144,528 Sq. Ft. 38 96.54%
77.05% 68.73% 2000 49,773 Sq. Ft. 108 100.00%
79.75% 70.44% 1986 2001 108 Units 48,739 98.15%
74.94% 65.16% 1973 1995 224 Units 23,083 91.96%
69.75% 61.69% 1998 77,554 Sq. Ft. 66 94.24%
61.57% 56.29% 1990 64,381 Sq. Ft. 77 85.55%
79.77% 69.33% 1968 217 Pads 22,792 94.00%
67.47% 59.34% 1971 162 Pads 30,401 100.00%
75.08% 65.56% 2001 23,280 Sq. Ft. 210 100.00%
75.00% 68.57% 1982 1992 64,155 Sq. Ft. 75 92.99%
64.81% 55.82% 1987 152 Units 31,550 95.39%
79.60% 75.47% 1987 75 Units 63,681 100.00%
77.05% 73.27% 1985 299 Pads 15,719 78.60%
69.85% 56.88% 2001 32,580 Sq. Ft. 143 90.62%
74.14% 65.84% 2001 41,200 Sq. Ft. 112 100.00%
79.65% 69.78% 2001 25,000 Sq. Ft. 180 100.00%
74.75% 65.22% 2001 37,680 Sq. Ft. 119 100.00%
74.62% 64.94% 1920 57 Units 78,548 100.00%
79.83% 64.52% 2001 64,681 Sq. Ft. 69 95.05%
72.86% 64.37% 1999 33,240 Sq. Ft. 134 100.00%
LARGEST LARGEST
OCCUPANCY UW NET CASH FLOW TENANT TENANT
"AS OF" DATE ($) LARGEST TENANT SQ. FT. % OF NRA
- ------------------------------------------------------------------------------------------------------------------------------------
31-Mar-2002 3,036,454 Wachovia Corporation 139,753 43.84%
25-Jan-2002 2,601,040
19-Mar-2002 2,556,603
31-Dec-2001 2,966,904 Conning & Co 59,276 20.30%
8-Feb-2002 2,152,391 Burlington Coat Factory 100,749 30.03%
11-Jan-2002 1,999,613 Bed Bath & Beyond 30,529 17.65%
27-Feb-2002 1,861,364
28-Mar-2002 1,836,428 Babies R Us 30,606 20.59%
19-Feb-2002 1,917,273
16-Nov-2001 2,125,516 Dana Corporation 677,400 100.00%
28-Feb-2002 1,633,210 Linens N Things 32,066 18.43%
30-Sep-2001 1,572,827 Honeywell Inc. 252,300 100.00%
23-Oct-2001 1,279,180
8-Apr-2002 1,357,084 Various Various Various
8-Apr-2002 590,687 Moll Industries 30,500 12.15%
8-Apr-2002 351,421 Safesite 42,000 28.89%
8-Apr-2002 291,605 Caremark, Inc. 18,200 30.40%
8-Apr-2002 123,371 Visual Innovations 5,338 19.07%
1-Aug-2001 1,316,584 IDEC Pharmaceuticals 91,000 100.00%
26-Mar-2002 1,325,558 Kohl's Corporation 86,584 64.12%
25-Jan-2002 1,267,948 K-Mart 87,407 52.99%
22-Jan-2002 1,157,536
31-Dec-2001 1,554,730
1-Feb-2002 1,054,450
1-Jan-2002 862,350
2-Jan-2002 1,159,997 McDonnell Douglas 88,284 100.00%
31-Jan-2002 1,075,341
31-Dec-2001 1,683,448
20-Mar-2002 1,250,484 Target 99,800 43.29%
1-Feb-2002 1,053,620 Sit & Sleep 13,222 11.40%
16-Nov-2001 1,317,924 Dana Corporation 143,200 100.00%
15-Mar-2002 1,148,197 Pier One Imports 9,025 13.85%
4-Jan-2002 1,014,954 Stater Brothers 35,232 27.30%
Various 998,620
25-Mar-2002 296,166
1-Apr-2002 284,961
4-Apr-2002 218,401
5-Apr-2002 162,677
5-Apr-2002 36,415
1-Apr-2002 902,426
1-Mar-2002 1,498,233
13-Dec-2001 903,701
21-Nov-2001 949,421 Ross 26,950 49.91%
1-Jan-2002 1,030,627 Ethan Allen Home Interior 25,493 27.48%
1-Mar-2002 848,452 CACI Technologies 15,320 24.89%
22-Jan-2002 853,229 LA County Assessor's Office 30,507 40.51%
25-Feb-2002 818,407 Wal-Mart 151,980 100.00%
20-Nov-2001 895,414 Paxson Communications 21,819 21.47%
14-Jan-2002 986,702 Eckerd 11,500 20.32%
1-Jan-2002 852,435 Pre-Trial Services, Inc 5,316 8.43%
5-Feb-2002 770,450
1-Feb-2002 839,812 Processes Unlimited International 16,051 13.62%
11-Jan-2002 790,039 Sav-On Drugs 21,000 39.42%
16-Nov-2001 965,924 Dana Corporation 541,609 100.00%
1-Feb-2002 816,370 Pier 1 Imports 8,400 12.76%
6-Mar-2002 957,178
31-Oct-2001 710,286 Farmer Jack's (A&P) 52,842 45.87%
4-Dec-2001 699,125
15-Jan-2002 698,151 Century Suites 12,921 24.94%
1-Mar-2002 961,416 Linens 'N Things 32,013 38.44%
12-Dec-2001 693,351 Uniprise 64,722 100.00%
31-Jan-2002 683,763
31-Oct-2001 707,289 Pacific Ranch Market 20,730 44.26%
27-Feb-2002 796,003
1-Mar-2002 667,886 Pacific Bell 28,418 45.89%
17-Jan-2002 669,375 Coldwell Banker 10,260 16.65%
31-Jan-2002 629,781
30-Oct-2001 636,931 Remax Premier Realty 11,040 23.36%
27-Nov-2001 597,655 Richmond American 10,387 23.16%
27-Mar-2002 788,887 Harvest Gourmet Market 5,730 9.85%
5-Feb-2002 695,128 Bank of America 8,678 14.68%
17-Oct-2001 574,264
20-Feb-2002 585,390 Best Buy Co., Inc. 44,236 100.00%
25-Feb-2002 657,641
18-Dec-2001 670,705 Portland Teacher's CU 6,660 14.30%
1-Jan-2002 606,581 ACS - Tech 80, Inc. 12,685 13.32%
31-Dec-2001 718,468
27-Feb-2002 580,979 Hobby Lobby 61,854 42.80%
1-Dec-2001 584,572 Long's Drug Store 21,157 42.51%
17-Dec-2001 553,445
28-Feb-2002 579,093
6-Dec-2001 549,225 Safeway 60,000 77.37%
2-Jan-2002 606,724 Wayne & Ester Smith dba Tender Life Thrift Store 12,089 18.78%
1-Feb-2002 496,231
27-Mar-2002 488,809
11-Feb-2002 506,684 Mission Hospital 8,000 34.36%
2-Jan-2002 502,539 Desert Institute Travel, Inc. 6,553 10.21%
31-Jan-2002 542,951
31-Dec-2001 456,499
11-Mar-2002 478,047
8-Jan-2002 553,751 Hong Kong Buffet 9,000 27.62%
9-Jan-2002 506,396 Dollar Tree 9,000 21.84%
28-Feb-2002 460,742 McDonald's Corporation 5,000 20.00%
31-Jan-2002 470,962 Colorado Springs Health Partners, P.C. 37,680 100.00%
26-Sep-2001 425,884
23-Oct-2001 479,564 Food Lion 37,881 58.57%
6-Nov-2001 461,401 John Lang Homes 10,280 30.93%
2ND
LARGEST 2ND LARGEST
LARGEST TENANT TENANT TENANT 2ND LARGEST TENANT
EXP. DATE 2ND LARGEST TENANT NAME SQ. FT. % OF NRA(%) EXP. DATE
- -----------------------------------------------------------------------------------------------------------------------------------
30-Apr-2013 Smith, Hulsey & Busey 26,898 8.44% 31-Oct-2009
31-Mar-2005 Webster Bank 41,147 14.09% Multiple Spaces
31-Jul-2009 Gold's Gym 40,160 11.97% 31-Aug-2015
31-Jan-2011 Ross Dress for Less 30,187 17.45% 31-Jan-2011
30-Nov-2016 Bed Bath & Beyond 30,448 20.48% 31-Jan-2017
11-Oct-2021
31-Mar-2011 Dick's Sporting Goods 30,409 17.48% 31-Jan-2017
15-Jul-2006
Various Various Various Various Various
31-Mar-2003 Allegro, Inc. 21,528 8.57% 29-Feb-2004
Multiple Spaces S A Express News 15,750 10.83% 31-Aug-2003
31-Jan-2004 United Refridgeration, Inc. 12,922 21.59% 30-Jun-2004
15-Dec-2003 Engineering and Fire Investigations 2,760 9.86% 31-Dec-2003
30-Jun-2010
29-Jan-2022 Office Depot 20,515 15.19% 30-Nov-2016
31-May-2006 Hometown Buffet 10,347 6.27% 31-Dec-2011
31-May-2004
31-Jan-2021 Staples 21,879 9.49% 30-Apr-2013
31-Jan-2009 Lamps Plus Inc. 11,120 9.58% 31-Aug-2004
26-Oct-2021
31-Mar-2011 Party America 9,025 13.85% 31-May-2006
30-Nov-2013 Rite Aid (dark but paying rent) 33,006 25.58% 1-Oct-2013
31-Jan-2005 OfficeMax 23,050 42.69% 31-Oct-2010
30-Nov-2014 Saddleback of San Diego 18,270 19.69% 30-Nov-2005
31-Dec-2006 San Diego Travel Group 7,410 12.04% 30-Nov-2005
16-Apr-2010 Careside, Inc. 22,212 29.50% 31-Jul-2006
1-Apr-2022
31-Oct-2002 GSA 20,805 20.47% 31-Mar-2006
31-Jan-2006 The Gap 6,910 12.21% 28-Feb-2007
31-Jul-2005 American Psychological Society 5,189 8.23% 28-Feb-2008
30-Sep-2004 Manpower, Inc. 12,106 10.27% Multiple Spaces
25-Jan-2010 Catch 21 2,500 4.69% 31-Mar-2009
26-Oct-2021
Multiple Spaces Buffet King 5,222 7.93% 30-Nov-2006
31-May-2010 Dollar Daze 9,934 8.62% 30-Jun-2003
31-Jan-2007 The Crossings 4,135 7.98% 30-Sep-2003
31-Jan-2017 Barnes & Noble Books 23,241 27.91% 1-Jan-2011
31-Aug-2011
31-Mar-2009 Tuesday Morning 5,200 11.10% 15-Jan-2005
6-Aug-2008 North County Interns 6,073 9.81% 14-Jun-2014
31-Oct-2002 Eugene Burger Inc. 5,804 9.42% 30-Mar-2003
31-Aug-2006 Blockbuster Video 6,000 12.69% 30-Jun-2003
31-Oct-2006 Transwest Properties Inc. 8,174 18.22% 31-Mar-2006
30-May-2012 Joy Luck 4,200 7.22% 30-Jun-2003
30-Jun-2005 Dunhill International List Co 7,040 11.91% 31-Aug-2003
21-Dec-2021
30-Apr-2004 Deseret Books 5,330 11.44% 31-Aug-2007
31-Dec-2005 Symbology, Inc. 10,000 10.50% 31-Mar-2006
31-Mar-2016 Gordmans 55,344 38.29% 30-Jun-2010
28-Feb-2025 Rocky Mountain Motorists 5,202 10.45% 31-Aug-2005
30-Sep-2021 Blockbuster Video 2,980 3.84% 31-May-2004
30-Nov-2004 Kampai Acquisition Corporation 4,706 7.31% 31-Dec-2010
30-Jun-2016 Pacific Dental Services, Inc. 5,422 23.29% 1-Jun-2011
13-Nov-2006 Howard Sanger 3,871 6.03% 1-Mar-2006
5-Oct-2011 Fogo e' Brasa 4,110 12.62% 14-Apr-2012
31-Aug-2006 CATO 4,640 11.26% 31-Jan-2006
12-Dec-2021 Washington Mutual 5,000 20.00% 31-Dec-2021
31-Jul-2021
18-Sep-2021 Dollar General 8,000 12.37% 1-Aug-2008
31-Mar-2005 Encore Executive Suites 6,400 19.25% 1-Mar-2006
3RD LARGEST
LARGEST 3RD LARGEST AFFILIATED MORTGAGE
TENANT TENANT 3RD LARGEST TENANT SPONSOR FLAG LOAN
3RD LARGEST TENANT NAME SQ. FT. % OF NRA EXP. DATE LOCKBOX (> THAN 4% OF POOL) NUMBER
- ------------------------------------------------------------------------------------------------------------------------------------
Craig I/S 23,890 7.49% 28-Feb-2008 Springing 1
Springing 2
3
Merrill Lynch 32,966 11.29% 31-Jul-2011 Day 1 4
Linens 'N Things 39,193 11.68% 31-Jan-2012 Day 1 5
Borders Books 25,000 14.45% 31-Jan-2022 Springing 6
Springing 7
Old Navy 30,000 20.18% 30-Sep-2011 8
9
Day 1 10
Best Buy 30,000 17.25% 31-Jan-2017 11
Day 1 12
13
Various Various Various Various Springing 14
S A Express News 20,000 7.96% 14-Jul-2002 14.1
Plan B, Inc. 8,902 6.12% 14-Jun-2003 14.2
Summit DME 6,760 11.29% 28-Feb-2003 14.3
Tradesmen International, Inc. 2,744 9.80% 30-Nov-2003 14.4
Day 1 15
Paper Warehouse 8,929 6.61% 30-Nov-2010 Springing 16
Big 5 Sporting Goods 10,000 6.06% 31-Jan-2007 Day 1 17
18
19
20
Springing 21
Springing Abbey 22
23
24
99 Cents Only 20,196 8.76% 31-Jan-2010 25
US Office Products 10,662 9.19% MTM Springing Abbey 26
Day 1 27
Chili's Bar & Grill 7,410 11.37% 30-Nov-2011 28
Pick N' Save 15,000 11.62% 28-Feb-2003 29
30
30.1
30.2
30.3
30.4
30.5
31
32
33
Mimi's Cafe 6,729 12.46% 31-Dec-2015 Springing 34
Richard D. Katnik, DDS 7,800 8.41% 31-May-2004 35
Benefit Land Title Company 5,400 8.77% 30-Apr-2003 Springing 36
P.E.T Net Pharmaceutical Sv 11,365 15.09% 28-Feb-2010 37
38
Becker & Poliakoff 11,153 10.98% 31-Mar-2005 39
Astoria Federal Savings 4,690 8.29% 30-Jun-2007 Springing 40
DCV 5,153 8.18% 30-Apr-2006 Springing 41
42
BFGC Architect Planners, Inc. 9,451 8.02% 1-Nov-2003 Springing Abbey 43
Adele's 2,334 4.38% 1-Dec-2006 44
Day 1 45
Hudson's Grill 5,070 7.70% 31-May-2003 Springing Abbey 46
47
Works Michigan 13,600 11.81% 31-Jan-2003 48
49
Sear Brown 3,809 7.35% 30-Sep-2003 50
Gateway Country 8,034 9.65% 1-Sep-2005 51
Springing 52
Day 1 53
Orange Canyon Pet Clinic 2,400 5.12% 31-Aug-2002 54
55
Planned Parenthood 4,400 7.11% 30-Sep-2003 56
Napa Sonoma Grocery Company 5,450 8.85% 15-Sep-2007 57
58
Honey Baked Ham 4,322 9.14% 19-Mar-2006 59
Morgan Stanley Dean Witter 6,242 13.92% 30-Apr-2011 60
Bagel Works 3,426 5.89% 31-Aug-2006 61
Salu, Inc 6,288 10.64% 31-Aug-2006 62
63
Springing 64
Springing 65
Washington Federal 5,074 10.89% 30-Sep-2006 66
Stereotaxis, Inc. 9,140 9.59% 31-Dec-2003 67
68
Famous Footware 9,900 6.85% 31-Jul-2006 69
Jason's Deli 4,480 9.00% 30-Jun-2010 70
71
72
El Dorado Medical Center 2,311 2.98% 28-Feb-2006 73
Lovett's ATA Black Belt Academy 4,235 6.58% 14-Apr-2007 Springing Abbey 74
75
76
Physical Therapy 2,750 11.81% 30-Jun-2006 77
Paul W. Doherty, M.D. 2,958 4.61% 1-Mar-2005 Springing Abbey 78
79
80
81
Play it again Sports 3,098 9.51% 31-Jan-2007 82
Movie Gallery 4,000 9.71% 31-Aug-2006 83
Chick-fil-A, Inc. 5,000 20.00% 31-Jan-2022 84
85
86
Goodwill Stores 6,000 9.28% 1-Dec-2006 87
Ameriresource 3,162 9.51% 31-Jan-2006 88
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST SERIES 2002-C1
ANNEX A-1 CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
MORTGAGE
LOAN
MORTGAGE PROPERTY NAME ADDRESS CITY STATE
- ------------------------------------------------------------------------------------------------------------------------------------
89 Walgreens - Burbank, CA 1028 S. San Fernando Blvd. Burbank CA
90 2029 K Street NW 2029 K Street NW Washington DC
91 GSL Portfolio Various Various TX
91.1 8640 North Eldridge Parkway 8640 North Eldridge Parkway Houston TX
91.2 1109 Howard Avenue 1109 Howard Avenue Deer Park TX
91.3 1434 Sens Road 1434 Sens Road La Porte TX
91.4 5048 Timber Creek 5048 Timber Creek Houston TX
92 La Mirada Business Center 14670-14770 E. Firestone Blvd. La Mirada CA
93 Summit Square Apartments 936 41st Street Northwest Rochester MN
94 North Delray Commons SWC US 1 & NE 6th Street Delray Beach FL
95 Marconi Palms Apartments 3821 Marconi Avenue Sacramento CA
96 Citizen's Building 105 S. Narcissus Avenue West Palm Beach FL
97 Concorde Distribution Center 1889 E. Maule Ave. Las Vegas NV
98 7560 Topanga Canyon Blvd. 7560 Topanga Canyon Blvd. Canoga Park CA
99 1900 Aerojet Way 1900 Aerojet Way North Las Vegas NV
100 Fairway Lane Apartments 3979 NW Fairway Lane Bremerton WA
101 Cotton Building 4645 E. Broadway Rd. Phoenix AZ
102 North Beltsville Business Center 11900-11914 Old Baltimore Pike Beltsville MD
103 Park Plaza Apartments 507 Main Street Worcester MA
104 PerkinElmer-Warwick, RI 15 Pioneer Avenue Warwick RI
105 301 W. Bennett Avenue 301 W. Bennett Avenue Council Bluffs IA
106 Orange Commerce Center 1337 Braden Court Orange CA
107 Cottonwood Square Shopping Center 17858-17930 Cottonwood Drive Parker CO
108 Chapel Trail Commerce Center III 21011 Johnson St Pembroke Pines FL
109 Wal-Mart - Branson, MO 2050 West Highway 76 Branson MO
110 Walgreens - Chicago, IL 1001 West Belmont Avenue Chicago IL
111 Walgreens - Chaska, MN 110 Hwy 212 East Chaska MN
112 506 N. Miller Valley Road 506 N. Miller Valley Road Prescott AZ
113 Walgreen's-Bremerton, WA 3333 Wheaton Way Bremerton WA
114 Riviera Northgate Apartments 11540 Pinehurst Way NE Seattle WA
115 Walgreens - Memphis TN 6770 Macon Road Memphis TN
116 Heritage Hills Apartments 10836 Clemson Blvd. Seneca SC
117 The Mark Apartments 125 Lower Woodville Road Natchez MS
118 Park 2000 - Building L 6295 McLeod Drive Las Vegas NV
119 Sugar Land Shopping Center 16550 Southwest Freeway Sugar Land TX
120 Belfort Arms Apartments 3541 Whitney Avenue Sacramento CA
121 Plaza VI Office Building 350 Camino Gardens Boulevard Boca Raton FL
122 Arroyo Fairways Mobile Home Club 42751 East Florida Avenue Hemet CA
123 Barnes & Noble 4024C Wards Road Lynchburg VA
124 Fair Oaks Building 880 - 898 North Fair Oaks Avenue Pasadena CA
125 Office Depot - Stockbridge, GA 3480 Mt. Zion Rd Stockbridge GA
126 Rivergreen Office Park 1122-1128 NE Second Street Corvallis OR
127 Walgreen's/Kaiser Building 1363 Divisadero Street and 2105-2107 San Francisco CA
O'Farrell Street
128 Fairmont Park Apartments 1204, 1209, 1210 73rd Street East and Tacoma WA
7226, 7227, 7302, 7303, 7305, 7312,
7313, 7316, and 7317 13th Avenue Ct. E.
129 Kinko's 829, 839 & 855 East Colorado Boulevard. Pasadena CA
130 Boca Manor Apts 2500 N Federal Highway Boca Raton FL
131 Eastern Marketplace 10170 South Eastern Avenue Henderson NV
132 Holridge Apartments 12440 North 20th Street Phoenix AZ
133 Bridle Trails Apts & Retail 13200 Old Redmond Road Redmond WA
134 1145 W. I Street 1145 W. I Street Ontario CA
135 Austin Laurel Professional 4905 West Laurel Street Tampa FL
Office Building
136 Pine Meadows Mobile Estates 3450 S. IH-35 Waxahachie TX
137 Thermal Supply-3 Locations Various Various WA
137.1 Thermal Supply- Seattle 717 South Lander Street Seattle WA
137.2 Thermal Supply - Spokane 165 South Pine Street Spokane WA
137.3 Thermal Supply - Yakima 202 West Spruce Street Yakima WA
138 Twin Gardens Apartments 5831 Fair Oaks Boulevard Carmichael CA
139 Vermont Apartments 1112 - 9th Street S.E. Puyallup WA
140 Westview Terrace Apartments 2201, 2205, 2209, 2219, 2223 & 2227 Tacoma WA
South 74th Street
141 1161 W. I Street 1161 W. I Street Ontario CA
142 Walgreens-Arlington, Texas 2420 West Arkansas Lane Arlington TX
143 Calder Square Shopping Center 1101 West Main League City TX
144 4116 Silver Star Road 4116 Silver Star Road Orlando FL
145 Westwood Village Shopping Center 4722-4748 Rainbow Boulevard Westwood KS
146 Wheatland III Townhomes 3502-3534 30th Avenue Southwest Fargo ND
147 110 Lehigh Ave. 110 Lehigh Ave. Lakewood NJ
148 West Valley Shopping Center 4083 South Redwood Road West Valley City UT
149 2120 Jimmy Durante Boulevard 2120 Jimmy Durante Boulevard Del Mar CA
150 4969 E. McKinley Avenue 4969 E. McKinley Avenue Fresno CA
151 Fleet Bank 190 Haverhill Street Methuen MA
152 Chinese Garden Plaza 5435, 5445 & 5485 West Sahara Avenue Las Vegas NV
153 Fairwood Commerce Center 14300 SE Petrovitsky Road Renton WA
154 Jefferson Square Shopping Center 1552-1557 Jefferson Avenue St. Louis MO
155 1378 & 1380 Old Northern Boulevard 1378-80 Old Northern Boulevard Roslyn Village NY
156 South Rice Shopping Center 6600 S. Rice Avenue Bellaire TX
(1) For purposes of calculating the underwritten DSCR for Mortgage Loan No. 21
(the "LOC Loan"), the amount available under a certain letter of credit
securing such Mortgage Loan was deducted from the applicable principal balance
for purposes of debt service calculations. For purposes of calculating LTV
Ratio for the LOC Loan, the principal balance of the Mortgage Loan was reduced
by the amount of such letter of credit.
(2) For Mortgage Loan No. 4, the indicated origination date is that of the
A-note which was split from the original loan originated November 9, 1999.
(3) For Mortgage Loan No. 14, which is secured by multiple properties, the
underwritten net cash flow is allocated based on an individual property's
appraised value as a percentage of the total appraised value of all the related
Mortgaged Properties.
CROSS
COLLATERALIZED
AND CROSS
DEFAULTED LOAN LOAN GENERAL PROPERTY ORIGINAL LOAN CUT-OFF DATE LOAN
ZIP CODE FLAG ORIGINATOR TYPE SPECIFIC PROPERTY TYPE BALANCE ($) BALANCE ($)
- ------------------------------------------------------------------------------------------------------------------------------------
91502 Wachovia Retail Anchored 4,350,000.00 4,350,000.00
20006 AMCC Office CBD 4,327,000.00 4,307,305.00
Various GCFP Industrial Flex 4,220,000.00 4,197,853.92
77041 Industrial Flex
77536 Industrial Flex
77571 Industrial Flex
77017 Industrial Flex
90638 Abbey Portfolio II Wachovia Office Suburban 4,175,000.00 4,159,192.90
55901 AMCC Multifamily Conventional 4,150,000.00 4,129,359.96
33483 Wachovia Retail Anchored 4,050,000.00 4,046,712.75
95821 GCFP Multifamily Conventional 4,050,000.00 4,024,055.32
33401 GCFP Office CBD 3,907,000.00 3,881,113.12
89119 Wachovia Industrial Distribution 3,810,000.00 3,807,178.08
91303 GCFP Retail Anchored 3,625,000.00 3,607,040.74
89030 GCFP Industrial Warehouse 3,625,000.00 3,604,190.07
98312 Wachovia Multifamily Conventional 3,600,000.00 3,594,941.90
85040 Wachovia Retail Anchored 3,550,000.00 3,536,635.55
20705 GCFP Industrial Warehouse 3,400,000.00 3,383,273.73
01608 Wachovia Multifamily Conventional 3,400,000.00 3,379,522.28
01453 Wachovia Industrial Light Industrial 3,316,800.00 3,301,965.97
51503 GCFP Retail Anchored 3,230,000.00 3,220,511.76
92868 Abbey Portfolio I Wachovia Office Suburban 3,200,000.00 3,187,884.39
80134 AMCC Retail Unanchored 3,200,000.00 3,166,799.03
33029 Wachovia Industrial Flex 3,000,000.00 2,988,770.22
65616 Wachovia Retail Anchored 3,000,000.00 2,982,114.92
60657 Wachovia Retail Anchored 2,920,000.00 2,917,918.23
55318 Wachovia Retail Anchored 2,810,000.00 2,799,630.13
86301 GCFP Retail Anchored 2,770,000.00 2,762,166.48
98310 AMCC Retail Anchored 2,650,000.00 2,646,514.12
98125 AMCC Multifamily Conventional 2,583,000.00 2,579,312.56
38134 Wachovia Retail Anchored 2,500,000.00 2,500,000.00
29678 AMCC Multifamily Conventional 2,465,000.00 2,456,941.99
39120 Wachovia Multifamily Conventional 2,456,000.00 2,449,626.73
89120 GCFP Mixed Use Office/Warehouse 2,397,000.00 2,391,379.51
77479 GCFP Retail Shadow Anchored 2,400,000.00 2,389,876.95
95821 GCFP Multifamily Conventional 2,362,500.00 2,352,459.18
33432 GCFP Office CBD 2,311,000.00 2,305,544.23
92544 NCCI Mobile Home Park Mobile Home Park 2,250,000.00 2,221,306.69
24502 AMCC Retail Anchored 2,210,000.00 2,203,244.51
91103 AMCC Industrial Flex 2,180,000.00 2,173,243.14
30281 Wachovia Retail Anchored 2,170,000.00 2,164,517.11
97330 AMCC Office Suburban 2,250,000.00 2,115,627.28
94115 AMCC Mixed Use Retail/Office 2,100,000.00 2,100,000.00
98404 AMCC Multifamily Conventional 2,095,000.00 2,087,794.14
91101 AMCC Retail Unanchored 2,000,000.00 2,000,000.00
33431 Wachovia Multifamily Conventional 2,000,000.00 1,993,571.85
89052 GCFP Retail Unanchored 1,928,000.00 1,923,353.04
85022 GCFP Multifamily Conventional 1,895,000.00 1,881,856.47
98052 AMCC Mixed Use Multifamily/Retail 1,880,000.00 1,878,604.76
91762 Wachovia Multifamily Conventional 1,775,000.00 1,768,355.71
33607 GCFP Office Suburban 1,700,000.00 1,692,626.20
75165 Wachovia Mobile Home Park Mobile Home Park 1,640,000.00 1,635,016.65
Various AMCC Industrial Various 1,620,000.00 1,459,812.28
98134 Industrial Warehouse
99202 Industrial Warehouse
98902 Industrial Flex
95608 GCFP Multifamily Conventional 1,425,000.00 1,418,943.63
98372 AMCC Multifamily Conventional 1,397,000.00 1,392,678.57
98409 AMCC Multifamily Conventional 1,375,000.00 1,370,746.64
91762 Wachovia Multifamily Conventional 1,225,000.00 1,220,414.51
76015 AMCC Retail Anchored 1,188,000.00 1,183,689.62
77573 AMCC Retail Unanchored 1,200,000.00 1,136,176.95
32808 GCFP Industrial Warehouse 1,100,000.00 1,095,156.68
66205 AMCC Retail Unanchored 1,040,000.00 1,023,270.07
58103 AMCC Multifamily Conventional 1,000,000.00 993,394.96
08701 Wachovia Industrial Warehouse 1,000,000.00 992,365.27
84123 AMCC Retail Shadow Anchored 800,000.00 770,214.67
92014 AMCC Industrial Flex 750,000.00 700,602.39
93727 AMCC Office Suburban 685,000.00 671,691.63
01844 AMCC Retail Shadow Anchored 695,000.00 658,769.01
89102 AMCC Mixed Use Retail/Office 680,000.00 645,233.82
98058 AMCC Mixed Use Office/Retail 680,000.00 622,467.50
63104 AMCC Retail Shadow Anchored 700,000.00 604,264.92
11476 AMCC Mixed Use Retail/Multifamily 515,000.00 487,206.95
77401 AMCC Retail Unanchored 445,000.00 383,074.81
% OF LOAN
AGGREGATE ADMINISTRATIVE INTEREST
CUT-OFF DATE ORIGINATION FIRST PAY MATURITY DATE MORTGAGE COST RATE ACCRUAL
BALANCE DATE DATE OR ARD RATE (%) (%) METHOD
- -----------------------------------------------------------------------------------------------------------------
0.46% 2-Apr-2002 1-Jun-2002 1-May-2007 7.6700% 0.05268% Actual/360
0.45% 14-Dec-2001 1-Feb-2002 1-Jan-2012 7.5700% 0.05268% Actual/360
0.44% 19-Sep-2001 1-Nov-2001 1-Oct-2011 7.1620% 0.05268% Actual/360
0.44% 11-Jan-2002 1-Mar-2002 1-Dec-2009 7.2500% 0.05268% Actual/360
0.43% 17-Dec-2001 1-Feb-2002 1-Jan-2007 7.0100% 0.05268% Actual/360
0.43% 28-Mar-2002 1-May-2002 1-Apr-2012 7.0500% 0.05268% Actual/360
0.42% 31-Oct-2001 1-Jan-2002 1-Dec-2011 6.6500% 0.05268% Actual/360
0.41% 13-Jun-2001 1-Aug-2001 1-Jul-2011 7.5870% 0.09768% Actual/360
0.40% 11-Mar-2002 1-May-2002 1-Apr-2012 7.5100% 0.05268% Actual/360
0.38% 23-Oct-2001 1-Dec-2001 1-Nov-2011 6.8400% 0.05268% Actual/360
0.38% 31-Aug-2001 1-Oct-2001 1-Sep-2011 7.4200% 0.05268% Actual/360
0.38% 27-Feb-2002 1-Apr-2002 1-Mar-2012 7.1250% 0.05268% Actual/360
0.37% 22-Jan-2002 1-Mar-2002 1-Feb-2012 7.2900% 0.05268% Actual/360
0.36% 27-Sep-2001 1-Nov-2001 1-Oct-2011 7.4500% 0.05268% Actual/360
0.36% 30-Jul-2001 1-Sep-2001 1-Aug-2011 7.6250% 0.05268% Actual/360
0.35% 21-Dec-2001 10-Feb-2002 10-Jan-2012 7.6800% 0.05268% Actual/360
0.34% 20-Dec-2001 1-Feb-2002 1-Jan-2012 7.6000% 0.05268% Actual/360
0.34% 11-Jan-2002 1-Mar-2002 1-Dec-2009 7.2500% 0.05268% Actual/360
0.33% 11-Jan-2001 1-Mar-2001 1-Feb-2011 7.6700% 0.05268% Actual/360
0.31% 18-Jan-2002 1-Mar-2002 1-Feb-2012 7.3300% 0.05268% Actual/360
0.31% 25-Feb-2002 1-Apr-2002 1-Mar-2010 7.3000% 0.05268% Actual/360
0.31% 15-Mar-2002 1-May-2002 1-Apr-2012 7.7000% 0.05268% Actual/360
0.29% 25-Jan-2002 1-Mar-2002 1-Feb-2012 7.4300% 0.05268% Actual/360
0.29% 27-Dec-2001 1-Feb-2002 1-Jan-2012 7.7900% 0.05268% Actual/360
0.28% 22-Feb-2002 1-Apr-2002 1-Mar-2012 7.3900% 0.05268% Actual/360
0.27% 22-Feb-2002 1-Apr-2002 1-Mar-2012 7.0600% 0.05268% Actual/360
0.26% 12-Apr-2002 1-Jun-2002 1-May-2012 7.8200% 0.05268% Actual/360
0.26% 21-Dec-2001 1-Feb-2002 1-Jan-2012 7.0600% 0.11768% Actual/360
0.26% 18-Jan-2002 1-Mar-2002 1-Feb-2012 7.1700% 0.05268% Actual/360
0.25% 9-Jan-2002 1-Mar-2002 1-Feb-2012 7.7650% 0.05268% Actual/360
0.25% 30-Oct-2001 1-Dec-2001 1-Nov-2011 7.6000% 0.05268% Actual/360
0.25% 31-Oct-2001 1-Jan-2002 1-Dec-2011 6.6500% 0.05268% Actual/360
0.24% 10-Jan-2002 1-Mar-2002 1-Feb-2012 7.7250% 0.09768% Actual/360
0.23% 28-Dec-2001 11-Feb-2002 11-Jan-2012 6.9800% 0.05268% Actual/360
0.23% 3-Dec-2001 1-Feb-2002 1-Jan-2012 7.4000% 0.05268% Actual/360
0.23% 12-Dec-2001 1-Feb-2002 1-Jan-2012 7.3300% 0.05268% Actual/360
0.23% 6-Feb-2002 1-Apr-2002 1-Mar-2012 7.5000% 0.05268% Actual/360
0.22% 14-Jul-1999 1-Sep-1999 1-Aug-2019 8.4000% 0.05268% 30/360
0.22% 17-Apr-2002 1-Jun-2002 1-May-2012 7.7300% 0.05268% Actual/360
0.22% 27-Dec-2001 1-Feb-2002 1-Jan-2012 6.8000% 0.05268% Actual/360
0.21% 4-Apr-2002 1-Jun-2002 1-May-2012 8.0500% 0.05268% Actual/360
0.21% 18-Jan-2002 1-Mar-2002 1-Feb-2012 7.0200% 0.05268% Actual/360
0.20% 9-Jan-2002 1-Mar-2002 1-Feb-2012 7.6030% 0.05268% Actual/360
0.20% 30-May-2001 1-Jul-2001 1-Jun-2011 7.8600% 0.05268% Actual/360
0.20% 15-Mar-2002 1-May-2002 1-Apr-2012 7.5000% 0.05268% Actual/360
0.19% 29-Jan-2002 1-Mar-2002 1-Feb-2012 7.3300% 0.05268% Actual/360
0.18% 16-Oct-2001 1-Dec-2001 1-Nov-2011 7.4700% 0.05268% Actual/360
0.17% 26-Dec-2001 1-Feb-2002 1-Jan-2012 7.4300% 0.05268% Actual/360
0.15% 26-Oct-1998 1-Dec-1998 1-Nov-2008 7.7500% 0.05268% Actual/360
0.15% 31-Oct-2001 1-Jan-2002 1-Dec-2011 6.6500% 0.05268% Actual/360
0.15% 27-Dec-2001 1-Feb-2002 1-Jan-2012 7.3400% 0.05268% Actual/360
0.14% 27-Dec-2001 1-Feb-2002 1-Jan-2012 7.3400% 0.05268% Actual/360
0.13% 29-Jan-2002 1-Mar-2002 1-Feb-2012 7.3300% 0.05268% Actual/360
0.12% 14-Feb-2002 1-Apr-2002 1-Mar-2022 7.3300% 0.05268% Actual/360
0.12% 28-Jul-1998 1-Sep-1998 1-Aug-2008 7.6500% 0.05268% Actual/360
0.12% 19-Oct-2001 1-Dec-2001 1-Nov-2011 7.4000% 0.05268% Actual/360
0.11% 9-Nov-2000 1-Jan-2001 1-Dec-2010 8.4500% 0.05268% Actual/360
0.10% 7-Jun-2001 1-Aug-2001 1-Jul-2011 7.6000% 0.05268% Actual/360
0.10% 18-Jul-2001 1-Sep-2001 1-Aug-2011 8.9000% 0.05268% Actual/360
0.08% 13-May-1999 1-Jul-1999 1-Jun-2009 8.0500% 0.05268% Actual/360
0.07% 30-Mar-1999 1-Jun-1999 1-May-2019 8.4000% 0.05268% 30/360
0.07% 22-Jul-1999 1-Sep-1999 1-Aug-2009 8.3500% 0.05268% Actual/360
0.07% 10-Jun-1998 1-Aug-1998 1-Jul-2008 7.9000% 0.05268% Actual/360
0.07% 14-Aug-1998 1-Oct-1998 1-Sep-2008 7.7500% 0.05268% Actual/360
0.07% 22-Sep-1998 1-Nov-1998 1-Oct-2008 7.5000% 0.05268% Actual/360
0.06% 14-Dec-1998 1-Feb-1999 1-Jan-2014 7.5000% 0.05268% 30/360
0.05% 15-Jul-1999 1-Sep-1999 1-Aug-2009 8.7000% 0.05268% Actual/360
0.04% 25-Nov-1998 1-Jan-1999 1-Dec-2013 7.6500% 0.05268% 30/360
ORIGINAL
INTEREST TERM TO REMAINING
ACCRUAL MATURITY OR TERM TO REMAINING ORIGINAL REMAINING MATURITY DATE OR
METHOD OR ARD MATURITY OR IO PERIOD AMORT TERM AMORT TERM MONTHLY P&I ARD BALLOON ARD
DURING IO (MOS.) ARD (MOS.) (MOS.) (MOS.) (MOS.) PAYMENTS($) BALANCE($) LOANS
- ------------------------------------------------------------------------------------------------------------------------------------
60 60 360 360 30,923.80 4,151,870.67 Y
120 116 300 296 32,173.43 3,520,566.52 N
120 113 360 353 28,536.39 3,695,559.54 N
94 91 300 297 30,177.19 3,592,502.31 N
60 56 300 296 29,357.82 3,807,591.31 N
120 119 360 359 27,081.00 3,537,529.02 N
120 115 300 295 27,726.70 3,203,530.49 N
120 110 360 350 27,551.44 3,459,398.88 N
120 119 360 359 26,666.17 3,367,618.65 N
120 114 360 354 23,728.95 3,147,111.49 N
120 112 360 352 25,148.24 3,195,207.27 N
120 118 360 358 24,253.87 3,151,163.59 N
120 117 300 297 25,751.20 2,863,651.89 N
120 113 360 353 23,657.00 2,999,530.32 N
120 111 360 351 24,064.99 3,012,814.77 N
120 116 300 296 24,900.51 2,707,436.93 N
120 116 360 356 22,806.21 2,859,672.71 N
94 91 300 297 23,129.82 2,753,534.99 N
120 105 360 345 22,748.55 2,837,334.36 N
120 117 300 297 21,839.07 2,422,921.27 N
96 94 180 178 27,470.51 1,832,499.51 N
120 119 360 359 20,818.44 2,593,202.72 Y
120 117 300 297 20,637.88 2,276,315.30 Y
120 116 360 356 19,921.24 2,463,876.48 N
120 118 360 358 18,330.00 2,335,569.44 N
120 118 360 358 17,288.98 2,257,092.40 N
120 120 360 360 18,031.39 2,227,063.96 Y
120 116 360 356 16,499.16 2,152,509.35 N
120 117 360 357 16,621.19 2,150,487.54 N
120 117 360 357 17,197.25 2,130,417.47 N
120 114 360 354 16,945.79 2,124,922.71 N
120 115 360 355 15,166.42 2,040,693.50 N
120 117 360 357 16,516.38 2,051,980.11 N
120 116 180 176 20,198.49 1,046,130.39 N
120 116 360 356 15,301.60 1,946,834.08 N
120 116 360 356 14,989.92 1,916,992.40 N
120 118 276 274 16,522.15 1,676,372.84 Y
240 207 240 207 19,383.86 0.00 N
120 120 300 300 15,834.35 1,718,152.76 N
120 116 360 356 13,657.84 1,816,791.03 N
120 120 360 360 14,745.07 1,791,554.17 N
120 117 330 327 13,698.53 1,680,642.01 N
120 117 360 357 13,617.10 1,706,780.40 N
120 109 360 349 13,720.34 1,688,962.88 N
120 119 360 359 13,145.24 1,661,292.73 N
120 117 300 297 12,921.45 1,433,561.71 N
120 114 360 354 11,851.74 1,500,274.20 N
120 116 360 356 11,388.61 1,445,806.97 N
120 78 216 174 13,930.45 1,017,932.62 N
120 115 360 355 9,148.00 1,230,894.39 N
120 116 360 356 9,615.44 1,228,769.97 N
120 116 360 356 9,464.01 1,209,420.32 N
120 117 300 297 8,917.62 989,359.56 N
240 238 240 238 9,526.64 0.00 N
120 75 300 255 8,985.31 979,249.32 N
120 114 360 354 7,616.18 969,050.82 N
120 103 300 283 8,339.35 867,946.53 N
120 110 360 350 7,060.75 885,722.59 N
120 111 300 291 8,323.59 845,049.27 N
120 85 300 265 6,201.06 660,601.44 N
240 204 240 204 6,461.29 0.00 N
120 87 360 327 5,194.42 617,854.79 N
120 74 300 254 5,318.17 571,443.88 N
120 76 300 256 5,136.24 556,436.48 N
120 77 240 197 5,478.04 471,327.41 N
180 140 180 140 6,489.09 0.00 N
120 87 240 207 4,534.70 372,099.01 N
180 139 180 139 4,163.23 0.00 N
APPRAISED
PREPAYMENT PROVISIONS VALUE ($) APPRAISAL DATE DSCR (X)
- -----------------------------------------------------------------------------------
L(48),D(11),O(1) 5,875,000 2-Feb-2002 1.20
L(36),D(80),O(4) 6,100,000 1-Nov-2001 1.26
L(31),D(85),O(4) 5,310,000 Various 1.25
2,575,000 22-Aug-2001
835,000 22-Jun-2001
1,070,000 30-Sep-2001
830,000 21-Jun-2001
L(27),D(62),O(5) 5,650,000 26-Sep-2001 1.40
L(36),D(20),O(4) 6,000,000 1-Nov-2001 1.33
L(48),D(68),O(4) 5,100,000 26-Jan-2002 1.20
L(29),D(87),O(4) 5,400,000 10-Jun-2001 1.35
L(34),D(82),O(4) 5,400,000 15-Mar-2001 1.24
L(36),D(81),O(3) 5,200,000 4-Feb-2002 1.29
L(30),D(86),O(4) 5,750,000 19-Sep-2001 1.54
L(32),D(84),O(4) 5,120,000 31-May-2001 1.37
L(48),D(69),O(3) 4,600,000 10-Jul-2001 1.30
L(48),D(69),O(3) 5,800,000 9-Oct-2001 1.26
L(31),D(85),O(4) 4,500,000 4-May-2001 1.29
L(48),D(69),O(3) 4,400,000 2-Jul-2001 1.20
L(28),D(91),O(1) 4,500,000 1-Jan-2002 1.31
L(59),GRTR1%orYM(57),O(4) 4,500,000 31-Oct-2001 1.27
L(27),D(62),O(5) 4,200,000 1-Oct-2001 1.30
L(39),D(76),O(5) 4,500,000 25-Oct-2000 1.40
L(48),D(68),O(4) 4,030,000 12-Nov-2001 1.36
L(48),D(45),O(3) 5,500,000 28-Jun-2001 1.30
L(25),D(94),O(1) 3,650,000 8-Nov-2001 1.22
L(48),D(71),O(1) 3,800,000 4-Jan-2002 1.23
L(28),D(88),O(4) 3,750,000 26-Oct-2001 1.20
L(36),D(81),O(3) 3,900,000 15-Dec-2001 1.36
L(36),D(81),O(3) 3,450,000 10-Jan-2002 1.23
L(48),D(71),O(1) 3,200,000 16-Feb-2002 1.22
L(36),D(81),O(3) 3,132,500 28-Nov-2001 1.25
L(48),D(65),O(7) 3,070,000 23-Oct-2001 1.23
L(27),D(89),O(4) 3,300,000 9-Nov-2001 1.26
L(30),D(86),O(4) 3,200,000 14-Apr-2001 1.27
L(29),D(87),O(4) 3,150,000 10-Jun-2001 1.34
L(27),D(89),O(4) 3,100,000 3-Dec-2001 1.30
L(28),D(89),O(3) 5,100,000 27-Sep-2001 1.83
L(36),D(81),O(3) 3,000,000 18-Sep-2001 1.30
L(36),D(80),O(4) 2,950,000 29-Oct-2001 1.44
L(48),D(71),O(1) 2,780,000 12-Dec-2001 1.20
L(59),GRTR1%orYM(177),O(4) 3,170,000 1-Jul-1999 1.22
L(36),D(81),O(3) 2,920,000 20-Jan-2002 1.23
L(36),D(81),O(3) 3,000,000 2-Nov-2001 1.31
L(36),D(81),O(3) 2,700,000 11-Feb-2002 1.28
L(36),D(81),O(3) 4,035,000 3-Jan-2002 1.89
L(27),D(89),O(4) 2,570,000 16-Nov-2001 1.25
L(35),D(81),O(4) 2,400,000 3-Apr-2001 1.23
L(60),GRTR1%orYM(57),O(3) 2,720,000 31-Dec-2001 1.26
L(48),D(68),O(4) 2,350,000 17-May-2001 1.32
L(30),D(86),O(4) 2,300,000 6-Sep-2001 1.27
L(48),D(69),O(3) 2,050,000 17-Aug-2001 1.28
L(59),GRTR1%orYM(57),O(4) 2,665,000 Various 1.35
1,575,000 16-Mar-2000
650,000 18-Mar-2000
440,000 22-Jun-2000
L(29),D(87),O(4) 1,900,000 10-Jun-2001 1.29
L(36),D(81),O(3) 2,050,000 16-Nov-2001 1.20
L(36),D(81),O(3) 1,925,000 16-Nov-2001 1.23
L(48),D(68),O(4) 1,600,000 17-May-2001 1.28
L(60),GRTR1%orYM(177),O(3) 3,260,000 4-Jan-2002 2.15
L(59),GRTR1%orYM(54),O(7) 1,675,000 10-Jan-2001 1.25
L(30),D(86),O(4) 1,380,000 6-Aug-2001 1.31
L(60),D(56),O(4) 1,600,000 6-Sep-2000 1.28
L(36),D(80),O(4) 1,250,000 3-Apr-2001 1.26
L(48),D(68),O(4) 1,500,000 25-Jan-2001 1.32
L(59),GRTR1%orYM(57),O(4) 1,155,000 12-Apr-1999 1.30
L(59),GRTR1%orYM(177),O(4) 1,250,000 21-Jan-1999 1.79
L(59),GRTR1%orYM(58),O(3) 1,010,000 28-May-1999 1.40
L(59),GRTR1%orYM(54),O(7) 1,100,000 23-Jun-2000 1.24
L(59),GRTR1%orYM(58),O(3) 1,635,000 12-Mar-2000 1.57
L(59),GRTR1%orYM(57),O(4) 1,350,000 17-Mar-2000 1.64
L(59),GRTR1%orYM(117),O(4) 1,025,000 27-Jan-2000 1.24
L(59),GRTR1%orYM(57),O(4) 800,000 18-May-1999 1.35
L(59),GRTR1%orYM(117),O(4) 900,000 14-Oct-1998 1.42
LTV RATIO CUT-OFF DATE
CUT-OFF DATE AT MATURITY YEAR YEAR NUMBER UNIT OF LOAN AMOUNT OCCUPANCY
LTV RATIO OR ARD BUILT RENOVATED OF UNITS MEASURE PER UNIT ($) RATE (%)
- ------------------------------------------------------------------------------------------------------------------------------------
74.04% 70.67% 2001 15,120 Sq. Ft. 288 100.00%
70.61% 57.71% 1956 1985 35,408 Sq. Ft. 122 100.00%
79.06% 69.60% Various Various 88,300 Sq. Ft. 48 100.00%
2001 35,500 Sq. Ft. 100.00%
1997 13,200 Sq. Ft. 100.00%
1999 2001 19,200 Sq. Ft. 100.00%
1994 20,400 Sq. Ft. 100.00%
73.61% 63.58% 1975 82,010 Sq. Ft. 51 93.56%
68.82% 63.46% 1978 2001 150 Units 27,529 94.67%
79.35% 69.36% 2001 34,087 Sq. Ft. 119 100.00%
74.52% 59.32% 1960 2001 119 Units 33,816 96.60%
71.87% 64.06% 1922 Various 51,420 Sq. Ft. 75 86.71%
73.21% 64.76% 1999 69,589 Sq. Ft. 55 100.00%
62.73% 54.73% 2001 15,015 Sq. Ft. 240 100.00%
70.39% 62.41% 1994 106,717 Sq. Ft. 34 100.00%
78.15% 68.50% 1988 & 1992 78 Units 46,089 100.00%
60.98% 49.37% 1999 34,144 Sq. Ft. 104 84.18%
75.18% 66.66% 1986 72,222 Sq. Ft. 47 100.00%
76.81% 68.47% 1912 1961 90 Units 37,550 95.56%
73.38% 60.17% 1955, 1965 & 1975 95,720 Sq. Ft. 34 100.00%
71.57% 63.55% 2001 14,241 Sq. Ft. 226 100.00%
75.90% 65.56% 1984 29,987 Sq. Ft. 106 100.00%
70.37% 63.05% 1984 56,795 Sq. Ft. 56 100.00%
74.16% 60.12% 1999 55,192 Sq. Ft. 54 100.00%
54.22% 33.32% 1987 1992 112,000 Sq. Ft. 27 100.00%
79.94% 71.05% 1929 20,483 Sq. Ft. 142 100.00%
73.67% 59.90% 2000 13,905 Sq. Ft. 201 100.00%
73.66% 65.70% 2001 15,251 Sq. Ft. 181 100.00%
67.86% 59.89% 2001 15,120 Sq. Ft. 175 100.00%
74.76% 65.42% 1970 2002 44 Units 58,621 95.45%
78.13% 69.60% 1999 15,120 Sq. Ft. 165 100.00%
78.43% 68.72% 1995 80 Units 30,712 100.00%
79.79% 70.05% 1984 96 Units 25,517 90.63%
72.47% 64.56% 2000 29,670 Sq. Ft. 81 97.55%
74.68% 66.40% 1998 2001 16,750 Sq. Ft. 143 100.00%
74.68% 64.78% 1960 60 Units 39,208 100.00%
74.37% 66.19% 1981 1996 26,079 Sq. Ft. 88 92.38%
43.56% 20.51% 1966 182 Pads 12,205 100.00%
73.44% 64.89% 2000 21,350 Sq. Ft. 103 100.00%
73.67% 64.98% 1989 38,504 Sq. Ft. 56 100.00%
77.86% 60.30% 2001 20,000 Sq. Ft. 108 100.00%
66.74% 0.00% 1999 21,398 Sq. Ft. 99 100.00%
71.92% 58.84% 1926 1993 13,844 Sq. Ft. 152 100.00%
69.59% 60.56% 1985 2000 87 Units 23,998 97.70%
74.07% 66.35% 1933 1996 9,400 Sq. Ft. 213 100.00%
49.41% 41.65% 1972 85 Units 23,454 97.65%
74.84% 66.41% 2001 11,681 Sq. Ft. 165 100.00%
78.41% 70.37% 1986 58 Units 32,446 94.83%
69.07% 61.08% 1994 19,567 Sq. Ft. 96 100.00%
75.25% 61.00% 1965 51 Units 34,674 94.12%
73.59% 65.23% 1985 23,288 Sq. Ft. 73 100.00%
79.76% 70.53% 1976 160 Pads 10,219 93.82%
54.78% 38.20% Various Various 59,173 Sq. Ft. 25 100.00%
1972 1997 32,189 Sq. Ft. 100.00%
1975 14,984 Sq. Ft. 100.00%
1963 1996 12,000 Sq. Ft. 100.00%
74.68% 64.78% 1967 40 Units 35,474 97.50%
67.94% 59.94% 1984 2000 51 Units 27,307 96.08%
71.21% 62.83% 1979 2000 47 Units 29,165 97.87%
76.28% 61.83% 1962 30 Units 40,680 100.00%
36.31% 0.00% 2001 14,490 Sq. Ft. 82 100.00%
67.83% 58.46% 1985 19,382 Sq. Ft. 59 100.00%
79.36% 70.22% 2001 16,500 Sq. Ft. 66 100.00%
63.95% 54.25% 1978 16,945 Sq. Ft. 60 100.00%
79.47% 70.86% 2000 15 Units 66,226 100.00%
66.16% 56.34% 1989 29,877 Sq. Ft. 33 100.00%
66.69% 57.19% 1986 10,599 Sq. Ft. 73 100.00%
56.05% 0.00% 1968 17,099 Sq. Ft. 41 100.00%
66.50% 61.17% 1982 21,814 Sq. Ft. 31 100.00%
59.89% 51.95% 1983 6,216 Sq. Ft. 106 100.00%
39.46% 34.03% 1982 1997 19,000 Sq. Ft. 34 100.00%
46.11% 34.91% 1979 10,977 Sq. Ft. 57 100.00%
58.95% 0.00% 1991 9,840 Sq. Ft. 61 100.00%
60.90% 46.51% 1927 1998 4,800 Sq. Ft. 102 100.00%
42.56% 0.00% 1998 4,133 Sq. Ft. 93 100.00%
LARGEST
OCCUPANCY UW NET CASH FLOW TENANT
"AS OF" DATE ($) LARGEST TENANT SQ. FT.
- ------------------------------------------------------------------------------------------
2-Feb-2002 445,203 Walgreen Co. 15,120
12-Dec-2001 487,017 GWU Div. of Continuing Education 11,422
31-Jan-2002 426,662 Various Various
31-Jan-2002 203,051 Uson 35,500
31-Jan-2002 67,968 ABB Turbocharger Company 13,200
31-Jan-2002 89,413 Catalyst Services, Inc. 19,200
31-Jan-2002 66,230 Airborne Freight Corporation 20,400
1-Feb-2002 508,560 US Micro Lab, Inc. 4,977
15-Jan-2002 467,877
26-Mar-2002 391,180 Publix 27,887
31-Oct-2001 449,324
30-Dec-2001 408,573 Pescatore Restaurant 7,035
8-Mar-2002 414,320 OSA West, Inc. 10,631
23-Oct-2001 438,408 Walgreen Co. 15,015
30-Nov-2001 413,434 Wal-Mart Stores, Inc. 106,717
21-Feb-2002 378,298
22-Jan-2002 389,030 Staples 24,064
1-Jan-2002 366,834 Janitex Rug Service Corp. 56,163
16-Jan-2002 347,941
14-Dec-2001 390,081 PerkinElmer 95,720
20-Dec-2001 348,769 Walgreen Co. 14,241
1-Feb-2002 360,110 County of Orange 29,987
31-Dec-2001 382,050 Tuesday Morning 7,394
11-Feb-2002 356,057 Miami Management, Inc 9,226
18-Jan-2002 427,984 Wal-Mart Stores, Inc. 112,000
30-Nov-2001 305,559 Walgreen Co. 20,483
14-Jan-2002 305,269 Walgreen Co. 13,905
19-Dec-2001 286,879 Albertson's, Inc. 15,251
7-Feb-2002 299,792 Walgreen Co. 15,120
14-Feb-2002 254,474
16-Feb-2002 264,656 Walgreen Co. 15,120
6-Nov-2001 246,771
10-Dec-2001 245,522
1-Nov-2001 259,832 Expanets of North America, LLC 3,729
17-Oct-2001 258,778 River Oaks Imaging 10,750
31-Oct-2001 243,412
1-Feb-2002 257,908 The Interiors Group 5,936
1-Feb-2002 442,509
22-Feb-2002 238,750 Barnes & Noble 21,350
28-Feb-2002 258,877 Green Street Press 10,875
30-Jan-2002 237,930 Office Depot, Inc. 20,000
31-Dec-2001 283,054 David Evans & Assoc. 7,050
12-Mar-2002 233,406 Walgreen Co. 9,231
12-Feb-2002 214,053
2-Apr-2002 226,160 Kinko's 9,400
31-Dec-2001 311,349
9-Nov-2001 204,707 James E. Barber, M.D., P.C. 4,641
14-Mar-2002 202,427
1-Jan-2002 198,644 Blockbuster 4,829
10-Dec-2001 204,440
31-Dec-2001 180,945 Carter & Associates, LLC 8,994
26-Dec-2001 175,066
31-Dec-2001 225,443 Various Various
31-Dec-2001 133,944 Thermal Supply-Seattle 32,189
31-Dec-2001 50,391 Apples and Oranges 9,914
31-Dec-2001 41,108 Thermal Supply 12,000
31-Oct-2001 141,793
22-Jan-2002 138,417
19-Dec-2001 140,231
10-Dec-2001 136,507
24-Feb-2002 245,879 Walgreen Co. 14,490
13-Feb-2002 134,926 Kenneth Kaye Attorney 2,500
31-Dec-2001 119,302 Entenmann's 16,500
16-Jan-2002 128,518 Consignment Shop 3,038
31-Dec-2001 106,555
15-Nov-2001 132,222 Lifestyle Fascinations 29,877
5-Jan-2002 96,746 Constant Care Family Medical 3,150
7-Mar-2002 138,779 Del Mar Body Works/Bradshaw 1,930
31-Dec-2001 87,033 AGI Publishing, Inc. 8,050
31-Dec-2001 79,202 Baybank Merrimac Valley, N.A./Fleet 4,847
25-Feb-2002 96,460 Five Oceans Enterprises Inc 9,000
4-Mar-2002 107,794 R & M Foods, Inc (Shakey's Pizza) 3,105
12-Mar-2002 96,554 E. E. Laundromat 3,000
28-Feb-2002 73,586 AC & CC, Inc 1,250
31-Dec-2001 71,020 Starbucks #6292 1,657
2ND LARGEST
LARGEST TENANT LARGEST TENANT 2ND LARGEST TENANT %
% OF NRA EXP. DATE 2ND LARGEST TENANT NAME TENANT SQ. FT. OF NRA (%)
- ---------------------------------------------------------------------------------------------------------------------------------
100.00% 1-Jun-2021
32.26% 31-Dec-2004 George Washington University 5,820 16.44%
Various Various
100.00% 16-Aug-2016
100.00% 14-May-2007
100.00% 31-Jan-2009
100.00% 30-Apr-2003
6.07% 28-Feb-2005 Magic Store Fixt, Inc. 4,580 5.58%
81.81% 28-Feb-2021 Blockbuster Video 3,800 11.15%
13.68% 31-Oct-2007 Zeidler Roberts Architect 4,050 7.88%
15.28% 30-Sep-2004 The Delivery Company, Inc. 9,040 12.99%
100.00% 30-Apr-2061
100.00% 30-Sep-2004
70.48% 31-Jul-2015 Papa Johns Pizza 1,800 5.27%
77.76% 31-Dec-2004 Charette Corporation 8,158 11.30%
100.00% 31-Dec-2021
100.00% 30-Jun-2076
100.00% 30-Sep-2004
13.02% 14-Feb-2005 Omega Karate, Inc 5,321 9.37%
16.72% 25-Feb-2005 Jemco Medical 6,920 12.54%
100.00% 31-Jan-2012
100.00% 1-Nov-2021
100.00% 1-Mar-2020
100.00% 30-Nov-2021
100.00% 31-Aug-2061
100.00% 1-Dec-2020
12.57% 30-Apr-2004 Woods & Associates 2,592 8.74%
64.18% 31-Dec-2010 Mattress Giant 6,000 35.82%
22.76% 31-Oct-2006 Worker's Comp Group 3,935 15.09%
100.00% 31-Jan-2022
28.24% 28-Feb-2006 Five Acres - Boys & Girls 8,836 22.95%
100.00% 31-Aug-2016
32.95% 30-Sep-2008 Soil Foodweb 4,333 20.25%
66.68% 31-Oct-2023 Kaiser HMO 4,613 33.32%
100.00% 31-Aug-2007
39.73% 15-Oct-2016 Blood Systems Inc. d.b.a. United Blood Services 4,117 35.25%
24.68% 15-Sep-2005 Michaels Cleaning 1,400 7.15%
38.62% 30-Nov-2005 Quintairos, McCumber, et. al. 4,362 18.73%
Various Various Various Various Various
100.00% 30-Sep-2010
66.16% 31-Oct-2002 MCSi 5,070 33.84%
100.00% 30-Sep-2010
100.00% 23-Feb-2077
12.90% 31-May-2002 Southland Title 2,100 10.83%
100.00% 30-Sep-2011
17.93% 30-Nov-2006 Nance's Deli 2,703 15.95%
100.00% 31-Jan-2016
29.72% 30-Jun-2006 Payless Shoesource #1365 3,000 28.30%
11.29% 30-Apr-2003 Alpha Medical 1,420 8.30%
36.90% 31-Oct-2005 Consumer Credit Counseling of Central Valley, Inc. 4,348 19.93%
77.98% 31-Dec-2008 Vitamins Plus 1,369 22.02%
47.37% 31-Jan-2011 Pain Clinic, Inc Chiropractic 5,000 26.32%
28.29% 31-Oct-2007 Dr. Chuck Ingle 2,169 19.76%
30.49% 31-May-2006 Mimi's Beauty Supply 2,760 28.05%
26.04% 9-Feb-2009 Squire Deli 1,250 26.04%
40.09% 31-Jul-2008 Great Clips-DLG Ventures 1,276 30.87%
2ND LARGEST 3RD LARGEST
TENANT 3RD LARGEST TENANT %
EXP. DATE 3RD LARGEST TENANT NAME TENANT SQ. FT OF NRA
- ------------------------------------------------------------------------------------------------------------------------
31-Dec-2002 Dr. James A Cobey 3,500 9.88%
31-Jan-2004 Richie's Install, Inc. 4,556 5.56%
31-Jan-2006 Jersey Mike's Subs 1,400 4.11%
28-Feb-2003 Underground Coffee House 3,075 5.98%
29-Feb-2004 S.P. Enterprises, Inc. 8,829 12.69%
30-Jun-2006 Port of Subs (Restaurant Investment Group, LLC) 1,440 4.22%
31-Jul-2002 Carpet Consultants 7,901 10.94%
31-May-2002 Destination Cyclery 3,862 6.80%
1-Jul-2002 FEC Telecom 6,808 12.34%
28-Feb-2004 Aloha Continental Travel & Tours 2,495 8.41%
31-May-2011
31-Dec-2006 John Cappeller, PA 2,596 9.95%
31-Aug-2002 Health Guard Corporation 8,600 22.34%
31-Mar-2004 First American Title 4,144 19.37%
31-Aug-2009
15-Oct-2006 Worthington Real Estate d.b.a. Realty Executives 1,823 15.61%
30-Apr-2004 Edward Jones 1,125 5.75%
30-Sep-2014 GSA (U.S. Dept. of Labor) 4,314 18.52%
Various
31-Oct-2002
31-Mar-2004 The Kids Room 1,950 10.06%
31-Oct-2003 WH Cleaners, Inc. 2,400 14.16%
30-Nov-2005 Wells Fargo Financial, Inc 1,804 17.02%
31-Oct-2003 Del Mar Glass 1,350 7.90%
31-Aug-2006 State of California 3,842 17.61%
31-Jul-2004
1-Apr-2005 Novastar Mortgage 1,000 5.26%
1-Oct-2003 Dr. Mario Chorak, D.D. S., P.S. 1,986 18.09%
31-May-2006 Rent-A-Center 2,730 27.74%
31-Jan-2012
30-Sep-2003 Vogue (Tip Top) Cleaners 1,200 29.03%
LARGEST
AFFILIATED
3RD LARGEST SPONSOR FLAG MORTGAGE
TENANT (> THAN 4% LOAN
EXP. DATE LOCKBOX OF POOL) NUMBER
- ----------- ------- ------------ --------
Springing 89
14-Sep-2002 90
Day 1 91
91.1
91.2
91.3
91.4
31-Jan-2002 Springing Abbey 92
93
31-Aug-2006 94
95
30-Nov-2002 96
28-Feb-2005 97
98
99
100
31-Jul-2006 101
31-May-2002 102
103
Day 1 104
105
Springing Abbey 106
30-Nov-2006 107
31-Jan-2010 108
Day 1 109
Springing 110
Day 1 111
112
113
114
Springing 115
116
117
31-May-2004 118
119
120
31-Jan-2015 121
122
123
28-Feb-2006 124
Springing 125
28-Feb-2005 126
Day 1 127
128
129
130
15-Oct-2006 131
132
30-Apr-2003 133
134
31-Mar-2003 135
136
137
137.1
137.2
137.3
138
139
140
141
142
31-Jul-2004 143
144
31-Jul-2006 145
146
147
31-May-2003 148
31-Jan-2005 149
28-Feb-2003 150
151
1-Mar-2004 152
30-Nov-2005 153
31-May-2003 154
Springing 155
31-Oct-2003 156
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST SERIES 2002-C1
ANNEX A-2
CERTAIN INFORMATION REGARDING MULTIFAMILY MORTGAGED PROPERTIES
MORTGAGE
LOAN
NUMBER PROPERTY NAME PROPERTY ADDRESS PROPERTY CITY
- ---------------------------------------------------------------------------------------------------------
2 Oak Brook Apartments 12499 Folsom Boulevard Rancho Cordova
3 Mediterranean Village 2001 SE 10th Avenue Ft. Lauderdale
7 215 East 23rd Street 215 East 23rd Street New York
9 Forest Acres Apartments 28 Forest Acres Drive Bradford
18 Avalon Square Apartments 2400 Westheimer Road Houston
20 The Gatsby Apartments 1515 O Street Washington
21 Summit Pointe Apartments 108 Summit Pointe Drive Scranton
23 Carriage House Apartments 3900 Monroe Avenue Fremont
30 Citivest Multifamily Portfolio Various Dallas
30.1 Avalon Apartments 1925 Moser Avenue Dallas
30.2 Catalina Apartments 2500 Bennett Avenue Dallas
30.3 Montecito-Sausalito Apartments 2301 North Garrett Avenue
& 2222 Bennett Avenue Dallas
30.4 Monterey Apartments 4726 Homer Street Dallas
30.5 Santa Cruz Apartments 2602 North Fitzhugh Avenue Dallas
32 Timber Creek Apartments 820 W. 3900 South Salt Lake City
33 Brookstone Apartments 6430 Brookstone Lane Fayetteville
42 Austin Creek Apartments 55 Valle Vista Avenue Vallejo
49 Normandy Park Apartments 11110 North 56th Street Temple Terrace
53 Rustic Village Apartments 9303 Town Park Drive Houston
55 Brookwood Park Apartments 3854 West Rockwood Way West Valley City
58 The Pointe at College Place 2620 College Place Fullerton
63 Los Altos Village Apartments 2525 North Los Altos Avenue and
2530-2576 North Geronimo Avenue Tucson
65 Park Apartments 403 Southwest 13th Place Deerfield Beach
68 Waterloo Apartments 1464, 1470 & 1478 English Drive and
1538, 1540, 1544, 1546, 1548
& 1550 Maurice Lane San Jose
71 The Village At Nisqually Ridge 9211-9223 and 9231-9343
Skokomish Way NE Olympia
72 Auburn Creek Apartments 4411 Gardendale Drive San Antonio
79 Del Flora Apartments 30598 Independence Avenue Redlands
80 Fallbrook Apts (Raintree,
Ironwood & Smoketree) 735, 747 & 795 West Fallbrook Street Fallbrook
86 Colchester Apartments 1470 Beacon Street Brookline
93 Summit Square Apartments 936 41st Street Northwest Rochester
95 Marconi Palms Apartments 3821 Marconi Avenue Sacramento
100 Fairway Lane Apartments 3979 NW Fairway Lane Bremerton
103 Park Plaza Apartments 507 Main Street Worcester
114 Riviera Northgate Apartments 11540 Pinehurst Way NE Seattle
116 Heritage Hills Apartments 10836 Clemson Blvd. Seneca
117 The Mark Apartments 125 Lower Woodville Road Natchez
120 Belfort Arms Apartments 3541 Whitney Avenue Sacramento
128 Fairmont Park Apartments 1204, 1209, 1210 73rd Street East
and 7226, 7227, 7302, 7303, 7305,
7312, 7313, 7316, and 7317
13th Avenue Ct. E. Tacoma
130 Boca Manor Apts 2500 N Federal Highway Boca Raton
132 Holridge Apartments 12440 North 20th Street Phoenix
134 1145 W. I Street 1145 W. I Street Ontario
138 Twin Gardens Apartments 5831 Fair Oaks Boulevard Carmichael
139 Vermont Apartments 1112 - 9th Street S.E. Puyallup
140 Westview Terrace Apartments 2201, 2205, 2209, 2219, 2223
& 2227 South 74th Street Tacoma
141 1161 W. I Street 1161 W. I Street Ontario
146 Wheatland III Townhomes 3502-3534 30th Avenue Southwest Fargo
<Table>
NUMBER
PROPERTY GENERAL SPECIFIC UTILITIES OF
PROPERTY ZIP PROPERTY PROPERTY ELEVATOR TENANT STUDIO
STATE CODE COUNTY TYPE TYPE BUILDINGS PAYS UNITS
- --------------------------------------------------------------------------------------------------------------------
CA 95742 Placer Multifamily Conventional N E,G,P,C
FL 33316 Broward Multifamily Conventional N E,G,P,C
NY 10010 New York Multifamily Student Housing Y 1
MA 01835 Essex Multifamily Conventional N E
TX 77098 Harris Multifamily Conventional Y W
DC 20005 Washington Multifamily Conventional Y E,G,W,T
PA 18508 Lackawanna Multifamily Conventional N E,G
CA 94536 Alameda Multifamily Conventional N P,C
TX Various Dallas Multifamily Conventional N Various 22
TX 75206 Dallas Multifamily Conventional N E 18
TX 75206 Dallas Multifamily Conventional N E,G 1
TX 75206 Dallas Multifamily Conventional N E 1
TX 75204 Dallas Multifamily Conventional N E
TX 75204 Dallas Multifamily Conventional N E 2
UT 84123 Salt Lake Multifamily Conventional N E,G,P,C
NC 28314 Cumberland Multifamily Conventional N E,G
CA 94590 Solano Multifamily Conventional N P,C
FL 33617 Hillsborough Multifamily Conventional N E,P,C,W,S
TX 77036 Harris Multifamily Conventional N E 48
UT 84120 Salt Lake Multifamily Conventional N E
CA 92831 Orange Multifamily Student Housing N E
AZ 85705 Pima Multifamily Conventional N E
FL 33441 Broward Multifamily Section 8 N E
CA 95129 Santa Clara Multifamily Conventional N E,G
WA 98516 Thurston Multifamily Conventional N E,T
TX 78240 Bexar Multifamily Conventional N P,C
CA 92374 San Bernardino Multifamily Conventional N P,C
CA 92028 San Diego Multifamily Conventional N E
MA 02446 Norfolk Multifamily Conventional Y E 37
MN 55901 Olmsted Multifamily Conventional N E
CA 95821 Sacramento Multifamily Conventional N E,G
WA 98312 Kitsap Multifamily Conventional N E,G
MA 01608 Worcester Multifamily Conventional Y C,P 11
WA 98125 King Multifamily Conventional Y E
SC 29678 Oconee Multifamily Conventional N W,E
MS 39120 Adams Multifamily Conventional N E,G,W,P,C
CA 95821 Sacramento Multifamily Conventional Y E,G
WA 98404 Pierce Multifamily Conventional N E
FL 33431 Palm Beach Multifamily Conventional N E,C
AZ 85022 Maricopa Multifamily Conventional N E
CA 91762 San Bernardino Multifamily Conventional N 13
CA 95608 Sacramento Multifamily Conventional N E,G
WA 98372 Pierce Multifamily Conventional N E
WA 98409 Pierce Multifamily Conventional N E
CA 91762 San Bernardino Multifamily Conventional N E,G,P,C
ND 58103 Cass Multifamily Conventional N E,G
<Caption>
NUMBER NUMBER NUMBER AVERAGE RENT; AVERAGE RENT; MORTGAGE
OF 1 BR OF 2 BR OF 3 BR RENT RANGES - RENT RANGES - LOAN
UNITS UNITS UNITS 3 BR UNITS 4+ BR UNITS NUMBER
- ---------------------------------------------------------------------------------------------------------
148 148 8 1525;1525-1525 2
100 164 3
39 34 7
81 313 16 988;950-1100 9
126 78 16 1281;1250-1300 18
22 30 20
81 109 22 835;739-865 21
69 50 4 1525;1525-1525 23
213 111 2 Various 30
70 19 30.1
62 21 2 760;760-760 30.2
36 41 30.3
36 24 30.4
9 6 30.5
364 48 32
126 156 33
76 80 42
48 80 16 874;869-879 49
96 132 16 704;495-765 53
216 55
81 48 58
192 57 63
84 84 750;750-750 65
60 30 68
14 86 8 934;925-950 71
56 112 56 695;695-695 72
56 96 79
10 65 80
20 86
78 72 93
46 68 5 735;675-750 95
6 44 28 914;875-995 100
70 9 103
28 16 114
40 40 116
24 72 117
48 12 759;750-800 120
55 31 1 675;675-675 128
62 23 130
16 34 8 729;720-730 132
16 20 2 850;850-850 134
17 23 138
24 27 139
21 24 2 765;750-780 140
18 12 800;800-800 141
15 1035;1035-1035 146
</Table>
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST SERIES 2002-C1
ANNEX A-3 RESERVE ACCOUNT INFORMATION
MORTGAGE MONTHLY
LOAN GENERAL PROPERTY MONTHLY TAX INSURANCE
NUMBER PROPERTY NAME TYPE SPECIFIC PROPERTY TYPE ESCROW ESCROW
- -------------------------------------------------------------------------------------------------------------------------------
1 One Enterprise Center Office CBD 46,268 9,146
2 Oak Brook Apartments Multifamily Conventional 17,506 3,088
3 Mediterranean Village Multifamily Conventional 22,787 5,962
4 CityPlace II Office CBD 104,377 3,821
5 Marketplace at Altamonte Retail Anchored 26,686 12,857
6 Broadmoor Towne Center Retail Anchored
7 215 East 23rd Street Multifamily Student Housing 3,157 3,813
8 Maine Crossing Retail Anchored 10,032
9 Forest Acres Apartments Multifamily Conventional 19,633 16,433
10 Dana Corporation - Antioch Industrial Warehouse/Distribution
11 Cox Creek Centre Retail Anchored 5,164 1,467
12 19019 North 59th Avenue Mixed Use Office/Industrial
13 Holiday Village Mobile Home Park Mobile Home Park Mobile Home Park 6,282 3,119
14 Sealy Industrial Portfolio Industrial Warehouse/Distribution 35,989 3,682
14.1 Northwest Business Center Industrial Warehouse/Distribution 15,251 2,012
14.2 West Loop Business Center Industrial Warehouse/Distribution 13,253 342
14.3 Westway Service Center Industrial Warehouse/Distribution 5,327 1,170
14.4 Commerce Center Industrial Warehouse/Distribution 2,157 158
15 Torrey Pines Corporate Center Office Suburban 13,750 1,495
16 Silver Springs Pointe Retail Anchored 2,358 500
17 Pinole Vista Shopping Center Retail Anchored 8,277 2,362
18 Avalon Square Apartments Multifamily Conventional 23,439 5,335
19 Radisson Hotel & Conference Center Hospitality Full Service 13,764 4,000
20 The Gatsby Apartments Multifamily Conventional 9,214 1,773
21 Summit Pointe Apartments Multifamily Conventional 15,953 2,500
22 4403 Donald Douglas Office Suburban 4,588 1,134
23 Carriage House Apartments Multifamily Conventional 9,447 1,194
24 Radisson Hotel & Conference Center Hospitality Full Service 11,475 7,865
25 Hemet Valley Center Retail Anchored 12,139 1,807
26 Upland Freeway Center Retail Unanchored 7,544 1,001
27 Dana Corporation - Rochester Hills Industrial Flex
28 Laguna Pavilion Shopping Center Retail Anchored 6,187 1,397
29 Perris Towne Centre Retail Anchored 2,827 722
30 Citivest Multifamily Portfolio Multifamily Conventional 14,903 6,945
30.1 Avalon Apartments Multifamily Conventional
30.2 Catalina Apartments Multifamily Conventional
30.3 Montecito-Sausalito Apartments Multifamily Conventional
30.4 Monterey Apartments Multifamily Conventional
30.5 Santa Cruz Apartments Multifamily Conventional
31 Roadrunner Club MHP Mobile Home Park Mobile Home Park 10,549 2,003
32 Timber Creek Apartments Multifamily Conventional 8,097 5,282
33 Brookstone Apartments Multifamily Conventional 13,625 2,074
34 396-400 North Moorpark Road Retail Unanchored 7,289 1,711
35 Independence Square Retail Anchored 10,866 1,492
36 Mission Valley Plaza Office Suburban 10,542 1,282
37 Fox Hills Business Park Office Suburban 8,717 1,137
38 Main Street Station Retail Anchored 7,979
39 Clearlake Plaza Office CBD 20,510 12,897
40 Willow Wood Shoppes Retail Unanchored 41,103 3,209
41 1010 Vermont Avenue Office CBD 8,555 534
42 Austin Creek Apartments Multifamily Conventional 5,719 1,193
43 Ming Office Park Office Suburban 7,216 800
44 Encino Oaks Shopping Center Retail Anchored 11,735 1,500
45 Dana Corporation - Gastonia Industrial Warehouse
46 Santa Maria Commerce Center Retail Unanchored 5,708 515
47 Mini U Storage Self Storage Self Storage
48 Midland Towne Center Retail Anchored 9,563 1,876
49 Normandy Park Apartments Multifamily Conventional 1,005 1,507
50 Spanish Vista Office Complex Office Suburban 5,963 990
51 Gateway Courtyard Retail Anchored 1,145
52 1930 W. Bennett Street Office Suburban
53 Rustic Village Apartments Multifamily Conventional 14,920 6,788
54 Orange Canyon Village Retail Anchored 6,465 849
55 Brookwood Park Apartments Multifamily Conventional 7,440 1,387
56 Town View Professional Center Office Medical 6,213 1,751
57 Independence Square Mixed Use Retail/Office 5,753 1,866
58 The Pointe at College Place Multifamily Student Housing 7,280 2,224
59 La Toscana Village Retail Shadow Anchored 14,477 842
60 Casas Adobes Corporate Park Office Suburban 5,785 709
61 West Boca Place Retail Shadow Anchored 13,383 3,638
62 Bank of America Building Office Suburban 11,285 4,311
63 Los Altos Village Apartments Multifamily Conventional 5,656 1,134
64 Best Buy - Manchester, CT Retail Anchored
65 Park Apartments Multifamily Section 8 6,558 4,741
66 Kruse Meadows Shopping Center Retail Unanchored 11,047 657
67 Eagle Lake Business Center III Industrial Flex 21,198 728
68 Waterloo Apartments Multifamily Conventional 3,711 2,887
69 Southridge Square Shopping Center Retail Shadow Anchored 17,441 1,279
70 Harmony Market Center Retail Shadow Anchored 3,090 675
71 The Village At Nisqually Ridge Multifamily Conventional 5,371 1,339
72 Auburn Creek Apartments Multifamily Conventional 9,754 2,333
73 Silverado Hills Plaza Shopping Center Retail Anchored 16,864 1,980
74 Oxnard Commerce Center Retail Unanchored 5,577 515
75 Mobiland by the Sea Mobile Home Park Mobile Home Park 7,251 1,267
76 Rancho Santa Ynez Mobile Estates Mobile Home Park Mobile Home Park 2,680 698
77 Mission Medical Office Building Office Medical 4,412 787
78 The Abbey Center Office Suburban 5,253 481
79 Del Flora Apartments Multifamily Conventional 5,120 1,340
80 Fallbrook Apts (Raintree, Ironwood & Smoketree) Multifamily Conventional 5,512 898
81 Tropical Palms Mobile Home Park Mobile Home Park 8,623 1,604
82 Ahwatukee Hills Plaza Retail Unanchored 5,000 727
83 The Shops at Chippenham Forest South Retail Shadow Anchored 377 349
84 Deerfield Square Retail Anchored 381
85 Lake Pointe Medical Building Office Medical 2,270 (2)
86 Colchester Apartments Multifamily Conventional 5,667
87 Waynesboro Market Place Retail Anchored 3,884 465
88 Encore Office Park Office Suburban 3,185 600
INITIAL DEPOSIT TO
ANNUAL DEPOSIT CAPITAL
TO REPLACEMENT IMPROVEMENTS INITIAL TI/LC ONGOING TI/LC
RESERVES RESERVE ESCROW FOOTNOTE
- ---------------------------------------------------------------------------
60,569 249,690 (1)
60,800
66,000
58,440 93,625 600,000 (1)
70,460 5,000 300,000 (1)
15,792 (1)
18,500
14,867
191,340 1,197,101
26,092 (1)
(1)
28,650
52,479 29,500 250,000 (1)
12,563
9,125
5,250
2,563
5,000 183,532 (1)
2,882
37,020 3,125 650,000
55,000 142,500
337,220
10,400
50,028 997,700
17,657 300,000 (1)
33,333 4,375
500,000
23,052 53,750
23,206 2,500 (1)
6,515
12,905 81,246
87,000 57,350
23,750
10,000
12,225
7,500
3,875
16,200 468,750
82,400
70,500 53,125
10,836 3,750
17,629 42,188 3,866 (1)
15,375 (1)
15,060 300,000 (1)
22,920 4,313 9,748 (1)
23,820 24,556 200,000 (1)
12,606 3,750 (1)
48,984 3,750
23,569 (1)
59,625 (1)
13,421 (1)
33,193 20,969 5,872 (1)
1,000
10,415 58,136 (1)
3,985 499,699 (1)
46,638
10,668 15,559 65,000 (1)
62,452 14,700
12,384 30,750 250,000 (1)
12,321 40,000 (1)
32,250 1,250
7,090 5,263 3,227 (1)
8,971 4,268 (1)
5,817 225,000 (1)
21,874 30,090 100,000 (1)
75,696 24,178
50,400 625
19,535 20,800 6,268 (1)
9,526 8,938 (1)
13,500
18,841 10,613 (1)
5,727 1,311 (1)
32,400
48,832 47,256
15,488 1,264 (1)
12,876 3,000 (1)
8,100 4,410
545,400
12,831 (1)
43,776 27,938
17,256 6,250
750
4,888 3,580 (1)
4,120 1,313 (1)
7,536 230,000 (1)
14,250 3,125
6,468 36,000
6,661 8,272 (1)
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST SERIES 2002-C1
ANNEX A-3 RESERVE ACCOUNT INFORMATION
MORTGAGE MONTHLY
LOAN GENERAL PROPERTY MONTHLY TAX INSURANCE
NUMBER PROPERTY NAME TYPE SPECIFIC PROPERTY TYPE ESCROW ESCROW
- ----------------------------------------------------------------------------------------------------------------------------------
89 Walgreens - Burbank, CA Retail Anchored
90 2029 K Street NW Office CBD 24,781 (2)
91 GSL Portfolio Industrial Flex 5,426 876
91.1 8640 North Eldridge Parkway Industrial Flex 711 389
91.2 1109 Howard Avenue Industrial Flex 2,379 146
91.3 1434 Sens Road Industrial Flex 1,004 174
91.4 5048 Timber Creek Industrial Flex 1,332 167
92 La Mirada Business Center Office Suburban 6,148 353
93 Summit Square Apartments Multifamily Conventional 11,020 (2)
94 North Delray Commons Retail Anchored 1,029 613
95 Marconi Palms Apartments Multifamily Conventional 3,652 866
96 Citizen's Building Office CBD 6,806 3,627
97 Concorde Distribution Center Industrial Distribution 2,743 1,149
98 7560 Topanga Canyon Blvd. Retail Anchored
99 1900 Aerojet Way Industrial Warehouse 3,086 675
100 Fairway Lane Apartments Multifamily Conventional 4,777 788
101 Cotton Building Retail Anchored 5,992 631
102 North Beltsville Business Center Industrial Warehouse 3,496 434
103 Park Plaza Apartments Multifamily Conventional 3,895 1,668
104 PerkinElmer-Warwick, RI Industrial Light Industrial
105 301 W. Bennett Avenue Retail Anchored
106 Orange Commerce Center Office Suburban 2,399 284
107 Cottonwood Square Shopping Center Retail Unanchored 8,961 (2)
108 Chapel Trail Commerce Center III Industrial Flex 10,238 2,009
109 Wal-Mart - Branson, MO Retail Anchored
110 Walgreens - Chicago, IL Retail Anchored 1,510
111 Walgreens - Chaska, MN Retail Anchored
112 506 N. Miller Valley Road Retail Anchored
113 Walgreen's-Bremerton, WA Retail Anchored
114 Riviera Northgate Apartments Multifamily Conventional 1,814 638
115 Walgreens - Memphis TN Retail Anchored
116 Heritage Hills Apartments Multifamily Conventional 1,960 592
117 The Mark Apartments Multifamily Conventional 3,961 1,794
118 Park 2000 - Building L Mixed Use Office/Warehouse 1,522
119 Sugar Land Shopping Center Retail Shadow Anchored 3,568 877
120 Belfort Arms Apartments Multifamily Conventional 2,179 461
121 Plaza VI Office Building Office CBD 3,626 699
122 Arroyo Fairways Mobile Home Club Mobile Home Park Mobile Home Park 1,629 680
123 Barnes & Noble Retail Anchored
124 Fair Oaks Building Industrial Flex 3,063 (2)
125 Office Depot - Stockbridge, GA Retail Anchored 173
126 Rivergreen Office Park Office Suburban 1,925 (2)
127 Walgreen's/Kaiser Building Mixed Use Retail/Office 720 863
128 Fairmont Park Apartments Multifamily Conventional 3,766 734
129 Kinko's Retail Unanchored 1,700 560
130 Boca Manor Apts Multifamily Conventional 5,525
131 Eastern Marketplace Retail Unanchored 1,817 365
132 Holridge Apartments Multifamily Conventional 1,874 459
133 Bridle Trails Apts & Retail Mixed Use Multifamily/Retail 2,178 411
134 1145 W. I Street Multifamily Conventional 954 526
135 Austin Laurel Professional Office Building Office Suburban 2,910 402
136 Pine Meadows Mobile Estates Mobile Home Park Mobile Home Park 3,287 704
137 Thermal Supply-3 Locations Industrial Various 2,196
137.1 Thermal Supply- Seattle Industrial Warehouse
137.2 Thermal Supply - Spokane Industrial Warehouse
137.3 Thermal Supply - Yakima Industrial Flex
138 Twin Gardens Apartments Multifamily Conventional 2,032 461
139 Vermont Apartments Multifamily Conventional 2,247 668
140 Westview Terrace Apartments Multifamily Conventional 2,429 494
141 1161 W. I Street Multifamily Conventional 719 333
142 Walgreens-Arlington, Texas Retail Anchored
143 Calder Square Shopping Center Retail Unanchored 3,567 (2)
144 4116 Silver Star Road Industrial Warehouse
145 Westwood Village Shopping Center Retail Unanchored 2,959 (2)
146 Wheatland III Townhomes Multifamily Conventional 1,504 252
147 110 Lehigh Ave. Industrial Warehouse 2,932 292
148 West Valley Shopping Center Retail Shadow Anchored 1,398 (2)
149 2120 Jimmy Durante Boulevard Industrial Flex 1,319 (2)
150 4969 E. McKinley Avenue Office Suburban 1,528 (2)
151 Fleet Bank Retail Shadow Anchored 1,400 (2)
152 Chinese Garden Plaza Mixed Use Retail/Office 2,984 (2)
153 Fairwood Commerce Center Mixed Use Office/Retail 1,384
154 Jefferson Square Shopping Center Retail Shadow Anchored 572 (2)
155 1378 & 1380 Old Northern Boulevard Mixed Use Retail/Multifamily 1,150 350
156 South Rice Shopping Center Retail Unanchored 913 (2)
INITIAL DEPOSIT TO
ANNUAL DEPOSIT CAPITAL
TO REPLACEMENT IMPROVEMENTS INITIAL TI/LC ONGOING TI/LC
RESERVES RESERVE ESCROW FOOTNOTE
- -----------------------------------------------------------------
1,512
11,328 41,250 100,000 (1)
8,830
3,550
1,320
1,920
2,040
23,783 11,875 (1)
45,000
3,409
29,750 20,000
16,488 10,000 150,000 (1)
4,493 11,281
2,268
21,343 10,625 200,000 (1)
21,216 387,060
3,414 32,400
10,833 2,500 2,957 (1)
28,530 32,500
1,449
7,497 150,000 (1)
11,412 6,250 150,000 (1)
5,519 250,000
31,360 63,878
2,048
1,391 5,125
2,288 6,250
2,232
11,040
1,512
20,004
31,008 22,175
6,379 (1)
2,513 (1)
15,739
6,528 125,000 (1)
210,000 (1)
6,024 41,808 25,000 (1)
2,000
2,076 (1)
27,408 54,500
1,416 150,000 (1)
10,938
2,920 1,087 (1)
14,500 1,500
4,104 (1)
12,750 10,938
10,713 2,500 1,878 (1)
8,000 10,825
11,051 3,179
18,516 16,750
12,612 2,500
7,500
2,475 45,962 (1)
2,556 (1)
3,756
3,063 6,250
5,900
31,000
20,000
1,968 22,500
(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 the borrower upon satisfaction of
certain leasing conditions.
(2) Monthly escrows for insurance have been aggregated within the monthly escrow
for taxes.
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST SERIES 2002-C1
<Table>
<Caption>
ANNEX A-4 COMMERCIAL TENANT SCHEDULE
MORTGAGE GENERAL SPECIFIC CUT-OFF NUMBER OF
LOAN PROPERTY PROPERTY DATE LOAN UNITS UNIT OF
NUMBER PROPERTY NAME TYPE TYPE BALANCE ($) (UNITS) MEASURE LARGEST TENANT
- ------------------------------------------------------------------------------------------------------------------------------------
1 One Enterprise Center Office CBD 28,477,855.49 318,782 Sq. Ft. Wachovia Corporation
4 CityPlace II Office CBD 22,500,000.00 292,039 Sq. Ft. Conning & Co
5 Marketplace at Altamonte Retail Anchored 20,112,903.09 335,523 Sq. Ft. Burlington Coat Factory
6 Broadmoor Towne Center Retail Anchored 18,973,728.60 172,965 Sq. Ft. Bed Bath & Beyond
8 Maine Crossing Retail Anchored 17,456,037.76 148,672 Sq. Ft. Babies R Us
10 Dana Corporation - Antioch Industrial Warehouse/ 15,622,494.06 677,400 Sq. Ft. Dane Corporation
Distribution
11 Cox Creek Centre Retail Anchored 15,328,246.92 173,948 Sq. Ft. Linens N Things
12 19019 North 59th Avenue Mixed Use Office/ 15,005,561.40 252,300 Sq. Ft. Honeywell Inc.
Industrial
14 Sealy Industrial Portfolio Industrial Warehouse/ 12,700,000.00 484,369 Sq. Ft. Various
Distribution
14.1 Northwest Business Center Industrial Warehouse/ 252,125 Sq. Ft. Moll Industries
Distribution
14.2 West Loop Business Center Industrial Warehouse/ 145,394 Sq. Ft. Safesite
Distribution
14.3 Westway Service Center Industrial Warehouse/ 59,863 Sq. Ft. Caremark, Inc.
Distribution
14.4 Commerce Center Industrial Warehouse/ 27,987 Sq. Ft. Visual Innovations
Distribution
15 Torrey Pines Corporate Office Suburban 12,664,377.45 91,000 Sq. Ft. IDEC Pharmaceuticals
Center
16 Silver Springs Pointe Retail Anchored 12,090,838.71 135,028 Sq. Ft. Kohl's Corporation
17 Pinole Vista Shopping Retail Anchored 11,943,694.20 164,957 Sq. Ft. K-Mart
Center
22 4403 Donald Douglas Office Suburban 10,061,760.11 88,284 Sq. Ft. McDonnell Douglas
25 Hemet Valley Center Retail Anchored 9,493,089.57 230,522 Sq. Ft. Target
26 Upland Freeway Center Retail Unanchored 9,375,938.36 116,029 Sq. Ft. Sit & Sleep
27 Dana Corporation - Industrial Flex 9,283,433.28 143,200 Sq. Ft. Dana Corporation
Rochester Hills
28 Laguna Pavillion Shopping Retail Anchored 9,210,000.00 65,148 Sq. Ft. Pier One Imports
Center
29 Perris Towne Centre Retail Anchored 9,164,918.88 129,048 Sq. Ft. Stater Brothers
34 396-400 North Moorpark Road Retail Unanchored 8,370,995.06 54,000 Sq. Ft. Ross
35 Independence Square Retail Anchored 8,239,738.79 92,784 Sq. Ft. Ethan Allen Home
San Diego Interior
36 Mission Valley Plaza Office Suburban 8,100,000.00 61,558 Sq. Ft. CACI Technologies
37 Fox Hills Business Park Office Suburban 7,994,477.71 75,307 Sq. Ft. LA County Assessor's
Office
38 Main Street Station Retail Anchored 7,993,298.82 151,980 Sq. Ft. Wal-Mart
39 Clearlake Plaza Office CBD 7,974,709.20 101,618 Sq. Ft. Paxson Communications
40 Willow Wood Shoppes Retail Unanchored 7,868,918.49 56,590 Sq. Ft. Eckerd
41 1010 Vermont Avenue Office CBD 7,856,898.33 63,031 Sq. Ft. Pre-Trial Services, Inc
43 Ming Office Park Office Suburban 7,580,545.90 117,847 Sq. Ft. Processes Unlimited
International
44 Encino Oaks Shopping Center Retail Anchored 7,500,000.00 53,269 Sq. Ft. Sav-On Drugs
45 Dana Corporation - Gastonia Industrial Warehouse 7,412,890.75 541,609 Sq. Ft. Dana Corporation
46 Santa Maria Commerce Center Retail Unanchored 7,081,825.77 65,844 Sq. Ft. Pier 1 Imports
48 Midland Towne Center Retail Anchored 6,877,839.88 115,190 Sq. Ft. Farmer Jack's (A&P)
50 Spanish Vista Office Office Suburban 6,683,367.15 51,799 Sq. Ft. Century Suites
Complex
51 Gateway Courtyard Retail Anchored 6,600,000.00 83,282 Sq. Ft. Linens 'N Things
52 1930 W. Bennett Street Office Suburban 6,577,076.96 64,722 Sq. Ft. Uniprise
54 Orange Canyon Village Retail Anchored 6,477,955.82 46,836 Sq. Ft. Pacific Ranch Market
56 Town View Professional Office Medical 6,295,134.03 61,923 Sq. Ft. Pacific Bell
Center
57 Independence Square Reno Mixed Use Retail/Office 6,153,116.20 61,605 Sq. Ft. Coldwell Banker
59 La Toscana Village Retail Shadow Anchored 6,127,920.25 47,267 Sq. Ft. Remax Premier Realty
60 Casas Adobes Corporate Park Office Suburban 6,025,604.31 44,855 Sq. Ft. Richmond American
61 West Boca Place Retail Shadow Anchored 6,000,000.00 58,174 Sq. Ft. Harvest Gourmet Market
62 Bank of America Building Office Suburban 5,875,948.05 59,120 Sq. Ft. Bank of America
64 Best Buy - Manchester, CT Retail Anchored 5,662,140.68 44,236 Sq. Ft. Best Buy Co., Inc.
66 Kruse Meadows Shopping Retail Unanchored 5,534,241.61 46,582 Sq. Ft. Portland Teacher's CU
Center
67 Eagle Lake Business Industrial Flex 5,500,000.00 95,260 Sq. Ft. ACS - Tech 80, Inc.
Center III
69 Southridge Square Shopping Retail Shadow Anchored 5,433,830.02 144,528 Sq. Ft. Hobby Lobby
Center
70 Harmony Market Center Retail Shadow Anchored 5,393,703.41 49,773 Sq. Ft. Long's Drug Store
73 Silverado Hills Plaza Retail Anchored 5,084,533.74 77,554 Sq. Ft. Safeway
Shopping Center
74 Oxnard Commerce Center Retail Unanchored 4,987,201.26 64,381 Sq. Ft. Wayne & Ester Smith dba
Tender Life Thrift
Store
77 Mission Medical Office Office Medical 4,880,241.51 23,280 Sq. Ft. Mission Hospital
Building
78 The Abbey Center Office Suburban 4,837,585.21 64,155 Sq. Ft. Desert Institute
Travel, Inc.
82 Ahwatukee Hills Plaza Retail Unanchored 4,662,793.76 32,580 Sq. Ft. Hong Kong Buffet
83 The Shops at Chippenham Retail Shadow Anchored 4,596,700.64 41,200 Sq. Ft. Dollar Tree
Forest South
84 Deerfield Square Retail Anchored 4,500,000.00 25,000 Sq. Ft. McDonald's Corporation
85 Lake Pointe Medical Office Medical 4,484,821.21 37,680 Sq. Ft. Colorado Springs Health
Building Partners, P.C.
87 Waynesboro Market Place Retail Anchored 4,470,245.39 64,681 Sq. Ft. Food Lion
88 Encore Office Park Office Suburban 4,444,700.83 33,240 Sq. Ft. John Lang Homes
89 Walgreens - Burbank, CA Retail Anchored 4,350,000.00 15,120 Sq. Ft. Walgreen Co.
90 2029 K Street NW Office CBD 4,307,305.00 35,408 Sq. Ft. GWU Div. of Continuing
Education
91 GSL Portfolio Industrial Flex 4,197,853.92 88,300 Sq. Ft. Various
91.1 8640 North Eldridge Industrial Flex 35,500 Sq. Ft. Uson
Parkway
91.2 1109 Howard Avenue Industrial Flex 13,200 Sq. Ft. ABB Turbocharger
Company
91.3 1434 Sens Road Industrial Flex 19,200 Sq. Ft. Catalyst Services, Inc.
91.4 5048 Timber Creek Industrial Flex 20,400 Sq. Ft. Airborne Freight
Corporation
92 La Mirada Business Center Office Suburban 4,159,192.90 82,010 Sq. Ft. US Micro Lab, Inc.
94 North Delray Commons Retail Anchored 4,046,712.75 34,087 Sq. Ft. Publix
96 Citizen's Building Office CBD 3,881,113.12 51,420 Sq. Ft. Pescatore Restaurant
97 Concorde Distribution Industrial Distribution 3,807,178.08 69,589 Sq. Ft. OSA West, Inc.
Center
98 7560 Topanga Canyon Blvd. Retail Anchored 3,607,040.74 15,015 Sq. Ft. Walgreen Co.
99 1900 Aerojet Way Industrial Warehouse 3,604,190.07 106,717 Sq. Ft. Wal-Mart Stores, Inc.
101 Cotton Building Retail Anchored 3,536,635.55 34,144 Sq. Ft. Staples
102 North Beltsville Business Industrial Warehouse 3,383,273.73 72,222 Sq. Ft. Janitex Rug Service
Center Corp.
104 PerkinElmer-Warwick, RI Industrial Light Industrial 3,301,965.97 95,720 Sq. Ft. PerkinElmer
105 301 W. Bennett Avenue Retail Anchored 3,220,511.76 14,241 Sq. Ft. Walgreen Co.
106 Orange Commerce Center Office Suburban 3,187,884.39 29,987 Sq. Ft. County of Orange
107 Cottonwood Square Shopping Retail Unanchored 3,166,799.03 56,795 Sq. Ft. Tuesday Morning
Center
108 Chapel Trail Commerce Industrial Flex 2,988,770.22 55,192 Sq. Ft. Miami Management, Inc
Center III
109 Wal-Mart - Branson, MO Retail Anchored 2,982,114.92 112,000 Sq. Ft. Wal-Mart Stores, Inc.
110 Walgreens - Chicago, IL Retail Anchored 2,917,918.23 20,483 Sq. Ft. Walgreen Co.
111 Walgreens - Chaska, MN Retail Anchored 2,799,630.13 13,905 Sq. Ft. Walgreen Co.
112 506 N. Miller Valley Road Retail Anchored 2,762,166.48 15,251 Sq. Ft. Albertson's, Inc.
113 Walgreen's-Bremerton, WA Retail Anchored 2,646,514.12 15,120 Sq. Ft. Walgreen Co.
115 Walgreens - Memphis TN Retail Anchored 2,500,000.00 15,120 Sq. Ft. Walgreen Co.
118 Park 2000 - Building L Mixed Use Office/ 2,391,379.51 29,670 Sq. Ft. Expanets of North
Warehouse America, LLC
119 Sugar Land Shopping Center Retail Shadow Anchored 2,389,876.95 16,750 Sq. Ft. River Oaks Imaging
121 Plaza VI Office Building Office CBD 2,305,544.23 26,079 Sq. Ft. The Interiors Group
123 Barnes & Noble Retail Anchored 2,203,244.51 21,350 Sq. Ft. Barnes & Noble
124 Fair Oaks Building Industrial Flex 2,173,243.14 38,504 Sq. Ft. Green Street Press
125 Office Depot - Retail Anchored 2,164,517.11 20,000 Sq. Ft. Office Depot, Inc.
Stockbridge, GA
126 Rivergreen Office Park Office Suburban 2,115,627.28 21,398 Sq. Ft. David Evans & Assoc.
127 Walgreen's/Kaiser Building Mixed Use Retail/Office 2,100,000.00 13,844 Sq. Ft. Walgreen Co.
129 Kinko's Retail Unanchored 2,000,000.00 9,400 Sq. Ft. Kinko's
131 Eastern Marketplace Retail Unanchored 1,923,353.04 11,681 Sq. Ft. James E. Barber, M.D.,
P.C.
133 Bridle Trails Apts & Retail Mixed Use Multifamily/ 1,878,604.76 19,567 Sq. Ft. Blockbuster
Retail
135 Austin Laurel Professional Office Suburban 1,692,626.20 23,288 Sq. Ft. Carter & Associates,
Office Building LLC
137 Thermal Supply-3 Locations Industrial Various 1,459,812.28 59,173 Sq. Ft. Various
137.1 Thermal Supply-Seattle Industrial Warehouse 32,189 Sq. Ft. Thermal Supply-Seattle
137.2 Thermal Supply-Spokane Industrial Warehouse 14,984 Sq. Ft. Apples and Oranges
137.3 Thermal Supply-Yakima Industrial Flex 12,000 Sq. Ft. Thermal Supply
142 Walgreens-Arlington, Texas Retail Anchored 1,183,689.62 14,490 Sq. Ft. Walgreen Co.
143 Calder Square Shopping Retail Unanchored 1,136,176.95 19,382 Sq. Ft. Kenneth Kaye Attorney
Center
144 4116 Silver Star Road Industrial Warehouse 1,095,156.68 16,500 Sq. Ft. Entemmann's
145 Westwood Village Shopping Retail Unanchored 1,023,270.07 16,945 Sq. Ft. Consignment Shop
Center
147 110 Lehigh Ave. Industrial Warehouse 992,365.27 29,877 Sq. Ft. Lifestyle Fascinations
148 West Valley Shopping Center Retail Shadow Anchored 770,214.67 10,599 Sq. Ft. Constant Care Family
Medical
149 2120 Jimmy Durante Industrial Flex 700,602.39 17,099 Sq. Ft. Del Mar Body Works/
Boulevard Bradshaw
150 4969 E. McKinley Avenue Office Suburban 671,691.63 21,814 Sq. Ft. AGI Publishing, Inc.
151 Fleet Bank Retail Shadow Anchored 658,769.01 6,216 Sq. Ft. Baybank Merrimac
Valley, N.A./Fleet
152 Chinese Garden Plaza Mixed Used Retail/Office 645,233.82 19,000 Sq. Ft. Five Oceans Enterprises
Inc
153 Fairwood Commerce Center Mixed Used Office/Retail 622,467.50 10,977 Sq. Ft. R & M Foods, Inc.
(Shakey's Pizza)
154 Jefferson Square Shopping Retail Shadow Anchored 604,264.92 9,840 Sq. Ft. E. E. Laundromat
Center
155 1378 & 1380 Old Northern Mixed Used Retail/Multifamily 487,206.95 4,800 Sq. Ft. AC & CC, Inc
Boulevard
156 South Rice Shopping Center Retail Unanchored 383,074.81 4,133 Sq. Ft. Starbucks #6292
</Table>
<Table>
<Caption>
Largest 2nd Largest 2nd Largest 3rd Largest 3rd Largest Mortgage
Tenant Largest Tenant 2nd Largest Tenant % of Tenant 3rd Largest Tenant % of Tenant Loan
% of IRA Exp. Date Tenant Name NRA(%) Exp. Date Tenant Name NRA Exp. Date Number
- ------------------------------------------------------------------------------------------------------------------------------------
43.84% 30-Apr-2013 Smith, Hulsey & Busey 8.44% 31-Oct-2009 Craig I/S 7.49% 28-Feb-2008 1
20.30% 31-Mar-2005 Webster Bank 14.09% Multiple Spaces Merrill Lynch 11.29% 31-Jul-2011 4
30.03% 31-Jul-2009 Gold's Gym 11.97% 31-Aug-2015 Linens 'N Things 11.68% 31-Jan-2012 5
17.65% 31-Jan-2011 Ross Dress for Less 17.45% 31-Jan-2011 Borders Books 14.45% 31-Jan-2022 6
20.59% 30-Nov-2016 Bed Bath & Beyond 20.48% 31-Jan-2017 Old Navy 20.18% 30-Sep-2011 8
100.00% 11-Oct-2021 10
18.43% 31-Mar-2011 Dick's Sporting Goods 17.48% 31-Jan-2017 Best Buy 17.25% 31-Jan-2017 11
100.00% 15-Jul-2006
Various Various Various Various Various Various Various Various 14
12.15% 31-Mar-2003 Allegro, Inc 8.57% 29-Feb-2004 S.A. Express News 7.96% 14-Jul-2002 14.1
28.89% Multiple Spaces S.A. Express News 10.83% 31-Aug-2003 Plan B, Inc. 6.12% 14-Jun-2003 14.2
30.40% 31-Jan-2004 United Refridgeration, 21.59% 30-Jun-2004 Summit DME 11.29% 28-Feb-2003 14.3
Inc.
19.07% 15-Dec-2003 Engineering and Fire 9.88% 31-Dec-2003 Tradesman Inter- 9.80% 30-Nov-2003 14.4
Investigations national, Inc.
100.00% 30-Jun-2010 15
64.12% 29-Jan-2022 Office Depot 15.19% 30-Nov-2016 Paper Warehouse 6.61% 30-Nov-2010 16
52.99% 31-May-2006 Hometown Buffet 6.27% 31-Dec-2011 Big 5 Sporting Goods 6.06% 31-Jan-2007 17
100.00% 31-May-2004 22
43.29% 31-Jan-2021 Staples 9.49% 30-Apr-2013 99 Cents Only 8.76% 31-Jan-2010 25
11.40% 31-Jan-2009 Lamps Plus Inc. 9.58% 31-Aug-2004 US Office Products 9.19% MTM 26
100.00% 26-Oct-2021 27
13.85% 31-Mar-2011 Party America 13.85% 31-May-2006 Chili's Bar & Grill 11.37% 30-Nov-2011 28
27.30% 30-Nov-2013 Rite Aid (dark but paying 25.58% 1-Oct-2013 Pick N'Save 11.62% 28-Feb-2003 29
rent)
49.91% 31-Jan-2005 OfficeMax 42.69% 31-Oct-2010 Mimi's Cafe' 12.46% 31-Dec-2015 34
27.48% 30-Nov-2014 Saddleback of San Diego 19.69% 30-Nov-2005 Richard D. Katnik, 8.41% 31-May-2004 35
DDS
24.89% 31-Dec-2006 San Diego Travel Group 12.04% 30-Nov-2005 Benefit Land Title 8.77% 30-Apr-2003 36
Company
40.51% 16-Apr-2010 Careside, Inc. 29.50% 31-Jul-2006 P.E.T. Net Pharma- 15.09% 28-Feb-2010 37
ceutical Sv
100.00% 1-Apr-2002 38
21.47% 31-Oct-2002 GSA 20.47% 31-Mar-2006 Becker & Poliakoff 10.96% 31-Mar-2005 39
20.32% 31-Jan-2006 The Gap 21.21% 28-Feb-2007 Astoria Federal 8.29% 30-Jun-2007 40
Savings
8.43% 31-July-2005 American Psychological 8.23% 28-Feb-2008 DCV 8.18% 30-Apr-2006 41
Society
13.62% 30-Sep-2004 Manpower, Inc. 10.27% Multiple Spaces BFGC Architect 8.02% 1-Nov-2003 43
Planners, Inc.
39.42% 25-Jan-2010 Catch 21 4.69% 31-Mar-2009 Adele's 4.38% 1-Dec-2006 44
100.00% 26-Oct-2021 45
12.76% Multiple Spaces Buffet King 7.93% 30-Nov-2006 Hudson's Grill 7.70% 31-May-2003 46
45.87% 31-May-2010 Dollar Daze 8.62% 30-Jun-2003 Works Michigan 11.81% 31-Jan-2003 48
24.94% 31-Jan-2007 The Crossings 7.98% 30-Sep-2003 Sear Brown 7.35% 30-Sep-2003 50
38.44% 31-Jan-2017 Barnes & Noble Books 27.91% 1-Jan-2011 Gateway Country 9.65% 1-Sep-2005 51
100.00% 31-Aug-2011 52
44.26% 31-Mar-2009 Tuesday Morning 11.10% 15-Jan-2005 Orange Canyon Pet 5.12% 31-Aug-2002 54
Clinic
45.89% 6-Aug-2008 North County Interns 9.81% 14-Jun-2014 Planned Parenthood 7.11% 30-Sep-2003 56
16.65% 31-Oct-2002 Eugene Burger Inc. 9.42% 30-Mar-2003 Napa Sonoma Grocery 8.85% 15-Sep-2007 57
Company
23.36% 31-Aug-2006 Blockbuster Video 12.69% 30-Jun-2003 Honey Baked Ham 9.14% 19-Mar-2006 59
23.16% 31-Oct-2006 Transwest Properties Inc. 18.22% 31-Mar-2006 Morgan Stanley Dean 13.92% 30-Apr-2011 60
Witter
9.85% 30-May-2012 Joy Luck 7.22% 30-Jun-2003 Bagel Works 5.89% 31-Aug-2006 61
14.68% 30-Jun-2005 Dunhill International 11.91% 31-Aug-2003 Salu, Inc. 10.64% 31-Aug-2006 62
List Co
100.00% 21-Dec-2021 64
14.30% 30-Apr-2004 Deseret Books 11.44% 31-Aug-2007 Washington Federal 10.89% 30-Sep-2006 65
13.22% 31-Dec-2005 Symbology, Inc. 10.50% 31-Mar-2006 Sterotaxis, Inc. 9.59% 31-Dec-2003 67
42.80% 31-Mar-2016 Gordmans 38.29% 30-Jun-2010 Famous Footware 6.85% 31-Jul-2006 69
42.51% 28-Feb-2025 Rocky Mountain Motorists 10.45% 31-Aug-2005 Jason's Deli 9.00% 30-Jun-2010 70
77.37% 30-Sep-2021 Blockbuster Video 3.84% 31-May-2004 El Dorado Medical 2.98% 28-Feb-2006 73
Center
18.78% 30-Nov-2004 Kampai Acquisition 7.31% 31-Dec-2010 Lovett's ATA Black 6.58% 14-Apr-2007 74
Corporation Belt Academy
34.36% 30-Jun-2016 Pacific Dental Services, 23.29% 1-Jun-2011 Physical Therapy 11.81% 30-Jun-2006 77
Inc.
10.21% 13-Nov-2006 Howard Sanger 8.03% 1-Mar-2006 Paul W. Doherty, M.D. 4.61% 1-Mar-2005 78
27.62% 5-Oct-2001 Fogo e'Brass 12.62% 14-Apr-2012 Play it again Sports 9.51% 31-Jan-2007 82
21.84% 31-Aug-2006 CATO 11.26% 31-Jan-2006 Movie Gallery 9.71% 31-Aug-2006 83
20.00% 12-Dec-2021 Washington Mutual 20.00% 31-Dec-2021 Chick-fil-A, Inc. 20.00% 31-Jan-2002 84
100.00% 31-Jul-2021 85
58.57% 18-Sep-2021 Dollar General 12.37% 1-Aug-2008 Goodwill Stores 9.28% 1-Dec-2006 87
30.93% 31-Mar-2005 Encore Executive Suites 19.25% 1-Mar-2006 Ameriresource 9.51% 31-Jan-2006 88
100.00% 1-Jun-2021 89
32.26% 31-Dec-2004 George Washington 16.44% 31-Dec-2002 Dr. James A. Cobey 9.88% 14-Sep-2002 90
University
Various Various 91
100.00% 16-Aug-2016 91.1
100.00% 14-May-2007 91.2
100.00% 31-Jan-2009 91.3
100.00% 30-Apr-2003 91.4
6.07% 28-Feb-2005 Magic Store Fixt, Inc. 5.58% 31-Jan-2004 Richie's Install, Inc. 5.56% 31-Jan-2002 92
81.81% 28-Feb-2021 Blockbuster Video 11.15% 31-Jan-2006 Jersey Mike's Subs 4.11% 31-Aug-2006 94
13.86% 31-Oct-2007 Zeidler Roberts Architect 7.88% 28-Feb-2003 Underground Coffee 5.98% 30-Nov-2002 96
House
15.28% 30-Sep-2004 The Delivery Company, Inc 12.99% 29-Feb-2004 S.P. Enterprises, Inc. 12.69% 28-Feb-2005 97
100.00% 30-Apr-2061 98
100.00% 30-Sep-2004 99
70.48% 31-Jul-2015 Papa Johns Pizza 5.27% 30-Jun-2006 Port of Subs (Restaur- 4.22% 31-Jul-2006 101
ant Investment Group,
LLC)
77.76% 31-Dec-2004 Charlotte Corporation 11.30% 31-Jul-2002 Carpet Consultants 10.94% 31-May-2002 102
100.00% 31-Dec-2021 104
100.00% 30-Jun-2076 105
100.00% 30-Sep-2004 106
13.02% 14-Feb-2005 Omega karate, Inc. 9.37% 31-May-2002 Destination Cyclery 6.80% 30-Nov-2006 107
16.72% 25-Feb-2005 Jemco Medical 12.54% 1-Jul-2002 FEC Telecom 12.34% 31-Jan-2010 108
100.00% 31-Jan-2012 109
100.00% 1-Nov-2021 110
100.00% 1-Mar-2020 111
100.00% 30-Nov-2021 112
100.00% 31-Aug-2061 113
100.00% 1-Dec-2020 115
12.57% 30-Apr-2004 Woods & Associates 8.74% 28-Feb-2004 Aloha Continental 8.41% 31-May-2004 118
Travel & Tours
64.18% 31-Dec-2010 Mattress Giant 35.82% 31-May-2011 119
22.76% 31-Oct-2006 Worker's Comp Group 15.09% 31-Dec-2006 John Cappelier, PA 9.95% 31-Jan-2015 121
100.00% 31-Jan-2022 123
28.24% 28-Feb-2006 Five Acres-Boys & Girls 22.95% 31-Aug-2002 Health Guard 22.34% 28-Feb-2006 124
Corporation
100.00% 31-Aug-2016 125
32.95% 30-Sep-2008 Soil Foodweb 20.25% 31-Mar-2004 First American 19.37% 28-Feb-2005 126
Title
66.68% 31-Oct-2023 Kaiser HMO 33.32% 31-Aug-2009 127
100.00% 31-Aug-2007 129
39.73% 15-Oct-2016 Blood Systems Inc. 35.25% 15-Oct-2006 Worthington Real 15.61% 15-Oct-2006 131
d.b.a. United Blood Estate d.b.a.
Services Realty Executives
24.68% 15-Sep-2005 Michael's Cleaning 7.15% 30-Apr-2004 Edward Jones 5.75% 30-Apr-2003 133
38.62 30-Nov-2005 Quintairos, McCumber, 18.73% 30-Sep-2014 GSA (U.S. Dept. of 18.52% 31-Mar-2003 135
et al Labor)
Various Various Various Various Various 137
100.00% 30-Sep-2010 137.1
66.16% 31-Oct-2002 MCSI 33.84% 31-Oct-2002 137.2
100.00% 30-Sep-2010 137.3
100.00% 23-Feb-2077 142
12.90% 31-May-2002 Southland Title 10.83% 31-Mar-2004 The Kids Room 10.06% 31-Jul-2004 143
100.00% 30-Sep-2011 144
17.93% 30-Nov-2006 Nance's Deli 15.95% 31-Oct-2003 WH Cleaners, Inc. 14.16% 31-Jul-2006 145
100.00% 31-Jan-2016 147
29.72% 30-Jun-2006 Payless Shoesource 28.30% 30-Nov-2005 Wells Fargo Finan- 17.02% 31-May-2003 148
#1365 cial Inc.
11.29% 30-Apr-2003 Alpha Medical 8.30% 31-Oct-2003 Del Mar Glass 7.90% 31-Jan-2005 149
36.90% 31-Oct-2005 Consumer Credit 19.93% 31-Aug-2006 State of California 17.61% 28-Feb-2003 150
Counseling of
Central Valley, Inc.
77.98% 31-Dec-2008 Vitamins Plus 22.02% 31-Jul-2004 151
47.37% 31-Jan-2011 Pain Clinic, Inc. 26.32% 1-Apr-2005 Novastar Mortgage 5.26% 1-Mar-2004 152
Chiropractic
28.29% 31-Oct-2007 Dr. Chuck Ingle 19.76% 1-Oct-2003 Dr. Mario Chorak, 18.09% 30-Nov-2005 153
D.D.S., P.S.
30.49% 31-May-2006 Mimi's Beauty Supply 28.05% 31-May-2006 Rent-A-Center 27.74% 31-May-2003 154
28.04% 9-Feb-2009 Squire Deli 26.04% 31-Jan-2012 155
40.09% 31-Jul-2008 Great Clips-DLG Ventures 30.87% 30-Sep-2003 Vogue (Tip Top) 29.03% 31-Oct-2003 156
Cleaners
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST SERIES 2002-C1
ANNEX A-5 CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES (CROSSED & PORTFOLIOS)
CROSS-
COLLATERALIZED
AND CROSS-
MORTGAGE DEFAULTED LOAN ORIGINAL LOAN
LOAN NUMBER PROPERTY NAME CITY STATE FLAG BALANCE ($)
- --------------------------------------------------------------------------------------------------------------------------
Abbey Portfolio I Various CA Abbey Portfolio I 27,300,000
- --------------------------------------------------------------------------------------------------------------------------
26 Upland Freeway Center Upland CA Abbey Portfolio I 9,400,000
43 Ming Office Park Bakersfield CA Abbey Portfolio I 7,600,000
46 Santa Maria Commerce Center Santa Maria CA Abbey Portfolio I 7,100,000
106 Orange Commerce Center Orange CA Abbey Portfolio I 3,200,000
Abbey Portfolio II Various CA Abbey Portfolio II 24,125,000
- --------------------------------------------------------------------------------------------------------------------------
22 4403 Donald Douglas Long Beach CA Abbey Portfolio II 10,100,000
74 Oxnard Commerce Center Oxnard CA Abbey Portfolio II 5,000,000
78 The Abbey Center Palm Springs CA Abbey Portfolio II 4,850,000
92 La Mirada Business Center La Mirada CA Abbey Portfolio II 4,175,000
14 Sealy Industrial Portfolio San Antonio TX 12,700,000
- --------------------------------------------------------------------------------------------------------------------------
14.1 Northwest Business Center San Antonio TX
14.2 West Loop Business Center San Antonio TX
14.3 Westway Service Center San Antonio TX
14.4 Commerce Center San Antonio TX
30 Citivest Multifamily Portfolio Dallas TX 9,000,000
- --------------------------------------------------------------------------------------------------------------------------
30.1 Avalon Apartments Dallas TX
30.2 Catalina Apartments Dallas TX
30.3 Montecito-Sausalito Apartments Dallas TX
30.4 Monterey Apartments Dallas TX
30.5 Santa Cruz Apartments Dallas TX
91 GSL Portfolio Various TX 4,220,000
- --------------------------------------------------------------------------------------------------------------------------
91.1 8640 North Eldridge Parkway Houston TX
91.2 1109 Howard Avenue Deer Park TX
91.3 1434 Sens Road La Porte TX
91.4 5048 Timber Creek Houston TX
137 Thermal Supply-3 Locations Various WA 1,620,000.00
- --------------------------------------------------------------------------------------------------------------------------
137.1 Thermal Supply- Seattle Seattle WA
137.2 Thermal Supply - Spokane Spokane WA
137.3 Thermal Supply - Yakima Yakima WA
ORIGINAL
% OF TERM TO REMAINING
AGGREGATE MATURITY TERM TO
CUT-OFF DATE LOAN CUT-OFF DATE OR ARD MATURITY OR
BALANCE ($) BALANCE (MOS.) ARD (MOS.)
- ----------------------------------------------------------------------------
27,226,194.42 2.87% 94 91
- ----------------------------------------------------------------------------
9,375,938.36 0.99% 94 91
7,580,545.90 0.80% 94 91
7,081,825.77 0.75% 94 91
3,187,884.39 0.34% 94 91
24,045,739.48 2.53% 94 91
- ----------------------------------------------------------------------------
10,061,760.11 1.06% 94 91
4,987,201.26 0.52% 94 91
4,837,585.21 0.51% 94 91
4,159,192.90 0.44% 94 91
12,700,000.00 1.34% 60 60
- ----------------------------------------------------------------------------
8,966,974 0.94% 60 55
- ----------------------------------------------------------------------------
4,197,853.92 0.44% 120 113
- ----------------------------------------------------------------------------
1,459,812.28 0.15% 120 78
- ----------------------------------------------------------------------------
(1) For Mortgage Loan No. 14, which is secured by multiple properties, the
underwritten net cash flow is allocated based on an individual property's
appraised value as a percentage of the total appraised value of all the related
Mortgaged Properties.
REMAINING ORIGINAL REMAINING MATURITY DATE OR CUT-OFF
IO PERIOD AMORT TERM AMORT TERM MONTHLY P&I ARD BALLOON APPRAISED DATE LTV
(MOS.) (MOS.) (MOS.) PAYMENTS ($) BALANCE VALUE ($) DSCR(X) RATIO
- ---------------------------------------------------------------------------------------------------------------------------------
353 350 187,534.31 24,731,002.60 37,200,000 1.36 73.53%
- ---------------------------------------------------------------------------------------------------------------------------------
360 357 64,124.57 8,572,124.66 14,000,000 1.37 66.97%
360 357 51,845.40 6,930,653.60 10,000,000 1.35 75.81%
360 357 48,434.52 6,474,689.35 9,000,000 1.40 78.69%
300 297 23,129.82 2,753,534.99 4,200,000 1.30 75.90%
325 322 170,375.04 21,265,840.43 33,450,000 1.36 72.37%
- ---------------------------------------------------------------------------------------------------------------------------------
300 297 73,003.49 8,690,845.38 13,250,000 1.32 75.94%
360 357 34,108.81 4,559,641.26 8,100,000 1.48 61.57%
360 357 33,085.55 4,422,851.48 6,450,000 1.27 75.00%
300 297 30,177.19 3,592,502.31 5,650,000 1.40 73.61%
360 360 86,292.09 12,060,000.59 18,150,000 1.31 69.97%
- ---------------------------------------------------------------------------------------------------------------------------------
7,900,000
4,700,000
3,900,000
1,650,000
360 355 61,946.22 8,557,969 11,275,000 1.34 79.53%
- ---------------------------------------------------------------------------------------------------------------------------------
3,500,000
2,950,000
2,600,000
1,750,000
475,000
360 353 28,536.39 3,695,559.54 5,310,000 1.25 79.06%
- ---------------------------------------------------------------------------------------------------------------------------------
2,575,000
835,000
1,070,000
830,000
216 174 13,930.45 1,017,932.62 2,665,000 1.35 54.78%
- ---------------------------------------------------------------------------------------------------------------------------------
1,575,000
650,000
440,000
CUT-OFF DATE
LTV RATIO AT NUMBER LOAN MORTGAGE
MATURITY OR OF UNITS UNIT OF AMOUNT PER UW NET CASH FLOW LOAN
ARD (UNITS) MEASURE (UNIT) ($) ($) NUMBER
- -------------------------------------------------------------------------------------------------
66.77% 329,707 Sq. Ft. 83 3,069,912
- -------------------------------------------------------------------------------------------------
61.23% 116,029 Sq. Ft. 81 1,053,620 26
69.31% 117,847 Sq. Ft. 64 839,812 43
71.94% 65,844 Sq. Ft. 108 816,370 46
65.56% 29,987 Sq. Ft. 106 360,110 106
63.91% 298,830 Sq. Ft. 80 2,777,820
- -------------------------------------------------------------------------------------------------
65.59% 88,284 Sq. Ft. 114 1,159,997 22
56.29% 64,381 Sq. Ft. 77 606,724 74
68.57% 64,155 Sq. Ft. 75 502,539 78
63.58% 82,010 Sq. Ft. 51 508,560 92
66.45% 484,369 Sq. Ft. 26 1,357,084 14
- -------------------------------------------------------------------------------------------------
251,125 Sq. Ft. 590,687 14.1
145,394 Sq. Ft. 351,421 14.2
59,863 Sq. Ft. 291,605 14.3
27,987 Sq. Ft. 123,371 14.4
75.90% 348 Units 25,767 998,620 30
- -------------------------------------------------------------------------------------------------
107 Units 296,166 30.1
86 Units 284,961 30.2
78 Units 218,401 30.3
60 Units 162,677 30.4
17 Units 36,415 30.5
69.60% 88,300 Sq. Ft. 48 426,662 91
- -------------------------------------------------------------------------------------------------
35,500 Sq. Ft. 203,051 91.1
13,200 Sq. Ft. 67,968 91.2
19,200 Sq. Ft. 89,413 91.3
20,400 Sq. Ft. 66,230 91.4
38.20% 59,173 Sq. Ft. 25 225,443 137
- -------------------------------------------------------------------------------------------------
32,189 Sq. Ft. 133,944 137.1
14,984 Sq. Ft. 50,391 137.2
12,000 Sq. Ft. 41,108 137.3
ANNEX B
WACHOVIA COMMERCIAL MORTGAGE SECURITIES
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2002-C1
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
9062 Old Annapolis Road Reports Available on the World Wide Web
Columbia, MD 21045 @www.ctslink.com/cmbs
Payment Date: 06/15/2002
Record Date: 05/31/2002
DISTRIBUTION DATE STATEMENT
TABLE OF CONTENTS
STATEMENT SECTIONS PAGES(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
DEPOSITOR MASTER SERVICER SPECIAL SERVICER
Wachovia Commercial Mortgage Securities, Inc. Wachovia Bank, National Association Lennar Partners, Inc.
Charlotte, NC 28288-1016 Charlotte Plaza, Floor 23 NC-1075 700 N.W. 107th Avenue
201 South College Street Miami, FL 33172
Charlotte, NC 28288
Contact: Tim Steward Contact: Timothy S. Ryan Contact: Steve Bruha
Phone Number (704) 593-7822 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.
Page 1 of 17
WACHOVIA COMMERCIAL MORTGAGE SECURITIES
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2002-C1
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
9062 Old Annapolis Road Reports Available on the World Wide Web
Columbia, MD 21045 @www.ctslink.com/cmbs
Payment Date: 06/15/2002
Record Date: 05/31/2002
CERTIFICATE DISTRIBUTION DETAIL
Principal Interest Realized Loss/ Total Current
Pass-Through Original Beginning Distri- Distri- Prepayment Additional Trust Distri- Ending Subordination
Class CUSIP Rate Balance Balance bution bution Premium Fund 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%
A-3 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
A-4 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%
I 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%
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%
Z-III 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-I 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00
IO-II 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).
Page 2 of 17
B-2
WACHOVIA COMMERCIAL MORTGAGE SECURITIES
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2002-C1
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
9062 Old Annapolis Road Reports Available on the World Wide Web
Columbia, MD 21045 @www.ctslink.com/cmbs
PAYMENT DATE: 06/15/2002
RECORD DATE: 05/31/2002
CERTIFICATE FACTOR DETAIL
<Table>
<Caption>
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
A-3 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
A-4 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
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
Z-III 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
</Table>
<Table>
<Caption>
Beginning Ending
Notional Interest Prepayment Notional
Class CUSIP Amount Distribution Premium Amount
IO-I 0.00000000 0.00000000 0.00000000 0.00000000
IO-II 0.00000000 0.00000000 0.00000000 0.00000000
</Table>
Page 3 of 17
B-3
WACHOVIA COMMERCIAL MORTGAGE SECURITIES
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2002-C1
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
9062 Old Annapolis Road Reports Available on the World Wide Web
Columbia, MD 21045 @www.ctslink.com/cmbs
Payment Date: 06/15/2002
Record Date: 05/31/2002
RECONCILIATION DETAIL
<Table>
<Caption>
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 0.00 Less Reductions to Servicing Fees 0.00
Advances paid from general collections Plus Servicing Fees for Delinquent Payments Received 0.00
Reimbursement for Interest on Servicing 0.00 Plus Adjustments for Prior Servicing Calculation 0.00
Advances paid from general collections Total Servicing Fees Collected 0.00
Aggregate Amount of Nonrecoverable Advances 0.00
</Table>
CERTIFICATE INTEREST RECONCILIATION
<Table>
<Caption>
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 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-2 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-3 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-4 0.00 0.00 0.00 0.00 0.00 0.00 0.00
IO-I 0.00 0.00 0.00 0.00 0.00 0.00 0.00
IO-II 0.00 0.00 0.00 0.00 0.00 0.00 0.00
B 0.00 0.00 0.00 0.00 0.00 0.00 0.00
C 0.00 0.00 0.00 0.00 0.00 0.00 0.00
D 0.00 0.00 0.00 0.00 0.00 0.00 0.00
E 0.00 0.00 0.00 0.00 0.00 0.00 0.00
F 0.00 0.00 0.00 0.00 0.00 0.00 0.00
G 0.00 0.00 0.00 0.00 0.00 0.00 0.00
H 0.00 0.00 0.00 0.00 0.00 0.00 0.00
J 0.00 0.00 0.00 0.00 0.00 0.00 0.00
K 0.00 0.00 0.00 0.00 0.00 0.00 0.00
L 0.00 0.00 0.00 0.00 0.00 0.00 0.00
M 0.00 0.00 0.00 0.00 0.00 0.00 0.00
N 0.00 0.00 0.00 0.00 0.00 0.00 0.00
O 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Z-I 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Z-II 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Z-III 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total 0.00 0.00 0.00 0.00 0.00 0.00 0.00
</Table>
Page 4 of 17
B-4
WACHOVIA COMMERCIAL MORTGAGE SECURITIES
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2002-C1
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
9062 Old Annapolis Road Reports Available on the World Wide Web
Columbia, MD 21045 @www.ctslink.com/cmbs
PAYMENT DATE: 06/15/2002
RECORD DATE: 05/31/2002
OTHER REQUIRED INFORMATION
<Table>
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
Net Swap Payment received from Counterparty 0.00
Net Swap Payment made to Counterparty 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
</Table>
Appraisal Reduction Amount
<Table>
<Caption>
Appraisal Cumulative Most Recent
Loan Reduction ASER App. Red.
Number Amount Amount Date
Total
Page 5 of 17
B-5
WACHOVIA COMMERCIAL MORTGAGE SECURITIES
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2002-C1
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
9062 Old Annapolis Road Reports Available on the World Wide Web
Columbia, MD 21045 @www.ctslink.com/cmbs
PAYMENT DATE: 06/15/2002
RECORD DATE: 05/31/2002
RATINGS DETAIL
<Table>
<Caption>
Original Ratings Current Ratings(1)
------------------------------- -------------------------------
Class CUSIP Fitch Moody's S&P Fitch Moody's S&P
A-1
A-2
A-3
A-4
IO-I
IO-II
B
C
D
E
F
G
H
J
K
L
M
N
O
Z-I
Z-II
Z-III
</Table>
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.
<Table>
Fitch, Inc. Moody's Investors Service Standard & Poor's Rating Services
One State Street Plaza 99 Church Street 55 Water Street
New York, New York 10004 New York, New York 10007 New York, New York 10041
(212) 908-0500 (212) 553-0300 (212) 438-2430
</Table>
Page 6 of 17
B-6
WACHOVIA COMMERCIAL MORTGAGE SECURITIES
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2002-C1
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
9062 Old Annapolis Road Reports Available on the World Wide Web
Columbia, MD 21045 @www.ctslink.com/cmbs
PAYMENT DATE: 06/15/2002
RECORD DATE: 05/31/2002
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
SCHEDULED BALANCE
<Table>
<Caption>
% of
Scheduled # of Scheduled Agg. WAM Weighted
Balance Loans Balance Bal. (2) WAC Avg DSCR(1)
Totals
STATE(3)
<Caption>
% of
# of Scheduled Agg. WAM Weighted
State Props Balance Bal. (2) WAC Avg DSCR(1)
Totals
</Table>
See footnotes on last page of this section.
Page 7 of 17
B-7
WACHOVIA COMMERCIAL MORTGAGE SECURITIES
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2002-C1
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
9062 Old Annapolis Road Reports Available on the World Wide Web
Columbia, MD 21045 @www.ctslink.com/cmbs
PAYMENT DATE: 06/15/2002
RECORD DATE: 05/31/2002
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
DEBT SERVICE COVERAGE RATIO (1)
<Table>
<Caption>
Debt Service # of Scheduled % of WAM Weighted
Coverage Ratio Loans Balance Agg. (2) WAC Avg. DSCR(1)
Bal.
Totals
</Table>
PROPERTY TYPE(3)
<Table>
<Caption>
Property # of Scheduled % of WAM Weighted
Type Props Balance Agg. (2) WAC Avg. DSCR(1)
Bal.
Totals
</Table>
NOTE RATE
<Table>
<Caption>
Note # of Scheduled % of WAM Weighted
Rate Loans Balance Agg. (2) WAC Avg. DSCR(1)
Bal.
Totals
</Table>
SEASONING
<Table>
<Caption>
Seasoning # of Scheduled % of WAM Weighted
Loans Balance Agg. (2) WAC Avg. DSCR(1)
Bal.
Totals
</Table>
See footnotes on last page of this section.
Page 8 of 17
B-8
WACHOVIA COMMERCIAL MORTGAGE SECURITIES
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2002-C1
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
9062 Old Annapolis Road Reports Available on the World Wide Web
Columbia, MD 21045 @www.ctslink.com/cmbs
PAYMENT DATE: 06/15/2002
RECORD DATE: 05/31/2002
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
ANTICIPATED REMAINING TERM (ARD AND BALLOON LOANS)
<Table>
<Caption>
Anticipated Remaining # of Scheduled % of WAM Weighted
Term(2) Loans Balance Agg. (2) WAC Avg. DSCR(1)
Bal.
Totals
</Table>
REMAINING AMORTIZATION TERM (ARD AND BALLOON LOANS)
<Table>
<Caption>
Remaining Amortization # of Scheduled % of WAM Weighted
Term Loans Balance Agg. (2) WAC Avg. DSCR(1)
Bal.
Totals
</Table>
REMAINING STATED TERM (FULLY AMORTIZING LOANS)
<Table>
<Caption>
Remaining Stated # of Scheduled % of WAM Weighted
Term Loans Balance Agg. (2) WAC Avg. DSCR(1)
Bal.
Totals
</Table>
AGE OF MOST RECENT NOI
<Table>
<Caption>
Age of Most # of Scheduled % of WAM Weighted
Recent NOI Loans Balance Agg. (2) WAC Avg. DSCR(1)
Bal.
Totals
</Table>
(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.
Page 9 of 17
B-9
WACHOVIA COMMERCIAL MORTGAGE SECURITIES
COMMERCIAL MORTGAGE PASS-THROUCH CERTIFICATES
SERIES 2002-C1
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
9062 Old Annapolis Road Reports Available on the World Wide Web
Columbia, MD 21045 @www.ctslink.com/cmbs
PAYMENT DATE: 06/15/2002
RECORD DATE: 05/31/2002
MORTGAGE LOAN DETAIL
<Table>
<Caption>
Anticipated
Loan Property Interest Principal Gross Repayment
Number ODCR Type(1) City State Payment Payment Coupon Date
<Caption>
Net. Beginning Ending Paid Appraisal Appraisal Res. Mod.
Maturity Amort Scheduled Scheduled Thru Reduction Reduction Strat. Code
Date (Y/N) Balance Balance Date Date Amount (2) (3)
</Table>
<Table>
<Caption>
(1) Property Type Code (2) Resolution Strategy Code
- ------------------------------------------------- ---------------------------------------------------------------------------------
MF - Multi-Family OF - Office 1 - Modification 6 - DPO 10 - Deed in Lieu Of
RT - Retail MU - Mixed Use 2 - Foreclosure 7 - REO Foreclosure
HC - Health Care LO - Lodging 3 - Bankruptcy 8 - Resolved 11 - Full Payoff
IN - Industrial SS - Self Storage 4 - Extension 9 - Pending Return 12 - Reps and Warranties
WH - Warehouse OT - Other 5 - Note Sale to Master Servicer 13 - Other or TBD
MH - Mobile Home Park
<Caption>
(3) Modification Code
- -------------------------------
1 - Maturity Date Extension
2 - Amortization Change
3 - Principal Write-Off
4 - Combination
</Table>
Page 10 of 17
B-10
WACHOVIA COMMERCIAL MORTGAGE SECURITIES
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2002-C1
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
9062 Old Annapolis Road Reports Available on the World Wide Web
Columbia, MD 21045 @www.ctslink.com/cmbs
Payment Date: 06/15/2002
Record Date: 05/31/2002
PRINCIPAL PREPAYMENT DETAIL
<Table>
<Caption>
PRINCIPAL PREPAYMENT AMOUNT PREPAYMENT PENALTIES
OFFERING DOCUMENT -------------------------------------- ------------------------------------------------
LOAN NUMBER CROSS-REFERENCE PAYOFF AMOUNT CURTAILMENT AMOUNT PREPAYMENT PREMIUMS YIELD MAINTENANCE PREMIUM
Totals
</Table>
Page 11 of 17
B-11
WACHOVIA COMMERCIAL MORTGAGE SECURITIES
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2002-C1
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
9062 Old Annapolis Road Reports Available on the World Wide Web
Columbia, MD 21045 @www.ctslink.com/cmbs
Payment Date: 06/15/2002
Record Date: 05/31/2002
HISTORICAL DETAIL
<Table>
<Caption>
Delinquencies
- --------------------------------------------------------------------------------------------------------------
Distribution 30-59 Days 60-89 Days 90 Days or More Foreclosure REO Modifications
Date # Balance # Balance # Balance # Balance # Balance # Balance
<Caption>
Prepayments Rate and Maturities
- ------------------------- ---------------------------
Curtailments Payoff Next Weighted Avg.
# Amount # Amount Coupon Remit WAM
</Table>
Note: Foreclosure and REO Totals are excluded from the delinquencies aging
categories.
Page 12 of 17
B-12
WACHOVIA COMMERCIAL MORTGAGE SECURITIES
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2002-C1
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
9062 Old Annapolis Road Reports Available on the World Wide Web
Columbia, MD 21045 @www.ctslink.com/cmbs
PAYMENT DATE: 6/15/2002
RECORD DATE: 5/31/2002
DELINQUENCY LOAN DETAIL
<Table>
<Caption>
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
<Caption>
Foreclosure Actual Outstanding Bankruptcy REO
Date Principal Servicing Date Date
Balance Advances
Totals
</Table>
(1) Status of Mortgage Loan
A - Payment Not Received But Still in Grace Period
B - Late Payment But Less Than 1 Month Delinquent
0 - Current
1 - One Month Delinquent
2 - Two Months Delinquent
3 - Three or More Months Delinquent
- Assumed Scheduled Payment (Performing Matured Balloon)
7 - Foreclosure
9 - REO
(2) Resolution Strategy Code
1 - Modification
2 - Foreclosure
3 - Bankruptcy
4 - Extension
5 - Note Sale
6 - DPO
7 - REO
8 - Resolved
9 - Pending Return to Master Servicer
10 - Deed in Lieu of Foreclosure
11 - Full Payoff
12 - Reps and Warranties
13 - Other or TBD
**Outstanding P & I Advances include the current period advance.
Page 13 of 17
B-13
WACHOVIA COMMERCIAL MORTGAGE SECURITIES
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2002-C1
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
9062 Old Annapolis Road Reports Available on the World Wide Web
Columbia, MD 21045 @www.ctslink.com/cmbs
PAYMENT DATE: 06/15/2002
RECORD DATE: 05/31/2002
SPECIALLY SERVICED LOAN DETAIL - PART 1
<Table>
<Caption>
Offering Servicing Resolution
Loan Document Transfer Strategy Scheduled Property Interest
Number Cross-Reference Date Code(1) Balance Type(2) State Rate
<Caption>
Net Remaining
Actual Operating DSCR Note Maturity Amortization
Balance Income Date DSCR Date Date Term
</Table>
<Table>
<Caption>
(1) Resolution Strategy Code (2) Property Type Code
1 - Modification 6 - DPO 10 - Deed in Lieu of MF - Multi-Family OF - Office
2 - Foreclosure 7 - REO Foreclosure RT - Retail MU - Mixed Use
3 - Bankruptcy 8 - Resolved 11 - Full Payoff HC - Health Care LO - Lodging
4 - Extension 9 - Pending Return 12 - Reps and Warranties IN - Industrial SS - Self Storage
5 - Note Sale to Master Servicer 13 - Other or TBD WH - Warehouse OT - Other
MH - Mobile Home Park
</Table>
Page 14 of 17
B-14
WACHOVIA COMMERCIAL MORTGAGE SECURITIES
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2002-C1
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
9062 Old Annapolis Road Reports Available on the World Wide Web
Columbia, MD 21045 @www.ctslink.com/cmbs
PAYMENT DATE: 06/15/2002
RECORD DATE: 05/31/2002
SPECIALLY SERVICED LOAN DETAIL - PART 2
<Table>
<Caption>
Offering Resolution Site
Loan Document Strategy Inspection Phase 1 Date Appraisal Appraisal Other REO
Number Cross-Reference Code(1) Date Date Value Property Revenue Comment
</Table>
(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
Page 15 of 17
B-15
WACHOVIA COMMERICAL MORTGAGE SECURITIES
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2002-C1
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
9062 Old Annapolis Road Reports Available on the World Wide Web
Columbia, MD 21045 @ www.ctslink.com/cmbs
PAYMENT DATE: 06/15/2002
RECORD DATE: 05/31/2002
MODIFIED LOAN DETAIL
<Table>
<Caption>
Offering
Loan Document Pre-Modification
Number Cross-Reference Balance Modification Date Modification Description
Totals
</Table>
Page 16 of 17
B-16
WACHOVIA COMMERCIAL MORTGAGE SECURITIES
COMMERCIAL MORTGAGE PASS-THROUCH CERTIFICATES
SERIES 2002-C1
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
9062 Old Annapolis Road Reports Available on the World Wide Web
Columbia, MD 21045 @www.ctslink.com/cmbs
PAYMENT DATE: 06/15/2002
RECORD DATE: 05/31/2002
LIQUIDATED LOAN DETAIL
<Table>
<Caption>
Final Recovery Offering Gross Proceeds
Determination Document Appraisal Appraisal Actual Gross as a % of
Loan Number Date Cross-Reference Date Value Balance Proceeds Actual Balance
Current Total
Cumulative Total
<Caption>
Aggregate Net Net Proceeds Repurchased
Liquidation Liquidation as a % of Realized by Seller
Expenses* Proceeds Actual Balance Loss (Y/N)
Current Total
Cumulative Total
* Aggregate liquidation expenses also include outstanding
P & I advances and unpaid fees (servicing, trustee, etc.).
Page 17 of 17
B-17
ANNEX C
CMSA INVESTOR REPORTING PACKAGE
DELINQUENT LOAN STATUS REPORT
as of _____________
(Loan Level Report)
<Table>
<Caption>
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
<Caption>
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
</Table>
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
ANNEX D
CMSA INVESTOR REPORTING PACKAGE
HISTORICAL LOAN MODIFICATION REPORT
as of _____________
(Loan Level Report)
<Table>
<Caption>
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
- ---------- ---- ----- --------- --------- ------------ -------- ----------------- ---- -------- ---- ------- ---
<Caption>
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
- -------- -------- -------- -------- ---------- -------
</Table>
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.
Future modifications done on the same loan are additions to the report.
(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.
ANNEX E
CMSA INVESTOR REPORTING PACKAGE
HISTORICAL LIQUIDATION REPORT
(REO-SOLD, DISCOUNTED PAYOFF OR NOTE SALE)
AS OF ________________________
(LOAN LEVEL REPORT)
<Table>
<Caption>
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:
<Caption>
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:
</Table>
(h) Servicing Fee Expense includes fees such as Liquidation or Disposition fees
charged by the Special Servicer.
ANNEX F
CMSA INVESTOR REPORTING PACKAGE
REO STATUS REPORT
AS OF ________________________
(PROPERTY LEVEL REPORT)
<Table>
<Caption>
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
<Caption>
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
</Table>
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.
ANNEX G
CMSA INVESTOR REPORTING PACKAGE
SERVICER WATCH LIST
AS OF _____________
(LOAN LEVEL REPORT)
<Table>
<Caption>
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: $
</Table>
ANNEX H
<Table>
<Caption>
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
</Table>
<Table>
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)
</Table>
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.
MULTIFAMILY OPERATING STATEMENT ANALYSIS REPORT (includes Mobile Home Parks)
AS OF MM/DD/YY
<Table>
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.
</Table>
<Table>
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)
</Table>
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.
HEALTHCARE OPERATING STATEMENT ANALYSIS REPORT
AS OF MM/DD/YY
<Table>
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
</Table>
<Table>
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)
</Table>
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.
LODGING OPERATING STATEMENT ANALYSIS REPORT
AS OF MM/DD/YY
<Table>
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
</Table>
<Table>
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)
</Table>
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.
ANNEX I
<Table>
<Caption>
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
</Table>
<Table>
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)
</Table>
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
<Table>
<Caption>
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.
</Table>
<Table>
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)
</Table>
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
<Table>
<Caption>
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.
</Table>
<Table>
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)
</Table>
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
<Table>
<Caption>
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.
</Table>
<Table>
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 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)
</Table>
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
ANNEX J
CMSA INVESTOR REPORTING PACKAGE
COMPARATIVE FINANCIAL STATUS REPORT
AS OF _______________
(PROPERTY LEVEL REPORT)
<Table>
<Caption>
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
<Caption>
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
<Caption>
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
</Table>
(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.
ANNEX K
CLASS IO-II REFERENCE RATE SCHEDULE
<Table>
<Caption>
INTEREST
ACCRUAL CLASS IO-II INTEREST ACCRUAL CLASS IO-II
PERIOD DISTRIBUTION DATE REFERENCE RATE PERIOD DISTRIBUTION DATE REFERENCE RATE
- -------- ----------------- -------------- ---------------- ----------------- --------------
1 6/15/02 7.49817% 43 12/15/05 7.25399%
2 7/15/02 7.25545% 44 1/15/06 7.25395%
3 8/15/02 7.49810% 45 2/15/06 7.25391%
4 9/15/02 7.49807% 46 3/15/06 7.25461%
5 10/15/02 7.25535% 47 4/15/06 7.49656%
6 11/15/02 7.49800% 48 5/15/06 7.25377%
7 12/15/02 7.25528% 49 6/15/06 7.49648%
8 1/15/03 7.25524% 50 7/15/06 7.25368%
9 2/15/03 7.25520% 51 8/15/06 7.49639%
10 3/15/03 7.25570% 52 9/15/06 7.49635%
11 4/15/03 7.49781% 53 10/15/06 7.25355%
12 5/15/03 7.25508% 54 11/15/06 7.49626%
13 6/15/03 7.49775% 55 12/15/06 7.25345%
14 7/15/03 7.25502% 56 1/15/07 7.22997%
15 8/15/03 7.49769% 57 2/15/07 7.23112%
16 9/15/03 7.49766% 58 3/15/07 7.23291%
17 10/15/03 7.25493% 59 4/15/07 7.48492%
18 11/15/03 7.49760% 60 5/15/07 7.24412%
19 12/15/03 7.25486% 61 6/15/07 7.48562%
20 1/15/04 7.49753% 62 7/15/07 7.24320%
21 2/15/04 7.25480% 63 8/15/07 7.48551%
22 3/15/04 7.25497% 64 9/15/07 7.48545%
23 4/15/04 7.49744% 65 10/15/07 7.24303%
24 5/15/04 7.25470% 66 11/15/07 7.48534%
25 6/15/04 7.49738% 67 12/15/07 7.24291%
26 7/15/04 7.25463% 68 1/15/08 7.48522%
27 8/15/04 7.49731% 69 2/15/08 7.24278%
28 9/15/04 7.49728% 70 3/15/08 7.24303%
29 10/15/04 7.25453% 71 4/15/08 7.48504%
30 11/15/04 7.49722% 72 5/15/08 7.24259%
31 12/15/04 7.25446% 73 6/15/08 7.48491%
32 1/15/05 7.25442% 74 7/15/08 7.24246%
33 2/15/05 7.25439% 75 8/15/08 7.48434%
34 3/15/05 7.25502% 76 9/15/08 7.48382%
35 4/15/05 7.49704% 77 10/15/08 7.24106%
36 5/15/05 7.25427% 78 11/15/08 7.48323%
37 6/15/05 7.49696% 79 12/15/08 7.24021%
38 7/15/05 7.25419% 80 1/15/09 7.24015%
39 8/15/05 7.49689% 81 2/15/09 7.24008%
40 9/15/05 7.49685% 82 3/15/09 7.24102%
41 10/15/05 7.25408% 83 4/15/09 7.48229%
42 11/15/05 7.49677% 84 5/15/09 7.23987%
</Table>
K-1
PROSPECTUS
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
WACHOVIA COMMERCIAL MORTGAGE SECURITIES, INC.
DEPOSITOR
Wachovia Commercial Mortgage Securities, Inc. will periodically offer
certificates in one or more series. Each series of certificates will represent
the entire beneficial ownership interest in a trust fund. Distributions on the
certificates of any series will be made only from the assets of the related
trust fund.
Neither the certificates nor any assets in the related trust fund will be
obligations of, or be guaranteed by, the depositor, any servicer or any of their
respective affiliates. Neither the certificates nor any assets in the related
trust fund will be guaranteed or insured by any governmental agency or
instrumentality or by any person, unless otherwise provided in the prospectus
supplement.
The primary assets of the trust fund may include:
- 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 1, 2002
TABLE OF CONTENTS
<Table>
<Caption>
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 AND SERVICING AGREEMENTS......... 53
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
</Table>
2
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 117 in this
prospectus.
In this prospectus, the terms "depositor", "we", "us" and "our" refer to
Wachovia Commercial Mortgage Securities, Inc.
------------------------
Until 90 days after the date of each prospectus supplement, all dealers
effecting transactions in the offered certificates covered by that prospectus
supplement, whether or not participating in the distribution thereof, may be
required to deliver such prospectus supplement and this prospectus. This is in
addition to the obligation of dealers to deliver a prospectus and prospectus
supplement when acting as underwriters and with respect to their unsold
allotments or subscriptions.
You should rely only on any information or representations contained or
incorporated by reference in this prospectus and the related prospectus
supplement. This prospectus and any prospectus supplement do not constitute an
offer to sell or a solicitation of an offer to buy any securities in any state
or other jurisdiction in which such offer would be unlawful.
3
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement (of which this prospectus forms a part) under the Securities Act of
1933, as amended, with respect to the offered certificates. This prospectus and
the prospectus supplement do not contain all of the information set forth in the
registration statement. For further information, you should refer to the
registration statement and the exhibits attached thereto. Copies of the
Registration Statement may be obtained from the Public Reference Section of the
Securities and Exchange Commission, Washington, D.C. 20549, upon payment of the
prescribed charges, or may be examined free of charge at the Securities and
Exchange Commission's offices, 450 Fifth Street, N.W., Washington, D.C. 20549 or
at the regional offices of the Securities and Exchange Commission located at The
Woolworth Building, 233 Broadway, New York, New York 10279 and 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 Wachovia
Commercial Mortgage Securities, Inc., 301 South College Street, Charlotte, North
Carolina 28288-0166, Attention: Secretary, or by telephone at 704-374-6161.
4
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
5
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.
6
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 or on one or more classes of
certificates and increase the likelihood of
timely distributions on the certificates or
such classes of certificates, as the case may
be. The trust fund may include any of the
following types of cash flow agreements:
- 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, supple-
7
ment interest collections of the trust fund, or
such other purpose as specified in the
prospectus supplement.
Amounts on deposit in any pre-funding account
or any capitalized interest account will be
held in cash or invested in short-term
investment grade obligations. Amounts remaining
on deposit in any pre-funding account and any
capitalized interest account after the end of
the related pre-funding period will be
distributed to certificateholders as described
in the prospectus supplement.
Description of Certificates... Each series of certificates will include one or
more classes. Each series of certificates will
represent in the aggregate the entire
beneficial ownership interest in the related
trust fund. The offered certificates are the
classes of certificates being offered to you
pursuant to the prospectus supplement. The
non-offered certificates are the classes of
certificates not being offered to you pursuant
to the prospectus supplement. Information on
the non-offered certificates is being provided
solely to assist you in your understanding of
the offered certificates.
Distributions on
Certificates.................. The certificates may provide for different
methods of distributions to specific classes.
Any class of certificates may:
- 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
8
then entitled to receive in respect of
principal from future cash flow on the assets
in the related trust fund. Unless otherwise
specified in the prospectus supplement,
distributions of principal will be made on each
distribution date to the class or classes of
certificates entitled thereto until the
certificate balance of such certificates is
reduced to zero. Distributions of principal to
any class of certificates will be made on a pro
rata basis among all of the certificates of
such class.
Advances...................... A servicer may be obligated as part of its
servicing responsibilities to make certain
advances with respect to delinquent scheduled
payments and property related expenses which it
deems recoverable. The trust fund may be
charged interest for any advance. We will not
have any responsibility to make such advances.
One of our affiliates may have the
responsibility to make such advances, but only
if that affiliate is acting as a servicer or
master servicer for 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 represen-
9
tation that the investor is not (or is not
investing on behalf of) a plan or similar
arrangement or if other restrictions apply.
Legal Investment.............. The prospectus supplement will specify whether
the offered certificates will constitute
"mortgage related securities" for purposes of
the Secondary Mortgage Market Enhancement Act
of 1984, as amended. If your investment
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.
10
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
11
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
12
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
13
entitled under the related pooling and
servicing 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
14
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
15
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.
16
SPECIAL RISKS OF MORTGAGE
LOANS SECURED BY
MULTIFAMILY PROPERTIES...... Mortgage loans secured by multifamily
properties may constitute a material
concentration of the mortgage loans in a trust
fund. Adverse economic conditions, either
local, regional or national, may limit the
amount of rent that a borrower may charge for
rental units, and may result in a reduction in
timely rent payments or a reduction in
occupancy levels. Occupancy and rent levels
may also be affected by:
- 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.
17
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
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
18
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;
- 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
19
upon the strength of the franchisor, the
public perception of the franchise service
mark and the continued existence of any
franchise license agreement. The
transferability of a franchise license
agreement may be restricted, and a lender or
other person that acquires title to a
hospitality property as a result of
foreclosure may be unable to succeed to the
borrower's rights under the franchise license
agreement. Moreover, the transferability of a
hospitality property's operating, liquor and
other licenses upon a transfer of the
hospitality property, whether through purchase
or foreclosure, is subject to local law
requirements and may not be transferable.
SPECIAL RISKS OF MORTGAGE
LOANS SECURED BY
OFFICE BUILDINGS............ Mortgage loans secured by office buildings may
constitute a material concentration of the
mortgage loans in a trust fund. Significant
factors determining the value of office
buildings include:
- 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
20
quality of life issues such as schools and
cultural amenities. A central business
district may have an economy which is markedly
different from that of a suburb. The local
economy and the financial condition of the
owner will impact on an office building's
ability to attract stable tenants on a
consistent basis. In addition, the cost of
refitting office space for a new tenant is
often more costly than for other property
types.
SPECIAL RISKS OF MORTGAGE
LOANS SECURED BY WAREHOUSE
AND SELF STORAGE
FACILITIES.................. Mortgage loans secured by warehouse and
storage facilities may constitute a material
concentration of the mortgage loans in a trust
fund. The storage facilities market contains
low barriers to entry.
Increased competition among self storage
facilities may reduce income available to
repay mortgage loans secured by a self storage
facility. Furthermore, the inability of a
borrower to police what is stored in a self
storage facility due to privacy considerations
may increase environmental risks.
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
21
portion of their revenues from government
reimbursement programs, primarily Medicaid and
Medicare. Medicaid and Medicare are subject to
statutory and regulatory changes, retroactive
rate adjustments, administrative rulings,
policy interpretations, delays by fiscal
intermediaries and government funding
restrictions. Moreover, governmental payors
have employed cost-containment measures that
limit payments to health care providers, and
there exist various proposals for national
health care reform that could further limit
those payments. Accordingly, we cannot provide
assurance that payments under government
reimbursement programs will, in the future, be
sufficient to fully reimburse the cost of
caring for program beneficiaries. If those
payments are insufficient, net operating
income of health care-related facilities that
receive revenues from those sources may
decline, which consequently could have an
adverse affect on the ability of the related
borrowers to meet their obligations under any
mortgage loans secured by health care-related
facilities.
Moreover, health care-related facilities are
generally subject to federal and state laws
that relate to the adequacy of medical care,
distribution of pharmaceuticals, rate setting,
equipment, personnel, operating policies and
additions to facilities and services. In
addition, facilities where such care or other
medical services are provided are subject to
periodic 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,
22
bar it from participation in government
reimbursement programs. In the event of
foreclosure, we cannot provide assurance that
the trustee or any other purchaser at a
foreclosure sale would be entitled to the
rights under the licenses, and the trustee or
other purchaser may have to apply in its own
right for the applicable license. We cannot
provide assurance that the trustee or other
purchaser could obtain the applicable license
or that the related mortgaged property would
be adaptable to other uses.
Government regulation applying specifically to
acute care facilities, skilled nursing
facilities and certain types of assisted
living facilities includes health planning
legislation, enacted by most states, intended,
at least in part, to regulate the supply of
nursing beds. The most common method of
control is the requirement that a state
authority first make a determination of need,
evidenced by its issuance of a certificate of
need, before a long-term care provider can
establish a new facility, add beds to an
existing facility or, in some states, take
certain other actions (for example, acquire
major medical equipment, make major capital
expenditures, add services, refinance
long-term debt, or transfer ownership of a
facility). States also regulate nursing bed
supply in other ways. For example, some states
have imposed moratoria on the licensing of new
beds, or on the certification of new Medicaid
beds, or have discouraged the construction of
new nursing facilities by limiting Medicaid
reimbursements allocable to the cost of new
construction and equipment. In general, a
certificate of need is site specific and
operator specific; it cannot be transferred
from one site to another, or to another
operator, without the approval of the
appropriate state agency. Accordingly, in the
case of foreclosure upon a mortgage loan
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"
23
laws generally prohibit payment or
fee-splitting arrangements between health care
providers that are designed to induce or
encourage the referral of patients to, or the
recommendation of, a particular provider for
medical products or services. Violation of
these restrictions can result in license
revocation, civil and criminal penalties, and
exclusion from participation in Medicare or
Medicaid programs. The state law restrictions
in this area vary considerably from state to
state. Moreover, the federal anti-kickback law
includes broad language that potentially could
be applied to a wide range of referral
arrangements, and regulations designed to
create "safe harbors" under the law provide
only limited guidance. Accordingly, we cannot
provide assurance that such laws will be
interpreted in a manner consistent with the
practices of the owners or operators of the
health care-related mortgaged properties that
are subject to those laws.
The operators of health care-related
facilities are likely to compete on a local
and regional basis with others that operate
similar facilities, some of which competitors
may be better capitalized, may offer services
not offered by such operators, or may be owned
by non-profit organizations or government
agencies supported by endowments, charitable
contributions, tax revenues and other sources
not available to such operators. The
successful operation of a health care-related
facility will generally depend upon:
- 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
24
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, properties used for many
industrial purposes are more prone to
environmental concerns than other property
types.
Aspects of building site design and
adaptability affect the value of an industrial
property. Site characteristics which are
valuable to an industrial property include
clear heights, column spacing, zoning
restrictions, number of bays and bay depths,
divisibility, truck turning radius and overall
functionality and accessibility. Location is
also important because an industrial property
requires the availability of labor sources,
proximity to supply sources and customers and
accessibility to rail lines, major roadways
and other distribution channels.
Industrial properties may be adversely
affected by reduced demand for industrial
space occasioned by a decline in a particular
industry segment (e.g. a decline in defense
spending), and a particular industrial
property that suited the needs of its original
tenant may be difficult to relet to another
tenant or may become functionally obsolete
relative to newer properties.
POOR PROPERTY MANAGEMENT WILL
ADVERSELY AFFECT THE
PERFORMANCE OF THE RELATED
MORTGAGED PROPERTY.......... Each mortgaged property securing a mortgage
loan which has been sold into a trust fund is
managed by a property manager (which generally
is an affiliate of the borrower) or by the
borrower itself. The successful operation of a
real estate project is largely dependent on
the performance and viability of the
management of such project. The property
manager is responsible for:
- 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
25
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 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);
26
- 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.
THE SERVICER WILL HAVE
DISCRETION TO HANDLE OR
AVOID OBLIGOR DEFAULTS IN A
MANNER WHICH MAY BE ADVERSE
TO YOUR INTERESTS........... If and to the extent specified in the
prospectus supplement defaulted mortgage loans
exist or are imminent, in order to maximize
recoveries on defaulted mortgage loans, the
related pooling and servicing agreement will
permit (within prescribed limits) the master
servicer or a special servicer to extend and
modify mortgage loans that are in default or
as to which a payment default is imminent.
While the related pooling and servicing
agreement generally will require a master
servicer to determine that any such extension
or modification is reasonably likely to
produce a greater recovery on a present value
basis than liquidation, we cannot provide
assurance that any such extension or
modification will in fact increase the present
value of receipts from or proceeds of the
affected mortgage loans.
In addition, a master servicer or a special
servicer may receive a workout fee based on
receipts from or proceeds of such mortgage
loans.
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.
27
CREDIT SUPPORT MAY NOT COVER
LOSSES OR RISKS WHICH COULD
ADVERSELY AFFECT PAYMENT ON
YOUR CERTIFICATES........... The prospectus supplement for the offered
certificates of each series will describe any
credit support provided with respect to those
certificates. Use of credit support will be
subject to the conditions and limitations
described in this prospectus and in the
related prospectus supplement. Moreover,
credit support may not cover all potential
losses or risks; for example, credit support
may or may not cover fraud or negligence by a
mortgage loan originator or other parties.
A series of certificates may include one or
more classes of subordinate certificates
(which may include offered certificates), if
so provided in the prospectus supplement.
Although subordination is intended to reduce
the risk to holders of 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
28
of its initial rating analysis. None of the
depositor, the master servicer or any of our
or the master servicer's affiliates will have
any obligation to replace or supplement any
credit enhancement, or to take any other
action to maintain any rating of any series of
certificates.
MORTGAGORS OF COMMERCIAL
MORTGAGE LOANS ARE
SOPHISTICATED AND MAY TAKE
ACTIONS ADVERSE TO YOUR
INTERESTS................... Mortgage loans made to partnerships,
corporations or other entities may entail
risks of loss from delinquency and foreclosure
that are greater than those of mortgage loans
made to individuals. The mortgagor's
sophistication and form of organization may
increase the likelihood of protracted
litigation or bankruptcy in default
situations.
SOME ACTIONS ALLOWED BY THE
MORTGAGE MAY BE LIMITED BY
LAW......................... Mortgages securing mortgage loans included in
a trust fund may contain a due-on-sale clause,
which permits the lender to accelerate the
maturity of the mortgage loan if the borrower
sells, transfers or conveys the related
mortgaged property or its interest in the
mortgaged property. Mortgages securing
mortgage loans included in a trust fund may
also include a 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
29
of a receiver before becoming entitled to
collect the rents. In addition, bankruptcy or
the commencement of similar proceedings by or
in respect of the borrower may adversely
affect the lender's ability to collect the
rents.
INCLUSION IN A TRUST FUND OF
DELINQUENT MORTGAGE LOANS
MAY ADVERSELY AFFECT THE
RATE OF DEFAULTS AND
PREPAYMENTS ON THE MORTGAGE
LOANS....................... If so provided in the prospectus supplement,
the trust fund for a series of certificates
may include mortgage loans that are delinquent
as of the date they are deposited in the trust
fund. A mortgage loan will be considered
"delinquent" if it is 30 days or more past its
most recently contractual scheduled payment
date in payment of all amounts due according
to its terms. In any event, at the time of its
creation, the trust fund will not include
delinquent loans which by principal amount are
more than 20% of the aggregate principal
amount of all mortgage loans in the trust
fund. If so specified in the prospectus
supplement, the servicing of such mortgage
loans will be performed by a special servicer.
Credit support provided with respect to a
series of certificates may not cover all
losses related to delinquent mortgage loans,
and investors should consider the risk that
the inclusion of such mortgage loans in the
trust fund may adversely affect the rate of
defaults and prepayments on the mortgage loans
in the trust fund and the yield on the offered
certificates of such series.
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
30
trust fund includes mortgage loans and the
prospectus supplement does not otherwise
specify, the related pooling and servicing
agreement will contain provisions generally to
the effect that the master servicer, acting on
behalf of the trust fund, may not acquire
title to a mortgaged property or assume
control of its operation unless the master
servicer, based upon a report prepared by a
person who regularly conducts environmental
site assessments, has made the determination
that it is appropriate to do so. These
provisions are designed to reduce
substantially the risk of liability for costs
associated with remediation of hazardous
substances, but we cannot provide assurance in
a given case that those risks can be
eliminated entirely. In addition, it is likely
that any recourse against the person preparing
the environmental report, and such person's
ability to satisfy a judgment, will be
limited.
ONE ACTION JURISDICTION MAY
LIMIT THE ABILITY OF THE
SPECIAL SERVICER TO
FORECLOSE ON A MORTGAGED
PROPERTY.................... Several states (including California) have
laws that prohibit more than one "judicial
action" to enforce a mortgage obligation, and
some courts have construed the term "judicial
action" broadly. The special servicer may need
to obtain advice of counsel prior to enforcing
any of the trust fund's rights under any of
the mortgage loans that include mortgaged
properties where the rule could be applicable.
In the case of a mortgage loan secured by
mortgaged properties located in multiple
states, the special servicer may be required
to foreclose first on properties located in
states where "one action" rules apply (and
where non-judicial foreclosure is permitted)
before foreclosing on properties located in
states where judicial foreclosure is the only
permitted method of foreclosure.
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.
31
In some states, if tenant leases are
subordinate to the liens created by the
mortgage loans and such leases do not contain
attornment provisions, such leases may
terminate upon the transfer of the property to
a foreclosing lender or purchaser at
foreclosure. Accordingly, in the case of the
foreclosure of a mortgaged property located in
such a state and leased to one or more
desirable tenants under leases that do not
contain attornment provisions, such mortgaged
property could experience a further decline in
value if such tenants' leases were terminated
(e.g., if such tenants were paying
above-market rents).
If a lease is senior to a mortgage, the lender
will not (unless it has otherwise agreed with
the tenant) possess the right to dispossess
the tenant upon foreclosure of the property,
and if the lease contains provisions
inconsistent with the mortgage (e.g.,
provisions relating to application of
insurance proceeds or condemnation awards),
the provisions of the lease will take
precedence over the provisions of the
mortgage.
IF MORTGAGED PROPERTIES ARE
NOT IN COMPLIANCE WITH CURRENT
ZONING LAWS, YOU MAY NOT BE
ABLE TO RESTORE COMPLIANCE
FOLLOWING A CASUALTY LOSS... Due to changes in applicable building and
zoning ordinances and codes which have come
into effect after the construction of
improvements on certain of the mortgaged
properties, some improvements may not comply
fully with current zoning laws (including
density, use, parking and set-back
requirements) but may qualify as permitted
non-confirming uses. Such changes may limit
the ability of the related mortgagor to
rebuild the premises "as is" in the event of a
substantial casualty loss. Such limitations
may adversely affect the ability of the
mortgagor to meet its mortgage loan
obligations from cash flow. Insurance proceeds
may not be sufficient to pay off such mortgage
loan in full. In addition, if the mortgaged
property were to be repaired or restored in
conformity with then current law, its value
could be less than the remaining balance on
the mortgage loan and it may produce less
revenue than before such repair or
restoration.
INSPECTIONS OF THE MORTGAGED
PROPERTIES WERE LIMITED..... The mortgaged properties were inspected by
licensed engineers 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
32
provide assurance that all conditions
requiring repair or replacement have been
identified in such inspections.
LITIGATION CONCERNS........... There may be legal proceedings pending and,
from time to time, threatened against the
mortgagors or their affiliates relating to the
business, or arising out of the ordinary
course of business, of the mortgagors and
their affiliates. We cannot provide assurance
that such litigation will not have a material
adverse effect on the distributions to you on
your certificates.
33
DESCRIPTION OF THE TRUST FUNDS
GENERAL
The primary assets of each trust fund will consist of mortgage assets which
include (i) one or more multifamily and/or commercial mortgage loans and
participations therein, (ii) CMBS, 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
34
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
35
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
36
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
37
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.
38
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 or on one or more classes of
certificates. The principal terms of any guaranteed investment contract or other
agreement, and the identity of the obligor under any guaranteed investment
contract or other agreement, will be described in the prospectus supplement.
PRE-FUNDING
If so provided in the prospectus supplement, a trust fund may include
amounts on deposit in a separate pre-funding account that may be used by the
trust fund to acquire additional mortgage assets. Amounts in a pre-funding
account will not exceed 25% of the pool balance of the trust fund as of the Cut-
Off Date. Additional mortgage assets will be selected using criteria that are
substantially similar to the criteria used to select the mortgage assets
included in the trust fund on the closing date. The trust fund may acquire such
additional mortgage assets for a period of time of not more than 120 days after
the closing date for the related series of certificates. Amounts on deposit in
the pre-funding account after the end of the pre-funding period will be
distributed to certificateholders or such other person as set forth in the
prospectus supplement.
In addition, a trust fund may include a separate capitalized interest
account. Amounts on deposit in the capitalized interest account may be used to
supplement investment earnings, if any, of amounts on
39
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.
40
The prospectus supplement will describe the manner in which any prepayment
interest shortfalls will be allocated among the classes of certificates. If so
specified in the prospectus supplement, the master servicer will be required to
apply some or all of its servicing compensation for the corresponding period to
offset the amount of any prepayment interest shortfalls. The prospectus
supplement will also describe any other amounts available to offset prepayment
interest shortfalls. See "Description of the Pooling and Servicing
Agreements--Servicing Compensation and Payment of Expenses."
PREPAYMENT CONSIDERATIONS
A certificate's yield to maturity will be affected by the rate of principal
payments on the mortgage loans in the related trust fund and the allocation of
those principal payments to reduce the principal 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
41
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
42
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
44
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
Wachovia Commercial Mortgage Securities, Inc., the depositor, is a North
Carolina corporation organized on August 17, 1988 as a wholly-owned subsidiary
of Wachovia Bank, National Association (successor by merger to First Union
National Bank), a national banking association with its main office located in
Charlotte, North Carolina. Wachovia Bank, National Association is a subsidiary
of Wachovia Corporation, a North Carolina corporation registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended. Wachovia
Corporation is a financial holding company under the Gramm-Leach-Bliley Act. The
depositor's principal business is to acquire, hold and/or sell or otherwise
dispose of cash flow assets, usually in connection with the securitization of
that asset. The depositor maintains its principal office at 301 South College
Street, Charlotte, North Carolina 28288-0166. Its telephone number is
704-374-6161. There can be no assurance that the depositor will have any
significant assets.
USE OF PROCEEDS
The net proceeds to be received from the sale of certificates will be
applied by the depositor to the purchase of trust assets or will be used by the
depositor for general corporate purposes. The depositor expects to sell the
certificates from time to time, but the timing and amount of offerings of
certificates will
45
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 and servicing agreement. Each series of
certificates may consist of one or more classes of certificates (including
classes of offered certificates), and such class or classes may (i) provide for
the accrual of interest thereon at a fixed, variable or adjustable rate; (ii) be
senior or subordinate to one or more other classes of certificates in
entitlement to certain distributions on the certificates; (iii) be entitled, as
Stripped Principal Certificates, to distributions of principal with
disproportionately small, nominal or no distributions of interest; (iv) be
entitled, as Stripped Interest Certificates, to distributions of interest with
disproportionately small, nominal or no distributions of principal; (v) provide
for distributions of principal and/or interest thereon that commence only after
the occurrence of certain events such as the retirement of one or more other
classes of certificates of such series; (vi) provide for distributions of
principal to be made, from time to time or for designated periods, at a rate
that is faster (and, in some cases, substantially faster) or slower (and, in
some cases, substantially slower) than the rate at which payments or other
collections of principal are received on the mortgage assets in the related
trust fund; (vii) provide for distributions of principal to be made, subject to
available funds, based on a specified principal payment schedule or other
methodology; and/or (viii) provide for distributions based on a combination of
two or more components thereof with one or more of the characteristics described
in this paragraph, including a Stripped Principal Certificate component and a
Stripped Interest Certificate component, to the extent of available funds, in
each case as described in the prospectus supplement. Any such classes may
include classes of offered certificates. With respect to certificates with two
or more components, references in this prospectus to certificate balance,
notional amount and pass-through rate refer to the principal balance, if any,
notional amount, if any, and the pass-through rate, if any, for that component.
Each class of offered certificates of a series will be issued in minimum
denominations corresponding to the certificate balances or, in 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
46
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
47
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.
48
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.
49
If and to the extent so provided in the prospectus supplement, any entity
making advances will be entitled to receive interest on those advances for the
period that such advances are outstanding at the rate specified therein and will
be entitled to pay itself that interest periodically from general collections on
the mortgage assets prior to any payment to certificateholders as described in
the prospectus supplement.
The prospectus supplement for any series of certificates evidencing an
interest in a trust fund that includes CMBS will describe any comparable
advancing obligation of a party to the related pooling and servicing agreement
or of a party to the related CMBS agreement.
REPORTS TO CERTIFICATEHOLDERS
On each distribution date a master servicer or trustee will forward to the
holder of certificates of each class of a series a distribution date statement
accompanying the distribution of principal and/or interest to those holders. As
further provided in the prospectus supplement, the distribution date statement
for each class will set forth to the extent applicable and available:
(i) the amount of such distribution to holders of certificates of such
class applied to reduce the certificate balance thereof;
(ii) the amount of such distribution to holders of certificates of
such class allocable to Accrued Certificate Interest;
(iii) the amount, if any, of such distribution to holders of
certificates of such class allocable to prepayment premiums;
(iv) the amount of servicing compensation received by each servicer and
such other customary information as the master servicer or the
trustee deems necessary or desirable, or that a certificateholder
reasonably requests, to enable certificateholders to prepare their
tax returns;
(v) the aggregate amount of advances included in such distribution and
the aggregate amount of unreimbursed advances at the close of
business on, or as of a specified date shortly prior to, such
distribution date;
(vi) the aggregate principal balance of the related mortgage loans on,
or as of a specified date shortly prior to, such distribution
date;
(vii) the number and aggregate principal balance of any mortgage loans
in respect of which (A) one scheduled payment is delinquent, (B)
two scheduled payments are delinquent, (C) three or more
scheduled payments are delinquent and (D) foreclosure proceedings
have been commenced;
(viii) with respect to any mortgage loan liquidated during the related
prepayment period (as to the current distribution date, generally
the period extending from the prior distribution date to and
including the current distribution date) in connection with a
default on that mortgage loan or because the mortgage loan was
purchased out of the trust fund (other than a payment in full),
(A) the loan number, (B) the aggregate amount of liquidation
proceeds received and (C) the amount of any loss to
certificateholders;
(ix) with respect to any REO Property sold during the related
collection period, (A) the loan number of the related mortgage
loan, (B) the aggregate amount of sales proceeds and (C) the
amount of any loss to certificateholders in respect of the related
mortgage loan;
(x) the certificate balance or notional amount of each class of
certificates (including any class of certificates not offered
hereby) immediately before and immediately after such distribution
date, separately identifying any reduction in the certificate
balance due to the allocation of any losses in respect of the
related mortgage loans;
(xi) the aggregate amount of principal prepayments made on the mortgage
loans during the related prepayment period;
50
(xii) the amount deposited in or withdrawn from any reserve fund on such
distribution date, and the amount remaining on deposit in the
reserve fund as of the close of business on such distribution
date;
(xiii) the amount of any Accrued Certificate Interest due but not paid
on such class of offered certificates at the close of business
on such distribution date; and
(xiv) if such class of offered certificates has a variable pass-through
rate or an adjustable pass-through rate, the pass-through rate
applicable thereto for such distribution date.
In the case of information furnished pursuant to subclauses (i)-(iv) above,
the amounts will be expressed as a dollar amount per minimum denomination of the
relevant class of offered certificates or per a specified portion of such
minimum denomination. The prospectus supplement for each series of offered
certificates will describe any additional information to be included in reports
to the holders of such certificates.
Within a reasonable period of time after the end of each calendar year, the
related master servicer or trustee, as the case may be, will be required to
furnish to each person who at any time during the calendar year was a holder of
an offered certificate a statement containing the information set forth in
subclauses (i)-(iv) above, aggregated for such calendar year or the applicable
portion thereof during which such person was a certificateholder. Such
obligation will be deemed to have been satisfied to the extent that
substantially comparable information is provided pursuant to any requirements of
the Code as are from time to time in force. See, however, "Description of the
Certificates--Book-Entry Registration and Definitive Certificates."
If the trust fund for a series of certificates includes CMBS, the ability
of the related master servicer or trustee, as the case may be, to include in any
distribution date statement information regarding the mortgage loans underlying
such CMBS will depend on the reports received with respect to such CMBS. In such
cases, the prospectus supplement will describe the loan-specific information to
be included in the distribution date statements that will be forwarded to the
holders of the offered certificates of that series in connection with
distributions made to them.
VOTING RIGHTS
The voting rights evidenced by each series of certificates will be
allocated among the respective classes of such series in the manner described in
the prospectus supplement.
Certificateholders will generally have a right to vote only with respect to
required consents to certain amendments to the related pooling and servicing
agreement and as otherwise specified in the prospectus supplement. See
"Description of the Pooling and Servicing Agreements--Amendment." The holders of
specified amounts of certificates of a particular series will have the
collective right to remove the related trustee and also to cause the removal of
the related master servicer in the case of an event of default under the related
pooling and servicing agreement on the part of the master servicer. See
"Description of the Pooling and Servicing Agreements--Events of Default,"
"--Rights upon Event of Default" and "--Resignation and Removal of the Trustee."
TERMINATION
The obligations created by the pooling and servicing agreement for each
series of certificates will terminate upon the payment (or provision for
payment) to certificateholders of that series of all amounts held in the related
certificate account, or otherwise by the related master servicer or trustee or
by a special servicer, and required to be paid to such certificateholders
pursuant to such pooling and servicing agreement following the earlier of (i)
the final payment or other liquidation of the last mortgage asset subject to the
pooling and servicing agreement or the disposition of all property acquired upon
foreclosure of any mortgage loan subject to the pooling and servicing agreement
and (ii) the purchase of all of the assets of the related trust fund by the
party entitled to effect such termination, under the circumstances and in the
manner that will be described in the prospectus supplement. Written notice of
termination of a
51
pooling and servicing agreement will be given to each certificateholder of the
related series, and the final distribution will be made only upon presentation
and surrender of the certificates of such series at the location to be specified
in the notice of termination.
If so specified in the prospectus supplement, a series of certificates will
be subject to optional early termination through the repurchase of the assets in
the related trust fund by a party that will be specified in the prospectus
supplement, under the circumstances and in the manner set forth in the
prospectus supplement. If so provided in the prospectus supplement, upon the
reduction of the certificate balance of a specified class or classes of
certificates by a specified percentage or amount, a party identified in the
prospectus supplement will be authorized or required to solicit bids for the
purchase of all the assets of the related trust fund, or of a sufficient portion
of such assets to retire such class or classes, under the circumstances and in
the manner set forth in the prospectus supplement. In any event, unless
otherwise disclosed in the prospectus supplement, any such repurchase or
purchase shall be at a price or prices that are generally based upon the unpaid
principal balance of, plus accrued interest on, all mortgage loans (other than
mortgage loans secured by REO Properties) then included in a trust fund and the
fair market value of all REO Properties then included in the trust fund, which
may or may not result in full payment of the aggregate certificate balance plus
accrued interest and any undistributed shortfall in interest for the then
outstanding certificates. Any sale of trust fund assets will be without recourse
to the trust and/or certificateholders, provided, however, that there can be no
assurance that in all events a court would accept such a contractual
stipulation.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the prospectus supplement, one or more classes of the
offered certificates of any series will be offered in book-entry format through
the facilities of DTC, and each such class will be represented by one or more
global certificates registered in the name of DTC or its nominee.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking corporation" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participating organizations deposit
with DTC. DTC also facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book entry changes in their accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
participants that maintain accounts with DTC include securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations. DTC is owned by a number of its direct participants
and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and
the National Association of Securities Dealers, Inc. Access to the DTC system
also is available to indirect participants in the DTC system such as securities
brokers and dealers, banks and trust companies that clear through or maintain a
custodial relationship with a direct participant in the DTC system, either
directly or indirectly. The rules applicable to DTC and its participants are on
file with the Securities and Exchange Commission.
Purchases of book-entry certificates under the DTC system must be made by
or through direct participants in the DTC system, which will receive a credit
for the book-entry certificates on DTC's records. A certificate owner's
ownership interest as an actual purchaser of a book-entry certificate will in
turn be recorded on the records of direct participants and indirect
participants. Certificate owners will not receive written confirmation from DTC
of their purchases, but certificate owners are expected to receive written
confirmations providing details of such transactions, as well as periodic
statements of their holdings, from the direct participant or indirect
participant through which each certificate owner entered into the transaction.
Transfers of ownership interest in the book-entry certificates will be
accomplished by entries made on the books of participants acting on behalf of
certificate owners. Certificate owners will not receive certificates
representing their ownership interests in the book-entry certificates, except in
the event that use of the book-entry system for the book-entry certificates of
any series is discontinued as described below.
52
DTC will not know the identity of actual certificate owners of the
book-entry certificates; DTC's records reflect only the identity of the direct
participants in the DTC system to whose accounts such certificates are credited.
The participants will remain responsible for keeping account of their holdings
on behalf of their customers. Notices and other communications conveyed by DTC
to direct participants in the DTC system, by direct participants to indirect
participants, and by direct participants and indirect participants to
certificate owners will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Distributions on the book-entry certificates will be made to DTC. DTC's
practice is to credit direct participants' accounts on the related distribution
date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on such date.
Disbursement of such distributions by participants to certificate owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of each such participant (and not
of DTC, the depositor or any trustee or master servicer), subject to any
statutory or regulatory requirements as may be in effect from time to time.
Under a book-entry system, certificate owners may receive payments after the
related distribution date.
As may be provided in the prospectus supplement, the only
"certificateholder" (as such term is used in the related pooling and servicing
agreement) of a book-entry certificate will be the nominee of DTC, and the
certificate owners will not be recognized as certificateholders under the
pooling and servicing agreement. Certificate owners will be permitted to
exercise the rights of certificateholders under the related pooling and
servicing agreement only indirectly through the participants who in turn will
exercise their rights through DTC. The depositor is informed that DTC will take
action permitted to be taken by a certificateholder under a pooling and
servicing agreement only at the direction of one or more participants to whose
account with DTC interests in the book-entry certificates are credited.
Because DTC can act only on behalf of direct participants in the DTC
system, who in turn act on behalf of indirect participants and certain
certificate owners, the ability of a certificate owner to pledge its interest in
book-entry certificates to persons or entities that do not participate in the
DTC system, or otherwise take actions in respect of its interest in book-entry
certificates, may be limited due to the lack of a physical certificate
evidencing such interest.
As may be specified in the prospectus supplement, certificates initially
issued in book-entry form will be issued as definitive certificates to
certificate owners or their nominees, rather than to DTC or its nominee, only if
(i) the depositor advises the trustee in writing that DTC is no longer willing
or able to properly discharge its responsibilities as depository with respect to
such certificates and the depositor is unable to locate a qualified successor or
(ii) the depositor, at its option, elects to terminate the book-entry system
through DTC with respect to such certificates. Upon the occurrence of either of
the events described in the preceding sentence, DTC will be required to notify
all participants of the availability through DTC of definitive certificates.
Upon surrender by DTC of the certificate or certificates representing a class of
book-entry certificates, together with instructions for registration, the
trustee or other designated party will be required to issue to the certificate
owners identified in such instructions the definitive certificates to which they
are entitled, and thereafter the holders of such definitive certificates will be
recognized as certificateholders under the related pooling and servicing
agreement.
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS
GENERAL
The certificates of each series will be issued pursuant to a pooling and
servicing agreement or other agreement specified in the prospectus supplement.
In general, the parties to a pooling and servicing agreement will include the
depositor, the trustee, the master servicer and, in some cases, a special
servicer appointed as of the date of the pooling and servicing agreement.
However, a pooling and servicing agreement that relates to a trust fund that
consists solely of CMBS may not include a master servicer or
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other servicer as a party. All parties to each pooling and servicing agreement
under which certificates of a series are issued will be identified in the
prospectus supplement.
A form of a pooling and servicing agreement has been filed as an exhibit to
the registration statement of which this prospectus is a part. However, the
provisions of each pooling and servicing agreement will vary depending upon the
nature of the certificates to be issued thereunder and the nature of the related
trust fund. The following summaries describe certain provisions that may appear
in a pooling and servicing agreement under which certificates that evidence
interests in mortgage loans will be issued. The prospectus supplement for a
series of certificates will describe any provision of the related pooling and
servicing agreement that materially differs from the description thereof
contained in this prospectus and, if the related trust fund includes CMBS, will
summarize all of the material provisions of the related pooling and servicing
agreement. The summaries in this prospectus do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, all of the
provisions of the pooling and servicing agreement for each series of
certificates and the description of such provisions in the prospectus
supplement. As used in this prospectus with respect to any series, the term
"certificate" refers to all of the certificates of that series, whether or not
offered hereby and by the prospectus supplement, unless the context otherwise
requires.
ASSIGNMENT OF MORTGAGE ASSETS; REPURCHASES
As set forth in the prospectus supplement, generally at the time of
issuance of any series of certificates, the depositor will assign (or cause to
be assigned) to the designated trustee the mortgage loans to be included in the
related trust fund, together with, unless otherwise specified in the prospectus
supplement, all principal and interest to be received on or with respect to such
mortgage loans after the Cut-Off Date, other than principal and interest due on
or before the Cut-Off Date. The trustee will, concurrently with such assignment,
deliver the certificates to or at the direction of the depositor in exchange for
the mortgage loans and the other assets to be included in the trust fund for
such series. Each mortgage loan will be identified in a schedule appearing as an
exhibit to the related pooling and servicing agreement. Such schedule generally
will include detailed information that pertains to each mortgage loan included
in the related trust fund, which information will typically include the address
of the related mortgaged property and type of such property; the mortgage
interest rate and, if applicable, the applicable index, gross margin, adjustment
date and any rate cap information; the original and remaining term to maturity;
the original amortization term; the original and outstanding principal balance;
and the Loan-to-Value Ratio and Debt Service Coverage Ratio as of the date
indicated.
With respect to each mortgage loan to be included in a trust fund, the
depositor will deliver (or cause to be delivered) to the related trustee (or to
a custodian appointed by the trustee) certain loan documents which will include
the original mortgage note (or lost note affidavit) endorsed, without recourse,
to the order of the trustee, the original mortgage (or a certified copy thereof)
with evidence of recording indicated thereon and an assignment of the mortgage
to the trustee in recordable form. The related pooling and servicing agreement
will require that the depositor or other party thereto promptly cause each such
assignment of mortgage to be recorded in the appropriate public office for real
property records.
The related trustee (or the custodian appointed by the trustee) will be
required to review the mortgage loan documents within a specified period of days
after receipt thereof, and the trustee (or the custodian) will hold such
documents in trust for the benefit of the certificateholders of the related
series. Unless otherwise specified in the prospectus supplement, if any document
is found to be missing or defective, in either case such that interests of the
certificateholders are materially and adversely affected, the trustee (or such
custodian) will be required to notify the master servicer and the depositor, and
the master servicer will be required to notify the relevant seller of the
mortgage asset. In that case, and if the mortgage asset seller cannot deliver
the document or cure the defect within a specified number of days after receipt
of such notice, then unless otherwise specified in the prospectus supplement,
the mortgage asset seller will be obligated to replace the related mortgage loan
or repurchase it from the trustee at a price that will be specified in the
prospectus supplement.
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If so provided in the prospectus supplement, the depositor will, as to some
or all of the mortgage loans, assign or cause to be assigned to the trustee the
related lease assignments. In certain cases, the trustee, or master servicer, as
applicable, may collect all moneys under the related leases and distribute
amounts, if any, required under the leases for the payment of maintenance,
insurance and taxes, to the extent specified in the related leases. The trustee,
or if so specified in the prospectus supplement, the master servicer, as agent
for the trustee, may hold the leases in trust for the benefit of the
certificateholders.
With respect to each CMBS in certificate form, the depositor will deliver
or cause to be delivered to the trustee (or the custodian) the original
certificate or other definitive evidence of such CMBS together with bond power
or other instruments, certifications or documents required to transfer fully
such CMBS to the trustee for the benefit of the certificateholders. With respect
to each CMBS in uncertificated or book-entry form or held through a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, the
depositor and the trustee will cause such CMBS to be registered directly or on
the books of such clearing corporation or of a financial intermediary in the
name of the trustee for the benefit of the certificateholders. Unless otherwise
provided in the prospectus supplement, the related pooling and servicing
agreement will require that either the depositor or the trustee promptly cause
any CMBS in certificated form not registered in the name of the trustee to be
reregistered, with the applicable persons, in the name of the trustee.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
The depositor will, with respect to each mortgage loan in the related trust
fund, make or assign certain representations and warranties made by the
warranting party, covering, by way of example: (i) the accuracy of the
information set forth for such mortgage loan on the schedule of mortgage loans
appearing as an exhibit to the related pooling and servicing agreement; (ii) the
enforceability of the related mortgage note and mortgage and the existence of
title insurance insuring the lien priority of the related mortgage; (iii) the
warranting party's title to the mortgage loan and the authority of the
warranting party to sell the mortgage loan; and (iv) the payment status of the
mortgage loan. Each warranting party will be identified in the prospectus
supplement.
Each pooling and servicing agreement will provide that the master servicer
and/or trustee will be required to notify promptly any warranting party of any
breach of any representation or warranty made by it in respect of a mortgage
loan that materially and adversely affects the interests of the related
certificateholders. If such warranting party cannot cure such breach within a
specified period following the date on which it was notified of such breach,
then, unless otherwise provided in the prospectus supplement, it will be
obligated to repurchase such mortgage loan from the trustee within a specified
period at a price that will be specified in the prospectus supplement. If so
provided in the prospectus supplement for a series of certificates, a warranting
party, in lieu of repurchasing a mortgage loan as to which a breach has
occurred, will have the option, exercisable upon certain conditions and/or
within a specified period after initial issuance of such series of certificates,
to replace such mortgage loan with one or more other mortgage loans, in
accordance with standards that will be described in the prospectus supplement.
This repurchase or substitution obligation may constitute the sole remedy
available to holders of certificates of any series for a breach of
representation and warranty by a warranting party. Moreover, neither the
depositor (unless it is the warranting party) nor 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.
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CERTIFICATE ACCOUNT
General. The master servicer and/or the trustee will, as to each trust
fund, establish and maintain or cause to be established and maintained
certificate accounts for the collection of payments on the related mortgage
loans, which will be established so as to comply with the standards of each
rating agency that has rated any one or more classes of certificates of the
related series. As described in the prospectus supplement, a certificate account
may be maintained either as an interest-bearing or a non-interest-bearing
account, and the funds held therein may be held as cash or invested in permitted
investments, such as United States government securities and other investment
grade obligations specified in the related pooling and servicing agreement. Any
interest or other income earned on funds in the certificate account will be paid
to the related master servicer or trustee as additional compensation. If
permitted by such rating agency or agencies and so specified in the prospectus
supplement, a certificate account may contain funds relating to more than one
series of mortgage pass-through certificates and may contain other funds
representing payments on mortgage loans owned by the related master servicer or
serviced by it on behalf of others.
Deposits. Unless otherwise provided in the related pooling and servicing
agreement and described in the prospectus supplement, the related master
servicer, trustee or special servicer will be required to deposit or cause to be
deposited in the certificate account for each trust fund within a certain period
following receipt (in the case of collections and payments), the following
payments and collections received, or advances made, by the master servicer, the
trustee or any special servicer subsequent to the Cut-Off Date (other than
payments due on or before the Cut-Off Date):
(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
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Mortgage Loans," and all liquidation proceeds resulting from any
mortgage asset purchased as described under "Description of the
Certificates--Termination;"
(viii) any amounts paid by the master servicer to cover prepayment
interest shortfalls arising out of the prepayment of mortgage
loans as described under "--Servicing Compensation and Payment of
Expenses;"
(ix) to the extent that any such item does not constitute additional
servicing compensation to the master servicer or a special
servicer, any payments on account of modification or assumption
fees, late payment charges, prepayment premiums or lenders' equity
participations on the mortgage loans;
(x) all payments required to be deposited in the certificate account
with respect to any deductible clause in any blanket insurance
policy described under "--Hazard Insurance Policies;"
(xi) any amount required to be deposited by the master servicer or the
trustee in connection with losses realized on investments for the
benefit of the master servicer or the trustee, as the case may be,
of funds held in the certificate account; and
(xii) any other amounts required to be deposited in the certificate
account as provided in the related pooling and servicing agreement
and described in the prospectus supplement.
Withdrawals. Unless otherwise provided in the related pooling and
servicing agreement and described in the prospectus supplement, the master
servicer, trustee or special servicer may make withdrawals from the certificate
account for each trust fund for any of the following purposes:
(i) to make distributions to the certificateholders on each
distribution date;
(ii) to reimburse the master servicer or any other specified person
for unreimbursed amounts advanced by it as described under
"Description of the Certificates--Advances in Respect of
Delinquencies," such reimbursement to be made out of amounts
received which were identified and applied by the master servicer
as late collections of interest (net of related servicing fees)
on and principal of the particular mortgage loans with respect to
which the advances were made or out of amounts drawn under any
form of credit support with respect to such mortgage loans;
(iii) to reimburse the master servicer or a special servicer for unpaid
servicing fees earned by it and certain unreimbursed servicing
expenses incurred by it with respect to mortgage loans in the
trust fund and properties acquired in respect thereof, such
reimbursement to be made out of amounts that represent
liquidation proceeds and insurance proceeds collected on the
particular mortgage loans and properties, and net income
collected on the particular properties, with respect to which
such fees were earned or such expenses were incurred or out of
amounts drawn under any form of credit support with respect to
such mortgage loans and properties;
(iv) to reimburse the master servicer or any other specified person for
any advances described in clause (ii) above made by it, any
servicing expenses referred to in clause (iii) above incurred by
it and any servicing fees earned by it, which, in the good faith
judgment of the master servicer or such other person, will not be
recoverable from the amounts described in clauses (ii) and (iii),
respectively, such reimbursement to be made from amounts collected
on other mortgage loans in the related trust fund or, if and to
the extent so provided by the related pooling and servicing
agreement and described in the prospectus supplement, only from
that portion of amounts collected on such other mortgage loans
that is otherwise distributable on one or more classes of
subordinate certificates of the related series;
(v) if and to the extent described in the prospectus supplement, to
pay the master servicer, a special servicer or another specified
entity (including a provider of credit support) interest
57
accrued on the advances described in clause (ii) above made by it
and the servicing expenses described in clause (iii) above
incurred by it while such remain outstanding and unreimbursed;
(vi) to pay for costs and expenses incurred by the trust fund for
environmental site assessments performed with respect to mortgaged
properties that constitute security for defaulted mortgage loans,
and for any containment, clean-up or remediation of hazardous
wastes and materials present on such mortgaged properties, as
described under "--Realization Upon Defaulted Mortgage Loans;"
(vii) to reimburse the master servicer, the depositor, or any of their
respective directors, officers, employees and agents, as the case
may be, for certain expenses, costs and liabilities incurred
thereby, as and to the extent described under "--Certain Matters
Regarding the Master Servicer and the Depositor;"
(viii) if and to the extent described in the prospectus supplement, to
pay the fees of the trustee;
(ix) to reimburse the trustee or any of its directors, officers,
employees and agents, as the case may be, for certain expenses,
costs and liabilities incurred thereby, as and to the extent
described under "--Certain Matters Regarding the Trustee;"
(x) to pay the master servicer or the trustee, as additional
compensation, interest and investment income earned in respect of
amounts held in the certificate account and, to the extent
described in the prospectus supplement, prepayment interest
excesses collected from borrowers in connection with prepayments
of mortgage loans and late charges and default interest collected
from borrowers;
(xi) to pay (generally from related income) for costs incurred in
connection with the operation, management and maintenance of any
mortgaged property acquired by the trust fund by foreclosure or
otherwise;
(xii) if one or more elections have been made to treat the trust fund or
designated portions thereof as a REMIC, to pay any federal, state
or local taxes imposed on the trust fund or its assets or
transactions, as and to the extent described under "Material
Federal Income Tax Consequences--Taxation of Owners of REMIC
Residual Certificates--Prohibited Transactions Tax and Other
Taxes;"
(xiii) to pay for the cost of an independent appraiser or other expert
in real estate matters retained to determine a fair sale price
for a defaulted mortgage loan or a property acquired in respect
thereof in connection with the liquidation of such mortgage loan
or property;
(xiv) to pay for the cost of various opinions of counsel obtained
pursuant to the related pooling and servicing agreement for the
benefit of certificateholders;
(xv) to pay for the cost of recording the pooling and servicing
agreement if recorded in accordance with the pooling and servicing
agreement;
(xvi) to make any other withdrawals permitted by the related pooling and
servicing agreement and described in the prospectus supplement;
and
(xvii) to clear and terminate the certificate account upon the
termination of the trust fund.
COLLECTION AND OTHER SERVICING PROCEDURES
Master Servicer. The master servicer for any mortgage pool, directly or
through sub-servicers, will be required to make reasonable efforts to collect
all scheduled mortgage loan payments and will be required to follow such
collection procedures as it would follow with respect to mortgage loans that are
comparable to such mortgage loans and held for its own account, provided such
procedures are consistent with (i) the terms of the related pooling and
servicing agreement and any related instrument of credit support included
58
in the related trust fund, (ii) applicable law and (iii) the servicing standard
specified in the pooling and servicing agreement.
The master servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining escrow or
impound accounts for payment of taxes, insurance premiums and similar items, or
otherwise monitoring the timely payment of those items; attempting to collect
delinquent payments; supervising foreclosures; conducting property inspections
on a periodic or other basis; managing REO Properties; and maintaining servicing
records relating to the mortgage loans. Generally, the master servicer will be
responsible for filing and settling claims in respect of particular mortgage
loans under any applicable instrument of credit support. See "Description of
Credit Support."
A master servicer may agree to modify, waive or amend any term of any
mortgage loan serviced by it in a manner consistent with the servicing standard
specified in the pooling and servicing agreement; provided that the
modification, waiver or amendment will not (i) affect the amount or timing of
any scheduled payments of principal or interest on the mortgage loan or (ii) in
the judgment of the master servicer, materially impair the security for the
mortgage loan or reduce the likelihood of timely payment of amounts due thereon.
A master servicer also may agree to any other modification, waiver or amendment
if, in its judgment (x) a material default on the mortgage loan has occurred or
a payment default is imminent and (y) such modification, waiver or amendment is
reasonably likely to produce a greater recovery with respect to the mortgage
loan on a present value basis than would liquidation.
Sub-Servicers. A master servicer may delegate its servicing obligations in
respect of the mortgage loans serviced by it to one or more third-party
sub-servicers, but the master servicer will remain liable for such obligations
under the related pooling and servicing agreement unless otherwise provided in
the prospectus supplement. Unless otherwise provided in the prospectus
supplement, each sub-servicing agreement between a master servicer and a
sub-servicer must provide that, if for any reason the master servicer is no
longer acting in such capacity, the trustee or any successor master servicer may
assume the master servicer's rights and obligations under such sub-servicing
agreement.
Generally, the master servicer will be solely liable for all fees owed by
it to any sub-servicer, irrespective of whether the master servicer's
compensation pursuant to the related pooling and servicing agreement is
sufficient to pay such fees. Each sub-servicer will be reimbursed by the master
servicer for certain expenditures which it makes, generally to the same extent
the master servicer would be reimbursed under a pooling and servicing agreement.
See "--Certificate Account" and "--Servicing Compensation and Payment of
Expenses."
Special Servicers. If and to the extent specified in the prospectus
supplement, a special servicer may be a party to the related pooling and
servicing agreement or may be appointed by the master servicer or another
specified party to perform certain specified duties (for example, the servicing
of defaulted mortgage loans) in respect of the servicing of the related mortgage
loans. The special servicer under a pooling and servicing agreement may be an
affiliate of the depositor and may have other normal business relationships with
the depositor or the depositor's affiliates. The master servicer will be liable
for the performance of a special servicer only if, and to the extent, set forth
in the prospectus supplement.
Each pooling and servicing agreement may provide that neither the special
servicer nor any director, officer, employee or agent of the special servicer
will be under any liability to the related trust fund or certificateholders for
any action taken, or not taken, in good faith pursuant to the pooling and
servicing agreement or for errors in judgment; provided, however, that neither
the special servicer nor any such person will be protected against any breach of
a representation, warranty or covenant made in such pooling and servicing
agreement, or against any expense or liability that such person is specifically
required to bear pursuant to the terms of such pooling and servicing agreement,
or against any liability that would otherwise be imposed by reason of
misfeasance, bad faith or negligence in the performance of obligations or duties
thereunder.
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REALIZATION UPON DEFAULTED MORTGAGE LOANS
A borrower's failure to make required mortgage loan payments may mean that
operating income is insufficient to service the mortgage debt, or may reflect
the diversion of that income from the servicing of the mortgage debt. In
addition, a borrower that is unable to make mortgage loan payments may also be
unable to make timely payment of taxes and to otherwise maintain and insure the
related mortgaged property. In general, the related master servicer will be
required to monitor any mortgage loan that is in default, evaluate whether the
causes of the default can be corrected over a reasonable period without
significant impairment of the value of the related mortgaged property, initiate
corrective action in cooperation with the borrower if cure is likely, inspect
the related mortgaged property and take such other actions as are consistent
with the servicing standard specified in the pooling and servicing agreement. A
significant period of time may elapse before the master servicer is able to
assess the success of any such corrective action or the need for additional
initiatives.
The time within which the master servicer can make the initial
determination of appropriate action, evaluate the success of corrective action,
develop additional initiatives, institute foreclosure proceedings and actually
foreclose (or accept a deed to a mortgaged property in lieu of foreclosure) on
behalf of the certificateholders may vary considerably depending on the
particular mortgage loan, the mortgaged property, the borrower, the presence of
an acceptable party to assume the mortgage loan and the laws of the jurisdiction
in which the mortgaged property is located. If a borrower files a bankruptcy
petition, the master servicer may not be permitted to accelerate the maturity of
the related mortgage loan or to foreclose on the mortgaged property for a
considerable period of time. See "Certain Legal Aspects of Mortgage Loans and
Leases."
A pooling and servicing agreement may grant to the master servicer, a
special servicer, a provider of credit support and/or the holder or holders of
certain classes of certificates of the related series a right of first refusal
to purchase from the trust fund, at a predetermined purchase price (which, if
insufficient to fully fund the entitlements of certificateholders to principal
and interest thereon, will be specified in the prospectus supplement), any
mortgage loan as to which a specified number of scheduled payments are
delinquent. In addition, 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 and servicing 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 and servicing
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 and servicing 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, the master servicer, on
behalf of the trustee, may at any time institute foreclosure proceedings,
exercise any power of sale contained in the related mortgage, obtain a deed in
lieu of foreclosure, or otherwise acquire title to the related mortgaged
property, by operation of law or otherwise, if such action is consistent with
the servicing standard specified in the pooling and servicing agreement. Unless
otherwise specified in the prospectus supplement, the master servicer may not,
however, acquire title to any mortgaged property or take any other action that
would cause the trustee, for the benefit of certificateholders of the related
series, or any other specified person to be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or an "operator" of, such
mortgaged property within the meaning of certain federal environmental laws,
unless 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
60
(ii) either there are no circumstances or conditions present at the
mortgaged property relating to the use, management or disposal of
hazardous materials for which investigation, testing, monitoring,
containment, cleanup or remediation could be required under any
applicable environmental laws and regulations or, if such
circumstances or conditions are present for which any such action
could reasonably be expected to be required, taking such actions
with respect to the mortgaged property is reasonably likely to
produce a greater recovery on a present value basis than not
taking such actions. See "Certain Legal Aspects of Mortgage Loans
and Leases--Environmental Considerations."
If title to any mortgaged property is acquired by a trust fund as to which
a REMIC election has been made, the master servicer, on behalf of the trust
fund, will be required to sell the mortgaged property by the end of the third
calendar year following the year of acquisition or unless (i) the Internal
Revenue Service grants an extension of time to sell such property or (ii) the
trustee receives an opinion of independent counsel to the effect that the
holding of the property by the trust fund for more than three years after the
end of the calendar year in which it was acquired will not result in the
imposition of a tax on the trust fund or cause the trust fund to fail to qualify
as a REMIC under the Code at any time that any certificate is outstanding.
Subject to the foregoing, the master servicer will generally be required to
solicit bids for any mortgaged property so acquired in such a manner as will be
reasonably likely to realize a fair price for such property. If the trust fund
acquires title to any mortgaged property, the master servicer, on behalf of the
trust fund, may retain an independent contractor to manage and operate such
property. The retention of an independent contractor, however, will not relieve
the master servicer of its obligation to manage such mortgaged property in a
manner consistent with the servicing standard specified in the pooling and
servicing agreement.
If liquidation proceeds collected with respect to a defaulted mortgage loan
are less than the outstanding principal balance of the defaulted mortgage loan
plus interest accrued thereon plus the aggregate amount of reimbursable expenses
incurred by the master servicer with respect to such mortgage loan, the trust
fund will realize a loss in the amount of such difference. The master servicer
will be entitled to reimburse itself from the liquidation proceeds recovered on
any defaulted mortgage loan (prior to the distribution of such liquidation
proceeds to certificateholders), amounts that represent unpaid servicing
compensation in respect of the mortgage loan, unreimbursed servicing expenses
incurred with respect to the mortgage loan and any unreimbursed advances of
delinquent payments made with respect to the mortgage loan.
HAZARD INSURANCE POLICIES
Each pooling and servicing agreement may require the related master
servicer to cause each mortgage loan borrower to maintain a hazard insurance
policy that provides for such coverage as is required under the related mortgage
or, if the mortgage permits the holder thereof to dictate to the borrower the
insurance coverage to be maintained on the related mortgaged property, such
coverage as is consistent with the requirements of the servicing standard
specified in the pooling and servicing agreement. Such coverage generally will
be in an amount equal to the lesser of the principal balance owing on such
mortgage loan and the replacement cost of the mortgaged property, but in either
case not less than the amount necessary to avoid the application of any
co-insurance clause contained in the hazard insurance policy. The ability of the
master servicer to assure that hazard insurance proceeds are appropriately
applied may be dependent upon its being named as an additional insured under any
hazard insurance policy and under any other insurance policy referred to below,
or upon the extent to which information concerning covered losses is furnished
by borrowers. All amounts collected by the master servicer under any such policy
(except for amounts to be applied to the restoration or repair of the mortgaged
property or released to the borrower in accordance with the master servicer's
normal servicing procedures and/or to the terms and conditions of the related
mortgage and mortgage note) will be deposited in the related certificate
account. The pooling and servicing agreement may provide that the master
servicer may satisfy its obligation to cause each borrower to maintain such a
hazard insurance policy by maintaining a blanket policy insuring against hazard
losses on all of the mortgage loans in the related trust fund. If such blanket
policy contains a
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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.
The hazard insurance policies covering the mortgaged properties will
typically contain co-insurance clauses that in effect require an insured at all
times to carry insurance of a specified percentage (generally 80% to 90%) of the
full replacement value of the improvements on the property in order to recover
the full amount of any partial loss. If the insured's coverage falls below this
specified percentage, such clauses generally provide that the insurer's
liability in the event of partial loss does not exceed the lesser of (i) the
replacement cost of the improvements less physical depreciation and (ii) such
proportion of the loss as the amount of insurance carried bears to the specified
percentage of the full replacement cost of such improvements.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the mortgage loans may contain a due-on-sale clause that
entitles the lender to accelerate payment of the mortgage loan upon any sale or
other transfer of the related mortgaged property made without the lender's
consent. Certain of the mortgage loans may also contain a due-on-encumbrance
clause that entitles the lender to accelerate the maturity of the mortgage loan
upon the creation of any other lien or encumbrance upon the mortgaged property.
The master servicer will determine whether to exercise any right the trustee may
have under any such provision in a manner consistent with the servicing standard
specified in the pooling and servicing agreement. Unless otherwise specified in
the prospectus supplement, the master servicer will be entitled to retain as
additional servicing compensation any fee collected in connection with the
permitted transfer of a mortgaged property. See "Certain Legal Aspects of
Mortgage Loans and Leases--Due-on-Sale and Due-on-Encumbrance."
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Generally, a master servicer's primary servicing compensation with respect
to a series of certificates will come from the periodic payment to it of a
portion of the interest payments on each mortgage loan in the related trust
fund. Since that compensation is generally based on a percentage of the
principal balance of each such mortgage loan outstanding from time to time, it
will decrease in accordance with the amortization of the mortgage loans. The
prospectus supplement with respect to a series of certificates may provide that,
as additional compensation, the master servicer may retain all or a portion of
late payment charges, prepayment premiums, modification fees and other fees
collected from borrowers and any interest or other income that may be earned on
funds held in the certificate account. Any sub-servicer will receive a portion
of the master servicer's compensation as its sub-servicing compensation.
In addition to amounts payable to any sub-servicer, a master servicer may
be required, to the extent provided in the prospectus supplement, to pay from
amounts that represent its servicing compensation certain expenses incurred in
connection with the administration of the related trust fund, including, without
limitation, payment of the fees and disbursements of independent accountants and
payment of 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
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prospectus supplement, interest on such expenses at the rate specified therein,
and the fees of the trustee and any special servicer, may be required to be
borne by the trust fund.
If and to the extent provided in the prospectus supplement, the master
servicer may be required to apply a portion of the servicing compensation
otherwise payable to it in respect of any period to prepayment interest
shortfalls.
See "Yield Considerations--Shortfalls in Collections of Interest Resulting
from Prepayments."
EVIDENCE AS TO COMPLIANCE
Each pooling and servicing agreement may require that, on or before a
specified date in each year, the master servicer cause a firm of independent
public accountants to furnish a statement to the trustee to the effect that,
based on an examination by such firm conducted substantially in compliance with
the Uniform Single Audit Program for Mortgage Bankers, the servicing by or on
behalf of the master servicer of mortgage loans under pooling and servicing
agreements substantially similar to each other (which may include the related
pooling and servicing agreement) was conducted through the preceding calendar
year or other specified twelve-month period in compliance with the terms of such
agreements except for any significant exceptions or errors in records that, in
the opinion of such firm, paragraph 4 of the Uniform Single Audit Program for
Mortgage Bankers requires it to report. Each pooling and servicing agreement
will also provide for delivery to the trustee, on or before a specified date in
each year, of a statement signed by one or more officers of the master servicer
to the effect that the master servicer has fulfilled its material obligations
under the pooling and servicing agreement throughout the preceding calendar year
or other specified twelve-month period.
Copies of the annual accountants' statement and the statement of officers
of a master servicer will be made available to certificateholders upon written
request to the master servicer.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE DEPOSITOR
The master servicer under a pooling and servicing agreement may be an
affiliate of the depositor and may have other normal business relationships with
the depositor or the depositor's affiliates. The related pooling and servicing
agreement may permit the master servicer to resign from its obligations
thereunder upon a determination that such obligations are no longer permissible
under applicable law or are in material conflict by reason of applicable law
with any other activities carried on by it at the date of the pooling and
servicing agreement. Unless applicable law requires the master servicer's
resignation to be effective immediately, no such resignation will become
effective until the trustee or a successor servicer has assumed the master
servicer's obligations and duties under the pooling and servicing agreement. The
related pooling and servicing agreement may also provide that the master
servicer may resign at any other time provided that (i) a willing successor
master servicer has been found, (ii) each of the rating agencies that has rated
any one or more classes of certificates of the related series confirms in
writing that the successor's appointment will not result in a withdrawal,
qualification or downgrade of any rating or ratings assigned to any such class
of certificates, (iii) the resigning party pays all costs and expenses in
connection with such transfer, and (iv) the successor accepts appointment prior
to the effectiveness of such resignation. Unless otherwise specified in the
prospectus supplement, the master servicer will also be required to maintain a
fidelity bond and errors and omissions policy that provides coverage against
losses that may be sustained as a result of an officer's or employee's
misappropriation of funds, errors and omissions or negligence, subject to
certain limitations as to amount of coverage, deductible amounts, conditions,
exclusions and exceptions.
Each pooling and servicing agreement may further provide that none of the
master servicer, the depositor and any director, officer, employee or agent of
either of them will be under any liability to the related trust fund or
certificateholders for any action taken, or not taken, in good faith pursuant to
the pooling and servicing agreement or for errors in judgment; provided,
however, that none of the master servicer, the depositor and any such person
will be protected against any breach of a representation, warranty or covenant
made in such pooling and servicing agreement, or against any expense or
liability
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that such person is specifically required to bear pursuant to the terms of such
pooling and servicing agreement, or against any liability that would otherwise
be imposed by reason of misfeasance, bad faith or negligence in the performance
of obligations or duties thereunder. Unless otherwise specified in the
prospectus supplement, each pooling and servicing agreement will further provide
that the master servicer, the depositor and any director, officer, employee or
agent of either of them will be entitled to indemnification by the related trust
fund against any loss, liability or expense incurred in connection with the
pooling and servicing agreement or the related series of certificates; provided,
however, that such indemnification will not extend to any loss, liability or
expense (i) that such person is specifically required to bear pursuant to the
terms of such agreement, and is not reimbursable pursuant to the pooling and
servicing agreement; (ii) incurred in connection with any breach of a
representation, warranty or covenant made in the pooling and servicing
agreement; (iii) incurred by reason of misfeasance, bad faith or negligence in
the performance of obligations or duties under the pooling and servicing
agreement. In addition, each pooling and servicing agreement will provide that
neither the master servicer nor the depositor will be under any obligation to
appear in, prosecute or defend any legal action unless such action is related to
its respective duties under the pooling and servicing agreement and, unless it
is specifically required under the pooling and servicing agreement to bear the
costs of such legal 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 and servicing
agreement and the interests of the certificateholders thereunder. In such event,
the legal expenses and costs of such action, and any liability resulting
therefrom, will be expenses, costs and liabilities of the certificateholders,
and the master servicer or the depositor, as the case may be, will be entitled
to charge the related certificate account therefor.
Subject, in certain circumstances, to the satisfaction of certain
conditions that may be required in the related pooling and servicing agreement,
any person into which the master servicer or the depositor may be merged or
consolidated, or any person resulting from any merger or consolidation to which
the master servicer or the depositor is a party, or any person succeeding to the
business of the master servicer or the depositor, will be the successor of the
master servicer or the depositor, as the case may be, under the related pooling
and servicing agreement.
EVENTS OF DEFAULT
The events of default for a series of certificates under the related
pooling and servicing agreement generally will include (i) any failure by the
master servicer to distribute or cause to be distributed to certificateholders,
or to remit to the trustee for distribution to certificateholders in a timely
manner, any amount required to be so distributed or remitted, provided that such
failure is permitted so long as the failure is corrected by 10:00 a.m. on the
related distribution date, (ii) any failure by the master servicer or the
special servicer duly to observe or perform in any material respect any of its
other covenants or obligations under the pooling and servicing agreement which
continues unremedied for 30 days after written notice of such failure has been
given to the master servicer or the special servicer, as applicable, by any
party to the pooling and servicing agreement, or to the master servicer or the
special servicer, as applicable, by certificateholders entitled to not less than
25% (or such other percentage specified in the prospectus supplement) of the
voting rights for such series (subject to certain extensions provided in the
related pooling and servicing agreement); and (iii) certain events of
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings in respect of or relating to the master servicer or the
special servicer and certain actions by or on behalf of the master servicer or
the special servicer indicating its insolvency or inability to pay its
obligations. Material variations to the foregoing events of default (other than
to add thereto or shorten cure periods or eliminate notice requirements) will be
specified in the prospectus supplement.
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RIGHTS UPON EVENT OF DEFAULT
So long as an event of default under a pooling and servicing agreement
remains unremedied, the depositor or the trustee will be authorized, and at the
direction of certificateholders entitled to not less than 25% (or such other
percentage specified in the prospectus supplement) of the voting rights for such
series, the trustee will be required, to terminate all of the rights and
obligations of the master servicer as master servicer under the pooling and
servicing agreement, whereupon the trustee will succeed to all of the
responsibilities, duties and liabilities of the master servicer under the
pooling and servicing agreement (except that if the master servicer is required
to make advances in respect of mortgage loan delinquencies, but the trustee is
prohibited by law from obligating itself to do so, or if the prospectus
supplement so specifies, the trustee will not be obligated to make such
advances) and will be entitled to similar compensation arrangements. If the
trustee is unwilling or unable so to act, it may (or, at the written request of
certificateholders entitled to at least 51% (or such other percentage specified
in the prospectus supplement) of the voting rights for such series, it will be
required to) appoint, or petition a court of competent jurisdiction to appoint,
a loan servicing institution that (unless otherwise provided in the prospectus
supplement) is acceptable to each rating agency that assigned ratings to the
offered certificates of such series to act as successor to the master servicer
under the pooling and servicing agreement. Pending such appointment, the trustee
will be obligated to act in such capacity.
No certificateholder will have the right under any pooling and servicing
agreement to institute any proceeding with respect thereto unless such holder
previously has given to the trustee written notice of default and unless
certificateholders entitled to at least 25% (or such other percentage specified
in the prospectus supplement) of the voting rights for the related series shall
have made written request upon the trustee to institute such proceeding in its
own name as trustee thereunder and shall have offered to the trustee reasonable
indemnity, and the trustee for 60 days (or such other period specified in the
prospectus supplement) shall have neglected or refused to institute any such
proceeding. The trustee, however, will be under no obligation to exercise any of
the trusts or powers vested in it by any pooling and servicing agreement or to
make any investigation of matters arising thereunder or to institute, conduct or
defend any litigation thereunder or in relation thereto at the request, order or
direction of any of the holders of certificates of the related series, unless
such certificateholders have offered to the trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
AMENDMENT
Each pooling and servicing agreement may be amended by the parties thereto,
without the consent of any of the holders of the related certificates, (i) to
cure any ambiguity, (ii) to correct, modify or supplement any provision in the
pooling and servicing agreement that may be inconsistent with any other
provision therein, (iii) to add any other provisions with respect to matters or
questions arising under the pooling and servicing agreement that are not
inconsistent with the provisions thereof, (iv) to comply with any requirements
imposed by the Code or (v) for any other purpose; provided that such amendment
(other than an amendment for the purpose specified in clause (iv) above) may not
(as evidenced by an opinion of counsel to such effect satisfactory to the
trustee) adversely affect in any material respect the interests of any such
holder. Each pooling and servicing agreement may also be amended for any purpose
by the parties, with the consent of certificateholders entitled to at least 51%
(or such other percentage specified in the prospectus supplement) of the voting
rights for the related series allocated to the affected classes; provided,
however, that no such amendment may (x) reduce in any manner the amount of, or
delay the timing of, payments received or advanced on mortgage loans that are
required to be distributed in respect of any certificate without the consent of
the holder of such certificate, (y) adversely affect in any material respect the
interests of the holders of any class of certificates, in a manner other than as
described in clause (x), without the consent of the holders of all certificates
of such class or (z) modify the provisions of the pooling and servicing
agreement described in this paragraph without the consent of the holders of all
certificates of the related series. However, unless otherwise specified in the
related pooling and servicing agreement, the trustee will be prohibited from
consenting to any amendment of a pooling and servicing agreement pursuant to
which a REMIC election is to be or has been made unless
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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 and servicing agreement, the
trustee or other specified person will afford such certificateholder access,
during normal business hours, to the most recent list of certificateholders of
that series then maintained by such person.
THE TRUSTEE
The trustee under each pooling and servicing agreement will be named in the
related prospectus supplement. The commercial bank, national banking
association, banking corporation or trust company that serves as trustee may
have typical banking relationships with the depositor and its affiliates and
with any master servicer and its affiliates.
DUTIES OF THE TRUSTEE
The trustee for a series of certificates will make no representation as to
the validity or sufficiency of the related pooling and servicing agreement, the
certificates or any mortgage loan or related document and will not be
accountable for the use or application by or on behalf of any master servicer of
any funds paid to the master servicer or any special servicer in respect of the
certificates or the mortgage loans, or any funds deposited into or withdrawn
from the certificate account or any other account by or on behalf of the master
servicer or any special servicer. If no event of default under a related pooling
and servicing agreement has occurred and is continuing, the trustee will be
required to perform only those duties specifically required under the related
pooling and servicing agreement. However, upon receipt of any of the various
certificates, reports or other instruments required to be furnished to it
pursuant to the pooling and servicing agreement, the trustee will be required to
examine such documents and to determine whether they conform to the requirements
of the pooling and servicing agreement.
CERTAIN MATTERS REGARDING THE TRUSTEE
The trustee for a series of certificates may be entitled to
indemnification, from amounts held in the related certificate account, for any
loss, liability or expense incurred by the trustee in connection with the
trustee's acceptance or administration of its trusts under the related pooling
and servicing agreement; provided, however, that such indemnification will not
extend to any loss, liability or expense that constitutes a specific liability
imposed on the trustee pursuant to the pooling and servicing agreement, or to
any loss, liability or expense incurred by reason of willful misfeasance, bad
faith or negligence on the part of the trustee in the performance of its
obligations and duties thereunder, or by reason of its reckless disregard of
such obligations or duties, or as may arise from a breach of any representation,
warranty or covenant of the trustee made in the pooling and servicing agreement.
As and to the extent described in the prospectus supplement, the fees and normal
disbursements of any trustee may be the expense of the related master servicer
or other specified person or may be required to be borne by the related trust
fund.
RESIGNATION AND REMOVAL OF THE TRUSTEE
The trustee for a series of certificates will be permitted at any time to
resign from its obligations and duties under the related pooling and servicing
agreement by giving written notice thereof to the depositor. Upon receiving such
notice of resignation, the master servicer (or such other person as may be
specified in the prospectus supplement) will be required to use reasonable
efforts to promptly appoint a successor trustee. If no successor trustee shall
have accepted an appointment within a specified period after the
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giving of such notice of resignation, the resigning trustee may petition any
court of competent jurisdiction to appoint a successor trustee.
Unless otherwise provided in the prospectus supplement, if at any time the
trustee ceases to be eligible to continue as such under the related pooling and
servicing agreement, or if at any time the trustee becomes incapable of acting,
or if certain events of (or proceedings in respect of) bankruptcy or insolvency
occur with respect to the trustee, the depositor will be authorized to remove
the trustee and appoint a successor trustee. In addition, unless otherwise
provided in the prospectus supplement, holders of the certificates of any series
entitled to at least 51% (or such other percentage specified in the prospectus
supplement) of the voting rights for such series may at any time (with or
without cause) remove the trustee and appoint a successor trustee.
Any resignation or removal of the trustee and appointment of a successor
trustee will not become effective until acceptance of appointment by the
successor trustee.
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DESCRIPTION OF CREDIT SUPPORT
GENERAL
Credit support may be provided with respect to one or more classes of the
certificates of any series, or with respect to the related mortgage assets.
Credit support may be in the form of over-collateralization, a letter of credit,
the subordination of one or more classes of certificates, the use of a pool
insurance policy or guarantee insurance, the establishment of one or more
reserve funds or another method of credit support described in the prospectus
supplement, or any combination of the foregoing. If so provided in the
prospectus supplement, any form of credit support may provide credit enhancement
for more than one series of certificates to the extent described in the
prospectus supplement.
The credit support generally will not provide protection against all risks
of loss and will not guarantee payment to certificateholders of all amounts to
which they are entitled under the related pooling and servicing agreement. If
losses or shortfalls occur that exceed the amount covered by the credit support
or that are not covered by the credit support, certificateholders will bear
their allocable share of deficiencies. Moreover, if a form of credit support
covers more than one series of certificates, holders of certificates of one
series will be subject to the risk that such credit support will be exhausted by
the claims of the holders of certificates of one or more other series before the
former receive their intended share of such coverage.
If credit support is provided with respect to one or more classes of
certificates of a series, or with respect to the related mortgage assets, the
prospectus supplement will include a description of (i) the nature and amount of
coverage under such credit support, (ii) any conditions to payment thereunder
not otherwise described in this prospectus, (iii) the conditions (if any) under
which the amount of coverage under such credit support may be reduced and under
which such credit support may be terminated or replaced and (iv) the material
provisions relating to such credit support. Additionally, the prospectus
supplement will set forth certain information with respect to the obligor under
any instrument of credit support, generally including (w) a brief description of
its principal business activities, (x) its principal place of business, place of
incorporation and the jurisdiction under which it is chartered or licensed to do
business, (y) if applicable, the identity of the regulatory agencies that
exercise primary jurisdiction over the conduct of its business and (z) its total
assets, and its stockholders equity or policyholders' surplus, if applicable, as
of a date that will be specified in the prospectus supplement. See "Risk
Factors--Credit Support May Not Cover Losses or Risks Which Could Adversely
Affect Payment on Your Certificates."
SUBORDINATE CERTIFICATES
If so specified in the prospectus supplement, one or more classes of
certificates of a series may be subordinate certificates which are subordinated
in right of payment to one or more other classes of senior certificates. If so
provided in the prospectus supplement, the subordination of a class may apply
only in the event of (or may be limited to) certain types of losses or
shortfalls. The prospectus supplement will set forth information concerning the
amount of subordination provided by a class or classes of subordinate
certificates in a series, the circumstances under which such subordination will
be available and the manner in which the amount of subordination will be made
available.
CROSS-SUPPORT PROVISIONS
If the mortgage assets in any trust fund are divided into separate groups,
each supporting a separate class or classes of certificates of a series, credit
support may be provided by cross-support provisions requiring that distributions
be made on senior certificates evidencing interests in one group of mortgage
assets prior to distributions on subordinate certificates evidencing interests
in a different group of mortgage assets within the trust fund. The prospectus
supplement for a series that includes a cross-support provision will describe
the manner and conditions for applying such provisions.
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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 and servicing agreement. Unless otherwise specified in the
prospectus
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supplement, any reinvestment income or other gain from such investments will be
credited to the related reserve fund for such series, and any loss resulting
from such investments will be charged to such reserve fund. However, such income
may be payable to any related master servicer or another service provider as
additional compensation for its services. The reserve fund, if any, for a series
will not be a part of the trust fund unless otherwise specified in the
prospectus supplement.
CREDIT SUPPORT WITH RESPECT TO CMBS
If so provided in the prospectus supplement for a series of certificates,
any CMBS included in the related trust fund and/or the related underlying
mortgage loans may be covered by one or more of the 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 a poor credit risk or an unfamiliar tenant if the lease
was assigned, and any assurances provided to the lessor may, in fact, be
inadequate. If the lease is rejected, such rejection generally
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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.
Certain of the mortgagors may be partnerships. The laws governing limited
partnerships in certain states provide that the commencement of a case under the
Bankruptcy Code with respect to a general partner will cause a person to cease
to be a general partner of the limited partnership, unless otherwise provided in
writing in the limited partnership agreement. This provision may be construed as
an "ipso facto" clause and, in the event of the general partner's bankruptcy,
may not be enforceable. Certain limited partnership agreements of the mortgagors
may provide that the commencement of a case under the Bankruptcy Code with
respect to the related general partner constitutes an event of withdrawal
(assuming the enforceability of the clause is not challenged in bankruptcy
proceedings or, if challenged, is upheld) that might trigger the dissolution of
the limited partnership, the winding up of its affairs and the distribution of
its assets, unless (i) at the time there was at least one other general partner
and the written provisions of the limited partnership agreement permit the
business of the limited partnership to be carried on by the remaining general
partner and that general partner does so or (ii) the written provisions of the
limited partnership agreement permit the limited partner to agree within a
specified time frame (often 60 days) after such withdrawal to continue the
business of the limited partnership and to the appointment of one or more
general partners and the limited partners do so. In addition, the laws governing
general partnerships in certain states provide that the commencement of a case
under the Bankruptcy Code or state bankruptcy laws with respect to a general
partner of such partnerships triggers the dissolution of such partnership, the
winding up of its affairs and the distribution of its assets. Such state laws,
however, may not be enforceable or effective in a bankruptcy case. The
dissolution of a mortgagor, the winding up of its
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affairs and the distribution of its assets could result in an acceleration of
its payment obligation under a related mortgage loan, which may reduce the yield
on the related series of certificates in the same manner as a principal
prepayment.
In addition, the bankruptcy of the general partner of a mortgagor that is a
partnership may provide the opportunity for a trustee in bankruptcy for such
general partner, such general partner as a debtor-in-possession, or a creditor
of such general partner to obtain an order from a court consolidating the assets
and liabilities of the general partner with those of the mortgagor pursuant to
the doctrines of substantive consolidation or piercing the corporate veil. In
such a case, the mortgaged property could become property of the estate of such
bankrupt general partner. Not only would the mortgaged property be available to
satisfy the claims of creditors of such general partner, but an automatic stay
would apply to any attempt by the trustee to exercise remedies with respect to
such mortgaged property. However, such an occurrence should not affect the
trustee's status as a secured creditor with respect to the mortgagor or its
security in the mortgaged property.
ENVIRONMENTAL CONSIDERATIONS
General. A lender may be subject to environmental risks when taking a
security interest in real property. Of particular concern may be properties that
are or have been used for industrial, manufacturing, military, disposal or
certain commercial activities. Such environmental risks include the possible
diminution of the value of a contaminated property or, as discussed below,
potential liability for clean-up costs or other remedial actions and natural
resource damages that could exceed the value of the property or the amount of
the lender's loan. In certain circumstances, a lender may decide to abandon a
contaminated mortgaged property as collateral for its loan rather than foreclose
and risk liability for such costs.
Superlien Laws. Under certain federal and state laws, contamination on a
property may give rise to a lien on the property for clean-up costs. In several
states, such a lien has priority over all existing liens, including those of
existing mortgages. In these states, the lien of a mortgage may lose its
priority to such a "superlien."
CERCLA. The federal Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended ("CERCLA"), imposes strict liability on
present and past "owners" and "operators" of contaminated real property for the
costs of clean-up. Excluded from CERCLA's definition of "owner" or "operator,"
however, is a lender that, "without participating in the management" of a
facility holds indicia of ownership primarily to protect his security interest
in the facility. This secured creditor exemption is intended to provide a lender
certain protections from liability under CERCLA as an owner or operator of
contaminated property. However, a secured lender may be liable as an "owner" or
"operator" of a contaminated mortgaged property if agents or employees of the
lender are deemed to have actually participated in the management of such
mortgaged property or the operations of the borrower. Such liability may exist
even if the lender did not cause or contribute to the contamination and
regardless of whether the lender has actually taken possession of a mortgaged
property through foreclosure, deed in lieu of foreclosure or otherwise.
Moreover, such liability, if incurred, would not be limited to, and could
substantially exceed, the original or unamortized principal balance of a loan or
to the value of the property securing a loan.
In addition, lenders may face potential liability for remediation of
releases of petroleum or hazardous wastes from underground storage tanks under
the federal Resource Conservation and Recovery Act ("RCRA"), if they are deemed
to be the "owners" or "operators" of facilities in which they have a security
interest or upon which they have foreclosed.
The federal Asset Conservation, Lender Liability and Deposit Insurance
Protection Act of 1996 (the "Lender Liability Act") seeks to clarify the actions
a lender may take without incurring liability as an "owner" or "operator" of
contaminated property or underground petroleum storage tanks. The Lender
Liability Act amends CERCLA and RCRA to provide guidance on actions that do or
do not constitute "participation in management." However, the protections
afforded by these amendments are subject to
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terms and conditions that have not been clarified by the courts. Moreover, the
Lender Liability Act does not, among other things: (1) eliminate potential
liability to lenders under CERCLA or RCRA, (2) necessarily reduce credit risks
associated with lending to borrowers having significant environmental
liabilities or potential liabilities, (3) eliminate environmental risks
associated with taking possession of contaminated property or underground
storage tanks or assuming control of the operations thereof, or (4) necessarily
affect liabilities or potential liabilities under state environmental laws which
may impose liability on "owners or operators" but do not incorporate the secured
creditor exemption.
Certain Other State Laws. Many states have statutes similar to CERCLA and
RCRA, and not all of those statutes provide for a secured creditor exemption.
In a few states, transfers of some types of properties are conditioned upon
cleanup of contamination. In these cases, a lender that becomes the owner of a
property through foreclosure, deed in lieu of foreclosure or otherwise, may be
required to enter into an agreement with the state providing for the cleanup of
the contamination before selling or otherwise transferring the property.
Beyond statute-based environmental liability, there exist common law causes
of action (for example, actions based on nuisance or on toxic tort resulting in
death, personal injury, or damage to property) related to hazardous
environmental conditions on a property. While a party seeking to hold a lender
liable in such cases may face litigation difficulties, unanticipated or
uninsured liabilities of the borrower may jeopardize the borrower's ability to
meet its loan obligations.
Additional Considerations. The cost of remediating hazardous substance
contamination at a property can be substantial. If a lender becomes liable, it
can bring an action for contribution against other potentially liable parties,
but such parties may be bankrupt or otherwise judgment proof. Accordingly, it is
possible that such costs could become a liability of the trust fund and occasion
a loss to the certificateholders.
To reduce the likelihood of such a loss, unless otherwise specified in the
prospectus supplement, the pooling and servicing agreement will provide that the
master servicer, acting on behalf of the trustee, may not take possession of a
mortgaged property or take over its operation unless the master servicer, based
solely on a report (as to environmental matters) prepared by a person who
regularly conducts environmental site assessments, has made the determination
that it is appropriate to do so, as described under "Description of the Pooling
and Servicing Agreements--Realization upon Defaulted Mortgage Loans."
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
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enforceable, within certain limitations as set forth in the Garn Act and the
regulations promulgated thereunder), a master servicer may nevertheless have the
right to accelerate the maturity of a mortgage loan that contains a
"due-on-sale" provision upon transfer of an interest in the property, regardless
of the master servicer's ability to demonstrate that a sale threatens its
legitimate security interest.
SUBORDINATE FINANCING
Certain of the mortgage loans may not restrict the ability of the borrower
to use the mortgaged property as security for one or more additional loans.
Where a borrower encumbers a mortgaged property with one or more junior liens,
the senior lender is subjected to additional risk. First, the borrower may have
difficulty servicing and repaying multiple loans. Moreover, if the subordinate
financing permits recourse to the borrower (as is frequently the case) and the
senior loan does not, a borrower may have more incentive to repay sums due on
the subordinate loan. Second, acts of the senior lender that prejudice the
junior lender or impair the junior lender's security may create a superior
equity in favor of the junior lender. For example, if the borrower and the
senior lender agree to an increase in the principal amount of or the interest
rate payable on the senior loan, the senior lender may lose its priority to the
extent any existing junior lender is harmed or the borrower is additionally
burdened. Third, if the borrower defaults on the senior loan and/or any junior
loan or loans, the existence of junior loans and actions taken by junior lenders
can impair the security available to the senior lender and can interfere with or
delay the taking of action by the senior lender. Moreover, the bankruptcy of a
junior lender may operate to stay foreclosure or similar proceedings by the
senior lender.
DEFAULT INTEREST AND LIMITATIONS ON PREPAYMENTS
Notes and mortgages may contain provisions that obligate the borrower to
pay a late charge or additional interest if payments are not timely made, and in
some circumstances, may prohibit prepayments for a specified period and/or
condition prepayments upon the borrower's payment of prepayment fees or yield
maintenance penalties. In certain states, there are or may be specific
limitations upon the late charges which a lender may collect from a borrower for
delinquent payments. Certain states also limit the amounts that a lender may
collect from a borrower as an additional charge if the loan is prepaid. In
addition, the enforceability of provisions that provide for prepayment fees or
penalties upon an involuntary prepayment is unclear under the laws of many
states.
CERTAIN LAWS AND REGULATIONS; TYPES OF MORTGAGED PROPERTIES
The mortgaged properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply (together
with an inability to remedy any such failure) could result in 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
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reimpose interest rate limits by adopting, before April 1, 1983, a law or
constitutional provision that expressly rejects application of the federal law.
In addition, even where Title V is not so rejected, any state is authorized
by the law to adopt a provision limiting discount points or other charges on
mortgage loans covered by Title V. Certain states have taken action to reimpose
interest rate limits and/or to limit discount points or other charges.
No mortgage loan originated in any state in which application of Title V
has been expressly rejected or a provision limiting discount points or other
charges has been adopted will (if originated after that rejection or adoption)
be eligible for inclusion in a trust fund unless (i) such mortgage loan provides
for such interest rate, discount points and charges as are permitted in such
state or (ii) such mortgage loan provides that the terms thereof are to be
construed in accordance with the laws of another state under which such interest
rate, discount points and charges would not be usurious and the borrower's
counsel has rendered an opinion that such choice of law provision would be given
effect.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a borrower who enters military service after the
origination of such borrower's mortgage loan (including a borrower who was in
reserve status and is called to active duty after origination of the mortgage
loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such borrower's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
individuals who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to
individuals who enter military service (including reservists who are called to
active duty) after origination of the related mortgage loan, no information can
be provided as to the number of loans with individuals as borrowers that may be
affected by the Relief Act. Application of the Relief Act would adversely
affect, for an indeterminate period of time, the ability of any servicer to
collect full amounts of interest on certain of the mortgage loans. Any
shortfalls in interest collections resulting from the application of the Relief
Act would result in a reduction of the amounts distributable to the holders of
the related series of certificates, and would not be covered by advances or,
unless otherwise specified in the prospectus supplement, any form of credit
support provided in connection with such certificates. In addition, the Relief
Act imposes limitations that would impair the ability of the servicer to
foreclose on an affected mortgage loan during the borrower's period of active
duty status and, under certain circumstances, during an additional three-month
period thereafter.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such 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.
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FORFEITURE IN DRUG, RICO AND MONEY LAUNDERING VIOLATIONS
Federal law provides that property purchased or improved with assets
derived from criminal activity or otherwise tainted, or used in the commission
of certain offenses, can be seized and ordered forfeited to the United States of
America. The offenses which can trigger such a seizure and forfeiture include,
among others, violations of the Racketeer Influenced and Corrupt Organizations
Act, the Bank Secrecy Act, the anti-money laundering laws and regulations,
including the USA Patriot Act of 2001 and the regulations issued pursuant to
that Act, as well as the narcotic drug laws. In many instances, the United
States may seize the property even before a conviction occurs.
In the event of a forfeiture proceeding, a lender may be able to establish
its interest in the property by proving that (1) its mortgage was executed and
recorded before the commission of the illegal conduct from which the assets used
to purchase or improve the property were derived or before the commission of any
other crime upon which the forfeiture is based, or (2) the lender, at the time
of the execution of the mortgage, "did not know or was reasonably without cause
to believe that the property was subject to forfeiture." However, there is no
assurance that such a defense will be successful.
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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.
85
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 and
servicing 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 and servicing agreement with respect to each REMIC
will include provisions designed to maintain the trust status as a REMIC under
the REMIC provisions. It is not anticipated that the status of any trust as a
REMIC will be terminated.
Characterization of Investments in REMIC Certificates. In general, with
respect to each series of certificates for which a REMIC election is made,
certificates held by a real estate investment trust will constitute "real estate
assets" within the meaning of section 856(c)(5)(B) of the Code, and each such
series of certificates will constitute assets described in section
7701(a)(19)(C) of the Code in the same proportion that the assets of the REMIC
underlying such certificates would be so treated. However, to the extent that
the REMIC assets constitute mortgages on property not used for residential or
certain other prescribed purposes, the REMIC Certificates will not be treated as
assets qualifying under section 7701(a)(19)(C)(v) of the Code. Moreover, if 95%
or more of the assets of the REMIC qualify for any of the foregoing treatments
at all times during a calendar year, the REMIC Certificates will qualify for the
corresponding status in their entirety for that calendar year. Interest on the
REMIC Regular Certificates and income allocated to the class of REMIC Residual
Certificates will be interest described in section 856(c)(3)(B) of the Code to
the extent that such certificates are treated as "real estate assets" within the
meaning of section 856(c)(5)(B) of the Code. In addition, generally the REMIC
Regular Certificates will be "qualified mortgages" within the meaning of section
860G(a)(3) of the Code. The determination as to the percentage of the REMIC's
assets that constitute assets described in the foregoing sections of the Code
will be made with respect to each calendar quarter based on the average adjusted
basis of each category of the assets held by the REMIC during such calendar
quarter. The servicer or the trustee will report those determinations to
certificateholders in the manner and at the times required by the applicable
Treasury regulations.
The assets of the REMIC will include, in addition to mortgage loans,
payments on mortgage loans held pending distribution on the REMIC Certificates
and property acquired by foreclosure held pending sale, and may include amounts
in reserve accounts. It is unclear whether property acquired by foreclosure held
pending sale and amounts in reserve accounts would be considered to be part of
the mortgage loans, or whether such assets otherwise would receive the same
treatment as the mortgage loans for purposes of all of the foregoing sections.
The related prospectus supplement will describe whether any mortgage loans
included in the trust fund will not be treated as assets described in the
foregoing sections. The REMIC regulations do provide that payments on mortgage
loans held pending distribution are considered part of the mortgage.
Tiered REMIC Structures. For certain series of REMIC Certificates, two or
more separate elections may be made to treat designated portions of the related
trust fund as separate or tiered REMICs for federal income tax purposes. Upon
the issuance of any such series of REMIC Certificates, counsel to the depositor
will deliver its opinion generally to the effect that, assuming compliance with
all provisions of the
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related pooling and servicing 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 and servicing agreement that
are intended to reduce the possibility of any such transfer being disregarded.
Such restrictions will require each party to a transfer to provide an affidavit
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 (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;
- 80% of the amount of itemized deductions otherwise allowable for the
taxable year; or
- the section 68 reduction of allowable itemized deductions will be phased
out beginning in 2006 and eliminated after 2009.
In determining the alternative minimum taxable income of such a holder of a
REMIC Certificate that is an individual, estate or trust, or a "pass-through
entity," beneficially owned by one or more individuals, estates or trusts, no
deduction will be allowed for such holder's allocable portion of servicing fees
and other miscellaneous itemized deductions of the REMIC, even though an amount
equal to the amount of 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
and servicing agreement will include provisions designed to prevent the
acceptance of any contributions that would be subject to such tax.
REMICs also are subject to federal income tax at the highest corporate rate
on "net income from foreclosure property," determined by reference to the rules
applicable to real estate investment trusts. "Net income from foreclosure
property" generally means gain from the sale of a foreclosure property that is
inventory property and gross income from foreclosure property other than
qualifying rents and other qualifying income for a real estate investment trust.
A REMIC may recognize "net income from foreclosure property" subject to federal
income tax if the Trustee or applicable servicer determines that the recovery to
certificateholders is likely to be greater on an after tax basis than earning
qualifying income that is not subject to tax.
Unless otherwise disclosed in the related prospectus supplement, it is not
anticipated that any material state or local income or franchise tax will be
imposed on any REMIC.
Unless otherwise stated in the related prospectus supplement, and to the
extent permitted by then applicable laws, any tax on prohibited transactions,
contributions, "net income from foreclosure property" or state or local tax
imposed on the REMIC will be borne by the related servicer or trustee in any
case out of its own funds, if such tax arose out of a breach of such person's
obligations under the related pooling and servicing agreement and in respect of
compliance with applicable laws and regulations. Any such tax not borne by a
servicer or trustee will be charged against the related trust fund resulting in
a reduction in amounts payable to holders of the related REMIC Certificates.
Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain
Organizations. If a REMIC Residual Certificate is transferred to a
"disqualified organization," a tax would be imposed in an amount equal to the
product of:
- 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 and servicing agreement, and will be discussed more fully in any
prospectus supplement relating to the offering of any REMIC Residual
Certificate.
In addition, if a "pass-through entity" includes in income excess
inclusions with respect to a REMIC Residual Certificate, and disqualified
organization is the record holder of an interest in such entity, then a tax will
be imposed on such entity equal to the product of the amount of excess
inclusions allocable to the interest in the pass-through entity held by such
disqualified organization and the highest marginal federal income tax rate
imposed on corporations. A pass-through entity will not be subject to this tax
for any period, however, if each record holder of an interest in such
pass-through entity furnishes to such pass-through entity such holder's social
security number and a statement under penalty of perjury that such
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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 30% for 2002-3, 29% for
2004-5 and 28% commencing in 2006 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.
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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
- to the extent of the amount of interest paid by the related mortgagor on
a particular mortgage loan, a REMIC Regular Certificateholder that owns a
10% or greater ownership interest in such mortgage or a controlled
foreign corporation of which such mortgagor is a "United States
shareholder" within the meaning of section 951(b) of the Code.
If the holder does not qualify for exemption, distributions of interest,
including distributions in respect of accrued original issue discount, to such
holder may be subject to a tax rate of 30%, subject to reduction under any
applicable tax treaty. In addition, the foregoing rules will not apply to exempt
a United States shareholder of a controlled foreign corporation from taxation on
such United States shareholder's allocable portion of the interest income
received by such controlled foreign corporation. Further, it appears that a
REMIC Regular Certificate would not be included in the estate of a nonresident
alien individual and would not be subject to United States estate taxes.
However, certificateholders who are non-resident alien individuals should
consult their tax advisors concerning this question. Transfers of REMIC Residual
Certificates to investors that are not United States persons will be prohibited
under the related pooling and servicing agreement.
The Treasury Department issued final regulations which make certain
modifications to the withholding, backup withholding and information reporting
rules described above. 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 and servicing agreement,
the grantor trust fund will be classified as a grantor trust under subpart E,
part I of subchapter J of the Code and not as a partnership or an association
taxable as a corporation. Accordingly, each holder of a grantor trust
certificate generally will be treated as the owner of an interest in the
mortgage loans included in the grantor trust fund.
For purposes of the following discussion, a grantor trust certificate
represents an undivided equitable ownership interest in the principal of the
mortgage loans constituting the related grantor trust fund, together with
interest thereon at a pass-through rate, will be referred to as a "grantor trust
fractional interest certificate." A grantor trust certificate representing
ownership of all or a portion of the difference between interest paid on the
mortgage loans constituting the related grantor trust fund less normal
administration fees and any spread and interest paid to the holders of grantor
trust fractional interest certificates issued with respect to a grantor trust
fund will be referred to as a "grantor trust strip certificate." A grantor trust
strip certificate may also evidence a nominal ownership interest in the
principal of the mortgage loans constituting the related grantor trust fund.
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
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- "real estate assets" within the meaning of section 856(c)(5)(B) of the
Code.
In addition, counsel to the depositor will deliver an opinion that interest
on grantor trust fractional interest certificates will to the same extent be
considered "interest on obligations secured by mortgages on real property or on
interests in real property" within the meaning of section 856(c)(3)(B) of the
Code.
Grantor Trust Strip Certificates. Even if grantor trust strip certificates
evidence an interest in a grantor trust fund consisting of mortgage loans that
are assets described in section 7701(a)(19)(C) of the Code, "real estate assets"
within the meaning of section 856(c)(5)(B) of the Code, and the interest on
which is "interest on obligations secured by mortgages on real property" within
the meaning of section 856(c)(3)(B) of the Code, it is unclear whether the
grantor trust strip certificates, and the income they produce, will be so
characterized. Although the policies underlying such sections may suggest that
such characterization is appropriate, counsel to the depositor will not deliver
any opinion on the characterization of these certificates. Prospective
purchasers of grantor trust strip certificates should consult their tax advisors
regarding whether the grantor trust strip certificates, and the income they
produce, will be so characterized.
The grantor trust strip certificates will be "obligation[s] (including any
participation or certificate of beneficial ownership therein) which . . . [are]
principally secured by an interest in real property" within the meaning of
section 860G(a)(3)(A) of the Code.
TAXATION OF OWNERS OF GRANTOR TRUST FRACTIONAL INTEREST CERTIFICATES
General. Holders of a particular series of grantor trust fractional
interest certificates generally will be required to report on their federal
income tax returns their shares of the entire income from the mortgage loans
(including reasonable servicing fees and other expenses) and will be entitled to
deduct their shares of any such reasonable servicing fees and other expenses. In
some situations, the taxpayer's deduction may be subject to itemized deduction
limitations and be limited if the taxpayer is subject to the corporate
alternative minimum tax. For a more detailed discussion of these limitations,
see "--Taxation of Owners of REMIC Residual Certificates--Possible Pass-Through
of Miscellaneous Itemized Deductions".
Although it is not entirely clear, it appears that in transactions in which
multiple classes of grantor trust certificates are issued, such fees and
expenses should be allocated among the classes of grantor trust certificates
using a method that recognizes that each such class benefits from the related
services. In the absence of further guidance, it is intended to base information
returns or reports on a method that allocates such expenses among classes of
grantor trust certificates with respect to each period based on the
distributions made to each such class during that period.
The federal income tax treatment of grantor trust fractional interest
certificates of any series will depend on whether they are subject to the
"stripped bond" rules of section 1286 of the Code. Grantor trust fractional
interest certificates may be subject to those rules if a class of grantor trust
strip certificates is issued as part of the same series of Certificates or the
depositor or any of its affiliates retains a right to receive a specified
portion of the interest payable on a mortgage asset. Further, the IRS has ruled
that an unreasonably high servicing fee retained by a seller or servicer will be
treated as a retained ownership interest in mortgages that constitutes a
stripped coupon. For purposes of determining what constitutes reasonable
servicing fees for various types of mortgages the IRS has established certain
"safe harbors." The servicing fees paid with respect to the mortgage loans for
certain series of grantor trust certificates may be higher than the "safe
harbors" and, accordingly, may not constitute reasonable servicing 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
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"--Taxation of Owners of Grantor Trust Fractional Interest Certificates--Market
Discount." Under the stripped bond rules, the holder of a grantor trust
fractional interest certificate will be required to report "qualified stated
interest" from its grantor trust fractional interest certificate for each month,
as such amounts are received or accrued (based on the holder's method of
accounting) and will be required to report an amount equal to the original issue
discount income that accrues on such certificate in that month calculated under
a constant yield method, in accordance with the rules of the Code relating to
original issue discount.
The original issue discount on a grantor trust fractional interest
certificate will be the excess of such certificate's stated redemption price
over its issue price. The issue price of a grantor trust fractional interest
certificate as to any purchaser will be equal to the price paid by such
purchaser for the grantor trust fractional interest certificate. The stated
redemption price of a grantor trust fractional interest certificate will be the
sum of all payments to be made on such certificate, other than "qualified stated
interest," and the certificate's share of reasonable servicing and other
expenses. See "--Taxation of Owners of Grantor Trust Fractional Interest
Certificates--If Stripped Bond Rules Do Not Apply" for a definition of
"qualified stated interest." In general, the amount of such income that accrues
in any month would equal the product of such holder's adjusted basis in such
grantor trust fractional interest certificate at the beginning of such month
(see "--Sales of Grantor Trust Certificates") and the yield of such grantor
trust fractional interest certificate to such holder. Such yield would be
computed at the rate that, if used to discount the holder's share of future
payments on the mortgage loans, would cause the present value of those future
payments to equal the price at which the holder purchased such certificate. In
computing yield under the stripped bond rules, a certificateholder's share of
future payments on the mortgage loans will not include any payments made in
respect of any spread or any other ownership interest in the mortgage loans
retained by the depositor, a servicer, or their respective affiliates, but will
include such certificateholder's share of any reasonable servicing fees and
other expenses.
With respect to certain categories of debt instruments, section 1272(a)(6)
of the Code requires the use of a reasonable prepayment assumption and conforms
to the prepayment assumption used in pricing the instrument. Regulations could
be adopted applying those provisions to the grantor trust fractional interest
certificates. It is unclear whether those provisions would be applicable to the
grantor trust fractional interest certificates or whether use of a reasonable
prepayment assumption may be required or permitted without reliance on these
rules. It is also uncertain, if a prepayment assumption is used, whether the
assumed prepayment rate would be determined based on conditions at the time of
the first sale of the grantor trust fractional interest certificate or, with
respect to any holder, at the time of purchase of the grantor trust fractional
interest certificate by that holder. Certificateholders are advised to consult
their own tax advisors concerning reporting original issue discount in general
and, in particular, whether a prepayment assumption should be used in reporting
original issue discount with respect to grantor trust fractional interest
certificates.
In the case of a grantor trust fractional interest certificate acquired at
a price equal to the principal amount of the mortgage loans allocable to such
certificate, the use of a prepayment assumption generally would not have any
significant effect on the yield used in calculating accruals of interest income.
In the case, however, of a grantor trust fractional interest certificate
acquired at a discount or premium, the use of a reasonable prepayment assumption
would increase or decrease such yield, and thus accelerate or decelerate,
respectively, the reporting of income.
If a prepayment assumption is not used, then when a mortgage loan prepays
in full, the holder of a grantor trust fractional interest certificate acquired
at a discount or a premium generally will recognize income or loss, which under
amendments to the Code adopted in 1997 would be capital except to the 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
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similar to that described for taking account of original issue discount on REMIC
Regular Certificates. See "--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount." It is unclear whether any other
adjustments would be required to reflect differences between an assumed
prepayment rate and the actual rate of prepayments.
In the absence of statutory or administrative clarification, it is
currently intended to base information reports or returns to the IRS and
certificateholders in transactions subject to the stripped bond rules on a
prepayment assumption that will be disclosed in the related prospectus
supplement and on a constant yield computed using a representative initial
offering price for each class of certificates. However, neither the depositor
nor any other person will make any representation that the mortgage loans will
in fact prepay at a rate conforming to such stripped bond prepayment assumption
or any other rate and certificateholders should bear in mind that the use of a
representative initial offering price will mean that such information returns or
reports, even if otherwise accepted as accurate by the IRS, will in any event be
accurate only as to the initial certificateholders of each series who bought at
that price.
Under Treasury regulation section 1.1286-1(b), certain stripped bonds are
to be treated as market discount bonds and, accordingly, any purchaser of such a
bond is to account for any discount on the bond as market discount rather than
original issue discount. This treatment only applies, however, if immediately
after the most recent disposition of the bond by a person stripping one or more
coupons from the bond and disposing of the bond or coupon, there is less than a
de minimis amount of original issue discount or the annual stated rate of
interest payable on the original bond is no more than one percentage point lower
than the gross interest rate payable on the original mortgage loan before
subtracting any servicing fee or any stripped coupon. Original issue discount or
market discount on a grantor trust fractional interest certificate are de
minimis if less than 0.25% of the stated redemption price multiplied by the
weighted average maturity of the mortgage loans. Original issue discount or
market discount of only a de minimis amount will be included in income in the
same manner as de minimis original issue discount and market discount described
in "--If Stripped Bond Rules Do Not Apply" and "--Market Discount."
If Stripped Bond Rules Do Not Apply. Subject to the discussion below on
original issue discount, if the stripped bond rules do not apply to a grantor
trust fractional interest certificate, the certificateholder will be required to
report its share of the interest income on the mortgage loans in accordance with
such certificateholder's normal method of accounting. The original issue
discount rules will apply to a grantor trust fractional interest certificate to
the extent it evidences an interest in mortgage loans issued with original issue
discount.
The original issue discount, if any, on the mortgage loans will equal the
difference between the stated redemption price of such mortgage loans and their
issue price. Under the OID regulations, the stated redemption price is equal to
the total of all payments to be made on such mortgage loan other than "qualified
stated interest." "Qualified stated interest" generally includes interest that
is unconditionally payable at least annually at a single fixed rate, at a
"qualified floating rate" or at an "objective rate." In general, the issue price
of a mortgage loan will be the amount received by the borrower from the lender
under the terms of the mortgage loan, less any "points" paid by the borrower,
and the stated redemption price of a mortgage loan will equal its principal
amount, unless the mortgage loan 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
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income as each payment of stated principal price is made, based on the product
of the total amount of such de minimis original issue discount and a fraction,
the numerator of which is the amount of each such payment and the denominator of
which is the outstanding stated principal amount of the mortgage loan. The OID
Regulations also permit a certificateholder to elect to accrue de minimis
original issue discount into income currently based on a constant yield method.
See "--Market Discount" below.
If original issue discount is in excess of a de minimis amount, all
original issue discount with respect to a mortgage loan will be required to be
accrued and reported in income each month, based on a constant yield. The OID
regulations suggest that no prepayment assumption is appropriate in computing
the yield on prepayable obligations issued with original issue discount. In the
absence of statutory or administrative clarification, it currently is not
intended to base information reports or returns to the IRS and
certificateholders on the use of a prepayment assumption in transactions not
subject to the stripped bond rules. However, section 1272(a)(6) of the Code may
require that a prepayment assumption be made in computing yield with respect to
all mortgage-backed securities. Certificateholders are advised to consult their
own tax advisors concerning whether a prepayment assumption should be used in
reporting original issue discount with respect to grantor trust fractional
interest certificates. Certificateholders should refer to the related prospectus
supplement with respect to each series to determine whether and in what manner
the original issue discount rules will apply to mortgage loans in such series.
A purchaser of a grantor trust fractional interest certificate that
purchases such grantor trust fractional interest certificate at a cost less than
such certificate's allocable portion of the aggregate remaining stated
redemption price of the mortgage loans held in the related trust fund will also
be required to include in gross income such certificate's daily portions of any
original issue discount with respect to such mortgage loans. However, each such
daily portion will be reduced, if the cost of such grantor trust fractional
interest certificate to such purchaser is in excess of such certificate's
allocable portion of the aggregate "adjusted issue prices" of the mortgage loans
held in the related trust fund, approximately in proportion to the ratio such
excess bears to such certificate's allocable portion of the aggregate original
issue discount remaining to be accrued on such mortgage loans. The adjusted
issue price of a mortgage loan on any given day equals the sum of the adjusted
issue price of such mortgage loan at the beginning of the accrual period that
includes such day plus the daily portions of original issue discount for all
days during such accrual period prior to such day. The adjusted issue price of a
mortgage loan at the beginning of any accrual period will equal the issue price
of such mortgage loan, increased by the aggregate amount of original issue
discount with respect to such mortgage loan that accrued in prior accrual
periods, and reduced by the amount of any payments made on such mortgage loan in
prior accrual periods of amounts included in its stated redemption price.
The trustee or servicer, as applicable, will provide to any holder of a
grantor trust fractional interest certificate such information as such holder
may reasonably request from time to time with respect to original issue discount
accruing on grantor trust fractional interest certificates. See "--Grantor Trust
Reporting" below.
Market Discount. If the stripped bond rules do not apply to the grantor
trust fractional interest certificate, a certificateholder may be subject to the
market discount rules of sections 1276 through 1278 of the Code to the extent an
interest in a mortgage loan is considered to have been purchased at a "market
discount." If market discount is in excess of a de minimis amount, the holder
generally will be required to include in income in each month the amount of such
discount that has accrued through such month that has not previously been
included in income, but limited, in the case of the portion of such discount
that is allocable to any mortgage loan, to the payment of stated redemption
price on such mortgage loan that is received by or due to the trust fund in that
month. A certificateholder may elect to include market discount in income
currently as it accrues under a constant yield method rather than including it
on a deferred basis in accordance with the foregoing. If made, such election
will apply to all market discount bonds acquired by such certificateholder
during or after the first taxable year to which such election 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
105
made an election to currently include market discount in income with respect to
all other debt instruments having market discount that such certificateholder
acquires during the taxable year of the election and thereafter and, possibly,
previously acquired instruments. Similarly, a certificateholder that made this
election for a certificate acquired at a premium would be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such certificateholder owns or acquires. See
"--Taxation of Owners of REMIC Regular Certificates--Premium." Each of these
elections to accrue interest, discount and premium with respect to a certificate
on a constant yield method or as interest is irrevocable.
Section 1276(b)(3) of the Code authorized the Treasury Department to issue
regulations providing for the method for accruing market discount on debt
instruments where principal is payable in more than one installment. Until such
time as regulations are issued by the Treasury Department, certain rules
described in the Committee Report apply. For a more detailed discussion of the
treatment of market discount, see "Taxation of Owners of REMIC Regular
Certificates--Market Discount".
Because the mortgage loans will provide for periodic payments of stated
redemption price, such discount may be required to be included in income at a
rate that is not significantly 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
106
and some uncertainty exists as to how it will be applied to securities such as
the grantor trust strip certificates. Accordingly, holders of grantor trust
strip certificates should consult their own tax advisors concerning the method
to be used in reporting income or loss with respect to such certificates.
The OID regulations 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
107
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
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
108
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 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, state or local law (which may contain restrictions
substantially similar to those in ERISA and the Code).
ERISA generally imposes on Plan fiduciaries certain general fiduciary
requirements, including those of investment prudence and diversification and the
requirement that a Plan's investments be made in accordance with the documents
governing the Plan. In addition, ERISA and the Code prohibit a broad range of
transactions involving assets of a Plan and persons ("Parties-in-Interest") who
have certain specified relationships to the Plan, unless a statutory or
administrative exemption is available. Certain Parties-in-Interest that
participate in a prohibited transaction may be subject to an excise tax imposed
pursuant to Section 4975 of the Code, unless a statutory or administrative
exemption is available. These prohibited transactions generally are set forth in
Section 406 of ERISA and Section 4975 of the Code.
Plan Asset Regulations. A Plan's investment in offered certificates may
cause the trust assets to be deemed "plan assets" of a Plan. Section 2510.3-101
of the regulations of the United States Department of Labor (the "DOL") provides
that when a Plan acquires an equity interest in an entity, the Plan's assets
include both such equity interest and an undivided interest in each of the
underlying assets of the entity, unless certain exceptions not applicable to
this discussion apply, or unless the equity participation in the entity by
"benefit plan investors" (defined to include Plans and certain employee benefit
plans not subject to ERISA, including foreign and governmental plans) is not
"significant." For this purpose, in general, equity participation in a trust
fund will be "significant" on any date if, immediately after the most recent
acquisition of any certificate, 25% or more of any class of certificates is held
by benefit plan investors
109
(excluding for this calculation any person, other than a benefit plan investor,
who has discretionary authority or control, or provides investment advice
(direct or indirect) for a fee with respect to the assets of the trust fund).
Any person who has discretionary authority or control respecting the
management or disposition of plan assets of a Plan, and any person who provides
investment advice with respect to such assets for a fee, will generally be a
fiduciary of the investing plan. If the trust assets constitute plan assets,
then any party exercising management or discretionary control regarding those
assets, such as a master servicer, a special servicer or any sub-servicer, may
be deemed to be a Plan "fiduciary" with respect to the investing Plan, and thus
subject to the fiduciary responsibility provisions and prohibited transaction
provisions of ERISA and the Code. In addition, if the trust assets constitute
plan assets, the purchase of certificates by a Plan, as well as the operation of
the trust fund, may constitute or involve a prohibited transaction under ERISA
and the Code.
PROHIBITED TRANSACTION EXEMPTIONS
Wachovia Corporation ("Wachovia") has received from the DOL an individual
prohibited transaction exemption (the "Exemption"), which generally exempts from
the application of the prohibited transaction provisions of sections 406(a) and
(b) and 407(a) of ERISA, and the excise taxes imposed on such prohibited
transactions pursuant to Section 4975(a) and (b) of the Code, certain
transactions, among others, relating to the servicing and operation of mortgage
pools and the purchase, sale and holding of mortgage pass-through certificates
underwritten by an underwriter, provided that certain conditions set forth in
the Exemption application are satisfied. For purposes of this Section, "ERISA
Considerations," the term "underwriter" includes (i) Wachovia, (ii) any person
directly or indirectly, through one or more intermediaries, controlling,
controlled by or under common control with Wachovia, and (iii) any member of the
underwriting syndicate or selling group of which Wachovia or a person described
in (ii) is a manager or co-manager with respect to a class of certificates. See
"Method of Distribution."
The Exemption sets forth five general conditions which, among others, must
be satisfied for a transaction involving the purchase, sale and holding of
offered certificates by a Plan to be eligible for exemptive relief under the
Exemption:
First, the acquisition of offered certificates by a Plan must be on terms
that are at least as favorable to the Plan as they would be in an arm's-length
transaction with an unrelated party.
Second, the offered certificates at the time of acquisition by the Plan
must be rated in one of the four highest generic rating categories by Standard &
Poor's Rating Services, a division of The McGraw-Hill Companies, Inc. ("Standard
& Poor's"), Moody's Investors Service, Inc. ("Moody's"), or Fitch Ratings, 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 and servicing agreement and reimbursement of such
person's reasonable expenses in connection therewith.
110
Fifth, the investing Plan must be an accredited investor as defined in Rule
501(a)(1) of Regulation D of the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
In the event the obligations used to fund the trust fund have not all been
transferred to the trust fund on the closing date, additional obligations
meeting certain requirements as specified in the Exemption may be transferred to
the trust fund in exchange for the amounts credited to the Pre-Funding Account
during a period required by the Exemption, commencing on the closing date and
ending no later than the earliest to occur of: (i) the date the amount on
deposit in the Pre-Funding Account (as defined in the Exemption) is less than
the minimum dollar amount specified in the pooling and servicing agreement; (ii)
the date on which an event of default occurs under the pooling and servicing
agreement; or (iii) the date which is the later of three months or 90 days after
the closing date. In addition, the amount in the Pre-Funding Account may not
exceed 25% of the aggregate principal amount of the offered certificates.
Certain other conditions of the Exemption relating to pre-funding accounts must
also be met, in order for the exemption to apply. The prospectus supplement will
discuss whether pre-funding accounts will be used.
The Exemption also requires that the trust fund meet the following
requirements: (i) the trust fund must consist solely of assets of the type that
have been included in other investment pools; (ii) certificates in such other
investment pools must have been rated in one of the four highest categories of
Standard & Poor's, Moody's, or Fitch for at least one year prior to the Plan's
acquisition of certificates; and (iii) certificates in such other investment
pools must have been purchased by investors other than Plans for at least one
year prior to any Plan's acquisition of certificates.
The Exemption generally applies to mortgage loans such as the mortgage
loans to be included in any trust fund. It is not clear whether the Exemption
applies to participant directed plans as described in Section 404(c) of ERISA or
plans that are subject to Section 4975 of the Code but that are not subject 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
111
acquired by persons independent of the Restricted Group and at least 50% of the
aggregate interest in the trust fund is acquired by persons independent of the
Restricted Group.
The Exemption also applies to transactions in connection with the
servicing, management and operation of the trust fund, provided that, in
addition to the general requirements described above, (a) such transactions are
carried out in accordance with the terms of a binding pooling and servicing
agreement, (b) the pooling and servicing agreement is provided to, or described
in all material respects in the prospectus or private placement memorandum
provided to, investing Plans before their purchase of certificates issued by the
trust fund and (c) the terms and conditions for the defeasance of a mortgage
obligation and substitution of a new mortgage obligation, as so directed, have
been approved by an NRSRO and do not result in any certificates receiving a
lower credit rating from the NRSRO than the current rating. The pooling and
servicing agreements will each be a "Pooling and Servicing Agreement" as defined
in the Exemption. Each pooling and servicing agreement will provide that all
transactions relating to the servicing, management and operations of the trust
fund must be carried out in accordance with the pooling and servicing agreement.
The DOL has issued a Prohibited Transaction Class Exemption 95-60 (the
"Class Exemption"), which provides relief from the application of the prohibited
transaction provisions of Sections 406(a), 406(b) and 407(a) of ERISA and
Section 4975 of the Code for transactions in connection with the servicing,
management and operation of a trust in which an insurance company general
account has an interest as a result of its acquisition of certificates issued by
such trust, provided that certain conditions are satisfied. Insurance company
general accounts meeting the specified conditions may generally purchase, in
reliance on the Class Exemption, classes of certificates that do not meet the
requirements of the Exemption solely because they have not received a rating at
the time of the acquisition in one of the four highest rating categories from
Standard & Poor's, Moody's, or Fitch. In addition to the foregoing Class
Exemption, relief may be available to certain insurance company general
accounts, which support policies issued by any insurer on or before December 31,
1998 to or for the benefit of employee benefit plans, under regulations
published by the DOL under Section 401(c) of ERISA, that became applicable on
July 5, 2001.
Any Plan fiduciary considering the purchase of certificates should consult
with its counsel with respect to the applicability of the Exemption and other
issues and determine on its own whether all conditions have been satisfied and
whether the certificates are an appropriate investment for a Plan under ERISA
and the Code (or, in the case of governmental plans or church plans, under
applicable federal, state or local law). The prospectus supplement will specify
the representations required by purchasers of certificates, but generally, each
purchaser using the assets of one or more Plans to purchase a certificate shall
be deemed to represent that each such Plan qualifies as an "accredited investor"
as defined in Rule 501(a)(1) of Regulation D under the Securities Act of 1933,
and no Plan will be permitted to purchase or hold such certificates unless such
certificates are rated in one of the top four rating categories by at least one
rating agency at the time of such purchase, unless such Plan is an insurance
company general account that represents and warrants that it is eligible for,
and meets all of the requirements of, Sections I and III of Prohibited
Transaction Class Exemption 95-60. Each purchaser of classes of certificates
that are not rated at the time of purchase in one of the top four rating
categories by at least one rating agency shall be deemed to represent that it is
eligible for, and meets all of the requirements of, Sections I and III of
Prohibited Transaction Class Exemption 95-60. The prospectus supplement with
respect to a series of certificates may contain additional information regarding
the application of the Exemption or any other exemption, with respect to the
certificates offered thereby.
112
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 investment laws and regulations, regulatory capital
requirements or review by regulatory authorities 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 any nationally recognized statistical
rating organization and (2) are part of a series evidencing interests in a trust
fund consisting of loans originated by certain types of originators specified in
SMMEA and secured by first liens on real estate, 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 same extent that, under
applicable law, obligations issued by or guaranteed as to principal and interest
by the United States or any agency or instrumentality thereof constitute legal
investments for such entities. Under SMMEA, a number of states enacted
legislation, on or before the October 3, 1991 cutoff for such enactments,
limiting to various extents the ability of certain entities (in particular,
insurance companies) to invest in "mortgage related securities" secured by liens
on residential, or mixed residential and commercial properties, in most cases by
requiring the affected investors to rely solely upon existing state law, and not
SMMEA. Pursuant to Section 347 of the Riegle Community Development and
Regulatory Improvement Act of 1994, which amended the definition of "mortgage
related security" to include, in relevant part, offered certificates satisfying
the rating and qualified originator requirements for "mortgage related
securities," but evidencing interests in a trust fund consisting, in whole or in
part, of first liens on one or more parcels of real estate upon which are
located one or more commercial structures, states were authorized to enact
legislation, on or before September 23, 2001, specifically referring to Section
347 and prohibiting or restricting the purchase, holding or investment by
state-regulated entities in such types of offered certificates. Accordingly, the
investors affected by any state legislation overriding the preemptive effect of
SMMEA will be authorized to invest in offered certificates qualifying as
"mortgage related securities" only to the extent provided in that legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in "mortgage related
securities" without limitation as to the percentage of their assets represented
thereby, federal credit unions may invest in 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 1 to
authorize national banks to purchase and sell for their own account, without
limitation as to a percentage of the bank's capital and surplus (but subject to
compliance with certain general standards in 12 C.F.R. 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(m) to include certain "commercial
mortgage-related securities" and "residential mortgage-related securities." As
so defined, "commercial mortgage-related security" and "residential
mortgage-related security" mean, in relevant part, "mortgage related security"
within the meaning of SMMEA, provided that, in the case of a "commercial
mortgage-related security," it "represents ownership of a promissory note or
certificate of interest or participation that is directly secured by a first
lien on one or more parcels of real estate upon which one or more commercial
structures are located and that is fully secured by interests in a pool of loans
to numerous
113
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 own legal advisors in
determining whether and to what extent the offered certificates of any class
constitute legal investments or are subject to investment, capital or other
restrictions and, if applicable, whether SMMEA has been overridden in any
jurisdiction relevant to such investor.
114
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.
In connection with the consummation of the merger of First Union
Corporation and Wachovia Corporation, on or about June 15, 2002, Wachovia
Securities, Inc. and First Union Securities, Inc. will merge and the successor
entity will be named Wachovia Securities, Inc.
115
The depositor anticipates that the offered certificates will be sold
primarily to institutional investors which may include affiliates of the
depositor. Purchasers of offered certificates, including dealers, may, depending
on the facts and circumstances of such purchases, be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended, in connection with
reoffers and sales by them of offered certificates. Certificateholders should
consult with their legal advisors in this regard prior to any such reoffer or
sale.
As to each series of certificates, only those classes rated in an
investment grade rating category by any rating agency will be offered hereby.
Any class of certificates not offered by this prospectus may be initially
retained by the depositor, and may be sold by the depositor at any time to one
or more institutional investors.
Underwriters or agents and their associates may be customers of (including
borrowers from), engage in transactions with, and/or perform services for the
depositor, its affiliates, and the trustee in the ordinary course of business.
LEGAL MATTERS
Unless otherwise specified in the prospectus supplement, certain legal
matters in connection with the certificates of each series, including certain
federal income tax consequences, will be passed upon for the depositor by
Cadwalader, Wickersham & Taft, 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.
116
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.
117
"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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The file "WBCMT 2002-C1 Prossup Annexes A1-5.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 and A-5. In addition, the
spreadsheet provides certain Mortgage Loan and Mortgaged Property information
contained in Annex A-1 and information detailing the changes in the amount of
monthly payments with regard to certain Mortgage Loans. As described under
"DESCRIPTION OF THE CERTIFICATES--Reports to Certificateholders; Available
Information" in the Prospectus Supplement, each month the Trustee will make
available through its internet website an electronic file in CMSA format
updating and supplementing the information contained in the "WBCMT 2002-C1
Prossup Annexes A1-5.xls" file.
To open the file, insert the diskette into your floppy drive. Copy the file
"WBCMT 2002-C1 Prossup Annexes A1-5.xls" to your hard drive or network drive.
Open the file "WBCMT 2002-C1 Prossup Annexes A1-5.xls" as you would normally
open any spreadsheet in Microsoft Excel. After the file is opened, a securities
law legend will be displayed. READ THE LEGEND CAREFULLY. To view the data, see
the worksheets labeled "Disclaimer", "A-1 Loan and Property Schedule" or "A-2
Multifamily Data" or "A-3 Reserve Accounts" or "A-4 Commercial Tenant Schedule"
or "A-5 Crossed Collateralized Pool", respectively.
* Microsoft Excel is a registered trademark of Microsoft Corporation.
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UNTIL AUGUST 19, 2002, ALL DEALERS THAT EFFECT TRANSACTIONS IN THE OFFERED
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS IS IN ADDITION TO THE
DEALERS' OBLIGATION TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
-----
PROSPECTUS SUPPLEMENT
Summary of Prospectus Supplement................ S-7
Risk Factors.................................... S-36
Description of the Mortgage Pool................ S-78
Servicing of the Mortgage Loans................. S-129
Description of the Certificates................. S-140
Yield and Maturity Considerations............... S-168
Use of Proceeds................................. S-174
Material Federal Income Tax Consequences........ S-174
ERISA Considerations............................ S-176
Legal Investment................................ S-179
Method of Distribution.......................... S-179
Legal Matters................................... S-180
Ratings......................................... S-181
Index of Defined Terms.......................... S-182
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 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
Annex K......................................... K-1
PROSPECTUS
Additional Information.......................... 3
Incorporation of Certain Information By
Reference..................................... 4
Summary of Prospectus........................... 4
Risk Factors.................................... 5
Description of the Trust Funds.................. 11
Yield Considerations............................ 34
The Depositor................................... 40
Use of Proceeds................................. 45
Description of the Certificates................. 46
Description of the Pooling Agreements........... 53
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
</Table>
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$821,786,000
(APPROXIMATE)
WACHOVIA COMMERCIAL
MORTGAGE SECURITIES, INC.
(DEPOSITOR)
WACHOVIA BANK COMMERCIAL
MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH
CERTIFICATES SERIES 2002-C1
-------------------------------------------
PROSPECTUS SUPPLEMENT
-------------------------------------------
(WACHOVIA LOGO)
(GREENWICH CAPITAL LOGO)
(NOMURA LOGO)
May 14, 2002
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